And finally, after a quiet session, Britain’s FTSE 100 has closed at a seven-week high.
Mining stocks led the mini-rally, thanks to the jump in metal prices earlier today. The drop in the pound also helped exporters, but bookmaker Paddy Power shed around 5% after announcing its CEo was stepping down.
The French market was flat, though, while Germany’s DAX finished down 0.33%.
European Closing Prices:#FTSE 7531.94 +0.27%#DAX 12257.17 -0.33%#CAC 5207.89 +0.09%#MIB 22031.17 +0.43%#IBEX 10676.5 +0.17%
— IGSquawk (@IGSquawk) August 7, 2017
Over in New York, the Dow Jones could be on track for its ninth record closing high in a row, after rising at the open.
David Madden of CMC Market explains:
The Dow Jones hit another record-high as the bullish sentiment is not showing any signs of slowing down. The US equity benchmark was on a roll last as it was racking up fresh record-highs, and the better-than-expected jobs report was the icing on the cake
That’s probably all for today. Thanks for reading and commenting. GW
Fitch raises growth forecasts, but fears Brexit weakness
Rating agency Fitch has revised up its 2017 and 2018 world GDP growth forecasts.
It now expects the global economy to grow by 3.0% this year, up from 2.9% in June, accelerating to 3.2% in 2018 (from 3.1%).
Brian Coulton, Fitch’s Chief Economist, says the global picture looks brighter:
“The revisions are led by emerging markets and China in particular, whose recovery has been more pronounced than anticipated. But data continue to suggest a synchronised global expansion across both advanced and emerging market economies.
Spill-overs from the rebound in emerging market demand are reflected in the fastest growth in world trade since 2010”
However.... Fitch is concerned that the UK economy is faltering, and expects further weakness as negotiations with Brussels intensify.
It says:
The slowdown in the UK since late 2016 was confirmed with the 2Q17 GDP release, revealing that growth remained subdued at 0.3%. Declining real incomes and a household saving ratio that is already at a 50 year low suggest that consumer spending will slow further.
Brexit uncertainties will weigh heavily on investment this year and next.
Dow hits record high (yes, another one)
Over in New York, the Dow Jones industrial average has crept up to another record high.
The Dow ticked up to 20,092 points at the open, a small gain of just 4 points, but leaving it on track for its ninth record rise in a row.
Dow opens at another record high https://t.co/we9t4evqaT pic.twitter.com/HXt5jTW335
— CNBC (@CNBC) August 7, 2017
Sterling hits 10-month low vs the euro
Splat! The pound has just hit a 10-month low against the euro, in a blow to any holidaymakers who haven’t got their spending money sorted yet....
Sterling has fallen by 0.5% agains the euro to €1.1036, meaning one euro is now worth 90.6p.
This has dragged the pound down to a five-month low against a basket of currencies....
Sterling's trade-weighted index, still down 13.2% since #Brexit referendum, hits lowest since March. Pound at 10-month low vs euro pic.twitter.com/WLfqzeFDzy
— Mike Dolan (@reutersMikeD) August 7, 2017
The pound has been weak since the Bank of England decided not to raise interest rates last Thursday, and cuts its growth forecasts.
Persistent worries over Brexit are also hitting sterling; today, the government has been denying reports that it could pay a €40bn bill to leave the EU.
Global stock prices have crept up to a new alltime high today, as relief over last Friday’s decent US jobs report lingers.
Even in the age of budget airlines and cost-cutting, a pilot remains one of the ‘Must Have’ items for a successful flight.
But maybe not for much longer?
Swiss bank UBS have created a stir this morning, by predicting that dropping the pilot could save billions of pounds. But there’s a snag; some passengers aren’t prepared to step into a plane flown totally by computer, with no-one in the cockpit in case things go wrong.
It seems people aren't really that keen on flying in a pilotless plane yet. Even the keener youth seem mostly unkeen. Prob. biggest barrier. pic.twitter.com/HSTfr5ff1h
— Garry White (@GarryWhite) August 7, 2017
My colleague Patrick Collinson has the details:
Pilotless planes would save airlines $35bn (£27bn) a year and could lead to substantial fare cuts – if passengers were able to stomach the idea of remote-controlled flying, according to new research.
Full-size cargo planes will be airborne without pilots by 2025, according to the report by the investment bank UBS, but it predicts it will take until the middle of the century before passengers have enough confidence to board pilotless planes.
The savings for the airlines could be huge, UBS said. It estimated that pilots cost the industry $31bn a year, plus another $3bn in training, and that fully automated planes would fly more efficiently, saving another $1bn a year in fuel.
More here:
We’ll have to wait longer than expected before discovering how Greece’s economy fared in the last quarter.
That’s because Athens has decided to stop releasing ‘flash’ estimates of GDP, and is going to hold back until it has more comprehensive data.
This follows some wild swings between the two releases -- last quarter, the flash estimate plunged Greece into recession, before updated data showed the economy was actually growing.
That sort of thing might keep me amused, but it’s not great for investors or economists as they try to make sense of the situation
Reuters has the details:
Greece’s statistics service ELSTAT has suspended until further notice the release of flash quarterly estimates on the country’s gross domestic product because of divergences with provisional estimates, an official at the statistics service said on Monday.
The move means that flash data will not be issued on August 14. Nationwide quarterly GDP data will be released on September 1, taking into account more information than the early indicator of the flash estimate.
That quarterly figure, known as provisional data, can also be subject to revisions over time.
Greek GDP stats gaps prompt suspension of flash data https://t.co/uA9XEL4OOM #Greece
— Nick Malkoutzis (@NickMalkoutzis) August 7, 2017
Greece’s statistics office is under particular scrutiny right now, after its former chief was convicted of “breach of duty” last week.
Andreas Georgiou’s crime? Officially, for failing to tell the statistics agency’s board about the release of Greek fiscal data.
Many experts, though, say Georgiou is paying the price for his efforts to improve Elstat, and making its data more reliable and accurate.
As Yale professor Stathis Kalyvas puts it:
Just to let the absurdity sink in: Greece falsified its official statistics for years & the only person prosecuted is the one who fixed them
— Stathis Kalyvas (@SKalyvas) August 5, 2017
Here’s our news story about the UK house price slowdown:
Germany’s stock market is lagging behind the rest of Europe today, after this morning’s surprise fall in industrial output.
Britain’s FTSE 100 has risen to a seven week high, though, and is not far from its record closing high of 7,547 points.
Mining companies are driving the rally in London, after a jump in commodity prices overnight.
Anglo American, Glencore, Rio Tinto and BHP Billiton are all up over 1%, after Iron ore prices surged.
Joshua Mahony of IG explains:
New Chinese regulations over capacity curbs in the winter means that buyers are now pushing their demand forward somewhat, driving Chinese steel futures to their highest level in more than four years, while Iron Ore rose 7% overnight.
Otherwise, the City is a little subdued. Foreign exchange markets are a particular snooze fest, with the pound hovering around $1.3050
Pretty quiet in FX land - cable not doing much... pic.twitter.com/y8fOEr2hcy
— Neil Wilson (@neilwilson_etx) August 7, 2017
City of London deserted. Either 1) The quants have already gone to Frankfurt or 2) War has broken out or 3) It's August.
— Jennifer Selway (@jenselway) August 7, 2017
Sentix: Eurozone investor confidence dips
Newsflash: Investor morale across the eurozone has dipped, as expectations for the future weaken.
The Sentix investor confidence index dropped to 27.7 this month, down from 28.3 and slightly below expectations.
EU Sentix Index. pic.twitter.com/slMX7bfVBM
— Sigma Squawk (@SigmaSquawk) August 7, 2017
Sentix, a market research firm, says that the eurozone economy seems to have peaked.
Optimism in the US has dropped, while German sentiment has been hurt by the scandals in its car industry, it says.
The economy is going through a zenith https://t.co/72BgP0SIpQ sentix #economic #index #leading indicator pic.twitter.com/g4ajaicCbJ
— sentix (@sentixsurvey) August 7, 2017
Halifax house price survey: What the experts say
Jeremy Duncombe, director of the Legal & General Mortgage Club, is concerned that UK house prices are still unaffordable for many people, despite the recent slowdown.
“Year-on-year house prices continue to creep upwards, in spite of political and economic headwinds.
With prices still rising, first-time buyers are now on average having to save for over 11 years to save enough just for a deposit, and for those who are unable to save, they face staying in Generation Rent indefinitely.
Jonathan Samuels, CEO of property lender, Octane Capital, says lack of housing supply is holding prices up.
“The UK’s property market is in a steady but decisive slowdown mode.
Only the lack of properties for sale is preventing the market from deteriorating more quickly.
While the jobs market is strong, buyers are increasingly feeling the pinch due to stubbornly high inflation and low wage growth.
Squeezed finances will invariably see new house purchases put on the back burner. At the higher end of the market, stamp duty has put countless transactions to the sword....
Jonathan Hopper, managing director of Garrington Property Finders, reckons the UK housing market is cooling, but nothing more serious:
“The speed of price growth has slowed substantially, and at a national level average prices are still flatlining rather than falling.
“But what growth there is is meandering and listless, with prices being propped up by record low levels of supply.
“On the other side of the equation there is genuine buyer intent, and rumours that the government may review the Help to Buy scheme could add fuel to the fire as some hesitant buyers may be spurred into action by the idea of ‘use it or lose it’.
Property expert Henry Prior has tweeted the key points from the Halifax report:
Halifax marks house prices up 0.4% on last month and by 2.1% over the last year. pic.twitter.com/H1qonvP284
— Henry Pryor (@HenryPryor) August 7, 2017
Average house prices fell slightly (0.2%) over the last quarter according to Halifax the most useful figure they say in their monthly report
— Henry Pryor (@HenryPryor) August 7, 2017
Joshua Mahony of IG points out that house price growth has been weak for months;
Halifax HPI rose to 0.4%. However, H1 2017 hasn't seen a MoM figure above 0.4%. Last time we saw 6m period of such low growth was 2008
— Joshua Mahony (@JMahony_IG) August 7, 2017
Economics journalist Dharshini David points out that prices are still rising faster than wages.
Annual house price growth slows to 4 yr low of 2.1% according to Halifax - but at that rate, still outpacing earnings growth
— Dharshini David (@DharshiniDavid) August 7, 2017
UK house price growth hits four-year low
Breaking! UK house prices growth has hit a four-year low.
Halifax’s monthly survey, just released, shows that prices in the three months to July were only 2.1% higher than a year ago.
That’s the weakest annual rate since April 2013, down from a blistering 10% back in March 2016.
House prices in the last three months were 0.2% lower than in the previous three months (February-April). That’s the fourth quarterly fall in a row, and another sign that the economy is slowing.
In July alone, though, prices rose by 0.4% compared with June.
Russell Galley, managing director at Halifax Community Bank, says demand for houses is dropping as people are hit by rising inflation.
“House prices continue to remain broadly flat, as they have since the start of the year. Prices in the three months to July were marginally lower than in the preceding three months, while the annual rate of growth has edged down from 5.7% in January to 2.1% in July; the lowest rate since April 2013.
“The rise in the employment level by 175,000 in the three months to May helped push the unemployment rate down to 4.5%, the lowest since June 1975.
However, this improvement in the jobs market has not, as yet, boosted wage growth, resulting in earnings rising at a slower rate than consumer prices. This squeeze on spending power, together with the impact on property transactions of the stamp duty changes in 2016 now being realised, along with affordability concerns, appear to have contributed to weaker housing demand.
More reaction to follow....
We also have worrying signs that British households are being squeezed again, as consumer spending falls again.
My colleague Zoe Wood explains:
Britons are slashing spending on new clothes, cars and foreign holidays, according to new figures that underscore the effect on consumer confidence of rising living costs and the uncertainty surrounding Brexit.
Spending fell for a third consecutive month in July, according to Visa’s consumer spending index, which it said was the longest-running slump since February 2013. The 0.8% year-on-year decline in July was worse than June’s 0.2% drop, but not as steep as the fall of 0.9% in May.
UK consumers cut spending on clothes, cars and foreign travel https://t.co/zlZA9iUWPR
— Aditya Chakrabortty (@chakrabortty) August 7, 2017
One month’s bad data doesn’t equal a crisis.
Marc Ostwald of ADM Investor Service points out that June’s disappointment follows a “very robust run” of growth this year.
To suggest it marks a trend change would be extraordinarily premature, the more so given the post re-unification record high in the Ifo Business Climate.
Holger Sandte of Nordea Markets also isn’t panicking.
Fall in German #production could be just summertime noise. PMIs still look good but momentum may have peaked pic.twitter.com/sjn799GMdH
— Holger Sandte (@HolgerSandte) August 7, 2017
Economist Carsten Brzeski of ING says we shouldn’t be too alarmed by these figures.
He writes:
As unexpected as today’s drop in industrial production has been, the German economy is still on track to post another strong quarter.
Given the sound fundamentals, a month of weaker industrial data should only be like a rain shower on hot and humid summer day: a welcome refresher.
[Frankly, some hot and humid days would be a welcome change for Britain right now...]
But, Brzeski also warns that the ongoing scandals at Germany’s car industry could hurt the economy:
The automotive industry is currently in the middle of structural changes; partly self-inflicted and partly stemming from external factors.
To some extent, the industry is in a similar situation as the banking sector. In Germany, the self-inflicted part goes back to the diesel emission scandal and the latest antitrust allegations, while at the same time possible bans of diesel bans in cities have emerged, international competition for electric vehicles has increased and phenomena like car sharing could also put pressure on future automobile productions.
The 1.1% drop in German industrial output in June is ‘not what the doctor ordered’, says the Financial Times:
It adds:
Before today’s figures, German factories had been enjoying five straight months of growing output, driven by a robust economic recovery in the eurozone, rising consumer confidence in the bloc, and a brightening world economy.
German stats office Destatis said investment goods production contracted 1.9 per cent, while consumer output was down 0.7 per cent in June. Energy production was up on the month.
German factory output suffers worst month of the year in June https://t.co/KRYbFcWCxy pic.twitter.com/aI0Yd6XrBe
— fastFT (@fastFT) August 7, 2017
Updated
The agenda: German factory output disappoints
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Germany has got the new week off to a disappointing start, reporting that factory output fell unexpectedly in June. It’s the biggest decline this year.
German industrial production fell by 1.1% during the month, dashing expectations of a 0.2% gain, and reversing May’s 1.2% rise.
The downturn was due to weaker construction output, as well as a dip in the production of intermediate, consumer and capital goods.
This is the first decline this year, and potentially a sign that the powerhouse German economy is starting to lose momentum.
#Production in June 2017: –1.1% seasonally adjusted on the previous month #productionInIndustry https://t.co/QLC9l8QPqN pic.twitter.com/APDm6Uqz9q
— Destatis news (@destatis_news) August 7, 2017
But... this is only one month’s figures, so not a reason to panic.
Output is still up strongly over the last quarter, by around 1.8%, so this could just be a monthly blip.
Fred Ducrozet of Swiss bank Pictet shows how German output has been strong this year:
Before you talk about German IP disappointment (up 1.8% in QoQ). pic.twitter.com/moVQ4vps0u
— Frederik Ducrozet (@fwred) August 7, 2017
I’ll pull together more reaction now...
Otherwise, the diary is a little quiet, apart from a new survey of UK house prices from Halifax and a regular update on eurozone confidence.
European stock markets are expected to open higher, with the FTSE 100 called up around 20 points.
Our European opening calls:$FTSE 7531 +0.26%
— IGSquawk (@IGSquawk) August 7, 2017
$DAX 12318 +0.17%
$CAC 5216 +0.24%$IBEX 10690 +0.30%$MIB 21982 +0.21%
The agenda:
- 8.30am BST: Halifax survey of UK house prices in July
- 9.30am BST: Eurozone investor confidence survey from Sentix
Updated
