FTSE at two month high but European markets edge lower
A rise in banking shares helped lift the FTSE 100 to a two month high, with brokers saying they should benefit from a soft Brexit. Better than expected industrial production figures helped outweigh a jump in the UK trade deficit.
But European markets edged lower on uncertainty ahead of the Catalan parliament discussing independence. (Our live blog on the meeting is here.)
The final scores showed:
- The FTSE 100 finished up 30.38 points or 0.4% at 7538.27
- Germany’s Dax dipped 0.21% to 12,949.25
- France’s Cac closed down 0.04% at 5363.65
- Italy’s FTSE MIB fell 0.63% to 22,335.91
- Spain’s Ibex ended down 0.92% at 10,142.3
- In Greece, the Athens market added 0.65% to 755.03
On Wall Street, the Dow Jones Industrial Average is currently up 28 points or 0.13%.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
The IMF predictions are too pessimistic for the UK and too optimistic for China and India, says Nikita Shah at Capital Economics, who is also more optimistic about a fiscal stimulus in the US next year:
The Fund dropped its assumption of a fiscal expansion taking place [in the US], due to “significant policy uncertainty”. We think that Congress will pass a small fiscal stimulus early next year and that this will help to boost US GDP growth to 2.5% in 2018, a touch higher than the IMF’s forecast of 2.3%.
[On the UK] the headlines focussed on the 0.3pps downgrade to the IMF’s 2017 UK growth forecast from its projection in April. But this was partly due to the Fund catching up with weaker-than-expected growth early this year, which we had already incorporated in our forecasts. And although the IMF attributed this slowdown in the UK to the long-term adverse impact of Brexit starting to show, we think it instead reflects the (temporary) impact of the lower pound on consumers. Indeed, our forecast for GDP growth in 2018 of 2.2% is significantly higher than the IMF’s of 1.5%...
Our forecasts for the major emerging economies differ significantly from the IMF’s. Our view is that GDP growth in both China and India will be 6.0% this year, which is slower than the IMF’s forecasts of 6.8% and downwardly-revised 6.7%, respectively. In contrast, we expect the recoveries in Brazil and Russia’s economies to be stronger than the IMF expects.
The IMF’s growth forecasts suggest the global economy could be getting back to normal after the battering it received during the financial crisis, suggests Aviva Investors. Senior economist Stewart Robertson said:
After five years (2013-2017 inclusive) when the IMF routinely revised its global growth expectations lower, they have for the second time in a row revised it higher for the year ahead. The differences may be quite small, but the fact they are in a positive direction is news in itself. Having got used to regular disappointments, successive growth upgrades are an indication that things are perhaps changing in a good way – the economic expansion has become more entrenched. Solid foundations now provide a sound base for ongoing growth and slow normalisation after ten-years of doubt and setback.
At today’s press conference in Washington the IMF was keen to highlight that growth outcomes in the first half of 2017 were stronger than expected and also that the continuing economic recovery had become more broad-based. This being the IMF, however, it was not all good news. It was noticeable that compared to as recently as July, the UK was the only major developed nation not to receive an upward growth revision. The reasons for this are well-documented, largely the result of weaker consumer spending. Looking further ahead, the IMF referred to the “highly uncertain” medium-term outlook, a direct consequence of Brexit. The last time that Britain was such a notable underperformer was in the dark days of the 1970s. Let’s hope it is cyclical this time, not structural.
The IMF also stressed that “the recovery is not complete”. This is a strange choice of phrase, suggesting that there is a standard template for economic revivals. As any student of economic history will tell you, they are all different. Variations on a theme perhaps, but this one especially is treading a great deal of new ground. The themes that the IMF chooses to draw special attention to in advanced nations are below-target inflation in several countries and weak productivity growth and rising old-age dependency. We believe that global inflation will return gradually as long as growth continues, but recognise that the longer-term supply-side issues will be an enduring challenge for the decades to come.
More from Ireland:
There were two new initiatives in the Irish budget prompted by concerns over public health.
First, a Sugar Tax of 30 cents per litre on soft drinks which have between five and eight grams of sugar per 100 millilitres in them.
The Irish Heart Foundation described the imposition of the tax as a “landmark day in the fight against obesity.”
Sunbeds and tanning salons have been hit with extra VAT charges rising from 13.5 per cent to 23 per cent. The Irish government said this was in line with its National Cancer Strategy to reduce cancer particular of the skin. It is the most common form of cancer in Ireland.
The IMF’s forecasts have had little impact on the markets, reckons Connor Campbell, financial analyst at Spreadex:
[The IMF} was relatively upbeat this Tuesday, stating that the world economy should grow by 3.7% in 2017, up from 3.2% in 2016, while maintaining those levels in 2018. However, the IMF wasn’t so positive about the UK, stating it was an ‘exception’ to the overall chirpy outlook due to the uncertainty of Brexit, and the subsequent impact on wages and household spending.
Yet...none of this made too much difference to investors. Cable continued to chug along with a 0.3% to 0.4% rise, while sterling dipped 0.1% to 0.2% against the euro. The FTSE rode the pound’s inconsistent performance to a 20 point increase, while the DAX and CAC fell 0.4% and 0.2% respectively off the back of the euro’s half a percent jump against the dollar (a move that was already in place before the IMF upgraded the Eurozone’s growth forecasts).
Market-wise the biggest news was probably that the Dow Jones hit a fresh all-time high. But even this was pretty lame, the index briefly spiking to 22850 before settling back below 22800.
More on the Irish budget. Henry McDonald writes:
Ireland’s budget for 2018 has included some extra measures to help smaller and medium businesses cope with the impact of Brexit.
Paschal Donohoe, Irish Finance Minister, has announced a Brexit Loan Scheme for the small business sector in the Republic. SME’s employ 69 per cent of the Irish workforce. €25m is being set aside to help small businesses in the agri-food sector.
The body that promotes trade across the Irish Sea has welcomed the loan scheme. The British Irish Chamber of Commerce said the loan scheme would give the SME sector “the means to adequately prepare for Brexit [and] is vital as part of our national effort to mitigate the negative impacts of Brexit.”
Another major headline figure in the budget has been a promised €1.8bn for housing. There has been massive pressure on the Fine Gael minority government to start building more public housing in response to rising rents, soaring mortgage costs and the fact that there are 3,000 children currently living in emergency accommodation in Dublin.
He is asked about his first impressions of Donald Trump’s tax plans, and if he won’t answer that, could he say what would be an appropriate plan?
Obstfeld says, “Aren’t we on the second impression at least?”
He says he won’t indeed answer the first part of the question. He says there is a lot yet to be determined in the tax plan, people might think it is just detail but it is quite crucial to how the thing will work and what deficit or surplus in the government budget it will lead to.
As a general priniple, he says, simplification is a good thing; if it brings a sharp reduction in exemptions, loopholes, special giveaways allowing a reduction in rates, that is a good thing.
“We are increasingly aware that tax systems have to be cogniscent of how they affect inequality.” They need to be attuned to the needs of the middle class and those below the median.
What happens with government revenues is important as well, do you invest in infrastructure, people.
Where the US is, he adds, we feel that whatever the tax reform plan, it should not increase the deficit, tax reform should be revenue enhancing. The US could usefully use more revenue.
And the press conference ends.
The Guardian’s Larry Elliott asks about the risks to the outlook that the IMF has identified, and says the financial markets do not seem to be taking these on board. Are the markets being irrationally exhuberant?
Obstfeld jokes that it is fitting that Richard Thaler won the economics Nobel prize yesterday ( irrationality being one of his themes) although he adds “he wan’t the irrational exhuberance guy” (that was of course Alan Greenspan.)
He adds, “It is always difficult to determine what a fair asset price is in a rigorous way [but] when you view a number of indices at historic highs, you have to wonder.
“To some degree [markets] are supported by low interest rates, and growth expectations which could be disappointed.”
He says the IMF’s longer term growth rates, especially in advanced economies, could see a slowdown, and if interest rates rise more quickly than expected, there could be “an abrupt repricing [of assets] which could be disruptive.”
We are not ready to make a judgement that assets are overpriced. he adds, but we are ready to say there are risks and there could be a downward adjustment.
Updated
The IMF is asked about the effects of the recent hurricanes and tropical storms.
Obstfeld says they will obviously have a big impact on the regional outlook, less so on the global outlook. He says, “We stand ready with our rapid financing facility if that is needed.”
Going forward, if some events become more routine - with theories as to why, some linked to climate change - the international community has to think about what kind of support it can give to communities...the suffering is quite grave.
Wall Street has opened higher, with the Dow Jones Industrial Average up around 55 points or 0.25%.
US stocks open higher today, IMF upgrade to world growth may help sentiment, risk sentiment remains supportive, Vix just above 10 today.
— City Index (@CityIndex) October 10, 2017
On the US:
IMF’s Obstfeld: In ‘Wait-And-See’ Mode On US Policy
— LiveSquawk (@LiveSquawk) October 10, 2017
IMF’s Obstfeld: US Growth Upgrade Was Based On Strong Data In H1, Not Tax Plan
— LiveSquawk (@LiveSquawk) October 10, 2017
Updated
The IMF is asked by a Portuguese journalist about the situation in Catalonia.
Obstfeld says the situation in Spain is concerning, there is a lot of uncertainty, and we can only hope the parties do not act precipitously [but] negotiate. There are a lot of potential gains on both sides if they do settle.
There would probably be spillovers [from the Catalonia situation] to Portugal and other countries in Europe.
The IMF are now taking questions on the world economic outlook.
The panel is asked about Brexit, and the impact on the UK and European economies if no deal is agreed?
Maurice Obstfeld, the IMF’s economic counsellor, said, “We very much hope negotiations can be constructive and minimise the costs to both sides.”
But the clock is short, he added, especially as whatever deal there is has to be approved by the 27 members of the EU.
He said Theresa May’s speech in Florence was very constructive, when she suggested a two year transition period. That could be a good thing, he said, if it allows more time for adjustments, given there is a clear process in getting to the end point.
Updated
IMF declares Canada the winner of the fastest growing G7 economy competition for 2017. UK & US 2017 forecasts lower than April's WEO. pic.twitter.com/ibEcZ4OeIM
— Rupert Seggins (@Rupert_Seggins) October 10, 2017
Global economy gaining strength, with growth marked up at 3.6% this year and 3.7% for 2018 #WEO https://t.co/i8QzV8jOkB pic.twitter.com/1BZvEp12R7
— IMF (@IMFNews) October 10, 2017
And here is Larry Elliott’s analysis of the IMF report:
IMF warns global economic recovery may not last
Ahead of its annual meeting in Washington later this week, the International Monetary Fund has issued its latest update on the global economy. Larry Elliott writes:
The International Monetary Fund has said the global economy’s recent recovery may not last, despite a pickup in activity in all western countries except the UK.
Marking the 10th anniversary of the onset of the financial crisis, the IMF said there was a risk that governments could be lulled into a false sense of security by booming markets and policymakers needed to guard against complacency.
The Washington-based fund said in its half-yearly World Economic Outlook (WEO) that global output growth would increase from 3.2% in 2016 to 3.6% this year and 3.7% in 2018. It upgraded its growth forecast by 0.1 percentage points for this year and next from the last full WEO in April and the update to its forecasts in July.
The full story is here:
Updated
If NIESR’s estimate is right, the UK economy probably grew slower than the rest of Europe, for the third quarter in a row.
🇬🇧@NIESRorg GDP estimate shows slightly higher #UK GDP growth in Q3 than in Q2, however still weaker than rest of Europe $EURGBP pic.twitter.com/i87rFwE80A
— Danske Bank Research (@Danske_Research) October 10, 2017
NIESR: UK growth rose to 0.4% in Q3 2017
Just in: Britain’s economy probably grew by 0.4% in the last three months.
That’s according to the latest monthly forecasts from the NIESR thinktank.
If NIESR are right, that means the UK’s growth rate has picked up a little, from 0.3% in the second quarter of 2017.
Our monthly estimates of GDP suggest that output grew by 0.4 per cent in the third quarter of this year #NIESRGDP pic.twitter.com/a1IzuIYDLw
— NIESR (@NIESRorg) October 10, 2017
Any increase in growth is welcome, but this would still be below the UK’s recent trend growth.
Amit Kara, head of UK macroeconomic forecasting at NIESR, explains:
Although economic growth is likely to be a touch stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year and this at a time when real GDP growth in other major economies such as the Euro Area and the USA has strengthened. Looking ahead, we expect the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth and weaker sterling and away from domestic demand.
Kara adds that there is a “strong chance” that UK interest rates will be increased in November, if next week’s data shows that inflation has risen and the labour market is still strong.
Over in parliament, business minister Claire Perry has told MPs that the government “stands ready” to help BAE Systems workers.
Perry said the government would work to avoid compulsory redundancies at the company (but isn’t giving much detail about how, exactly).
She is being criticised by opposition MPs for not supporting the company.
In response, Perry denied that UK defence spending changes were responsible for the 2,000 job cuts announced today.
Minister says #BAE decision "normal business practise" and nothing to do with any gov procurement decisions - derisive snorts from #Labour
— Andy Bell (@andybell5news) October 10, 2017
Labour's @NiaGriffithMP says one way to help #BAE is for government to order new Hawk aircraft for the Red Arrows
— Andy Bell (@andybell5news) October 10, 2017
Minister taking questions on BAE. Each answer basically a variation of: "we're busy flying the flag" for British exports
— Jon Yeomans (@JonLYeomans) October 10, 2017
There’s no lack of productivity at the OBR, though. They’ve created a handy little video on Britain’s productivity problems:
FER17: as productivity growth disappoints again we review our forecast assumptions and the rationale underpinning them. pic.twitter.com/gPLo7NxX1l
— OBR (@OBR_UK) October 10, 2017
Ireland: Don't expect a giveaway budget today
Over in Ireland, Taoiseach Leo Varadkar says there will be “no bonanza” and “no fireworks” in today’s budget.
Speaking before a pre-budget cabinet meeting this Tuesday morning, Varadkar the latest financial measures would mark another “small sustainable step in the right direction for our country.”
His finance minister, Paschal Donohoe, is expected to announce modest tax cuts for middle income earners in Ireland of up to €250 per year.
Donohoe’s budget has been backed by the Independent Alliance and the main opposition party, Fianna Fail.
Fianna Fail operates a similar policy of confidence and supply to the Fine Gael minority government that the Democratic Unionist Party uses to keep Theresa May and the Tories in power.
The highlights the budget for 2018 in Ireland are expected to be:
- A rise in the Irish minimum wage by 30 cents to €9.55 per hour.
- A hike in stamp duty tax on commercial property sales by 5 per cent which could raise up to €400m for the Irish Exchequer.
- Tax cuts including the slashing of the Universal Social Charge that was imposed on Ireland by the IMF and ECB when the country was bailed out of national bankruptcy.
- €25 million allocated to the farming sector to help farmers with the fall out from Brexit.
- A sugar tax will be imposed but won’t be implemented until April next year.
- Fifty cents put onto a packet of twenty cigarettes, bringing the price to €11 for the first time.
- No rises in the price of alcoholic drinks.
The solution to Britain’s productivity problem must include raising skills levels among the nation’s workers, says TUC General Secretary Frances O’Grady:
“Britain’s productivity headache is a self-inflicted wound. Years of cuts, low public investment, and rising job insecurity have taken a heavy toll.
“Ministers need to return to the drawing board. Our yawning productivity gap is holding our economy back.
“With Brexit fast approaching, we urgently need to create more highly-skilled jobs. And improve workforce training and engagement.”
Making predictions is very difficult, especially about the future, as the old saying has it.
The OBR doesn’t shy away from this either. Today’s report shows how it has been too optimistic about UK growth and business investment, and also expected interest rates to be rather higher today.
Heads-up: I’ve just posted a new version of the UK trade data chart (in the 9.58am post) showing how imports hit a record high in August. You might need to refresh to see it.
Updated
Why UK productivity has been so poor
The OBR says there are several reasons why UK productivity growth has been so disappointing.
1) Firms aren’t spending enough on new equipment and infrastructure. Business investment today is just 5 per cent above its pre-crisis peak almost a decade ago, compared to 63% after the 1980s recession.
2) Zombie firms are clinging onto life. Record low interest rates mean that companies who would normally have gone bust are still operating, but not contributing much.
3) Brexit uncertainty is making bosses cautious. OK, this only explains recent productivity problems, but it’s possible that companies are choosing to hire workers, who can be laid off easily, rather than investing in new capital.
Here’s the end result:
OBR Forecast Evaluation Report is out. Unsurprisingly majors on productivity assumptions given how reality has failed to match expectations pic.twitter.com/2hx63ATwXw
— Matt Whittaker (@MattWhittakerRF) October 10, 2017
Lower productivity = lower economic growth.
OBR had previously forecast an increase of 1.6% in 2017.
— Richard Partington (@RJPartington) October 10, 2017
OBR says productivity revisions will hit GDP growth forecast. pic.twitter.com/k8TkbFMkW3
— Adam Parsons (@AdamParsons1) October 10, 2017
OBR: We'll downgrade Britain's productivity growth
The Office for Budget Responsibility has announced that it expects to “significantly” downgrade its estimates of Britain’s potential productivity growth.
The fiscal watchdog, which is independent of the government, has admitted that it has been too optimistic over productivity for many years.
It now plans to make amends at the next budget, in November. This is a serious blow to chancellor Philip Hammond - weak productivity means slower growth, and thus erodes the size of his war chest to help the UK economy.
In a new report, the OBR points out that productivity has lagged its forecasts since 2010, while employment and average hours worked have both exceeded forecasts.
The OBR says :
While we continue to believe that there will be some recovery from the very weak productivity performance of recent years, the continued disappointing outturns, together with the likelihood that heightened uncertainty will continue to weigh on investment, means that we anticipate significantly reducing our assumption for potential productivity growth over the next five years in our forthcoming November 2017 Economic and Fiscal Outlook.
So why is UK productivity so bad, and what did the OBR get wrong?
The watchdog says it had expected productivity rise as firms stopped ‘hoarding labour’ after the financial crisis and invested in new machinery instead. It also hoped that it would pick up once banks were strong enough to lend more to the real economy. But this hasn’t happened....
BAE cutting 2,000 jobs
In a blow to Britain’s manufacturing base, arms manufacturer BAE has announced plans to cut almost 2,000 jobs.
The axe will fall heavily on BAE’s factories in Lancashire, including its site at Warton on the outskirts of Preston.
The company is blaming a decline in orders for its Eurofighter Typhoon. It has also suffered from public sector spending cuts since the financial crisis. Unions are urging the government to help the company by committing to new orders soon.
Here’s the full story:
On this day in 2010 David Cameron said defence spending would fall by 8% over 4 years. 42k jobs, HMS Ark Royal, Harrier & Nimrod jets axed. pic.twitter.com/GMAlRqwzHV
— Colin Brazier (@colinbraziersky) October 10, 2017
Updated
This morning’s trade, industrial production and construction data paint a mixed picture of the UK economy, says Kate Davies of the Office for National Statistics.
Commenting on today’s Short-term economic indicator figures, ONS senior statistician, @StatsKate said: https://t.co/uIAp3H3Yfc pic.twitter.com/v9kEJ8x9dI
— ONS (@ONS) October 10, 2017
You can see the UK trade data yourself, here.
UK’s total trade deficit, excluding erratic items, widened by £2.9bn to £10.8bn in the 3 months to August https://t.co/AiFYMLCB5p
— ONS (@ONS) October 10, 2017
The Sun’s political editor is also struck by the rise in EU exports:
Today's @ONS trade figures: exports to EU growing, non-EU countries shrinking. Reversal from eurozone crisis years. pic.twitter.com/cCxiJABEmK
— Tom Newton Dunn (@tnewtondunn) October 10, 2017
Britain’s trade figures are no better if you strip out ‘erratic’ elements, such as trade in gold, precious stones and aircraft, and oil.
UK balance of trade in goods, excluding erratics and oil. I know the big rebalancing towards exports is coming, I can feel it in my bones. pic.twitter.com/LXADwfuTDm
— Mike Bird (@Birdyword) October 10, 2017
In better news, UK manufacturing output rose by 0.4% in August, better than expected.
That means British factories have enjoyed their best quarter of growth since February.
The country’s builders also had a better month; construction output rose by 0.65 in August, the first increased since May.
This may encourage the Bank of England’s monetary policy committee to raise interest rates next month.
Ian Kernohan, Economist at Royal London Asset Management, explains:
“Industrial Production rose by 0.9% in the three months to August, with the largest contribution coming from manufacturing. Construction output also picked up slightly in August, boosted by infrastructure and private house building. These figures will feed into the first estimate of Q3 GDP, ahead of the next MPC meeting in November.
A majority on the MPC appear committed to a rate hike at that meeting, which is now 80% priced in by the market.”
Labour MP Stephen Doughty says the widening of Britain’s trade deficit is “alarming news”, and shows the dangers of leaving the EU single market.
“We were repeatedly told that crashing the pound would result in a major boost for British exports. But 15 months on we are still waiting, as Britain’s trade deficit with the rest of the world continues to widen.
“These figures only serve to underline how reckless it is for the Government to be wrenching the UK out of the Single Market, our largest export market right on our doorstep, in pursuit of fantasy trade deals on the other side of the world.”
This is from Andy Bruce of Reuters:
Still no clear sign that weakened pound has been a boost for UK trade in an improved global economy.
— Andy Bruce (@BruceReuters) October 10, 2017
Record goods trade deficit.
Updated
UK's EU exports have risen
Brexit didn’t stop the UK expanding its exports to other European countries over the last three months.
Today’s report shows that Britain sold an extra £1.7bn of goods to the EU in June-August, but suffered a drop in sales to the rest of the world.
The ONS says:
Exports of goods to non-EU countries decreased by £4.0 billion (8.8%) between the three months to May 2017 and the three months to August 2017. As shown in Figure 2, almost half was due to a decrease in fuel exports (£1.9 billion).
Exports of goods to the EU increased by £1.7 billion (4.1%) between the three months to May 2017 and the three months to August 2017, due to machinery and transport equipment exports increasing by £0.8 billion, and smaller increases elsewhere.
Who needs EU trade oh wait pic.twitter.com/zL5yZZhC41
— Katie Martin (@katie_martin_fx) October 10, 2017
In total, the UK exported £42.7bn of goods to the EU in June, July and August, and imported £66.6bn.
Updated
The widening of Britain’s trade deficit last month is a disappointment, says Suren Thiru, head of economics at the British Chambers of Commerce.
Thiru writes:
Taken together with the recent widening of the current account deficit, the figures paint a rather gloomy picture of the UK’s external position.
“The latest trade data is further evidence that the decline in sterling’s value over the past year is doing little to boost the UK’s overall trade position. Businesses continue to report that the post-EU referendum weakness in sterling is hurting as much as its helping, with firms continuing to face higher input costs due to the weakening currency, particularly those locked into global supply chains.
For those companies that rely on overseas suppliers for their production equipment, a weak pound also makes investment in growth less viable.
As Ben Chu of the Independent points out, the drop in the pound last year hasn’t revitalised Britain’s exports:
Record high UK trade in goods value deficit in August. No sign of currency-driven rebalacing yet. @TheIndyBusiness https://t.co/KfWFlT7e8a pic.twitter.com/PGNBqUGmEw
— Ben Chu (@BenChu_) October 10, 2017
Updated
Britain's EU imports hit record high too
Britain’s imports of goods from the EU hit a record high last month.
The UK imported £22bn of physical items from Europe in August, but only exported £14bn, according to today’s report.
That highlights the importance of Britain’s economy to the rest of Europe. Brexit supporters will argue that this should help Theresa May cut a good trade deal.....
But the UK also imported £19bn of goods from outside the EU -- which is also a record high -- while exporting £13.8bn.
That’s why Britain’s overall goods deficit hit a record high last month, as this chart shows:
Updated
UK trade in goods deficit hits record high
Breaking: Britain’s trade in goods deficit with the rest of the world has hit a record high.
The gap between what the UK bought and sold widened to £14.245 in August, the Office for National Statistics reports.
That’s much bigger than expected, and up from £12.8bn in July.
Imports surged by 4.2% during the month, due to higher imports of chemicals, machinery and textiles.
Exports, though, only rose by 0.7% during the month.
UK’s good trade deficit hits record high in August due to jump in imports of chemicals, machinery and textiles @ONS
— David Milliken (@david_milliken) October 10, 2017
Despite a surplus in services trade, the overall UK trade deficit has now widened to £5.626bn, the biggest reading in 12 months.
*U.K. AUG. TOTAL TRADE DEFICIT WIDENS TO GBP5.6B
— WorldFirst (@World_First) October 10, 2017
So, about that rebalancing
Over the last three months, the total UK trade deficit in goods and services widened by £2.9 billion to £10.8 billion.
More to follow.
Updated
The pound is creeping higher in early trading, gaining 0.4 of a cent to almost $1.319.
That’s its highest level since last Wednesday, when Theresa May’s ‘nightmare’ party conference speech sparked speculation over her future.
Domino's shares surge after jump in sales
Domino’s Pizza shares are having a sizzling morning, jumping almost 11% in early trading and outperforming the rest of the London market.
Traders are pleased that it is pressing on with 90 new UK store openings this year, despite warning that British consumers are “uncertain”.
Sales across the fast food group jumped by 20% in the last quarter, with UK online sales also strong.
Steve Clayton, fund manager at Hargreaves Lansdown, says Domino’s is fighting off rising competition:
Domino’s is a cash generative business model and significant potential to add new stores in the UK and overseas. Domino’s are winning market share in the pizza delivery sector, not least due to the strength of their online ordering platform, which saw online sales in the UK rise 17.4%.
In Q3, Domino’s turned up the marketing heat, with a “Dine for £9.99” offer and customers responded strongly, despite increasing competition in the online food delivery sector from Just Eat, Deliveroo and Uber Eats.
Elsewhere, after a mixed session in Asia, European stock markets are pretty flat. The FTSE 100 has inched up a bit, but Spain’s IBEX has lost 0.4% amid Catalonian worries.
- Asia shares mixed
— Bloomberg (@business) October 10, 2017
- Japan steel scandal
- Dollar declines
- Lira steadier
- Oil higherhttps://t.co/xmMuboLJz1 pic.twitter.com/03KrMODfvt
Economics blogger Jeroen Blokland is impressed by this morning’s German trade figures:
New day, same story. German macro data beats estimates. Exports rise 3.1% in August, almost triple the increase expected. #EUROBOOM pic.twitter.com/2ztPyok4FN
— jeroen blokland (@jsblokland) October 10, 2017
The #EUROBOOM in one chart! Eurozone macro surprises have not fallen below zero for over a year. pic.twitter.com/ozZjrQb4jH
— jeroen blokland (@jsblokland) October 10, 2017
Just in: French industrial production fell unexpectedly in August, by 0.3%
Manufacturing output dropped too, by 0.4%.
Economists had expected industrial output to have risen by 0.4%, so this indicates that France’s economy may have softened a little last summer.
French industry down in August. Q3 still looks positive, but now unable to repeat Q2's stellar performance. My take: https://t.co/igXkPwEIAR pic.twitter.com/5NnB3Lo1eF
— Maxime Sbaihi (@MxSba) October 10, 2017
Updated
German trade surplus swells
Germany’s trade surplus has widened again, as Europe’s largest economy continues to enjoy a good year.
New figures released this morning show that seasonally adjusted exports rose by 3.1% in August, the biggest rise in a year, while imports only rose by 1.2%.
That shows that the stronger euro isn’t preventing German firms from racking up new business.
It pushed the German trade surplus up to €21.6bn, from €19.3bn in July.
On an annual basis, exports were 7.2% higher than a year ago:
German exports in August 2017: +7.2% on August 2016 https://t.co/KUiu2XXvza #foreigntrade #economy pic.twitter.com/fuk8DjpPXV
— Destatis news (@destatis_news) October 10, 2017
Whil
The agenda: UK economy in focus
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
UK trade is on everyone’s mind right now, with the Brexit negotiations struggling to make meaningful progress and the risks of no deal rising. So economists will be poring over the latest trade figures, due this morning, to see what shape Britain’s economy is in.
The City predicts that Britain ran up a trade deficit of around £2.8bn, close to the £2.87bn incurred in July.
That is due to an estimated trade on goods deficit of around £11.2bn, as Britain continued to buy in much more stuff than she produces. But this will probably be partially balanced by the service sector’s traditional surplus.
The figures will also show how dependent Britain was on imports and exports with the European Union. Recent figures have shown that UK exports to the EU have risen since the referendum, while the deficit with the rest of the world has dropped.
That could change, though, if new restrictions are imposed on trade across the Channel from 2019 if a transition deal isn’t agreed (as the government warned yesterday).
Here’s a tweet from a month ago, showing the situation in July:
UK goods export volume growth hits 9-month low in July.
— Andy Bruce (@BruceReuters) September 8, 2017
The fact it's growing at all is down to EU exports - worth bearing in mind! #Brexit pic.twitter.com/WEbUwFBdHA
The ONS will also report how Britain’s manufacturing sector fared in August.
Industrial production is expected to grow by 0.2% during the month, as the weaker pound helped factories to sell their wares (and pushed up the cost of imported raw materials).
New industrial production reports from across the eurozone will give an international comparison....
Britain’s productivity problems will also come under the microscope today, when the the Office for Budget Responsibility publishes its annual forecast evaluation report. Britain’s fiscal watchdog will probably admit that it has overestimated UK productivity growth for several years, which means the economy is in worse shape than we thought.
All these OBR forecasts on UK Productivity, not one close to being correct, but remember GERS is flawless 😑 pic.twitter.com/dMcKgM2jXF
— Jim Dewar (@deoradh1) October 10, 2017
That will be followed by a new estimate of how fast (or slow?) Britain’s economy grew in the last three months. The NIESR thinktank is expected to estimate growth of around 0.3% in July-September.
Then, the International Monetary Fund issues its own healthcheck on the global economy, the World Economic Outlook, at 2pm BS (9am in Washington).
This will show the Fund’s latest growth forecasts, and also highlight the key risks that could spark a downturn, or even a new financial crisis.
Elsewhere, Britain’s BAE Systems may announce sweeping job cuts at its aerospace and naval servicing operation today.
On the corporate side, Domino’s Pizza has reported another quarter of growth, up 12% in the UK.
Domino’s Pizza strong growth
— Louise Cooper (@Louiseaileen70) October 10, 2017
System sales +21%
UK +12% -online +17%
Strong progress Intl
“UK consumers uncertain & focus value”
European stock markets look quiet, with the FTSE 100 expected to drop by just 6 points at the open to 7501.
Traders will be watching Spain closely, where the President of Catalonia will address the region’s parliament later today.
European opening call @LCGTrading $FTSE -6 points at 7501$DAX -21 points at 12955$CAC -3 points at 5362$IBEX -40 points at 10196
— Ipek Ozkardeskaya (@IpekOzkardeskay) October 10, 2017
Here’s the agenda:
- 9.30: Office for National Statistics publishes UK trade, industrial production and construction output data for August
- 11am: Britain’s Office For Budget Responsibility releases its latest Forecast evaluation report, showing how its forecasts compared with reality.
- 1pm: The National Institute of Economic and Social Research estimates UK growth in the last three months.
- 1pm: Ireland presents its 2018 budget
- 2pm: International Monetary Fund releases the latest World Economic Outlook
Updated
