The earlier gains on Wall Street have been erased, and the FTSE 100’s losses have accelerated:
- Dow Jones: -0.5% at 20,798
- S&P 500: -0.3% at 2,367
- Nasdaq: -0.1% at 5,406
- FTSE 100: -0.4% at 7,399
On that note we’ll close up for the day. Thanks for reading the blog and for all the comments. We’ll be back tomorrow.
Monday’s Eurogroup meeting of finance ministers ended without a decisive agreement between Greece and its creditors. The Guardian’s Helena Smith brings this report:
The Greek finance minister Euclid Tsakalotos has decided to stay on in Brussels in all out bid to come to some agreement on the festering issue of labour reforms, now seen as the central obstacle to finally ending the review.
Many fear a repeat of the the summer of 2015 when Greece came closest yet to euro exit in the face of default. Athens owes hefty repayments of €7.4bn this July, mostly to the the European Central Bank - money it does not have. Greece is now under immense pressure to come to some deal with lenders but few believe it will be able to achieve this before May at the earliest, with Tsakalotos holding out for a comprehensive solution that will also include debt relief - something unlikely to be discussed before the International Monetary Fund’s spring meeting at the end of April. The next few days could prove decisive, Greek government sources say.
Meanwhile, banks are reporting that with the backdrop of uncertainty caused by the stalled review, bank deposits have fallen by €4bn since the end of 2016 - effectively wiping out the increase in deposits last year.
The EU economic affairs commissioner, Pierre Moscovici, warned against further delays, describing them as “very harmful.”
“That would impair the confidence of investors and consumers,” he said after the meeting. “That would be detrimental to economic recovery.”
The pound is still up 0.8% against the dollar at $1.2458.
Meanwhile the euro is also having a good day, climbing to six-week highs of above $1.08 following the French presidential election debate, where the centrist Emmanuel Macron appeared to come out on top over the far-right’s Marine Le Pen.
Wall Street opens higher
Over in the US, markets have opened higher, tracking rises in Europe (with the exception of the FTSE) and higher oil prices.
- Dow Jones: +0.1% at 20,919
- S&P 500: +0.2% at 2,379
- Nasdaq: +0.4% at 5,435
It’s another record high for the Nasdaq, helped by Apple shares which are also at a record high, up 0.9% at $142.70 after the tech company released the latest version of the iPad.
The Nasdaq’s biggest risers:
Pay packets in the UK are probably already shrinking according to the Resolution Foundation.
Stephen Clarke, economic analyst at the thinktank, says:
After 38 months inflation is back above the Bank’s target, bringing to an end the era of ultra-low inflation that has boosted living standards in recent years. Today’s rapid increase is part of a wider trend with price rises set to the big living standards story of this year.
To date pay settlements have failed to respond to rapidly rising prices, meaning there’s a good chance pay packets are already shrinking in real terms.
While there is little that can be done to prevent oil price rises and a falling pound driving up inflation, today’s figures reinforce the risks to living standards of weak wage rises, especially in the context of the recent slowdown in employment growth.
February’s inflation data was the first time the ONS focused on the CPIH measure of inflation, which is “consumer prices index including owner-occupiers’ housing costs”.
As my colleague Katie Allen explains, this move is not without controversy:
Some economists say CPIH is lacking as a measure because by using figures based on “rent equivalence”, it does not truthfully capture people’s experience of the housing market. CPIH lost its status as a “national statistic” in 2014 and has yet to regain it.
As it turns out, CPIH was 2.3% in February, the same level as the more traditional consumer prices index (CPI).
The ONS says CPIH is the most comprehensive measure of inflation, but the fact remains it is not classed as a national statistic and the Bank of England continues to target CPI.
Whether you measure wage growth against CPI, CPIH or RPI, it doesn’t look good for most UK workers in 2017 https://t.co/6VDt4Z9593 @CIPD
— Charles Cotton (@CharlesMCotton) March 21, 2017
After all the kerfuffle the CPI and CPIH #inflation figures are the same today anyway. The price of stuff increased by 2.3% in Feb
— Colletta Smith (@collettasmith) March 21, 2017
Here in the UK, the big jump in inflation to 2.3% in February is in focus.
Philip Shaw, economist at Investec, says the Bank of England is unlikely to raise interest rates until 2019, despite rising inflation:
So far in 2017, CPI inflation is running ahead of the Bank of England’s forecasts – February’s outturn [of 2.3%] compares with a BoE projection of 2.1%.
UK markets reacted sharply to today’s data. Sterling rose to $1.2470, its highest level against the dollar since late-February. Interest rate markets sold off, but remain sceptical of a hike this year, and are not fully pricing in a tightening until the second half of 2018.
We continue to believe that the first move will not occur until 2019, but figures on growth and pay will be as important as inflation in determining the timing.
Ruth Gregory, UK economist at Capital Economics, says while there is no immediate pressure the Bank’s Monetary Policy Committee to raise rates, that could change:
The MPC looks likely to stand pat at least until 2018. But if the economy continues to hold up as well as we expect, interest rates could rise rather sooner than the markets have recently been anticipating.
Time to take a look at the markets. The pound’s gain is the FTSE 100’s loss, as the modest gains made earlier have been erased.
Here’s how it looks:
- FTSE 100: -0.1% at 7,422
- Germany’s DAX: +0.2% at 12,076
- France’s CAC: +0.6% at 5,040
- Italy’s FTSE MIB: +1.3% at 20,236
- Spain’s IBEX: +0.9% at 10,310
- Europe’s STOXX 600: +0.2% at 379
Wall Street is expected to open higher, tracking the broad gains in European markets.
Updated
CBI: manufacturing optimism hits 22-year high
On a busy day for UK data, the CBI has got in on the act with its latest industrial trends survey.
Manufacturers’ expectations for growth were at the highest level in 22 years in March as export orders and output both rose at an accelerated rate.
Anna Leach, head of economic intelligence at the CBI, said the drop in the value of the pound appears to be boosting to be exports:
It’s been a strong month for UK manufacturers, with production growing robustly and overseas demand on the up. The past fall in the pound seems finally to be helping lift demand for UK manufactured exports, which rose at one of the fastest paces in this survey’s history. And manufacturers are positive about the quarter ahead, expecting output to grow at the fastest rate since February 1995.
But the flipside is that cost pressures are widespread, and manufacturers expect factory-gate prices to continue to rise strongly over the next three months. And this will also put pressure on prices generally.
Here’s our full story on Mark Carney latest comments on the Charlotte Hogg debacle:
Mark Carney was not amused when he was lobbed a question about today’s inflation data during the Q&A on banking standards.
Asked what he made of the jump to 2.3% - a faster acceleration than the Bank expected - he answered rather abruptly that we shouldn’t “overreact to a single data point”.
Government borrows less than expected in February
The government borrowed £1.8bn in February, £2.8bn lower than a year earlier and the lowest amount for the month of February since 2007, before the financial crisis took hold.
So the government is still spending more than it earns, but economists had forecast higher borrowing of £2.1bn for last month. With just one month to go before the end of the fiscal year, borrowing totalled £47.8bn - £19.9bn less than at the same point last year. Tax receipts were strong last month, with income tax receipts up 13.3% and corporate tax receipts up 17.9%.
That’s good news for the chancellor, putting him firmly on track to meet the 2016-17 borrowing target of £51.7bn.
As Howard Archer points out, it’s a boost for Philip Hammond after his national insurance U-turn shocker last week:
Some much needed good news for chancellor Philip Hammond as the February public finance data (and an upwardly revised January surplus) put him on track to meet the markedly lowered 2016/17 fiscal target contained in March’s budget.
This is a particular relief for the chancellor as he has been under pressure after swiftly and embarrassingly scrapping his budget plans to raise national insurance contributions for the self-employed.
The fiasco over the national insurance contributions for the self-employed means that the chancellor really could do with meeting his 2016/17 budget targets. Missing the 2016/17 budget deficit forecast contained in March’s budget - even modestly - would be a further blow as he looks to regain credibility after the fiasco over the self-employed’s national insurance contributions.
Updated
Carney suggests he did not want Charlotte Hogg to resign:
An honest mistake that is freely admitted for which a firm takes prompt remedial action is not a firing offence.
He has given some some interesting details on the Bank’s response to the revelation that Charlotte Hogg had broken Bank rules by failing to disclose her brother worked for Barclays (in a potential conflict of interest).
He says:
- Hogg was “formally warned in the strongest – and most public – of terms”
- She waived her salary increase this year
- Hogg’s responsibilities as chief operating officer were reassigned (she was originally going to stay on as COO as well as taking on the role of deputy governor for markets and banking)
- Reporting lines and internal structures have been changed to improve governance and disciplinary processes
- The Bank is undertaking a review following the incident and the results will be made public
Updated
Carney says Bank of England will learn from Hogg debacle
Bank of England governor Mark Carney is giving a speech on banking standards over at Threadneedle Street.
He has taken the opportunity to address the issue of Charlotte Hogg - who resigned as deputy governor - less than two weeks after taking up the role - after failing to disclose her brother works for Barclays:
Carney says the Bank understands it should be held up to the highest standards and accountability:
For those who have questioned whether we “get it”, we do. We know this honest mistake was also a serious mistake – one that was compounded by the fact that Charlotte Hogg had overseen the development of our new code.
We were clear upfront that there must be consequences for both her and the Bank.
Carney on Hogg - who did not disclose her brother worked at Barclays - made "honest mistake" which was also a "serious one"
— Jill Treanor (@jilltreanor) March 21, 2017
Here is a reminder of the story:
UK inflation is on its way up...here’s how it looks:
Lots of reaction coming in to the inflation data but first a quick look at some of the detail from the ONS report.
The main drivers of the sharper-than-expected rise in inflation were food and fuel prices. A sustained period of food deflation appears to be firmly over.
- Food prices increased by 0.3% in February compared with a year earlier, ending 31 consecutive months of falling prices. Over the month, food prices rose by 0.8%
- Fuel prices rose by 1.2% between January and February
- The price of computers (including laptops and tablets) rose 2.3% during the month
Vegetables were major factor behind the rise in food prices, largely because of weather-related shortages in southern Europe.
The price of an iceberg lettuce, for example, rose by 67% between January and February, having fallen 5.1% a year ago,
Updated
TUC: government is sleepwalking into another living standards crisis
The larger-than-expected rise in inflation to 2.3% in February further closes the gap between the rise in prices and wage growth.
Inflation is now higher than wage growth (2.2% in the three months to January), signalling a return to falling real pay for UK workers.
Frances O’Grady, general secretary of the TUC, has commented on the inflation figures:
Working people across the UK are now facing the double blow of rising prices and slower wage growth.
If the government doesn’t wake up, we risk sleepwalking into another living standards crisis.
We urgently need more investment in skills and infrastructure to build strong foundations for better paid jobs. And it’s time to scrap the pay restrictions hitting hardworking teachers, nurses and other public servants.
Sharp rise in inflation pushes pound higher
The pound is up 0.8% against the dollar after the sharp jump in inflation, to $1.2455.
Responding to the inflation figures, a spokesperson for the Treasury acknowledged that families are growing increasingly concerned about the rising cost of living.
A strong economy and sustainable public finances are vital to achieve rising living standards. The spring budget set out plans to build a stronger, fairer economy by investing in skills, schools, social care and cutting-edge technology, while continuing to bring down the deficit and live within our means.
The government appreciates that families are concerned about the cost of living, and that is why we are cutting tax for millions of working people, increasing the National Living Wage to £7.50 per hour from next month, and freezing fuel duty for the seventh year in a row.
UK inflation jumps to 2.3%
Breaking: UK inflation rose to 2.3% in February from 1.8% in January. Food and fuel prices were the main drivers.
It’s a bigger-than-expected rise after economists forecast 2.1%, and the highest level since September 2013.
Also a return to the Bank of England’s 2% target.
More soon...
Pound rises ahead of inflation data
The pound is up 0.5% against the dollar, at $1.2412.
The annual inflation rate is expected to rise to a three-year high of 2.1% in February from 1.8% in January, which in theory raises the prospect of an interest rate hike.
In reality, economists expect Bank of England policymakers to keep rates on hold at an all-time low of 0.25% for the foreseeable future, as the Brexit road aheads remains hugely uncertain.
Meanwhile the dollar index - which measures the performance of the US currency against other key currencies - fell below 100 for the first time since early February.
Just five minutes to go until the inflation data...
Updated
Bellway: house builders could suffer from shortage of workers after Brexit
The UK house builder Bellway has warned on possible labour shortages after Brexit because the industry is so reliant on workers from abroad.
It could exacerbate the housing shortage in the UK, according to the chief executive of the Newcastle-based builder.
Speaking to the Guardian, Ted Ayres said:
The big thing for construction industry is we have a reliance on overseas labour, and [the question is], will it have any impact on people not wanting to live in the UK or will it stop further people coming to the UK to help us meet the housing demand?
We’re not going to able to build the number of units completely off the UK workforce.
He made the comments after Bellway posted a 9% rise in first half profits to £247m, pleasing investors and sending shares up 2.4% this morning.
Neil Wilson, senior market analyst at ETX Capital, says house builders have been more resilient than expected since the Brexit vote.
Shares in Bellway now stand above where they were before the Brexit vote. It’s a far cry from June. To all those who bet against UK housebuilders in what was a bloodbath for the sector on June 24th [the day after the referendum], the last few months have been a lesson in fundamentals. The likes of Taylor Wimpey and Persimmon are also back to pre-referendum levels. Redrow has surged well past that level. Bovis is the laggard and left itself open to a takeover as a result.
Part of it is down to the resilience of the UK economy and in particular the continued strength of consumer spending and confidence. The Bank of England played its part too in slashing interest rates to help boost confidence and ensure access to credit was not about to be a problem. This was an important signal at the time. Mortgage rates and availability remain very supportive.
But the most important factor is the fundamental mismatch in the property sector between supply and demand, which across large parts of the country continues to exert upward pressure on selling prices faster than wages can keep pace.
European markets rise in early trading
Europe’s main indices are up this morning.
The FTSE 100 is up by a modest 4 points at 7,433 as investors ponder Theresa May’s decision to trigger Article 50 next Wednesday, formally kickstarting divorce proceedings with the EU.
Markets have also shrugged of last night’s presidential election debate in France, where the far-right Front National’s Marine Le Pen came under fire from rivals.
Here are the scores on the board:
- FTSE 100: +0.04% at 7,433
- Germany’s DAX: +0.1% at 12,070
- France’s CAC: +0.3% at 5,029
- Italy’s FTSE MIB: +1% at 20,166
- Spain’s IBEX: +0.8% at 10,298
- Europe’s STOXX 600: +0.1% at 378
Also coming up today is UK public finances data for February, which will show how much the government borrowed over the month and reveal how the chancellor is doing as the fiscal year to the end of March 2017 draws to a close.
In Philip Hammond’s Spring budget earlier this month, the outlook for the public finances was revised to show lower borrowing over the coming years than previously expected - partly because economic growth has been more resilient.
Borrowing in the full 2016-17 fiscal year is now expected to be £51.7bn, after budget forecasts were revised down from £68.2bn. That would be sharply lower than the £76bn borrowed by the government in 2015-16.
Here is our preview story on the UK inflation data, out at 9.30am:
Traders at IG, the spread-betting firm, are expecting markets to be pretty subdued when trading gets underway in Europe this morning:
Our European opening calls:$FTSE 7431 up 1
— IGSquawk (@IGSquawk) March 21, 2017
$DAX 12068 up 15
$CAC 5018 up 5$IBEX 10222 up 8$MIB 19954 down 15
The agenda: UK inflation expected to return to 2% target
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s UK inflation day, and it is expected to a significant one. The consumer prices index has been rising since October and the latest data from the Office for National Statistics is expected to show a further rise in February to 2.1% from 1.8% in January.
That would be the highest since November 2013 and mark a return to the Bank of England’s 2% target after a prolonged period of below-target inflation.
Brexit has put an end to the weak inflationary pressures of recent years, as the sharp drop in the value of the pound since the vote has pushed up the cost of imports from abroad and is starting to feed through to higher prices in the shops.
Higher food and petrol prices are expected to contribute to the higher rate of inflation in February.
Inflation is expected to rise to about 3% by the end of the year, putting increasing pressure on household finances at a time when wage growth is slowing.
Higher inflation does not mean the Bank will raise interest rates any time soon though, as Philip Shaw from Investec explains:
We still expect inflation to surpass 3% over the summer. But we do not expect the MPC to respond by raising rates unless there is a material acceleration in pay rates, a scenario which data earlier this week suggest is unlikely for now.
The data is out at 9.30am.
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