Markets slide as Brexit fears hit UK factories; EC slashes forecasts - as it happened

Discussion in 'Market News' started by Lily, May 4, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Britain’s manufacturing sector has shrunk for the first time in three years, and the EC has slashed UK growth forecasts

    5.58pm BST

    A combination of downbeat factors - the raft of disappointing data from around the world, the EU cutting its growth forecasts, falling commodity prices thanks to weak Chinese numbers, a cut in Australian interest rates to boost flagging growth and a volatile day for the dollar - all combined to revive worries about the state of the global economy and sent stock markets sharply lower. The final scores showed:

    5.12pm BST

    Commenting on the JP Morgan global survey, Capital Economics said:

    Manufacturing activity seems to have remained weak across the board at the start of the second quarter. Markit’s global manufacturing PMI, released today, slipped from 50.6 in March to 50.1 in April, extending a downward trend which began in 2013. On past form, it is now consistent with global growth of only around 2%.

    4.55pm BST

    A number of factors have led to today’s market sell-off, including weak economic data and a volatile dollar. Jasper Lawler, market analyst at CMC Markets, said:

    Woeful economic news and weak bank earnings put stock market bears in charge on Tuesday. Weak manufacturing data from China and the UK, downgraded forecasts for UK and Eurozone growth as well as the Reserve Bank of Australia cutting interest rates to ward off deflation all point to a weaker economic outlook.

    US stocks slumped on the open with the Dow Jones losing over 200 points after weak auto sales number added to a weak economic outlook in China, the UK and Europe.

    4.29pm BST

    Global manufacturing growth slipped in April, according to the latest JPMorgan and Markit survey.

    The global manufacturing purchasing managers’ index came in at 50.1 in April, down from 50.6 in March and only just above the 50 level which separates growth from contraction. The reading is the second weakest in the past forty months. David Hensley, director of global economic coordination at J.P.Morgan, said:

    The latest PMI data indicate global manufacturing output is growing at an anemic pace, similar to the past year. What is notable is the sharp drop in the PMI finished goods inventory index. Once manufacturers have aligned inventories with sales, faster production gains should ensue.

    3.46pm BST

    Markets continue to come under pressure. with the Dow Jones Industrial Average now down 178 points or just over 1%. Here are the biggest movers in the index:

    3.10pm BST

    The latest New York manufacturing survey showed business activity growing at its fastest pace since December last year.

    But there was a drop in the six-month outlook in April to a seven year low. The Institute for Supply Management index rose from 50.4 in March to 57 but the six month outlook fell to 53.1.

    2.40pm BST

    As expected, and in line with other global markets, Wall Street is on the slide.

    The Dow Jones Industrial Average is down 134 points or 0.75% in early trading, as fears about the global economy re-emerge. Poor manufacturing data from the US on Monday, and China and the UK today, have unsettled investors, along with the news that Australia’s central bank cut interest rates to help support growth.

    2.24pm BST

    The US could raise interest rates twice this year, following December’s increase, but there were a number of uncertainties including whether Britain votes to leave the European Union.

    That is the view of Atlanta Federal Reserve president Dennis Lockhart. Speaking to reporters in Florida he said two hikes were possible, but it depended on how the economy evolved. He said (quote from Reuters):

    Atl #Fed Pres Lockhart (dove/non-voter) claims June meeting is “live”. Futures market seems to disagree, assigning only a 10% probability

    1.57pm BST

    Never let it be said that government ministers can’t learn from their mistakes.

    “Given the Business Secretary’s focus on the steel industry,he has decided to postpone his trip to Iran.

    He remains committed to exploring the opportunities for trade and investment with this emerging market and an alternative date will be arranged in due course.”

    Related: Tata Steel: Liberty House to submit bid

    12.48pm BST

    It’s an old City motto, to “sell in May and go away”.

    The foreign exchange markets are taking centre stage today, as incessant US dollar selling has brought about an 18-month low in the US dollar-Japanese yen rate, an eight month high in the euro-US dollar rate, and a four-month high for the pound against the US dollar.

    With IG clients currently seeing a 71% chance of the UK remaining in the EU, it is clear traders are heavily betting that the late February low of $1.3836 represents the bottom for GBP/USD.

    11.56am BST

    Martin Beck, senior economic advisor to the EY ITEM Club, has warned that today’s grim UK factory data could herald more bad new...

    “Manufacturing output in April recorded a shocking reading dropping to the lowest point since the throes of the euro-zone crisis in March 2013. The tailwinds afflicting the manufacturing sector – concerns around the health of the global economy, uncertainty surrounding the result of June’s EU referendum and evidence of a broad slowdown in activity in the UK – means that the ‘makers’ will struggle to avoid a repeat in Q2 of the decline in output seen in the first three months of the year.

    “The detail of the survey offered further causes for pessimism. Both the consumer and investment goods sectors registered declines in output, while survey respondents highlighted a weakening in both domestic and overseas demand. In addition, export orders dropped for the fourth month in a row, while jobs in the sector fell at the fastest rates since February 2013.”

    11.17am BST

    Here’s our news story on the downturn in UK manufacturing:

    Related: UK manufacturing sector suffers worst month in three years

    11.13am BST

    America’s stock market is expected to fall when it opens in three hours time, following today’s disappointing news from China and the UK.

    BREAKING: Dow futures drop triple digits on weak China data

    10.39am BST

    The EC has also predicted another year of recession in Greece, with its GDP shrinking by 0.3%.

    We all want Greece to find growth again, and create jobs particularly for its young people, says commissioner Mosocovici.

    Lower growth, lower inflation, and a stronger euro - the best charts from the EU's forecast

    10.38am BST

    European commissioner Pierre Moscovici has challenged Europe’s politicians to do more to stimulate growth:

    He says:

    Growth in Europe is holding up despite a more difficult global environment.

    “The recovery in the euro area remains uneven, both between Member States and between the weakest and the strongest in society. That is unacceptable and requires determined action from governments, both individually and collectively.

    In this context of modest growth and high risks, economic policy has to reinvigorate potential growth #ECforecast

    10.37am BST

    Today’s forecasts assume that the British public vote to remain in the EU, the Commisison says:

    'Our forecasts are built on assumption of no policy change and for UK you know what no policy change is' - @pierremoscovici on Brexit

    10.26am BST

    In another blow, the European Commission has just cut its forecast for UK growth this year.

    The EC now expects Britain’s economy to expand by just 1.8% this year, down from a previous forecast of 2.1%, inching up to 1.9% in 2017.

    “Risks to the outlook are tilted to the downside, reflecting less favourable external demand and uncertainty in the lead-up to the June referendum.

    Net exports are forecast to continue to detract from growth although less markedly in 2017.”

    Breaking - EU spring forecast says 'uncertainty ahead of the UK’s EU referendum' poses 'considerable' risk to economic outlook @AFP #Brexit

    All that ECB easing too...
    EU Commission cuts 2016 euro zone inflation forecast to 0.2% from 0.5%.

    10.11am BST

    Ms Lee Hopley, chief economist at EEF, the manufacturers’ organisation, agrees that the Brexit referendum is partly to blame for the slump in UK manufacturing:

    “The sharp drop to a three year low and another month of reported job cuts could be the clearest sign yet that referendum uncertainty is starting to weigh on the real economy.

    However, this is just another straw on the back of a sector already grappling with the struggling oil and gas sector, softening domestic demand and weak order outlook from other parts of the world, all of which are failing to provide any counterbalance to the political uncertainty at home.

    10.10am BST

    These chart shows how UK factories have weakened in the last few months:

    9.53am BST

    The shock slump in UK factory activity last month is a serious sign, warns David Noble of the Chartered Institute of Procurement & Supply.

    Noble says an “atmosphere of deep unease” is building throughout the manufacturing supply chain, as new orders and exports come under pressure.

    “A sense of apprehension across the sector is being caused by enduring volatility in the oil and gas industry, falling retailer confidence and the uncertainty created by the EU referendum. In a month that saw the collapse of BHS, the troubles in the British High Street are being felt just as keenly in Britain’s factories.

    Manufacturers are compensating for stalling new order growth by depleting their stocks, and dramatically cutting the amount of raw materials they buy from suppliers.

    The sector is nervously waiting to see whether this is a temporary blip or the beginning of a more pervasive slow down.

    9.51am BST

    UK factories slashed jobs last month at the fastest rate since February 2013, led by major manufacturers.

    Markit explains:

    The downturn at manufacturers was reflected in the labour market at the start of the second quarter.

    Job cuts were reported for the fourth successive month, with the rate of decline the fastest since February 2013. Losses were mainly centred on large-sized companies, as SMEs recorded (on average) a further increase in workforce numbers.

    9.36am BST

    Breaking! Britain’s manufacturing sector has suffered its worst performance in three years.

    Markit’s UK manufacturing PMI, which measures activity across the sector, has slumped to 49.2 in April, down from 50.7 in March

    “Manufacturers are emphasising slower domestic demand growth and declining new export orders as the key weaknesses they are facing, amid rising uncertainty about the global economy, the oil & gas industry, retail sector and the EU referendum.

    With this backdrop unlikely to change in the coming months, the second quarter is likely to remain a bleak landscape for industry.”

    9.22am BST

    The British pound is on a tear this morning, hitting its highest level against the US dollar since last December.

    Sterling has gained almost one cent to $1.4758, a level last seen in mid-December before Brexit fears began to bite.

    US dollar getting spanked, except against the $AUD $DXY

    9.09am BST

    The London stock market has now hit its lowest level since early April, as traders begin May with a bout of selling.

    8.51am BST

    Europe’s stock markets have all fallen in the first hour of trading.

    London’s FTSE 100 is down 35 points at 6208, dragged down by those falling mining stocks.

    Mario Draghi will be spluttering into his expresso this morning as he notes a Euro exchange rate near 1.16 versus the US Dollar #ECB #QE

    8.42am BST

    Mining stocks are sliding this morning, pulling London’s stock market into the red.

    The miners are suffering from falling commodity prices, after today’s weak Chinese factory data.

    Once again commodity stocks are taking a toll with Anglo American leading the pack lower, with a slide in oil prices during yesterday’s session instrumental here.

    8.31am BST

    The Japanese yen has just hit an 18-month high against the US dollar, in another blow to the country’s exporters.

    Investors are piling into the yen after the Japanese central bank disappointed investors last week by not boosting its stimulus programme. That’s going to worry policymakers in Toyko, who are gunning for a weaker currency to help get inflation moving.

    #USDJPY lowest since September 2014. Kuroda pain trade gets a little bit more painful

    8.22am BST

    Over in the City, HSBC shares have jumped 3% in early trading as investors show relief that profits have ‘only’ fallen by 14%.

    8.03am BST

    Australia’s interest rate cut will fuel fears of another round of ‘currency wars’ as nations fight for the competitive edge of a weaker currency, says Mike van Dulken of Accendo Markets.

    7.57am BST

    Australia’s stock market has hit a six-month high following today’s interest rate cut.

    The S&P/ASX jumped 2%, as investors welcomed the promise of cheaper money (even though it was driven by deflation fears).

    Aussie dollar getting ripped apart after RBA rate cut. U.S. dollar drops below 106 yen.

    7.51am BST

    There’s no let-up in the pain gripping China’s factories.

    The latest healthcheck of the sector shows that activity fell again last month. Total new orders stagnated and new export orders shrinking for the fifth month in a row.

    “All of the index’s categories indicated conditions worsened month-on-month, with output slipping back below the 50-point neutral level. The fluctuations indicate the economy lacks a solid foundation for recovery and is still in the process of bottoming out.

    The government needs to keep a close watch on the risk of a further economic downturn.”

    7.42am BST

    Australia has fired another shot in the currency battles by unexpectedly cutting interest rates to fresh record lows.

    Shadow treasurer, Chris Bowen, said the interest rate decision reflected the Liberal government’s incredibly poor economic management.

    He said in August 2013 when interest rates were cut to 2.5% the Coalition seized on it as a sign of economic weakness.

    Related: Reserve Bank cuts cash rate by 0.25% to record low of 1.75%

    7.30am BST

    Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

    Traders in London are struggling back to their desks after the long weekend, and wondering whether the advice to “sell in May and go away” holds firm this year.

    Profits at HSBC fell in the first three months of the year after Britain’s biggest bank was knocked by the volatility that gripped global markets in January and February.

    Statutory pre-tax profits in the three-months to the end of March fell 14% to $6.1bn, which the bank described as “a resilient performance despite challenging market conditions”. If currency movements and other one-off items were excluded profits fell 18% to $5.4bn.

    Related: HSBC profits fall sharply as global volatility hits bottom line

    Related: Tata Steel: Liberty House confirms bid for UK assets

    UK companies posting results today - HSBC, SAB Miller, Aberdeen Asset Management, Just Eat

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