Markets on both sides of the Atlantic are trading slightly higher as investors await developments on the Republicans’ crucial healthcare bill - which may or may not be put to the vote today.
Stronger-than-expected data in the UK and the US has managed to keep sentiment broadly positive:
- FTSE 100: +0.1% at 7,332
- Dow Jones: +0.2% at 20,703
- Germany’s DAX: +0.7% at 11,984
- France’s CAC: +0.5% at 5,018
- Europe’s STOXX 600: +0.5% at 376
The pound has held on to its gains against the dollar and is currently up 0.3% at $1.2521. Sterling is also up 0.4% against the euro, at €1.1604.
That’s all for today. Thank you for your comments and please join us again tomorrow morning.
The short-term lettings industry is attempting to clean-up its reputation with the creation of a new trade body.
Airbnb has teamed up with Under The Doormat and various other sites to form the short-term accommodation association (STAA).
The industry has been criticised for contributing to the housing crisis by taking properties out of the market.
Merilee Karr, chairman of STAA and the founder of Under the Doormat, said the new body intended to create a new industry code:
We understand there are concerns but the reality is that short-term lettings offer an opportunity for people to earn an extra source of income from their most important assets.
Homeowners and families who have struggled through the financial crisis have the chance to make a little extra money when they are away. We will also set our industry code of conduct to raise the bar for our members and new market entrants to ensure the standards that we have all worked so hard to make are the industry norm.
Updated
Unite, Britain’s largest union, has renewed its calls for access to the single market after Brexit. It follows the strong car manufacturing figures for February.
Len McCluskey, general secretary, said:
These astonishingly good figures clearly demonstrate that the automotive industry is the ‘jewel in the crown’ of British manufacturing which the prime minister needs to vigorously fight for in the forthcoming Brexit negotiations.
Unite’s red line for the car industry is access to the European single market with no tariffs and a frictionless supply chain through membership of the customs union.
Unite and the car companies are ‘at one’ in wanting this success story to continue – and protecting and enhancing the dominant role that the automotive industry plays in the British economy should be at the top of the prime minister’s agenda when the Brexit talks start.
US new home sales hit 7-month high
New us home sales rose by 6.1% to 592,000 in February, the Commerce Department said. It was the highest level since July 2016.
The figure for January was also revised up to 558,000 from an earlier estimate of 555,000.
New home sales account for almost 10% of overall home sales, and were boosted last month by some unseasonably warm weather.
An update on Greece now, where it is hoped record tourism will provide a boost to the crisis-hit economy. The Guardian’s Helena Smith reports:
Greece’s largest carrier, Aegean Airlines, has reported a rise in passenger numbers despite a drop in profits. The record numbers visiting Greece were reflected in the airline’s figures, which showed that passengers grew 7% in 2016 to 12.5 million.
Despite the airline posting a 53% drop in net profit – mainly because of higher VAT offsetting a rise in sales - the carrier’s load factor also increased by 0.6 percentage points to 77.4 percent.
An unprecedented 30 million foreign tourists – almost three times the entire Greek population – are likely to visit the country this year. “We are expecting an exceptional year for tourism,” Dimitris Tsiodras, spokesman of the centrist Potami party told the Guardian. “Hellenic bankers were just telling us that they expect tourism to play a significant role in stabilising the economy. It is the bright light on the horizon.”
In Syntagma square, overlooking the Greek parliament, kiosk owners were echoing that view this morning. “In the coming weeks the tourist season will begin and we can’t wait!” said Pavlos Yiannopoulos as he hung newspapers from a rack. “We need to become the Florida of Europe. After all these years of recession, it is our only hope.”
Tourism employs one in five Greeks in a nation where the jobless rate among the under 25’s is over 50 percent.
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Wall Street opens lower
Trading is underway in the US and markets subdued ahead of the crucial vote on Trump’s controversial healthcare bill.
- Dow Jones: -0.1% at 20,634
- S&P 500: -0.2% at 2,345
- Nasdaq: -0.2% at 5,812
As we wait for the Wall Street bell to go, here are the latest scores across Europe:
- FTSE 100: -0.2% at 7,314
- Germany’s DAX: +0.1% at 11,917
- France’s CAC: -0.04% at 4,993
- Italy’s FTSE MIB: +0.3% at 20,011
- Spain’s IBEX: +0.1% at 10,242
- Europe’s STOXX 600: +0.1% at 375
US markets are expected to open slightly lower:
US Opening Calls:#DOW 20634 -0.15%#SPX 2346 -0.07%#NASDAQ 5362 -0.10%#IGOpeningCall
— IGSquawk (@IGSquawk) March 23, 2017
Fed's Yellen: need to better prepare the young for work
Janet Yellen, chair of the Federal Reserve, has been speaking at a Fed event in Washington, DC.
Anyone looking for a steer on the timing of the next interest rate rise will be disappointed, as Yellen’s focus was on young people and education, and not on monetary policy.
She said more needed to be done to prepare young people for success in the jobs markets:
Research presented over the next two days makes a compelling case that there is a need to also think longer term about how to prepare people for success in the labor market. This research underscores the value of starting young to develop basic work habits and skills, like literacy, numeracy, and interpersonal and organizational skills.
These habits and skills help prepare people for work, help them enter the labor market sooner, meet with more success over time, and be in a position to develop the more specialized skills and obtain the academic credentials that are strongly correlated with higher and steadier earnings.
Yellen said a better long-term approach would be beneficial to the wider economy:
Our young people are the future, and we all want them to have the support they need for successful and fulfilling lives. As a central banker, I recognize the benefits to the broader economy when more people are better prepared for work and for managing their finances. In short, ensuring that all of our kids have “strong foundations” will help build a similarly strong foundation for the U.S. economy.
The full speech is available here.
Surprise rise in US jobless claims
New US jobless claims rose unexpectedly last week.
The US Labor Department said initial claims were 258,000 in the week ending 18 March, following 243,000 claims a week earlier (revised up from 241,000).
Economists had forecast 240,000 claims for the latest week.
#UnitedStates #IJC Initial Jobless Claims at 258K https://t.co/7jKKbGM762 pic.twitter.com/7ciejLwzl5
— Trading Economics (@tEconomics) March 23, 2017
BoE's Broadbent: UK exporters are in 'sweet spot'
Ben Broadbent, the Bank of England’s deputy governor for monetary policy, has given a speech in London on ‘Brexit and the pound’.
He said consumers are already feeling the pinch from the drop in then value of the pound, and the effects are starting be reflected in shops sales:
The vote to leave the EU led to a big drop in sterling’s exchange rate. One consequence is a rise in import prices and a squeeze on households’ real income. We may already be seeing the impact of that squeeze on retail spending, which in real terms fell quite sharply around the turn of the year.
Exporters on the other hand are enjoying a “sweet spot”, he argued, because their goods are cheaper abroad but Britain’s current membership of the EU means they are not yet facing additional tariffs.
The result – higher prices and profits but unchanged rules and costs – represents something of a sweet spot for exporters and businesses that compete with imports.
The sweet spot is not expected to last, he adds, which could make businesses more cautious about investing.
UK car manufacturing hits 17-year high on export demand
No sign yet of that much feared slowdown in British car manufacturing following the Brexit vote.
The number of cars rolling off UK production lines rose 8% in February (compared with a year earlier), to 153,041. It was the strongest February in 17 years, and meant that factories turned out one car every 16 seconds last month according to the Society of Motor Manufacturers and Traders.
The vast majority - 78% - were destined for overseas market, with cars built for export up 13.4%.
Domestic demand for British-built cars was much weaker, falling 7.4%.
Mike Hawes, chief executive of the SMMT trade body, used the figures as an opportunity to highlight the industry’s concerns about possible trade tariffs post Brexit:
Today’s figures illustrate the continuing global popularity of British-built vehicles and the export-led nature of the industry.
With eight out of every 10 cars we produce destined for international markets – and half of those for customers in the EU – we must avoid barriers to trade, whether tariff, customs or other regulatory obstacles, at all costs. To do otherwise would damage our competitiveness and threaten the continued success of UK automotive manufacturing.”
Returning to the official retail sales for February, the strong monthly figure masks the underlying weakness revealed by the broader three-month trend.
Over the three months, retail sales volumes fell 1.4%, the biggest drop since March 2010. The ONS suggested that higher fuel prices made drivers less willing to fill-up their tanks over the period.
The narrowing gap between growth in shop prices and retail sales on a three-month basis, is illustrated here:
The pound is just about holding on to one-month highs above $1.25:
CBI: retailers' ability to raise prices will be limited
The CBI has just published its own survey of the retail sector, which is also slightly ahead of expectations.
Strength in the retail sector continued into March according to the business lobby group’s distributive trades survey.
Of the retailers surveyed, 44% said sales volumes were up on a year ago, while 35% said they were down. That gave a balance of +9%, matching February’s figure but better than the +5% forecast by economists.
It’s not all plain sailing however. The CBI said retailers face the twin pressures of having to pay more for goods and materials, and increased competition. Anna Leach, head of economic intelligence at the group, explains:
It’s encouraging to see that sales volumes growth is holding up and expectations have strengthened.
However, retailers continue to be squeezed by rising cost pressures on the one hand, and intense competition on the other, which will limit their ability to raise prices. With household spending growth set to slow as inflation rises, retailers seem likely to remain under pressure through this year.
Read our full story on the bumper retail sales figures for February:
Retail sales reaction: this could be as good as it gets
The surprisingly sharp rise in retail sales suggests UK consumers were not deterred from spending by higher shop prices in February. But this could change, economists are warning.
In the same month, higher food and fuel prices pushed inflation up to 2.3% in February - the highest in almost three-and-a-half years - from 1.8% in January. Prices are expected to rise further still, with inflation forecast to hit about 3% later this year.
As price rises accelerate, wage growth is weakening, meaning that household finances are likely to come under increasing strain in the coming months.
Martin Beck, senior economic advisor to the EY Item Club, prefers to look at retail sales over the three months to February, which fell 1.4%, rather than the single month.
With shoppers facing a combination of still-subdued pay growth and rising inflation, Q1’s likely weak performance may be a harbinger for 2017 as a whole.
Annual shop price inflation increased to 2.8% from 1.9% in January, a 60-month high. How the year pans out will depend heavily upon consumers’ willingness to draw on savings or take on more debt. While these sources may deliver some mitigation to squeezed spending power, last year’s retail boom looks set to become an increasingly distant memory.”
Alan Clarke, economist at Scotiabank:
UK retail sales showed the first upwards surprise for 3 months. Will it last? With inflation getting higher and higher, the fundamentals would suggest not - i.e. the squeeze on disposable income is intensifying. The downward glide path should resume in the coming months.
Updated
Pound rises above $1.25 as retail sales surge
The stronger-than-expected retail sales have helped to push the pound higher against the dollar and the euro.
Sterling is up 0.2% against the dollar at $1.2510 and up 0.5% against the euro at €1.1612.
Alex Edwards, currency analyst at OFX, said a combination of factors were helping to drive the pound higher and could push it further still:
Retail sales data was very strong this morning and sterling has rallied once again. It comes hot off the back of the headline inflation earlier in the week, with the hawkish MPC statement and rate vote results still resonating.
It’s likely to make for an even more aggressive BoE statement next month, with sterling up through 1.25 as a result. This recent combination of market data will likely support the pound through to the end of the week and perhaps into next. 1.26 could well be in sight.
UK retail sales jump 1.4% in February
Figures just out show stronger than expected retail sales in February.
Sales jumped 1.4%, signalling consumer resilience despite rising inflation and weak wage growth. Economists had forecast far weaker growth of 0.4%.
The January figure was revised down to show a 0.5% drop in sales, bigger than the 0.3% drop initially estimated.
A strong performance in February pushed the annual rate of growth to 3.7% from 1% in January.
However, the Office for National Statistics cautioned the broader quarterly picture was less rosy. Retail sales over the three months to February fell by 1.4% form the second month in a row - the largest fall since March 2010 and only the second fall since December 2013.
Kate Davies, senior statistician at the ONS, said:
February’s retail sales figures show fairly strong growth, though the underlying three-month picture shows falling sales as February’s figures follow two consecutive months of decline in December and January.
The monthly growth in February is seen across all store types. The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months.
Over in France, optimism among firms in the industrial sector fell to a four-month low in March, in a possible sign that uncertainty surrounding the presidential election is starting to weigh on confidence.
The business climate index for the industrial sector, published by Insee, fell to 104 points in March from 107 in February. Economists polled by Reuters had expected the index to stay at 107.
European markets are in a subdued mood this morning as investors await the crucial US vote on the healthcare bill which seeks to overturn Obamacare.
With many opposed to the bill in its current form, investors are concerned that should Trump lose the vote, his growth-boosting policy promises might not materialse.
Connor Campbell, analyst at Spreadex:
The markets got off to an understandably quiet start this Thursday, the European indices gently slipping into the red after the bell.
There are a couple of reasons why investors may be sitting on their hands this morning. Firstly, the tragedy in Westminster on Wednesday is the kind of event that casts the cold light of perspective on the stock market’s frivolities.
Secondly, investors are waiting for the House of Representatives vote on ‘Trumpcare’ later in the day; if the President can’t get the bill passed it would suggest he faces an uphill battle push through his tax and infrastructure reforms. And considering it was those promises that sent the Dow Jones et al. sky high, investors will likely not react well to that eventuality.
Neil Wilson, senior market analyst at ETX Capital, says that investors knew what was coming from the retailer in the form of the first profit drop in eight years.
Not a pretty set of figures from Next but no worse than expected after warning on profits in January. Following that dire Christmas trading update investors were prepared for this and the retailer remains extremely cautious about the year ahead.
It was the first drop in annual profits in 8 years but investors seem to be reassured that it’s taking steps to turn things around with a focus on core products.
Next has to get its house in order and focus more on its core product – something it says it began doing in January. UK retail sales have held up in the months following the Brexit vote (led by clothing retail sales hit a 14-year peak in October) but Next has suffered – it’s clearly not been getting things right.
The question is whether a return to ‘easy to wear styles that can be delivered in large volumes’ will be enough to offset the external headwinds.
Fundamentally the business remains strongly cash generative even if it’s not expanding rapidly and is able to maintain solid returns to investors. Shares have already halved in value since the 2015 peak. With the Directory division performing very well it appears well placed to respond to consumer trends as they shift more spend online.
Next tops FTSE 100 leader board as it signals a return to basic ranges
Next is at the top of the FTSE 100 leader board this morning, despite reporting its first annual profits fall in eight years.
Shares in the clothing and homeware retailer are up 6% at £41.05 after it said pre-tax profit fell 5.5% to £790.2m last year. It was in line with City expectations, so investors were relieved there were no nasty surprises in the numbers.
Chief executive Lord Wolfson said the year ahead was also looking challenging:
The year ahead looks like it will be tough with a combination of economic, cyclical and internal factors working against us.
Next also signalled a shift in emphasis in its clothing ranges, suggesting it had neglected simpler, popular ranges, in favour of more fashionable lines.
In focussing so much energy on changing our buying culture, processes and adopting exciting new trends, we have omitted some of our best-selling, heartland product from our ranges. These are the easy to wear styles that can be delivered in large volumes and great prices across several colours.
Corrective action is relatively straightforward and began in late January. We believe that some of these changes will begin to be reflected in our Summer ranges from May onwards, but we will not have our ranges where we want them until the Autumn season.
FTSE 100 dips in early trading
Trading is Europe is underway and investors are in following Asia and Wall Street by taking a bit of a breather.
The FTSE 100 is down 13 points or 0.2% at 7,312.
Elsewhere in Europe:
- Germany’s DAX: +0.1% at 11,914
- France’s CAC: flat at 4,995
- Italy’s FTSE MIB: +0.2% at 19,985
- Spain’s IBEX: +0.1% at 10,242
- Europe’s STOXX 600: +0.03% at 374
The agenda: Trump's faces key test on healthcare bill
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Asian markets are subdued after Wall Street stabilised on Wednesday. Fears that President Trump will not be able to deliver on his growth boosting policy pledges have not gone away, but investors appear to be taking a breather before today’s crucial vote on the Republican healthcare bill in the US.
The bill, which seeks to overturn Obamacare and has been a key priority for Trump from the outset, is a major test for the President.
A failure to win the vote will ring alarm bells on Wall Street and beyond that Trump will not be able to deliver other policy pledges, such as tax giveaways and infrastructure spending.
In Asia, the Hang Seng was down 0.2% at 24,278, while the Nikkei rose 0.2% to 19,085.
Here is how Wall Street closed on Wednesday:
US Closing Prices:#DOW 20661.3 -0.03%#SPX 2348.45 +0.19%#NDX 5367.55 +0.66%#VIX 12.81 +2.73%
— IGSquawk (@IGSquawk) March 22, 2017
Also today, we have official UK retail sales for February at 9.30am, giving an insight into how resilient consumers are feeling in the face of rising inflation and weak wage growth.
The CBI will give its take on the retail sector in its latest distributive survey at 11am.
And in the US, Janet Yellen, head of the Federal Reserve, will give a speech.
We will be tracking all the key developments through the day.
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