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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2pm) and Nick Fletcher

Eurozone outpaces UK with fastest growth since 2011 – as it happened

The Eiffel Tower in Paris
The Eiffel Tower in Paris Photograph: Westend61/Getty Images/Westend61

European markets edge higher

Positive eurozone economic data in the form of strong third quarter growth figures and falling unemployment meant a fairly positive end to the month for European equities.

Most markets managed to close higher, although Germany’s Dax was closed for a public holiday. In the US, investors were more focused on this week’s Federal Reserve meeting than upbeat consumer confidence figures, but Wall Street still managed to make slight gains after an uncertain start.

The final scores showed:

  • The FTSE 100 finished up 5.27 points or 0.07% at 7493.08
  • France’s Cac closed 0.18% better at 5503.29
  • Italy’s FTSE MIB was up 0.18% at 22,793.69
  • Spain’s Ibex ended 0.74% better at 10,523.5
  • In Greece, the Athens market added 2.12% to 759.30

On Wall Street, the Dow Jones Industrial Average is currently up 17 points or 0.08%.

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

The continuing dispute between Spain and Catalan separatists should have no immediate effect on the country’s sovereign debt ratings, says S&P Global.

The agency said that the “orderly application of Article 155 [removing Catalonia’s regional government from office] and the frontloading of regional elections have reduced the likelihood of a short-term escalation of tensions.”

It said it did not believe Catalan independence would take place:

As we expected, no national government has recognized Catalonia as an independent state. The most prominent credit risk we continue to see is that the related tensions could lead to a sustained drop in business and consumer confidence and potential business disruption from fourth-quarter 2017 onward, especially in Catalonia. While the economic consequences of these developments have yet to emerge, Spain’s most recent economic data were positive. In third-quarter 2017, GDP growth remained robust at 0.8%, while the unemployment rate fell to 16.4%, the lowest level since 2008. This confirms our expectation of Spain’s strong economic performance.

US markets are more focused on this week’s Federal Reserve meeting than the positive data we have seen today. Connor Campbell, financial analyst at Spreadex, said:

Despite a very good afternoon for data the Dow Jones and dollar were reticent to do much this Tuesday, investors holding back ahead of tomorrow’s Fed statement.

The CB consumer confidence reading smashed expectations, coming in at 125.9 against the 121.1 forecast and the 120.6 seen in September (itself revised higher from the initial estimate). The Chicago PMI was also pretty muscular; at 66.2 it hit its best level in around 3 years.

Yet off the back of these numbers the Dow Jones could only rise 0.1%, while the greenback actually fell 0.3% against the pound. That’s likely because investors are a bit nervy ahead of the week’s Fed meeting. While a December hike seems pretty much locked on – with the CME Group’s FedWatch tool pointing to a 98.2% chance of a rate rise in the festive month – the market will still be looking for a firmly hawkish statement from Janet Yellen on Wednesday.

Elsewhere the FTSE saw its daily gains shrink to just 0.1% as the afternoon wore on, leaving the index once again the wrong side of 7500. Sterling, on the other hand, stretched its legs against the euro, doubling its growth to 0.4%, while cable climbed back above $1.325, as investors continue to focus on Thursday’s BoE rate vote.

Over in Greece, and there is some good news for the country from this morning’s eurozone jobs figures. Helena Smith reports:

Greek unemployment dropped to 21 % in July [the latest data available] according to the European statistics agency (Eurostat), with the number of jobless Greeks at 1.01m. Of that number 17.5 % were men and 25.3 percent women, it said.

At the height of Greece’s debt crisis four years ago, unemployment nudged 28 % spurring a massive exodus of hundreds of thousands of qualified Greek abroad.

The jobless rate among those under the age of 25 also dropped from 43% in June to 42.8%.

Meanwhile, well-placed finance ministry officials say the government is also planning a second foray into the bond market possibly as early as next month, before Greece completes a third bailout review with the international bodies keeping the debt-stricken country afloat.

News of the prospective foray, in effect a second test run, would prepare Athens for exit from its current bailout programme which expires in less than a year. Greece successfully put its toe back into bond market for the first time since 2014 in July but analysts insist that real economic recovery will only come when its staggering debt pile is ultimately tackled.

More on the UK crackdown on fixed-odds betting terminals in bookmakers shops.

Here’s our latest report from Rob Davies:

And here’s Rob on BBC Radio Scotland talking about the issue (from about 49.45).

Wall Street drifts ahead of Fed

US investors seem to be playing its safe ahead of this week’s Federal Reserve meeting.

Despite further upbeat trading statements from the likes of Kellogg and Mastercard, the Dow Jones Industrial Average is virtually unchanged, down 0.74 points, while the S&P 500 has edged up 0.16% and the Nasdaq Composite has slipped 0.01%.

European markets are generally flat too, although Spain’s Ibex is up another 0.5% as fears over the Catalan independence threat continue to recede. Germany’s Dax meanwhile is closed for a holiday.

On the confidence figures, Lynn Franco, director of economic indicators at the Conference Board, said:

Consumer confidence increased to its highest level in almost 17 years (Dec. 2000, 128.6) in October after remaining relatively flat in September. Consumers’ assessment of current conditions improved, boosted by the job market which had not received such favorable ratings since the summer of 2001. Consumers were also considerably more upbeat about the short-term outlook, with the prospect of improving business conditions as the primary driver. Confidence remains high among consumers, and their expectations suggest the economy will continue expanding at a solid pace for the remainder of the year.

USconf31oct

These positive US figures come as the Federal Reserve holds its latest monetary policy meeting, and while no rise in interest rates is expected this month, all the signs point to an increase in December. (By then we should also know the name of the next Fed chair, with Donald Trump set to announce his appointee sometime this week.)

US consumer confidence at highest since 2000

Over in the US, and consumers were more confident than expected in October.

The Conference Board’s consumer confidence index came in at 125.9, better than the 121 figure forecast by analysts. It was also higher than September’s 120.6, itself revised upwards from 119.8, and the best level since December 2000.

Earlier there were also positive manufacturing figures from Chicago. The purchasing managers index rose from 65.2 in September to 66.2, better than the expected fall to 61.

Updated

Lunchtime summary

Right, time for a quick recap....

The Eurozone is on track to grow faster than America and the UK this year, after reporting better-than-expected growth figures over the last quarter.

Eurozone GDP grew by 0.6% in the three months to September, faster than expected and beating the UK’s 0.4% growth.

Eurozone and UK growth

On an annual basis, the eurozone economy expanded by 2.5% during the last quarter - which is its fastest rate since the first three months of 2011. Economists say the recovery seems to be strengthening.

In another boost, the eurozone unemployment rate fell to 8.9%, as the expanding economy helped people to find work.

Robert Gordon, CEO of Hitachi Capital UK, says British businesses should look for growth opportunities in the euro area.

“It is easy for businesses to fall into the trap of over-cautiousness when the UK’s own growth rate is slower, but capitalising on Eurozone successes now will help companies to secure their future.

Businesses can and should be doing as much as they can to drive up productivity and activity through positive investment in both people and assets, taking advantage of positive economic conditions to help them navigate successfully through times of uncertainty, and emerge in a position of strength.”

The day began with solid growth figures from France, which grew by 0.5% during the last quarter.

Like the wider eurozone, France racked up its best annual growth since the early days of the euro debt crisis (when Greece was being bailed out and the Italian government was faltering). It grew by 2.2% compared with Q3 2016, while the UK only grew by 1.5% over the same time.

Experts say France moved into a higher gear. Domestic demand drove the growth, with household spending and business investment both up.

Austria also had a decent summer, expanding by 0.8%.

Canada, though, seems to be slowing. It’s GDO shrank by 0.1% in August, after stagnating in July.

Hello..... sterling is suddenly pushing higher against the euro.

The pound has gained almost 0.5% against the single currency to a one-month high of €1.138.

This follows reports that the European Union’s chief Brexit negotiator, Michel Barnier, ha said he’s ready to speed up negotiations with the UK.

Canadian economy shrank in August

Canada flag in mountains

Newsflash: Canada’s economy unexpectedly contracted, a little, in August.

Canadian GDP shrank by 0.1% in August, due to a decline in mining and manufacturing output.

Canada’s good-producing sector shrank by 0.7% during August, wiping out a 0.1% rise in service sector output.

Economists had expected GDP to rise by 0.1% in August, having been flat in July as the strong growth recorded earlier this year has faded.

Unless something remarkable happened in September, Canada’s Q3 growth rate is going to struggle to match other advanced economies.

That has hurt the Canadian dollar, which is now falling against the US dollar.

Updated

Clothing is displayed inside the new John Lewis store in Westgate shopping centre in Oxford.

High street retailer John Lewis has fuelled worries about UK consumer spending, by posting its fifth weekly fall in sales in a row.

Takings at John Lewis’s department stores fell by 4.0% year-on-year in the seven days to Saturday 28th October. That includes a 1.9% drop in fashion sales, and a 7% slump in sales of electronics and home technology.

Last week, the CBI warned that retailers were reporting the biggest drop in demand since the recession....

Not only is the eurozone enjoying faster growth than Britain, it’s also experiencing less inflation.

The consumer prices index, which tracks the cost of living, rose by just 1.4% per annum this month, according to new data released this morning. That’s down from 1.5% in September.

In contrast, Britain’s inflation rate hit 3% in September, and the Bank of England expects it kept rising in October.

So with inflation down, unemployment down and growth up, the eurozone does look rather healthier than a few years ago:

Halloween decorations at the White House in Washington, U.S.

It may be Halloween, but there’s nothing scary in today’s eurozone growth figures, says Kathleen Brooks of City Index:

Eurozone growth is pretty broad-based right now, adding weight to the argument that the Eurozone’s economic recovery is well entrenched. Spain, for all of its political woes related to Catalonia’s bid for independence, posted a 3.1% GDP rate for Q3, while France saw growth beat expectations and reach 2.2% for last quarter.

We are still waiting to hear about growth rates in other major nations such as Germany and Italy, if they can post rates around this level then the mood music in Brussels is likely to be good.

The eurozone economy is benefitting from strong domestic demand, thanks to record low interest rates, says Raj Badiani, director at IHS Markit:

Households are experiencing a more supportive climate, characterized by still-cheap credit, while lower-than-expected inflation rates have limited the anticipated squeeze on household purchasing power during second and third quarters.

Additionally, still-rising employment and a retreating unemployment rate have lifted both household confidence and spending across the region in the first three quarters of 2017.

We’ve plotted the eurozone’s quarterly growth figures alongside the UK’s own GDP figures, to show how Europe powered ahead this year.

UK and eurozone growth figures
Chart: How Europe has grown faster than the UK this year

Updated

The long-awaited fall in eurozone unemployment is helping to drive growth this year, says Danielle Haralambous of the Economist Intelligence Unit.

Eurozone GDP: Instant reaction

Ulster Bank’s economists say the eurozone recovery is stronger than expected:

Ben Chu of the Independent shows how Europe’s growth rate overtook the UK a year ago:

Philip Shaw of Investec thinks the eurozone could outpace America this year, as well as the UK.

(last week we learned that US GDP grew by 2.3% over the last 12 months, so a little slower than the eurozone).

The eurozone has just posted its fastest annual growth rate since the beginning of the debt crisis, partly due to France’s strong performance.

That means the eurozone has outpaced Britain this year, as UK GDP only expanded by 1.5% over the last 12 months (as explained at 7.32am).

Eurozone posts 0.6% growth as recovery continues

Breaking! The eurozone grew by 0.6% in the third quarter of this year.

That’s a stronger reading than expected. In another boost, growth in the second quarter has been revised up to 0.7%, from 0.6%.

On an annual basis, the eurozone expanded by 2.5% -- a healthy rate, which underlines that the European economy has enjoyed quite a sparkling 2017.

The latest unemployment figures also show an improvement -- the euro area jobless rate has dropped to 8.9% for September, the lowest since the start of 2009.

Christopher Bailey (centre) at London Fashion Week in 2014
Christopher Bailey (centre) at London Fashion Week in 2014 Photograph: Richard Young/REX

Newsflash: Fashion chain Burberry have just announced that its chief creative officer, Christopher Bailey, is leaving.

Thats’s a surprise. It’s only three months since Bailey relinquished the CEO’s chair to Marco Gobbetti, a move that was meant to allow Bailey to focus on creative matters.

Bailey has received wide acclaim over the years for transforming Burberry into a global fashion house, so this could be a blow to the company.

As chairman Sir John Peace puts it: “Christopher is a unique talent and an exceptional person”, who has worked as a “great partner” at the firm.

Shareholders may be concerned. Burberry’s shares have fallen by 2% to the bottom of the FTSE 100 leaderboard.....

Updated

In other news, the UK government has outlined its plans to protect gamblers from fixed-odds betting terminals.

Under the plan, the maximum bet could be cut from £100 to just £2 (or possibly to £50, which seems rather less radical)....

Here’s another neat chart, which suggests France’s economy has shifted into a higher gear:

Barclays economics team agree, saying:

We think the French economy is poised to grow solidly next year, projecting 1.9% (consensus: 1.7%), with investment likely to provide increasing support to private consumption, the main growth engine.

Richard Turnill, BlackRock’s global chief investment strategist, is concerned that the UK is lagging behind other advanced economies such as France.

He believes Brexit uncertainty is weighing the economy down, meaning Britain faces a ‘tough slog’.

Turnill says:

The UK’s muted growth outlook stands in stark contrast to 2016, when the UK sat close to the top of G7 growth charts alongside Germany.

Brexit negotiations in particular are weighing on the UK economy. Significant progress on three key issues is needed for discussions to move on to the post-Brexit trade relationship between the UK and European Union (EU): the rights of EU citizens in the UK and vice versa, the UK’s financial obligations to the EU, and the Irish border.

Progress has been made in recent weeks on these issues, but not enough to advance talks, the EU leaders concluded at their recent summit.

Why French GDP is a boost to Macron

French President Emmanuel Macron.
French President Emmanuel Macron. Photograph: BLONDET-PO/SIPA/REX/Shutterstock

Reuters have a good first take on this morning’s French growth figures, for anyone just tuning in:

The French economy grew 0.5% in the third quarter from the previous three months as consumer spending picked up and investment remained robust, the INSEE national statistics agency said on Tuesday in a first estimate.

The result, which was spot in line with a Reuters poll of 27 analysts, meant gross domestic product (GDP) expanded by 2.2% over a year, the fastest pace of growth since 2011.

Upward revisions in the second quarter of this year and the fourth quarter of last year - both by 0.1 percentage point to 0.6% - gave a growth carry-over of 1.7%, the performance for 2017 if growth was zero in the final quarter.

Following the economy’s performance over the first nine months, President Emmanuel Macron’s government should have little trouble surpassing the 1.7% growth forecast it built its budget plans on.

Barclays have also hailed France’s growth performance:

AUSTRIAN GDP RELEASED

Newsflash: Austria’s economy grew by 0.8% in the third quarter of this year.

That matches the country’s growth rate in the second quarter, and is a pretty decent result.

It means Austria is growing as fast as Spain (and rather faster than both France and the UK).

WIFO, the think tank which compiled the report, says the recovery is “broad-based”, with foreign trade and domestic demand both growing.

On an annual basis, Austria’s economy is motoring along nicely with 2.6% growth.

Updated

Holder Sandte, economist at Nordea Markets, believes France’s domestic economy strengthened over the summer:

How France has outpaced the UK this year

Today’s report is fresh confirmation that France’s economy has outperformed the UK this year

French GDP grew by 0.5% in the first quarter of 2017, then 0.6% in Q2, and then 0.5% in Q3.

In contrast, the UK’s economy only expanded by 0.3% in the first and second quarters of this year, rising to 0.4% in the last three months.

That’s why France’s annual growth rate, at 2.2%, is so much better than the UK’s 1.5%.

UK growth figures

Updated

INSEE says that France’s annual growth rate, of 2.2%, is the strongest since 2011 -- when the eurozone debt crisis was exploding.

French GDP: What the experts say

Bloomberg’s Mark Deen is impressed by France’s performance over the last year:

Economist Fred Ducrozet, of Swiss bank Pictet, agrees that the recovery is on track:

Claus Vistesen of Pantheon Economics reckons that Paris is now going ‘toe to toe’ with Berlin in the growth stakes:

(reminder, we get German GDP on 14th November)

Updated

French GDP: Where did this 0.5% growth come from?

Today’s growth report shows that French household spending accelerated in the last three months, from 0.3% to 0.5%.

Businesses also kept spending on new machinery and equipment; ‘gross fixed capital formation’ rose by 0.8% during the quarter.

Inventory changes also boosted growth,as firms stocked up on new raw materials and components.

But, foreign trade was a drag on growth. Imports accelerated sharply (+2.5% after +0.2%) while exports decelerated significantly (+0.7% after +2.3%). INSEE says that France imported more transport equipment during the quarter, but sold fewer manufacturing goods abroad.

UK GDP
French GDP: The key components Photograph: INSEE

FRENCH GDP RELEASED

BREAKING: France’s economy grew by 0.5% in the third quarter of 2017.

That’s the fifth quarter of growth in a row, as the French recovery continues to gather pace.

Consumer spending and business investment drove French growth during the quarter, says statistics body INSEE.

In another boost for president Emmanuel Macron, the growth rate in the second quarter of 2017 has been revised up to 0.6%, from 0.5%.

The French economy has grown by 2.2% over the last 12 months. That’s the strongest annual growth rate since 2011, I think....

It’s also rather stronger than the UK, which only grew by 1.5% over the last 12 months (and 0.4% in the third quarter).

I’ll pull details and reaction together now....

The agenda: It's Eurozone GDP Day

A two Euro coin.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

European politicians and top officials will be hoping to avoid any Halloween shocks today, as the region’s economy comes under the microscope.

Yes, it’s Eurozone GDP day, when we find out how fast Europe’s recovery continued in the third quarter of 2017.

Economists predict that the eurozone’s quarterly growth rate dipped to 0.5% in Q3, from the almost-boisterous 0.6% recorded in April-June.

If so, that would beat the UK, which grew by 0.4% in the same period.

As well as the headline eurozone growth figure, at 10am GMT, we’re also getting data from France and Austria. Alas, we’ll have to wait until next month for other heavyweights like Germany and Italy.

We’ve already seen some signs that Europe did well in the third quarter - yesterday, Spain posted 0.8% growth in the last three months.

But that’s not all.... we also get new eurozone inflation and unemployment figures this morning. This splurge of data should give us a good picture of how the economy is faring.

Later today, Canada also posts growth figures.

It’s also going to be a busy morning for airline news, with budget operator Ryanair and manufacturer Airbus both reporting results.

Europe’s stock markets are expected to open fairly flat, as traders watch for political drama in America following yesterday’s indictments of three of Donald Trump’s former aides:

October’s been a good month for shares, as Michael Hewson of CMC Markets explains:

Despite the fallout from a new series of political surprises across Europe, the Teflon rally that we’ve seen since the beginning of the year shows no signs of slowing down apart from the occasional pause, with markets across Europe set to post significant gains in another good month for stocks.

Here’s the agenda:

  • 6.30am GMT: French GDP for the third quarter of 2017
  • 8am GMT: Austrian GDP for the third quarter of 2017
  • 10am GMT: Eurozone GDP for the third quarter of 2017
  • 10am GMT: Eurozone flash inflation rate for October
  • 10am GMT: Eurozone unemployment figures for September
  • 12.30pm GMT: Canadian GDP for August

Updated

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