Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Martin Farrer (now), Graeme Wearden and Nick Fletcher (earlier)

As it happened – Asian stock markets drop after Dow's second biggest fall

Market trading boards show losses at the Australian Securities Exchange in Sydney on Friday.
Market trading boards show losses at the Australian Securities Exchange in Sydney on Friday. Photograph: David Moir/AAP

CLOSING SUMMARY

Just when you thought it was safe to go back ... the selling is back.

Those numbers in full:

Nikkei 225: DOWN 2.32% (close)

Hang Seng: DOWN 3.2%

ASX200, Sydney: DOWN 0.91% (close)

Shanghai Composite: DOWN 4.1% (close)

Kospi, South Korea: DOWN 1.82% (close)

FTSE100: DOWN 1.5% at 7,170.69 (close)

Dow Jones: DOWN 4.2% at 23,860.46 (close)

S&P 500: DOWN 3.8% at 2,581.00 (close)

Nasdaq: DOWN 3.9% at 6,777.16 (close)

Pound/dollar: UP at $1.394 from $1.3912

Brent crude: DOWN 46 cents at $64.35 per barrel

I’m off now – thanks for joining me for the day. My colleague in London, Nick Fletcher, has started a new blog here, so you don’t have to miss any of the action as European markets grind into gear.

Updated

Shanghai Composite closes down 4.1%

The Chinese market has had one of its worst days for two years. the leading Shanghai Composite index has fallen 4.1%. At one point it was down nearly 6%.

Today’s sell-off coincided with lower than expected inflation numbers, suggesting that the world’s second biggest economy is slowing down after a strong 2017.

Sentiments mentioned earlier about volatility are echoed by another market watcher, David Bassanese, chief economist at BetaShares Capital in Sydney. He said the markets were “skittish” and said the Bank of England governor’s comments on Thursday that rates might have to rise again may have influenced Wall Street, however unusual that situation might be.

David says:

What’s amazing is that the overnight sell-off came off the back of relatively little new fundamental news, and highlights the continued skittishness of market sentiment and hyped up concern with regard to bond yields. Indeed, it’s not often the Wall Street sells off 4% due to an apparent tightening bias announced by the Bank of England!

'Shanghai index could drop to 2,600 points'

As we’ve said, China has been hit hard for the first time in this sell-off. Analysts have been discussing why this might have happened.

An investor at a securities company in Shanghai on Friday. On China’s trading exchanges, green represents stocks in negative territory.
An investor at a securities company in Shanghai on Friday. On China’s trading exchanges, green represents stocks in negative territory. Photograph: Johannes Eisele/AFP/Getty Images

Yang Weixiao, an analyst with Founder Securities, told Reuters that it was possible foreign investors were having an impact for the first time by selling up in the wake of the broader global dumping. The Shanghai Composite could drop another 15-16% to 2,600 points from its current mark at around 3,100.

Yang says:

We could see impact from the foreign participation that has become a more significant force in the A-share market, as a global selloff could prompt foreign investors to dump stocks in China.

Investors will be very cautious for the moment, and we expect the Shanghai index to drop to 3,000 points, or even further to 2,600 points.

Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong, said Chinese shares slid mostly because of the US correction but he had some China-specific worries. He said he now is neutral on China equities “due to two concerns: valuations on China-consumer related industries and execution risks on deleveraging”.

Nikkei closes down 2.32%

And here’s Daniel again on the Tokyo close:

Here in Japan, the benchmark Nikkei 225 index has finished trading for the day. It closed down 2.32% at 21,382.62 points. That marks a slight improvement from morning trade when it had sunk as low as 3.5%.

For a full wrap of the overnight events, my colleague in Tokyo, Daniel Hurst, has just filed this story:

SUMMARY

If you’re just waking up in Europe here is a ready reckoner on the overnight market moves.

Nikkei 225: DOWN 2.95%

Hang Seng: DOWN 3.3%

ASX200, Sydney: DOWN 0.91% (close)

Shanghai Composite: DOWN 4.93%

Kospi, South Korea: DOWN 1.82%

FTSE100: DOWN 1.5% at 7,170.69 (close)

Dow Jones: DOWN 4.2% at 23,860.46 (close)

New York - S&P 500: DOWN 3.8% at 2,581.00 (close)

New York - Nasdaq: DOWN 3.9% at 6,777.16 (close)

Pound/dollar: UP at $1.394 from $1.3912

Oil - Brent: DOWN 46 cents at $64.35 per barrel

Australia's ASX200 closes down 0.91%

It’s stumps on the Australian market where the AsX200 has lost 0.91%, or 53.7 points to stand at 5,837 points. That’s around $20bn in value.

'There's no certainty for investors'

Chris Weston, chief market strategist at the online trader IG in Melbourne, says volatility is the enemy in the markets at the moment.

The Vix volatility index – also known as the “fear index” – has spiked sharply this year and created uncertainty loathed by investors.

Vix volatility index
Vix volatility index. Photograph: Yahoo Finance

Chris told the blog:

The Vix volatility index is trading above 30% and that means there is no confidence about going out and filling your boots with stocks. You could wake up and the Dow is down another 1,000 points, or it could be up. There’s no certainty. Markets like certainty but the only certainty at the minute is of a big move but that could be up or down.

Second US government shutdown in three weeks

The fiasco that is the US federal budget process has produced another government shutdown.

Kentucky Senator Rand Paul at the US capitol on Thursday night.
Kentucky Senator Rand Paul at the US Capitol on Thursday night. Photograph: Win McNamee/Getty Images

Funding for the government machine will lapse at midnight US eastern time tonight (that’s in about 25 minutes) after Republican Senator Rand Paul stalled a key vote.

Read the full story here:

'Next bear market will be worst ever' – Jim Rogers

Having said that we shouldn’t get carried away, let’s just get carried away again.

Jim Rogers, the veteran US stock picker, reckons that the next bear market will be the worst he’s ever known. The reason he feels so pessimistic is that there’s so much debt around. While a lot of experts talk up the strong fundamentals in the global economy, he says a lot of the upside has been built on debt.

Jim Rogers.
Jim Rogers. Photograph: Martin Argles for the Guardian

He told Bloomberg:

When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime. Debt is everywhere, and it’s much, much higher now.

He thinks the selling will go on until the Fed raises rates in March.

I’m very bad in market timing. But maybe there will be continued sloppiness until March when they raise interest rates, and it looks like the market will rally.

Things have eased slightly since this tweet. For example, the Shanghai Comp is now off only 4.11%. But you’ve got to love the redness.

Updated

Before we get carried away with doom and gloom, this chart from Commsec is quite good. It shows the trajectory of US and Australian stocks since Trump was elected.

US and Australian shares since Trump elected, 9 February 2018
US and Australian shares since Trump elected, 9 February 2018 Photograph: Commsec

Indexed to 100 from November 2016, you can see that the Dow Jones had added almost 50% in the 14 months or so up to last week. That is an enormous rise, so even if the current spate of selling continues there is still clearly a lot of froth to wipe off the top, as it were.

There are quite a few theories about what has sparked the latest selling.

We know that last Friday’s strong US jobs and wages figures strengthened the feeling that inflation was on the up and that interest rate rises would not be far behind. That had been prefigured, it must be said, by the weeks-long rise in US bond yields which pointed to higher long-term rates. This is a good roundup on those factors.

However, there are also human factors at large. Earlier today Craig James, chief economist at Commsec in Sydney, told ABC radio that profit-taking – where investors see the dip and think that they may as well cash in some recent gains – was one reason for the renewed selling.

Doug Cote, meanwhile, who is chief market strategist at the US firm Voya Investment Management, told Bloomberg News that some traders had been caught out by the prospect of up to four rate hikes by the US Federal reserve this year. He even used the “p” word.

“There’s some big-money players that have really leveraged to the low rates forever, and they have to unwind those trades. They could be in full panic mode right now.

Shanghai Composite down 5.6%

The sell-off is intensifying around Asia. The Nikkei closed for the lunch break down 3.22%, or more than 700 points. But the biggest hit is in China where the Shanghai Compsoite has taken a real battering, losing 5.6% so far. The biggest comapnies have suffered most. The Hang Seng is off 4.25% and Seoul 2.16%.

Back to Australia. Earlier we heard from Michael McCarthy at CMC markets who said that traders wouldn’t pay much heed to local data today and would instead be driven by the moves on Wall Street.

I think we can assume, though, that the local news would not have had an upward effect on the markets either as mortgage approvals missed expectations by quite a long chalk.

Figures from the Australian Bureau of Statistics showed that the number of home loan approvals for owner occupiers fell 2.3% in December, short of forecasts for a decline of 1.0%. The value of total housing finance also fell by 1.6 per cent to $32.88bn. The value of new mortgages for owner-occupiers was down 1.0% compared with November, while investor loans were off 2.6%.

Time for roundup of the stock market moves in Asia Pacific today:

Nikkei - DOWN 2.64%

ASX200 - DOWN 1.16%

Kospi (Seoul) - DOWN 1.58%

Hang Seng - DOWN 2.64%

Shanghai Composite - DOWN 2.68%

Chinese yuan in sharpest one-day fall since 2015

Talking of China, we haven’t heard much from there during this mini-market meltdown. Back in the northern summer of 2015 a devaluation of the yuan triggered all sorts of mayhem on global markets. You might remember it.

Things are much calmer on that front and in fact the yuan has been moving steadily upwards ever since that crisis eventually cooled in January 2016.

Back then, investors were having kittens as the yuan hit nearly 7 to the US dollar and the talk was of currency manipulation to make Chinese exports cheaper. A certain US presidential candidate made a lot of the issue.

The yuan has since appreciated to 6.3, confounding Trump’s rhetoric, but yesterday it actually had its biggest one-day fall since August 2015.

Mark Williams, chief Asia economist at Capital Economics, wrote in a note earlier today that the drop possibly reflects discomfort in Beijing about the continued strength of the currency. The People’s Bank has ways of influencing the unit,including capital controls and using the state press to talk it down a bit.

As Mark wryly observes at the end of his note:

In the eyes of the People’s Bank, this is all consistent with the longstanding aim of allowing the currency’s value to reflect market fundamentals. Policymakers just reserve the right to decide what those fundamentals are.

Hong Kong opens down 2.5%, Shanghai is off 2.7%

The sell-off in Asia is continuing in Hong Kong where the market opened a few minutes ago. The Shanghai Composite is down even more with a drop of 2.7%.

It’s down 2.5%, taking it below 30,000 points.

Here’s some heavyweight commentary from Mohammed El-Erian, the man who once controlled the $2 trillion assets of Pimco, the world’s largest bond trader.

He’s got advice about the markets in two helpful stages, which goes roughly like this: 1) don’t panic, and 2) seriously folks, don’t panic.

And secondly:

Aussie dollar slips against the greenback

As Michael McCarthy notes below, the Aussie has slipped a bit in the last few hours as more cautious investors sought the safe haven of the US dollar and commodity prices were under pressure.

It’s sitting at a six-week low of US78c this lunchtime having dropped to US0.77.83 earlier.

Westpac’s Imre Speizer says the Australian dollar was among the worst performing currencies in the offshore session.

Defensive currencies and the British pound were the best performers on the day, the AUD and NZD the worst. The USD was resilient, perhaps displaying its defensive qualities, (with) the US dollar index up 0.1 per cent on the day.

Ah yes, the pound. It’s on $1.39 at the moment.

Losses on the Australian market have eased slightly since the 10am open. The ASX200 is now off 1.5%, or 87.4 points, at 5,801.7.

Michael McCarthy, chief market strategist at CMC Markets, in Sydney, says that the markets have returned to “extraordinary volatility” as the re-pricing of assets resumed in the light of concerns about possible higher interest rates in the US. It leaves Asia Pacific investors facing a torrid trading today.

Ten year bond yields in the US, Germany, the UK and many other countries are at multi-year highs as nascent inflation emerges in key economies. In accelerating declines US indices shed 4% last night, the sum of the previous week. Ironically investors favoured the more certain earnings streams of utilities and property stocks despite their obvious sensitivity to rising interest rates. The contradictory investment logic indicates markets have much to resolve and volatility will continue to bite.

A stronger US dollar weighed on commodity markets. Commodity currencies like the Aussie dollar fell with oil, copper and gold. However the safe haven status of the Japanese yen attracted buyers and it was the most sought currency overnight. The strong relationship between USD/JPY and the Nikkei index could see more value destruction in Tokyo than other regional centres.

Corporate results and Australian home lending data are unlikely to shape trading, despite the high relevance to financial stocks. Traders will instead monitor the out of hours trading of US futures markets to calibrate their responses.

Updated

Ouch.

And in case you missed the earlier action on Wall Street here’s a chart that tells the story of the official correction in the market.

Good morning Asia Pacific market watchers! This Martin Farrer in Sydney taking over from the blogtastic Graeme Wearden.

It’s been a busy day and night in the world of finance but now all eyes are on the markets in this time zone. As we’ve already seen, it’s been a rough start in Australia and Japan.

But take heed, perhaps, of a point by respected AMP economist Shane Oliver, who says there’s really no need to panic – “corrections of 5-15% are normal”.

Japan's Nikkei joins the sell off

Newsflash: Japan’s stock market has opened, and it’s following Australia’s lead downwards.

The Nikkei has shed almost 3% to 21,245.50 points. The Topix index is down 2.8%.

After today’s slide, America’s stock market is on track for its worst week in over two years, reports my colleague Dominic Rushe:

Another day of wild swings in the financial markets saw more than 1,000 points wiped off the Dow Jones industrial average – a loss for the day of over 4%. It was the third drop of more than 500 points for the Dow in the last five days and the Dow is now down 10% from its peak on 26 January, a fall known as a “correction”.

The more broadly based measure of US share prices – the S&P 500 – and the tech-heavy Nasdaq index were also sharply lower as traders reacted nervously to concerns about rising inflation in the world’s biggest economy....

“Things haven’t quietened down. Things are all over the place. The market is trying to find a bottom to this madness,” said Jason Ware, chief investment officer at Albion Financial Group.
“Now we are having acute attention on what happens in the bond markets, so when yields move up there is an unsettling feeling in the equity market.”

Every sector of the Australian stock market is down this morning:

Here are the biggest fallers on the ASX 200:

ASX biggest fallers

Australia’s stock market has hit its lowest level in nearly four months.

With trading fully underway, the S&P/ASX 200 index has shed 1.7%, inflicting fresh losses on shareholders.

It’s now down at 5,789 points, the lowest since 12 October 2017:

The ASX 200 over the last six motnhs
The ASX 200 over the last six motnhs Photograph: Thomson Reuters

Australian stock market falls over 1.5%

Breaking: Australia’s stock market has fallen by more than 1.5% at the start of trading, following the losses in New York a few hours ago.

The S&P/ASX 200 index is down 97 points at 5,793, as the global stock market turmoil enters a new day.

New Zealand’s market is also under pressure, falling 1.7% at the open.

Asian traders are clearly jittery, having heard that the Dow Jones industrial average has now fallen into a correction.

New Zealand’s stock market
New Zealand’s stock market Photograph: Bloomberg TV

Updated

Financial spreadbetting firm IG predicts that Japan’s Nikkei index could tumble by 3% on Friday.

It also sees chunky losses in Australia, Japan, Hong Kong, India and China.

Australia’s stock market will become the first to react to Wall Street’s fall into a correction, in just 25 minutes.

Tension is already building, with shares expected to fall sharply.

As well as being 10% off its peak, the Dow is also down almost 3.5% during 2018.

But, the benchmark index is still up around 30% since Donald Trump won the US election in November 2016.

Mohamed El-Erian, chief economic adviser at Allianz, makes an important point over Twitter. During the bull market, shares and bonds both rose. Now in this crash, they’re both falling:

[In a ‘normal’ market, you’d expect bonds and shares to move inversely - with investors pushing shares up when they felt confident, but rushing into the safety of bonds when they were nervous]

Bloomberg: Some investors are in panic mode

A trades on the floor of the New York Stock Exchange on Thursday
A trades on the floor of the New York Stock Exchange on Thursday Photograph: Bryan R. Smith/AFP/Getty Images

The surge in market volatility this week may force speculators who had bet on calm markets to unwind their positions -- potentially driving shares even lower.

Bloombeg has a good take:

“For a market that hadn’t fallen 3 percent from any high in more than a year, the week’s action was enough to rattle even the biggest equity bulls. Accustomed to buying the dip, that wisdom is now in question when more selling by speculators may be imminent.

“There’s some big-money players that have really leveraged to the low rates forever, and they have to unwind those trades,” said Doug Cote, chief market strategist at Voya Investment Management. “They could be in full panic mode right now.”

Australian market heading for fresh losses

Asia-Pacific stock markets are expected to suffer fresh losses when investors return to work for Friday’s trading session.

Australia’s main stock index, the ASX200, is being called down 1.5% or 82 points, as traders take their cue from the Dow’s plunge into correction territory at the end of Thursday’s session.

That’s a blow to hopes that the market might be bottoming out - on Thursday, bargain hunters lifted Australian stocks a little.

This latest slide on Wall Street shows that markets haven’t reached the bottom of this current correction.

Jonathan Corpina, senior managing partner at Meridian Equity Partners in New York, expects further volatility....

“The dust hasn’t settled yet, and I think both buyers and sellers are trying to figure out what this market really wants to do.

I would think that this continues to happen for the next few trading sessions for everything to kind of get flushed out.”

Wall Street falls into correction: instant reaction

Here’s how financial types are reacting to the news that America’s stock market is now in a correction, after four days of wild swings:

Fears over falling government bond prices - and the prospect of higher interest rates - seem to have sparked today’s selloff.

Jason Ware, chief investment officer at Utah’s Albion Financial Group, says:

“We are having acute attention on what happens in the bond markets, so when yields move up there is an unsettling feeling in the equity market. Things haven’t quietened down...

“As rates rise, things, as far as equity investors are concerned, are getting worse.”

A trader reacts near the end of the day on the floor of the New York Stock Exchange in New York, U.S.
A trader reacts near the end of the day on the floor of the New York Stock Exchange in New York, U.S. Photograph: Brendan Mcdermid/Reuters

Here’s Reuters closing market report:

US STOCKS SNAPSHOT-Wall St. sinks further in volatile trading as bond yields rise

U.S. stocks plunged anew on Thursday in another trading session with big swings, as equities remained in a tug-of-war with bond yields, volatility remained
high, and investors saw no relief ahead in finding the bottom of the market.

The Dow Jones Industrial Average fell 1,032.89
points, or 4.15%, to 23,860.46, the S&P 500 lost
100.58 points, or 3.75%, to 2,581.08 and the Nasdaq Composite dropped 274.83 points, or 3.9%, to 6,777.16.

DOW FALLS 1,000 POINTS AGAIN

Boom! The Dow Jones industrial average has posted its second-biggest points slump ever.

The Dow has closed down around 1,032 points, a fall of over 4%. It’s the second quadruple-point dip this week (and ever).

The S&P 500 also suffered another bad day.

Reuters is reporting that the S&P and the Dow are now both now in a correction (more than 10% off their peak).

The Wall Street close tonight
The Wall Street close tonight Photograph: Thomson Reuters

Updated

Yikes..... the sell off is intensifying, as Wall Street gets the last-minute jitters again....

An Update: A late surge of selling is pushing shares lower on Wall Street.

With 10 minuted to go, the Dow is off over 3%, or over 800 points.....

European markets close sharply lower

It was another day of declines for stock markets, with the falls accelerating as the day progressed. The growing fear of interest rate rises which has spooked investors over the last few days was given additional impetus by the Bank of England’s hawkish tone after its latest meeting and the better than expected weekly US jobless claims. The VIX volatility index was also higher, adding to the downbeat mood. David Madden, market analyst at CMC Markets UK, said:

Stocks are offside today as traders undo the positive move from yesterday. Investors remain unconvinced that panic has disappeared from the markets. The aftermath of a major decline usually leaves traders in limbo as the fear another leg lower is around the corner.

The final scores in Europe showed:

  • The FTSE 100 finished down 108.73 points or 1.49% at 7170.69
  • Germany’s Dax dropped 2.62% to 12,260.29
  • France’s Cac closed down 1.98% at 5151.68
  • Italy’s FTSE MIB fell 2.26% to 22,466.60
  • Spain’s Ibex ended down 2.21% at 9756.3
  • In Greece, the Athens market lost 1.01% to 841.38

On Wall Street, the Dow Jones Industrial Average is currently down 570 points or 2.2%.

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

Adding to the prospects of interest rate rises and thus the market decline - the Dow is off 550 points at the moment - New York Fed president William Dudley has been telling Bloomberg TV that three hikes in 2018 seems reasonable. But:

The Dow has now dropped 543 points or just over 2%. It is on track for its worst weekly fall since January 2016.

The Dow Jones Industrial Average is now down 430 points or 1.72%, and if US bond yields continue to rise markets could fall even further, says David Morrison, senior market strategist at GKFX:

The equity market sell-off has spooked investors and led many to speculate that the Fed may decide to pull back from hiking rates aggressively this year. However, this week Bill Dudley, President of the Federal Reserve Bank of New York, dismissed the stock market sell-off as being of little consequence to central bankers. Meanwhile Dallas Fed President Robert Kaplan told the Financial Times that market volatility could be healthy and that he was sticking with his forecast of three rate hikes in 2018. So, the implication is that it would take a lot more than a doubling of volatility and a 1,000-point sell-off to throw the Fed off its current path of monetary tightening.

Anyway, what if the Fed’s monetary tightening in the form of rate increases and balance sheet reduction is going to happen anyway, no matter what the inflation and growth outlook? What if the Fed is thinking ahead to the next recession and is desperate to build up ammunition for when it must slash rates again in response? Also, this market was already selling off on the back of rising bond yields before Friday’s rout. In the space of a month the yield on the US 10-year Treasury note had risen from below 2.5% to close to 2.9%. While this week’s sell-off in equities saw yields drop back sharply as investors sought out safety of US Treasuries, the 10-year yield is once again approaching 2.9% and giving every indication the new key level of 3.0% is about to be tested. If so, then we can expect global equities to take another hit as investors panic about the prospect of higher rates on highly leveraged and over-indebted markets.

One Wall Street economist points to the earlier US jobless claims as a reason for the Wall Street slide:

The VIX volatility index is also higher, up around 6% at 29.41 although it is still well below the 50 level it reached earlier in the week.

Markets continue to be spooked by the prospect of higher interest rates and the removal of the wall of money provided by central banks since the financial crisis. The Bank of England’s more hawkish tone has only served to reinforce the view that rates are going to continue rising.

Updated

The market falls are accelerating again.

On Wall Street the Dow Jones Industrial Average is now down 220 points or 0.9%. The FTSE 100 has fallen just over 1%, Germany’s Dax is down 1.3% and France’s Cac is 1% lower.

The prospect of a UK rate rise continues to support the pound, which is up just over 1% against the dollar at $1.4030.

In turn, the FTSE 100 remains in the red, packed as it is with overseas earners which benefit from a weaker sterling. At the moment it is down more than 1%, while the more domestically focused FTSE 250 is 1.2% lower. Ken Odeluga, market analyst at City Index, said:

Both the FTSE 100 and the mid-cap FTSE 250 took Thursday’s notice that rates were on the up as negative and traded lower. However, further out, we expect recent evidence of a weakened pound/stocks correlation to become clearer. This should enable equities to participate in the return to the ‘new normal’ for UK markets as well.

Back with the Bank of England and the suggestion of a May interest rate rise, economist Daniel Vernazza at UniCredit Bank is not entirely convinced:

We retain our forecast for the MPC to remain on hold this year, largely because we expect economic activity and inflation to be weaker than the BoE expects. The main uncertainty surrounding the economic outlook is how businesses and households react to progress in Brexit negotiations. On the one hand, any resolution of Brexit-related uncertainty is likely to boost confidence and demand

On the other hand, any progress on Brexit negotiations will not become binding until ratified as part of the whole “withdrawal agreement”, which won’t be until Spring next year, and meanwhile the impact of uncertainty could increase as the potential cliff-edge of 29 March 2019 draws nearer and businesses act on their contingency plans. In addition, the November rate hike is still working its way through the economy and there are signs that the pace of slowing in the housing market has accelerated, with mortgage approvals dropping sharply in December and the Halifax house price index falling for two consecutive months.

In our view, this provides sufficient reason for caution. But, as we have previously flagged – and in light of today’s “hawkish” Inflation Report – the risks are increasingly skewed towards an earlier hike, possibly as soon as May.

Wall Street opens lower

After Wall Street’s last minute drop into negative territory last night, US markets are on the back foot once more.

With bond prices falling and yields continuing to rise, the Dow Jones Industrial Average is down around 100 points or 0.46% in early trading. The S&P 500 opened 0.04% lower while the Nasdaq Composite was down 0.23%.

There has been increasing talk that the Federal Reserve might raise interest rates by four times this year, more times than previously expected. But Patrick Harker, president of the Philadelphia Fed, said:

The public should heed the Bank’s warning that rates will probably rise soon, says Hannah Maundrell, editor in chief of money.co.uk:

“The base rate may have remained the same today, however borrowers and savers should remain alert.

“The word on the street suggests rate rises may be seen on the horizon for later in the year so now is the time to shop around with your borrowing and lock in your fixed deals at a low rate.

“The previous rate rise meant some people now pay more on their mortgage. Homeowners on variable rate deals should check whether they could save money by switching to a fixed rate or, if you have significant savings, offset mortgage; this may give you some protection against subsequent rate hikes and the difference could be thousands so it’s worth exploring.”

Updated

Over to the US, and earlier there were more signs of a stronger economy with the latest weekly jobless claims.

The number of Americans claiming benefits fell unexpectedly last week by 9,000 to a seasonally adjusted 221,000. Analysts were forecasting an increase to 232,000.

Bank of England: A recap

Bank of England Governor Mark Carney speaks during today’s quarterly inflation report press conference in the City of London.
Bank of England Governor Mark Carney speaks during today’s quarterly inflation report press conference in the City of London. Photograph: POOL/Reuters

Here’s a quick wrap-up of the Bank of England’s press conference, after it voted to leave UK interest rates unchanged.

Bank of England governor Mark Carney has said that UK interest rates are not heading back to pre-crisis levels, despite hinting that borrowing costs will be hiked soon.

Carney insisted that interest rate rises will be gradual and limited, and that borrowing costs won’t hit the 5% level.

But he also reiterated that the UK is running out of ‘spare capacity’, creating pressure to raise borrowing costs.

In order to bring it (inflation) back to target over a more conventional horizon which means moving it in from that three year horizon that it will be necessary, likely to be necessary,to raise interest rates to a limited degree in a gradual process but somewhat earlier and to a somewhat greater extent than we thought in November.”

Carney warned that UK inflation could rise over 3% in the near term, but also offered optimism that wages will rise this year. The Bank has also hiked its growth forecasts a little for the next few years.

The governor was sanguine about the recent market turmoil, pointing out that volatility had been unusually low recently.

On Brexit, the governor pointed out that there have been benefits and costs...

Investment is being restrained by Brexit related uncertainties. This remains the shallowest investment recovery in the UK for more than half a century.

British exporters are in a sweet spot with sterling down 16% overall and around 20% against the euro in anticipation of a Brexit that has not yet happened.”

He also made a plea for those making forecasts about Brexit to release their underlying methodology and assumptions, so they can be properly interrogated.

Carney refused to agree that interest rates are likely to rise in May, as many forecasts expect.

But traders are already reacting. The pound has now jumped almost two cents today, to $1.4060. Government bond yields have weakened, though, while the FTSE 100 is down 0.8% or 60 points lower at 7219.

City Index market analyst Fiona Cincotta explains:

Whilst policy makers at the Bank of England are unlikely to be considering 3 or 4 hikes this year, the possibility of two hikes across 2018 appears to be increasing. This brings forward the possibility of interest rates being hiked as early as the Spring with May being the most likely month, then an additional increase potentially in November.

As the pound has strengthen, the FTSE has come under increased pressure. A stronger pound is less favourable for the international firms that make up 70% of the FTSE. Banks are one of the few sectors to move higher on the FTSE, as they stand to benefit from a higher interest rate environment.

Perhaps a May hike is not nailed on:

Jeremy Cook of World First has neatly summed up the Bank’s new forecasts:

Carney: Brexit forecasters should released underlying models

Q: Are you worried that Brexit will undermine confidence in economic forecasting - as any assumptions you make tend to look political.

Mark Carney says that forecasters need to be “transparent, up front” about the assumptions that underpin any Brexit forecasts.

He also says it’s important to release the model used when, say, comparing the impact of different trading relationships on the economy, along with the underlying assumptions. That means that people can ‘interrogate’ them.

Brexit forecasts are a big issue in Britain today, after the government’s secret analysis was leaked.

The governor then argues that some of the excitement over economic forecasts has been “overplayed”. They can’t be compared to weather forecasts -- unlike weather forecasters, we help make the weather, he points out.

Carney concludes:

The big picture there is something in these forecasts that tell people about how the economy is going to respond.

But the challenge will come over the next year, when policymakers and the public become “a lot better informed” about Brexit.

The bank, he pledges, will be “absolutely clear” about its forecasts, to provide a reference point to help us all understand the situation.

The press conference is now over.

Fidelity International’s global economist is not impressed by the Bank:

The chief economist at the EY Item Club is not changing his rate forecasts despite today’s hawkishness from the Bank:

Updated

Q: When you raised rates in November, you said you expected banks to pass it on. But many savers haven’t seen the benefits....

Mark Carney says the pass-through has been similar to previous rate increases.

Q: Little seems to have changed between November’s inflation report and today’s one, so why are you so much more hawkish?

Mark Carney denies that little has changed -- today’s forecasts is “slightly stronger”. But the future path of interest rates depends how the economy develops.

Carney: Jump in market volatility is not surprising

Q: What’s your take on the recent turmoil in the markets?

Mark Carney says he won’t give a running commentary, but points out that he and other policymakers have recently observed that volatility was extremely low.

It is healthier when markets have two-way risks around prices, the governor explains. He doesn’t want to say the recent jump in volatility is welcome, but it’s “not an entirely surprising development”.

Q: Would there be a material impact on your forecasts if Britain and the EU don’t agree a transition deal by the end of March?

Fair question, Mark Carney replies. It all depends on the impact on consumer confidence, business confidence and activity -- and whether a transition deal was agreed later than March, or not at all.

Our forecasts is based on two Brexit factors - that there is “a smooth transition”, and that it leads to an “average of potential outcomes’, Carney says.

Updated

Q: Is there a chance you’re being too pessimistic about productivity, governor? Recent figures have shown it picking up (which would remove some pressure to raise interest rates)

Carney says there is a risk either way, joking that the Bank has been “making the case” for a pick-up in productivity, but the economy hasn’t played ball.

Another clip from today’s report:

Good point.....

Q: Will making companies report their gender pay gap help to fix this problem?

Yes, Mark Carney replies. Extra transparency should force organisations and individuals to think about this issue and bring in policies to fix it.

On a personal level, Carney says the Bank has found that it gets “better judgements” when there is more diversity.

This message is slightly undermined by the fact that today’s press conference has a certain ‘male, pale’ feel to it:

Today’s press conference
Today’s press conference Photograph: Bank of England

Carney insists the BoE is making progress. Thirty percent of senior managers are women, up from 20% five years ago.

The Bank’s Ben Broadbent
The Bank’s Ben Broadbent Photograph: Bank of England

Updated

Carney: We've helped UK through 'very difficult' times

Q: Household consumption has fallen since the referendum, productivity is low, Brexit is causing uncertainty, and the markets went into meltdown this week -- so is this really a good time to wean the UK off cheap money?

Mark Carney says some of these problems are linked.

For example, Britain’s productivity problems mean the economy can’t grow as fast as it used to without generating inflation.

The speed limit of the economy has changed. It’s lower.

And UK household spending is being driven by incomes, not debt -- so as real wages fall, people have had less money to spend.

The governor then defends the Bank’s stimulus measures - saying it has helped the economy ride out the storms.

We have been providing a significant amount of support to this economy during very difficult periods. That’s one of the reasons unemployment is at a 40-year low, with more people in work than ever before.

It’s one of the reasons why some adjustment of policy is necessary.

Carney: inflation could rise over 3%

Bad news for households: Mark Carney has warned that inflation could accelerate again in the next few months.

During today’s press conference, he said:

It’s possible that inflation could rise back above 3%, temporarily, in the short term.

That’s due to higher import prices caused by the weak pound, he added.

Q: Many experts are saying that an May interest rate rise is now ‘in play’. Are they correct?

Carney repeats that he won’t be tied down. He then embarks on a long explanation about how market expectations have evolved in recent months, as the spare capacity within the UK economy has been used up.

But the degree, and the exact timing, of interest rate rises, depends on how the economy develops.

Carney then points to the European Union issue, saying “This is a crucial year for the Brexit negotiations.

We will all be better informed by this time next year about the UK’s future relationship with the EU, he adds -- the impact could be positive, negative or neutral, though.

Carney: Rates aren't going back to 5%

Q: The markets think interest rates will be 1.25% by the start of 2020 - do you agree?

Mark Carney says the Bank won’t tie its hands.

But he says people need to remember that the current interest rate cycles will be unlike those of the past.

If you look before the financial crisis, bank rate was 5% on average, says Carney, adding:

“We’re not talking about going back to those levels.....And we’re not talking about going at that pace [as seen in previous cycles].

Asked about the government’s Brexit scenarios, Carney says that business are reacting to the uncertainty.

Households, though, are reacting to the squeeze in their real incomes - rather than Brexit’s long-term effects, the governor says.

carney8feb

Carney's Q&A begins

Q: Are you warning us that interest rates are going to rise faster than we thought?

Our message is that, if the economy evolves broadly as expected, interest rates will likely rise “somewhat sooner, and to a somewhat greater extent” than forecast in November, Carney clarifies.

But it will still be a gradual process, with rates rising to a limited extent, he insists.

On Brexit... Carney says the Bank has been setting monetary policy to balance its inflation targeting while protecting jobs and growth.

It will keep doing that through the ups and downs in the financial markets, and the ‘twists and turns’ of Brexit.

Good news for workers -- Mark Carney says the Bank is increasingly confident that growth in wages and unit labour costs will pick up.

Carney gets to the key message - the Bank of England thinks there is very little spare capacity in the UK economy.

That’s why the BoE thinks that monetary policy will be tightened “somewhat earlier and by a somewhat greater extent” than it expected three months ago.

Mark Carney's press conference begins

Mark Carney, governor of the Bank of England, begins the press conference - with deputy governors Ben Broadbent and Dave Ramsden.

Carney says it’s 25 years since the Bank first created an inflation report.

The backdrop to today’s report is that the global economy is strong. And that’s helping Britain -- net trade is contributing substantially to the UK economy

British exporters are in a “sweet spot”, with a lower currency helping them sell overseas, Carney continues.

But....business investment is being held back by Brexit uncertainty. It’s growing, but much weaker than in previous economic cycles -- the shallowest recovery in 50 years.

Updated

The Bank of England is holding a press conference now to discuss today’s interest rate decision, and the latest quarterly inflation report.

UK interest rates: what the experts say

Andrew Sentance, senior economic adviser at PwC, predicts there will be at least one UK interest rate rise this year - and possibly two or three.

“Inflation remains significantly above target and will only fall back gradually as we move through this year, as the Bank of England recognises in its latest forecasts. Global inflationary pressures are building - with rising energy and food prices. And with the unemployment rate at its lowest level for over forty years, we could see some gradual rise in wage inflation.

Alexandra Russell-Oliver, currency markets analyst at Caxton, says speculation of a May rate hike is building.

“The pound has rallied sharply towards 1.40 against the dollar and 1.14 against the euro after the BoE raised its economic growth and inflation projections and said it may need to increase rates earlier and to a “greater extent” than thought in November.

While markets had been pricing in a hike in November, speculation has been building recently that the BoE could move as soon as May, and today’s hawkish language shift will likely increase that speculation. A rate hike earlier in the year could help the pound maintain higher levels, but Brexit negotiations and political uncertainty remain a significant risk.

Ben Brettell, senior economist at Hargreaves Lansdown, says there are some “key takeaways” in the Bank of England’s new inflation report:

Firstly, the expected – a unanimous vote to leave interest rates on hold for now. The Bank raised borrowing costs for the first time in a decade in November, and as such was fully expected to wait until later this year before considering a further upward move.

However, the Bank upgraded its forecast for the UK economy slightly today, citing stronger global conditions. It now expects 1.8% growth this year, as against 1.6% forecast in November. Policymakers also said they will try and bring inflation back to their 2% target more quickly than previously, which means rates could rise faster and further than investors had expected. The Bank’s rhetoric echoed that of September’s meeting minutes, which preceded the November rate hike.

It now looks like the next rise could happen as soon as May – the next time the Bank’s economic forecasts are due to be updated. Prior to today’s announcement, markets were factoring in a 50% chance of a rate rise in May, and an 80% chance they’ll be higher by the end of the year.

You can read the minutes of this week’s Bank of England meeting online, here.

Here’s a flavour, explaining why the MPC left rates on hold:

On the upside, momentum in global growth might persist for longer and the boost to UK demand from global factors could prove greater than anticipated. Global inflationary pressures had also shown signs of building. The tightness of the domestic labour market could result in faster wage and unit labour cost growth. The predicted pickup in productivity growth was not assured.

On the downside, some business survey indicators of output had weakened. Recent housing and retail sales data had softened and, more generally, consumers might still respond to the past squeeze in real incomes to a greater degree than anticipated.

And UK net trade could benefit by less from the pickup in global demand than had been the case recently. There was a possibility that the contribution of imported inflation pressures would diminish more rapidly than in the central projection.

Dennis de Jong, managing director at UFX.com, predicts that the next UK interest rate hike could come in May.

“If the UK improves on wage growth and unemployment rates remain stable, then it’s almost certain that the MPC will rethink their strategy in Q2.

It’s ‘as you were’ for now but, pending Brexit developments in the new few months, don’t be surprised to see Mark Carney take the plunge and raise interest rates for only the second time in a decade come May.”

UK government debt is also weakening, sending Britain’s borrowing costs to their highest level in over a year.

Pound jumps

The pound has jumped by a whole cent against the US dollar, following the Bank of England’s unexpectedly hawkish announcement.

It’s now trading just below $1.40.

The Bank of England has also raised its growth forecasts - predicting that the economy will expand faster than expected over the next couple of years.

Updated

BoE: Rate rise is coming

The Bank of England has warned that interest rates may rise sooner than previously expected.

In the minutes of today’s meeting, the BoE also warns that rates could rise higher than it forecast three months ago.

That’s a clear warning to households and businesses to expect rising borrowing costs - even though the BoE resisted hiking at this month’s meeting.

Here’s the key section from the report:

Were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report.

Updated

Bank of England interest rate decision

Breaking: The Bank of England has left UK interest rates unchanged at 0.5%.

It’s a unanimous decision too, with all nine policymakers voting to leave borrowing costs at their present level.

More to follow!

The Bank of England in London.
The Bank of England in London. Photograph: Hannah Mckay/Reuters

Tension is building in the City ahead of the Bank of England interest rate decision, due in 15 minutes.

Although borrowing costs aren’t expected to move, traders are wondering whether the Bank will use the minutes of this month’s meeting to hint at future rate hikes.

Mihir Kapadia – CEO and Founder of Sun Global Investments, says:

“Amidst a volatile week for the markets, traders are bracing themselves for the Bank of England’s interest rate decision today. The BoE’s decision comes at a time when concerns over rising inflation and the possibility of more central banks tightening monetary policy is a key driver of the markets.

Although most analysts expect that rates will be unchanged , traders will be watching for clues about the probability of the timing and probability of a future interest rate rise.

The FTSE 100 is still in the red (down 63 points right now), while the pound is unchanged against the US dollar at $1.388.

ECB's Mersch on dangers of bitcoin

European central bank policymaker Yves Mersch is putting the boot into bitcoin.

In a speech in London, Mersch compares digital currencies to ‘will-o’-the-wisps’ -- mysterious lights in the marsh that would lead unsuspecting travellers to their doom.

He says:

With the draining of marshes to make way for agricultural land, will-o’-the-wisps are rarely sighted nowadays. But there remain plenty of distant flashing lights to distract travellers with promises of riches. As with the previous incarnation, these flashing lights often turn out to be just like bubbles of marsh gas – insubstantial and foul-smelling, but also flammable and sometimes able to burn things around them.

The most recent beguiling wisps are named variously “cryptocurrencies” – to denote the use of cryptographic methods and technology – or “virtual currencies” (VCs) – to denote their lack of legal recognition.

He then hits out at Bitcoin’s inferiority to current payment systems.

Bitcoin transactions generally require confirmation from six miners. With each block taking around ten minutes to mine, you would expect transactions to take an hour to process. But with recent network congestion, the average time for one confirmation can easily exceed several hours.

At these speeds, if you bought a bunch of tulips with Bitcoin they may well have wilted by the time the transaction was confirmed.

Mersch says regulators need to ‘urgently’ look at how virtual currencies are being used, but also concedes that the underlying technologies may yet have a bright future. The speech is online here.

A Carillion logo

Newsflash: Another 101 Carillion workers have just lost their jobs, following the company’s collapse last month.

The Official Receiver announced the latest redundancies this morning, alongside the better news that 1,221 jobs have been ‘safeguarded’.

A spokesperson says:

We have continued to review Carillion’s contracts, as well as core divisions of the business, and I can confirm that we have safeguarded a further 1,221 jobs. These roles are connected to the delivery of both public and private contracts and cover services for a city council, as well as a range of facilities management services. This means so far, we have been able to save more than 2,000 jobs.

“Regrettably, we are also announcing that 101 roles have been made redundant. These are a mix of back-office functions and engineering support roles that new suppliers no longer require.

Updated

Greece’s public debt management agency (PDMA) has decided to press ahead today with the sale of a new seven-year bond.

The auction, Greece’s boldest foray yet onto international markets, had been put on ice by this week’s market turbulence, but is now back on!

Helena Smith explains:

The government hopes to bring in at least €3bn from the markets – a significant addition to the €6.5bn cash buffer it has already built up to cover debt repayments when its third EU-IMF sponsored bailout programme ends.

The seven-year euro benchmark had been postponed on account of market volatility with the sell off Monday. Now that markets have calmed down, the PDMA had decided to go ahead with the issue.

Insiders say they expect the bond, which matures on February 15, 2015, to yield around 3.75%.

Moscovici: Greece could exit bailout in June

The EU economic and financial affairs commissioner Pierre Moscovici has begun a visit to Greece voicing optimism that the debt stricken country is well on the way to exiting its third international bailout programme.

Our correspondent Helena Smith reports from Athens

Holding talks with Greece’s head of state, president Prokopis Pavalopoulos, the Frenchman not only expressed optimism that Athens was on the right track but went further still -- pinpointing a date by which the Euro zone’s problem child will have exited its last economic adjustment programme.

Once a fourth compliance reform review was over, “Greece could conclude its exit from the program by June 21,” he said.

Moscovici, who will be holding closed-door talks with Athens’ finance minister Euclid Tsakalotos this afternoon, has long seen himself as a champion of Greece. Before arriving in Athens, he told the country’s state run news agency that his priority was to see Greece become a “normal euro area member state.”

“Now is the time for a final effort to complete the programme successfully and move to a more peaceful and bright future, “ he said, adding that discussions has already begun on restructuring Greece’s staggering €320bn debt load.

“Technical work has already begun on a debt relief mechanism linked to economic growth, an idea first proposed last year and supported by the Eurogroup [of finance ministers] in June 2017”.

Updated

Brexit fears are also looming over the City today.

Nicky Morgan MP has heavily criticised the government for failing to publish its “position paper on financial services”, leaving banks in the dark about the future.

That comes hot on the heels of the news that a hard Brexit could cost Britain £80bn, with the north-east and the West Midlands hit particularly hard.

Today’s sell-off leaves the FTSE 100 hovering around 7220 points.

Earlier this week it hit a 13-month trough, below 7,100, before Wednesday’s rally clawed back some ground.

Carlo Alberto De Casa, Chief Analyst at ActivTrades, says:

The rebounds of yesterday certified, as we suggested, that so far it is too early to call an inversion and the right word to call this movement is still “correction” after an important bullish rally.

The scenario could change if FTSE 100 goes below 7,000 points and DAX below 11,950.

Updated

FTSE falls further

Mining companies are pushing the FTSE 100 deeper into the red.

After two hours trading, the blue chip index is down 60 points, or 0.8%. BHP Billiton, Antofagasta and Glencore are all among the top fallers.

It would be worse apart from food company Compass, which posted decent results this morning, and pharma firm GlaxosmithKline which beat expectations yesterday.

The best and worst-performing shares on the FTSE 100 today
The best and worst-performing shares on the FTSE 100 today Photograph: Thomson Reuters

David Madden of CMC Markets says City traders have been booking profits after yesterday’s rally:

The weak finish in the US last night left traders feeling uneasy on this side of the Atlantic, and the optimistic sentiment that dominated yesterday has subsided.

Traders are often nervous about holding a firm long position in the wake of a severe sell-off, and today’s move is proof we are not out of the woods yet. At midday in the UK, the Bank of England’s (BoE) update will be closely watched as it may add volatility to the pound.

Updated

The Bahrain Bourse in Manama, Bahrain.
The Bahrain Bourse in Manama, Bahrain. Photograph: Hamad I Mohammed/Reuters

Equities (shares) have born the brunt of this week’s volatility - with heavy losses in New York on Monday, then Europe and Asia on Tuesday.

Larry Hatheway, group head of investment solutions at asset manager GAM, says there has been a rush to the exits, as traders who’d bet on low volatility were suddenly badly hit.

So, with interest rates likely to rise in the months ahead, Hatheway predicts that shares will continue be buffeted around:

The most outstanding feature of the adverse market movements has been the discrepancy between shifts in equity prices and those of other assets.

Long equity and short equity implied volatility were among the most crowded trades, meaning that risk management manoeuvres in response to the initial market action accelerated the sell-off. Nevertheless, while technical factors may have contributed to the extent of the adjustment, the source of it appears to have been driven by fundamentals as market participants come to terms with the beginning of the exit from the so-called “new normal”.

With the prospect of rising inflation both crimping corporate profits and making forthcoming monetary policy less predictable, we believe that expectations for equity returns need to be revised lower while implied volatility will rise from previously depressed levels.

The team at ING have made a handy crib sheet showing what the Bank of England could do, and how the markets might react:

A Debenhams store in Stockport.
A Debenhams store in Stockport. Photograph: Phil Noble/Reuters

UK department store group Debenhams has become the latest retailer to slash jobs.

Debenhams is cutting 320 in-store management roles, as part of a push to “reduce cost and complexity”

This comes a month after the company hit shareholders with a profits warning, following a disappointing Christmas.

Several analysts are predicting that one or two Bank of England policymakers will vote to raise UK interest rates today.

Michael Saunders and Ian McCafferty are the most likely hawks, out of the nine members of the Monetary Policy Committee.

Dennis de Jong, managing director at UFX.com, says the vote could move the markets today:

“The rise to 0.75% is expected to come at some point in the next few months, with many thinking that the UK economy is performing well enough to shoulder a rate hike in May.

“What will be scrutinised most by traders is the composition of Thursday’s vote. Any more than two thumbs up for a rate rise could see the pound make significant gains, while ears will then tune into any remarks Mark Carney follows up with.

Kit Juckes of Société Générale thinks the Bank might pave the way to a rate hike in three months.

The UK MPC meets today with the market universally expecting no change in policy, but also expecting an element of hawkishness in preparation for a hike this spring.

The market prices a 50% chance of a May hike and anything which pushes those expectations back leaves GBP (the British pound) a little vulnerable.

Strategist: There could be more losses ahead

Most analysts are sticking to the idea that the markets are going through a healthy correction, not a panicky crash.

So investors have to decide whether to plunge in and buy some shares, or keep safely on the sidelines until things calm down.

It’s a great time to be a daredevil speculator, but long-term investors may not be enjoying the ride.

Hussein Sayed, chief market strategist at FXTM, predicts markets could shed another 10%:

Many contrarians would like to follow Baron Rothschild’s advice: “Buy when there’s blood in the streets”. As of now, I do not see any blood, but a healthy correction which has been overdue for a long time. From a valuation perspective, the forward price to earnings ratio on the S&P 500 has dropped from 20 at the beginning of the year to below 18, suggesting that prices are still expensive when compared to historic averages. Deciding to buy, sell, or hold is a tough one in such circumstances, but if investors believe the global economy and corporates will continue firing on all cylinders, the downside risk is likely to be limited from current levels. However, another 5-10% correction should not be ruled out.

Fixed income markets have started looking attractive and if the surge in bold yields resumes, there will be more incentives to pull out from stocks to bonds. That’s why bond markets, particularly in the U.S. will play a major role in how much further the correction may continue.

Down we go again....

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

Trading is underway in London, where the FTSE 100 has dropped 28 points to 7251.

The other European markets are also down, with the Stoxx 600 benchmark losing around 0.4%.

The agenda: Bank of England 'Super Thursday'

The New York Stock Exchange yesterday
The New York Stock Exchange yesterday Photograph: Brendan Mcdermid/Reuters

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

It’s another nervous day on Europe’s trading floors. Shares are expected to fall back, unravelling Wednesday’s recovery, as the wild swings that have dominated this week continue.

Wall Street suffered a late wobble last night, with the Dow Jones surrendering all its gains to close slightly lower (down 19 points). That’s going to feed through to the City, where the FTSE 100 is being called down around 0.6%.

Worries over rising inflation and bond yields continue to drive the markets, with traders wondering how fast central banks will tighten monetary policy. That means the Bank of England will be centre stage today.

The BoE will set interest rates at noon today, and also release its latest quarterly inflation report -- packed with new economic forecasts.

One or two policymakers may vote for a rate hike -- but the majority will almost certainly vote to leave rates at 0.5%.

The big question is whether the BoE is inching closer to raising borrowing costs in May.

Michael Hewson of CMC Markets says governor Mark Carney will face plenty of questions about the UK economic outlook:

Today’s interest rate decision isn’t expected to offer too many surprises on the rates front, the main steer for the next move in the pound will come from Governor Carney’s assessment of the UK economy, which he has already stated is suffering from under investment as a result of the uncertainty being generated by the Brexit talks.

Markets will also be looking for any further steers on the outlook for wages growth, as well as productivity which has also started to show signs of improving.

It will be in the area of wages that markets could well focus most of their attention, particularly in light of last week’s strong US wages numbers, which has made bond markets globally particularly susceptible to how policy makers view the outlook for them.

Several other central bankers are speaking today, which should keep the markets on their toes.

The agenda

  • 10.30am GMT: ECB executive board member Yves Mersch speech on Digital Currency.
  • Noon GMT: Bank of England interest rate decision
  • 12.30pm GMT: Bank of England press conference
  • 1pm GMT: Federal Reserve Bank of Philadelphia president Patrick Harker speaks on “The Economy: Output and Impact for Colleges and Universities”
  • 1.30pm GMT: The US weekly jobless figures
  • All day: EU Commissioner Pierre Moscovici visiting Greece

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
Does A$AP Rocky Know Ivanna Ortiz? Rihanna's Attempted Shooter Allegedly Had an Affair With Rapper
The alleged motive behind the shooting of Rihanna's home has just been released, and it involves allegations of cheating by A$AP Rocky.
International Business Times UK
International Business Times UK
Avengers: Secret Wars Rumor Will Please Longtime Spider-Man Fans (If It’s True)
Big changes may be ahead for the wall-crawler.
Cinemablend
Cinemablend
Gwen Stefani Addresses Her Christian Pivot After Promoting Controversial Anti-Abortion App
Critics pointed to a prayer asking God to guide women considering abortion, including pregnancies from non-consensual acts.
Bored Panda
Bored Panda
One Move Kanye West’s Wife Bianca Censori Is (Allegedly) Considering If They Split
This would be a big decision.
Cinemablend
Cinemablend
“I was a good bass player, and I am proud of my Celebrity Skin work, but oh my God, it changed my level of musicianship forever”: Melissa Auf der Maur on what she learned from playing with Billy Corgan and The Smashing Pumpkins
Auf der Maur joined the Pumpkins in October 1999 following a five-year stint with Hole
Guitar World
Guitar World
The View guest host Sheryl Underwood addresses feud with former co-star Sharon Osbourne
‘I still believe there's some love between me and Sharon Osbourne,’ Underwood said about her former ‘The Talk’ co-host
The Independent UK
The Independent UK
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play