UK service sector growth slows; eurozone growth makes 'grim reading' -- business live
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Version 0 of 1. 5.43pm GMT17:43 European markets head higher A bout of positive company results - not least those from Marks & Spencer - helped European markets while the Republican victory in the mid-term elections boosted Wall Street to new highs in early trading. The US market was also helped by positive private sector jobs data from the latest report from payroll processor ADP, ahead of Friday’s non-farm payroll numbers. A fall in US oil inventories and reports of a pipeline fire in Saudi Arabia have combined to lift crude prices off their lows, and help oil shares regain some ground. The final scores showed: On Wall Street, the Dow Jones Industrial Average is currently 0.50% or 87 points higher at 17471 after earlier hitting a new high of 17484. Finally, a word of caution if you are walking around the City of London. British Land has just issued a statement saying a couple of bolts recently broke on the Leadenhall Building it owns with Oxford Properties - commonly called the Cheesegrater. Part of one of the bolts fell to the ground, and the area has been cordoned off. On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back tomorrow for the latest Bank of England and European Central Bank meetings. Updated at 5.44pm GMT 5.20pm GMT17:20 Over to Greece where leaders have emerged from talks saying tomorrow’s eurogroup meeting of euro area finance ministers will be “decisive” for the country’s bid to exit its bailout programme. Helena Smith reports from Athens: Greece will come one step closer to ending the international scrutiny that has marked its relationship with foreign lenders when euro area finance ministers meet tomorrow. That was the message Evangelos Venizelos, the country’s deputy premier and the finance minister Gikas Hardouvelis were determined to convey as both men talked up the prospect of an imminent agreement with creditors following talks with prime minister Antonis Samaras. “In January we are going [into a new phase],” insisted Hardouvelis reminding reporters that as of December 31 EU bailout disbursements will stop. “So everyone has an incentive to go into a situation where everyone wins… the will is there, incentives are there and because incentives always work in life … a solution will be found.” Tomorrow’s eurogroup meeting will be crucial in determining negotiations that will mark the beginning of the end, Venizelos said. “Our goal is to reach [a deal with foreign lenders] before the last eurogroup of the year which is 8 December. Thursday’s meeting will be of decisive importance for the hard and delicate negotiations that the government is waging, “ he said adding that it was vital Greece exited the programme with the support needed to ensure that market volatility was kept at bay. The EU’s new monetary affairs chief Pierre Moscovici has given the Greeks cause for optimism. Earlier this week he said the EU commission would study their “evolving demand” for an exit positively, provided that Greece also kept up with reforms. “We will have a first discussion on the euro group on Thursday, while decisions will be taken on December 8,” he said announcing that his first foreign visit would be to Greece before then. 4.10pm GMT16:10 Back in the US and Dallas Federal Reserve president Richard Fisher has been commenting on interest rates, and the mid-term elections. He has told Bloomberg TV that the Fed can’t wait for inflation to reach its target before beginning to tighten monetary policy. He added that the Fed does not want to raise interest rates and then have to reverse course. He said: I would be very careful about waiting until we’ve already achieved our targets and then trying to rein in by raising interest rates, because every time this has been done in the history of the Fed, to my knowledge, then we’ve forced a recession. On the elections, dominated by the Republicans, he said he hoped the new Congress would limit any laws which might endanger the Fed’s independence: I think it’s very dangerous to tamper with the institution. Yes, we could be updated and tweaked but on balance we have lasted 100 years and on balance we have done a very good job. (Quotes from Reuters.) Updated at 4.13pm GMT 3.48pm GMT15:48 Reforms in Portugal have lost momentum, according to the latest review by teams from the European Commission and ECB which visited the country over the past few days. Its report said: Economic and financial conditions in Portugal have generally improved since the end of the EU/IMF-supported programme in June. Sovereign yields remain low, in line with developments elsewhere in the euro area and normal market-financing is being gradually restored. Nevertheless, economic recovery is constrained by high levels of debt in the public and private sector and by an increasingly weak external environment which highlights the need for further competitiveness gains. The pace of budgetary consolidation has been adversely affected by a series of one-off factors, despite strong revenue performance. Moreover, efforts to reduce the underlying structural budget deficit have clearly slackened. Progress in structural reforms has lost momentum, with an uneven pace of implementation across policy areas. The Portuguese banking sector continues to deleverage amid improving liquidity conditions. The results of the ECB’s comprehensive assessment have generally confirmed the solvency of the sector, notwithstanding the recent resolution of BES. Yet, looking ahead it is important that the opportunity provided by the comprehensive assessment to strengthen further the resilience of the banking system as a whole is seized. While most banks still project losses in 2014, cost-saving measures are now beginning to yield positive results. However, future profitability remains challenging, not least in light of the domestic macroeconomic environment. The mission expressed concern that the pace of structural reform appears to have diminished considerably since the end of the programme, in some cases reversing past achievements. Notably, while it remains to be seen whether recent policy measures relating to collective wage bargaining could on balance contribute to a better alignment of wages to productivity developments, the decision to increase the minimum wage could make the transition into employment for the most vulnerable even more difficult. Moreover, efforts to reduce excessive rents in network industries, in particular in energy, need to be stepped up. The mission recalled the importance of increasing the flexibility and competitiveness of the Portuguese economy to underpin the still nascent economic recovery. It therefore urged the Government to maintain an ambitious reform agenda for the future. There is also a need to more systematically monitor and evaluate the impact of reforms. Updated at 4.14pm GMT 3.18pm GMT15:18 The ISM service sector survey may have fallen but it was still a strong outcome, said James Knightley of ING Bank, and could point to a stronger than expected non-farm number on Friday : The ISM non-manufacturing index was unable to replicate the surprise jump seen in the manufacturing index earlier this week. Instead it fell to 57.1 from 58.6 versus market expectations of 58.0. Nonetheless, this is still a very strong reading and the series continues to run well above its 12 month average and substantially above the 50 break-even level. Indeed, new orders remain close to 60, suggesting that business activity will remain robust through the quarter while the employment component rose to 59.6 from 58.5. This leaves that series at its highest level since August 2005 and is very positive news ahead of Friday’s payrolls number. The current consensus for the change in non-farm payrolls is 235,000, but given the strength in the ISM employment indices, the ADP report and the consistently low readings for initial jobless claims then the odds favour a stronger outcome. 3.04pm GMT15:04 And here’s the ISM survey, also showing a slowdown in the pace of growth in October. The ISM services index fell from 58.6 in September to 57.1, lower than the expected 58 and falling to its lowest level since June. But the employment index rose to 59.6, the highest since August 2005, from 58.5. ISM non-manufacturing employment index at highest level since Aug 2005 pic.twitter.com/EiSh5VY6nx Updated at 3.28pm GMT 3.01pm GMT15:01 Here’s the Markit composite PMI, showing the slowdown: Updated at 3.01pm GMT 2.55pm GMT14:55 US service sector growth slows And here’s Markit. The final services sector purchasing managers index for October came in at 57.1, down from 58.9 in the previous month. This was its lowest level since April, and was slightly down on the preliminary reading of 57.3. And Markit’s composite index, a weighted average of its manufacturing and services indices, fell to 57.2 in October from 59 in September. Markit said this suggested the brisk economic growth seen in the previous two quarters of the year would not be repeated in the final three months. Markit chief economist Chris Williamson said: The manufacturing and services surveys collectively indicated the slowest pace of expansion for six months in October and, with inflows of new business also hitting a six-month low, there’s good reason to believe that the pace of growth could slacken further in coming months. The October survey data running at a level consistent with GDP rising at an annualised rate of 2.5% at the start of the fourth quarter, but any further drop in the PMI numbers raises the risk of an even sharper slowdown. However, although cooling, the pace of expansion clearly remains sufficiently strong to generate an impressive rate of job creation. The surveys are signalling another month of non-farm payroll growth in excess of 200,000 in October. The concern is that, with growth slowing and business confidence sliding to one of the lowest levels seen over the past two years, employers could soon start to show greater hesitancy in recruiting new staff. Updated at 3.49pm GMT 2.42pm GMT14:42 Coming up we have the latest from the US services sector, with two different measures from, first, Markit, then the Institute of Supply Management. If it is anything like Monday’s two manufacturing surveys, they are not likely to agree, although they may at least head in the same direction this time. Meanwhile the Dow Jones Industrial Average hit yet another record high at the open, although it is currently off its best levels, up around 50 points. Updated at 3.19pm GMT 2.27pm GMT14:27 Summary: UK slowdown, and euro weakness Time for a late lunchtime summary, before this afternoon’s US data arrives (service PMIs from Markit and ISM). Economists have warned that Britain’s economy is slowing, after the service sector recorded its weakest growth in 17 months. The services PMI fell to just 56.2, down from 58.7 in September. That is the lowest level since May 2013. Details start here. The pound hit a one-year low, with traders concluding that interest rates will remain at record lows for longer. Ranko Berich, Head of Market Analysis at Monex Europe, says the data shows the engine of UK economy has “dropped down a gear” Today’s Service PMI is another nail in the coffin for the Bank of England’s plan for early rate hikes, as the engine of the UK economy dropped down a gear in October. Services represented almost all of the third quarter growth in the UK and, should this crucial sector slow further, the economy as a whole could be heading for a fall. “There are some causes for optimism in the report, particularly the continued expansion of employment in the services sector, but the actual level of activity grew at the slowest pace in 17 months. There was also a notable fall in optimism, as businesses became increasingly concerned about future prospects for growth. With manufacturing looking sluggish and construction growth cooling, the signs look ominous for the wider economy. The eurozone’s service sector has also recorded another tough month, with private sector activity only rising narrowly. Markit, which compiles the report, says it made for ‘grim reading’. MPs have warned that Rolls-Royce’s plan to cut 2,600 jobs could have a serious negative impact on the UK economy, at an Urgent Question in parliament. Marks & Spencer’s shares have soared, up 8.5% at pixel time after it reported better than expected results and hiked its dividend. However the high street retailer also reported another quarter of falling clothing sales, which it partly blamed on the unusually warm UK weather this autumn. Ireland’s unemployment rate has fallen to 11%.... ...while US firms created 230,000 new jobs last month. Updated at 2.27pm GMT 2.07pm GMT14:07 Today’s drop in Ireland’s unemployment rate to 11% (see 11.56am) has been hailed by Irish politicians as a sign of economic recovery. Henry McDonald, our Ireland correspondent, explains: Irish Deputy Prime Minister and Minister for Social Protection Joan Burton said the latest figures indicated that progress was being made to reduce unemployment. “These are once again hugely encouraging figures, showing that the Pathways to Work strategy to reduce unemployment is making significant progress. In the first 9 months of this year, over 100,000 people have left the Live Register to take up employment. Unemployment is down from a crisis peak of 15.1 per cent to 11 per cent now, and, critically, the pace of the reduction is accelerating,” she said. There was more good jobs news in Ireland today with the announcement of 200 extra posts at a U.S medical devices company in Co.Wexford, Henry adds: Clearstream Technologies based at Enniscorthy is expanding its operation in its southeast Ireland plant. It manufactures devices such as catheters and stents for uses in cancer treatments and major surgery. 2.00pm GMT14:00 Over to America...and the latest ADP jobs report shows that US companies created 230,000 new jobs last month. That’s up from 213,000 in September, suggesting that America’s labour market improved again last month. However, there are signs that weaker conditions overseas hit job creation. Paul Dales of Capital Economics explains: The fact that, according to the ADP, large firms added just 4,000 jobs while small firms added 102,000 and medium firms added 122,000 could be a sign that the easing in global demand is hindering US employment. After all, large firms are more likely to be exposed to overseas developments. That said, the encouraging performance of small and medium firms supports our view that any weakening in demand from overseas is being offset by stronger demand at home. On Friday we get the eagerly awaited Non-Farm Payroll, showing how many new jobs were created across the whole economy (and whether earnings went up). 1.27pm GMT13:27 Last question: Conservative MP Stephen Metcalfe asks the government to ensure that young people aren’t deterred from entering engineering by the sight of Rolls-Royce cutting 2,600 jobs. Absolutely, BIS minister Matt Hancock replies. Engineering is an exciting profession, and a well-paid one too. Britain is a world career in engineering, and I’d encourage anyone considering joining it to give serious consideration, he adds. And that’s that. 1.11pm GMT13:11 What impact will the Rolls-Royce job cuts have on the wider East Midlands economy? Matthew Hancock, minister for Business, Enterprise and Energy, agrees that “We need to take the impact on the supply chain into account”. Hancock also says that the UK has a shortage of trained engineers -- the government will “work night and day” to ensure that the people who leave Rolls-Royce can be redeployed. Another MP (sorry, missed his name) suggests that another UK engineering firm, Babcock, needs more engineering talent to handle future nuclear power work. Updated at 1.19pm GMT 1.07pm GMT13:07 Powerful point from @IainWrightMP every engine made by rolls Royce supports 3,000 jobs -losses announced will have massive impact #bizteam Local MPs Jack Lopresti, Chris Skidmore & me ask Business Minister about threat of job losses for our constituents who work at Rolls Royce. 1.01pm GMT13:01 1.01pm GMT13:01 Labour MP Jack Dromey says the government shouldn’t simply accept Rolls-Royce’s job cuts -- the consultation should consider whether the plan is right. Matt Hancock replies that RR faces a tough international market, and needs to make changes. The government will continue to engage with it. 12.59pm GMT12:59 Conservative MP David Mowat asks whether the sanctions imposed on Russia have contributed to Rolls-Royce’s jobs cuts. That hasn’t come up in our talks, minister Hancock replies. 12.58pm GMT12:58 Kerry McCarthy, Labour MP for Bristol East, is worried that new apprentices joining Rolls-Royce today will suffer as the company implements its job cuts plan. 12.55pm GMT12:55 MPs fear impact of Rolls-Royce job cuts on British economy Adrian Bailey MP, who chairs the business, innovation and skills committee, is also concerned about the impact of Rolls-Royce’s job cuts on Britain. We are desperately short of skilled engineers nationally...and short of young people entering the profession. And here we have a blue chip company actually laying people off, he says. Minister Matt Hancock replies that Rolls-Royce is still committed to taking on graduates and apprentices. 12.52pm GMT12:52 Margaret Beckett, Labour MP for Derby South, warns parliament that Rolls-Royce’s job cuts could hurt the wider UK economy by reducing the country’s engineering talent base. 12.51pm GMT12:51 Matt Hancock is telling MPs that we still don’t know exactly where Rolls-Royce’s 2,600 job cuts will fall. 12.38pm GMT12:38 Heads-up. MPs in parliament are holding an urgent question on the 2,600 job cuts announced by Rolls-Royce yesterday. Minister Matthew Hancock is saying the government will do everything it can to help those affected, and will help set up a taskforce to help those affected. Many of the people hit by the layoffs will be engineers, he warns, adding: We are determined to help Rolls-Royce as they make the changes they need. 12.38pm GMT12:38 Europe’s stock markets are all up today, helped by better than expected results from Marks & Spencer (see opening post) and German chemicals firm Brenntag (details). Traders also seem to be less fearful about yesterday’s report of divisions at the top of the European Central Bank. Marks & Spencer is the biggest gainer in London, up 9% today. But gold producer Randgold is the biggest faller, down 2.8%. Gold has fallen to a new four-year low, as my colleague Nick Fletcher reports: FTSE moves higher as Marks soars, but miner Randgold fails to shine 11.56am GMT11:56 Ireland’s unemployment rate has dropped again, to 11% in October from 11.1% in September. The Irish central statistics body reports that that number of people receiving jobless benefits fell by 3,500 to 371,400 (seasonally adjusted). Ireland’s labour market has strengthened since it exited its bailout last December. A year ago, its unemployment rate was 12.4%. But as this chart shows, most of the new jobs created have gone to men: 11.36am GMT11:36 CIPS Services reports growth at 17 month low, @ONS says sector now 78.4% economy (so why @George_Osborne always at factories on GDP days?) 11.33am GMT11:33 Over in Athens, the race is on to get the troika back in town so that a deal can be cut on Greece’s exit from its bailout programme. It is the main issue at talks between prime minister Antonis Samaras and his deputy Evangelos Venizelos taking place in Athens right now. From the Greek capital, Helena Smith reports: The two men hope by this evening to have wrapped up a plan that will entice international auditors back to Greece so that it can be presented by the Greek finance minister Gikas Hardouvelis at tomorrow’s Eurogroup meeting. Officials here are saying they hope mission heads representing the EU, ECB and IMF will return next week “in order for negotiations to finally begin.” Greek government sources, who I spoke to this morning, have been emboldened by an array of encouraging noises made by top EU officials, including the German chancellor Angela Merkel, that suggest Athens’ bailout programme is coming to an end - even if a precautionary credit line will still be needed. In his first TV interview since assuming the post, Hardouvelis announced that Greece was on the way to forming a “new kind of relationship” with lenders. “This new relationship will be an issue of negotiation,” he told Mega TV. As of 2015, the troika would not have such an active role in the day-to-day running of affairs even if “the relationship with lenders will last many years until we pay back 75 percent of the loan.” 11.10am GMT11:10 Yet more gloomy news -- eurozone retail spending has taken quite a tumble, highlighting the weakness of the Europe economy. Retail sales volumes across the eurozone slid by 1.3% month-on-month in September, a rather bigger decline than expected. It’s the biggest monthly decline since April 2012. Non-food spending shrank by 2.2%, while food spending was 0.1% lower. Eurostat adds that: The highest increases in total retail trade were registered in Malta (+1.0%), Luxembourg (+0.9%), Hungary and Slovakia (both +0.7%), and the largest decreases in Germany (-3.2%), Portugal (-2.5%) and Poland (-2.4%). Retail sales in the euro-zone dropped 1.3% in Sept..and the biggest drop was in Germany 3.2%. Reflects weak consumer confidence. 10.54am GMT10:54 Martin Beck, senior economic advisor to the EY ITEM Club, agrees that the UK growth rate appears to be dipping, given today’s drop in service sector growth. “It appears that some of the clouds that have been lingering over the manufacturing sector in recent months have now started to cast a shadow over services as well. A weaker new business pipeline and softer confidence is likely to reflect heightened concerns about global economic and geopolitical risk. “These results are consistent with our long-held view that the pace of growth will cool a little around the turn of the year. 10.40am GMT10:40 Update, the pound actually hit a one-year low against the US dollar this morning. Sterling fell as low as $1.5867 after October’s service sector PMI came in weaker than expected, below the previous 11-month low set in mid-October. Updated at 10.40am GMT 10.31am GMT10:31 Britain’s service sector firms probably suffered a knock-on effect from the stock market volatility in October, says Rob Wood, economist at Berenberg bank. Wood points out that a service sector PMI of 56.2 is still quite strong (50 is the cut-off point between expansion and contraction). But... That being said, for now we have to get used to more average rather than spectacular PMI readings. Firm’s expectations for growth over the next twelve months, a decent leading indicator, are a little below their historical average. Wood also reckons that domestic politics could be the biggest threat to the economy next year: With UKIP’s surge prompting the Conservative’s to consider more extreme immigration policies and Labour seemingly suffering an implosion of support in Scotland, the chances of an unstable government after the May-2015 election seem to be rising, as is the chance of Brexit. We do not expect doomsday scenarios to come to pass – we expect the UK to remain in the EU and a stable coalition government to emerge after the 2015 election – but those political risks are worth watching very carefully. Updated at 10.31am GMT 10.13am GMT10:13 Howard Archer of IHS Global Insight is also unimpressed by today’s UK service sector PMI: This is a relatively disappointing survey adding to the recent evidence that both the dominant services sector and the economy overall has come off the boil. 10.11am GMT10:11 The UK services sector is entering the winter lacking the self-belief that it exhibited earlier in this year, says Jeremy Cook of World First, the currency exchange firm. “Although new business measures increased, this rate has fallen. Combined with slower demand growth from respondents, there is a new unease in the services sector as to where the industry moves from here.” 10.10am GMT10:10 Pound hit by UK service sector report The pound has fallen to a two-week low, following the weaker-than-expected service sector report. It has lost a cent against the US dollar this morning, to $1.5887 Traders are calculating that there’s even less chance of the Bank of England rushing to raise interest rates at this month’s two-day meeting, which began this morning. Updated at 10.10am GMT 9.49am GMT09:49 City economists aren’t panicking about the UK service sector slowdown. Here’s some instant reaction: UK services PMI drop reinforces our sense of caution for Q4. But, perspective. 56.2 is still a strong number, and firms hiring strongly. UK services PMI badly overshot actual activity;Im quite sanguine about correction.Also the report reflects certain amount of price pressure Key phrase in UK PMI report; "Wage cost pressures were reportedly the principal driver of another round of input price inflation in Oct" Updated at 9.53am GMT 9.43am GMT09:43 UK growth slowing as service sector PMI hits 17-month low More disappointing data! Growth in the UK’s service sector dropped sharply in October, according to Markit’s survey of the sector. That suggesting Britain’s economic growth is slowing as 2014 comes to a close. The UK service sector PMI fell to 56.2 in October, down from 58.7 in September. That indicates the slowest monthly growth in 17 months. Markit reports that UK business confidence weakened slightly last month - although firms did also keep hiring staff. It’s not a reason to panic -- any reading over 50 shows growth. But Chris Williamson, Markit’s chief economist, says that “ a cloud of uncertainty” has gathered over the UK economy in recent weeks. Although manufacturing growth picked up (details), construction growth slowed (details) He reckons that UK GDP may only rise by 0.5% in the final three months of this year, down from 0.7% in the July-September quarter. Here’s why: “A sharp easing of service sector growth to the weakest since May of last year comes on the heels of data showing construction growth sliding to a five-month low and the goods-producing sector shifting down a gear since earlier in the year. “After GDP growth slowed to 0.7% in the third quarter, a 0.5% expansion is currently being signalled by the surveys for the fourth quarter. However, with inflows of work rising across all three sectors at the slowest rate for 16 months, there is a risk that economic growth could weaken further. And David Noble, CEO of the Chartered Institute of Purchasing & Supply, says UK firms are “tiptoeing through a time of uncertainty”. “This month appears to be a slowdown month as the services sector comes off the boil, challenged by capacity constraints, increased backlogs and a slight reduction in new business growth. 9.25am GMT09:25 Credit Agricole economist Frederik Ducrozet remains hopeful that the eurozone economy will pick up next year, despite struggling last month. Eurozone services PMI details weaker than headlines - true, but resilient domestic demand good enough into 2015. 9.15am GMT09:15 Eurozone business growth makes for "grim reading" It’s official: Eurozone economy remains weak, dragged back by weak demand and renewed job losses among companies. That’s the conclusion of this morning’s service sector data (details start here), and Monday manufacturing PMIs. Markit, which conducts the polls of eurozone firms, says: The rate of economic expansion in October was little-changed from September’s ten-month low, with modest output growth registered at manufacturers and service providers alike. Job losses were reported for the first time since November 2013, while price pressures remained muted. Markit’s composite PMI, measuring activity across the eurozone private sector, inched up to 52.1, up from 52.0 in September. That shows modest growth, but not enough to drag the economy out of its rut. Firms reported that they cut jobs because new work rose at a slower pace, meaning backlogs of work fell for the fifth month running. And France is a big worry - as covered earlier, the contraction in its service sector accelerated to a four-month low. Chris Williamson, chief economist at Markit, says the PMIs suggest the fragile eurozone economy could worsen in the months ahead. That raises the threat of a recession -- the third since the financial crisis began. Williamson explains: “The eurozone PMI makes for grim reading, painting a picture of an economy that is limping along and more likely to take a turn for the worse than spring back into life. While output grew at a slightly faster rate than in September, consistent with quarterly GDP growth of 0.2%, a near- stagnation of new orders, with the worst reading for 15 months, suggests that the pace of growth may deteriorate in coming months. “A fall in employment for the first time since November casts a further cloud over the outlook. Firms are often being forced to cut employment due to squeezed profits margins. Input costs are rising but prices charged for goods and services have fallen almost continually over the past three years, with the rate of decline accelerating to the fastest seen over this period in October as companies increasingly turn to discounting to help boost sales.” 9.02am GMT09:02 Germany’s service sector grew at its slowest pace in six months, Markit says. Its service sector PMI dropped to 54.4 in October, down from 55.7 -- showing that growth slowed last month. Markit also found that sentiment among German service sector firms hit a 22-month low. Oliver Kolodseike, economist at Markit, says that: Companies are worried about the introduction of a national minimum wage in January 2015, a general economic slowdown and sluggish new order growth. German service sector activity growth at 7-month low (54.4 in Oct, 55.7 in Sep) and sentiment drops to 22-month low http://t.co/OFA36VqbNB 8.56am GMT08:56 French service sector decline continues Bad news from France -- its service sector has shrunk again, with activity shrinking at the fastest pace in four months. New business declined at the sharpest rate since August 2013. And staffing levels in the French private sector fell again, for the twelfth month running This meant that Markit’s Services PMI fell to 48.3, down from 48.4 in September, showing activity shrank at a slightly faster rate. Markit paints a grim picture: The performance of France’s service sector worsened further in October. Activity contracted for a second successive month, reflecting a steeper reduction in new business. Backlogs of work declined, while firms continued to cut staffing levels. Output prices decreased at the steepest rate in five years, in contrast to a further rise in input costs. Business expectations remained historically muted. Full report here. 8.50am GMT08:50 Italy's service sector grows, but firms still cut jobs Back to the eurozone.... and Italy’s service sector has returned to growth, but firms are still laying off staff. The monthly Italian services PMI, calculated by data firm Markit, rose to 50.8 in October, up from 48.8 in September. Any reading over 50 shows growth. Markit found that business activity at Italian service providers rose slightly in October, but: employment in the sector returned to contraction after having held steady during September. Business confidence also fell. Although still positive, sentiment was the weakest in almost a year, having eased for the third time in four months Italy Services PMI (Oct) comes in at 50.8 exp: 49.4 8.41am GMT08:41 Back to M&S briefly.... chief executive Marc Bolland has told reporters that sales in October weren’t as badly hit by the weather. He’s also upbeat about Christmas trading: 8.36am GMT08:36 Spanish service sector posts a year of growth Over to the eurozone, and Spain’s service sector has posted its 12th month of consecutive growth, as it continues to recover (slowly) from the eurozone crisis. The Spanish PMI, which measures activity across the sector, rose to 55.9 in October from 55.8 in September. Firms reported that output and new business rose a little, and hired more workers. Andrew Harker, senior economist at Markit, says: “The twelfth successive rise in activity during October means that the Spanish service sector has been able to sustain growth for a year for the first time since 2007, and with the expansion in new business picking up the recovery looks set to continue in the near-term at least. The rate of job creation was weak, but the return to hiring after employment stabilised in September provides some reassurance.” Spain PMi services at 55.9 .... bit better than expected The full report was here. Updated at 8.38am GMT 8.21am GMT08:21 Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, reckons that Marks & Spencer is still a “work in progress”. He’s impressed, though, that the company managed to grow profits and gross margins despite the warm autumn (apparently) hitting clothing sales. “The profit beat and improvement to gross margins have taken investors by surprise, with the share price strongly ahead in early trade. Even so, with General Merchandising sales down, food sales up and online yet to gain traction, the summary is a familiar one, even if the initial share price reaction may suggest some optimism on prospects.” 8.18am GMT08:18 8.11am GMT08:11 M&S shares jump 7% ZING. Marks & Spencer shares have jumped by over 7% at the start of trading in London, to 432p. Investors are cheered that the company has raised its interim dividend by 3.2% (details), after increasing its underlying profits by 2.3%. Updated at 8.12am GMT 8.02am GMT08:02 Veteran City commentator David Buik says that M&S’s results (details start here) were “not quite as bad as expected”. 7.53am GMT07:53 Marks & Spencer's reports clothing sales drop for 13th consecutive quarter, but a surprise half-year pre-tax profits rise: up 2.3% to £268m. 7.53am GMT07:53 M&S hikes its dividend It’s not all bad news from Marks & Spencer this morning -- the company is handing more cash than back to shareholders. M&S has raised its interim dividend for the first time in several years, by 0.2p to 6.4p per share. This reflects the fact that underlying pre-tax profits rose by 2.3% in the six months to end-September, despite the latest fall in clothing and general merchandise sales. Retail analyst Nick Bubb reckons M&S shares should rally when the stock market opens. Blimey, M&S have increased the interim dividend by 0.2p to 6.4p, to show their free cash flow generation... So, the M&S interims weren't a damp squib after all and the shares should rocket first thing today (Nov 5th)... Boom boom 7.50am GMT07:50 Marks & Spencer has opened a Simply Food store in Hong Kong, which is going v well by all accounts. Fresh food being flown in 7.48am GMT07:48 Some instant reaction: @marksandspencer say "increasingly positive feedback from customers" but clothing sales still down 2.2% - is that really down to weather? Marks & Spencer like-for-like clothes sales down 3.4% in Q2 as warm September weather took its toll. Ouch. H1 profits up 2.3% to £268m. @graemewearden @BusinessDesk It's not just the weather - M&s clothing is now v. expensive for the majority of us. 7.46am GMT07:46 M&S is planning to build on its success in food, by opening 200 more Simply Food stores over the next three years -- up from 150 previously. 7.45am GMT07:45 M&S also warns that geopolitical issues, and foreign exchange movements, have hurt trading overseas: In our International business, we have delivered sales and profit growth in our Owned business, despite currency headwinds and unseasonal conditions across Europe. However, our Franchise business has been impacted by currency and political issues in our Middle East region and lower shipments, which we expect to continue into the second half of this year. On a happier note, its standalone Food stores in Paris and Hong Kong have performed “strongly”. 7.41am GMT07:41 British retailer Marks & Spencer reports its 13th consecutive quarterly drop in clothing sales http://t.co/Ap9Pyoip5h 7.30am GMT07:30 M&S blames warm weather for sales slide Marks & Spencer has become the latest UK retailer to warn that the unseasonably warm UK weather has hit trading. The high street chain just reported that clothing and general merchandise sales fell again in the last six months. Clothing sales have now fallen, on a like-for-like basis, for the last 13 quarters in a row! M&S’s like-for-like general merchandise (GM) sales fell by 2.9% in the six months to the end of September. The decline accelerated as warm weather deterred customers from splashing out on autumn clothing. Those “unseasonal conditions in September” knocked 2.5% off its GM sales during the month. Fellow retailers SuperGroup and Next have already warned that the hot weather has hurt trading. Overall like-for-like sales in the UK are down by 0.7% during the last six months, with food sales outperforming as usual, up 1%. Marc Bolland, chief executive, is still upbeat: “M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September. We are pleased with the progress we have made against our key priorities for the year: GM gross margin, improving Womenswear, driving Food growth and Cash generation.” Here’s the details: Updated at 7.39am GMT 7.29am GMT07:29 The Agenda: M&S Results, Service sector PMIs, and ECB tensions Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone. Coming up today.... Financial results from Marks & Spencer -- city investors, and the army of M&S small shareholders, will be taking a close look to see how the high street veteran performed. After several years of declining profits, the pressure is building on CEO Marc Bolland: Is Marc Bolland testing beleaguered investors patience? Shares down 16% over the last year. Market down just 4.5% pic.twitter.com/6W8APypI3L In the economic sphere, we get new surveys of Europe’s service sector. These purchasing managers indexes (PMI) are likely to show contractions in Italy and France, but growth in Germany and Spain, and the UK. We’ll also be digesting yesterday’s news that a bunch of eurozone central bankers are losing patience with ECB president Mario Draghi. In case you missed it, Reuters reported that.... National central bankers in the euro area plan to challenge European Central Bank chief Mario Draghi on Wednesday over what they see as his secretive management style and erratic communication and will urge him to act more collegially, ECB sources said. They’re also unhappy that Draghi (apparently) faffs around with his phone rather than listening to their pearls of wisdom: “He sits there with these three mobile phones in front of him and sometimes he’s sending text messages or going out to make or take phone calls,” one source usually in the room said. On at least one occasion, a national governor has skipped his turn to speak because Draghi was not present. “This has got a bit better. He’s paying a bit more attention now,” the source said. More here: Exclusive - Central bankers to challenge Draghi on ECB leadership style I’ll be tracking all the main events through the day.... |