Closing post: Wall Street opens higher
The bell has gone on Wall Street and here’s how it looks:
- Dow Jones: +0.6% at 24,351
- S&P 500: +0.4% at 2,728
- Nasdaq: +0.5% at 7,541
On that note, we’ll close for the day. Thank you for all the comments and please join us again on Monday.
Have a good weekend. AM
The pound is still going (relatively) strong against the dollar, up 0.5% at $1.3145.
It is not doing so well against the euro, down 0.1% at €1.1290.
The euro has held on to its gains against the dollar, currently up 0.6% at $1.1641.
US consumer spending edges higher in May
Over in the US, consumers only slightly increased their spending in May - despite rising wages - as prices increased at the fastest rate in more than six years.
Personal spending grew by 0.2% last month, down from 0.5% in April and weaker than the 0.4% predicted by economists.
A fall in spending on services like household utilities was partially offset by higher spending on items such as recreational goods.
Personal income - measuring Americans’ pretax earnings from salaries and other sources including investments - rose by 0.4% in May, according to the figures from the US Commerce Department.
The price index for personal consumption expenditures - the Federal Reserve’s preferred measure of inflation - increased by 2.3% in the year to May, which was the highest rate since March 2012.
Solid US personal income +0.4% in May.
— Gregory Daco (@GregDaco) June 29, 2018
Real disposable income +0.2% & real consumer spend flat.
Solid but slowing momentum for consumer spending +2.3% y/y -- slowest since Mar 2016. Growth in Q2 ~2.8% (saar) much better than +0.9% Q1.
Our Q2 #GDP tracker down to +4.3% from +5%. pic.twitter.com/27VSqKAtaZ
Updated
IMF gives fresh warning about Greece
Barely a week after the EU announced a debt deal for Greece - saying the country’s long-running economic crisis was over - the International Monetary Fund has sounded the alarm. Helena Smith reports from Athens.
Greece will need significant further debt relief if it is to have problem-free access to international markets “over the longer run.”
That, in a nutshell, is the message from the IMF today, which said Greece’s pledge to achieve a primary surplus of 3.5% annually, was “very optimistic … [and] ambitious.”
Speaking eight days after the eurozone agreed to medium-term debt relief for Athens – extending maturities and prolonging interest payments on about a third of its €320bn debt pile – the IMF’s mission chief for Greece insisted it wasn’t enough.
Peter Dohlman said:
We are concerned this improvement in debt indicators … can only be sustained over the long run under what appear to be very optimistic – maybe ambitious is a better word – assumptions on GDP growth and Greece’s ability to run high primary surpluses for an extended period of time.
Without more measures, Greece’s debt load would be unsustainable he warned, adding that if there was a let-up in reforms to boost competitiveness, growth would be limited.
Burdened with the highest debt-to-GDP ratio in the euro zone, Greece will exit its third and final international rescue programme in August.
Time for another look at European markets, boosted today by the news that EU leaders had agreed a migration deal in Brussels, easing fears of political instability.
- FTSE 100: +0.7% at 7,666
- Germany’s DAX: 1.4% at 12,344
- France’s CAC: +1.3% at 5,344
- Italy’s FTSE MIB: +1% at 21,644
- Spain’s IBEX: +0.8% at 9,665
- Europe’s STOXX 600: +1% at 381
Lloyd's of London boss Inga Beale to leave in 2019
The insurance firm Lloyd’s of London has announced that its chief executive Dame Inga Beale will step down next year after five years.
The company did not give a reason for her departure and said the search for her replacement had begun.
Bruce Carnegie-Brown, chairman at Lloyd’s, said:
In her five years at Lloyd’s, Inga has set in motion a series of changes aimed at modernising the market and making it more efficient and inclusive. Her boldness and persistence have generated the momentum required to bring about real change. I have very much enjoyed working with Inga, and I am grateful for the support she has given me in my first year as chairman”
Inga’s leaving date will be confirmed in due course and the search for her successor is underway.
Beale said:
The decision to leave has been a tough one and when the time comes I will miss the energy, innovative spirit and expertise that I come across every working day. Leading Lloyd’s is an honour and I am proud to have played a part in ensuring that it remains relevant and fit for purpose for the future.
Updated
As the first half of 2018 draws to a close, analysts at Hargreaves Lansdown have done a review of markets.
The FTSE is slightly below where it started the year, but thanks to dividends, investors are still in positive territory. Despite fears of overvaluation, the US has proved the best performing major stock market this year, though most of the returns for UK investors have come from a strengthening dollar.
After a strong run, the German stock market has fallen from grace, as cracks in the eurozone resurfaced, and trade tensions have stoked concerns over the exporting giants of the German economy. A collapse in the share price of Deutsche Bank hasn’t helped matters either.
FTSE’s top five performing stocks in the first half:
1. Ocado: +160%
2. Evraz: +49%
3. Sky: +44%
4. Next: +34%
5. Sainsbury’s: +33%
...and the five worst performers:
1. Micro Focus International: -50%
2. Standard Life Aberdeen: -26%
3. British American Tobacco: -23%
4. Sage Group: -22%
5. Randgold Resources: -22%
Laith Khalaf, senior analyst at the firm, says:
In the UK, Ocado has been the stand-out performer. After sealing a deal with the US grocery giant Kroger, the online supermarket has thrust its way into the FTSE 100. Its meteoric rise has inflicted serious pain on the hedge funds who bet against it, and they will still be licking their considerable wounds.
At the other end of proceedings, a profit warning and a chief executive resignation has done for the Micro Focus share price. Likewise the shine has come off Standard Life Aberdeen following last year’s merger.
The pick-up in eurozone inflation is another factor behind a stronger euro today, on top of the EU deal on migrants, says John Dolan from currency firm Fexco Corporate Payments:
The Euro enjoyed a boost from the overnight deal in Brussels, and this was consolidated by the news that eurozone inflation has ticked up.
While the increase in eurozone inflation to 2.0% was widely expected, and will do little to soften Mario Draghi’s dovish dogma in the short term, the combination of economic growth and rising prices will eventually force the ECB into normalising monetary policy.
All of which has helped the Euro hold onto its early morning gains against the Dollar, and the single currency is set to end the month on a high.
Eurozone inflation picks up to 2%
Annual inflation in the eurozone edged up to 2% in June from 1.9% in May according to the ‘flash’ Eurostat, the region’s statistics office.
It is the highest rate in more than a year, as higher energy prices pushed price growth above the European Central Bank’s target of just below 2%. Inflation was also pushed up by higher prices of food, alcohol and tobacco.
The rise will be welcome news for Mario Draghi and his colleagues on the governing council of European Central Bank, providing justification for their decision to phase out the bank’s massive bond-buying programme by the end of the year.
UK mortgage approvals highest in four months
The number of mortgages approved for house purchase rose to a four-month high of 64,526 in May, according to figures from the Bank of England.
It was up from 62,941 in April and beat economists expectations of 62,200 approvals.
However, the data also reflected a weak backdrop for consumers, with 8.5% growth in unsecured consumer lending the weakest since November 2015.
Jeremy Thomson-Cook, chief economist at WorldFirst, is not impressed by the upward revision to UK GDP and says it shouldn’t be soothing fears.
Headlines can be misleading and while an upgrade is always welcome, it comes purely down to a revision to the contribution of the construction sector which contracted by only a miserable 0.8% against a previously abhorrent estimate of 2.7%.
Q1 is still the quarter of the ‘Beast from the East’ and sizeable disruption to consumption habits as a result and while Q2 data will be higher, it is unlikely to do anything than confirm the malaise at the heart of the UK’s economic engine.
UK construction revised up but still weak
UK growth was revised up after more the ONS received more data from the construction firms, which showed a fall in output in the sector was smaller than previously estimated.
Construction output fell by 0.8% between January and March, and not by a sharper 2.7% according to earlier estimates from the ONS. It was the weakest growth since the third quarter of 2012.
Despite the upward revision, the ONS said Britain’s building industry struggled over the first quarter, and the Beast from the East wasn’t entirely to blame:
While there is some evidence of an impact from the bad weather on this industry, our initial analysis shows weakness in construction throughout the quarter, not just the period during the bad weather.
Pound strengthens against the dollar
The pound is up 0.7% against the dollar to $1.3169, building on earlier gains after the ONS revised up UK growth in the first quarter to 0.2% from 0.1%.
Sterling was briefly up against the euro, but has edged lower again, down 0.1% at €1.1296.
UK growth revised up
Breaking: The UK economy grew by 0.2% in the first quarter of 2018, slightly faster than the 0.1% previously estimated by the Office for National Statistics.
Rob Kent-Smith, head of GDP at the ONS, explains the revision:
GDP growth was revised up slightly in the first three months of 2018, with later construction data, and significantly improved methods for measuring the sector, nudging up growth.
These improved methods, introduced as part of ONS’s annual update to its figures, will lead to better early estimates of the construction sector with smaller revisions in the future.
Overall, households have now been borrowers for six consecutive quarters as rising prices have continued to squeeze domestic budgets.
Investment by both local and central government and the private sector fell, with spending on buildings, machinery and software all seeing notable falls.
Updated
MPs warn Bank of England over lack of diversity
MPs on the influential Treasury committee have issued a warning to the Bank of England over the lack of women in senior roles.
In the first intervention of its kind, the committee warned it could block the appointment of male candidates to its main policymaking committees.
The Bank’s nine-strong Monetary Policy Committee, which sets interest rates, includes only one woman - Silvana Tenreyro.
Nicky Morgan, Conservative MP and chair of the committee, said MPs were “prepared to take progress on this matter into account”.
Read our full story here:
Downing Street says BAE Systems’ Australian shipbuilding win is the biggest Naval defence contract for a decade.
PM @theresa_may has welcomed a shipbuilding contract worth up to £20 billion between BAE Systems and the Australian government as the biggest of its kind for a decade: https://t.co/2EWtIBRGtH
— UK Prime Minister (@10DowningStreet) June 29, 2018
BAE Systems wins £20bn Australian warship contract
British defence manufacturer, BAE Systems, is one of the FTSE 100’s biggest risers this morning after it won a £20bn contract to build Australian warships.
The company will build nine new ships at the Osborne Naval Shipyard in Adelaide. The ships will be modelled on BAE’s Type 26 global combat ship and will be known as the Hunter class.
Theresa May said the export of a British design for the frigates would be an “enormous boost” for the UK economy, although the jobs associated with the programme will be created in Australia.
Production of the first ship is expected to start in early 2020s, BAE said. Shares are up 2.4% at 647p.
European markets rise sharply in early trading
Trading is underway across Europe and the mood is upbeat:
- FTSE 100: +1% at 7,691
- Germany’s DAX: +1.2% at 12,328
- France’s CAC: +1.4% at 5,350
- Italy’s FTSE MIB: +1.5% at 21,751
- Spain’s IBEX: +0.9% at 9,675
Euro rallies after EU leaders agree deal on migrants
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The euro is rallying after EU leaders in Brussels broke the deadlock on migration talks after a marathon session lasting nearly 10 hours.
Investors fearful of an escalation of political instability breathed a sigh of relief when Donald Tusk, head of the European Council, tweeted the news shortly before dawn.
The euro jumped to $1.1650, and is currently up 0.6% at $1.1642.
It is also up 0.3% against the pound at 87.5p.
EU28 leaders have agreed on #euco conclusions incl. migration.
— Donald Tusk (@eucopresident) June 29, 2018
Fears had been mounting that a deal in Brussels would not be struck, when Italy threatened to veto the text, unless other EU states did more to help with people arriving on Italian shores.
Jasper Lawler from London Capital Group explains why traders felt relief at the deal:
The migrant crisis in Europe threatened German Chancellor Angela Merkel’s fragile coalition, which was in danger of collapsing if she left the summit without a deal. The euro picked up from €1.157 to €1.162 in the space of a few short minutes.
The deal will also reassure investors of broader political stability in the European Union, lowering the risk of any further breakaway from a member country.
Our full story on the deal:
Also coming up:
- 9.30am BST: UK GDP, third estimate of first quarter growth
- 9.30am BST: UK mortgage approvals for May
- 10am BST: Eurozone inflation, flash estimate for June
Updated
