FTSE 100 hits 15-month low as stock markets slide - live
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Version 0 of 1. 10.42pm BST22:42 Yellen expresses confidence in US economy The US stock market recovered some losses after it emerged, with fortunate timing, that Fed chair Janet Yellen had spoken confidently about America’s economic prospects. Bloomberg has the details: Federal Reserve Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion in the face of slowing global growth and turbulent financial markets at a closed-door meeting in Washington last weekend, according to two people familiar with her comments. The people, who asked not to be named because the meeting was private, said Yellen told the Group of 30* that the economy looked to be on track to achieve growth of around 3 percent. She also saw inflation eventually rising back to the Fed’s 2 percent target as unemployment falls further, according to the people. *The Group of 30 is, it says, a “nonprofit, international body composed of very senior representatives of the private and public sectors and academia.” 10.14pm BST22:14 But there is some late gloom in the US markets too, with Netflix missing Wall Street forecasts. Shares in the web TV streaming firm tumbled by over 25% in after-hours trading, after it reported disappointing new customer growth. Netflix craters after-hours as new subscribers disappoint Updated at 10.14pm BST 10.12pm BST22:12 Evening update: After a wild day’s trading on Wall Street, the main indices finished in the red, but not as badly damaged as earlier in the day. Given the Dow was down 370 points at one stage, that’s something of a recovery. This was the most emotionally charged market day in quite some time, IMHO. Anyone disagree? STOCKS PLUNGE THEN COMEBACK THEN PLUNGE THEN COMEBACK THEN FALL: Here's what you need to know. http://t.co/0b0IxpMSNU 5.34pm BST17:34 I’m going to pause this blog now, as Europe’s markets are closed (nursing those heavy losses....). My colleague Nick Fletcher’s news story on the market mayhem is here, and will be updated as things develop: Global markets tumble on new fears of economic slowdown I may pop back if there are major developments tonight. Otherwise, do scroll back through the blog to catch up with another dramatic day in the markets... GW 5.25pm BST17:25 Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey, says Wall Street has been spooked by weak US economic data today (as covered earlier). Fears over the ebola virus (a second Texas healthcare worker has been diagnosed with the virus today) also sparked the selloff: “We had Empire State manufacturing coming in much lower than expected, we had retail sales coming in lower than expected, so there were signs, with this recent data, of an economic slowdown,” ”You couple this with fears about the spread of Ebola, with the recent downtrend and what we had today, the mindset has been a flight to safety and cash is certainly a safe place to be in.” 5.20pm BST17:20 There’s no let-up to the stresses on Wall Street, where the Dow Jones industrial average is down 2%, or 310 points, again. DOW - 310 wheels coming off again The biggest fallers are chipmaker Intel (down 4%), JP Morgan (down 3.7%) and Walt Disney (-3.4%). Updated at 5.20pm BST 5.17pm BST17:17 European markets all fall sharply amid rout Here’s confirmation that Europe’s stock markets were all hit by the selloff. The Athens market was the worst performer, dragged down by its banks: Michael Hewson of CMC Markets sums up the mood: Carnage on the markets today as European markets, hit by a perfect storm of disappointment over the health of the economy in Europe, concerns about a slowdown in Asia, as well as Ebola, and political dislocation at the heart of Europe, as investors look ahead to the end of QE at the end of this month, and see very little evidence of a balancing factor to mitigate the end of monetary stimulus and falling prices. Combined with concerns about economic and political paralysis at the heart of Europe, as Germany pushes back against French and Italian demands to give the ECB free rein has raised the prospect that Europe’s economic growth could well be sub-par for years to come. A fact reinforced by the recent growth downgrades by the IMF and OECD of the European economy and more recently by the German finance ministry of the German economy, which is the anchor around which all of Europe has pivoted. 5.11pm BST17:11 The FTSE 100 was dragged down by pharmaceuticals firm Shire, which lost a quarter of its value after US rival AbbVie had second thoughts about its takeover plan (now the US government is fighting the practice of tax inversion). Here’s the biggest fallers after today’s tumble: Only a handful of shares rose: 4.58pm BST16:58 How world markets look on my Bloomberg screen right now. Haven't seen so much red for a long time pic.twitter.com/NJWYKyVAnK 4.51pm BST16:51 4.45pm BST16:45 FTSE 100 tumbles 2.83%, biggest one-day fall since June 2013 The FTSE 100 index of leading blue-chip shares has tumbled to its lowest level in 15 months, as fear stalks the markets. The Footsie closed down 181 points at 6211, a 2.83% slide, which is the biggest one-day fall since June 2013. Biggest 1-day fall on the #ftse100 since 20th June 2013. Closes -2.83% or 181pts. Other markets also posted major falls, with the German DAX provisionally closing down 2.9% and the French CAC tumbling a hefty 3.6%. The weak economic data, growth fears, deflation worries -- and the looming threat of ebola and geopolitical tensions -- all combined to drive the markets down today. The sell-off is also triggered by fears that the Federal Reserve will soon normalise monetary policy, by ending its QE bond-buying programme this month and then raise interest rates in 2015. Henk Potts, director of global research at Barclays, explains (via Reuters): The stock market is in a fear mode at the moment on worries about global growth conditions and normalisation of U.S. interest rates,” ”But if the sell-off continues, it could prove to be a strong entry point into an asset class that we think will continue to outperform.” Updated at 4.49pm BST 4.34pm BST16:34 CRUNCH. The Italian stock markets has tumbled by 850 points to 18,304, a 4.4% slide. FTSE MIB CLOSE 18,304.99 -4.44% 4.31pm BST16:31 European shares were sliding right into the close of trading...the FTSE 100 was down 2.78% as the final orders flashed through.... 4.29pm BST16:29 You know when a market closes on the low of the day, it's known as a sell signal. Well the #FTSE is closing on its daily low right now. 4.28pm BST16:28 Over in the FT, John Authers writes that the surge of money into US Treasuries, driving down bond yields, is a worrying sign: Such a fall in such a liquid market implies that someone, somewhere is under stress. Much like the “flash crash” of early 2010, which presaged a long period of volatility before the post-crisis rally resumed late the next year, it is a symptom of distress that cannot be ignored, even if the immediate effect on prices can quickly be reversed Fear returns to markets with plunge in bond yields 4.18pm BST16:18 S&P 500 falls to lowest level since April on weak economic data: http://t.co/WEe6M7NXTz pic.twitter.com/lX8thX3drh 4.16pm BST16:16 US budget deficit falls below 3% of GDP It’s not all bad news this afternoon --- the US budget deficit has just fallen, to below 3% of GDP. The US Treasury has reported that the US budget deficit fell by nearly a third to $483bn in the 2014 fiscal year (the 12 months to the end of September), as tax receipts rise on the back of the economic recovery. At 2.8% of GDP, that is the smallest deficit since 2007 -- and dwarfed by the $1trn-plus deficits which America ran after Lehman Brothers collapsed. US Treasury Secretary Jack Lew says that America has returned to “fiscal normalcy”: The president’s policies and a strengthening U.S. economy have resulted in a reduction of the U.S. budget deficit of approximately two-thirds -- the fastest sustained deficit reduction since World War II,” It’s a vindication for Keynesian stimulus, over eurozone-style austerity. And for the ultra-loose monetary policy implemented by the Federal Reserve since 2008. NEWSFLASH: U.S. budget deficit reaches lowest level since 2007: http://t.co/pOO4HnuA0o 4.09pm BST16:09 It’s a bear market out there... WIth the sell-off, looks like bears are taking over: 'License and registration please?' pic.twitter.com/dE8uO0SjeV 3.35pm BST15:35 Summary: Growth fears spark market turbulance A quick recap might be in order.... World stock markets have fallen sharply today, as fears over the global economy and falling inflation hit shares and drive up bond prices. The Dow Jones Industrial Average suffered its biggest fall in over a year, down 370 points at one stage, in a volatile session. The S&P 500 is now in negative territory for the year. US stock index with blue chip companies more than erased gains & is negative for 2014 RT @BloombergTV: Dow now down 2.5% for the year. Europe’s stock markets are being hit hard too, in afternoon trading. The FTSE 100 is currently down 120 points, or almost 2%, and there are bigger decliner on other markets. Volatility is soaring, hitting its highest rates in two years. This latest selloff was sparked by today’s disappointing US economic data, with retail sales falling 0.3% last month, producer prices falling 0.1%, and manufacturing conditions deteriorating. But it also reflects deeper fears over the health of the global economy, particularly the eurozone, given recent weak data from Germany. Economists are also worried that inflation is slowing across the world economy; China’s consumer prices index hit a near five-year low early today, and some eurozone countries such as Greece and Spain are in deflation. Fears over Ebola are also hitting investor confidence. This has driven up the price of safe-haven sovereign debt, thus driving down the yield on UK gilts, German bunds and US Treasuries. Interest rates on UK 10yr govt bonds have dropped beneath 2% for first time in more than a yr. Amid wider market fear pic.twitter.com/IFjnLx48LV And the yield on 30-year UK gilts hit a record low earlier today. In the commodities space, gold has hit a one-month high. Oil, though, has continued to decline to fresh four-year lows. Updated at 3.54pm BST 3.15pm BST15:15 The last hour will be interesting. A lot of margin calls today. 3.12pm BST15:12 Volatility hits two-year high Volatility is surging in the European markets this afternoon, hitting its highest level since the height of the eurozone crisis two years ago: Reuters has the details: The Euro STOXX 50 Volatility Index surged to 28.6 on Wednesday, its highest level since mid-2012 as mounting jitters over the strength of the global economy prompted investors to slash exposure to risky assets. Europe’s widely-used measure of investor risk aversion known as the VSTOXX - which is based on put and call options on Euro STOXX 50 stocks - was trading at around 19 a week ago. The FTSEurofirst 300 index of top European shares was down 3% on Wednesday, at 1,255.07 points, a level not seen in 10 months, with Greek stocks among the hardest hit. 3.07pm BST15:07 The Wall Street Journal’s Simon Nixon is in wry mood: The 1% are demanding their methadone again. 3.02pm BST15:02 The Dow was down as many as 370 points earlier in the session, its largest intraday drop since June 20, 2013. (via @GiovannyMoreano) 3.02pm BST15:02 Another sign that investors are fearful today - the gold price has hit a one month high, at $1,248 per ounce. That’s also due to the US dollar falling in value (so you need more dollars to buy the same amount of gold). 2.58pm BST14:58 There’s frenzied trading in Wall Street right now, and in the City. The Dow has rebounded off its lowest point, now down 202 points, and the Footsie is slightly less deeply in the red, but still down 2% or 131 points. This has been probably the most exciting opening 30 minutes in over 3 years. Updated at 2.58pm BST 2.51pm BST14:51 Investors are continuing to rush into safe-haven government bonds. This is driving down the rate of return (or yield) on US, German and UK sovereign debt. The yield on 10-year German debt, or bunds, has fallen to just 0.72%. That is an astoundingly low rate of return, showing that investors are ignoring profits in favour of protecting their cash. US 10-year yield falls by most since March 2009 (!) and UK, US 10-year both below 2% http://t.co/8m7ZRnitb2 pic.twitter.com/HfYBMFFXkM 2.44pm BST14:44 FTSE 100 falls further European markets are deeper in the red too, as traders watch the Dow Jones industrial average shed points like they’re going out of fashion. The FTSE 100 is now down 161 points, a 2.5% slide today, to 6226 points. “Investors are fleeing for the exits right now,” says Bloomberg’s Betty Liu, capturing the mood rather well.... 2.40pm BST14:40 DJIA takes out 16,000 and now down 360 points! 2.39pm BST14:39 “This is sheer panic that I’m seeing in the market now”, says Betty Liu, anchor on Bloomberg, as the US stock market continues to fell. 2.38pm BST14:38 And the S&P 500 index, the broader measure of the US stock market, has now shed all its gains for this year. It is down another 1% in early trading. 2.37pm BST14:37 Make that a 310 point drop on the Dow Jones...... 2.36pm BST14:36 Make that a 290 point tumble on the Dow.... 2.33pm BST14:33 US stock market falls in early trading Over in New York, the Wall Street opening bell has been rung, and shares are (as expected) losing ground fast. The Dow Jones Industrial Average has immediately lost 265 points to 16048, a tumble of 1.4%. Fears over the global economy are stalking trading floors on both side of the Atlantic.... 2.27pm BST14:27 Proper 'growth scare' market sell off happening at the moment. 2.27pm BST14:27 Today’s slump in Greek bank shares comes just 11 days before the results of the new eurozone bank stress tests are released. Those tests will show whether banks need to raise fresh capital. 2.16pm BST14:16 Paul Diggle of Capital Economics says today’s shock fall in the US Empire State manufacturing index, to a six-month low of 6.2 in October, is a worry. It adds to the weaker tone of the data and could be the first real sign that the stronger dollar and global slowdown are taking their toll on activity. 2.07pm BST14:07 UK 30-year bond yields hit record lows Money is flowing out of shares, and piling into safe-haven government bonds. That’s driving up the prices of US Treasuries and UK gilts, which pushes down the yield, or interest rate, on the debt. And Reuters is reporting that the yields on UK sovereign debt are at record lows: 2.02pm BST14:02 The US stock market opens in 30 minutes, and analysts predict a selloff. The Dow Jones industrial average could shed another 200 points.... US stocks bath on open FUTURES S&P -23.25 NAS - 43 RUSSELL 200 - 10.7 DAX -204 10 TR +1-01.05 Updated at 2.04pm BST 2.00pm BST14:00 Italian bank shares are now being suspended, after falling too sharply: Italy's Monte dei Paschi di Siena shares suspended after 4.5 pct drop - RTRS 1.57pm BST13:57 Greece leads the European market rout Another day, another sea of red across Europe’s markets: And in Athens, there’s a full-blown rout. The main stock index is down 8% and counting, with banks leading the selloff: -8% now #Greece #ase everything not awesome. ICYMI> http://t.co/Jy6SVU9939 MT @charlesforelle: Greek banks today. NBG -13%, Piraeus -14, Alpha -14, Eurobank -20 1.46pm BST13:46 US retail sales, producer prices and Empire manufacturing all disappoint A triple-dose of bad economic news from America just hit the financial markets, driving shares lower. US retail sales fell 0.3 per cent in September, the first decline since January, and rather worse than the 0.1% decline expected. That suggests consumers are becoming more cautious, cutting back on spending. US producer prices (what firms receive for their goods) has also fallen, down 0.1% in September, in the first decline since August 2013. That is the latest in a swath of signs that inflation is falling. And the Empire manufacturing report, which tracks factories in the New York area, has slumped., It fell to 6.17 this month, from 20.5 in September. Both the manufacturing conditions measure, and the new orders index, hit the lowest level since April. That has driven stock market down further, with the FTSE 100 falling up to 102 points, to 6290. And the yield on US Treasury bills (ie, the interest rate on US debt) is falling further.. 1.15pm BST13:15 US bond prices are strengthening today, pushing down the yield on its 10-year bonds below 2.2%. Traders who sold their Treasuries this year, anticipating that prices would weaken as the Federal Reserve ended its QE bond-buying programme, can’t be happy.... This. RT @FerroTV: US 10-year bond yield. The pain trade of 2014. pic.twitter.com/cJ04hqKjXE 1.13pm BST13:13 Another sign of alarm in the markets, the yield (or interest rate) on Greek 10-year bonds has jumped today, from around 7% to 7.5%. That means traders are pushing down the value of Greek debt, as speculation swirls in Athens about early elections and a possible cabinet reshuffle.... Well, hello, #Greece 10yr bond chart! It's been months since I've seen you! How have things been? Not so good, huh? pic.twitter.com/Z4bpmsnxYn 1.10pm BST13:10 European markets fall again amid growth gloom European stock markets are in retreat again this afternoon, as nervous traders continue to push share prices down. The FTSE 100 has shed another 85 points to 6306, a fresh one-year low. Around half that loss is due to Shire, the pharmaceuticals firm, down 26% as its takeover by AbbVie hits trouble. Germany’s DAX is down 1.3%, the Italian MIB has shed 2.4%, and the Greek stock market has tumbled 5%, as fears of a global slowdown and a eurozone recession hit markets. The slide in the crude oil price, to a new four-year low, is driving up concerns over the health of the global economy. There’s plenty of talk that this will drive inflation lower: As Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ, puts it: “The sharp decline in the price of crude oil is serving to increase downside risks to inflation in the near-term,” 12.55pm BST12:55 PricewaterhouseCoopers says the clampdown on European bank bonuses announced this lunchtime will have a major impact: PwC on EBA bonus clampdown … "the vast majority of major banks operating in the EU will need to change their remuneration policies" 12.52pm BST12:52 Back to this morning’s unemployment data. And our economics editor Larry Elliott writes that while the headline numbers look good, the slowdown in employment growth is a concern: You have to go back a long way to find a time when unemployment fell as quickly as it has in the past 12 months. Modern records began in 1972 – the year David Bowie released Ziggy Stardust and Mary Peters won gold in the pentathlon at the Munich Olympics – and there is no precedent for the 538,000 drop in the internationally agreed measure of joblessness. Unsurprsingly, that was the cue for the government to give itself a pat on the back. Our plan is working, said the prime minister. Britain is fast becoming the employment capital of the west, according to Danny Alexander, the Liberal Democrat chief secretary to the Treasury. Ministers had plenty to savour. Unemployment fell below 2 million and the jobless rate tumbled to 6% – in both cases to levels not seen since the three months ending in October 2008, the month in which the global system had its near-death experience. Dig a bit deeper, however, and the picture is not quite so encouraging. In the three months to August there were almost three-quarters of a million more people in work than there were in the same period a year earlier. But in the most recent three months, the increase was a much more modest 46,000. That is consistent with another piece of evidence from today’s labour market statistics – a rise in inactivity – suggesting that the pace of growth has eased back a bit...... Full analysis: Coalition sprinkles stardust over UK unemployment figures 12.42pm BST12:42 Michel Barnier, the EU vice-president responsible for the internal market and the services sector, has hailed the EBA”s clampdown on banks who are dodging bonus rules: I welcome the EBA's findings on bankers' allowances. Existing rules must be implemented properly: important signal to the rest of society Updated at 12.44pm BST 12.31pm BST12:31 The UK Treasury has played a straight bat to the call for banks to stop evading the EU bonus cap. A spokesperson says: “We note today’s report from the European Banking Authority (EBA), which looks at the practice of paying allowances at banks. We expect to receive the EBA’s guidelines on this issue in due course, which will then be subject to public consultation.” 12.29pm BST12:29 Banks told not to evade EU bonus cap Important news in the banking sector -- Europe’s top banking regulator has said major banks should not try to get around the EU’s cap on bonuses by handing their staff extra payments to top up their pay. The move sets the EBA up on a collision course with no fewer than 39 banks, who are paying their senior staff some ‘allowances’ to bump up their take-home pay. City editor Jill Treanor reports: The ruling of the European Banking Authority (EBA) has implications for 39 financial institutions, thousands of bankers and risks putting the UK’s already strained relationship with the EU under further pressure. The chancellor, George Osborne, is already challenging the restriction on bonus payouts in the European court of justice. The announcement by the EBA –which is likely to have an impact on UK banks such as Barclays, HSBC and the bailed-out Royal Bank of Scotland – raises the prospect of thousands of bankers being denied any further of top-up payments. The regulator did not name any banks as it published its analysis into the way the industry had implemented the bonus cap, which restricts them to 100% of a bankers’ salary, rising to 200% if shareholders grant their approval. Full story: Banks should not use extra payments to get around bonus cap, says regulator Reaction to follow.... Updated at 12.30pm BST 11.55am BST11:55 Economists: UK interest rates won't rise until 2015 City economists are rewriting their predictions for when the Bank of England will start to raise interest rates. Today’s jobs report, showing weak wage growth, and yesterday’s surprise fall in inflation means a rate hike in 2014 looks most unlikely. Investec, which expected a rate rise in November, now reckon the BoE will hold borrowing costs at 0.5% until next summer. That’s quite a u-turn.... Investec economist Philip Shaw says: We are dropping our November 2014 rate hike call. We now consider that a combination of low inflation, international economic uncertainty and the absence of pay pressures means that the MPC will hold off from raising rates until August next year. Swiss bank UBS have made the same decision: UBS push back call for a BoE rate hike from November 2014 to August 2015 Reminder: In June-August, pay including bonuses was just 0.7% higher than a year earlier, while pay excluding bonuses was 0.9% higher. Inflation was 1.5% in August. David Kern, chief economist at the British Chambers of Commerce (BCC), says this will encourage the Bank of England to sit tight: With early wage increases remaining below 1% a year there is clearly no case for early rate increases - and we are pleased that this view is now widely accepted by the financial markets.” Mark Miller, UK Analyst at The Economist Intelligence Unit, also reckons interest rates will remain at 0.5% until June 2015 at the earliest: Following yesterday’s weak CPI data, we continue to feel a first interest rate increase is unlikely before next year’s general election”. Updated at 12.06pm BST 11.46am BST11:46 The lack of wage growth remains a thorn in the side of an otherwise fairly robust recovery, says Ben Brettell, senior economist at Hargreaves Lansdown. He adds: A year-on-year increase in earnings of 0.7% is nothing to write home about, and remains considerably below the rate of inflation. Many economists predict that we will see wage growth start to come through over the next twelve months or so, but this has been the forecast for a while and it is yet to materialise. The weakness in wages reflects subdued productivity, which has been hamstrung by a lack of capital investment. 11.33am BST11:33 Martin Beck, senior economic advisor to the EY ITEM Club, has echoed the TUC’s concerns (see here) over Britain’s weak wage growth: It’s a blow to workers, and also to the Treasury, he explains: “Despite record employment rates, the traditional relationship between more people in work and faster pay growth still shows little sign of being re-established. Real pay continues to drop, carrying on the trend that began six years ago. Weak pay is bad news for household budgets, but also for the levels of income tax receipts and the UK’s fiscal position.” On a brighter note, there are finally signs that the British economy is being more productive: “Employment rose by a modest 0.1% in the three months to August, while hours worked saw no change. Our estimate of GDP growth at 0.8% over the same period implies output per worker is picking up and, as pay rises are still very weak, unit labour costs should fall. Overall, a sustainable and low-inflation expansion should remain on track.” 11.24am BST11:24 The PM is tweeting again: Lower unemployment isn't just a number. It's more people with the security of a job and providing for their families. pic.twitter.com/CKSx8Tgodt 11.24am BST11:24 TUC: Workers excluded from recovery by wage squeeze The ongoing pay squeeze means that British workers aren’t sharing in the recovery, says TUC General Secretary Frances O’Grady: The real value of wages has fallen again this month. This is not only the longest and deepest pay cut on record but there is no end in sight. She adds: “Detailed analysis of the figures show that even the cash increase in pay was entirely due to the finance and business sectors. “With these never ending falls in living standards and so many new jobs insecure, low-paid and self-employed, Britain’s workers have been excluded from the recovery. The TUC is holding a demonstration in central London this weekend, to press its case that “Britain needs a pay rise.” 11.10am BST11:10 The London mayor’s special economic advisor, Dr Gerard Lyons, tweets that Britain’s unemployment rate needs to fall further, despite hitting a six-year low. Another welcome set of jobs data today for London & UK economy & although unemployment rate still too high it is moving in right direction. Updated at 11.11am BST 11.08am BST11:08 Here’s my colleague Angela Monaghan’s first take on today’s jobless report: UK unemployment has tumbled to its lowest level since 2008, when the fall of the US investment bank Lehman Brothers brought the global economy to the brink of collapse. The jobless rate in Britain fell by more than City economists had been expecting, to 6% in the three months to August, from 6.2% in the three months to July. The forecasts had been 6.1%. The last time the unemployment rate was lower than 6% was in August 2008, when it was 5.9%. Danny Alexander, chief secretary to the Treasury, said: “Our jobs’ rich economic recovery means that Britain is fast becoming the job creation capital of the western economies. Because our recovery plan is working, so is the country and in record numbers.” The number of unemployed people fell by 154,000 between June and August to 1.97 million. Pay increased by 0.7% over the three months, compared with a year earlier, prolonging the fall in real pay as wage growth continued to lag behind inflation. Pay growth excluding bonuses was 0.9% over the same period. The prime minister, David Cameron, tweeted: “The biggest-ever fall in unemployment in history, taking it below 2m, is great news. Our plan is working, but there’s still much more to do.” She’ll be updating the story through the day: UK unemployment falls to 6% Updated at 11.32am BST 11.05am BST11:05 And this graph shows how economic inactivity rose in the last quarter, reversing a recent trend: 10.48am BST10:48 Charles Levy, senior economist at Lancaster University’s Work Foundation, is also worried that job creation in the UK economy is slowing: Employment [in June-August] increased by only 46,000, far below the rate we have seen in the past year. He argues that George Osborne should be worried that economic inactivity increased, by 113,000, in the three months to August (see previous post). That coupled with sluggish wage growth which remained at half the rate of inflation in August should start alarm bells ringing and be the focus of the Chancellor’s Autumn Statement.” 10.34am BST10:34 Concern over rise in 'economic inactivity' Here’s another reason for caution -- the number of people in Britain classed as ‘economically inactive’ rose by 113,000 in the last quarter, compared to March to May 2014. That helped to drag the unemployment rate down, from 6.2% to 6.0%. Dr John Philpott, director of The Jobs Economist, explains: Unemployment has continued to fall sharply because slower job creation was dwarfed by a big quarterly rise of 113,000 in the number of economically inactive people, almost half of which is accounted for by a rise in the student population. The fact that the latest fall in unemployment has been driven by rising inactivity rather than job creation explains why the associated fall in the number of people unemployed and claiming job seekers allowance (JSA) is also much lower than in previous months. 10.23am BST10:23 Rachel Reeves MP, Labour’s Shadow Work and Pensions Secretary, flags up that point that pay is still falling “far” behind the cost of living: A higher minimum wage is one solution, she argues: “Working people have seen their real wages fall by over £1,600 a year since 2010. The Government’s failure to act on low pay has led to millions of people struggling to get by, huge additional costs in Housing Benefit and Tax Credits paid to those in work, and the OBR warning about the impact on the public finances. “That’s why Chuka Umunna and I will call on the Government to adopt Labour’s plan to raise the national minimum wage to £8 during a debate in Parliament on low pay later today. This is an important part of Labour’s economic plan to tackle the cost-of-living crisis and ensure we earn our way to higher living standards for all, not just a few at the top.” Updated at 10.24am BST 10.21am BST10:21 GMB general secretary Paul Kenny has urged the government to do more to push up living standards: “The long-delayed recovery is welcome. It is essential that, as the public finances improve, that money is spent getting the two million still on the dole back to work and restoring living standards.” 10.08am BST10:08 UK unemployment, the key charts: These five charts also tell the story of Britain’s labour market. The jobless rate has fallen steadily over the last year, to its near six-year low of 6.0%: This graph shows the sharp rise in job creation, and the record-breaking drop in unemployment, over the last year: The employment rate rose again, to 73.0%, showing that more 16 to 64-year olds are in work: But the recovery hasn’t reached people’s pockets yet. Wages (the blue lines) continue to lag inflation (yellow): And this chart shows where these new jobs have been created: Updated at 10.09am BST 10.01am BST10:01 UK unemployment, the key points Here are the five main points in today’s unemployment report (which is online here). 9.49am BST09:49 And here’s Liberal Democrat Chief Secretary to the Treasury, Danny Alexander, on today’s employment numbers: ‘Our jobs rich economic recovery means that Britain is fast becoming the job creation capital of the western economies. Because our recovery plan is working, so is the country and in record numbers. Every job created is a family made more secure and is another step towards the stronger economy and fairer society that Liberal Democrats are committed to build.’ 9.48am BST09:48 It’s “great news” that Britain’s jobless total has fallen below the two million mark, the prime minister tweets: The biggest-ever fall in unemployment in history, taking it below 2m, is great news. Our plan is working, but there's still much more to do. 9.45am BST09:45 Biggest annual fall in unemployment on record This should go down well in Downing Street: Britain has just recorded its biggest annual fall in unemployment on record. The ONS says: There were 1.97 million unemployed people, 154,000 fewer than for March to May 2014 and 538,000 fewer than a year earlier. This is the largest annual fall in unemployment on record. Records for annual changes in unemployment begin in 1972. Largest annual fall in unemployment since records began in 1972 -remarkable. Critics argue we need quality as well as quantity of jobs. Large fall in unemployment. Best news might be that total hours worked flat on the quarter - possible evidence of some productivity growth. 9.44am BST09:44 So UK real wages continue to shrink as growth of 0.7% is behind the 1.5% CPI was in August and the 2.4% RPI was. 9.39am BST09:39 Real wages still falling.. Real wages in the UK economy are still shrinking, but there are signs that the gap is closing at LONG last. The Office for National Statistics reports that average earnings in the UK rose by just 0.7% annually in the June-August quarter. If you exclude bonuses, pay rose by 0.9% in the quarter. And in August alone, average earnings ex-bonuses rose by 1.2%. Inflation in August was 1.5% 1.6% , and dropped to 1.2% in September. Updated at 9.43am BST 9.36am BST09:36 Employment growth has slowed, though, perhaps suggesting that Britain’s recovery slowed over the summer. The number of people employed in the UK rose by 46,000 in the three months to August, which is the smallest quarterly rise since March-May 2013. 9.35am BST09:35 The number of people out of work in the UK fell by 154,000 in the three months to August. That takes Britain’s jobless total down to 1.972 million. 9.31am BST09:31 UK jobless rate falls to six-year low of 6.0% Breaking: Britain’s unemployment rate has fallen to 6.0% in the three months to August. That’s the lowest since October 2008, the month in which Lehman Brothers collapsed..... Updated at 9.59am BST 9.29am BST09:29 heads up. UK unemployment data out in 5 mins. Expected flat at 6.1%. Also UK earnings out too. Avg 3mnth wage growth expected 0.7%. $GBPUSD 9.27am BST09:27 UK unemployment, a preamble... OK, it’s nearly time for the main event of the morning, the latest UK employment report. It’s due at 9.30am sharp, and will give a new healthcheck on Britain’s labour market. Economists expect that the jobless rate will fall again, to 6.1% in the three months to August, from 6.2% a month ago. But will average earnings rise? A month ago, they were up by just 0.6% annually... 9.22am BST09:22 There’s a lot of argument about whether the drop in the oil price is good (lower fuel prices, more cash in consumer’s pockets), or bad (sign of weak demand, a blow to petro-countries). For example: @RichardBarley1 lower oil pricrs are reflationary boosting consumption and corporate earnings therefore very good in current climate Declining oil prices are a powerful tool for disinflation, which isn't going to help countries that already have depressed core inflation. 9.17am BST09:17 Italian growth figures revised Just in.... Italy’s economy shrank by more than previously thought in the last three months, but didn’t actually contract at the start of the year. ISTAT, the Italian statistics body, has revised its data to match new international standards. And it now reckons that: 1) Italian GDP was flat in January-March, rather than contracting by 0.1% as previously thought. 2) Italian GDP fell by 0.3% in April-June, rather than 0.2%. I think that means that Italy is no longer officially in recession (defined as two consecutive quarters of negative growth). Istat lowers #Italy Final 2Q GDP to -0.3% on Yr vs earlier -0.2%, with new accounting rules. (DJ) 9.14am BST09:14 Europe’s main stock markets have all in the red, today, with London leading the selloff due to the tumble in Shire’s shares (details). The FTSE 100 is down 77 points, or another 1.2%, at 6316 points. Germany’s DAX is down 0.15% and the French CAC is down just 0.1%. And that, according to Bloomberg, means that the Euro STOXX 50 index, made up of largest eurozone companies, is officially in ‘correction’ territory. It’s down 10% from its recent peak. *EURO STOXX 50 INDEX FALLS 10% FROM JUNE HIGH 9.05am BST09:05 Oil price hits fresh four-year low The oil price has fallen again today, hit by growing concerns that the global economy is slowing. The price of a barrel of Brent oil for delivery in November is down another 1.3% at $83.91, a fresh four-year low. New York crude is down a similar amount, to $80.50 per barrel. Brent Crude touches new 4 year low below $84 Oil getting CHEAP. Brent now just below $84 Oil is also weakening because the International Energy Agency yesterday cut its demand forecasts, as the global economic outlook darkens. As the FT points out this morning, there’s no shortage of crude oil right now: The world’s weakening appetite for oil comes with the market awash with plentiful supplies of crude. Libya’s production has recovered strongly even as the country descends further into chaos, while Iraq’s oilfields have remained insulated from the violence in the north. Meanwhile, US output remains strong, leading to a glut of supply in the Atlantic Basin and the North Sea. 8.55am BST08:55 Shire shares crash 28% after AbbVie reconsiders £34bn takeover bid http://t.co/nJtsZnDd0X 8.42am BST08:42 But while Shire’s takeover wobbles, another UK firm - CSR - is being taken over by a US rival. CSR, the Cambridge-based semiconductor firm, has agreed to be acquired by Qualcomm for $2.5bn (£1.57bn). That trumps an earlier bid from Microchip Technologies, and values CSR’s shares at 900p each. And CSR’s shares have spiked by almost a third, up 31% to 865p. Updated at 8.43am BST 8.25am BST08:25 #Inversion Aversion Day ! Shire Down Most Since 2002; Astra, S&N Fall on Inversion Doubt 8.22am BST08:22 Shire’s tumbling share price, and the knock-on effect on other pharmaceuticals firm, has knocked 40 points off the blue-chip FTSE 100. It’s down another 0.6%, to 6354 points. Shire move itself (-28%) is contributing to 34pts off the FTSE today alone. Astrazeneca also taking 8pts off FTSE. 8.17am BST08:17 8.15am BST08:15 Shire shares tumble 28% as AbbVie rethinks takeover OUCH. Shares in UK pharmaceuticals firm Shire have fallen by more than a quarter as its planned merger with AbbVie appears to unravel. Shares slid by 28% to £36.50, to £14.88, wiping over £8bn off its market value. This follows the news that AbbVie has cold feet, following America’s new clampdown on tax inversions (in which US companies shift their tax base abroad). More than £8bn slashed from market value of Shire, as shares plummet 27% to £37.10 on US bidder AbbVie "reconsidering" £32bn bid.. AstraZeneca and Smith & Nephew also showing losses of 3% in early trading 8.05am BST08:05 France received another blow overnight, by the way: Fitch put its credit rating on negative watch. Fitch warned that the outlook for the French economy has deteriorate, and that risks to its recovery remain on the downside. It also reckons that France’s debt-to-GDP could peak at 99.7% in 2017. Fitch currently rates France at AA+, the second-highest level At least France still has that Nobel Prize.... Updated at 8.06am BST 8.00am BST08:00 And here’s another sign of deflationary pressures building in China: Producer prices, which measures how much they receive for their wares, fell by 1.8% annually last month. #China | Sept PPI -1.8% y/y ...31st straight month of declines pic.twitter.com/wxHff0MyoV 7.58am BST07:58 China inflation at 5-yr low is the main mkt headline, equities set for lower open with Shire seen slumping, oil stabilising after big falls 7.57am BST07:57 Chinese inflation rate falls to 1.6% China’s consumer inflation has fallen to its lowest level in five years, fuelling fears that the world economy is sinking into a low-growth, low-flation bog. The Chinese consumer prices index slid to 1.6% in September, down sharply on August’s 2.0%, renewing calls for Beijing to do more to spur Chinese growth and demand. The main cause of the drop in inflation was falling food and fuel prices (as we also say in the UK yesterday). But it also hints at weaker domestic demand. China's inflation falls to 1.6%, a near 5-year low. Sub-1% soon? pic.twitter.com/SK5YUxcWBL Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, predicts that Chinese politicians will be worried that global disinflationary pressures are reaching China. “The low inflation readings will open the door to further targeted monetary and fiscal easing. There is also less need for a strong currency to offset imported inflation.” ANZ analysts agreed, saying in a research note that:. “China’s soft inflation profile heightens the risk of deflation, thus requiring further monetary policy easing.” Updated at 7.57am BST 7.52am BST07:52 The agenda: UK unemployment rate expected to fall again Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone. Coming up today, we have the latest UK unemployment data, at 9.30am. That will show whether Britain’s economy continues to create more jobs (probably), and also whether there was any meaningful increase in real wages (probably not). As Maeve Johnston of Capital Economics explains, the data may show that employment growth has weakened again and pay growth has remained subdued. We are likely to see only another small increase, or perhaps even a slight fall, in employment over the three months to August. Even so, we expect further drops in the workforce to bring the headline ILO unemployment rate down to 6.1%. Meanwhile, headline wage growth may have crept up to 0.7% in August, although this would remain well below CPI inflation of 1.5% in that month. UK labour market stats out at 9.30am. Consensus forecast is unemployment to fall to 6.1% and earnings growth at 0.7%. In the eurozone, there’s no signs that consumer prices are rising steeply, either. German inflation data for September, just released, confirmed that prices were flat month-on-month. That means that harmonised inflation rate remains at just 0.8%. And in the City, UK pharmaceuticals firm Shire had a nasty shock overnight. Rival pharma firm AbbVie is having second thoughts over their planned merger, now that the US congress is clamping down on “tax inversion”. Shares are going to tumble..... I’ll be tracking all the main events through the day... |