That’s it for today folks. Thank you for reading and commenting and please join us again tomorrow morning for more rolling news.
US markets open down
- Dow Jones: -0.5% at 17,633.18
- S&P 500: -0.4% at 2,058.38
- Nasdaq: -0.6% at 4,893.24
Investors appear to be jittery about the global outlook and general uncertainty about when the Fed might next raise rates.
John McDonnell, Labour’s shadow chancellor, has commented on those weak UK productivity numbers:
Latest productivity figures showing the largest quarterly fall since 2008 are deeply concerning. It comes only weeks after the Office for Budget Responsibility revised down forecasts for growth due to weak productivity expectations throughout this Parliament.
George Osborne has been chancellor for six years now and has made almost no progress with what may be the biggest challenge facing Britain’s economy. It’s about time he listened to the coalition of voices calling for more investment in infrastructure, to boost productivity, as well as addressing the skills shortage which is being reported by employers across the economy.
US jobless claims fall
The number of people claiming for unemployment benefits in America dropped more than expected last week.
New jobless claims fell 9,000 to 267,000 (seasonally adjusted) for the week ended 2 April, the US Labor Department said.
Economists polled by Reuters had expected a smaller fall to 270,000.
New jobless claims have now been below the 300,000 mark for 57 weeks - the longest run since 1973.
Despite the apparent strength of the US labour market, Fed policymakers are in cautious mode and are not expected to raise interest rates in April.
Reaction to the ECB minutes...
Jonathan Loynes, chief European economist at Capital Economics:
The minutes of the ECB’s monetary policy meeting on March 10th may reinforce concerns that the Governing Council is starting to run out of ammunition.
There appears to have been broad support for the package of measures unveiled at the meeting... However, there were differences of opinion about the merits of the different components, with some members expressing concerns over some of the side-effects e.g. the effect of more negative interest rates on banks’ profitability. A few members – presumably led by the Bundesbank’s Jens Weidmann – also objected to the expansion of asset purchases. There was broader support for the TLTROs.
We don’t think any of this rules out further action from the ECB altogether. With the economic recovery slowing and the euro rising, officials have already stressed since the meeting that interest rates could fall further and other measures are possible. Accordingly, we still think that a further extension of the APP is likely at some point and would not entirely rule out more drastic measures such as some form of “helicopter drop”.
Howard Archer, chief European economist at IHS Global Insight:
Having delivered a major package of measures in March, we believe the ECB will now likely remain in “wait and see” mode for an extended period.
Nevertheless, senior ECB policymakers have actually been out in force on Thursday indicating that the ECB is willing and able to take further stimulative action should it deem it necessary.
For example, ECB President Draghi stated that “the ECB does not surrender to excessively low inflation”.
Should the ECB eventually feel the need to undertake more stimulus, it does seem most likely that this would be in the form of more QE or liquidity measures than further interest rate cuts.
ECB minutes: broad support for policy measures
Following on from Mario Draghi’s gloomy comments published in the ECB’s annual report earlier today, minutes from the governing council’s latest meeting have been released.
The minutes reveal that governing council members were broadly supportive of the additional stimulus measures announced in March. Measures included cutting the main interest rate to zero from 0.05%, and cutting the deposit rate by 10 basis points to -0.4%.
From the minutes:
Taking into account the views expressed by the members of the governing council, the president concluded that a large majority of voting members supported the proposed policy package.
Some members were concerned however about the limitations of monetary policy, and reiterated the need for governments to play their part in boosting activity through fiscal policy and reforms.
Overall, the recovery in the euro area economy was expected to continue at a more subdued pace, while the risks to the growth outlook were mostly seen to remain tilted to the downside. These risks related in particular to the heightened uncertainties regarding the external environment and to broader geopolitical risks.
Against this background, members reiterated the necessity for other policy areas to support sustained output growth and that monetary policy on its own was not sufficient. There was a need for both structural reforms and fiscal policy to also play their part.
The yen has hit a 17-month high against the dollar, following the Fed’s cautious stance revealed in the FOMC minutes.
The yen is up around 9.5% against the dollar this year, despite negative rates in Japan.
The dollar fell 1.4% to 108.02 yen.
ING currency strategist Petr Krpata:
We are in a broad based soft dollar environment, and given the yen is cheap in relation to its long-term fundamentals, it is not surprising it is outperforming.
Love this Wurst AGM bust up ever (Die heisse Schlacht am Daimler Buffet) https://t.co/znQhTcqeeM
— Katie Allen (@KatieAllenGdn) April 7, 2016
and Reinhard Mey https://t.co/q34UMaiFNT
Dublin Airport is pressing ahead with plans for a second runway, in a sign of Ireland’s reviving fortunes.
The second, 3,110 metre runway, is expected to be ready in 2020. Dublin Airport originally received planning permission for a second runway in August 2007, but the plans were shelved as the global economy plunged into crisis and Ireland was hit hard.
In a statement on Thursday, the airport’s operator DAA, said the recovery in passenger numbers - particularly in the past two years - had been “significant”.
DAA chief executive Kevin Toland:
Last year was the busiest year ever in the airport’s history with a record 25 million passengers travelling in 2015. Passenger numbers continue to grow strongly in 2016 with double digit growth recorded in the first two months of this year.
The north runway will significantly improve Ireland’s connectivity which plays a critical role in growing passenger numbers and sustaining the future economic development of Ireland.
Updated
A US recession is now “virtually inevitable” according to Societe Generale’s resident bear, Albert Edwards.
Edwards says his failsafe recession indicator has turned to red, giving a very gloomy view of the world’s largest economy and its policymakers.
Despite risk assets enjoying a few weeks in the sun our failsafe recession indicator has stopped flashing amber and turned to red. Newly released US whole economy profits data show a gut wrenching slump.
Whole economy profits never normally fall this deeply without a recession unfolding. And with the US corporate sector up to its eyes in debt, the one asset class to be avoided – even more so than the ridiculously overvalued equity market - is US corporate debt. The economy will surely be swept away by a tidal wave of corporate default.
I suppose now the S&P has recovered we are about to go through another turn on the monetary/market merry-go-round. Ignore this noise. Recent whole economy profits data show that while the Fed plays its games, the economic cycle is withering and writhing from within. For historically, when whole economy profits fall this deeply, recession is virtually inevitable as business spending slumps.
And if I had to pick one asset class to avoid it would be US corporate bonds, for which sky high default rates will shock investors.
Japanese interest rates go negative, and the yen *rises* against the dollar. Now ain't that weird? https://t.co/aKoEluYDjE
— Noah Smith (@Noahpinion) April 7, 2016
European markets fall, fears over yen rise
Earlier gains have faded away and most indices are slightly down. The FTSE 100 is down just a touch (4 points) at 6,157.
David Morrison, senior market strategist at Spread Co, says fears over the strengthening yen are damaging investor confidence.
European equities and US stock index futures are coming off their best levels following yesterday’s sharp oil-inspired rally. While crude prices have held on to recent gains, boosted to a great extent by a surprise drop in US inventories, traders are looking past these this morning and worrying about FX moves. Specifically their concerns focus on the relentless surge in the Japanese yen.
The currency is sharply higher again this morning. The rally has gained momentum since the USDJPY broke decisively below 110.00 yesterday and the euro is also sharply lower against the yen this morning.
No doubt there was some disappointment that in a speech overnight Bank of Japan governor Haruhiko Kuroda said nothing new about Japan’s economic outlook or monetary policy. But the real fear is that Japan’s policymakers are losing control of the situation and will be unable to counter the yen’s rally. This is a serious concern given Japan’s tepid growth, parlous debt load and inability to create inflation.
The European Central Bank is prepared to inject more stimulus if necessary, according to top policymakers.
Writing in the ECB’s annual report, the bank’s president Mario Draghi said 2016 would be another challenging year.
We face uncertainty about the outlook for the global economy. We face continued disinflationary forces. And we face questions about the direction of Europe and its resilience to new shocks.
Meanwhile the ECB’s chief economist, Peter Praet, told an audience of economists in Frankfurt that the bank stood ready to do more:
If further adverse shocks were to materialise, our measures could be recalibrated once more commensurate with the strength of the headwind.
UK productivity falls at fastest rate since financial crisis
UK productivity slumped in the final quarter of 2015 according to the latest official figures.
Output per hour fell 1.2% in the last three months of the year, compared with the previous quarter. It was the biggest drop since the end of 2008, and reversed a 0.6% in the third quarter.
It will come as a blow to Treasury officials and policymakers at the Bank of England, who have been scratching their heads over Britain’s poor productivity performance and hoping for a turnaround.
UK productivity growth has lagged that of most major economies since the financial crisis, and last month the Office for Budget Responsibility (the government’s independent forecaster) revised down its forecasts.
Unit labour costs were also lower than expected, up 1.3% in the fourth quarter compared with a year earlier. Economists were expecting a 1.9% increase.
Alan Clarke, economist at Scotiabank, said the data reinforced the view that the Bank of England will not be raising interest rates any time soon.
The market seems to be taking this in its stride, which is understandable. The Brexit vote has tied the BoE’s hands for the time being. If an imminent rate hike was on a knife edge, this data release would have just pushed the hike into the long grass.
But with a rate hike a distant prospect, this release merely confirms the market thinking. If the Bank’s Monetary Policy Committee weren’t in a rush to hike rates before, they won’t be after this release.
UK productivity falls at the fastest rate since the global crisis. Via @BruceReuters pic.twitter.com/tHjc3eYKzn
— Jamie McGeever (@ReutersJamie) April 7, 2016
Over in Germany, the latest Daimler AGM took a rather unsavoury turn when two shareholders had a row over the buffet sausages and police were called.
The free food at company AGMs has long been a draw for shareholders but Daimler could not have predicted events as the luxury car maker announced a record dividend.
Things turned nasty when one shareholder apparently accused another of being too greedy by attempting to pocket several sausages.
The sausages in question were Saitenwuerschtle, from the carmaker’s home state of Baden Wuerttemberg. Daimler provided 12,500 sausages for about 5,500 shareholders who attended the meeting, so just over two per person.
When one shareholder was caught wrapping up several sausages to apparently take away with him, he was confronted by another and a shouting match began, resulting in the police being called.
Daimler board chairman Manfred Bischoff confirmed the incident.
We had to call the police to settle the matter.
Either we need more sausages or we drop the sausages completely.
#sausagegate
Updated
A little more on the new M&S boss Steve Rowe.
Making his debut with an underwhelming trading update, he told journalists he wants to take a straightforward approach to how he leads the business.
For starters, he his getting rid of the term “general merchandise” (replacing it with “clothing and home”), which can only be a good thing.
Steve Rowe on using term 'clothing and home' rather than general merchandise: 'We're going to start referring to GM in customer langauage.'
— George MacDonald (@GeorgeMacD) April 7, 2016
Rowe might be new to the top job but he first started working for M&S at the Croydon store on Saturdays, aged 15.
Read our piece - From Saturday boy to big boss - here.
Despite Bolland's supposed focus on GM, sales have fallen again at M&S. Let's see if Rowe can do better. Need to simplify product offering.
— Jonathan De Mello (@DeMelloRetail) April 7, 2016
Blower’s retail cartoon: New M&S boss Rowe targets fashion turnaround https://t.co/VnZvMeqndb (£)
— Retail Week (@RetailWeek) April 5, 2016
Reviewing M&S clothing is like watching schoolboy football. All the Sub-brands chasing the same ball, Rowe needs to get his whistle out.
— Philip Dorrell (@phil_dorrell) April 7, 2016
New M&S boss: clothing performance 'unsatisfactory'
Steve Rowe, the man newly in charge of Marks & Spencer, has given his first trading update since taking over the top job on Saturday.
Clothing sales fell again over the most recent quarter (they have risen in only quarter over the past five years). Rowe said the performance of its clothing business was “unsatisfactory” and turning it around was his “number one priority”.
Like-for-like clothing and home sales were down by 2.7% in the 13 weeks to 26 March.
Nevertheless M&S is one of the top risers on the FTSE this morning, with shares up 1.9% at 428.4p, because the City was expecting a bigger drop in clothing sales.
Food sales were flat over the quarter. Read our full story on the trading update here.
Updated
European markets open higher
Europe’s main markets are mostly up this morning, boosted by the Fed’s signal that it is in no immediate hurry to raise rates again.
Brent crude oil prices rose above $40 a barrel earlier but are now down a touch at $39.82.
Now for some reaction to those Fed minutes. As always its a case of reading between the lines and much of the language is open to interpretation.
Steve Murphy, US economist at Capital Economics:
Although the minutes acknowledge that a few officials were ready to raise interest rates in April, many thought that the Fed should precede more cautiously, in particular because of worries about global downside risks.
At this stage, the chances of an April rate hike are very slim, but we expect the Fed will resume raising rates in June.
By that time, fears surrounding global risks should have faded and further increases in core inflation will have convinced officials that the pick-up is in fact genuine. Thereafter, we expect the fed funds rate will end this year at between 1.00% and 1.25%.
Michael Hewson, chief market analyst at CMC Markets UK:
As suspected the US Federal Reserve’s FOMC minutes painted a picture of a divided central bank, but what was clear is that [while] there is some appetite to pull the trigger on a rate rise in April it is a sentiment that is not shared amongst the majority of the voting members on the committee.
“A range of views” was expressed about the likelihood of a move in April, but it is clear that policymakers are concerned about the volatility that has rippled through markets for a good part of this year.
Reading between the lines this makes the prospect of a move in April unlikely and hasn’t shifted the dial higher on the odds of a June hike either, with markets assigning a 19.6% probability of a move before the publication of the minutes, and a 17.6% probability afterwards.
Mkts got no clue from Fed min's. Not as dovish as Yellen but still plus&minuses. Next hike priced for Dec, as before pic.twitter.com/0N6z2FrUd9
— Holger Zschaepitz (@Schuldensuehner) April 6, 2016
Fed minutes summary. pic.twitter.com/CFPJTzLtCO
— Pedro da Costa (@pdacosta) April 6, 2016
US Fed: April rate rise unlikely
Good morning and welcome to our rolling coverage of the world economy, the financial markets and business.
The US Federal Reserve is unlikely to raise interest rates at its April meeting, the latest minutes of the Federal Open Market Committee (FOMC) suggest.
Chaired by Janet Yellen, the committee was clearly divided. Some members judged improving data suggested the US economy was ready for another rate hike. Others were more wary, fearful of recent trends in the global economy where risks appear to be mounting.
Overall, the tone was cautious:
A number of participants judged that the headwinds restraining growth and holding down the neutral rate of interest were likely to subside only slowly. In light of this expectation and their assessment of the risks to the economic outlook, several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate.
In contrast, some other participants indicated that an increase in the target range at the Committee’s next meeting might well be warranted if the incoming economic data remained consistent with their expectations for moderate growth in output, further strengthening of the labor market, and inflation rising to 2% over the medium term.
US markets rose:
- Dow Jones: +0.6% at 17,716.05
- S&P 500: +1% at 2,066.66
Markets this morning await the latest minutes from the European Central Bank.
