Get all your news in one place.
100's of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.15pm) and Nick Fletcher

Wall Street falls 1%; Europe outpaces UK and US with strongest GDP growth in a decade - as it happened

Traders on the floor of the New York stock exchange as US markets slide
Traders on the floor of the New York stock exchange as US markets slide Photograph: Justin Lane/EPA

Dow Jones down 1.4%

The sell-off on Wall Street is getting worse.

The Dow Jones Industrial Average now down 368 points or 1.4%, while the S&P 500 is down around 1%.

Rising bond yields - and falling prices - ahead of the Federal Reserve’s latest interest rate decision, as well as a slump in healthcare shares, continue to do the damage.

“Investors are getting a bit worried about inflation which has led some people to believe the Fed might be more aggressive when it comes to raising rates,” SlateStone Wealth strategist Robert Pavlik told Reuters.

There is also the excuse of profit taking after the recent record breaking run for US markets, and by recent, I mean a run which was only broken on Friday.

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

Updated

European markets end sharply lower

With falling bond prices and concerns that shares may be overvalued after their recent record run, stock markets suffered a severe sell-off.

Investors have become nervous amid growing signs that central banks - whose supportive monetary policies have helped markets hit new peaks - are beginning to pull the plug on cheap borrowing and hefty bond buying programmes.

Add to that a slump in US healthcare shares after Amazon and co decided to enter the market, and it was a bad day all round for equities. The final scores in Europe showed:

  • The FTSE 100 finished 83.55 points or 1.09% lower at 7587.98
  • Germany’s Dax dropped 0.95% to 13,197.71
  • France’s Cac closed 0.87% lower at 5473.78
  • Italy’s FTSE MIB fell 1.35% to 23,480.92
  • Spain’s Ibex ended down 1.21% at 10,428.2
  • In Greece, the Athens market lost 2.08% to 868.08

There is little sign of a recovery on Wall Street, with falling bond prices and a drop in heathcare stocks pushing markets lower. The Dow Jones Industrial Average is now down around 288 points or just over 1%.

David Madden, market analyst at CMC Markets UK, says another factor for the US market decline is concern about what the Federal Reserve will say tomorrow at the end of its two day meeting:

Profit taking is rife on Wall Street as the hefty declines last night has spooked traders and now the selling has intensified. Investors have been concerned about the US stock market being overbought for some time, and now it seems the jitters are setting in.

The chatter is the Federal Reserve will raise growth and inflation expectations, and that is pushing up US government bond yields, which are now at a rate that is attractive to investors. The jump from stocks to bonds could continue until we hear from the US central bank tomorrow.

The US dollar index has fallen to a three year low, and that is likely to lead to inflation as imports are tipped to become more expensive. The perception that inflation will rise is fuelling the rise in US government bond yields.

Despite Goldman Sachs talking of a possible market correction, not everyone agrees.

Joshua Mahony, market analyst at IG, says Donald Trump’s State of the Union address later could give a renewed lift to flagging markets:

The global stock selloff has persisted into a second day, with overnight losses in Asia giving way to widespread selling in Europe and the US.

Interestingly, with gold and the yen gaining ground over recent weeks, there has clearly been an underlying risk-off move waiting to rear its head.

However, with treasuries selling off throughout the beginning of 2018, there is reason to believe that market confidence will not be gone for long, as investors shift away from bonds amid improved economic and corporate performance...

The focus is going to shift firmly onto the US from here on, as markets brace themselves for Donald Trump’s State of the Union address. Despite the pause in the US equity rally, there is reason to believe that Trump could provide enough of a boost to see us back into the highs yet again. Talk of a $1.5 trillion infrastructure package may simply be words for now, but with the tax reforms passed, there is a growing belief that Donald Trump can finally deliver.

Away from the markets, and Bank of England governor Mark Carney is appearing in front of the House of Lords economic affairs committee.

He is being quizzed on forecasting (timely, given the latest Brexit forecast confusion).

My colleague Andrew Sparrow is monitoring Carney’s performance in the politics live blog here:

Updated

As markets continue to wobble, Spreadex financial analyst Connor Campbell said:

The US open was not a welcome sight for the European indices, with an ugly start from the Dow Jones infecting the FTSE et al.

The Dow Jones plunged a stomach-churning 300 points after the bell, hitting an 8 day low of just under 26150 as investors stared down the barrel of an incredibly hectic rest of the week. There’s the unknown of this evening’s State of the Union address from Donald Trump; the first Fed meeting of the year on Wednesday, with rising bond yields suggesting something hawkish; and a non-farm Friday that may become even more important than normal dependant on what the central bank say mid-week.

Interestingly the dollar, which had been mounting something of a comeback as recent as this morning, completely gave up the ghost this Tuesday afternoon. Having at one point fallen below $1.40, cable jumped 0.4% to re-cross $1.41, while against the euro the greenback shed 0.3%, allowing the single currency back above $1.24.

All this spelt disaster for the European indices. The FTSE plunged 70 points, falling below 7600 for the first time in more than a month. The DAX and CAC, meanwhile, dropped 0.8% apiece, hitting 13210 and 5475 respectively.

Updated

The Dow Jones Industrial Average is now down 300 points, which puts it on course for its biggest one day fall since May last year.

Added to Monday’s 177 point decline, it would be the biggest two day points fall since June 2016 after Britain voted to leave the EU.

Updated

US consumer confidence improves

US consumer confidence remains strong, according to a new report from the Conference Board.

Its confidence index climbed to 125.4 in January from 1 revised figure of 123.1 in the previous month. Analysts had been expecting 123.1. (The survey was taken before this week’s decline on Wall Street of course.)

The decline on Wall Street has meant the falls in Europe have accelerated.

The FTSE 100 is now down nearly 1%, Germany’s Dax has dropped 0.9% and France’s Cac has fallen 0.8%. Trevor Greetham, head of multi asset at Royal London Asset Management, said:

Global stock markets dipped on Tuesday on concerns about rising US interest rates and high equity valuations.

This sell-off doesn’t come as a surprise. Investor sentiment has been getting very frothy, with our composite sentiment indicator hitting its highest reading since March 2017 this week.

The recent increase in share prices has been powered by the prospect of large corporate tax cuts in America so it’s noteworthy that US company directors have started to sell shares in their own companies in large numbers.

With expectations running high, we think the sell-off may have further to run and we reduced our exposure to equities in our multi asset funds yesterday, although we still remain overweight stocks.

With the world economy strong and interest rates low, we would probably buy a more pronounced dip.

The worst performer in the Dow is, unsurprisingly, United Healthcare:

UNited healh

And here’s our report on the new healthcare partnership causing all the fuss:

Wall Street opens sharply lower

US markets have come under renewed pressure, as investors face the prospect of rising interest rates and the withdrawal of central banks’ bond buying programmes.

With bond prices falling ahead of the latest Federal Reserve decision (no move is expected yet but there is a growing expectation of at least three more rises this year) the Dow Jones Industrial Average has fallen 230 points or 0.9% in early trading.

After Monday’s 177 point fall, that would mark the first two day decline since December. But bear in mind, US markets had hit new peaks as recently as Friday.

Meanwhile the S&P 500 opened 0.8% lower and the Nasdaq Composite fell just over 1%. Neil Wilson, senior market analyst at ETX Capital, said:

The rise in global sovereign bond yields has unsettled investors and hit riskier assets. US 10s are holding above 2.7%, while the 30-year T note is approaching 3%.

Certainly the dynamics have shifted in bond markets. Central banks are either out of the market or buying fewer bonds. The Fed is now in the business of selling not buying. The ECB seems to be teeing up a short taper that could see QE end in September, which is a shade earlier than most anticipated back in December. The BoJ is also tilting towards normalisation, albeit much more slowly.

Earlier this week Goldman Sachs warned of a possible market correction.

“Whatever the trigger, a correction of some kind seems a high probability in the coming months,” said Peter Oppenheimer, the bank’s chief global equity strategist. “[But] the continuation of low core inflation and easy monetary policy suggests that a correction is more likely than a bear market.”

A sharp decline in healthcare stocks is also hitting the market today, after Amazon, Warren Buffett and JP Morgan teamed up to form their own healthcare partnership.

Ahead of Wall Street opening, Lukman Otunuga, research analyst at FXTM, said:

Global equity bulls failed to make an appearance during Tuesday’s trading session as higher U.S. bond yields and caution ahead of the Federal Reserve meeting weighed heavily on sentiment.

World shares were under renewed selling pressure today with Asian shares tumbling lower during early trade, following Wall Street’s steep declines overnight. In Europe, equities tumbled amid the lack of appetite for risk. With Wall Street suffering its largest drop in more than four months on Monday, U.S. stocks could remain pressured by the negative sentiment this afternoon.

Updated

A quick summary

Updated

PwC also made this chart, showing how the eurozone outperformed other major economies last year:

Growth figures

Getting back to the eurozone growth figures...Barret Kupelian, senior economist at PwC, says:

“The good news keeps on coming from the Eurozone, which grew at a quarterly rate of 0.6% in the last quarter of 2017. Even though this is slightly slower than the previous quarter, the fuller picture for 2017 is overwhelmingly positive, with growth in the Eurozone ahead of the UK, US and Japan.

“Taking a more historical look at the growth track record of large advanced economies, the Eurozone can now boast holding the title of the fastest growing large advanced economy four times since the financial crisis compared to three times for the US and the UK and once for Japan.

PwC also expect the eurozone to do well in 2018, unless any ‘major unexpected shocks’ hit the global economy.

Kupelian says:

In our main scenario projection, we expect the Eurozone to grow by at least 2%, marking its strongest two-year streak since the global financial crisis.”

More here.

Updated

Economists are continuing to welcome today’s French GDP figures, which showed a strong pick-up in business investment.

This is from Emily Mansfield of the Economist Intelligence Unit (GFCF = gross fixed capital formation, or the purchase of new assets)

Nikolay Markov, senior economist at Pictet Asset Management, hopes this trend will continue:

The selloff continues! Wall Street is heading for a second day of losses, as heathcare companies are hit by the surprise arrival of Amazon in their sector...

Investors in US healthcare firms may need a lie-down, possibly with a cold flannel....

Amazon, Berkshire and JP Morgan form healthcare team

In other news....retail giant Amazon, Warren Buffett’s Berkshire Hathaway and Wall Street titan JPMorgan have announced a curious tie-up.

The three companies are going to create a not-for-profit company to give their own staff high-quality and transparent healthcare.

Veteran investor Warren Buffett suggests the trio are keen to shake up the way healthcare is provided in America.

Buffett says:

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy.

Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”

Pan Pylas of Associated Press has a good take on today’s growth figures:

The eurozone economy, for so long a source of uncertainty, has enjoyed its best year in a decade, clear evidence it has broken out of its prolonged and acute debt crisis that raised fears about the very survival of the euro currency.

In its first estimate for the fourth quarter, Eurostat, the European Union’s statistics agency, said Tuesday that the eurozone expanded by 0.6 percent in the October-December period from the three months before.

That more-than-healthy level of growth means that for the whole of 2017, the eurozone economy expanded by 2.5 percent, its best performance since 2007, when it grew 3 percent. The eurozone even grew faster than the U.S., which expanded by 2.3 percent.

In the decade since 2007, the eurozone has had to grapple with one crisis after another, starting with the financial crash of 2008 that prompted the deepest worldwide recession since World War II. That exposed the weak underbelly of the eurozone the state of the public finances in a number of member economies.

Four countries Greece, Ireland, Portugal and Cyprus had to be bailed out by their partners in the eurozone and the International Monetary Fund, and in return they made deep budget cuts to get their public finances into shape, hitting their economies hard.

The Greek economy, for example, shed around a quarter of its output, and saw unemployment and poverty levels ratchet higher.

It’s only recently that fears of a eurozone break-up have eased. Greece, notably, is set to emerge from its bailout era this summer, eight years after it first faced potential bankruptcy.

Another chart showing how the eurozone outpaced its major rivals last year:

ING’s Bert Colijn is also impressed that the eurozone grew by 2.5% during 2017.

He writes:

Economic growth has shifted to a substantially faster growth path over the course of 2017, and current GDP data confirms that. Eurozone growth for 2017 as a whole was stronger than many advanced markets, like the US and UK for example.

While detailed breakdowns have yet to be released, it seems that the Eurozone economy continues to fire on all cylinders. Investment has yet to recover from the crisis fully but has been an essential contributor to growth during the year.

However, Colijn is also concerned that the strong euro could hold back growth in 2018 (as exports will be less competitive)

Analysts at Ulster Bank are hopeful that the eurozone will continue to grow robustly in 2018.

Jacob Deppe, Head of Trading at online trading platform, Infinox, is impressed by Europe’s growth last year:

“Anything the US economy can do the Eurozone economy can do, slightly better it seems.

“This is the best economic growth the Eurozone has seen since before the Global Financial Crisis.

“Where we go from here is anyone’s guess. But with both the US and Eurozone growing in tandem and with Asian economies on a roll, the hope is that 2018 delivers continued growth, further confidence and economic stability for the first time in a decade.

“There remain issues on the horizon. Unemployment in the Eurozone, while falling, is still too high, particularly among the young.

European growth: What the experts say

We now have confirmation that Europe and America both grew much faster than Britain last year.

Economists Rupert Seggins has tweeted a handy chart:

Aila Mihr of Danske Bank says Europe’s economy is expanding strongly:

Europe records its strongest growth in a decade

NEWSFLASH: The eurozone and the wider EU have both posted their strongest annual growth since the financial crisis.

New GDP figures from Eurostat confirm that the European recovery remains on track, with annual growth of 2.5% during 2017 in the EU and the narrower single currency block. That’s the strongest annual growth in a decade.

In comparison, the UK grew by around 1.8% during 2017 (according to figures released last week)

Eurostat also reports that the eurozone and the EU both grew by 0.6% in the final three months of 2017, partly thanks to France’s 0.6% growth and Spain’s 0.7%.

Compared to Q4 2016, seasonally adjusted GDP rose by 2.7% in the euro area and by 2.6% in the EU28.

In another boost, Eurozone and EU growth in the third quarter of last year has been revised up, from +0.6% to +0.7%.

Eurozone growth figures
Eurozone growth figures Photograph: Eurostat

There may be some celebrations in Brussels as this data filters through. Three years ago, the eurozone was being rocked by the Greek debt crisis. Now, the region is looking calmer and more secure, despite Brexit.

Over in Frankfurt, the European Central Bank might feel vindicated after launching a massive stimulus programme to ward off deflation, drive down unemployment and keep the economy growing.

Updated

Economists are concerned by the rise in UK consumer borrowing:

UK mortgage approvals fall; consumer credit rises

Breaking; The number of new mortgages approved in Britain has hit its lowest in almost three years.

Just 61,039 mortgages were signed off in December, a drop of over 3,000 compared to November. That’s the smallest number since January 2015.

Bank of England figures also show that UK consumers borrowed an extra £1.5bn on credit last month.

That pushed the annual growth in credit to 9.5%, up from 9.3%.

So, people are finding it harder to buy a new house, and borrowing more on credit to make ends meet. Not a good sign for the UK economy in 2018.

Poland’s economy accelerated last year, according to new data.

Poland’s GDP expanded by 4.6% in 2017, up from 2.9% in 2016.

Mining companies are leading the selloff today:

Markets fall as Goldman warns of correction

Trader John Panin on the floor of the New York Stock Exchange last night
Trader John Panin on the floor of the New York Stock Exchange last night Photograph: Richard Drew/AP

Europe’s major stock markets have all fallen this morning, despite the solid growth figures from France and Spain.

The UK’s FTSE 100, the German DAX and the French CAC are all in the red, following last night’s losses on Wall Street.

European stock markets this morning
European stock markets this morning Photograph: Thomson Reuters

The selloff in government bonds in recent days is starting to spook the equity markets, encouraging traders to sell shares.

Markets have had a strong run, of course, but analysts are wondering whether a selloff is imminent. Donald Trump’s tax cuts are likely to push US inflation higher, especially if more firms pass savings onto their staff in pay rises. That in turn increases the chance of US interest rates moving up.

Yesterday, Goldman Sachs predicted that “a correction of some kind seems a high probability in the coming months.”

Updated

Some reaction to the Spanish growth data:

Spanish GDP rose by 0.7% last quarter

A Spanish flag

Newsflash: Spain’s economy grew by 0.7% in the final quarter of 2017.

That’s a slight slowdown, following 0.8% growth in July-September, but still a decent performance. It should make Spain one of the faster-growing European members.

Spain’s economy grew by 3.1% during 2017, matching 2016’s performance, according to the INE statistics body.

The last few months of 2017 were dominated by the Catalonian independence crisis, as the region tried to break away from Madrd.

Update: the pound is slipping lower.

The most encouraging part of the French growth report is that business investment has risen sharply.

This means French firms have boosted their spending on equipment, offices and factories - a sign that they’re more confident about their future prospects.

Fred Ducrozet of Swiss bank Pictet says it’s a ‘big story’:

Brexit worries are weighing on the pound again this morning.

Sterling has shed half a cent against the US dollar, to $1.402, after leaked government papers showed that Britain’s economy would be worse off under all three likely Brexit scenarios.

My colleague Rowena Mason explains:

The document suggested that chemicals, clothing, manufacturing, food and drink, and cars and retail would be the hardest hit and every UK region would also be affected negatively in all the modelled scenarios, with the north-east, the West Midlands and Northern Ireland facing the biggest falls in economic performance.

France is benefitting from President Emmanuel Macron’s election win and the upturn in the global economy, says Bloomberg.

They add:

Macron’s government is currently working with unions and business lobbies to overhaul France’s job training system, and will move on to unemployment insurance in coming months.

Finance Minister Bruno Le Maire plans a major economy law for the spring that aims to further loosen restrictions on businesses, as well as increase profit-sharing plans for employees.

Updated

French GDP: Growth of 0.6% last quarter

French national flags.

Newsflash: France’s economy grew by 0.6% in the last three months.

Strong business investment and rising exports boosted growth, and compensated for a slowdown in household spending.

This means France slightly outpaced Britain, which grew by 0.5% in the last quarter.

Statistics body INSEE says:

  • Total gross fixed capital formation (business investment) accelerated slightly to +1.1% after +0.9%
  • Household consumption expenditure slowed down (+0.3% after +0.6%).
  • Foreign trade balance contributed positively to GDP growth (+0.6 points after −0.5 points): exports accelerated markedly (+2.6% after +1.1%) while imports slowed down sharply (+0.7% after +2.4%).
  • Inventory changes made a negative contribution (−0.5 points after +0.3 points).

The figures also show that France’s economy expanded by 1.9% during 2017 - the strongest annual growth since 2011.

Updated

The agenda: Eurozone growth figures

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

Today we learn if Europe’s economic recovery is on track.

New eurozone growth figures, due at 10am GMT, are expected to show that the single currency bloc expanded by 0.6% in October-December. That would be another solid quarter, as the region puts the debt crisis behind it.

Individual figures from France (in a moment) and Spain will also give some country-level insights.

We’ll also be watching the markets closely. Yesterday, government bond prices fell (pushing up bond yields), fuelling fears that the bull market might be over.

Wall Street suffered losses last night, and European markets are expected to drop this morning.

Jasper Lawler of London Capital Group explains:

After such a promising end to last week where the Dow rallied 200 points to a fresh record close, trading on Monday couldn’t have been more different. US stocks experienced a spectacular reversal and plummeted overnight, as the US 10 year treasury yield pushed relentlessly higher. Concerns are starting to enter the market that inflation could be catching up and higher interest rates could pour cold water on the bull run.

As the US treasury bond sell off depended, US treasury yields shot up to a peak of 2.73%, the highest level since 2014.The Dow dumped 177 points in its worst trading day so far this year and the S&P dived 0.7%.

Plus, new UK consumer credit figures will show if Britons melted their credit cards last month, or reined in spending.

Here’s the agenda:

  • 6.30am GMT: French GDP for Q4 2017 (first estimate)
  • 8am GMT: Spanish GDP for Q 2017 (first estimate
  • 9.30am: UK consumer credit and mortgage approval figures for December 2017
  • 10am: Eurozone GDP for Q4 2017 (first estimate)

Updated

Sign up to read this article
Read news from 100's of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
'It Made Me Shy Away': Barry Keoghan Says Online Hate About His Looks is Affecting His Confidence
Barry Keoghan has opened up about the impact of online hate, saying negative comments about his appearance have become a serious issue affecting his daily life.
International Business Times UK
International Business Times UK
The internet is convinced Jeffrey Epstein was just spotted alive in Florida and the viral footage is genuinely haunting
The internet is absolutely buzzing right now thanks to a viral video showing a man dubbed “Palm Beach Pete” cruising through South Florida, and people are convinced he’s none other than convicted sex offender Jeffrey Epstein. This footage has really lit up social media, sparking immediate comparisons.
The Mary Sue
The Mary Sue
Not just boys: The overlooked story of ADHD in women and girls
When people think about attention-deficit/hyperactivity disorder (ADHD), they often picture a hyperactive young boy running around a classroom, not the quiet girl daydreaming in the corner, the chatty student who can’t finish her work or the mother who is chronically late and constantly searching for her keys.
The Conversation
The Conversation
A new start after 60: I went on 75 first dates – and wrote a book of Kama Sutra-inspired poetry
Zack Rogow thought he was ready for love after the end of a long relationship – but not everyone agreed. How did he get over the rejections?
The Guardian - UK
The Guardian - UK
New social media study identifies the children ‘more likely to develop anxiety’
Experts from Imperial College London suggest the relationship between social media and mental health is ‘complex’
The Independent UK
The Independent UK
Leonardo DiCaprio's Oscars 'Glow-Up' Stuns Fans — Ozempic or Plastic Surgery Rumours Explode
Leonardo DiCaprio's appearance at the 2026 Academy Awards in Los Angeles has sparked widespread discussion on social media, with fans reacting to his striking 'glow-up.'
International Business Times UK
International Business Times UK
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play