Markets close higher down ahead of the ECB
And finally...the European stock markets have closed slightly higher, as all eyes turn to tomorrow’s European Central Bank meeting.
Mario Draghi is expected to announce new stimulus measures - perhaps deeper negative interest rates, and another splurge of quantitative easing to drag inflation above zero again.
Here’s Barbara Teixeira Araujo, economist at Moody’s Analytics, say:
We believe the ECB will cut its deposit rate from -0.3% to -0.5% and expand its bond-buying program, as the pressure for it to act ramps up amid recent financial turmoil and sluggish growth in the euro area’s main economies.”
The ECB president may also attempt one of his famous jawboning sessions to reassure investors, and perhaps weaken the euro.
And that leaves investors nervous, having been disappointed in December.
Chris Beauchamp, senior market analyst at IG, explains:
As John Cleese observed in ‘Clockwise’, it’s not the despair that gets you, it’s the hope. Traders have learned the wisdom of that observation over the past three days, as stock markets continue to oscillate in relatively tight ranges. In one sense, this is due entirely to the ECB – no one wants to get caught out with aggressive positioning ahead of a potentially decisive meeting tomorrow. Either that, or we are simply having to endure the inevitable consolidation period that follows a significant rally.
Either way, most investors have opted to sit on their hands. At least now we have fewer than 24 hours to go until we know Mario Draghi’s mind.
So the FTSE 100 has just closed up 20 points, or 0.35%, at 6146.
Prudential was the biggest riser, up 2.6%, after it posting a 22% jump in profits and announced a special dividend.
Burberry shares were firmly out of fashion. They slumped by 6.7% after it emerged that it isn’t facing a mystery takeover bid after all.
And across Europe, the FTSEurofirst 300 index finished 0.5% higher.
Goodnight, and thanks for reading and commenting. GW
NIESR: UK growth has slowed
Britain’s growth rate has dropped to just 0.3% in the last three months, according to the latest research from The National Institute Of Economic and Social Research (NIESR).
NIESR estimated that growth weakened in the December-February quarter, down from the 0.4% seen in November-January.
It’s also a slowdown compared to the 0.5% growth that was officially recorded in the final three months of last year.
NIESR’s data shows that the UK economy hit a sticky patch in December, a time when global slowdown fears were rising. It also sees signs that growth picked up since.
Jack Meaning, research fellow at NIESR, says:
It looks as if output growth at the start of 2016 has been subdued.
However, it appears that December 2015 may have been a low point for GDP and as this drops out of the calculation of quarterly growth rates, output growth for the first quarter may strengthen slightly.”
Anna Stupnytska, global economist at Fidelity International, is concerned by the slowdown:
#NIESR #UK GDP estimate for 3 months to Feb down to 0.3%. Mirrors weak PMIs, lowest since early 2013. Brexit ref not coming at good time...
— Anna Stupnytska (@AnnaStupnytska) March 9, 2016
Back in parliament, Steve Baker MP has accused the Bank of England of being at “sixes and sevens” over the Brexit issue, following Clara Furse and Richard Sharp’s testimony today.
Neither of today's @bankofengland FPC re-appointees listed Brexit as a risk to financial stability in their reappointment questionnaires...
— Steve Baker MP (@SteveBakerHW) March 9, 2016
Baker supports the campaign to leave the EU.
Updated
Anti-austerity protests are also underway in Athens this afternoon, against the economic reforms contained in the Greek bailout.
Two former government ministers who broke away from the government last summer, Panagiotis Lafazanis and Dimitris Stratoulis, are taking part:
Greek former ministers lead anti-EU protest https://t.co/69yg81xE2A pic.twitter.com/HseetzvmTf
— Kathimerini English (@ekathimerini) March 9, 2016
The Treasury committee is now examining Richard Sharp, ahead of his reappointment to the FPC.
Like Dame Clara Furse, Sharp has neglected to mention Brexit in his homework.
But he takes a different view - arguing that it isn’t a long-term financial instability issue at all, although it will create some volatility.
Sharp says
There are clearly issues around the Brexit situation.
We have seen them manifest themselves in the foreign exchange market, but I don’t consider them to be fundamental financial stability issues for this nation.
That is likely to please the eurosceptic side of the argument, who have claimed that the government is running a Project Fear campaign.
Updated
Over in parliament, Bank of England policymaker Dame Clara Furse has agreed that the possibility of Britain leaving the EU is a threat to UK financial stability.
She told the Treasury committee that:
It is clearly true that any significant uncertainty is likely to create disruption, and that disruption creates risks. It also creates opportunities, but it creates risk. And in the short term, that seems to be the case.
Dame Clara was being quizzed by the Treasury committee ahead of her re-appointment to the Bank’s Financial Policy Committee, which is charged with ensuring financial stability.
However, committee chair Andrew Tyrie isn’t too impressed that Brexit didn’t actually appear on the list of risks gave to the committee in her written evidence. Why wasn’t it there?
It’s all a little awkward, with Dame Clare eventually admitting that:
“I shall think more carefully next time I put in a written submission”.
She also denies being influenced by yesterday’s session, where BoE governor Mark Carney said Brexit was the biggest single domestic threat to the recovery.
You can watch the session live, here.
Updated
Over in France, transport unions and youth groups have been holding demonstrations and a strike against the government’s labour reforms.
Crowds took to the streets in scores of cities to protest against proposals to amend France’s 35-hour working week.
There was a big turnout in Marseille:
In Paris, several schools were blocked off by students who set up barricades with garbage cans.
Associated Press has more details:
Outside the Helene Boucher high school, students cheered any mention of how the movement would prevent Hollande and the government from passing the bill.
Maryanne Gicquel, a spokesperson for the FIDL student union, described young people’s journey towards a stable job as “a succession of internships and poorly paid jobs”.
“Now we’re being told that it will be easier for companies to lay off workers,” she said.
Updated
The Wall Street Journal has a good take on the Burberry takeover bid that wasn’t.
Saabira Chaudhuri writes:
Who is the mystery Burberry Group investor? There isn’t one.
The takeover speculation that drove the British luxury retailer’s shares 6.6% higher on Tuesday turned out to be mistaken, according to a person familiar with the matter, sending the stock tumbling in Wednesday trading.
The shares had soared after a Financial Times article reported on a routine shareholder filing made in February, showing that HSBC Holdings PLC had accrued a stake of more than 5% in Burberry on behalf of what appeared to be an undisclosed investor. That fueled speculation about a possible takeover bid or activist investment.
Burberry asked HSBC for the investor’s identity and was waiting on the bank’s response.
On Wednesday, the person familiar with the matter said Burberry had learned that the stake had been accumulated by several HSBC entities on behalf of multiple, separate investors, triggering the 5% threshold.
More here:
Burberry takeover talk eases as light is shed on mystery investor https://t.co/QwULvMqLwl
— Wall Street Journal (@WSJ) March 9, 2016
Burberry shares down 5.5% as takeover talk fades
Shares in Burberry have slumped by over 5%, as the takeover talk that gripped the City yesterday deflates.
That wipes out all yesterday’s rally:
Updated
Rumours that fashion house Burberry might be facing a takeover battle appear to be unfounded.
Burberry has been scrambling to protect itself against a mysterious predator, after it emerged that HSBC was holding a 5% stake in the company. This looked like a takeover bid could be looming.
But now, HSBC has revealed that this stake is actually made up of several smaller bundles of shares it’s holding for a few different clients.
The FT has more details:
One person close to Burberry said the company was informed on Tuesday that the unusual surge in HSBC holdings was “business as usual trading” and described the nature of the investors as “institutional”.
Another person said it was “multiple” investors. Burberry and HSBC declined to comment.
HSBC’s Burberry holding for multiple clients https://t.co/kvDUExzQLq
— fastFT (@fastFT) March 9, 2016
More well-heeled readers can cancel their private jet orders, because Michael O’Leary has got them covered.
His budget airline, Ryanair, has today announced plans for a new corporate jet operation, as my colleague Julia Kollewe explains:
The budget airline will offer fine dining on a Boeing 737-700 jet refitted to seat 60 passengers on reclining business class seats. A spokesman said the plane can be hired by the hour, with the “competitive” rate depending on the arrival and departure airports.
Ryanair said the jet would be “ideal for private corporate, sports team or group travel”. Asked if Ryanair would accept booking from stag and hen dos, a spokesperson said the carrier was “happy to provide quotes for any groups”.
After all, nothing says luxury like a bunch of lads necking Jägerbombs at 20,000 feet (I imagine).
More here:
The Economist Intelligence Unit is gloomier about China today, following dire-looking trade date earlier this week:
We cut our China growth forecast to 4.3% by 2020 (4.7% previously). Odds of hard landing have risen to 40%. pic.twitter.com/gK7P4lLXsC
— Joseph Lake (@EconomistLake) March 9, 2016
Wall Street shares are expected to rise when trading begins, at 2.3opm GMT/8.30am East Coast time.
US Opening Calls:#DOW 17061 +0.57%#SPX 1992 +0.66%#NASDAQ 4294 +0.68%#IGOpeningCall
— IGSquawk (@IGSquawk) March 9, 2016
After a subdued start, European stock markets are now positive, partly thanks to the rise in UK manufacturing output.
Here’s the situation:
- FTSE 100: up 35 points at 6160, +0.6%
- German DAX: up 112 points at 9805, + 1.1%
- French CAC: up 45 points at 4449, + 1%
Investors are also anticipating fresh stimulus measures from the European Central bank tomorrow, as Spreadex’s Connor Campbell explains:
It is interesting that the French index kept in-step with its German counterpart, since the Banque de France cut its growth forecasts to 0.3% for the quarter this morning following a factory sentiment slump.
Arguably, however, that news merely puts more pressure on Mario Draghi ahead of tomorrow’s meeting, investors hoping for a multi-faceted approach to stimulus (and not a damp squib like last December) from the region’s central bank.
The oil price is pushing up this morning, following reports that crude producers are planning a meeting.
Brent crude has gained 1.7% to $40.34, after an Iraqi oil official told state newspaper Al-Sabah that OPEC and non-OPEC members are going to gather in Moscow. They could potentially discuss freezing output.
Sports Direct boss ordered to testify to MPs
Mike Ashley, the boss of Sports Direct, has been ordered to testify to the House of Commons over the company’s treatment of its staff.
The Business, Innovation and Skills Committee has warned Ashley that, unless he appears, he would be found in contempt of parliament. That could, in theory, mean he’d be jailed*.
Ashley hasn’t accepted any of the dates offered by the committee..... and now Iain Wright, chair of the committee, has told him to find a window in his diary within two weeks, or else....
Here’s the full letter (which is online here)
I am writing on behalf of the Business, Innovation and Skills Select Committee to establish whether you will accept the Committee’s invitation to give evidence to it at Westminster.
The Committee would like to hear about the action that you have taken in response to reports in the media about the treatment ofworkers at Sports Direct and about the scope, progress and timetable of your own review of working practices that you announced in December. The treatment of low paid workers and enforcement of the national minimum wage are issues that the Committee will be keeping under review over the coming months.
The Committee noted your invitation to attend a meeting at the company’s premises at Shirebrook. In line with select committees’ commitment to transparency, it is normal practice for the BIS Committee to meet in public at Westminster and we agreed to adhere to this practice on this occasion.
A number of alternative dates have been offered to you by the Committee Clerk, but as yet you have not accepted any of them, nor agreed in principle to attend. As you will be aware, select committees do not normally need to have recourse to our formal powers to summon witnesses in order to secure attendance; refusal to attend without good reason may be considered a contempt of the House. Should you fail in your reply to agree to attend on one of the dates offered to you, or a mutually convenient alternative before 1 June, the Committee reserves the right to take the matter further, including seeking the support of the House of Commons in respect of any complaint of contempt.
In the interests of transparency, I may make this letter publicly available, and also your subsequent reply, which I would ask that we receive by 21 March.
Mike Ashley avoided appearing at Committee last year claiming he wasn't free until parliament dissolved. This parliament has 4 years to go..
— Simon Neville (@SimonNeville) March 9, 2016
* Update: The consequences of being in contempt of parliament are not completely clear. Back in 1880, one Charles Grissell was locked up in the House of Commons’ belltower for the offence.
But no-one has fallen foul of the law for decades, so the powers are effectively untested in recent times.
But the government’s recent “green paper on parliamentary privilege, published in 2012, said:
[Parliament’s] power to punish non-members for contempt is untested in recent times. In theory, both houses can summon a person to the bar of the house to reprimand them or order a person’s imprisonment.
Updated
Zero-hours contracts rise again
Unions have warned that British workers are getting a raw deal, after the number of people on zero-hours contracts jumped again.
New government figures show that 801,000 people were on contracts that don’t guarantee a minimum number of hours work each week. That’s up from 697,000 six months earlier.
Around one in three people on a zero-hours contract wanted to work more hours, with most wanting them in their current job, the ONS added.
Number of people on zero hours contracts rises 15% to 801,000 last year, with more than one in three on them wanting more hours - ONS
— Simon Neville (@SimonNeville) March 9, 2016
Britain’s unemployment rate is currently just 5.1%, which ought to put workers in a strong position. Instead, employers still seem to be calling the shots.
Zero-hours contracts seem pretty entrenched in UK now - not fading as labour market tightens. Now 2.5% of workforce, up from 2.3%.
— Sarah O'Connor (@sarahoconnor_) March 9, 2016
TUC general secretary Frances O’Grady says workers without guaranteed hours need more support:
“Zero-hours contracts may be a dream for cost-cutting employers, but they can be a nightmare for workers.
Many people on zero-hours contracts are unable to plan for their future and regularly struggle with paying bills and having a decent family life.
The so-called flexibility these contracts offer is far too one-sided. Staff without guaranteed pay have much less power to stand up for their rights and often feel afraid to turn down shifts in case they fall out of favour with their boss.
The European Union is proposing better rights for zero-hours workers - another reason why workers should be worried about the risks of Brexit.”
British manufacturers did extremely well to boost output by 0.7% in January, given the global turmoil.
So says Mark Stephenson, UK manufacturing industry leader at Deloitte:
“The challenges UK manufacturers are up against should not be underestimated. Slow global economic growth, weak Chinese trade data, downgraded UK growth forecasts, turmoil in the steel industry and the PMI at its lowest point for almost three years, are just some of the factors at play.
“Therefore today’s manufacturing output figures show how resilient the industry is and signals the prospect of a more positive year ahead for UK manufacturers. This week’s EEF survey highlighted that firms expect modest growth in the coming months, and a weakened pound should boost many exporters.”
This rather retailed chart confirms UK manufacturing picked up in January, while the mining and energy sector was notably weak:
UK manufacturing beats forecasts
Britain’s manufacturing sector has burst back to growth.
Manufacturing output rose by 0.7% month-on-month in January, according to the new report from the Office for National Statistics.
That follows three months of falling output and also beats City forecasts, with economists expecting an increase of just 0.2%.
Firms making plastic, metal and rubber products all reported that output rose during the month, and there was also a big rise in the ‘manufacturing and repair’ section of the report.
It looks like a decent sign, says Alex Lydall, senior sales trader at Foenix Partners:
Given fresh concerns over what a potential Brexit could do for large UK corporate companies, the strong recovery seen this morning for January’s Manufacturing Sector - recording 0.5% above analyst forecasts - will be a huge relief and welcome news for Bank of England governor Mark Carney.
But it’s not all good news. Manufacturing output is still 0.1% smaller than a year ago.
And wider measure of industrial production only rose by 0.3%, and was dragged down by a fall in mining, crude oil and gas production.
France cuts growth forecasts as confidence ebbs away
The gloom swirling over France has darkened this morning.
The country’s central bank has cut its growth forecast for the current quarter, after finding a big fall in confidence among factory bosses.
Sentiment among factory executives dropped to 98 in February from 101 in January, its biggest decline since January 2013, according to a monthly survey from the central bank.
As a result, the economy will expand 0.3% this quarter instead of 0.4%, the Bank of France said on Wednesday.
The drop in confidence is a significant indication that a slowdown in emerging-market economies such as China and Brazil is spilling over into Europe and may threaten France’s first real recovery since President Francois Hollande came to power in May 2012.
Tory MP: Mark Carney should consider position
The political storm swirling over Bank of England governor Mark Carney has intensified this morning, with one MP suggesting he should consider resigning.
Carney has irked the government’s eurosceptic wing (not a difficult task, to be fair) by warning yesterday that Britain’s economy could suffer if it left the EU. He suggested some banks could move jobs overseas, while consumer spending and house prices could be hit.
The governor insisted that the Bank wasn’t making any recommendation about Brexit, but that hasn’t convinced Sir Peter Bone.
Bone told Radio 4’s Today Programme that Carney’s performance was “extraordinary”, adding:
“He was speculating, and speculating in a way that I say is wholly unbelievable. It seemed to be part of the Project Fear. I guess it was orchestrated by conversations either with the Chancellor or the Prime Minister.
“If the governor had speculated that way that we should come out of the EU, do you think Downing Street wouldn’t be clamouring for his head at the moment?”
Bone is one of parliament’s more colourful backbenchers, famous for often telling the House of Commons what (the long-suffering) Mrs Bone thinks about the affairs of the nation.
So Carney may not be packing his bags quite yet.....
Updated
Insurance firm Prudential has just cheered the City by announcing a 22% jump in operating profits.
Investors are going to be quids in -- the Pru is raising its dividend by 5%, and paying a special divi of 10p as well.
The company is also arguing that we’re too pessimistic about the Asian emerging markets, where it is a big player.
Prudential CEO tells @CNBCi China and Asia in general are mis-read by the West.
— Squawk Box Europe (@SquawkBoxEurope) March 9, 2016
Prudential CEO tells @CNBCi structural demand for markets across Asia is intact.
— Squawk Box Europe (@SquawkBoxEurope) March 9, 2016
Updated
European stock markets have made a mixed start to trading, after seeing Asia hit a one-week low overnight.
Mining shares are mostly down in the City, reflecting concerns over China.
And the Restaurant Group’s downbeat results statement has also hit sentiment.
UK restaurant chains Frankie & Benny's & Garfunkles pouring cold water on UK sentiment..."softening..consumer demand & weaker. confidence"
— Caroline Hyde (@CarolineHydeTV) March 9, 2016
Despite the recent market turbulence, Britain’s premier luxury chocolate maker has decided to float on the London exchange.
Hotel Chocolat is hoping to raise £50m by entering the AIM Market.
The company already runs 84 shops, a tasting club with 70,000 members, and its own cocoa plantation on St Lucia. It now plans to expand its British chocolate manufacturing, and invest in in new stores and its digital operations.
Here’s the announcement.
After yday's big news that chocolate makes you smarter... today Hotel Chocolat reveals it's going to float on Aim https://t.co/GJ7mcoRSiP
— Cat Neilan (@CatNeilan) March 9, 2016
Kit Juckes: We're paying the price for Fed's mistakes
Kit Juckes, top foreign exchange strategist at French bank Société Générale, has an interesting take on the state of the markets.
He told clients this morning:
I can’t help reflecting that we’re still living with the consequences of the twin bubbles - credit and commodities - that were unleashed by the Fed’s absurdly easy monetary policy in 2003.
The credit bubble burst in 2008 and prompted even easier policy, as well as QE. That drove bond yields down and gave the commodity bubble a fresh lease of life, but when that too burst, we got commodity price deflation to go with the low yields and the result is they are even lower. Investors are left hunting for yield by buying emerging market or high-yield bonds as soon as there is any semblance of calm, but it’s no surprise that the over-riding mood is so fragile.
And while all this is going on, China’s economic re-balancing is still progressing at a glacial pace, Europe’s recovery is hamstrung by a broken financial transmission mechanism and an inability to ease fiscal policy, and the US is stuck in post-GFC second gear, with 2% growth in wages, employment and GDP but not prospect of an acceleration that would provide comfort for emerging market economies.
All of this leaves markets subject to mood swings such as we’re seeing.
Updated
Restaurant Group shares slump on gloomy outlook
There’s thin gruel for investors in the Restaurant Group today.
Shares in the company have tumbled 15% at the start of trading, after it warned the City this morning that like-for-like sales are down by 1.5% so far this year.
And it also cautioned that trading will remain tricks at its outlets, which includes the Frankie & Benny’s and Chiquito chains, plus eateries at various airports.
The more challenging trading conditions we saw at the end of last year have continued into the early part of 2016, reflecting a softening in consumer demand and weaker overall consumer confidence.
Whilst still early in the year, our assessment is that this more challenging environment and recent trading patterns are likely to persist.
Updated
Germany’s push into renewable energy has driven its utility giant E.ON into a record loss.
E.ON reported a net loss of €7bn for 2015, after writing billions off the value of its power plants. It also warned that 2016 will be tough too, due to the “structural transformations” in Germany’s energy industry.
The FT’s Nathalie Thomas explains:
Germany is aiming to generate 80 per cent of its electricity from renewable sources, such as wind and solar, by 2050, up from around a quarter today.
But government subsidies for renewables have led to an increase in power generation which has caused wholesale prices to tumble, eroding profitability at the utility companies’ coal and gas-fired power stations.
China stocks fall after trade shock
Worries over the Chinese economy have weighed on Asian stock markets overnight.
Yesterday’s alarmingly weak trade data, which showed a 25% tumble in China’s exports in February, hit many shares on the Shanghai stock market.
Reuters has the details:
China stocks dropped more than 1% on Wednesday, snapping a six-session winning streak, as a tumble in commodity prices hit resource shares and prompted profit-taking amid signs of persistent lethargy in the economy.
The blue-chip CSI300 index declined 1.2%, to 3,071.91, while the Shanghai Composite Index shed 1.3%, to 2,862.56 points, registering their first losses in seven sessions.
All sectors, with the exception of banks, lost ground as China’s much worse-than-expected February trade data revived concerns about the country’s economic health.
An index tracking resource businesses tumbled 5.3 percent, while the energy sector slumped 3.6 percent.
Investors dumped index heavyweights such as Baoshan Iron & Steel Co and Sinopec on lower raw material and oil prices.
Japan’s Nikkei also fell by almost 1%, while Hong Kong is also in the red in late trading.
Updated
Introduction: Anxiety ahead of UK manufacturing report
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s a fragile feel in the air in the City today - along with a LOT of rain - after Tuesday’s barrage of gloomy news.
The 25% slump in Chinese exports, allied to another warning from the IMF about economic risks, have punctured the optimism that had been building in the last couple of weeks.
Wall Street’s Citigroup has created extra anxiety, by warning last night that revenues this quarter will be sharply below forecasts.
And with the oil price falling back below $40 last night, we can all expect more volatility as 2016 shapes up to be an edgy and uncertain year.
We get a new healthcheck on the UK manufacturing sector this morning, when the latest industrial production data is released at 9.30am.
Economists are hoping for a decent report, as CMC’s Michael Hewson explains:
The manufacturing sector has borne the brunt of the global economic slowdown over the past few months and once again the UK economy is in the cross hairs today with the latest ONS manufacturing and industrial production data for January.
December was an extremely disappointing month with sharp declines in both as 2015 came to a disappointing end. The expectation is for a rebound in January with a 0.4% rise in industrial production, and a 0.2% rise in manufacturing production
This would be in line with a similar improvement seen in the January PMI numbers, but could well prove only temporary given the sharp drop seen in the February PMI data.
Otherwise, there’s not too much afoot, although tensions are building ahead of Thursday’s European Central Bank meeting.
Here’s today’s agenda:
- 9.30am: UK industrial and manufacturing report for January
- 3pm: Canadian central bank interest rate decision
- 3pm: NIESR publishes its latest estimate of UK growth in the last three months
And on the corporate front, we’re getting results from Germany utility firm E.ON, security firm G4S and eating out chain the Restaurant Group.
