Pound hits five-month low after Scottish independence poll; UK construction boom continues - business live
|
Version 0 of 1. 4.42pm BST16:42 Afternoon summary Time to wrap up. Quick summary follows: The pound has hit a five-month low, down over a cent against the US dollar, after the latest polling data showed a surge in support for Scottish independence. The gap between Yes and No is now just six points, with a majority of younger voters favouring breaking away from the UK. For the first time since YouGov started polling on it, all age groups under 60 are in favour of Scottish independence pic.twitter.com/I0xlSE4GIH The cost of insuring against the pound’s volatility has jumped, as analysts predict mayhem in the markets if the Yes side win. Neville Hill, head of European economics at Credit Suisse, has warned that a yes vote “would precipitate a significant financial accident,” “Given that there are no terms of reference, or contingency plans for Scottish independence if there is a ‘yes’ vote, this has the potential to deliver enormous financial, economic and, of course, political risk to the U.K.” And French bank SocGen predicts the pound could tumble by 5% if Yes win the referendum. Full Story: Pound slides after latest Scottish independence poll Britain’s construction sector is running out of trained builders as growth surges again, pushing up wages and making raw materials scarce. Full story: Construction skills shortage fears temper surge in building The IMF has flagged up that Ukraine may need another bailout, if the conflict in Eastern Ukraine is not resolved. Shocking IMF chart showing the speed at which money has been escaping Ukraine’s economy in the past six months. pic.twitter.com/I0KrUQLGqN The US has claimed the prize of the fastest-growing factory sector, after the latest PMI reports showed activity leap last month. The United States officially has the hottest manufacturing sector in the world. pic.twitter.com/CRNqNSj8MZ But Switzerland has been hit by the weakness of the eurozone economy. It failed to grow last quarter, as export growth slowed sharply. Goodnight. GW Updated at 4.44pm BST 4.20pm BST16:20 IG: Scottish uncertainty hits the pound The Scottish polling data has given the markets a large helping of their least favourite dish - uncertainty. So says Chris Beauchamp of IG: Fresh five-month lows are being seen in GBP/USD this afternoon, thanks to polls that indicate a swing to the ‘Yes’ camp in the Scottish referendum. This has overridden the better reading this morning from the UK construction sector, which showed impressive growth. With less than three weeks until the election, the evident worry is that the divorce of Scotland from the rest of the UK will be a lot messier, with all the attendant worries about the sharing (or non-sharing) of the debt burden and potential currency arrangements. Markets hate uncertainty, and the Scottish referendum is providing this in spades. The London stock exchange, though, has seen much less drama. The FTSE 100 is down just 0.01% this afternoon as the trading day comes to a close. Other European markets are showing small gains, on hopes of fresh stimulus (or at least hints of future action) from the European Central Bank on Thursday. Updated at 4.40pm BST 4.06pm BST16:06 JP Morgan has added today’s US factory data to yesterday’s surveys, and concluded that global manufacturing growth was unchanged in August. The US lead the way, and France brought up the rear. Global manufacturing growth stable: JPMorgan Global Man #PMI posts 52.6 (Jul: 52.4). US best performer, France worst http://t.co/mtxQucfd9z 3.53pm BST15:53 Back to the Scottish referendum...and analyst Alan Monks of JPMorgan says that the chance of a Yes vote has risen, but perhaps not by as much as the six-point gap reported by YouGov last night suggests. Monks reckons that there is a significant bias towards the status quo, when people are asked to vote on major constitutional reform. This bias could be more significant on 18th September than is evident in any of the polls on voting intentions we discuss. For this reason, our view is this: while the chances of a vote for independence has increased from the 20-25% probability we expressed a few weeks ago, we do not think the probability is quite as high as some of the recent polls suggest. Polls can of course be misleading. But in the absence of other clear signs of trend, we await more such surveys to get a clearer gauge of momentum in the run up to the referendum. 3.46pm BST15:46 As I was saying.... Rarely has the economic gulf that separates the US from the eurozone looked wider than now, with US ISM at 59 and €zone PMI at 50.7 3.44pm BST15:44 IMF: Ukraine may need extra funding The International Monetary Fund has warned that Ukraine will suffer a deeper recession than previously thought and may need more financial help, as the conflict with Russia continues. In a new report, the IMF predicted that Ukraine’s GDP will shrink by 6.5%, down from 5% before. It also fears that Ukraine might need extra funding totalling $19bn in the ‘adverse scenario’ where the unrest in its eastern regions last until the end of next year. IMF: Ukraine May Need $19 Bln In Additional Financing By End-2015, Assuming Fighting Continues Through 2015 IMF: Ukraine May Need Another Bailout Due to War The IMF also warned that some of the targets set in Ukraine’s original bailout are now out of reach: 3.29pm BST15:29 Update: the pound has now dipped below $1.65.... Cable drops below $1.6500 #forex $GBPUSD 3.24pm BST15:24 The pound has fallen further, as the strong American factory data pushes up the US dollar. The prospects of Scotland breaking away from the UK continue to hit sterling. The pound is now down 1 cent, or 0.65%, to $1.6503 right now, close to a five-month low. 3.20pm BST15:20 Those two surveys, from ISM and Markit, are pretty conclusive that America’s manufacturing sector just enjoyed a blowout month. Aug #ISM #manufacturing headline is best since March, 2011. New #orders best in 10 years! #Production strong, too: http://t.co/tCDvCEz5gF Quite a contrast with Europe. Yesterday, the eurozone manufacturing PMI hit a 13-month low of just 50.7, showing factory growth grinding to a near-halt. And the UK PMI hit a 14-month low, of 52.5, showing slower growth. Markit's #Manufacturing #PMI survey round-up: US booms while Eurozone & UK struggle. Japan reviving, China stagnates pic.twitter.com/75OPlGC7dQ 3.08pm BST15:08 And the rival measure of the US factory sector, from ISM, has also shown strong growth, just like Markit a few minutes ago. The ISM PMI index jumped to 59.0, up from 57.1 which is the highest since March 2011. It also found a big jump in new orders. *ISM FACTORY ORDERS INDEX JUMPED IN AUGUST TO 10-YEAR HIGH 2.57pm BST14:57 Markit PMI: US factory activity growth hits four year high Just in. America’s factory sector posted its fastest growth in over four years, according to data firm Markit. Markit’s US manufacturing Purchasing Managers Index came in at 57.9, up from 55.8 in July. Any reading over 50 shows growth, and this is the sharpest improvement in conditions since April 2010. The new orders index surged to 60.5, up from 59.5, showing an influx of business. And that encouraged firms to take on more staff too. Manufacturing payrolls rise at steepest pace since March, 2013 pic.twitter.com/4jfN3m1QxY Tim Moore, Senior Economist at Markit said: “The US manufacturing sector has gone from strength to strength this summer, with August’s improvement in business conditions the sharpest for over four years. “Impressive new business and output gains were matched by a solid rebound in employment growth. The latest survey points to the fastest upturn in payroll numbers for around a year-and-a-half, highlighting that the manufacturing sector continues to have a positive impact on overall labor market conditions. “Improving domestic economic fundamentals remain the key engine of growth. However, there were finally signs of external demand gaining traction in August, despite weakness across the euro area, as manufacturers indicated that new export orders picked up at the fastest pace for three years.” 2.40pm BST14:40 My colleague in Berlin, Ben Knight, writes that car pick-up service Uber is fighting on after being slapped with a ban in Germany: The car sharing service Uber has been hit with a temporary ban in Germany after a court in Frankfurt ruled that the mobile app violates the country’s Passenger Transportation Act. The ruling came into force on Tuesday following an expedited hearing. It means the ban remains in place until a full hearing takes place and Uber could face a €250,000 (£198,000) fine per ride. Uber has vowed to keep the app online regardless of the ban. “You cannot put the brakes on progress,” the company said in a statement. “Uber will continue its operations and will offer Uberpop ridesharing services via its app throughout Germany.” More here: Car sharing service Uber banned in Germany Go on, Germany, tell us the one about structural rigidities inhibiting growth in France and Italy again. #uberneindanke Updated at 2.53pm BST 2.21pm BST14:21 Halliburton reaches $1.1bn settlement over Gulf of Mexico disaster Just in. Halliburton, the US contractor, has reached a $1.1bn settlement over its role in the Deepwater Horizon disaster of 2011. Halliburton handled the cement work for the BP oil rig which caught fire and sunk in April 2011, with the loss of 11 lives, causing the huge environmental disaster in the Gulf of Mexico. It says it has reached a deal on “a substantial majority of the plaintiffs’ class claims”, following the deal which BP reached with local businesses two years ago. That includes: Halliburton reaches settlement on claims related to Macondo. Read more. http://t.co/ISOEx5I8Bj Updated at 2.27pm BST 2.06pm BST14:06 A reminder of how the cost of insuring against the pound being volatile this month has surged this morning, following the Scottish independence polling. If you are wondering about the effect of this Scotland poll this morning ...Cable 1 month option vol exploded pic.twitter.com/UmJgXDREMQ The pound hasn’t recovered either - still down 0.8 of a cent at $1.562. So why is the City so worried? Well, until now, investors had largely discounted the prospect of the Yes side winning, but the six-point gap has forced a rethink. And as our new data editor, Alberto Nardelli, explains, the Yes side are winning among the younger demographics: Yes vote ahead among all but older voters in latest YouGov Scotland #IndyRef poll pic.twitter.com/x2Ae5NdMYg 4 reasons why the narrowing #IndyRef gap might be significant http://t.co/Xu5c1b90fn - thoughts on that YouGov poll pic.twitter.com/vPSaBI6xGN 12.58pm BST12:58 Tell George Osborne what to do The government is inviting suggestions for measures that the chancellor could announce in December’s autumn statement. In the interest of “open and transparent policy-making”, the Treasury is keen to consider “original and innovative ideas” which could be included in the fiscal update. So, if you’d like to, say, abolish the bedroom tax or impose a windfall levy on the banks, please email autumnstatementrepresentations@hmtreasury.gsi.gov.uk. Have your say about what’s in this year’s Autumn Statement http://t.co/aKMy2TTcZN #AS2014 Updated at 1.44pm BST 12.30pm BST12:30 Get your diaries out. George Osborne will deliver the autumn statement on December 3rd. Brace yourselves for new financial forecasts; eagerly waited, with the general election just five months later. Autumn Statement will take place December 3, the Chancellor has announced #AS2014 Updated at 1.44pm BST 12.09pm BST12:09 Co-op sells security arm The reshaping of Britain’s Co-operative Group continues. It just announced the sale of its security arm, Sunwin Services, to US firm Cardtronics for £41.5m in cash. Cardtronics is also going to run the 1,800 cash machines across the Co-op’s supermarkets for seven years, starting January 2016 at the latest. Sunwin was created in the 1950s, when the Co-op got into the TV rental and repair business. These days, its role is to supervise and protect the movement of cash around the Co-Operative empire. Last weekend, Co-operative’s members agreed to wide-ranging changes to the way it runs. But City grandees Lord Myners warned that it must now appoint a fully independent chairman, and CEO, to avoid the reform process failing. Updated at 1.19pm BST 11.35am BST11:35 So what does this morning’s jump in sterling volatility actually mean? Basically, it shows that the cost of hedging against the risk of the pound’s value fluctuating wildly over the next month has risen. Traders are seeking protection against turmoil as the Scottish independence vote approaches. 11.27am BST11:27 Reuters newswire snap: Updated at 11.31am BST 11.20am BST11:20 City braces for "financial accident" over Scottish independence The pound is continuing to fall against the US dollar this morning. It’s now down 0.8 of a cent, or 0.5%, at $1.6526 today, as traders adjust their view of this month’s Scottish referendum on independence. Last night’s opinion poll, showing a mere 6-point gap between No and Yes (see details at 9.29am), has also pushed up volatility in the sector -- a sign that City investors are bracing for a possible shock on 18 September. Poll showing surge in support for Scottish independence triggers biggest rise in sterling volatility in 3 years: pic.twitter.com/SUablsXSYF Scottish referendum: the f/x market has started to take seriously the possibility of a yes vote for the first time. pic.twitter.com/Qdeo5O3ZmJ I flagged up earlier that the pound could swiftly tumble by 5% if Scotland votes for independence. Now Neville Hill, head of European economics at Credit Suisse, has warned that a yes vote “would precipitate a significant financial accident,” Hill said (via the WSJ): “Given that there are no terms of reference, or contingency plans for Scottish independence if there is a ‘yes’ vote, this has the potential to deliver enormous financial, economic and, of course, political risk to the U.K.” Updated at 12.39pm BST 11.02am BST11:02 Redrow workforce swells to cope with demand Looking back at the booming UK construction sector....building firm Redrow has revealed it expanded its workforce by a fifth last year to cope with the demand. My colleague Jennifer Rankin reports: Redrow said it had created 230 jobs, including 48 apprenticeships, amid the housing market revival. The new recruits include surveyors, planners, and sales and marketing experts, while the company’s expansion may have created up to five times as many jobs on the building sites managed by its contractors, according to John Tutte, Redrow chief executive. “When we create 230 jobs we create many more in the supply chain … you could say one job could easily create four or five in the supply chain.” And with profits up 91%, I imagine Redrow won’t struggle to pay staff a little more..... Redrow homebuilder adds 20% more staff as profits nearly double 10.47am BST10:47 Howard Archer of IHS Global Insight says this latest drop in eurozone producer prices is a worrying sign for the region: It is looking ever more likely that the European Central Bank will ultimately have to undertake some form of quantitative easing QE, although we suspect that it will be limited given apparent wariness among some Governing Council members to go down this route. The ECB may well initially at least limit itself to buying Asset Backed Securities rather than government bonds. The ECB press conference this Thursday should be very interesting and we expect Mr. Draghi to adopt a more dovish tone, Archer adds. 10.43am BST10:43 Eurozone producer prices fall again The latest economic news from the eurozone is less encouraging, though. Producer prices (which measures the cost of goods and services from euro firms ‘at the factory gate’) fell by 0.1% month-on-month in July, and were 1.1% lower than a year ago. It’s the sixth month-on-month fall in producer prices so far this year (June was a rare highlight, when PP rose by 0.2%). The fall was driven by cheaper energy supplies (down 0.6% month-on-month). Capital goods, durable goods, and non-durable consumer goods were all unchanged. Bye bye PPI, hello PPD - producer price deflation. Euro zone producer prices -1.1% in July, 13th month of decline: pic.twitter.com/maP101extP On an annual basis, ‘core’ producer prices (stripping out volatile items such as energy) were flat month-on-month in July. Or inflation.. RT @fwred: No pipeline deflation. pic.twitter.com/ltvvMdfJY1 Reaction to follow... Updated at 10.46am BST 10.26am BST10:26 This shortage of skilled construction workers could suggest that the spare capacity in the UK labour market is being sucked up. Something for the Bank of England’s monetary policy committee to ponder, as Rob Wood of Berenberg explains: The strength of construction output has raised capacity pressures, which were reflected in further rises in sub-contractor charges. If that trend of falling capacity is reflected in other sectors in the coming months it could become an issue for the Bank of England, who are currently assuming there is still enough slack in the economy to allow interest rates to stay on hold until next year. The MPC starts its two-day monthly meeting tomorrow. Last month, two members voted to raise rates, but Berenberg expect the BoE will not hike until next February. 10.15am BST10:15 Paul Kavanagh of City firm Killik & Co reminds me that builders have already seen their wages rise this year: @graemewearden already has....one house builder recently observed bricklayer rates have moved from £120 per day to £180, £200 soon Almost a year ago, we were writing that the Housing boom had produced the year of the £40k brickie @graemewearden in fairness, there has not been inflation here for seven years so they should have 'provisioned' for this day 10.02am BST10:02 Jeremy Cook: Construction is booming It’s a good time to be a skilled builder, points out Jeremy Cook, chief economist at the currency exchange company, World First. Here’s his take on today’s unexpectedly strong construction data: “The UK construction market is booming at the moment. Output and orders continue to fly higher, while the employment of skilled sub-contractor labour has contracted so much that availability has fallen to a record low and rates to a record high. “It is a good time to be working in construction if you have the skill-set. Gains appear to have been made across all three divisions – housing, commercial and civil engineering – of the construction sector driving confidence higher still. “According to the survey, eight times as many firms believe that the sector will continue expanding over the year ahead as opposed to seeing declines. “Price data was also strong with input inflation expanding at the strongest levels since July 2011; good news for margins in the short term, but a continuation is contingent on reliable progression onward.” 9.54am BST09:54 David Noble, Group CEO at the Chartered Institute of Purchasing & Supply, is worried by the shortage of skilled builders, and the pressure on raw materials: “The sector is struggling to find enough skilled tradesmen to keep pace with new work and the labour market will continue to put pressure on costs until the next wave of apprentices begin to enter the jobs market. “Indeed, across the supply chain, delivery times have seen the sharpest rise since the survey began, with input prices growing at the fastest rate since July 2011. With the UK’s appetite for building materials growing throughout the summer, suppliers are struggling to ramp up production to pre-crisis levels.” One person’s cost pressures is another person’s well-earned pay rise, of course.... 9.39am BST09:39 UK construction sector posts strongest growth in seven months The UK construction sector has posted its strongest jump in activity in seven month, raising fears of a shortage of skilled staff. Builders have reported a “surge” in housebuilding, and a rise in commercial and civil engineering last month. The UK construction PMI, calculated by Markit, has risen to 64.0, up from 62.4, indicating an acceleration in growth. That’s the strongest reading since January, and one of the best in the last seven years. Firms reported that a “sustained upturn in workloads”, and a rise in confidence -- which encourage them to hire more workers. Housebuilding posted the fastest rise in activity, while civil engineering activity increased at the strongest pace since March. Commercial construction grew at close to the fastest rate since the summer of 2007. Here’s the key points: Markit economist Tim Moore says “a broad-based upturn in construction demand has created a boom in job creation this summer”. “UK construction firms saw one of the sharpest rises in output for seven years in August, with increasing workloads driven by an array of factors including surging homebuilding activity, greater infrastructure spending and renewed confidence within the commercial development sector.” This means some building firms are struggling to find staff. Moore explains: Acute skill shortages meant that sub- contractor charges rose at the fastest pace since the survey began in 1997. Meanwhile, sub-contractor availability fell at a survey-record pace, which could act to further ignite pay pressures in the short term. Reaction to follow.... Updated at 9.42am BST 9.29am BST09:29 The pound has dipped against the US dollar this morning after a poll showed the Yes to Independence camp gaining ground in the Scottish referendum battle. It’s not a big move -- sterling is down about 0.3% today. One pound is worth $1.6564, down from $1.66 last night before the poll was released. Kit Juckes, Société Générale’s currency expert, says the City has noted the closing gap between the ‘No’ and Yes’ camps in the Scottish referendum, to 53-47 in favour of not leaving (excluding don’t knows). Kit explains: A Scottish ‘yes’ to independence poses far more questions (about the currency, the debt, the oil, the future) than it answers but my best guess is that a ‘Yes’ would trigger a 3-5% fall by sterling as an initial reaction, compared to an equally unsophisticated guess that the UK leaving the EU sends sterling down 10-15%. He adds that the issue of Scottish independence won’t go away, even if the No side win this month. It is now unlikely that the gap is big enough for a ‘no’ this time around to kick the issue into the long grass for ever. If, for example, the UK were to leave the EU after a referendum, Mr Salmond would leap back on the bandwagon and apply for an independent Scotland to remain in. And so on. 9.13am BST09:13 Spanish unemployment data released The latest Spanish employment figures are also out this morning, and show a small rise in unemployment. But the underlying picture does show signs of improvement within Spain’s chronically weak labour market. Spain’s jobless total rose by 8,070 in August, meaning there were 4,427,930 people out of work. But on a seasonally adjusted basis, the jobless total actually fell by over 11,000 people -- the second-biggest fall in 14 years. The Labour Ministry reports that 270,853 people have left the unemployment total in the last year, the best figure for any August on record. This chart shows how the jobless total is lower than in 2013 or 2012, although nearly one in four people are still classed as unemployed. Updated at 11.28am BST 8.35am BST08:35 Swiss GDP: What the experts say Economists are concerned by the evaporation of growth in the Swiss economy in the last quarter. Maxime Botteron of Credit Suisse is worried that capital investment fell, saying: ”For us it’s really below expectations. We expected a bit more growth. The trend in exports is not a big surprise. Trade data so far already pointed to a rather weak contribution of exports. What is a bit more surprising is the weak investment spending, especially in the construction sector.” David Marmet, an economist at Zuercher Kantonalbank, fears that the Switzerland will struggle: “The global economy isn’t developing as we’d expected,” “We think the weakness will last into 2015. The pickup will come, but not as strongly as we’d thought.” And the Guardian’s former European editor, David Gow, reckons it shows the risks of Brexit: #brexit Stagnant Swiss economy sends warning msg to UK europhobes hailing CH as the model to follow after leaving EU 8.18am BST08:18 Bloomberg pins the blame firmly on the weakness of the Eurozone, saying: The Swiss economy lost pace in the second quarter with private consumption failing to make up for slowing exports as stagnating growth in the euro-area took its toll.... Swiss GDP Unexpectedly Stagnates as Euro Area Leaves Mark 8.16am BST08:16 These are the worst Swiss growth figures in two years, as our friends at fastFT flag up: More here: Swiss economy unexpectedly stalls 8.10am BST08:10 Swiss economy: jewellery exports up, financial services struggles The full Swiss GDP report is available on the State Secretariat for Economic Affairs (SECO)‘s website. It shows that exports of jewellery made a notable positive contribution to growth. However, the country’s banking sector did not: SECO says: On the production side many sectors reported virtually no change in value added between the 1st and 2nd quarters. Industry, energy and water supply made an overall small positive contribution to GDP growth, by contrast the value added in the financial sector and some public sector economic areas showed a stagnating to slightly falling trend. 8.02am BST08:02 Chart: Swiss GDP Today’s GDP report shows that the Swiss economy has suffered a slowdown in export growth. Exports rose by just 0.6% in April-June, down from robust growth of 2.3% in January-March. So, trade in goods and services made a small negative contribution to GDP growth, the Switzerland’s State Secretariat for Economic Affairs says. That suggests Switzerland is feeling the chill from the eurozone – Germany contracted by 0.2% during this quarter, France also stagnated, and Italy fell into recession again. Switzerland’s construction sector activity fell by 0.7%, and government spending fell by 0.3% - wiping out a rise in consumer consumption. Updated at 8.12am BST 7.49am BST07:49 Swiss GDP fails to grow in last quarter Here’s Reuters’ first take on the unexpectedly weak Swiss GDP figures released this morning. Switzerland’s economy stalled in the second quarter, with output unchanged from the first, dragged down by weaker exports and falling construction spending, data showed on Tuesday. Analysts polled by Reuters had forecast a quarterly growth rate of 0.5%. Gross domestic product rose by 0.6% year on year, missing expectations of 1.7% and down from a revised 2.1% in the prior quarter, the State Secretariat for Economics said. Switzerland’s economy faces increased macroeconomic and geopolitical risks that may lead the Swiss National Bank to cut its economic outlook at its meeting in September, its chairman Thomas Jordan said on Sunday. 7.42am BST07:42 Opening post Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. The breaking news this morning is that Switzerland has joined the ranks of European countries suffering a slowdown. GDP figures, just released, show that the Swiss economy failed to grow at all in the second quarter of 2014, with export growth slowing sharply. That’s much worse than expected (the City had pencilled in growth of around 0.5%), and matches the average poor performance across its eurozone neighbours. It’s another sign that economic growth across the European region suffered a dip in April-June. I’ll have more details on this shortly. No shocks overnight - Australia’s central bank has left interest rates unchanged. The financial markets are jittery ahead of Thursday’s European Central Bank meeting, after yesterday’s weak factory growth figures put more pressure on Mario Draghi. In the corporate world, housebuilder Redrow is posting decent-looking results, with profits almost doubling over the last year. We’ll have more on that in a few minutes too. Another housebuilder with record results - North-focused Redrow's FY PBT up 91% to £132m. Help to Buy supported 35% of completions. Greek ministers are heading to Paris today for talks with its troika of lenders. But as we reported in yesterday’s blog, Athens is trying to dampen hopes of a breakthrough on debt relief. Finance minister Gikas Hardouvelis told reporters last night that Greece wouldn’t be imposing any ‘red lines’, and would mainly discuss structural reforms. “It will be a wide-ranging discussion …. the bar has been raised. We have to bear in mind who the counterparties are. They are members of the International Monetary Fund, the (European) Commission, and the European Central Bank You must understand their limits. They cannot speak politically.” Also on the agenda today: I’ll be tracking all the main events through the day |