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| UK service sector growth hits seven-month low, but US powers on - business live | |
| (35 minutes later) | |
| Economist Rupert Seggins has pulled together a neat Twitter thread on today’s UK data: | |
| 1. Some rougher-looking data on the UK economy this morning. Starting with new car sales, down -2.9%y/y in October. Growth figures have been hit by a couple of events over the past couple of years: the new VED regime and the more recent new emmissions testing regime. pic.twitter.com/odBeSRfYDt | |
| 2. As Howard points out here, the impact of the new emmissions testing regime is still working its way through the figures. https://t.co/Nted3SnajO | |
| 3. Next up, we have a fall in the PMI services figure from 59.3 to 52.2 in October. Still saying growth, just not as much as before. Caveat: the PMIs are a bit noisy and the correspondence to the official output statistics is only rough. Markit highlighting Brexit uncertainty. pic.twitter.com/IiUUeCxQgR | |
| 4. A few other possible influences. As Chris Giles highlights, there may be some weather-related unwiding going on here. What the sun giveth, the rain taketh away. https://t.co/Ua2GPgSlua | |
| 5. Simon also highlighting Q3 as being a blip, with UK growth rate in Q4 looking weaker than what we saw in the middle of this year. https://t.co/tgumqlKJY4 | |
| 6. Shaun puts a figure on what that weaker Q4 growth may look like. https://t.co/UYqHvhyLoI | |
| 7. Samuel brings in another important point whigh is that the UK economy is not disconnected with what is going on over the Channel. https://t.co/Pe5MTTzXSJ | |
| 8. Andy's nice colour-coded table here really helps illustrate the extent to which the UK and Euro Area PMI indicators move together. https://t.co/X2y6vAvmuS | |
| Here’s Andrew Hunter of Capital Economics on the strong US service sector growth: | |
| October’s reading was above the consensus forecast of 59.3. The modest decline was driven mainly by the business activity index, which fell from 65.2 to 62.5, and the employment index which dropped from 62.4 to 59.7. | |
| That said, the latter remains at a strong level by past standards and goes some way to explaining the 250,000 surge in non-farm payrolls last month. | |
| Encouragingly, the new orders index held up relatively well. | |
| America’s service sector has posted another month of strong growth. | |
| The monthly US Services PMI report, from the US Institute of Supply Management, came in at 60.3, indicating output rose sharply again. | |
| That’s down from September’s 61.6, but still much better than the UK’s service sector (which only managed a PMI of 52.2). | |
| Did US ISM N-MFG PMI just peak? pic.twitter.com/1xhFQt6wUT | |
| Energy company Chevron (+3.65%) is leading the Dow risers in New York, followed strong results last Friday. | Energy company Chevron (+3.65%) is leading the Dow risers in New York, followed strong results last Friday. |
| IBM are next in line, up 3.1%. Earlier today the tech firm reported that CEO Ginni Rometty recently bought $3m worth of the company’s stock; a sign of confidence in its prospects? | IBM are next in line, up 3.1%. Earlier today the tech firm reported that CEO Ginni Rometty recently bought $3m worth of the company’s stock; a sign of confidence in its prospects? |
| The US market has made a mixed start to trading. | The US market has made a mixed start to trading. |
| While the Dow gained 75 points (0.3%) at the open, the Nasdaq dippped by 0.3%, as Apple shed 2%. | While the Dow gained 75 points (0.3%) at the open, the Nasdaq dippped by 0.3%, as Apple shed 2%. |
| Global markets are on edge today as investors brace for tomorrow’s Midterm US elections. | Global markets are on edge today as investors brace for tomorrow’s Midterm US elections. |
| With Donald Trump and Barack Obama both in full-on campaign mode, turnout is likely to be high. | With Donald Trump and Barack Obama both in full-on campaign mode, turnout is likely to be high. |
| Pollsters are pretty confident that the Democrats will take back control of the House of Representatives, while the Republicans will hold onto the Senate. But politics has a habit of springing surprises.... | Pollsters are pretty confident that the Democrats will take back control of the House of Representatives, while the Republicans will hold onto the Senate. But politics has a habit of springing surprises.... |
| What might it all mean for the markets? Well, a Democrat-controlled House could start fresh investigations into Trump, and block further tax cuts and the unpicking of Obama’s legacy. | What might it all mean for the markets? Well, a Democrat-controlled House could start fresh investigations into Trump, and block further tax cuts and the unpicking of Obama’s legacy. |
| Mark Appleton, global head of multi-asset strategy at Ashburton Investments, thinks this could weaken the dollar, and the US stock market (something Trump’s critics would see as a small price to pay!). | Mark Appleton, global head of multi-asset strategy at Ashburton Investments, thinks this could weaken the dollar, and the US stock market (something Trump’s critics would see as a small price to pay!). |
| Appleton says: | Appleton says: |
| Should the Democrats make significant gains in the House of Representatives, there is a high possibility recent US dollar strength will abate. Democrats are not proponents of President Donald Trump’s low-tax regime and would likely frustrate plans for further cuts and deregulation, which have been recent drivers of the strong economy and currency. | Should the Democrats make significant gains in the House of Representatives, there is a high possibility recent US dollar strength will abate. Democrats are not proponents of President Donald Trump’s low-tax regime and would likely frustrate plans for further cuts and deregulation, which have been recent drivers of the strong economy and currency. |
| While a weaker US dollar would provide much needed relief for emerging markets, US equities may encounter some headwinds. | While a weaker US dollar would provide much needed relief for emerging markets, US equities may encounter some headwinds. |
| Some economists, of course, think this is the wrong moment to be giving the US economy a sugar rush anyway. | Some economists, of course, think this is the wrong moment to be giving the US economy a sugar rush anyway. |
| A quick recap. | A quick recap. |
| Growth across Britain’s service sector companies has hit a seven-month low. Firms say new orders are drying up, as Brexit uncertainty hits confidence. | Growth across Britain’s service sector companies has hit a seven-month low. Firms say new orders are drying up, as Brexit uncertainty hits confidence. |
| In another blow, UK car sales declined in October too. Diesel sales slumped again. | In another blow, UK car sales declined in October too. Diesel sales slumped again. |
| China’s private sector also stumbled in October, with growth hitting its weakest in over two years. Economists fear that the trade war with America is now biting. | China’s private sector also stumbled in October, with growth hitting its weakest in over two years. Economists fear that the trade war with America is now biting. |
| Eurozone investors are getting gloomier too. Confidence has fallen in November, for the third month in a row. | Eurozone investors are getting gloomier too. Confidence has fallen in November, for the third month in a row. |
| A runaway train has forced mining giant BHP Billiton to suspend rail operation in Western Australia. | A runaway train has forced mining giant BHP Billiton to suspend rail operation in Western Australia. |
| Any readers have a bad day at work can take comfort - at least you haven’t lost control of a massive train full of iron ore. | Any readers have a bad day at work can take comfort - at least you haven’t lost control of a massive train full of iron ore. |
| That’s what happened to one poor driver employed by mining giant BHP Billiton in Western Australia. All was well, until the driver apparently got out of the train to check one of its 268 wagons. | That’s what happened to one poor driver employed by mining giant BHP Billiton in Western Australia. All was well, until the driver apparently got out of the train to check one of its 268 wagons. |
| Next moment, the train was chugging along again, without human supervision.... | Next moment, the train was chugging along again, without human supervision.... |
| After 92 kilometres, the train was deliberately derailed. BHP has now suspended rail operations in the region while it works out what went wrong.... | After 92 kilometres, the train was deliberately derailed. BHP has now suspended rail operations in the region while it works out what went wrong.... |
| UK insurance group Hiscox have fallen to the bottom of the FTSE 250 this morning, following its latest financial results. | UK insurance group Hiscox have fallen to the bottom of the FTSE 250 this morning, following its latest financial results. |
| Hiscox disappointed investors by predicting that growth will slow in the next few months, following a challenging year dominated by US hurricanes, typhoons in Japan, and higher UK subsidence claims following the dry summer. | Hiscox disappointed investors by predicting that growth will slow in the next few months, following a challenging year dominated by US hurricanes, typhoons in Japan, and higher UK subsidence claims following the dry summer. |
| Hiscox also revealed that it has spent $15m setting up a new European subsidiary, so it is prepared for Britain’s exit from the EU. | Hiscox also revealed that it has spent $15m setting up a new European subsidiary, so it is prepared for Britain’s exit from the EU. |
| It says: | It says: |
| Our preparations for Brexit are well advanced.... | Our preparations for Brexit are well advanced.... |
| Our plans have always assumed a worst-case scenario ‘hard Brexit’ and we are prepared, irrespective of the outcome of the government’s negotiations. | Our plans have always assumed a worst-case scenario ‘hard Brexit’ and we are prepared, irrespective of the outcome of the government’s negotiations. |
| Hiscox shares dropped by 6.9% this morning, to £15.32. | Hiscox shares dropped by 6.9% this morning, to £15.32. |
| Here’s our news story on the slowdown at Britain’s service sector companies last month: | Here’s our news story on the slowdown at Britain’s service sector companies last month: |
| European stock markets have shrugged off this morning’s procession of bad news. | European stock markets have shrugged off this morning’s procession of bad news. |
| The main indices remain flattish, while Italy’s market is stuck in the red as the budget standoff between Rome and Brussels fizzles on. | The main indices remain flattish, while Italy’s market is stuck in the red as the budget standoff between Rome and Brussels fizzles on. |
| Overnight, Italy’s deputy prime minister insisted Rome’s spending plans will become “a recipe” for reviving European growth, in a sign that Italy won’t back down. | Overnight, Italy’s deputy prime minister insisted Rome’s spending plans will become “a recipe” for reviving European growth, in a sign that Italy won’t back down. |
| David Madden, analyst at CMC Markets, says investor sentiment has been shaken by those heavy losses in Asia overnight, and the slowdown in China’s economy. | David Madden, analyst at CMC Markets, says investor sentiment has been shaken by those heavy losses in Asia overnight, and the slowdown in China’s economy. |
| The Caixin survey of Chinese service sector slipped to 50.8 – its lowest reading in one year. This adds weight to the argument that China’s economy is cooling. | The Caixin survey of Chinese service sector slipped to 50.8 – its lowest reading in one year. This adds weight to the argument that China’s economy is cooling. |
| Overnight, China’s Xi Jinping talked about boosting global trade, and warned about the downside of protectionist policies, but the update failed to boost investor sentiment. | Overnight, China’s Xi Jinping talked about boosting global trade, and warned about the downside of protectionist policies, but the update failed to boost investor sentiment. |
| The standoff between Italy and Brussels continues. The anti-establishment coalition in Rome are showing no signs of backing down regarding their plans to raise the budget deficit, and this is playing on investors mind’s too. | The standoff between Italy and Brussels continues. The anti-establishment coalition in Rome are showing no signs of backing down regarding their plans to raise the budget deficit, and this is playing on investors mind’s too. |
| In another blow, eurozone investor confidence has fallen to a two-year low. | In another blow, eurozone investor confidence has fallen to a two-year low. |
| Sentix, the German research group, reports that its eurozone investor morale index has dropped to just 8.8, from 11.4 in October. | Sentix, the German research group, reports that its eurozone investor morale index has dropped to just 8.8, from 11.4 in October. |
| This is the third monthly decline in a row, and the lowest reading since November 2016. | This is the third monthly decline in a row, and the lowest reading since November 2016. |
| Manfred Huebner, managing director of Sentix, blames a range of factors. | Manfred Huebner, managing director of Sentix, blames a range of factors. |
| They include the US-China trade war, and the slowdown in car production as manufacturers scramble to meet new emissions tests. | They include the US-China trade war, and the slowdown in car production as manufacturers scramble to meet new emissions tests. |
| “The reasons for this development are manifold. There are external factors such as the U.S. president’s trade policies as well as European issues. | “The reasons for this development are manifold. There are external factors such as the U.S. president’s trade policies as well as European issues. |
| “The discussion about the future of the car industry in Germany, the weakness of the banking sector and the budget issue in Italy come to mind.” | “The discussion about the future of the car industry in Germany, the weakness of the banking sector and the budget issue in Italy come to mind.” |
| Here’s economist Sam Tombs of Pantheon on today’s PMI report: | Here’s economist Sam Tombs of Pantheon on today’s PMI report: |
| The PMIs have overstated the impact of Brexit uncertainty on GDP before (most obviously in Q3 2016), so should we trust them now? The fact that the EZ PMI has fallen sharply too bolsters the case for thinking they will be accurate this time (and suggests Brexit isn't only issue) pic.twitter.com/FpRG71HTzS | The PMIs have overstated the impact of Brexit uncertainty on GDP before (most obviously in Q3 2016), so should we trust them now? The fact that the EZ PMI has fallen sharply too bolsters the case for thinking they will be accurate this time (and suggests Brexit isn't only issue) pic.twitter.com/FpRG71HTzS |
| Britain isn’t the only economy which found October tough. | Britain isn’t the only economy which found October tough. |
| Factories around the globe reported a slowdown in activity last month: | Factories around the globe reported a slowdown in activity last month: |
| Synchronized global slowdown... pic.twitter.com/DG3WbENvLg | Synchronized global slowdown... pic.twitter.com/DG3WbENvLg |
| Economists predict that the eurozone service-sector PMI (due tomorrow) will confirm that European firms struggled in October. | Economists predict that the eurozone service-sector PMI (due tomorrow) will confirm that European firms struggled in October. |
| The drop in UK service sector growth last month is “thoroughly disappointing”, says economist Howard Archer of EY Item Club. | The drop in UK service sector growth last month is “thoroughly disappointing”, says economist Howard Archer of EY Item Club. |
| The slowdown in new business growth (to a 27-month low) “bodes ill” for future growth, Archer says, adding: | The slowdown in new business growth (to a 27-month low) “bodes ill” for future growth, Archer says, adding: |
| Brexit uncertainties and concerns over the UK and global economies weighed on demand for business services. | Brexit uncertainties and concerns over the UK and global economies weighed on demand for business services. |
| Additionally, demand for consumer services was reported to be subdued, which ties in with other signs that consumers reined in their spending at the start of the fourth quarter after splashing out over the summer | Additionally, demand for consumer services was reported to be subdued, which ties in with other signs that consumers reined in their spending at the start of the fourth quarter after splashing out over the summer |
| Jeremy Thomson-Cook, chief economist at foreign exchange firm WorldFirst, says Brexit delays and wider fears over the global economic outlook are hurting UK service sector firms. | Jeremy Thomson-Cook, chief economist at foreign exchange firm WorldFirst, says Brexit delays and wider fears over the global economic outlook are hurting UK service sector firms. |
| He fears the situation will get worse, until the UK and EU reach an agreement. | He fears the situation will get worse, until the UK and EU reach an agreement. |
| Services PMI shows that until a Brexit deal is done, business confidence and sentiment will only move lower. Whether this is enough to take the sector out of its recent morass will only be felt in time however. | Services PMI shows that until a Brexit deal is done, business confidence and sentiment will only move lower. Whether this is enough to take the sector out of its recent morass will only be felt in time however. |