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| Stock markets rebound after Japan's shock move to negative interest rates – live | Stock markets rebound after Japan's shock move to negative interest rates – live |
| (35 minutes later) | |
| 10.06am GMT | |
| 10:06 | |
| Let’s return to the Bank of Japan for a minute. | |
| Sean Yokota, head of Asia strategy at SEB, the Nordic corporate bank, explained the BOJ’s move to negative interest rates, which he thinks will push the yen down towards 126 against the dollar. | |
| The BoJ is adopting a multiple-tier system where the interest rate on financial institution’s current account are not all set at -0.1%. It will be divided into positive interest rate (for basic balance of reserves), zero interest rate and negative interest rate for ‘excess reserves’. On a weighted basis, the current account will likely have a rate closer to 0% instead of -0.1%. The BoJ moved to the tiered system because it is worried that negative rates on all of banks’ current account will eat into their earnings and tighten lending standards. | |
| Yokota said annual spring wage negotiations will be key to the inflation outlook. Compared to 2.4% increase in 2015, 2016 is expected to be lower at 2.0%. However, dipping below 2.0%, lower than BoJ inflation target of 2%, would be a negative development and hurt inflation expectations, he said. | |
| Second, Prime Minister Shinzo Abe may delay the VAT hike from 8% to 10% scheduled for April 2017, which will be positive for the equity market and negative for the yen. Abe reiterated this week that he still plans to increase the VAT as scheduled. His party has also recently excluded certain food items from the tax hike to reduce the impact on the economy.” | |
| 9.47am GMT | |
| 09:47 | |
| Economists at Société Générale also think the US GDP numbers will be weak. | |
| In stark contrast to an impressive acceleration in job creation, real business activity likely slowed to a near crawl during the fall quarter. We expect Q4 GDP growth of 0.5% seasonally adjusted annualised rate (from 2% in Q3), in part due to a considerable deceleration in real consumer spending which we forecast to also have slowed to 1.5% quarter-on-quarter from 3% in Q3. | |
| 9.43am GMT | |
| 09:43 | |
| At lunchtime (13:30 GMT), we are getting US GDP numbers for the fourth quarter – the first estimate. | |
| Weak, but how weak? And will it even remain positive? asks ING economist Rob Carnell. | |
| Preliminary GDP estimates are difficult to forecast accurately, and are also prone to massive revisions subsequently. But there is a growing body of evidence pointing to this latest GDP outcome being even weaker than the fairly soft 2.0% (annualised) reading delivered for 3Q15. A negative figure, though unlikely, cannot be ruled out. | |
| Business investment looks very weak after the latest negative durable goods orders and shipments for December, and could even be negative, he said. A further drag looks likely from inventories. | |
| This leaves only residential construction spending, which remains strong, though is probably beginning to wane, and consumer spending, which has definitely slowed to about a 2.0% pace from 3.0% in 3Q15. | |
| If you put all this together, you get a GDP figure of about 0.9%, the same as the consensus prior to the durable goods release. But the real consensus is likely lower now, and the risk is that the inventory figure is closer to zero than +US$50bn, and if so, then GDP will be closer to zero too – a negative number cannot be ruled out. | |
| Even the consensus figure is going to make it an uphill struggle for the Fed to hike rates any time soon. And with markets pricing in only one rate hike from the Fed in 2016, it is our forecast of two hikes, not the market expectations, that seems in need of revision.” | |
| Updated | |
| at 9.48am GMT | |
| 9.33am GMT | 9.33am GMT |
| 09:33 | 09:33 |
| Pantheon Macroeconomics said German retail sales were disappointing. | Pantheon Macroeconomics said German retail sales were disappointing. |
| Assuming no major revisions next month, retail sales fell 0.1% quarter-on-quarter in Q4, down from a 0.9% surge in Q3. These data then confirm our suspicion that consumers’ spending slowed towards the end of last year, but overall 2015 was a spectacular year for the German consumer, with record growth rates. Fundamentals look solid for strong growth in 2016 too, but momentum likely will slow in the short run.” | Assuming no major revisions next month, retail sales fell 0.1% quarter-on-quarter in Q4, down from a 0.9% surge in Q3. These data then confirm our suspicion that consumers’ spending slowed towards the end of last year, but overall 2015 was a spectacular year for the German consumer, with record growth rates. Fundamentals look solid for strong growth in 2016 too, but momentum likely will slow in the short run.” |
| 9.24am GMT | 9.24am GMT |
| 09:24 | 09:24 |
| In other economic news this morning, German retail sales unexpectedly dropped 0.2% on the month in December. Sales rose 1.5% year-on-year in December, down from a 2.4% rate in November and the lowest pace of growth for seven months. | In other economic news this morning, German retail sales unexpectedly dropped 0.2% on the month in December. Sales rose 1.5% year-on-year in December, down from a 2.4% rate in November and the lowest pace of growth for seven months. |
| A weak end to a strong year – retail sales rose 2.7% in 2015, the highest annual increase since 1994. | A weak end to a strong year – retail sales rose 2.7% in 2015, the highest annual increase since 1994. |
| Dec 0.2% m/m dip in #German #retail sales dilutes hopes that #consumer spending was a major contributor to GDP growth in Q4 2015 (1) | Dec 0.2% m/m dip in #German #retail sales dilutes hopes that #consumer spending was a major contributor to GDP growth in Q4 2015 (1) |
| (2) But #German #retail #sales data are not most reliable measure of #consumer spending & fundamentals look largely decent for 2016 | (2) But #German #retail #sales data are not most reliable measure of #consumer spending & fundamentals look largely decent for 2016 |
| 9.19am GMT | 9.19am GMT |
| 09:19 | 09:19 |
| Russia has poured cold water on the idea of a deal between oil-producing nations... | Russia has poured cold water on the idea of a deal between oil-producing nations... |
| No confirmed meeting with OPEC, Non-OPEC nations - Russia's Novak - Now Oil should crash + expensive US dollar will help to erase gains. | No confirmed meeting with OPEC, Non-OPEC nations - Russia's Novak - Now Oil should crash + expensive US dollar will help to erase gains. |
| Brent crude is still up 1.8% at $34.51 a barrel though. | Brent crude is still up 1.8% at $34.51 a barrel though. |
| 9.01am GMT | 9.01am GMT |
| 09:01 | 09:01 |
| Are we heading for a crash? Economists can’t agree if gyrating financial markets mean we face a global meltdown. We asked leading analysts to debate the question … you can read the piece here. | Are we heading for a crash? Economists can’t agree if gyrating financial markets mean we face a global meltdown. We asked leading analysts to debate the question … you can read the piece here. |
| 8.54am GMT | 8.54am GMT |
| 08:54 | 08:54 |
| Julien Manceaux, economist at Capital Economics, has looked at the French GDP numbers in more detail. The eurozone’s second-largest economy grew just 0.2% in the fourth quarter as consumer spending declined, partly due to the terrorist attacks in Paris but also the warm weather. The economy expanded just 1.1% in 2015 as a whole. | Julien Manceaux, economist at Capital Economics, has looked at the French GDP numbers in more detail. The eurozone’s second-largest economy grew just 0.2% in the fourth quarter as consumer spending declined, partly due to the terrorist attacks in Paris but also the warm weather. The economy expanded just 1.1% in 2015 as a whole. |
| If these figures are confirmed next month, it would mean that last year’s hopes to see 2015 showing a stronger recovery of 1.5% will never materialise. Worse, this is now all we can hope for in 2016. Indeed, 2015 had all the reasons to be better: some structural reforms, tax cuts for households and companies, a weaker euro and low energy prices should have made of 2015 the year of the recovery. But confidence never returned enough to ensure that, leaving business investments and job creations too low. | If these figures are confirmed next month, it would mean that last year’s hopes to see 2015 showing a stronger recovery of 1.5% will never materialise. Worse, this is now all we can hope for in 2016. Indeed, 2015 had all the reasons to be better: some structural reforms, tax cuts for households and companies, a weaker euro and low energy prices should have made of 2015 the year of the recovery. But confidence never returned enough to ensure that, leaving business investments and job creations too low. |
| Looking ahead, we expect the labour market to gradually stabilise and reinforce confidence in coming months, mostly because of new measures announced to the government. This means that the recovery is likely to continue to unfold in coming months, albeit at a slower pace than expected. If better labour market figures do not materialise soon, the risk is to see domestic demand faltering when temporary factors like low energy prices will see their effects abate. | Looking ahead, we expect the labour market to gradually stabilise and reinforce confidence in coming months, mostly because of new measures announced to the government. This means that the recovery is likely to continue to unfold in coming months, albeit at a slower pace than expected. If better labour market figures do not materialise soon, the risk is to see domestic demand faltering when temporary factors like low energy prices will see their effects abate. |
| The IMF recently forecast a tiny recovery for France in 2016 (1.3%). It may look pessimistic now, but if 2016 unfolds as 2015, it may become reality. However, there are still reasons to hope for a more dynamic recovery: if private consumption rebounds once more thanks to a more stable job market and that investments increase faster (because of the end of the downward housing cycle and important tax rebates for SME investments), we still believe that GDP growth could reach 1.6% in 2016. However, the risks already look oriented to the downside.” | The IMF recently forecast a tiny recovery for France in 2016 (1.3%). It may look pessimistic now, but if 2016 unfolds as 2015, it may become reality. However, there are still reasons to hope for a more dynamic recovery: if private consumption rebounds once more thanks to a more stable job market and that investments increase faster (because of the end of the downward housing cycle and important tax rebates for SME investments), we still believe that GDP growth could reach 1.6% in 2016. However, the risks already look oriented to the downside.” |
| 8.45am GMT | 8.45am GMT |
| 08:45 | 08:45 |
| Here’s a handy explainer on how negative interest rates work, following the Bank of Japan’s surprise move overnight. In 2014 the European Central Bank imposed negative interest rates of -0.1% on eurozone banks – to encourage them to lend to small firms rather than to hoard cash. | Here’s a handy explainer on how negative interest rates work, following the Bank of Japan’s surprise move overnight. In 2014 the European Central Bank imposed negative interest rates of -0.1% on eurozone banks – to encourage them to lend to small firms rather than to hoard cash. |
| 8.39am GMT | 8.39am GMT |
| 08:39 | 08:39 |
| Connor Campbell, financial analyst at Spreadex, has looked at the markets: | Connor Campbell, financial analyst at Spreadex, has looked at the markets: |
| After a shaky end to Thursday the markets have surged into life this Friday morning following the decision by the Bank of Japan to implement negative interest rates. | After a shaky end to Thursday the markets have surged into life this Friday morning following the decision by the Bank of Japan to implement negative interest rates. |
| The move follows the latest failing of ‘Abenomics’ to significantly boost Japan’s inflation, and has helped (temporarily) ease some of the macro-tensions that have plagued the start to 2016. This has led to a rather robust rebound from the European markets; the FTSE, also aided by a steady $35 per barrel level for Brent Crude, jumped 80 points after the bell, leaving the UK index just about back above the 6000 mark.” | The move follows the latest failing of ‘Abenomics’ to significantly boost Japan’s inflation, and has helped (temporarily) ease some of the macro-tensions that have plagued the start to 2016. This has led to a rather robust rebound from the European markets; the FTSE, also aided by a steady $35 per barrel level for Brent Crude, jumped 80 points after the bell, leaving the UK index just about back above the 6000 mark.” |
| 8.39am GMT | 8.39am GMT |
| 08:39 | 08:39 |
| Oil is continuing its recovery, with Brent crude now up half a dollar, or 1.5%, at $34.40 a barrel. It is heading for its fourth day of gains, spurred by hopes of a deal among oil producers to rein in the supply glut. | Oil is continuing its recovery, with Brent crude now up half a dollar, or 1.5%, at $34.40 a barrel. It is heading for its fourth day of gains, spurred by hopes of a deal among oil producers to rein in the supply glut. |
| Michael Hewson, chief market analyst at CMC Markets UK, said: | Michael Hewson, chief market analyst at CMC Markets UK, said: |
| While the move higher has been helped in no small part by vague chatter of some form of output deal between Russia and Opec, without agreement from Iran which seems unlikely, there is about as much chance of that happening as Aston Villa winning the Premier League this year. The main reason oil prices appear to have found a base is a weaker US dollar, as well as some position covering heading into month end, which is helping support prices.” | While the move higher has been helped in no small part by vague chatter of some form of output deal between Russia and Opec, without agreement from Iran which seems unlikely, there is about as much chance of that happening as Aston Villa winning the Premier League this year. The main reason oil prices appear to have found a base is a weaker US dollar, as well as some position covering heading into month end, which is helping support prices.” |
| Updated | Updated |
| at 8.58am GMT | at 8.58am GMT |
| 8.34am GMT | 8.34am GMT |
| 08:34 | 08:34 |
| The yen is sliding after the Bank of Japan stunned markets by moving into negative interest rates. It imposed a 0.1% fee on some deposits parked with the central bank, which means it will charge banks interest. | The yen is sliding after the Bank of Japan stunned markets by moving into negative interest rates. It imposed a 0.1% fee on some deposits parked with the central bank, which means it will charge banks interest. |
| The dollar jumped more than 2% against the yen at one stage to 121.495 yen, its highest level in more than a month, and is now trading at 120.82 yen, up 1.7% on the day. | The dollar jumped more than 2% against the yen at one stage to 121.495 yen, its highest level in more than a month, and is now trading at 120.82 yen, up 1.7% on the day. |
| 8.27am GMT | 8.27am GMT |
| 08:27 | 08:27 |
| European stock markets have got off to a strong start: | European stock markets have got off to a strong start: |
| 8.17am GMT | 8.17am GMT |
| 08:17 | 08:17 |
| Spain grows 0.8% in fourth quarter | Spain grows 0.8% in fourth quarter |
| ....and Spain has just followed suit with strong GDP figures: the eurozone’s fourth-largest economy posted another 0.8% gain in the fourth quarter. ¡Ay, caramba! | ....and Spain has just followed suit with strong GDP figures: the eurozone’s fourth-largest economy posted another 0.8% gain in the fourth quarter. ¡Ay, caramba! |
| But economists at Capital Economics say a pick-up in eurozone growth in the fourth quarter is now unlikely, because France was relatively weak. | But economists at Capital Economics say a pick-up in eurozone growth in the fourth quarter is now unlikely, because France was relatively weak. |
| Austria grew 0.3% between October and December, the same as in the previous quarter. | Austria grew 0.3% between October and December, the same as in the previous quarter. |
| OFFICIAL: Spain's GDP grew by 0.8% in Q4. That brings the 2015 growth rate to +3% => best yearly performance since 2007. ¡Felicitaciones! | OFFICIAL: Spain's GDP grew by 0.8% in Q4. That brings the 2015 growth rate to +3% => best yearly performance since 2007. ¡Felicitaciones! |
| #Austrian #GDP growth reported at 0.3% q/q in Q4 2015. #French GDP was up 0.2% q/q. Bank of #Spain has estimated Q4 growth at 0.8% q/q (1) | #Austrian #GDP growth reported at 0.3% q/q in Q4 2015. #French GDP was up 0.2% q/q. Bank of #Spain has estimated Q4 growth at 0.8% q/q (1) |
| Morning. French GDP grew just 0.2% qq in Q4 as hh spending fell. Spain posted another 0.8% gain but pick-up in EZ growth in Q4 now unlikely. | Morning. French GDP grew just 0.2% qq in Q4 as hh spending fell. Spain posted another 0.8% gain but pick-up in EZ growth in Q4 now unlikely. |
| Updated | Updated |
| at 8.18am GMT | at 8.18am GMT |
| 8.09am GMT | 8.09am GMT |
| 08:09 | 08:09 |
| The French economy – the second largest in the eurozone – grew just 1.1% in 2015, Insee said. Again, it was outperformed by Britain with 2.2% growth, although that was down from 2.9% in 2014. | The French economy – the second largest in the eurozone – grew just 1.1% in 2015, Insee said. Again, it was outperformed by Britain with 2.2% growth, although that was down from 2.9% in 2014. |
| France is the first country in the eurozone to publish growth figures for the end of 2015. | France is the first country in the eurozone to publish growth figures for the end of 2015. |
| Updated | Updated |
| at 8.11am GMT | at 8.11am GMT |
| 8.07am GMT | 8.07am GMT |
| 08:07 | 08:07 |
| French economy grows 0.2% in Q4 | French economy grows 0.2% in Q4 |
| French GDP data out this morning was bang in line with expectations: the flash estimate for the fourth quarter showed the French economy expanded by 0.2%, a slight slowdown from 0.3% in the third quarter. This compares with 0.5% growth in the UK between October and December. | French GDP data out this morning was bang in line with expectations: the flash estimate for the fourth quarter showed the French economy expanded by 0.2%, a slight slowdown from 0.3% in the third quarter. This compares with 0.5% growth in the UK between October and December. |
| Consumer spending in France dropped 0.4%, the national statistics agency Insee said. Insee warned earlier this month that the Paris terror attacks in November had a significant impact on hotel trade. Unusually warm weather in France also weighed on consumer spending by reducing demand for heating and clothing. | Consumer spending in France dropped 0.4%, the national statistics agency Insee said. Insee warned earlier this month that the Paris terror attacks in November had a significant impact on hotel trade. Unusually warm weather in France also weighed on consumer spending by reducing demand for heating and clothing. |
| #France GDP slowed in Q4 (0.2% qoq vs 0.3 in Q3). Terrorist attacks likely had some impact on activity | #France GDP slowed in Q4 (0.2% qoq vs 0.3 in Q3). Terrorist attacks likely had some impact on activity |
| #France | GDP really poor quality ...inventories pic.twitter.com/7yNWUHqzlw | #France | GDP really poor quality ...inventories pic.twitter.com/7yNWUHqzlw |
| 7.41am GMT | 7.41am GMT |
| 07:41 | 07:41 |
| Meanwhile, the Russian central bank is expected to leave interest rates on hold today, because further easing could exacerbate the rouble’s weakness. | Meanwhile, the Russian central bank is expected to leave interest rates on hold today, because further easing could exacerbate the rouble’s weakness. |
| The bank slashed rates by 6 percentage points to 11% in the first half of 2015 when western sanctions over Ukraine led to a deepening economic decline, but has left them unchanged since July. The country, which relies heavily on oil exports, has been hit hard by the slump in crude oil prices over the past year. | The bank slashed rates by 6 percentage points to 11% in the first half of 2015 when western sanctions over Ukraine led to a deepening economic decline, but has left them unchanged since July. The country, which relies heavily on oil exports, has been hit hard by the slump in crude oil prices over the past year. |
| The rouble plummeted to all-time lows against the dollar last week when oil prices fell to fresh 13-year lows and global stock markets tumbled. | The rouble plummeted to all-time lows against the dollar last week when oil prices fell to fresh 13-year lows and global stock markets tumbled. |
| Some economists are even speculating that rate hikes could be back on the agenda soon. At its last meeting in December Russia’s central bank said it had drawn up a risk scenario that projected oil prices at $35 for the next three years, but they have since fallen below that level. Brent crude, the global benchmark, dropped below $27 a barrel last week but has since recovered to $34.72. | Some economists are even speculating that rate hikes could be back on the agenda soon. At its last meeting in December Russia’s central bank said it had drawn up a risk scenario that projected oil prices at $35 for the next three years, but they have since fallen below that level. Brent crude, the global benchmark, dropped below $27 a barrel last week but has since recovered to $34.72. |
| But Russia’s recession is far from over. A spate of economic data on Monday showed how dire the situation is: the economy shrank 3.7% last year, retail sales slumped more than 15% year-on-year in December, real wages fell 10% and capital investment declined 8.7%. | But Russia’s recession is far from over. A spate of economic data on Monday showed how dire the situation is: the economy shrank 3.7% last year, retail sales slumped more than 15% year-on-year in December, real wages fell 10% and capital investment declined 8.7%. |
| William Jackson, senior emerging markets economist at Capital Economics, said while the worst of Russia’s crisis has now passed, another year of recession looks likely. | William Jackson, senior emerging markets economist at Capital Economics, said while the worst of Russia’s crisis has now passed, another year of recession looks likely. |
| Updated | Updated |
| at 7.44am GMT | at 7.44am GMT |
| 7.25am GMT | 7.25am GMT |
| 07:25 | 07:25 |
| The root of the BOJ’s decision today to effectively charge banks for new deposits is the dire state of the Japanese economy. | The root of the BOJ’s decision today to effectively charge banks for new deposits is the dire state of the Japanese economy. |
| Today’s inflation figures showed that prime minister’s Shinzo Abe’s much-heralded attempts to kickstart the economy after years of stagnation are failing – dubbed “Abenomics”. | Today’s inflation figures showed that prime minister’s Shinzo Abe’s much-heralded attempts to kickstart the economy after years of stagnation are failing – dubbed “Abenomics”. |
| Prices are rising at just 0.5%, nowhere near the 2% Abe needs to lift Japan out of years of falling prices which have conditioned consumers to delay purchases in the expectation that things will eventually become cheaper. | Prices are rising at just 0.5%, nowhere near the 2% Abe needs to lift Japan out of years of falling prices which have conditioned consumers to delay purchases in the expectation that things will eventually become cheaper. |
| For useful background, economics editor Larry Elliott wrote this analysis piece about Japan last year: | For useful background, economics editor Larry Elliott wrote this analysis piece about Japan last year: |
| Related: Japan beats recession but the good news ends there | Related: Japan beats recession but the good news ends there |
| 7.11am GMT | 7.11am GMT |
| 07:11 | 07:11 |
| It looks like being a decent start to the European trading day. FTSE forecast to rise 71 points at the opening. | It looks like being a decent start to the European trading day. FTSE forecast to rise 71 points at the opening. |
| 7.05am GMT | 7.05am GMT |
| 07:05 | 07:05 |
| Investors and market experts have been caught out by the BOJ’s decision, which comes days after Kuroda said that the board was not considering negative rates. | Investors and market experts have been caught out by the BOJ’s decision, which comes days after Kuroda said that the board was not considering negative rates. |
| Nicholas Smith, a strategist at CLSA based in Tokyo, told Reuters: | Nicholas Smith, a strategist at CLSA based in Tokyo, told Reuters: |
| Kuroda had been saying that he didn’t think something like this would help so it is a bit surprising and it’s clear the market has been surprised by it. | Kuroda had been saying that he didn’t think something like this would help so it is a bit surprising and it’s clear the market has been surprised by it. |
| But some felt it might not work very well because rates have been so low for long that banks have had plenty of opportunity to increase lending. | But some felt it might not work very well because rates have been so low for long that banks have had plenty of opportunity to increase lending. |
| Martin King, co-managing director at Tyton Capital Advisors in Tokyo, said: | Martin King, co-managing director at Tyton Capital Advisors in Tokyo, said: |
| This is an aggressive all-stick-no-carrot approach to spurring investment, as depositors are essentially penalised for holding cash. | This is an aggressive all-stick-no-carrot approach to spurring investment, as depositors are essentially penalised for holding cash. |
| 6.58am GMT | 6.58am GMT |
| 06:58 | 06:58 |
| Kuroda: We have more policy ammunition | Kuroda: We have more policy ammunition |
| Today’s steps don’t mean that we’ve reached limits to our [Japanese government bond] buying. We added interest rates as a new easing tool to our existing QQE framework. | Today’s steps don’t mean that we’ve reached limits to our [Japanese government bond] buying. We added interest rates as a new easing tool to our existing QQE framework. |