eBay unveils plans to spin off PayPal next year - business live

http://www.theguardian.com/business/live/2014/sep/30/eurozone-inflation-unemployment-data-house-prices-next-weather-business-live

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5.28pm BST17:28

European markets move higher but FTSE fades

Weak eurozone inflation figures helped lift stock markets, as investors bet the European Central Bank would act to stimulate the region’s flagging economy. The ECB meets on Thursday, with more details of its plan to buy asset backed securities expected. Despite the increases, investors were still cautious, with the continuing protests in Hong Kong, reports (later denied) that Russia was considering capital controls, and a weak manufacturing survey from China. And the FTSE 100 missed out on the rises, with retailers under pressure after stock market star Next said it may have to trim its profit forecasts since the warm weather was putting people off buying winter clothes. The final scores showed:

In the US, the Dow Jones Industrial Average is currently 49 points or 0.29% higher.

On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back again tomorrow.

5.09pm BST17:09

Mission chiefs representing Greece’s triumvirate of creditors are back in the county for what many believe will be a stormy last review of the Greek economy - ahead of more talks over how to deal with its debt later in the year. Helena Smith reports from Athens:

Finance Minister Gikas Hardouvelis kicked off what essentially is the fifth economic review of the Greek economy - and if government officials are to be believed the last by international supervisors connected to the EU, ECB and IMF - earlier today with a meeting with troika officials in his sixth floor office.

Greeks officials are putting on a bold face saying: “the talks took place in a good climate and went well.”

But the negotiations are not going to be easy: the two sides are at odds over next year’s budget, the size of the financing gap slated for 2015/16, the size of the primary surplus Greece has said is one of its biggest achievements, and whether Athens will need a third bailout.

The government, facing stiff opposition from the vehemently anti-bailout radical left Syriza party which is now leading in all polls, is determined it does not need a new financial assistance programme with prime minister Antonis Samaras telling MPs over the weekend that Greece has exited the “memorandum” accord with its creditors and will be forging ahead with tax breaks (another point of contention).

3.41pm BST15:41

US consumer confidence hits four month low

Perhaps everything isn’t as rosy in America’s economy as expected.

US consumer confidence has fallen unexpectedly this month, to a four-month low. The Confidence Board’s monthly survey of morale dipped to 86.0 from 93.4 in August.

Consumers said they were more worried about job prospects and likely future economic conditions.

Lynn Franco, director of economic indicators at The Conference Board, explains:

“A less positive assessment of the current job market, most likely due to the recent softening in growth, was the sole reason for the decline in consumers’ assessment of present-day conditions.”

“All told, consumers expect economic growth to ease in the months ahead.”

Surprise drop in US consumer confidence: Index drops to 4-month low of 86.0 (93.4 in Aug). Consensus was 92.5 pic.twitter.com/KvNwnQL6AT

3.27pm BST15:27

Summary

Oh dear. There will be red faces at Europe’s statistics body, Eurostat, this afternoon, after it admitted getting some of this morning’s inflation data wrong.

It initially reported that one measure of core eurozone inflation (excluding energy and unprocessed food) had fallen to 0.7% from 0.9%. But after checking its sums again, eurostat has realised the correct answer was 0.8%.

It’s being blamed on a ‘rounding error’.

Eurostat Core Inflation up 0.1 to 0.8% since 10am this morning http://t.co/JfQUI2NCoR http://t.co/a6iTXmlUAX #hyperinflation #Sinnwasright

The headline inflation rate is unchanged, though, at just +0.3%.

3.19pm BST15:19

Read the full story

From Wall Street, here’s my colleague Dominic Rushe on today’s eBay news:

Online auction site eBay plans to spin off its PayPal business into a separate publicly traded company next year, the company announced on Tuesday.

The surprise move comes after the company had rebuffed calls from billionaire hedge fund investor Carl Icahn to sell off its online payments business.

The decision comes shortly after Apple unveiled a new mobile payment system, Apple Pay, that looks set to be a fierce rival to PayPal and Alibaba, China’s massive online marketplace, debuted on the New York Stock Exchange.

“The industry landscape is changing, and each business faces different competitive opportunities and challenges,” eBay chief executive John Donahoe said in a news release.... (for more click here)

3.13pm BST15:13

eBay’s share price surge has taken it close to the recent high set in August but it’s still below the all-time closing high (i think) set in early March this year.

As this chart shows, eBay shares started to fall after investor Carl Icahn stopped agitating for the company to spin off PayPal.

Updated at 3.15pm BST

2.42pm BST14:42

eBay shares up 6.5% after PayPal spinoff announced

DING DING DING goes the Wall Street opening bell, and UP UP UP go eBay’s shares.

Shares in the company jumped by 7.3% at the start of trading.

They’ve now settled up 6.5%, gaining almost $3.50 to $56.12. Other tech companies are also rising.

Investors clearly feel that the two operations are better apart, and agree with eBay’s CEO John Donahoe that a split will help PayPal and eBay to tackle “different competitive opportunities and challenges.”

Updated at 2.49pm BST

2.34pm BST14:34

There’s an media truism that ‘all headlines come true eventually’. Technology venture capitalist Josh Kopelman could claim the same about his forecasts:

Wow. My longbet prediction from 2009 came true - eBay will spin out Paypal. I was just nine months off.... http://t.co/dElLpL9df1

2.22pm BST14:22

Why eBay-PayPal split makes sense

Looking back at the eBay-Paypal split...and analysts suggest that the deal could give the payments service new life.

Jason Del Rey of Re/code flags up that PayPal has lost the gloss it once enjoyed as a serious tech pioneer, before being bought by eBay in 2002.

Based on conversations with people who work in the payments game, PayPal rarely ranks at the top of wish lists that top talent wants to work for, despite generating $6.6 billion in revenue last year and growing at a rate of 20 percent annually.

Part of the reason for that is after 12 years as an eBay subsidiary, PayPal is no longer seen as an innovator.

After the split, PayPal will be able to offer its own stock to potential employees to lure them on board, along with the promise of a more focused business.

The move gives eBay new leadership too; with president of eBay Marketplaces, Devin Wenig, stepping up.

eBay has big challenges ahead as standalone company. Devin Wenig (@Norse5) will get his shot to put own stamp on business as CEO.

The PayPal question may also have been dragging eBay back; its shares have underperformed the wider tech sector this year.

Carl Icahn’s regular prompting must have been a boardroom distraction; at a time when eBay’s overall revenues are only growing half as fast as PayPal’s.

Currently, PayPal handles one of every six dollars spent online. So Apple, with its new Pay service, is a major threat.

And the web market is still changing fast, as the WSJ points out:

Additionally, the recent U.S. initial public offering of China’s Alibaba Group Holding Ltd.—a massive, rapidly growing, multifaceted online marketplace—commenced a new stage in the transformation of commerce and payments.

Updated at 2.23pm BST

2.02pm BST14:02

Here’s our take on the other big story of the day, the European Union’s investigation into the”sweetheart” tax relief which the Irish government granted to Apple for over a decade.

Apple may have to repay millions from Irish government tax deal

Apple may have to repay the tens of millions of euros that it received as “illegal state aid” through a sweetheart tax deal with the Irish government between 1991 and 2007.

The European commission (EC) on Tuesday formally opened an investigation into the deals, with the outgoing competition commissioner, Joaquín Almunia, warning that the recipient of any state aid would be liable to repay it..... (click here for more)

Apple may have to repay millions from Irish government tax deal http://t.co/TK8ZxlhlEO

1.55pm BST13:55

Marketwatch flags up Carl Icahn’s eBay stake is now worth a chunky $138m more than last night, based on pre-market moves on Wall Street.

Why he's smiling! Carl Icahn's eBay stake gains about $138 million so far. http://t.co/NnKmm4SpeA pic.twitter.com/996QmfwFqu

12.55pm BST12:55

It’s a good day for Carl Icahn. Not only is eBay now following his proposal to spin off the faster growing PayPal business into a separate company, but the news has sent eBay’s shares sharply higher in pre-market trading.

So Icahn is vindicated and his 30m shares in the company are worth substantially more.

Updated at 12.57pm BST

12.41pm BST12:41

eBay shares were suspended in pre-market trading ahead of the announcement of the PayPal spin-off, but they are back now:

$EBAY shares trade higher by 11% in pre-market trade after resuming trade, and following news that they are to spin-off Paypal

12.26pm BST12:26

$EBAY to spin off PayPal as tax-free distribution in 2015. PayPal has grown 50% since 2011 vs 20% for Marketplace/Auctions

12.13pm BST12:13

eBay and PayPal to split into two separate companies in 2015

Interesting news coming out of the US, with eBay announcing it has decided to spin off its PayPal business into an independent publicly traded company next year.

The move seems to be a u-turn from the company’s previous position but eBay president John Donahoe said:

For more than a decade, eBay and PayPal have mutually benefitted from being part of one company, creating substantial shareholder value.

However a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively. The industry landscape is changing, and each business faces different competitive opportunities and challenges.

eBay and PayPal will be sharper and stronger, and more focused and competitive as leading standalone companies in their respective markets.

Earlier this year activist investor Carl Icahn pressed the company to split the faster growing PayPal business from the original auction site, but the board managed to see off these demands. Now however, the plans seem to have changed.

A presentation on the spin-off is here (PDF)

Updated at 12.22pm BST

11.59am BST11:59

UK GDP revised - what the experts say

Back with the news that the UK economy grew even faster than expected in the second quarter of this year, and the reaction continues to come in.

One point for discussion is what effect the stronger than forecast figures will have on the Bank of England’s deliberations about raising interest rates. David Kern, Chief Economist at the British Chambers of Commerce said:

Overall these figures are positive – they show an upward revision in quarterly growth in the second quarter and growth in business investment. The current level of GDP is considerably higher than its pre-recession level, which mirrors our view that earlier official estimates have understated growth in recent years. However, there are concerning features in the latest figures - the volume of exports has fallen slightly and the current account deficit has widened to above 5% of GDP, a level which in the long- term will prove to be unsustainable.

While the strength of the recovery will support business confidence, these figures reinforce the need to rebalance the economy towards exports and investment. It is important that the [Bank of England’s Monetary Policy Committee] and the government make every effort to sustain the recovery. Interest rates must be kept low until there is a clear need to start increasing them, and government must do more to support exporters and improve access to finance for growing businesses.

Martin Beck, senior economic advisor to the EY ITEM Club, said:

Overall, while sizeable, the adjustments to measured GDP do not significantly change the story of a deep recession followed by a protracted recovery. And since key indicators of the amount of spare capacity in the economy such as inflation, wages and unemployment are not being revised, there seems little reason for the OBR or the Bank of England to change their view on this. So the implications of the revised national accounts for economic policy should be limited.

But Chris Williamson, chief economist at Markit, said:

All in all, the data paint a far brighter picture of the UK’s economic recovery than previously thought, but the revisions will probably do little to change the official economic outlook at the Bank of England. The Bank had already pencilled-in faster growth in the second quarter, and also uses the business surveys to ‘back-cast’ GDP over recent years, so the upward revisions to the official data were already baked into the policy cake to a large degree.

However, while the Bank’s official outlook is likely to be little changed following these revisions, it’s hard to see that the brighter picture will not add strength to the voices and conviction of those members of the Monetary Policy Committee who have already voted to hike interest rates.

Meanwhile the TUC focused on the signs of falling household incomes. General Secretary Frances O’Grady said:

While the size of the economy has been revised up, household incomes have been revised down. It turns out the UK’s living standards crisis is even worse than we thought.

This is set to be the first full Parliament since the Second World War when the government leaves office with people’s pay packets worth less than when they came into power.

There is something deeply wrong when the economy is growing, but the people who do all the work face ever shrinking pay and falling living standards.

We need an economy where everyone gets a fair share of growing prosperity instead of just a few at the top, with growth driven by rising wages rather than growing household debts.

Updated at 3.16pm BST

11.37am BST11:37

Today’s downbeat eurozone data means ECB president Mario Draghi might soon have to bite the bullet and authorise fully blown quantitative easing, something that Germany for one is not keen on.

That is the view of the Centre for Economics and Business Research, whose economist Danae Kyriakopoulou said:

Today’s news of a further fall in inflation set an urgent ground for the European Central Bank’s (ECB) announcement on Thursday detailing its plan to buy asset-backed securities.

Cebr is cautious about whether such a programme will be enough to steer the Eurozone ship towards a sustainable recovery. Even the maximum possible of €1.4 trillion of asset purchases will be equivalent to roughly only 15% of Eurozone GDP – the scale of quantitative easing in the US and the UK was higher at around 25% of GDP.

With both domestic and global weaknesses keeping inflation subdued, it might not be too long before Draghi has to resort to full-blown QE.

11.21am BST11:21

A late-morning summary

Time for a quick catch-up after a busy morning.

Pressure is mounting on the European Central Bank to take fresh action after inflation in the euro area fell to just 0.3% this month, and core inflation weakened to 0.7%.

The euro has fallen to fresh two-year lows against both the US dollar and the pound, as traders anticipate more easing from the ECB.

Story of the day - Euro only coming lower pic.twitter.com/mhgHrpI6Yd

There’s also little improvement in Europe’s labour market. The eurozone jobless rate was unchanged last month at 11.5%...

..and youth unemployment in Italy has hit a fresh record high.

In the UK, though, fresh data has shown that the economy is bigger than previously thought. Revisions, to bring Britain into line with global standards, show that it surpassed its pre-crisis peak a year ago.

The recovery is still slow in historic terms, though:

Even after today's revisions, the current UK recovery is slower than after the 70s, 80s or 90s recessions: pic.twitter.com/h6fzvu5VYi

The Office for National Statistics also reported that the UK grew a little faster than expected in the last quarter, with GDP rising by 0.9% (not 0.8%).

Here’s Katie Allen’s story: UK economy bigger and growing faster than thought, says ONS

Elsewhere....

Nationwide has reported that UK house price have fallen, for the first time in 17 months.

Prices in St Ablans are up 24%, and some London boroughs are even hotter than that.

High street retailer Next has warned that recent warm weather has hit demand for new clothes. Shares are down 4.3% at pixel time.

Profits at payday lender Wonga have halved. The ‘fake letter’ scandal, in which it sent 45,000 legal letters from a ficticious law firm, cost the company a total of £18.8m.

But Royal Bank of Scotland has announced that its bad loan provisions will be smaller than thought, thanks to an economic recovery in “key markets, including Ireland”. Shares are up 2.7%.

Updated at 3.17pm BST

10.58am BST10:58

John Hawksworth, PwC’s chief economist, says today’s revised British growth figures “now makes the UK look more like Germany and less like France”.

10.56am BST10:56

Analyst: Weak eurozone inflation brings QE closer

Ben Brettell, senior economist at Hargreaves Lansdown, says today’s data show eurozone inflation continues to fall perilously close to zero:

While it was widely forecast, today’s drop in consumer price inflation to just 0.3% - a five year low - heaps further pressure on Mario Draghi to engage in QE. I believe he will succumb to this pressure eventually, though perhaps not as soon as Thursday’s policy announcement. Stiff opposition from Germany will need to be overcome, and that will take time. Last week Draghi hinted at the prospect of QE, saying “we stand ready to use additional unconventional instruments”.

The market certainly believes today’s figure has brought QE closer – the euro fell sharply on the news (by almost a cent against the US dollar). The euro is now 9% lower against the dollar than its May peak, and this should aid the euro zone’s struggling exporters.

The ECB has in the past taken comfort in the fact that while inflation may be falling, inflation expectations are positive. However, inflation expectations are also declining amongst both consumers and producers, and it is worth noting that inflation expectations remained positive in Japan prior to its ‘lost decade’.

10.46am BST10:46

Credit Agricole economist Frederik Ducrozet reckons that core eurozone inflation (down from 0.9% to 0.7%), could be revised higher in Eurostat’s final data. Unless France’s prices have fallen really sharply....

To be sure, either French core inflation dropped by a large amount, or Eurozone core inflation will be revised higher.

BNP economist Alexandra Estiot flags up that sales are rampant in Paris right now, so maybe something is afoot in France....

@fwred Well, there's not a single retailer without some kind of sales currently. For the record, promotions are extending well into October

Updated at 10.47am BST

10.39am BST10:39

Looking back at the new UK growth data....Andrew Goodwin, Senior UK Economist at Oxford Economics, flags up that America’s economy has still powered ahead:

UK growth performance looks less bad, but we still lag way behind the US #gdp pic.twitter.com/P2z2RrzNdf

10.27am BST10:27

Euro tumbles after inflation report

The euro has fallen sharply following the news that eurozone inflation sagged to just 0.3% this month.

It shed three quarters of a cent against the US dollar, to €1.2608, a new two-year low.

And the euro has also hit a 26 month low against sterling, meaning one pound is now worth €1.2843.

Market reaction: EURUSD drooooping on flash CPI release. From 1.27 this morning to 1.2613 now. #ECB smiling, or not. pic.twitter.com/cQzgm87B45

Traders are calculating that today’s inflation report, including the drop in core inflation, will spur the European Central Bank into action. It meets on Thursday, and should discuss the asset-backed securities purchase scheme it announced (without much detail) last month.

10.26am BST10:26

Crucially, core inflation in the eurozone (stripping out volatile food, alcohol and energy prices) has fallen too, to just 0.7% from 0.9% in August.

EU Core Prices slip to 0.7% from 0.9% in September #euro

10.17am BST10:17

Eurozone inflation rate falls to five-year low of 0.3%

The eurozone has slipped closer to deflation this month, which will renew fears that Europe risks suffering Japanification unless policymakers manage to stimulate the economy.

Inflation across the single currency region has fallen to a fresh five-year low of 0.3% this month, Eurostat has reported. That’s down from 0.4% in August.

Once again, falling energy costs were the main driver behind the slowdown in the rising cost of living. But it wasn’t the only factor.

Eurostat estimates that inflation in the service sector rose by 1.1%, annually, this month. Food, alcohol & tobacco prises rose by just 0.2%, and non-energy industrial goods by just 0.1%.

Energy prices slid by 2.4%, having dropped by -2.0% in August.

Reaction to follow....

10.10am BST10:10

Europe's youth unemployment problem

Europe’s young people continue to suffer badly from the crisis.

In August 2014, the youth unemployment rate across the European Union was 21.6%, down from 23.5% a year ago. In the eurozone, the youth unemployment rate is 23.3%, down from 23.9% in August 2013.

And as flagged up earlier, Italy’s youth jobless rate hit a record high. Our data editor Alberto Nardelli has tweeted the details:

Italy's youth unemployment rate hit a record 44.2% in August pic.twitter.com/dPh8MO1rOm

Jobless rate among Italy's youth (aged 15-24) is 11.9%. 15% are employed. 44.2% unemployed (rate). 73.2% inactive. pic.twitter.com/YY3igeAUIC

10.07am BST10:07

Eurozone jobless rate steady at 11.5%

Back to the eurozone, the unemployment rate across the single currency region was steady at 11.5%, Eurostat has just reported.

That’s no better than in July, and not far from the record high of 12% set last year.

The wider rate across the EU fell to 10.1%, from 10.2%.

And as usual, there are sharp differences between Member States:

The lowest unemployment rates were recorded in Austria (4.7%) and Germany (4.9%), according to Eurostat’s methodology and the highest in Greece (27.0% in June 2014) and Spain (24.4%).

Compared with a year ago, the unemployment rate fell in twenty-two Member States, increased in four and remained stable in two.

The largest decreases were registered in Hungary (10.2% to 7.8% between July 2013 and July 2014), Portugal (16.1% to 14.0%), Spain (26.1% to 24.4%) and Croatia (18.2% to 16.5%), and the highest increases were registered in Finland (8.1% to 8.6%) and France (10.2% to 10.5%).

9.59am BST09:59

ONS: recovery is continuing

And here’s how the ONS sums up the situation:

The latest figures for Q2 2014 show the UK recovery continuing.

With GDP in real terms growing by 0.9% compared with the previous quarter, and by 3.2% between Q2 2013 and Q2 2014, the strongest quarter on same quarter a year ago growth since before the economic downturn.

GDP is now 2.7% above the pre-economic downturn level and there have been encouraging signs across the three approaches to measuring GDP. From the output approach, growth in services continues to strengthen with output now 6.4% above its pre-downturn peak, while production and construction output continues to grow. The expenditure measure shows continued growth in gross fixed capital formation and the largest component, household final consumption expenditure.

The income measure shows strong growth in gross operating surplus of corporations for the fourth consecutive quarter, rising by 3.2% in Q2 2014.

9.58am BST09:58

You can see the ONS’s full report on the UK economy here.

9.58am BST09:58

More reaction is coming in. Here’s Newsnight’s Duncan Weldon:

Big GDP revisions. UK recovery still looks weak compared to previous recoveries but much better relative to the rest of the world.

9.53am BST09:53

UK GDP: the key charts

As this chart shows, the ‘great recession’ of 2009 was still the biggest plunge in output in decades, even after today’s data revisions.

And the recovery has still been slower than after the 1970s and 80s recessions.

As this chart shows, Britain’s recovery stalled in 2011 and 2012 -- a combination of the government’s austerity cutbacks and the impact of the eurozone crisis:

Updated at 9.54am BST

9.49am BST09:49

UK economy bigger than thought - reaction

Sky News’s economics editor Ed Conway flags up that Britain’s recovery now looks less dire than its international rivals.

UK’s newly-revised economic growth profile suddenly looks a lot more respectable compared to the rest of the world pic.twitter.com/LZz6GmCE32

Here’s the old official estimate of UK GDP (blue) and the newly revised numbers published today (red) pic.twitter.com/j98eRW3lkB

9.47am BST09:47

Britain’s GDP is now 2.7% higher than the pre-economic downturn peak of Q1 2008, the ONS now reckons.

These changes are being made to bring the UK into line with international standards.

9.43am BST09:43

Perhaps the biggest news this morning is that Britain’s Great Recession was not quite as deep as previously thought.

The ONS now believes that the UK recovered all the output lost after 2008 in the third quarter of last year, rather than in this spring as initially thought.

*U.K. 2008/2009 PEAK-TROUGH GDP DROP WAS 6% VS 7.2% PREVIOUSLY

9.39am BST09:39

The ONS has also revised down its estimate for growth in the first three months of 2014, from +0.8% to +0.7%.

9.35am BST09:35

UK economic growth revised to +0.9% in last quarter

BREAKING NEWS: The UK economy grew even faster than expected in the second quarter of this year.

The Office for National Statistics has just revised up its estimate for GDP growth in the April-June quarter to +0.9%, from 0.8% previously.

The ONS reported that output in Britain’s services industry rose by 1.1% in the second quarter, the fastest growth since the third quarter of 2011.

Construction was revised up sharply to show 0.7 %, compared with a previous estimate of no growth.

It suggests the recovery was even stronger than expected this spring, and means the UK was 3.2% higher than a year ago.

The ONS also confirmed that the UK economy has exceeded its pre-crisis peak, and earlier than previously thought, as it revises a swath of historic GDP data.

Lots more details and reaction to follow....

Updated at 9.41am BST

9.29am BST09:29

Nearly time for the updated UK GDP data...

Remember at 9:30am the UK Blue Book will tell us how much the level of UK GDP has been revised higher under ESA 10 rules #GBP

9.29am BST09:29

Wonga profits halved

Back in the UK, pre-tax profits at payday firm Wonga have slumped by 53%.

And net profits have halved, as Wonga is hit by rising operating costs and a new tougher environment.

fastFT has more details:

Wonga’s loan book rose by 8 per cent to £1.3bn at the end of 2013, while its default rate nudged down from 7.4 per cent in 2012 to 7 per cent last year.

However, operating costs - including investments in debt collection and fines - climbed by 56 per cent to £133.7m, even as revenues only inched up to £314.7m, crimping profits severely.