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| UK economy outlook darkens as growth slows and trade gap widens - business live | |
| (35 minutes later) | |
| The British Chambers of Commerce, which represents UK firms, has no doubt what to blame for the slowdown -- BREXIT. | |
| Suren Thiru, head of economics at the BCC, says rising cost pressures (due to the weak pound) and the “drag effect of persistent Brexit uncertainty” is taking its toll on the UK economy. | |
| “The slowdown on the underlying three-month measure of GDP was largely driven by weaker service sector growth as car sales fell. That said, the service sector still made the largest contribution to overall economic activity, with manufacturing and construction adding little to overall UK growth. | |
| Thiru also warns that UK factories are suffering from higher import costs: | |
| “The widening in the UK’s trade deficit is a concern and reflects a sharp rise in goods imports. Trading conditions for UK exporters are deteriorating amid moderating global growth and uncertainty over Brexit. | |
| Businesses continue to report that the persistent weakness in sterling is hurting as much as its helping, with the weakening currency raising input costs. | |
| In another blow, Britain’s trade gap with the rest of the world has widened. | |
| The ONS reports that the total trade deficit in goods and services widened by £3.1bn in August-October to £10.3bn. | |
| Britain’s goods deficit widened by £1.7bn during the quarter, as imports increased £3.6 billion, while exports increased by a lesser £1.9 billion. | |
| The traditional services surplus shrank by £1.3bn, due to a £1bn fall in exports and £0.3bn increase in imports. | |
| The ONS says: | |
| The UK’s trade in goods deficit with the EU has actually narrowed over the last year, by £2.8bn,. | |
| However, this was wiped out by a £3.2bn increase in the deficit with non-EU countries. | |
| Geoff Tily, senior economist at the TUC, is concerned that the UK has barely posted any growth since the summer: | |
| ONS monthly GDP shows third consecutive weak figure, suggesting UK economy slowed significantly from August. Manufacturing declined 0.9 per cent in October, with a 6.6% reduction in motor vehicle production. pic.twitter.com/1tr9a7uu82 | |
| Howard Archer of EY Item Club has summed up the data: | |
| #UK #economy got off to lacklustre start to Q4 as #GDP edged up 0.1% m/m in October. 3-month growth rate slowed to 0.4% from 0.6% in September (Q3). #Services output rose 0.2% m/m but #industrial production fell 0.6% m/m. #Construction output down 0.2% after recent healthy gains | |
| Naeem Aslam of Think Markets blames the Brexit saga for the slowdown: | |
| There is no doubt that the UK’s economic data has deteriorated and the confidence has shattered among entrepreneurs. The ongoing Brexit saga has created nothing but the bad environment. | |
| This chart shows how the UK’s growth rate has petered out, as the bumper consumer spending boost in July drops out of the data. | This chart shows how the UK’s growth rate has petered out, as the bumper consumer spending boost in July drops out of the data. |
| [Each data point compares a three-month growth period to the previous quarter] | |
| Rob Kent-Smith, head of national accounts at the ONS, says the UK economy has weakened this autumn: | Rob Kent-Smith, head of national accounts at the ONS, says the UK economy has weakened this autumn: |
| “GDP growth slowed going into the autumn after a strong summer, with a softening in services sector growth mainly due to a fall in car sales. This was offset by a strong showing from IT and accountancy. | “GDP growth slowed going into the autumn after a strong summer, with a softening in services sector growth mainly due to a fall in car sales. This was offset by a strong showing from IT and accountancy. |
| “Manufacturing saw no growth at all in the latest three months, mainly due to a decline in the often-erratic pharmaceutical industry. | “Manufacturing saw no growth at all in the latest three months, mainly due to a decline in the often-erratic pharmaceutical industry. |
| Construction, while slowing slightly, continued its recent solid performance with growth in housebuilding and infrastructure.” | Construction, while slowing slightly, continued its recent solid performance with growth in housebuilding and infrastructure.” |
| Britain’s economy has now barely grown over the last three months. | Britain’s economy has now barely grown over the last three months. |
| Today’s growth report shows that GDP was flat in August and September, before inching up by 0.1% in October | Today’s growth report shows that GDP was flat in August and September, before inching up by 0.1% in October |
| Newsflash: the UK economy only grew by 0.1% in October, as manufacturing stumbles. | Newsflash: the UK economy only grew by 0.1% in October, as manufacturing stumbles. |
| This dragged the UK’s quarterly growth rate down to just 0.4%, from 0.6% in July-September. | This dragged the UK’s quarterly growth rate down to just 0.4%, from 0.6% in July-September. |
| 0.4% growth in #GDP in the 3-months to October, down from 0.6% in the 3-months to September https://t.co/TqaDo6UNae pic.twitter.com/LdKFpJAHU7 | 0.4% growth in #GDP in the 3-months to October, down from 0.6% in the 3-months to September https://t.co/TqaDo6UNae pic.twitter.com/LdKFpJAHU7 |
| In a worrying sign, the Office for National Statistics also reported that manufacturing output shrank by 0.9% in October, the worst performance since March 2016. That’s a surprise, as we thought factories were busy stockpiling in case of a hard Brexit... | In a worrying sign, the Office for National Statistics also reported that manufacturing output shrank by 0.9% in October, the worst performance since March 2016. That’s a surprise, as we thought factories were busy stockpiling in case of a hard Brexit... |
| The service sector grew by 0.2% in October, the ONS adds, while construction shrank by 0.2%. | The service sector grew by 0.2% in October, the ONS adds, while construction shrank by 0.2%. |
| More to follow.... | More to follow.... |
| Over in Japan, prosecutors in Japan have charged Carlos Ghosn with under-reporting his income -- three weeks after the former Nissan chairman was dramatically arrested. | Over in Japan, prosecutors in Japan have charged Carlos Ghosn with under-reporting his income -- three weeks after the former Nissan chairman was dramatically arrested. |
| And in another twist, prosecutors also indicted Nissan for filing false financial statements. That could leave other senior executives facing tough question, such as CEO Hiroto Saikawa, who was scathing about Ghosn’s performance after his arrest. | And in another twist, prosecutors also indicted Nissan for filing false financial statements. That could leave other senior executives facing tough question, such as CEO Hiroto Saikawa, who was scathing about Ghosn’s performance after his arrest. |
| Former Nissan chair Carlos Ghosn charged with financial misconduct | Former Nissan chair Carlos Ghosn charged with financial misconduct |
| Brexit anxiety is also bubbling in the markets today, as investors prepare for MPs to (probably) reject Theresa May’s deal tomorrow. | Brexit anxiety is also bubbling in the markets today, as investors prepare for MPs to (probably) reject Theresa May’s deal tomorrow. |
| The government is on track for a stonking defeat (assuming the vote goes ahead), meaning there’s plenty of chatter about leadership bids, no-confidence votes, and general elections. | The government is on track for a stonking defeat (assuming the vote goes ahead), meaning there’s plenty of chatter about leadership bids, no-confidence votes, and general elections. |
| Shares in UK-focused companies such as house builders and retailers are among the top fallers in London this morning. And sterling is bobbing around $1.27, a whole five cents lower than in late September. | Shares in UK-focused companies such as house builders and retailers are among the top fallers in London this morning. And sterling is bobbing around $1.27, a whole five cents lower than in late September. |
| Neil Wilson of Markets.com says | Neil Wilson of Markets.com says |
| Given the way political risk is starting to be priced into the market, we could see further losses if, or rather when, the prime minister loses her Brexit vote. | Given the way political risk is starting to be priced into the market, we could see further losses if, or rather when, the prime minister loses her Brexit vote. |
| Whilst a weaker pound could offer some support, a very high political risk premium would tend to trump that and drag the market lower. Investors will have to start, if they haven’t already, price in the risk of a General Election and Labour-led government. | Whilst a weaker pound could offer some support, a very high political risk premium would tend to trump that and drag the market lower. Investors will have to start, if they haven’t already, price in the risk of a General Election and Labour-led government. |
| In another twist, Europe’s top court has ruled that the UK can unilaterally stop the Brexit process, and remain in the EU on the same terms.... | In another twist, Europe’s top court has ruled that the UK can unilaterally stop the Brexit process, and remain in the EU on the same terms.... |
| Brexit: UK can unilaterally revoke article 50, says EU court | Brexit: UK can unilaterally revoke article 50, says EU court |
| O.M.G | O.M.G |
| Shares in UK outsourcing firm Interserve have cratered by three-quarters this morning, to just 6p, as the government contractor battles to negotiate its second rescue deal this year. | Shares in UK outsourcing firm Interserve have cratered by three-quarters this morning, to just 6p, as the government contractor battles to negotiate its second rescue deal this year. |
| The heavily indebted group, which has thousands of government contracts such as cleaning hospitals and serving school meals, said the rescue plan would mean substantial losses for current shareholders as the banks that have lent Interserve more than £600m take control of the company. It hopes to wrap up a deal early next year. | The heavily indebted group, which has thousands of government contracts such as cleaning hospitals and serving school meals, said the rescue plan would mean substantial losses for current shareholders as the banks that have lent Interserve more than £600m take control of the company. It hopes to wrap up a deal early next year. |
| Interserve’s shares plunged to 6p in early trading, giving it a market value of less than £9m. At its peak in 2014, the shares were worth more than 700p. | Interserve’s shares plunged to 6p in early trading, giving it a market value of less than £9m. At its peak in 2014, the shares were worth more than 700p. |
| Interserve share price obliterated this morning on news of debt-for-equity takeover by lenders. Down 70% in early trading to 7p, valuing the outsourcer at just £10m. Company set to fall into hands of hedge funds and banks in coming weeks just months after big refinancing | Interserve share price obliterated this morning on news of debt-for-equity takeover by lenders. Down 70% in early trading to 7p, valuing the outsourcer at just £10m. Company set to fall into hands of hedge funds and banks in coming weeks just months after big refinancing |
| European stock markets have followed Asia’s lead, dropping by around 0.6% in early trading. | European stock markets have followed Asia’s lead, dropping by around 0.6% in early trading. |
| That takes them back towards last Thursday’s two-year lows, wiping out some of Friday’s rally. | That takes them back towards last Thursday’s two-year lows, wiping out some of Friday’s rally. |
| Italian FTSE MIB has lost almost 1%, leading the selloff, as investors show little appetite for risk. | Italian FTSE MIB has lost almost 1%, leading the selloff, as investors show little appetite for risk. |
| Kit Juckes of Societe Generale says “geopolitics has taken over.” | Kit Juckes of Societe Generale says “geopolitics has taken over.” |
| The US ambassador to China has been summoned by Beijing in protest at the arrest of Huawei’s CFO, and that’s driving sentiment across Asia. | The US ambassador to China has been summoned by Beijing in protest at the arrest of Huawei’s CFO, and that’s driving sentiment across Asia. |
| Hopes of fruitful trade negotiations have taken a beating since the optimism that was around a week ago when the Buenos Aires G20 meeting prompted hope of a rally into the end of the year for equities. | Hopes of fruitful trade negotiations have taken a beating since the optimism that was around a week ago when the Buenos Aires G20 meeting prompted hope of a rally into the end of the year for equities. |
| Today’s losses have dragged the Australian stock market to a two-year low (a milestone which Britain’s FTSE 100 struck last week). | Today’s losses have dragged the Australian stock market to a two-year low (a milestone which Britain’s FTSE 100 struck last week). |
| Australian shares tumble to two-year low over US-China trade fears | Australian shares tumble to two-year low over US-China trade fears |
| Stock markets have also been hit by the news that Japan has suffered its worst contraction in four years. | Stock markets have also been hit by the news that Japan has suffered its worst contraction in four years. |
| Revised GDP figures show that the Japanese economy shrank by 0.6% in July-September, or 2.5% on an annualised basis, worse than first estimated. | Revised GDP figures show that the Japanese economy shrank by 0.6% in July-September, or 2.5% on an annualised basis, worse than first estimated. |
| Growth shrank as companies slashed spending, as the US-China trade war hurt demand for exports. | Growth shrank as companies slashed spending, as the US-China trade war hurt demand for exports. |
| Japan was also hit by several natural disasters during the quarter, including Typhoon Jebi (the worst in 25 years) and a destructive earthquake in Hokkaido. This forced factories to cut production. | Japan was also hit by several natural disasters during the quarter, including Typhoon Jebi (the worst in 25 years) and a destructive earthquake in Hokkaido. This forced factories to cut production. |
| Artjom Hatsaturjants of Accendo Markets says Japan’s contraction is “adding further fuel to the fire that set the stock markets red”. | Artjom Hatsaturjants of Accendo Markets says Japan’s contraction is “adding further fuel to the fire that set the stock markets red”. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| It’s a new week, but the same old story. Global financial markets are sliding amid worries about trade war tensions and the health of the global economy. | It’s a new week, but the same old story. Global financial markets are sliding amid worries about trade war tensions and the health of the global economy. |
| Asia-Pacific stock markets have slumped today, taking their cue from Wall Street where shares closed in the red on Friday night (the Dow surrendered another 558 points). | Asia-Pacific stock markets have slumped today, taking their cue from Wall Street where shares closed in the red on Friday night (the Dow surrendered another 558 points). |
| Japan’s Nikkei has shed more than 2%, China’s Shanghai Composite has lost 0.8%, while Australia’s S&P/ASX 200 is the real laggard, down almost 2.3%. | Japan’s Nikkei has shed more than 2%, China’s Shanghai Composite has lost 0.8%, while Australia’s S&P/ASX 200 is the real laggard, down almost 2.3%. |
| Stephen Innes of trading firm OANDA says investors have been left “battered, bruised and running for cover” after last week’s losses, which dragged European stocks down to a two-year low. | Stephen Innes of trading firm OANDA says investors have been left “battered, bruised and running for cover” after last week’s losses, which dragged European stocks down to a two-year low. |
| Innes adds: | Innes adds: |
| A high level of circumspection continues to engulf the global market. | A high level of circumspection continues to engulf the global market. |
| Another day another reason to sell risk. Equity markets remain in a world of pain with everyone in search of a very elusive silver lining, or even Santa for that matter. | Another day another reason to sell risk. Equity markets remain in a world of pain with everyone in search of a very elusive silver lining, or even Santa for that matter. |
| Bloomberg argues that investors are spooked: | Bloomberg argues that investors are spooked: |
| To Nader Naeimi, a Sydney-based fund manager at AMP Capital Investors Ltd., the recent market weakness has been “narrative based” as opposed to “fundamentally based,” and investors are in a “get-me-out-of-here mood.” | To Nader Naeimi, a Sydney-based fund manager at AMP Capital Investors Ltd., the recent market weakness has been “narrative based” as opposed to “fundamentally based,” and investors are in a “get-me-out-of-here mood.” |
| With every single market in the red, Asia’s benchmark MSCI Asia Pacific Index has erased November’s 2.7 percent climb and is heading to its lowest level since end-October. | With every single market in the red, Asia’s benchmark MSCI Asia Pacific Index has erased November’s 2.7 percent climb and is heading to its lowest level since end-October. |
| Investors are in a "get-me-out-of-here mood" as Asian stocks spiral https://t.co/VqluMQX687 pic.twitter.com/6Sv3aQKBdr | Investors are in a "get-me-out-of-here mood" as Asian stocks spiral https://t.co/VqluMQX687 pic.twitter.com/6Sv3aQKBdr |
| We’re expecting a weak start in Europe too, with Britain’s FTSE 100 expected to dip by 0.5%. | We’re expecting a weak start in Europe too, with Britain’s FTSE 100 expected to dip by 0.5%. |
| EU futures rally through 0700.UPDATED -European Opening Calls:#FTSE 6746 -0.47%#DAX 10697 -0.85%#CAC 4789 -0.51%#MIB 18597 -0.78%#IBEX 8767 -0.55% | EU futures rally through 0700.UPDATED -European Opening Calls:#FTSE 6746 -0.47%#DAX 10697 -0.85%#CAC 4789 -0.51%#MIB 18597 -0.78%#IBEX 8767 -0.55% |
| The arrest of Huawei’s chief financial officer last week continues to worry the market. | The arrest of Huawei’s chief financial officer last week continues to worry the market. |
| Investors fear that the truce agreed between Washington and Beijing will fracture, as China demands Meng Wanzhou’s immediate release. | Investors fear that the truce agreed between Washington and Beijing will fracture, as China demands Meng Wanzhou’s immediate release. |
| As Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, puts it:. | As Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, puts it:. |
| “The biggest concerns for equity markets currently is the U.S.-China trade conflict and the Huawei incident. | “The biggest concerns for equity markets currently is the U.S.-China trade conflict and the Huawei incident. |
| The trade theme will preoccupy the markets through the 90-day truce period between the United States and China, waiting for any signs of concession between the parties.” | The trade theme will preoccupy the markets through the 90-day truce period between the United States and China, waiting for any signs of concession between the parties.” |
| China summons US ambassador over Huawei CFO's arrest | China summons US ambassador over Huawei CFO's arrest |
| Also coming up today | Also coming up today |
| New GDP data will show how the UK’s economy is faring. Economists predict growth of just 0.1%. | New GDP data will show how the UK’s economy is faring. Economists predict growth of just 0.1%. |
| The Agenda | The Agenda |
| 9.30am GMT: UK GDP for October 2018 | 9.30am GMT: UK GDP for October 2018 |
| 9.30am GMT: UK trade, manufacturing and services | 9.30am GMT: UK trade, manufacturing and services |
| 3pm GMT: US JOLTS survey of job openings | 3pm GMT: US JOLTS survey of job openings |