This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2017/mar/01/us-presidential-address-calms-markets-ahead-of-manufacturing-figures-business-live

The article has changed 13 times. There is an RSS feed of changes available.

Version 8 Version 9
Pound falls as UK factory growth slows, but markets rise after US president's address - live FTSE 100 hits new record as pound falls - live
(35 minutes later)
1.35pm GMT
13:35
In the markets, the FTSE 250 mid-cap has followed the lead of the FTSE 100 and also hit a new peak.
The 250 has climbed nearly 0.8% to 18,915, beating the previous peak of 18,864.
1.32pm GMT
13:32
Back with the German inflation figures, and economist Carsten Brzeski at ING Bank says the figures are food for critics of the European Central Bank:
Based on the results of six regional states, German headline came in at 2.2% year on year in February versus 1.9% YoY in January. Based on the harmonised European definition (HICP), and more relevant for ECB policy-making, headline inflation also came in at 2.2% year on year; the highest level since August 2012...
With German headline inflation at/above the magical 2% level, new complaints against the ECB’s loose monetary policy and new media headlines are likely to emerge; though with little impact on next week’s ECB meeting. Obviously, increasing inflation – no matter what the drivers are – combined with low interest rates leads to even more negative real interest rates and hurts savers. Based on the central bank’s main policy rate and headline inflation, one has to go back to the 1970s to find similar negative levels of the real interest rate. At the same time, however, the common German reflex to criticize the ECB and call for an end of QE is, in our view, overblown.
First of all, there is very little the ECB can do about an increase in inflation, almost exclusively driven by energy and food prices. Developments of core inflation will determine future ECB action.
Secondly, even in an economy operating at full employment and which is most advanced in the current cycle, underlying inflationary pressure remains low; illustrated by the drop in core inflation.
Thirdly, even if German inflation was to exceed 2% sustainably, it is simply a mathematical prerequisite for the inflation in the entire Eurozone to also get close to 2%. Nothing the ECB should do about.
Fourthly, the current increase in headline inflation in the Eurozone is broadly in line with the ECB’s own projections. As the ECB has often stressed: these projections are conditional on full implementation of QE until the end of 2017.
Finally, the ECB conducts monetary policy for the entire Eurozone and not for the best student in class.
The German push for early tapering will continue. However, contrary to the situation at the beginning of the year, it seems as if the debate at the ECB has been taken off front pages and media headlines to discussions behind closed doors. Recent statements of German central bankers seem to hint at a slightly changed strategy of the internal critics of the ECB’s current policy. The partly loud and outspoken criticism has given way to a more subtle tone. Last week, ECB board member Lautenschläger even started to praise increasing inflation, only to add that it would enable the ECB to reach its goals.
On the eve of the first two important elections in the Eurozone, the ECB will in our view choose not to distort the market with tapering rumours. If and when the elections in the Netherlands and France manage to reduce political uncertainty, the ECB could already give first hints at 2018 tapering this summer.
Such a timing would help mitigate ECB bashing in the upcoming German election campaign. It seems that at least German central bankers are willing to keep their verbal powder dry until then.
1.26pm GMT
13:26
The Dow Jones Industrial Average is also expected to open higher and could even breach the 21,000 barrier.
1.24pm GMT
13:24
FTSE 100 hits new peak
The FTSE 100 has hit a record intra-day high, up 1.24% at 7354.24.
The previous intra-day record was 7354.14 on 16 January this year, and the previous record close was 7337 on 13 January.
Global markets generally have been boosted by the calmer tone of Donald Trump’s address to Congress, even though there was little new detail on his plans for infrastructure spending and tax reforms.
But the FTSE 100 in particular has been helped by weakness in sterling, which lifts the profits of its overseas earners.
The pound has been hit by weaker than expected UK manufacturing data earlier, which makes any interest rate rise from the Bank of England unlikely in the near future, as well as an increase in the dollar as the chances of the Federal Reserve increasing US borrowing costs grow stronger.
1.16pm GMT
13:16
German press cartoonists are already busy drawing wheelbarrows of banknotes, but remember that Q1 2017 may be "peak" inflation o/a yoy oil. https://t.co/mt3JRo4oFJ
1.08pm GMT
13:08
#German HICP #inflation up to 2.2% in Feb (1.9% in Jan) as higher y/y rises in energy (up to 7.2% from 5.9%) & food (up to 4.4% from 3.2%)
Rise in #German HICP #inflation to 2.2% in Feb (high since Aug 2012 & above ECB target rate) will highly likely fuel tensions with #ECB (1
Updated
at 1.10pm GMT
1.03pm GMT1.03pm GMT
13:0313:03
German inflation hits a four and a half year highGerman inflation hits a four and a half year high
German inflation rose further in February, up 2.2% on the year after a 1.9% rise in January.German inflation rose further in February, up 2.2% on the year after a 1.9% rise in January.
This is the highest annual inflation rate since August 2012 and puts the country ahead of the European Central Bank’s target of just under 2%. Higher energy and food costs were the main reason for the rises.This is the highest annual inflation rate since August 2012 and puts the country ahead of the European Central Bank’s target of just under 2%. Higher energy and food costs were the main reason for the rises.
But with elections due, the news is likely to see renewed calls in the country for the ECB to call an end to its loose monetary policy.But with elections due, the news is likely to see renewed calls in the country for the ECB to call an end to its loose monetary policy.
12.35pm GMT12.35pm GMT
12:3512:35
Back with the FTSE 100 and although it has not yet reached its intraday record of 7354, it could hit a new closing high if it ends around its current levels.Back with the FTSE 100 and although it has not yet reached its intraday record of 7354, it could hit a new closing high if it ends around its current levels.
It is now up 1.13% at 7345, which is above the record close of 7337 achieved on 13 January.It is now up 1.13% at 7345, which is above the record close of 7337 achieved on 13 January.
UpdatedUpdated
at 12.39pm GMTat 12.39pm GMT
11.51am GMT11.51am GMT
11:5111:51
With François Fillon, the conservative French presidential candidate, saying he will stay in the race despite now facing embezzlement charges (he denies all allegations), there has been some reaction:With François Fillon, the conservative French presidential candidate, saying he will stay in the race despite now facing embezzlement charges (he denies all allegations), there has been some reaction:
#France risk spread over #Germany rises as Francois Fillon stays in French presidential election race. pic.twitter.com/Iif1nGoflJ#France risk spread over #Germany rises as Francois Fillon stays in French presidential election race. pic.twitter.com/Iif1nGoflJ
UpdatedUpdated
at 12.55pm GMTat 12.55pm GMT
11.34am GMT11.34am GMT
11:3411:34
On the rising markets and falling pound, Connor Campbell, financial analyst at Spreadex, said:On the rising markets and falling pound, Connor Campbell, financial analyst at Spreadex, said:
A resurgent Trump rally gathered pace as Wednesday progressed, the European indices ignoring a mixed bag of manufacturing data.A resurgent Trump rally gathered pace as Wednesday progressed, the European indices ignoring a mixed bag of manufacturing data.
The FTSE barrelled towards a fresh all-time high this morning, rising more than 50 points to lurk just below 7350. It’s its best price in a month and a half, and one that paid no attention to the fact that the UK’s manufacturing PMI unexpectedly fell from 55.7 in January to 54.6 in February. That fact didn’t slip past the pound, however. Sterling has spent the last few session suffering in comparison to the Trump-swelled, rate hike-eyeing dollar, and today was no different, the currency shedding another 0.3% against the greenback to leave it firmly under $1.24 (something that no doubt helped out the FTSE).The FTSE barrelled towards a fresh all-time high this morning, rising more than 50 points to lurk just below 7350. It’s its best price in a month and a half, and one that paid no attention to the fact that the UK’s manufacturing PMI unexpectedly fell from 55.7 in January to 54.6 in February. That fact didn’t slip past the pound, however. Sterling has spent the last few session suffering in comparison to the Trump-swelled, rate hike-eyeing dollar, and today was no different, the currency shedding another 0.3% against the greenback to leave it firmly under $1.24 (something that no doubt helped out the FTSE).
Like their UK counterpart, the DAX and CAC also benefited from a weakened currency this Wednesday. With the euro down half a percent against the dollar, the German and French indices were given the green light to go big, both surging 1.3% as the day went on even despite a slight downward revision to the month’s region-wide manufacturing reading.Like their UK counterpart, the DAX and CAC also benefited from a weakened currency this Wednesday. With the euro down half a percent against the dollar, the German and French indices were given the green light to go big, both surging 1.3% as the day went on even despite a slight downward revision to the month’s region-wide manufacturing reading.
This optimism should continue into the afternoon, with the Dow Jones set to open just above 20900 for the first time in its history. The US index actually has a fair amount of data to deal with this Wednesday, including the Fed-favourite core PCE price index and the Markit and ISM manufacturing PIMs. This leaves the Dow in an interesting position – while Trump is currently the main driving force behind the market’s movements, as the month goes the potential Fed rate-hike in March is only going to gain more prominence, something that could put pressure on the index’s current highs.This optimism should continue into the afternoon, with the Dow Jones set to open just above 20900 for the first time in its history. The US index actually has a fair amount of data to deal with this Wednesday, including the Fed-favourite core PCE price index and the Markit and ISM manufacturing PIMs. This leaves the Dow in an interesting position – while Trump is currently the main driving force behind the market’s movements, as the month goes the potential Fed rate-hike in March is only going to gain more prominence, something that could put pressure on the index’s current highs.
11.29am GMT11.29am GMT
11:2911:29
Pound near six week low against the dollarPound near six week low against the dollar
Meanwhile sterling has fallen to a near-six week low against the dollar, falling as low as $1.2323 and boosting the FTSE 100’s overseas earners.Meanwhile sterling has fallen to a near-six week low against the dollar, falling as low as $1.2323 and boosting the FTSE 100’s overseas earners.
The currency has been reacting to the weaker than expected UK manufacturing figures - pushing the chances of a rate rise even further into the distance - as well as the strength of the dollar as the Fed does look likely to increase borrowing costs, perhaps as soon as this month.The currency has been reacting to the weaker than expected UK manufacturing figures - pushing the chances of a rate rise even further into the distance - as well as the strength of the dollar as the Fed does look likely to increase borrowing costs, perhaps as soon as this month.
There are also the concerns about the prospect of a Scottish referendum and the continuing uncertainty over Brexit.There are also the concerns about the prospect of a Scottish referendum and the continuing uncertainty over Brexit.
After an early rise against the euro, sterling is flat against the single currency at €1.1701.After an early rise against the euro, sterling is flat against the single currency at €1.1701.
UpdatedUpdated
at 12.28pm GMTat 12.28pm GMT
11.19am GMT11.19am GMT
11:1911:19
Trump address continues to lift markets, with FTSE heading towards new peakTrump address continues to lift markets, with FTSE heading towards new peak
Markets continue to be boosted by the calmer tone of Donald Trump’s address to Congress, along with a - generally - positive picture of the manufacturing sector in February.Markets continue to be boosted by the calmer tone of Donald Trump’s address to Congress, along with a - generally - positive picture of the manufacturing sector in February.
The FTSE 100 is up 1% at 7336, heading close towards its intra-day high of 7354 achieved on 16 January.The FTSE 100 is up 1% at 7336, heading close towards its intra-day high of 7354 achieved on 16 January.
Germany’s Dax is up 1.42% and France’s Cac 1.45%, despite the continuing concerns over the French presidential election.Germany’s Dax is up 1.42% and France’s Cac 1.45%, despite the continuing concerns over the French presidential election.
Meanwhile US futures are suggesting an 88 point opening for the Dow Jones Industrial Average, which dipped at the close on Tuesday after 12 days of rises.Meanwhile US futures are suggesting an 88 point opening for the Dow Jones Industrial Average, which dipped at the close on Tuesday after 12 days of rises.
Commodity shares were lifted by Trump’s repeating his plans for $1bn of infrastructure spending, with the Stoxx 600 basic resources index up 1.9%.Commodity shares were lifted by Trump’s repeating his plans for $1bn of infrastructure spending, with the Stoxx 600 basic resources index up 1.9%.
Building materials group CRH is the biggest riser in the FTSE 100 after a 10% rise in earnings. As the largest building materials business in North America, it is well placed to benefit from Trump’s spending proposals, although it said this was more likely to have an impact in the medium rather than short term.Building materials group CRH is the biggest riser in the FTSE 100 after a 10% rise in earnings. As the largest building materials business in North America, it is well placed to benefit from Trump’s spending proposals, although it said this was more likely to have an impact in the medium rather than short term.
UpdatedUpdated
at 11.23am GMTat 11.23am GMT
10.38am GMT
10:38
UK mortgage approvals rise in January
Phillip Inman
More on the UK housing market following the earlier Nationwide survey.
Bank of England mortgage approval figures show the upward trend since the Brexit vote last summer continued in January.
The number of mortgages approved for new house purchase jumped from 67,898 in December to 69,928, higher than the consensus among City economist for a gentler rise to 68,650.
This was the fifth monthly rise in a row and the highest since last March.
Scott Bowman, UK economist at Capital Economics, said the bounce in mortgage lending would have strengthened the argument for rate rises later in the year if it were not for a fall in annual growth in lending to corporates from 3.2% in December to 2.7% in January.
“This contributed to a drop in annual growth in the monetary policy committee’s preferred measure of bank lending - M4 lending excluding intermediate OFCs - from 6.2% to 5.3%. Nonetheless, we think that supportive monetary policy will ensure that the slowdown in bank lending this year isn’t too sharp.”
Jeremy Duncombe, director at Legal & General Mortgage Club, said the mortgage aprovals figures highlighted the resilience of the UK housing market.
“Despite an uncertain political outlook, it is great to see the industry adopting a ‘keep calm and carry on’ approach as the mortgage industry continues to serve the needs of remortgagers and buyers alike,” he said.
But Dennis de Jong, managing director at UFX.com warned that the strength was dependent on Bank of England support following the cut in interest rates last August.
“Mark Carney and his Bank of England colleagues helped to breathe some life into it by cutting interest rates further and mortgage approvals have stood up very well in January.
“However, this may not continue for long with high levels of uncertainty around Britain’s exit from the EU far from the best breeding ground for house buying. There has been some slightly conflicting data in the past fortnight regarding the strength of UK housing, but the general consensus is that things are likely to worsen throughout the year,” he said.
10.18am GMT
10:18
Here’s more reaction to the UK manufacturing PMI figures:
Lee Hopley, chief economist at EEF, the manufacturers’ organisation:
The slight slowing in the pace of expansion in UK manufacturing signalled by today’s PMI conceals some still positive trends across the industry. Export demand gained further ground in February, offsetting a bit of a slowdown in the rate of growth in the domestic market. This is likely to be a sign of things to come as consumer facing sectors are more challenged than other manufacturing sectors as rising inflation eats into household incomes.
However, it seems that investment goods will pick up the baton – more confident and busier firms, brighter global prospects and rising commodity prices should create the right conditions for growth in this industry segment. With recent official statistics confirming that manufacturing contributed positively to the UK economic performance in 2016, what we’ve seen so far suggests we should be in for more of the same in 2017.
Mike Rigby, Head of Manufacturing at Barclays:
Two months into 2017 and despite a slowing in the rate of growth in February, manufacturers continue to register strong levels of output, healthy order books and growing trade courtesy of a weak sterling. However, despite the recent surge in exports, the sector continues to rely mostly on domestic demand and with price rises feeding through on the back of growing input costs, even with their recent easing, inflationary pressure continues to hover with intent. It’s how manufacturers now respond, particularly in their investment intentions, that will help determine how long the raised level of optimism in the sector continues.
Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking, said:
There will be fears that the latest PMI data suggests the manufacturing sector is showing the first signs of slowdown since last summer as the UK prepares to begin in earnest the process of leaving the European Union.
Yet despite persistent headwinds, principally the uncertainty around future trade terms and pricier imports as a result of the weaker pound, some exporting manufacturers are taking the opportunity to review their international trade strategies and look beyond the EU, especially taking advantage in the short term of the devaluation of sterling making our exports more competitive.
Firms are also becoming more skilled at dealing with unexpected geopolitical events. Businesses in the car manufacturing supply chain are waiting to see how the PSA-Opel deal will pan out with elections in several major European countries this year.
Howard Archer, chief UK and European economist at IHS Markit:
While weaker than January and December, this is still a decent survey that points to decent manufacturing expansion in the first quarter. This would follow manufacturing output rebounding a pleasing 1.2% quarter-on-quarter in the fourth quarter of 2016 after declining 0.8% quarter-on-quarter in the third quarter.
However, the PMI does point to a slowdown in domestic demand in February. This was partly offset by a welcome pick-up in export orders after a lacklustre January performance.
Ongoing very high manufacturers’ pricing balances remains a serious black mark in the survey that fuels belief UK consumer price inflation is headed markedly higher over the coming months and will likely reach 3% later in the year.
The slowdown in growth in domestic orders in February fuels belief that there are mounting challenges for the manufacturing sector.
9.56am GMT
09:56
ITV suffers fall in advertising after Brexit vote
Mark Sweney
Meanwhile, ITV has reported its worst year for TV advertising since the 2009 recession as Brexit fears caused jittery companies to pull budgets last year.
ITV said that TV ad revenues fell 3% last year to £1.67bn and would fall 6% in the first four months this year as retailers and food companies focus on price cuts over ad spend to win over consumers.
However, the UK’s biggest free-to-air broadcaster was able to pay out a special dividend to shareholders of more than £200m thanks to the performance of ITV Studios.
The TV production business - which makes and sells shows including Victoria, Mr Selfridge, Come Dine with Me and Coronation Street - helped ITV more than offset the ad decline with double-digit growth in revenues and profits last year.
ITV saw pre-tax profits fall 14% to £553m, due to £164m in mostly non-cash charges, while total revenues grew 4% to £3.5bn. ITV, which had warned analysts of the Brexit-related TV ad decline, beat city consensus figures by 3%.
Updated
at 9.57am GMT
9.54am GMT
09:54
Despite the weaker than expected UK factory growth, Rob Dobson at survey compiler IHS Markit said UK manufacturing output could grow by as much ast 1.5% in the first quarter:
The big question is whether robust growth can be sustained or whether it will continue to wane in the coming months. The slowdown in new order growth and a drop in backlogs of work suggest output growth may slow further. However, elevated business optimism, continued job creation, a recovery in export orders and rising levels of purchasing all suggest that any easing will be only mild. Indeed, almost 50% of companies expect production to be higher in one year’s time.
Chris Williamson, chief business economist at IHS Markit, said the figures suggested the UK economy should grow by 0.5% in the first quarter.
Updated
at 10.10am GMT
9.33am GMT
09:33
UK factory growth slows
Britain’s factory activity grew more slowly than expected in February, but is still continuing to show the strong momentum seen since the Brexit vote.
The Markit/CIPS manufacturing purchasing managers index slipped from 55.7 in January to 54.6, below the expected figure of 55.6. But it remains close to a two and a half year high. There was a slight easing in inflationary pressures which had been rising in the wake of sterling’s slump following the referendum outcome last June.
9.26am GMT
09:26
And here is Markit’s PMI rankings:
9.24am GMT
09:24
Eurozone manufacturing boosted by weak euro
Eurozone factories grew at their fastest rate for 70 months in February, as the weak euro helped boost demand for exports.
The IHS Markit purchasing managers index rose from 55.2 in January to 55.4, the highest level since April 2011. It was revised down slightly from an initial estimate of 55.5. Markit said:
Companies indicated that domestic demand remained solid in a number of markets, while the weak euro contributed to the fastest growth of new export business for almost six years.
Chris Williamson, chief business economist at IHS Markit said:
Euro area manufacturers are reporting the strongest production and order book growth for almost six years, in what’s looking like an increasingly robust upturn.
Companies clearly expect the good times to persist. This year has seen firms more optimistic about the future than at any time since the region’s debt crisis. Companies are reporting stronger demand in both home and export markets, with the weakened euro providing an accompanying tailwind to help drive sales.
Given the current buoyant demand environment, manufacturers are eschewing political uncertainty and quietly getting on with growing their businesses. The rate of job creation seen so far this year in the manufacturing sector has consequently been among the best seen in the history of the euro.
Greece remains the outlier, stuck firmly in contraction territory while all other countries are expanding with the Netherlands, Austria and Germany enjoying the strongest growth.
On the price front, not only are higher commodity prices and the weak euro pushing up firms’ costs, but there’s also growing evidence of a sellers’ market developing for many goods as demand exceeds supply, which suggests core inflationary pressures may be starting to rise.
9.16am GMT
09:16
And over in China:
#China PMI points to robust Q1 - but weaker investment growth likely to weigh on the Chinese cycle soon https://t.co/1cixmwZh00 pic.twitter.com/9jemDlhPtX
9.07am GMT
09:07
There was also an improvement in Greek manufacturing last month, although it still contracted for the sixth month in a row.
#Greece Feb Manufacturing PMI +1.1 points to 47.7 from 46.6 in Jan (Markit). #economy
#Greece Markit Manufacturing PMI at 47.7 https://t.co/lhuFNx5fK1 pic.twitter.com/wGr4mQpH8c
9.06am GMT
09:06
Still with Germany, and seasonally adjusted unemployment fell by 14,000 in February to 2.592m.
This is a bigger fall than the expected 10,000 decline but less than the 26,000 drop seen the previous month.
The jobless rate was unchanged at 5.9%