Photograph: Roger Bamber / Alamy/Alamy
The pound is now down against the dollar, weakened in part by the comments from Andy Haldane earlier.
Sterling is down 0.4% at $1.3291, and down 0.1% against the euro at €1.1983.
And that’s it for today. Thank you for joining us and have a great weekend. AM
US markets open higher
US markets have opened slightly higher following the stronger-than-expected figures from the retail and manufacturing sectors in June.
- Dow Jones: +0.2% at 18,536
- S&P 500: +0.2% at 2,168
- Nasdaq: +0.2% at 5,043
The US manufacturing sector was also in better-than-expected health in June.
Output increased 0.4% over the month, compared with expectations of a 0.2% rise and a 0.3% drop in May.
The wider measure of industrial output rose by 0.6%, following a 0.3% drop in May.
Paul Ashworth, chief US economist at Capital Economics, says the unexpected strength of retail sales signals annual growth of between 2.5%-3% in the second quarter.
Rob Carnell, chief international economist at ING, says the data suggests the Federal Reserve might raise US interest rates before markets are currently expecting.
Markets have virtually no tightening by the Fed priced in until late 2017, but following on from the strong recent labour market report, the latest US data indicate that there is nothing much wrong with either US growth, and few reasons for concern about inflation either.
Markets seem in a wait-and-see mode following the UK Brexit vote, and the Fed seems in no hurry to disappoint them by doing anything radical. So we don’t see this data having much effect on markets expectations.
But the evidence is mounting that the pessimism on the US economy and the Fed in particular is overdone, and a market rethink cannot be too far away.
US retail sales rise 0.6% in June
US retail sales for June have come in stronger-than-expected, rising 0.6% over the month compared with expectations of a much smaller 0.1% increase.
It was an improvement on May, when sales were up by just 0.2% (revised down from an earlier estimate of 0.5% growth).
Separate US data showed annual inflation was unchanged at 1% in June, roughly in line with expectations of 1.1%.
Core inflation - which strips out more volatile elements such as energy and food - ticked up to 2.3% in June from 2.2% in May.
The rail minister Claire Perry has resigned, after previously admitting she was “often ashamed” to be in the job while Southern continues to cause misery for commuters.
Our story here:
European new car sales grew 6.9% in June compared with the same month a year earlier, with 1.46m vehicles registered. It was the 34th consecutive month of growth.
Among the major markets, Italy was the strongest performer, with new car sales up 11.9%, while the UK was at the bottom of the pile with sales down 0.8% (as private sales fell before the referendum).
- Italy: +11.9%
- Spain: +11.2%
- Germany: +8.3%
- France: 0.8%
- UK: -0.8%
Connor Campbell, analyst at Spreadex, has this take on equity markets, which are down across Europe:
Europe’s earlier positions only became more entrenched as Friday went on, while the US open looks unlikely to bring much excitement.
Dropping around 20 points the FTSE dipped below 6650, sporadically grazing lows not see since the start of the week.
The continued losses in the travel sector, alongside the wave of red currently coating the commodities, were the catalysts for the UK index’s Friday fall, though the residual disappointment that the Bank of England failed to reveal any stimulus measures yesterday obviously also played a part.
The eurozone understandably saw the biggest losses this morning, the DAX and CAC falling 0.5% and 0.8% respectively following the tragic events in Nice on Thursday evening.
Updated
Frances O’Grady, the TUC’s general secretary, says the drop in UK construction output in May shows there is an urgent need for Theresa May’s government to deliver on its industrial strategy pledge.
Even before the referendum vote, construction was in trouble. We need to ensure that working people do not pay the price for leaving the EU.
Greg Clark needs to live up to his new title as Industrial Strategy Secretary and develop an industrial road map for the UK.
A major programme of public investment can support jobs and growth, and provide a much-needed confidence boost. That means ministers greenlighting Heathrow’s third runway, expanding high-speed rail, and building more homes.
European markets are still down, with investors finding little to cheer.
The FTSE 250 is down 1.2% at 16,591
Here is our full story on Andrew Haldane’s insistence that the Bank of England must pump fresh stimulus into the UK economy from August.
Chris Williamson, chief economist at Markit, described this morning’s weak UK construction data as the latest in “an ugly run of data for the sector”.
He says the pace of UK economic growth probably slowed in the second quarter - from 0.4% in the first - with the construction acting as a drag.
Construction looks likely to have contracted in the second quarter, adding weight to expectations that the overall pace of economic growth will have slowed in the second quarter from the 0.4% expansion seen in the first quarter. PMI data point to just a 0.2% rise in second quarter GDP.
Going forward, prospects look worse, for the short term at least. The drop in activity seen in the June construction PMI was fueled by uncertainty about the mere possibility off ‘Brexit’.
The reality of the UK leaving the EU and the associated heightened uncertainty, especially in relation to commercial property and housing investment, is therefore likely to cause further stress in coming months.
Bank of England's Haldane says policymakers must act in August
The Bank of England needs to unleash fresh measures at its August policy meeting to deal with the fallout from the Brexit vote.
That is the view of Andy Haldane, the Bank’s chief economist and member of the rate-setting Monetary Policy Committee.
The MPC surprised the City yesterday by failing to cut interest rates. Economists were forecasting a quarter point cut to 0.25%.
But in comments made on Friday Haldane is loud and clear that the Bank is poised to act in August, an inflation report month when policymakers will have access to the latest forecasts. And the MPC might do more than cut rates.
Haldane says:
In my personal view... a material easing of monetary policy is likely to be needed, as one part of a collective policy response aimed at helping protect the economy and jobs from a downturn.
Given the scale of insurance required, a package of mutually complementary monetary policy easing measures is likely to be necessary.
And this monetary response, if it is to buttress expectations and confidence, needs I think to be delivered promptly as well as muscularly.
By promptly I mean next month, when the precise size and extent of the necessary stimulatory measures can be determined as part of the August Inflation Report round.
It is fairly unusually for a member of the MPC to be so direct, and Haldane’s comments immediately reduced the pound’s gains against the dolllar.
It is now up just 0.1% at $1.3352.
Haldane uses an interesting analogy to stress the importance of taking strong action, quickly:
I would rather run the risk of taking a sledgehammer to crack a nut than taking a miniature rock hammer to tunnel my way out of prison – like another Andy, the one in the Shawshank Redemption.
And yes I know Andy did eventually escape. But it did take him 20 years. The MPC does not have that same “luxury”.
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The poor construction data for May suggests the sector was a drag on the wider economy in the second quarter of the year.
Construction output would have had to have risen 1.9% in June just to be flat over the quarter. That seems unlikely, especially given the Markit PMI indicator suggests June was a very weak month for the sector.
The ONS will publish its first estimate of second-quarter growth on 27 July.
Reaction to the weak construction data is coming in.
Output fell 2.1% in May compared with June, and was 1.9% lower than a year earlier according to the Office for National Statistics data.
Howard Archer, chief UK economist at IHS Global Insight, said it was “more very disappointing news on the construction sector”.
Housebuilding was the main drag over the month.
The construction sector does look to be vulnerable following the Brexit vote.
The vote to leave the EU threatens to weigh down markedly on construction activity in the near term at least due to heightened caution of clients to commit to major projects particularly in the commercial real estate sector, likely markedly weakened economic activity and the very real risk of a significant downturn in the housing market.
Earlier this week, the UK’s biggest housebuilder Barratt said it could reduce the rate at which it builds new homes because of the economic slowdown the Brexit vote is expected to trigger.
Updated
The sharper-than-expected fall in construction in May came a month before Britain voted in the EU referendum on 23 June.
The biggest driver of the monthly fall was a slowdown in private housebuilding, signalling caution among companies in the run-up to the vote.
The only part of the construction sector that didn’t shrink in May was infrastructure.
Private housing (-3.5%) was the biggest contributor to the fall in monthly #construction https://t.co/NgC6Yz7Ymq
— ONS (@ONS) July 15, 2016
UK construction output fell sharply in run-up to referendum
Construction output fell 2.1% in May, following a 2.8% increase in April (revised up from 2.5%).
It was worse than expected, with economists forecasting a smaller drop of 1%.
Updated
Pound is on course for its best week since 2009
Sterling is set for its biggest weekly gain since 2009, during the depths of the financial crisis.
The pound is up 0.6% against the dollar at $1.3414, after hitting a low point on Monday of $1.2849.
Here is our story on how Canada is educating Britain on how to do trade deals...
UK turns to Canada for post Brexit trade advice
The UK government has approached Canada for advice on how to do trade deals following Britain’s decision to leave the EU.
Liam Fox, secretary of state for the newly created department for international trade, will meet Chrystia Freeland, Canada’s trade minister on Friday afternoon.
She will be able to give Fox a key insight into the technicalities of how Canada negotiated its recent trade agreement with the EU.
Freeland told BBC Radio 4’s Today programme that securing such trade deals is “very very complicated”, and that’s with a 300-strong negotiating team.
Britain, on the other hand, does not have a negotiating team. It hasn’t needed one as a member of the EU because trade agreements are struck by Brussels on behalf of its member states.
That could prove to be a major stumbling block, as the UK government will need to bring in a large team to negotiate new deals for Britain post-Brexit. Where will they all come from?
The government will hope that it can ‘borrow’ negotiators from places such as Canada and New Zealand, but it is also thought to be sounding out top law firms and consultancies which could prove costly for the UK taxpayer.
Updated
The pound is now back below $1.34, but is still up 0.3% at $1.3373.
It is just a touch up against the euro at€1.2006.
European shares fall
Markets are down across Europe this morning. Travel and leisure companies are among the biggest fallers following the Bastille Day attack in Nice, France.
- FTSE 100: -0.1% at 6,649
- FTSE 250: -0.2% at 16,760
- STOXX Europe 600: -0.5% at 337
- France’s CAC: -0.7% at 4,353
- Germany’s DAX: -0.5% at 10,021
- Italy’s FTSE MIB: -0.1% at 16,789
- Spain’s IBEX: -0.2% at 8,536
Asian markets have risen, helped by data from China which suggested the world’s second largest economy is stable.
Pound boosted as Bank of England holds rates
Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The pound continues to rise this morning and is now above $1.34, after receiving a boost on Thursday when the Bank of England surprised the City by leaving interest rates on hold at 0.5%.
Economists polled by Reuters were forecasting a quarter point rate following earlier signals from governor Mark Carney that the Bank was ready to pump more stimulus into the economy in a bid to ward off recession in this post Brexit-vote world.
The Bank’s Monetary Policy Committee is now expected to lower rates at its meeting in August - an inflation report month when policymakers have access to Threadneedle Street’s latest economic forecasts.
The pound is up 0.7% against the dollar at $1.3434, and up 0.6% against the euro at €1.2068.
Also coming up today...
- UK construction output numbers for May, which should give an indication of confidence in the run-up to the referendum.
- Eurozone inflation data for June.
- The Bank of England is expected to publish a speech by Andy Haldane, its chief economist and member of the Monetary Policy Committee.
- Mark Carney, the Bank’s governor is giving a speech in Toronto about climate change.
- From the US, we will bring you the latest data from the retail and manufacturing sectors, as well inflation data for June.
