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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.45) and Nick Fletcher

Markets hit by stronger US dollar and gloom from Next - as it happened

An electronic stock board showing Japan’s stock prices at a securities firm in Tokyo today.
An electronic stock board showing Japan’s stock prices at a securities firm in Tokyo today. Photograph: Shuji Kajiyama/AP

Here’s the detail of the rig count:

Rig count
Rig count Photograph: Baker Hughes

The fall in oil rigs to 372 is the lowest level since 2009, while the overall count of 464 for oil and natural gas rigs together dropped for the 14th week in a row to the lowest since at least 1940, according to Reuters. But analysts expect the rig count to bottom out in a few months and then recover later in the year.

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

Oil prices have pared their losses after the latest US rig count showed a fall last week.

The number of oil rigs dropped by 15 to 372, after a rise of 1 the previous week.

Brent crude is now down 0.8% at $40.14 a barrel having earlier fallen as low as $39.22.

Markets slide as stronger dollar hits commodities

It was a downbeat end to the shortened trading week for investors. The main damage was done by commodity companies, with metal prices hit by the stronger dollar (up on the back of hawkish comments on interest hikes by various US Federal Reserve members) and oil lower after US stocks rose on Thursday.

In the UK, the FTSE 100 was also hit by the disappointing outlook statement from Next, which lost 15% of its value and helped send fellow clothing retailers Marks & Spencer and Primark-owner Associated British Foods lower. The final scores showed:

  • The FTSE 100 finished down 1.49% or 92.63 points at 6106.48
  • Germany’s Dax dropped 1.71% to 9851.35
  • France’s Cac closed 2.13% lower at 4329.68
  • Italy’s FTSE MIB fell 1.61% to 18,165.84
  • Spain’s Ibex ended 1.54% lower at 8789.8
  • But in Greece, the Athens market ended up 1.04% at 557.04

On Wall Street, the Dow Jones Industrial Average is currently 80 points or 0.47% lower.

As markets remain in negative territory heading towards the close, next week could see further falls, says Chris Beauchamp, senior market analyst at IG:

The shortened week is ending on a downbeat note, as markets look to register their first serious losses since mid-February. Even now, the move lower doesn’t really put much of a dent in a remarkable rally off the lows of last month, but if US dollar strength and oil weakness continues, the final week of March could see the downside case accelerate.

So far this week markets have been unable to make upward progress, and with Fed commentary becoming progressively more hawkish the coming slew of US data, including the vital non-farm payrolls report, could be the factor that determines whether the rally blossoms into April or withers on the vine

The traditional ‘stronger dollar, weaker commodities’ trade is back in action in London today, plus a downgrade of the overall sector by Goldman Sachs is doing little for bullish sentiment. Any rally in miners in April is contingent on Chinese stimulus remaining a valid narrative, and right now the market doesn’t believe that will be the case.

The pound has steadied, after its earlier falls on growing fears about the repercussions if Britain votes to leave the EU in June’s referendum. It fell to its weakest level for two years on a trade weighted basis, but has recovered to trade at $1.4145 and 78.87p a euro, marginally up on the day.

The recovery has been helped by the 11% lead for the Remain camp in the latest Brexit poll, as well as the weak US figures denting talk of an imminent rate rise and putting pressure on the dollar.

Here’s more on the poor US durable goods figures:

Dennis de Jong, managing director at UFX.com, said:

After impressive results in January, US durable goods orders have slumped, reflecting a manufacturing sector still in recovery.

Fed Chair Janet Yellen wouldn’t have been expecting another large gain by the sector, but the fall of nearly three per cent will be of a concern to some observers.

Many will see today’s results as just a small bump in the road to recovery, and with retail sales and inflation data coming in better than expected this month, they may well be right.

Updated

Over on Wall Street, shares are down in early trading.

The Dow Jones industrial average has dropped by 82 points to 17,420.

US economy "in worst spell since 2012"

More gloomy news. America’s service sector companies are suffering from the weakest growth in new orders since the depths of the financial crisis.

Data firm Markit reports that activity across the sector has only risen slightly this month, after being hit by bad weather in February.

Firms also reported that new orders almost stalled, which is the weakest reading since October 2009.

They blamed the “less favourable economic backdrop”, which made some clients too nervous to launch new projects.

The overall Service sector PMI crept up to 51.0 in March, up from 49.7 in February, which suggests modest growth this month.

US service sector PMI, and GDP

Chris Williamson, chief economist at Markit said:

“The US economy is going through its worst growth spell for three and a half years.

“The lack of a strong rebound in service sector activity in March is a big disappointment, as bad weather had been blamed for part of the weakness in the first two months of the year.

“Combined with the lacklustre performance seen in manufacturing, the subdued services survey points to the weakest quarterly expansion of the economy since the third quarter of 2012. The PMI surveys suggest the economy grew at a worryingly meagre 0.7% annualised rate in the first quarter.

Williamson also fears that “worst may be to come”....

City traders have a new Brexit poll to digest, showing that the campaign to stay in the European Union has a smaller lead.

According to Survation, the Remain side have 46% support, with Leave on 35%, and 19% of the population still making up their mind.

That 11% gap is smaller than last month, as the WSJ’s Mike Bird points out:

Wall Street is expected to follow Europe and Asia lower, when trading begins in a few minutes:

The European stock selloff is accelerating, sending the FTSE 100 down 106 points or 1.7% to 6092.

Only a handful of share are up in London, while the mining sector continues to lead the market down.

And retailer Next is on track for its biggest one-day loss in 17 years, after warning about tough conditions this morning.

The top risers and fallers on the FTSE 100 today
The top risers and fallers on the FTSE 100 today Photograph: Thomson Reuters

Updated

US jobless claims rise and durable goods orders fall

A flurry of US economic data is heading our way.

First up, the number of Americans filing new claims for unemployment benefit has risen by 6,000, to 265,000.

That’s a slightly smaller drop than expected, and the 55th week in a row that it’s been below the 300,000 mark.

Separately, orders for durable goods at US factories have fallen by 2.8% in February.

January’s data has been revised down too, from a 4.7% increase to 4.2%.

It’s the third fall in four months, suggesting American manufacturers are experiencing softer demand.

The CBI business group has issued its own healthcheck on the UK retail sector, and it’s gloomier than the Office for National Statistics’s report [see here].

According to the CBI, 31% of retailers reported rising sales this month, while 24% said they were down. That gives a net balance of +7, down from +10 in February and 16% in January.

Sam Tombs of Pantheon Macroeconomics says it’s a concern:

Markets fall amid fears of more turbulence.

European stock markets are stumbling towards the Easter long weekend.

All the main bourses are in the red, with the FTSE 100 shedding 85 points or 1.4% to 6114 points.

European stock markets
European stock markets Photograph: Thomson Reuters

In London, Next has plunged by 12% after warning that 2016 will be a hard year. It is followed by a string of mining companies, suffering from weakening commodity prices as the US dollar rises.

Investor are worried that a new bout of turbulence could be approaching, as we enter the second quarter of the financial year next week.

Jeremy Batstone-Carr, chief global economist at stock brokers Charles Stanley, says “The sense of crisis has dissipated but has not completely evaporated”.

In a new report, he cautions:

Despite the apparently benign outlook for the global economy, risks to that view remain notably elevated. Many (including Deutsche Bank, JP Morgan, Morgan Stanley, Goldman Sachs and Societe General amongst them) are all urging investors to lock in recent gains.

The cost of protecting against a plunge in the value of the pound has hit new six-year highs this morning, as Brexit fears continue to stalk the City.

Reuters has snapped the details:

  • THREE-MONTH STERLING/DOLLAR IMPLIED VOLATILITY HITS 15 PERCENT FOR FIRST TIME IN ALMOST SIX YEARS
  • THREE-MONTH EURO/STERLING IMPLIED VOLATILITY ALSO HITS SEVEN-YEAR HIGH OF 13.8 PERCENT

UK chancellor George Osborne is testifying to the Treasury committee right now, about last week’s budget (and the political fallout it has triggered, I suspect).

It’s being streamed live here

Our Politics Live blog is covering it:

Canary Wharf.

A majority of Britain’s bankers believe they’d be better off if Britain stays in the European Union.

That’s according to the latest survey from the British Bankers’ Association, which includes all the major banks. It found that:

  • 60% of BBA members predict Brexit would have a “negative impact”
  • 26% believe the impact would be “significant”

BBA chief executive Anthony Browne said the surveys disproved suggestions that the City could welcome a victory for the Leave campaign.

“Our survey shows there is almost no appetite from banks for the UK to leave the EU...

However, as the majority of our members have not expressed a position on the matter of UK membership, the BBA will adopt a neutral position in the referendum debate.”

UK clothing sales hit by the weather

Retailers offer huge discounts in Boxing Day sales.

The latest UK retail sales figure are out....and they show that demand for new clothes has taken a dive.

Spending on textiles, clothes and footwear fell by 2.8% year-on-year in February, with consumers buying 2.4% less stuff than before (because of price deflation).

This was the only sub-sector not to achieve higher spending year-on-year, the Office for National Statistics says.

Britain’s clothing stores appear to have endured an unlucky run of weather. It was unusually warm in the run-up to Christmas, cutting demand for winter coats. And the wet weather in early 2016 hasn’t helped, as consumers have been put off from buying spring clothes.

According to the ONS, clothing sales are down 3.4% in the last three months - the biggest quarterly fall since December 1990.

ONS retail sales to February 2016

This rather backs up Next’s warning about how tough this year will be.

Overall retail sales spending fell by 0.7% in February, a smaller drop than expected after the January sales surge. On an annual basis, total retail spending was 1.4% higher than a year ago.

ONS retail sales to February 2016

Updated

The European Central Bank has warned that the global economic recovery has weakened, meaning 2016 will be challenging - particularly in emerging markets.

In its latest economic bulletin the ECB says:

Global activity moderated at the turn of the year, and is expected to continue expanding at a modest pace. Low interest rates, improving labour markets and rising confidence support the outlook for advanced economies. By contrast, the medium-term outlook for emerging market economies remains more uncertain.

Economic activity in China is expected to continue decelerating, with negative spillovers to other emerging market economies, particularly in Asia, while commodity exporting countries need to adjust further to lower commodity prices.

The ECB also points out that global trade seems to have “lost momentum again” at the turn of the year – a worrying sign.

World trade

Earnings growth in the eurozone is another concern:

The full report is online here

Pound hits 15-month low against the euro

The pound is coming under fresh pressure this morning.

Sterling has dropped to a 15-month low against the euro, down 0.3% to €1.2584. That means one euro is worth 79.40p.

Next’s warning may have heightened concerns over the UK economy, especially with the uncertainty of the EU referendum ahead.

Brexit fears have already driven traders to protect themselves against a sterling crisis, as this chart shows:

UK engineering firm Renishaw has also disappointed the City this morning by slashing its profit forecasts.

Renishaw, which specialises in precision engineering for jet engines, wind turbines and medical equipment, warned that it has suffered a fall in orders from Asian customers.

It says:

Revenue last year benefited from a number of large orders in the Far East which have not been repeated to the same extent this year, and we have now received information that indicates we are unlikely to achieve the trading levels previously anticipated at the time of our half year results announcement in January 2016.

That has heightened concerns over the global economy, and sent Renishaw’s shares sliding 12%.

Next shares plunge after "worst year since 2008" warning

After a delayed start, shares in Next have plunged by over 10% after the retailer warned that trading conditions are the toughest he’s seen since the collapse of Lehman Brothers.

In a strikingly gloomy statement, chairman Lord Wolfson told shareholders that the coming year “may well be the toughest we have faced since 2008”.

He cautioned:

It looks as though we may be set for a challenging year, with economic and cyclical factors potentially working against us.

It may well feel like walking up the down escalator, with a great deal of effort required to stand still.

Next also cut its sales forecasts, warning that they could fall by 1% at worst, or grow by 4% at best. That’s a sharp downgrade on its last statement, in January, when it predicted sales growth of between 1% and 6%.

That has sent investors racing to sell Next shares, sending them tumbling by 690p to £59.90p.

Next's share price

Updated

Mining shares drag London market down

European stock markets are falling at the start of trading.

The FTSE 100 has shed 60 points, dragged down by mining stocks.

Glencore, Anglo American and Rio Tinto are all being thumped by the impact of the higher US dollar on their profitability, given the slump in iron ore and oil prices this week.

Biggest fallers on the FTSE 100 at the start of trading.

Mike van Dulken of Accendo Markets says:

Global markets are moving into the Easter holiday long weekend on a more cautious note.... as a stronger US dollar following some hawkish Fed commentary weighs on the commodities space.

A piece of iron ore at the Fortescue Solomon iron ore mine in Australia.

Iron ore is also being hammered this morning.

Concerns over global growth, allied with the stronger US dollar, wiped almost 6% off the price of a ton of iron ore in Singapore trading.

Bloomberg has the details:

The SGX AsiaClear contract for May settlement sank as much as 5.8 percent to $49.90 a ton in Singapore....

Iron ore has been on a wild ride in March as investors sought to gauge conflicting economic signals from China against still-elevated port stockpiles and shifts in the U.S. currency.

Updated

Asian markets fall

Asian stock markets have hit a one-week low, as those worries over the stronger US dollar rippled through Tokyo, Shanghai, Seoul and Hong Kong.

The Chinese stock market led the selloff, down 1.7%, with the Hong Kong Hang Seng close behind.

The sight of falling commodity prices alarmed investors, despite an optimistic speech from the Chinese premier, who claimed that the country’s economy remains strong.

And Japan’s Nikkei dropped by 0.6%, even though a weaker yen should be good for Japanese exporters.

Angus Nicholson of IG says the markets simply aren’t happy by the recent dollar rally:

The oil price and equity markets are teetering on the verge of a much larger pullback as hawkish Fed officials have lifted the US dollar this week.

Markets in Asia look to be rolling over as the whole region suffered steady losses throughout the session. Chinese Premier Li Keqiang’s upbeat speech at the Bo’ao Forum did little to soothe investor concerns as the Shanghai Composite had its worst day in two weeks.

Introduction: Stronger dollar is worrying traders

The city of London, UK

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

It’s the last day before the Easter break, but there’s not much springtime cheer in the City of London this morning. That’s partly because it’s chilly and cloudy (with rain on the way) but mainly because the financial world is getting fretful again, mainly about the US dollar.

The dollar has strengthened in recent days, pushing commodity prices down and giving emerging markets fresh reasons to worry about capital flight.

This move is being driven by hints from US central bankers that the Federal Reserve could raise interest rates more aggressively than the markets expect, to keep inflationary pressures in check.

That’s curious, given the Fed sounded so dovish at last week’s policy meeting. But it’s enough to worry traders, as a stronger dollar will not be good for global economic growth.

Michael Hewson of CMC Markets explains:

A succession of Federal Reserve policymakers have come out in recent days suggesting a rate rise in April is a real possibility, which rather begs the question as to why there was so little dissent over the decision itself last week.

Granted, the majority of this week’s speakers haven’t got a vote on the committee this year but the level of hawkishness does jar somewhat with last week’s dovish message, and could present problems for Janet Yellen if the economic data shows significant signs of improvement between now and the end of April.

The change of tone also undermines the credibility and consistency of the FOMC’s message to the markets at a time when sentiment still remains fragile and emerging markets remain vulnerable to the strength of the greenback.

And that’s why the main European markets are expected to fall this morning:

In the corporate world, retailer Next is reporting results right now, and warning that 2016 looks pretty challenging (more on that shortly).

And there’s a splurge of economic data, as statistics bodies clear the decks before Good Friday. Highlights include:

  • 9am GMT: The European Central Bank Publishes its economic bulletin
  • 9.30am GMT: UK retail sales figures for February
  • 12.30pm GMT: US weekly jobless claims (for last week)
  • 12.30pm GMT: US durable goods orders for February
  • 5pm GMT: The Baker Hughes US rig count

We’ll be tracking all the main events through the day, and resisting cracking open the chocolate eggs....

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