Summary
Before we close up for the day, here is a summary of the main developments:
- We are still awaiting the outcome of the battle for GKN. Will the engineering giant win its fight to retain independence, or will shareholders back Melrose’s £8bn hostile takeover approach. The decision is due by 5pm and we will have the latest updates here.
- After a roller-coaster week for markets, shares are up today on both sides of the Atlantic. The FTSE 100 is up 0.3% or 19 points at 7,064.
- There was some bad news from the UK retail sector, as the owner of Bargain Booze and Wine Rack - Conviviality - said it would appoint administrators within a fortnight after failing to secure emergency funds.
- UK house prices fell for a second month in March according to Nationwide, by 0.2%, as cash-strapped consumers proved unwilling to make major spending commitments. London continues to lag the rest of the country.
- The ONS confirmed the UK economy grew by 0.4% in the fourth quarter of 2017, and revised up annual growth in 2017 to 1.8% from an earlier estimate of 1.7%.
- A breakdown of the GDP report showed that household spending growth of 1.7% in 2017 was the weakest in six years, as falling real pay took its toll on family finances.
- In the US, initial jobless claims dropped to a 45-year low of 215,000 last week, in a further show of strength for America’s labor market.
- The US Department of Justice announced that Barclays has agreed to pay $2bn to settle claims that it fraudulently sold residential mortgage-backed securities in the run-up to the financial crisis.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back on Tuesday.
Updated
Wall Street opens higher as tech stocks recover
US markets after the opening bell:
- Dow Jones: +0.5% at 23,974
- S&P 500: +0.5% at 2,617
- Nasdaq: +0.5% at 23,974
Updated
Barclays to pay $2bn US fine
Barclays has agreed to pay $2bn to settle claims that it fraudulently sold residential mortgage-backed securities in the run-up to the financial crisis.
Announcing the levy, the US Department of Justice said Barclays had caused billions of dollars in losses to investors by engaging in a fraudulent scheme to sell 36 residential mortgage-backed securities (RMBS) deals between 2005 and 2007, misleading investors about the quality of the mortgage loans backing those deals.
Richard Donoghue, United States Attorney for the Eastern District of New York, said:
This settlement reflects the ongoing commitment of the Department of Justice, and this Office, to hold banks and other entities and individuals accountable for their fraudulent conduct.
The substantial penalty Barclays and its executives have agreed to pay is an important step in recognizing the harm that was caused to the national economy and to investors in RMBS.
As well as the fine imposed on the bank, two former Barclays executives have agreed to pay a combined sum of $2m in exchange for a dismissal of claims brought against them individually.
Barclays Agrees to Pay $2 Billion in Civil Penalties to Resolve Claims for Fraud in the Sale of Residential Mortgage-Backed Securities https://t.co/nlKJWU8lMQ
— Justice Department (@TheJusticeDept) March 29, 2018
US jobless claims drop to 45-year low
The number of Americans filing new claims for unemployment benefits fell to the lowest level in 45 years last week.
Initial claims fell 12,000 to 215,000 in the week ending 24 March, the lowest since January 1973, the US Labor Department said.
It followed 227,000 claims a week earlier, and was well below the 230,000 claims forecast by economists.
Claims have now been below the 300,000 threshold - considered a measure of a strong labour market - for 158 consecutive weeks. That is the longest run of growth since 1970.
Labour: UK household finances 'deeply worrying'
John McDonnell, the shadow chancellor, says he is concerned by this morning’s ONS figures, which showed the savings ratio hit a record low of 4.9% in 2017.
He says:
These are deeply worrying figures. The fact that for the first time in 30 years households are now net borrowers, taking on more debt and seeing their incomes squeezed by inflation, while the savings ratio is at its lowest level since records began, should be setting off alarm bells in the Treasury.
The chancellor stubbornly refused to use the spring statement to help working families, but he must now reconsider his policy of inaction as households are clearly reeling from the effects of eight years of Tory economic failure – with real wages still lower than when the Conservatives first came to power in 2010.
The next Labour government will end austerity, introduce a £10 per hour real living wage and cap interest on credit cards, to build a high wage, high skill economy of the future.
Trump hits out at Amazon
President Trump has made very clear his feelings about Amazon in his first tweet of the day:
I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!
— Donald J. Trump (@realDonaldTrump) March 29, 2018
Time for a European market update:
- FTSE 100: +0.2% at 7,061
- Germany’s DAX: +0.8% at 12,037
- France’s CAC: +0.6% at 5,161
- Italy’s FTSE MIB: +0.2% at 22,386
- Spain’s IBEX: +0.7% at 9,620
- Europe’s STOXX 600: +0.4% at 371
US futures rise as tech stocks edge higher
US stock index futures are up with tech shares posting slim gains after being hammered earlier in the week.
Shares in the so-called FANG group - Facebook, Amazon, Netflix, and Google (now Alphabet) - were up between 0.6% and 1.6% in pre-market trading.
Global Stocks, US Futures Limp Tentatively Higher Ahead Of Long Weekend https://t.co/J08nryKTBq
— zerohedge (@zerohedge) March 29, 2018
Weakest household spending growth in six years
This morning’s GDP report from the ONS showed that household spending grew by 1.7% in 2017 - the weakest since 2011.
It reflects the tough backdrop faced by consumers since the Brexit vote in 2016, which drove a sharp fall in the value of the pound and pushed up the price of goods imported from abroad.
As those price rises fed through to higher inflation, wage growth failed to keep pace, signalling falling real pay for workers.
Households have responded to tighter budgets by spending less on non-essential items and becoming reluctant to commit to major spending decisions.
Victoria Clarke, economist at Investec, explains:
The detail today laid bare the squeeze on the household cash position sitting behind this subdued spending backdrop. Real household disposable income rose by just 0.1% over the quarter, a softening from the already subdued 0.3% increase in Q3.
Wages and salaries were a positive influence to incomes growth but their influence was almost completely offset by the impact of rising inflation. Following a run of soft outturns, real household incomes grew by just 0.3% in 2017 as a whole.
However, Paul Hollingsworth at Capital Economics say there is light at the end of the tunnel for UK consumers as inflation has already started to fall.
With a sustained rises in real wages on the horizon, the outlook for spending growth remains bright.
This supports our view that the economy will grow by around 2% this year, above the consensus estimate of 1.5%.
Renault shares jump on Nissan merger report
Shares in Renault rose more than 5% after Bloomberg reported the French car maker is in talks to merge with Japanese car giant Nissan.
Bloomberg says:
Renault SA and Nissan Motor Co. are in talks to merge, seeking to solidify their two-decade-old alliance under a single stock as an unprecedented shift toward electric and shared cars transforms the industry, people with knowledge of the matter said.
A deal would end the current alliance between the companies and marry them as one corporation, said the people, who asked not to be identified as the details aren’t public. Renault currently owns 43 percent of Nissan while the Japanese carmaker has a 15 percent stake in its French counterpart. Carlos Ghosn, the chairman of both companies, is driving the negotiations and would run the combined entity, the people said.
A merged giant would be a more formidable rival for Volkswagen AG and Toyota Motor Corp., allowing the partners to better pool resources as the industry shifts toward new-energy vehicles, autonomous driving and car-sharing services. While the alliance of Renault and Nissan has brought savings, the fragmented ownership structure has prevented the companies from reaping full benefits from their union.
BREAKING: Renault and Nissan are in talks to merge and create a new automaker, sources say https://t.co/CjxLolYQy0 pic.twitter.com/WxzL5VLXwM
— Bloomberg (@business) March 29, 2018
Updated
How the pound has fared against the dollar since the EU referendum:
Updated
Pound on track for best quarter since 2015
The pound is on course for its best quarterly performance against the dollar since 2015, despite dipping this morning.
After taking a hammering in the aftermath of the Brexit vote in June 2016, the pound is currently up 4% against the dollar over the first quarter as it draws to a close. That’s the biggest quarterly rise since mid 2015.
Against the euro, the pound has risen 1.4% since January, which would be the best performance since 2016.
Growing expectations that the Bank of England will raise interest rates faster than expected over the coming months has boosted the pound.
Developments in Brexit negotiations that have been interpreted as broadly positive have also helped the UK currency.
Current trading:
- The pound is roughly flat against the dollar at $1.4066
- It is down 0.1% against the euro at €1.1420
CME agrees £3.9bn deal for Michael Spencer’s Nex Group
The world’s largest futures exchange, CME Group, has agreed to buy Michael Spencer’s Nex Group in a £3.9bn deal that will net the former Tory party treasurer £670m.
CME also picked London as its European headquarters, giving a much-needed boost to the UK government during its Brexit negotiations. The move comes after CME’s decision last year to shut its loss-making London bourse and clearing house.
Spencer, chief executive of Nex, owns a 17.6% stake in the financial broker he founded in 1986. It changed its name from Icap at the end of 2016 and is one of the world’s biggest money-broking firms.
Spencer will join the CME board as a special advisor and will stay on for a minimum of two years to oversee the integration of the two businesses.
The takeover, which still has to be approved by Nex shareholders, will lead to 750 job losses over the next three years in the combined business, or 16% of the total workforce. It is not clear where they will occur.
Nex has 1,900 employees globally, including 634 in London and 42 in Bristol. CME employs 2,800 people worldwide, 400 of them in London.
Last year Nex agreed to pay back donations of £25,000 made to Conservative general election candidates following a shareholder revolt.
Britain’s services sector continued to be the main driver of growth in the fourth quarter of 2017, despite being revised down. It accounts for about three quarters of the UK economy.
Output in the sector increased by 0.4%, lower than the 0.6% growth estimated previously. Transport, storage and communications services grew by 1.1%, while output at hotels and restaurants fell 0.1%.
Here are how some of the other major parts of the economy performed between October and December:
- Industrial production grew by 0.4%
- Manufacturing output rose 1.3%
- Construction output fell 0.1%
- Agriculture contracted by 1%
- Household spending grew by 0.3%
- Government spending increased by 0.4%
- The trade deficit widened to £9.34bn from £7.6bn in Q3
- Business investment increased by 0.3%
Updated
2017 growth revised back up to 1.8%
The ONS has revised its estimate for annual growth in 2017 back up to 1.8%.
That’s in line with its first estimate, before the ONS revised it down to 1.7% in its first revision.
It is still the weakest growth in five years.
Consumer spending grew, but at a weaker rate than previous years as the fall in real wages took its toll:
Household spending grew by 1.7% between 2016 and 2017, the slowest rate of annual growth since 2011.
— Suren Thiru (@Suren_Thiru) March 29, 2018
Updated
UK growth confirmed at 0.4% in the fourth quarter
The UK economy grew by 0.4% in the final three months of 2017, the Office for National Statistics confirmed in its latest estimate of GDP. It was unchanged from previous estimates.
Rob Kent-Smith, a statistician at the ONS, gives a handy overview:
Economic growth at the end of last year was unrevised with services and manufacturing continuing to drive growth.
Household borrowing increased throughout 2017, while their saving was the lowest on record. However, the UK’s deficit with the rest of the world shrank, as the UK received increased earnings on foreign investments thanks to a growing world economy.
The service sector picked up in the three months to January with architecture, leasing companies and health work all boosting growth.
Brian Murphy, head of lending for the Mortgage Advice Bureau, has commented on the 0.2% fall in UK house prices reported by Nationwide:
Given that some areas of the country, such as Northern Ireland and Wales, are seeing more significant increases in prices, while London is still seeing prices cool, suggests that the [headline figure] masks a broad degree of variance across the regions, which rather underscores the effect that dipping London and South East values are having on the wider average.
That there is still such a marked North-South divide in average house properties values is, of course, no surprise. However, market conditions in London and thew South East market would appear to be somewhat lacklustre when compared to other areas, proving that consumer confidence is still very strong outside the capital and its commuter belt, as underscored by the ongoing paucity of stock in these areas.
German jobless rate hits record low
Germany’s unemployment rate fell to 5.3% in March from 5.4% in February. That’s the lowest rate since German reunification in 1990.
The total number of unemployed people fell more than expected by 19,000 to 2.37 million.
The positive backdrop for employment is likely to further boost consumer confidence in Europe’s largest economy.
German employment.
— Frederik Ducrozet (@fwred) March 29, 2018
No comment needed. pic.twitter.com/zj5iMRjTWW
UK house prices fall for a second month, Nationwide says
Nationwide has published its latest monthly house price index which shows the average price fell 0.2% in March, to £211,625.
It followed a 0.4% fall in March, and took the annual rate of house price growth to 2.1%. The last time the annual rate was weaker was June 2013.
Here is how the picture looks regionally, where London is lagging behind the rest of the country:
Robert Gardner, Nationwide’s chief economist, gives his view of the market:
On the surface, the relatively subdued pace of house price growth appears at odds with recent healthy rates of employment growth, a modest pick-up in wage growth and historically low borrowing costs. However, consumer confidence has remained subdued, due to the ongoing squeeze on household finances as wage growth continues to lag behind increases in the cost of living.
Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and the ongoing squeeze on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year.
Nationwide is predicting house price growth of just 1% in 2018 overall.
Here is our full story on Conviviality, which this morning said it would file for administration within a fortnight:
UK car production falls after slump in domestic demand
The number of cars rolling off UK production lines fell again in February after a 17% drop in demand from the home market.
A total of 145,475 cars were made in British factories last month, down 4.4% on a year earlier.
Cars built for export, which account for about 80% of UK production, dipped 0.8%.
Mike Hawes, chief executive, of the Society of Motor Manufacturers and Traders which produces the figures, said the figures were concerning:
Another month of double digit decline in production for the UK is of considerable concern, but we hope that the degree of certainty provided by last week’s Brexit transition agreement will help stimulate business and consumer confidence over the coming months.
These figures also highlight the scale of our sector’s dependency on exports, so a final deal that keeps our frictionless trade links with our biggest market, the EU, after December 2020 is now a pressing priority.
Bargain Booze owner Conviviality to appoint administrators
Conviviality, the firm behind Bargain Booze and Wine Rack has announced this morning that it will appoint administrators within a fortnight, putting 2,600 jobs at risk.
The British Beer & Pub Association has warned some pubs could face shortage of some drinks in the short-term, because the company’s Matthew Clark and Bibendum subsidiaries are major suppliers.
After failing to secure emergency funding from investors, Conviviality a brief statement:
Following discussions with its lending banks, the board has resolved to file notice of intention to appoint administrators to the Company. Unless circumstances change, and in accordance with statutory requirements, the board intend to appoint administrators within 10 business days. The secured creditors can, however, appoint administrators without the requirement for notice.
The directors intend to allow the business to continue to trade and the company continues to work alongside advisers in order to preserve as much value as possible for all stakeholders as it explores a number of inbound enquiries regarding a potential sale of all or parts of the business.
Further announcements will be made as appropriate.
Here is the background:
European markets edge higher
And we’re off. Here are the opening scores across Europe:
- FTSE 100: +0.1%
- Germany’s DAX: +0.1%
- France’s CAC: +0.3%
- Italy’s FTSE MIB: +0.2%
- Spain’s IBEX: +0.4%
- Europe’s STOXX 600: +0.1%
The agenda: UK GDP as one-year Brexit countdown begins, GKN battle reaches climax
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The one-year countdown to Brexit has begun. Concerns that the UK economy would suffer an immediate slump following the vote to leave the EU proved unfounded, and GDP has continued to grow, albeit at a modest pace.
However, Britain is now lagging behind peers in the G7 and major eurozone economies, as the uncertainty surrounding Brexit and strained household finances weigh on activity.
Figures to be published by the Office for National Statistics at 9.30am are expected to show the UK economy grew by 0.4% in the fourth quarter of 2017, unchanged from earlier estimates and following growth of 0.5% in the third quarter.
Also coming up today:
- 9.30am BST: February mortgage approvals and consumer credit data from the Bank of England
- 1pm-5pm BST: After weeks of bitter wrangling, we will learn the fate of GKN at some point this afternoon. Will the UK engineering giant win its fight to retain independence, or will shareholders vote in favour of Melrose’s £8bn hostile takeover?
- 1.30pm BST: US weekly job losses will give the latest snapshot of the labour market in the world’s largest economy
Updated
