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| UK faces 'mild recession' as economy shrinks at fastest rate since 2009 - business live | UK faces 'mild recession' as economy shrinks at fastest rate since 2009 - business live |
| (35 minutes later) | |
| 4.34pm BST | |
| 16:34 | |
| It’s been another day in the red for European markets, despite all the hype surrounding ‘Super Thursday’ when the Bank of England is widely expected to cut interest rates for the first time since early 2009, taking borrowing costs to a new record low. | |
| Josh Mahony, market analyst at online trading firm IG, said: | |
| Much of the market reaction following June’s referendum result have been somewhat surprising, with record highs in the US, the FTSE 250 reaching pre-referendum levels and now a sharp downturn in European stocks in the same week that both the RBA and BoE are likely to have ease monetary policy. The threat is that any rate cut is already priced in to markets and as such Carney & co will have to do more than simply a 25 basis points cut to get any positive response from markets tomorrow. | |
| Today’s survey data has confirmed the likelihood of a recession in the UK, with a sharp deterioration in the dominant services sector pointing towards a significant slowdown in hiring, business investment and ultimately economic growth. The manufacturing and construction industries have also weakened, according to equivalent surveys out earlier this week. | |
| The data from the US was more mixed today, with improvements in the jobs market on the one hand and weakening growth in the services sector on the other. Friday’s non-farm payrolls numbers should shed more light on the state of the US economy. | |
| 4.23pm BST | |
| 16:23 | |
| Moody's warns Brexit could lead to 10% price falls in commercial property | |
| Credit ratings agency Moody’s has warned that Brexit will have a negative effect on the UK’s commercial property market, forecasting price falls of up to 10%. | |
| However, any price falls would be smaller than those seen during the global financial crisis. Moody’s said: | |
| If London were to lose its “safe haven” status with foreign investors, it is likely that transaction volumes as well as property values would fall. Over the last two years, foreign direct investment has accounted for over two-thirds of all commercial real estate transactions in central London, with the remainder outside the city [according to CBRE data]. | |
| The office market in central London would be worst hit because that’s where most financial and professional service firms are located. Demand for property would fall as firms would move some operations elsewhere in the EU, Moody’s predicted. | |
| Developers Hammerson and Land Securities, which are major players in UK commercial property, are particularly at risk. | |
| 4.07pm BST | 4.07pm BST |
| 16:07 | 16:07 |
| Some of Britain’s biggest food producers have issued a serious warning about home-grown fruit and veg following the Brexit vote. | |
| Damian Carrington reports: | |
| British fruit and vegetables would all but vanish from shops if Brexit means the foreign workers who pick virtually all the home-grown produce are no longer able to come to the UK, according to some of the country’s biggest producers. | British fruit and vegetables would all but vanish from shops if Brexit means the foreign workers who pick virtually all the home-grown produce are no longer able to come to the UK, according to some of the country’s biggest producers. |
| They warn that the nation’s food security would be damaged and that produce in UK shops would become more expensive if the freedom of movement for EU workers came to an end. They are urging ministers to set up a new permit scheme for seasonal workers. | They warn that the nation’s food security would be damaged and that produce in UK shops would become more expensive if the freedom of movement for EU workers came to an end. They are urging ministers to set up a new permit scheme for seasonal workers. |
| Without a scheme, they say production would move abroad, where many already have large operations, or would switch to cereals which are harvested by machines. The Brexit vote is already deterring foreign workers from coming to the UK, the producers report. | Without a scheme, they say production would move abroad, where many already have large operations, or would switch to cereals which are harvested by machines. The Brexit vote is already deterring foreign workers from coming to the UK, the producers report. |
| About 90% of British fruit, vegetables and salads are picked, graded and packed by 60,000 to 70,000 workers from overseas, mostly from eastern Europe. Many of these work in areas which voted very strongly to leave the EU: the largely agricultural borough of Boston in Lincolnshire had the highest vote for leaving the EU in the whole country, at 75%. | About 90% of British fruit, vegetables and salads are picked, graded and packed by 60,000 to 70,000 workers from overseas, mostly from eastern Europe. Many of these work in areas which voted very strongly to leave the EU: the largely agricultural borough of Boston in Lincolnshire had the highest vote for leaving the EU in the whole country, at 75%. |
| Updated | |
| at 4.26pm BST | |
| 4.03pm BST | 4.03pm BST |
| 16:03 | 16:03 |
| It’s a pretty dull afternoon on the markets, ahead of the Bank of England’s ‘Super Thursday’. Connor Campbell, financial analyst at Spreadex, has sent us his thoughts. | It’s a pretty dull afternoon on the markets, ahead of the Bank of England’s ‘Super Thursday’. Connor Campbell, financial analyst at Spreadex, has sent us his thoughts. |
| Struggling for any direction that isn’t its current glacial decline the Dow Jones was left wanting, the latest data-dump a decidedly mixed bag. The ADP non-farm employment change reading was better than expected at 179k against the 171k forecast; this number tends to have a rather tenuous link to the government-released non-farm figure, however, leaving it with a limited amount of market relevance. More important was the Markit and ISM services PMIs, yet even these left investors scratching their heads; the former jumped to a better than forecast 51.4, while the latter was far lower than expected, sliding to 55.5 from 56.5 last month. Unsurprisingly the Dow Jones couldn’t find much clarity in these figures, rising a meagre 0.1% after the bell. | Struggling for any direction that isn’t its current glacial decline the Dow Jones was left wanting, the latest data-dump a decidedly mixed bag. The ADP non-farm employment change reading was better than expected at 179k against the 171k forecast; this number tends to have a rather tenuous link to the government-released non-farm figure, however, leaving it with a limited amount of market relevance. More important was the Markit and ISM services PMIs, yet even these left investors scratching their heads; the former jumped to a better than forecast 51.4, while the latter was far lower than expected, sliding to 55.5 from 56.5 last month. Unsurprisingly the Dow Jones couldn’t find much clarity in these figures, rising a meagre 0.1% after the bell. |
| Tomorrow, then, is the week’s biggie: the first Bank of England ‘Super Thursday’ with a chance of actually living up to its normally sarcastic moniker. Following the string of ominous UK PMIs between Monday and Wednesday Mark Carney and co. are almost guaranteed to do something on Thursday – the big question is what? | Tomorrow, then, is the week’s biggie: the first Bank of England ‘Super Thursday’ with a chance of actually living up to its normally sarcastic moniker. Following the string of ominous UK PMIs between Monday and Wednesday Mark Carney and co. are almost guaranteed to do something on Thursday – the big question is what? |
| Consensus seems to suggest at the very least a rate cut to 0.25%, with some analysts suggesting it could go as low as 0.1%. The main uncertainty is over quantitative easing. A £75bn extension to the pre-existing programme has been floated in certain quarters, though this is expected to be a more hotly debated issue in the MPC than the headline interest rate. Traditional logic would dictate that a rate cut alone should cause the FTSE to rise and the pound to fall; however, there is such an air of expectation around Thursday’s meeting that a lack of QE (or something similar) may lead to disappointment for the former and relief for the latter. | Consensus seems to suggest at the very least a rate cut to 0.25%, with some analysts suggesting it could go as low as 0.1%. The main uncertainty is over quantitative easing. A £75bn extension to the pre-existing programme has been floated in certain quarters, though this is expected to be a more hotly debated issue in the MPC than the headline interest rate. Traditional logic would dictate that a rate cut alone should cause the FTSE to rise and the pound to fall; however, there is such an air of expectation around Thursday’s meeting that a lack of QE (or something similar) may lead to disappointment for the former and relief for the latter. |
| 3.57pm BST | 3.57pm BST |
| 15:57 | 15:57 |
| Sterling is steadying ahead of tomorrow’s Bank of England decision, trading just off a three-week high against the dollar. Money markets are pricing in a quarter-point interest rate cut. Many economists are also expecting the central bank to announce other measures to stimulate the economy, for example through its quantitative easing (bond-buying) programme. | Sterling is steadying ahead of tomorrow’s Bank of England decision, trading just off a three-week high against the dollar. Money markets are pricing in a quarter-point interest rate cut. Many economists are also expecting the central bank to announce other measures to stimulate the economy, for example through its quantitative easing (bond-buying) programme. |
| The pound is holding above $1.33, down 0.25% against the dollar. | The pound is holding above $1.33, down 0.25% against the dollar. |
| 3.51pm BST | 3.51pm BST |
| 15:51 | 15:51 |
| Knight Frank’s report also showed that rental transactions for upmarket homes in central London are up since the Brexit vote on 23 June, while rental prices have declined. The lettings market is actually stronger than last summer, thanks to the more “realistic pricing”. More sellers have become landlords due to uncertainty around price growth, the estate agent added. | Knight Frank’s report also showed that rental transactions for upmarket homes in central London are up since the Brexit vote on 23 June, while rental prices have declined. The lettings market is actually stronger than last summer, thanks to the more “realistic pricing”. More sellers have become landlords due to uncertainty around price growth, the estate agent added. |
| Tim Hyatt, head of lettings at Knight Frank, said: | Tim Hyatt, head of lettings at Knight Frank, said: |
| The current lettings market in prime central London is encouragingly stable. We saw a spike in new instructions in the aftermath of the referendum vote, although the number of new applicants registering is slightly down creating an imbalance of supply and demand. | The current lettings market in prime central London is encouragingly stable. We saw a spike in new instructions in the aftermath of the referendum vote, although the number of new applicants registering is slightly down creating an imbalance of supply and demand. |
| From a transaction perspective, the level of new deals has remained strong. In particular, the number of corporate enquiries was encouragingly positive as it was dramatically up on last year, highlighting that confidence in London as a capital city of choice remains strong. | From a transaction perspective, the level of new deals has remained strong. In particular, the number of corporate enquiries was encouragingly positive as it was dramatically up on last year, highlighting that confidence in London as a capital city of choice remains strong. |
| Due to the imbalance of supply and demand, landlords need to be realistic when it comes to pricing in an increasingly competitive market. This includes considering price reductions, however significant, in order to reflect value in the current climate. | Due to the imbalance of supply and demand, landlords need to be realistic when it comes to pricing in an increasingly competitive market. This includes considering price reductions, however significant, in order to reflect value in the current climate. |
| 3.41pm BST | 3.41pm BST |
| 15:41 | 15:41 |
| In central London, prices for luxury homes have fallen 1.5% in the year to July, according to upmarket estate agent Knight Frank. It says buyers are typically asking for 10% or more off the asking price. | In central London, prices for luxury homes have fallen 1.5% in the year to July, according to upmarket estate agent Knight Frank. It says buyers are typically asking for 10% or more off the asking price. |
| The firm said stamp duty was more of a concern than the recent Brexit vote in prime central London. | The firm said stamp duty was more of a concern than the recent Brexit vote in prime central London. |
| Changes to the market over the last two years have meant that the Brexit vote has merely been a trigger for some to make overdue reductions to their asking price. It is too soon to say what impact Brexit will have on pricing but, in many cases, reductions reflect what would have been an appropriate price before the referendum. | Changes to the market over the last two years have meant that the Brexit vote has merely been a trigger for some to make overdue reductions to their asking price. It is too soon to say what impact Brexit will have on pricing but, in many cases, reductions reflect what would have been an appropriate price before the referendum. |
| The number of viewings in June was 17% higher than a year earlier, and demand in areas such as Belgravia and Knightsbridge held up better than elsewhere. | The number of viewings in June was 17% higher than a year earlier, and demand in areas such as Belgravia and Knightsbridge held up better than elsewhere. |
| Updated | Updated |
| at 3.57pm BST | at 3.57pm BST |
| 3.35pm BST | 3.35pm BST |
| 15:35 | 15:35 |
| OIl prices have moved higher after their recent slide, with Brent crude – the global benchmark – up 1.4% at $42.38 a barrel and US West Texas Intermediate up 1.5% at $40.10. Prices were boosted after US government data showed a bigger-than-expected gasoline drawdown that offset a surprise build-up in crude stockpiles. | OIl prices have moved higher after their recent slide, with Brent crude – the global benchmark – up 1.4% at $42.38 a barrel and US West Texas Intermediate up 1.5% at $40.10. Prices were boosted after US government data showed a bigger-than-expected gasoline drawdown that offset a surprise build-up in crude stockpiles. |
| US crude inventories rose by 1.4m barrels last week, while analysts had expected a fall of the same magnitude, the Energy Information Administration reported. At the same time, gasoline stocks slumped by 3.3m barrels, compared with forecasts of drop of 200,000 barrels. | US crude inventories rose by 1.4m barrels last week, while analysts had expected a fall of the same magnitude, the Energy Information Administration reported. At the same time, gasoline stocks slumped by 3.3m barrels, compared with forecasts of drop of 200,000 barrels. |
| Concerns over a global oil glut persist, however. Output from the Opec cartel is near record levels. | Concerns over a global oil glut persist, however. Output from the Opec cartel is near record levels. |
| Updated | Updated |
| at 4.12pm BST | at 4.12pm BST |
| 3.13pm BST | 3.13pm BST |
| 15:13 | 15:13 |
| But markets prefer to look at the ISM services survey. Both surveys signal an easing in activity. | But markets prefer to look at the ISM services survey. Both surveys signal an easing in activity. |
| Services Data Disappoints: Suggests "No Signs Of US Economy Moving Up A Gear" In Q3 https://t.co/QPwrGQdYCZ | Services Data Disappoints: Suggests "No Signs Of US Economy Moving Up A Gear" In Q3 https://t.co/QPwrGQdYCZ |
| 3.11pm BST | 3.11pm BST |
| 15:11 | 15:11 |
| A separate survey, from economic pollsters Markit, also showed that growth in the US service sector remained muted in July, with new business recording a slower increase. | A separate survey, from economic pollsters Markit, also showed that growth in the US service sector remained muted in July, with new business recording a slower increase. |
| However, the rate of job creation picked up slightly and business confidence improved markedly after hitting a record low in June. The Markit US services index came in at 51.4 in July, unchanged from June, and above the 50 mark the divides expansion from contraction. | However, the rate of job creation picked up slightly and business confidence improved markedly after hitting a record low in June. The Markit US services index came in at 51.4 in July, unchanged from June, and above the 50 mark the divides expansion from contraction. |
| Markit US services headline index still having some measurement problems vis-a-vis ISM pic.twitter.com/dCeDI5e04B | Markit US services headline index still having some measurement problems vis-a-vis ISM pic.twitter.com/dCeDI5e04B |
| 3.03pm BST | 3.03pm BST |
| 15:03 | 15:03 |
| The dollar is slipping against the yen and the euro on the data. | The dollar is slipping against the yen and the euro on the data. |
| 3.02pm BST | 3.02pm BST |
| 15:02 | 15:02 |
| US services sector slows in July | US services sector slows in July |
| US data just out: the closely watched ISM services/non-manufacturing index for July has come in at 55.5, slightly less than expected and down from 56.5 in June, signalling a slowdown. Employment in the services sector has weakened. | US data just out: the closely watched ISM services/non-manufacturing index for July has come in at 55.5, slightly less than expected and down from 56.5 in June, signalling a slowdown. Employment in the services sector has weakened. |
| US ISM Services/Non-Manufacturing (JUL) slight miss at 55.5 vs 55.9 exp, from 56.5; Employment subindex at 51.4 vs 52.7 prior. $DXY $FED | US ISM Services/Non-Manufacturing (JUL) slight miss at 55.5 vs 55.9 exp, from 56.5; Employment subindex at 51.4 vs 52.7 prior. $DXY $FED |
| Updated | Updated |
| at 3.11pm BST | at 3.11pm BST |
| 2.43pm BST | 2.43pm BST |
| 14:43 | 14:43 |
| US stock markets have opened and are broadly flat. The Dow Jones edged up nearly six points at the bell to 18,319.73 while the tech-heavy Nasdaq and the wider S&P 500 were down slightly. | US stock markets have opened and are broadly flat. The Dow Jones edged up nearly six points at the bell to 18,319.73 while the tech-heavy Nasdaq and the wider S&P 500 were down slightly. |
| Updated | Updated |
| at 2.50pm BST | at 2.50pm BST |
| 2.41pm BST | 2.41pm BST |
| 14:41 | 14:41 |
| Corporate round-up | Corporate round-up |
| Here’s a quick round-up of today’s corporate news: | Here’s a quick round-up of today’s corporate news: |
| HSBC, Britain’s biggest bank, has admitted a regulatory breach in the US as it unveiled a slump in first-half profits in what it termed “turbulent” markets, our City editor Jill Treanor reports. More here. | HSBC, Britain’s biggest bank, has admitted a regulatory breach in the US as it unveiled a slump in first-half profits in what it termed “turbulent” markets, our City editor Jill Treanor reports. More here. |
| Standard Chartered has been rooting out some of its clients as it cleans up its business in the wake of regulatory investigations, its chief executive has said as the emerging markets-focused bank returned to profit in the first half of 2016. Read the full story here. | Standard Chartered has been rooting out some of its clients as it cleans up its business in the wake of regulatory investigations, its chief executive has said as the emerging markets-focused bank returned to profit in the first half of 2016. Read the full story here. |
| The boss of ad agency Saatchi & Saatchi, Kevin Roberts, has resigned after provoking fury by claiming that women in the advertising industry lacked “vertical ambition” (he said they had “circular ambition”). He was suspended at the weekend by Publicis, Saatchi’s parent company, after denying that sexism was an issue in the advertising world. | The boss of ad agency Saatchi & Saatchi, Kevin Roberts, has resigned after provoking fury by claiming that women in the advertising industry lacked “vertical ambition” (he said they had “circular ambition”). He was suspended at the weekend by Publicis, Saatchi’s parent company, after denying that sexism was an issue in the advertising world. |
| The boss of London housebuilder Berkeley Group, Tony Pidgley, made £21.5m last year – despite a slight pay cut from £23.3m the previous year. Not bad for an East End lad who was adopted by travellers at the age of four and grew up in a disused railway carriage. You can read the full story here. | The boss of London housebuilder Berkeley Group, Tony Pidgley, made £21.5m last year – despite a slight pay cut from £23.3m the previous year. Not bad for an East End lad who was adopted by travellers at the age of four and grew up in a disused railway carriage. You can read the full story here. |
| The energy regulator, Ofgem, has promised to introduce next spring the first price controls for some customers since the domestic power sector was privatised more than 15 years ago. Full story by our energy editor, Terry Macalister, here. | The energy regulator, Ofgem, has promised to introduce next spring the first price controls for some customers since the domestic power sector was privatised more than 15 years ago. Full story by our energy editor, Terry Macalister, here. |
| The Scotch whisky industry has warned of higher tariffs following the Brexit vote in June, and urged the UK government to push for favourable trade conditions after leaving the EU. David Frost, chief executive of the Scotch Whisky Association, said: | The Scotch whisky industry has warned of higher tariffs following the Brexit vote in June, and urged the UK government to push for favourable trade conditions after leaving the EU. David Frost, chief executive of the Scotch Whisky Association, said: |
| We are calling on the UK government to bring clarity to the transition to Brexit as soon as possible and to negotiate to ensure that the current open trading environment is not affected. | We are calling on the UK government to bring clarity to the transition to Brexit as soon as possible and to negotiate to ensure that the current open trading environment is not affected. |
| Updated | Updated |
| at 2.45pm BST | at 2.45pm BST |
| 2.24pm BST | 2.24pm BST |
| 14:24 | 14:24 |
| A cut in UK interest rates on Thursday will only have a short term impact, says Christopher Metcalfe at Newton Investment Management: | A cut in UK interest rates on Thursday will only have a short term impact, says Christopher Metcalfe at Newton Investment Management: |
| Tomorrow the Bank of England is expected to announce the first interest rate reduction in more than seven years from its current record low of 0.5% to 0.25%. Given current market expectations, in such an event we would only expect a modest impact to sterling, FTSE and 10-year Gilts. | Tomorrow the Bank of England is expected to announce the first interest rate reduction in more than seven years from its current record low of 0.5% to 0.25%. Given current market expectations, in such an event we would only expect a modest impact to sterling, FTSE and 10-year Gilts. |
| A 25bp cut in the base rate will provide no more than a short-term sugar rush to the UK economy and the private sector will continue to be uncooperative. Unwilling or unable to take on the quantities of new debt necessary to overcome the structural headwinds facing the global economy, the response will continue to be the monetary policy equivalent of ‘Can’t Cook, Won’t Cook’. | A 25bp cut in the base rate will provide no more than a short-term sugar rush to the UK economy and the private sector will continue to be uncooperative. Unwilling or unable to take on the quantities of new debt necessary to overcome the structural headwinds facing the global economy, the response will continue to be the monetary policy equivalent of ‘Can’t Cook, Won’t Cook’. |
| Price of credit for firms is already low and it is difficult to imagine if businesses are scared or unwilling to invest in the wake of Brexit at 50bp interest rates, whether a further to 25bp will induce them to invest. Our view continues to be that the deflationary pressures exerted by the burden of surplus debt, overcapacity across many industries, and technological disruption are too big in magnitude for monetary policy to counter. Given the private sector lacks the confidence and/or ability to increase credit by the required amount, the onus falls on the public sector. | Price of credit for firms is already low and it is difficult to imagine if businesses are scared or unwilling to invest in the wake of Brexit at 50bp interest rates, whether a further to 25bp will induce them to invest. Our view continues to be that the deflationary pressures exerted by the burden of surplus debt, overcapacity across many industries, and technological disruption are too big in magnitude for monetary policy to counter. Given the private sector lacks the confidence and/or ability to increase credit by the required amount, the onus falls on the public sector. |
| Lower interest rates mean lower margins for the banking sector. It is increasingly difficult for banks to make an attractive spread on deposits without taking large credit and/or deposit risk. This is the clear message from Europe’s experiment with low interest thus far and continues to support our decision to hold zero banks within our Newton UK portfolios. | Lower interest rates mean lower margins for the banking sector. It is increasingly difficult for banks to make an attractive spread on deposits without taking large credit and/or deposit risk. This is the clear message from Europe’s experiment with low interest thus far and continues to support our decision to hold zero banks within our Newton UK portfolios. |
| Record-low interest rates and bond yields may validate continuing to pay higher prices for equities and other risk assets, continuing the hunt for yield and supporting safe haven assets. The housing market, particularly in the southeast of England has benefited from the availability of cheap finance. The search for yield and the decision to lower rates may support asset prices in the near-term. | Record-low interest rates and bond yields may validate continuing to pay higher prices for equities and other risk assets, continuing the hunt for yield and supporting safe haven assets. The housing market, particularly in the southeast of England has benefited from the availability of cheap finance. The search for yield and the decision to lower rates may support asset prices in the near-term. |