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UK service sector grows more strongly than expected - business live

Discussion in 'Market News' started by Lily, Feb 3, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Rolling coverage of the world economy and the financial markets, as investors continue to worry about the state of the global economy

    12.36pm GMT

    Here’s a minor bright spot from Brazil’s PMIs:

    #Brazil still in severe downturn, but rate of decline shows signs of moderating https://t.co/4JLiC1Jojo pic.twitter.com/cM0FIod7w2

    12.13pm GMT

    GlaxoSmithKline has beaten forecasts for its fourth quarter results, helped by growing demand for new drugs helping to offset falling sales of its Advair respiratory treatment.

    Sales rose 2% while core earnings per share fell 34% to 18.1p - better than the expected 17.9p.

    Our CEO on #GSKFY15 performance. https://t.co/r0VXcmeJlf pic.twitter.com/DezE7648Qj

    12.11pm GMT

    Oil is moving higher again on hopes that an agreement between Opec and Russia to cut production might be moving a step closer.

    Russian foreign minister Sergei Lavrov said if there was consensus among Opec and non-Opec producers to meet “then we will meet,” according to Reuters.

    11.50am GMT

    Here’s our report on the better than expected UK service sector survey:

    Related: UK service companies anxious about year ahead

    11.32am GMT

    Speaking of interest rates the Bank of Japan - which caught markets on the hop last week by introducing negative interest rates - said earlier there were no limits to the measures it could take to boost the economy. Reuters reports:

    Bank of Japan Governor Haruhiko Kuroda said the central bank has ample room to expand stimulus further and is prepared to cut interest rates deeper into negative territory, signalling a readiness to act again to hit his ambitious inflation target.

    Even after deploying what he described as “the most powerful monetary policy framework in the history of modern central banking,” Kuroda said he remained open to devising new means to revive the economy if existing tools did not work.

    “I am convinced that there is no limit to measures for monetary easing,” he said.

    The BOJ chief said although Japan’s economy was recovering moderately, it was taking longer than expected to achieve his 2 percent inflation target due to slumping energy costs.

    11.25am GMT

    The Bank of England’s latest interest rate decision is due on Thursday and, despite a slightly better than expected UK services PMI, no one expects any change at the meeting. Even if the pound is moving higher, that is probably as much to do with the betting on Brexit than anything else.

    Many economists have doubts about whether the Bank will raise rates at all in 2016. Howard Archer at IHS Global Insight said:

    There can be absolutely no doubt that the Bank of England will keep interest rates down at 0.50% again on Thursday at the conclusion of the February Monetary Policy Committee meeting.

    Whether the Bank of England acts on interest rates at all in 2016 currently looks touch and go.

    Heading into Thursday’s events, we just about believe that one interest rate hike from 0.50% to 0.75% is more likely than not before the end of 2016 – with November the most likely candidate for action. However, there is clearly a very real possibility that the bank will sit tight until 2017. Our assumption of a November interest rate hike is based on our belief that economic growth will become more solid later on in 2016, earnings growth picks up anew amid a tightening labour market and consumer price inflation trends gradually up. But there are appreciable uncertainties and downside risks to this outlook – not least the outcome of the UK referendum on EU membership, which currently looks like it could take place in June.

    Further out we expect the Bank of England to only lift interest rates to 1.50% by end-2017 and 2.25% by end-2018.

    10.49am GMT

    Back with the UK services PMI, and economist Daniel Vernazza at UniCredit Research said the numbers were positive, but talk of economic growth of 0.6% in the first quarter could be a little ambitious:

    It’s a reassuring number, particularly given the heightened financial market volatility in January that likely adversely impacted the banking and finance sector. Moreover, the more forward-looking new orders and employment indices both accelerated and lie above their long-run average. This resilience in services sector demand is reflected in wider margins, as output price inflation edged up despite a fall in input price inflation.

    The composite PMI (the weighted average of the services, manufacturing and construction PMIs) rose to a 6-month high and is consistent with quarterly GDP growth of around 0.6% at the turn of the year.

    10.22am GMT

    Christmas shoppers snapping up food, drinks and tobacco helped push eurozone retail sales up by 0.3% in December compared with November, in line with expectations.

    Year on year, eurozone retail sales climbed 1.4%, slightly less than the forecast 1.5%, according to Eurostat.

    10.17am GMT

    #GBPUSD managing to hold on to its services-PMI-inspired gains. Could it finally make a move towards old support/2015 low at 1.4565? ^FR #FX

    9.55am GMT

    UK #PMIs consistent with 0.6% q/q GDP growth, better than 2015's rates. But easing sentiment reason to be cautious pic.twitter.com/siJ9bL0BnR

    9.39am GMT

    Sterling has reached a three week high of $1.4449 after the stronger than expected services data.

    9.37am GMT

    The service sector survey suggests the UK economy could grow by around 0.6% in the first quarter, up from the estimated 0.5% in the final quarter of 2015, said Markit

    Surprise as UK PMI surveys signal FASTER expansion in Jan, consistent with c.0.6% GDP growth pic.twitter.com/lUyCVPTfR1

    9.35am GMT

    Despite the global economic jitters and the floods and storms in the country, the UK services sector unexpectedly grew in January.

    The Markit/CIPS services purchasing managers index came in at 55.6 last month, up slightly from 55.5 in December and better than the expected dip to 55.3. The stronger than forecast figures come ahead of the latest Bank of England rate decision on Thursday, albeit most economists expect rates to remain on hold for some time yet.

    The economy defied expectations and picked up speed in January, but cracks continue to appear in the country’s resilience to the various headwinds...

    Despite the uptick in growth, the increased uncertainty about the outlook and persistent lack of inflationary pressures means the majority of [Bank of England] policymakers will no doubt be more worried about avoiding another downturn than whether the economy needs higher interest rates.

    9.27am GMT

    The eurozone PMI figures add to the evidence for the European Central Bank to take more stimulus measures at its March meeting, says Howard Archer at IHS Global Insight:

    The slowdown in services expansion to a 12-month low in January will raise concern that heightened global economic uncertainty and financial market turmoil are weighing down on a reasonably decent but hardly robust Eurozone cyclical upturn.

    Indeed, with the corresponding manufacturing survey also showing some loss of momentum in January, the purchasing managers’ composite manufacturing and services output index for the Eurozone dipped to a 4-month low of 53.6 in January from 54.3 in December.

    9.23am GMT

    China has set a target range for economic growth in 2016, and it is slightly below last year’s objective following the target being missed last year. Bloomberg reports:

    China set an economic growth target range of 6.5 percent to 7 percent for this year, slower than the objective of about 7 percent in 2015, the head of the country’s top economic planner said.

    While downward pressure on the economy is “relatively big” in the first quarter, China has the ability to realize such a goal, National Development and Reform Commission Chairman Xu Shaoshi said Wednesday at briefing in Beijing. The country also plans to take steps to curb excess industrial capacity and deal with unprofitable “zombie companies,” Xu said.

    9.13am GMT

    Some people are hard to please:

    Eurozone services and composite PMIs fairly uninteresting so far, UK still to come, with highlight this afternoon coming in form of ADP

    9.10am GMT

    Germany’s service sector grew more slowly than expected in January.

    The Markit services PMI stood at 55 last month, compared to an initial reading of 55.4 and the 56 level seen in December. Markit economist Oliver Kolodseike told Reuters:

    Eurozone Markit Services PMI Jan F: 53.6 (est 53.6; prev 53.6)
    -Markit Composite PMI Jan F: 53.6 (est 53.5; prev 53.5)

    9.02am GMT

    More on the Italian and Spanish PMIs:

    Jan fall in #Italy #PMI means it was only above Spain for 1 month. We expect Italian growth to remain slow in 2016. pic.twitter.com/LagaxWB7PO

    9.00am GMT

    Here’s our report on the Syngenta deal. Sean Farrell writes:

    China National Chemical has offered to buy Syngenta, the Swiss pesticide maker, for more than $43bn (£30bn) in what will be the biggest takeover by a Chinese company.

    ChemChina, as the state-owned company is known, has courted Syngenta, the world’s largest agribusiness company, since November when it had a proposed $42bn offer rebuffed.

    Related: ChemChina makes $43bn offer for Swiss pesticide firm Syngenta

    8.52am GMT

    Italy’s service sector also grew in January - for the eleventh month in a row - but at a slower pace than in December.

    The Markit services PMI dropped to 53.6 in January from 55.3 the previous month, a bigger fall than expected. Analysts had forecast a figure of 54 for January.

    Italian Markit/ADACI Services PMI Jan: 53.6 (est 54.0; prev 55.3)
    -Markit/ADACI Composite PMI Jan: 53.8 (prev 56.0)

    8.36am GMT

    Here’s Japan’s services numbers from earlier:

    Nikkei #Japan Services #PMI rises to 52.4 (5-month high) in Jan’16 from 51.5 in Dec’15 https://t.co/LrXgWkCSOI pic.twitter.com/Bu6TNtZPbF

    8.28am GMT

    Despite the raft of service sector data emerging today, Tony Cross at Trustnet Direct says the most important numbers of the day could be the US ADP jobs figures, ahead of the non-farm payroll data on Friday:

    The key point on the economic calendar today may well be the ADP payroll figures from across the Atlantic. These are something of a curtain raiser ahead of Friday’s non-farm payrolls and with the US having printed a slew of downbeat data in recent weeks, there’s concern that the Federal Reserve may have moved too quickly with that first rate hike – today’s number could well be the canary in the coal mine here.

    8.24am GMT

    Spain’s service sector saw a slowdown in growth in January.

    Markit’s services purchasing managers index came in at 54.6 in January, down from 55.1 in the previous month and the slowest growth rate since December 2014.

    #Spanish @Markit #services PMI at 54.6 shows activity easing back to slowest rate since Dec 2014 although still points to decent growth

    8.09am GMT

    In early trading, European markets have - as expected - edged lower.

    The FTSE 100 has fallen 15 points or 0.27% while Germany’s Dax opened down 0.4% and France’s Cac is 0.1% lower.

    8.08am GMT

    On PMI services day, we’ve already had the Irish data, and it looks positive.

    The Investec services purchasing managers’ index rose to 64 in January from 61.8 in December. Philip O’Sullivan, chief economist at Investec Ireland, said:

    Taken together with Monday’s Manufacturing PMI report, this week’s surveys suggest that the strong momentum evident across the Irish economy in 2015 has continued into the New Year.

    Morning. Final Jan. #euro-zone & country comp. PMIs out this am. Irish PMI already out points to more strong growth. pic.twitter.com/0sJRu7X4CO

    8.00am GMT

    There may be worries about the state of the Chinese economy but that has not stopped one of its state owned companies making the country’s largest overseas acquisition by a Chinese firm.

    ChemChina is making an agreed $43bn offer for Swiss seeds and pesticides group Syngenta. Last year US rival Monsanto made an unsuccessful attempt to buy Syngenta.

    7.57am GMT

    Ahead of what is expected to be another bearish start on the European markets, Mic Mills at Capital Index said:

    An uneasy Asian session dismissed the surprisingly strong Caixin/Markit Services PMI and HSBC China Composite PMI figures from China overnight as crude oil remained centre stage, with worries of oversupply sending WTI futures back below $30 a barrel. After trading down to last week’s levels of 17070 the Nikkei did manage to claw back some ground...Gold was the biggest winner trading up to 3 month highs as investors seek a safe haven.

    European markets look set to suffer a weaker open... yesterday’s better than expected employment figures [were] unable to lift the gloom as the continuing glut in oil and fears of a global slowdown seem to outweigh any good news.... Whether decent performances in [the service sector] numbers can help the markets remains a doubt.

    7.48am GMT

    European markets are expected to drop back again at the open:

    Our European opening calls:$FTSE 5869 down 53
    $DAX 9485 down 96
    $CAC 4245 down 39$IBEX 8438 down 90$MIB 17742 down 180

    7.47am GMT

    Oil prices seem a little more stable after the recent falls. Brent crude is down 0.12% at $32.68 a barrel while West Texas Intermediate - the US benchmark - is up 0.1% at $29.91.

    7.46am GMT

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

    Stock markets continue to come under pressure on renewed fears of a global economic slowdown and a renewed fall in oil prices.

    The weak December reading of 50.2 in stark contrast to the much more bullish official measure had spooked concerns that Chinese consumers were reining back spending in the lead up to Chinese New Year.

    This morning’s January reading came in at 52.4 a significant improvement on the previous month and in the process rather undermining the argument that concerns about a Chinese slowdown are the primary factors behind the recent bout of equity market jitters.

    Continue reading...

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