IMF chief Lagarde warns against Brexit, as pound hits new seven-year low - as it happened
All the day's economic and financial news, as sterling hits its lowest level since 2009
- Latest: Christine Lagarde on EU referendum
- Cabinet row drives pound below $1.39
- HSBC says Brexit would hammer sterling
- WPP: Some clients very concerned
- Poll: Further losses if Out campaign win
- Sterling volatility at highest since 2011
4.12pm GMT
Time for a quick recap.
Growing anxiety over the UK's EU referendum has driven sterling down to a new seven year low. The pound fell as low as $1.3879, as cabinet ministers clashed over the legal strength of Britain's new deal with Europe.
4.10pm GMT
On top of Lagarde's remarks, the IMF has also cited the Brexit referendum as a risk to the UK recovery.
In a note issued today, the Fund took a broadly positive view of Britain's economy. It said "considerable progress has been achieved in the post-crisis repair of the UK economy", citing the halving of the deficit and the steady fall in unemployment.
With the output gap now nearly closed, growth is expected to average near its potential rate of around 21/4 percent over the medium term, with inflation rising slowly from its current low levels to the 2 percent target by end-2017.
Uncertainty associated with the outcome of the forthcoming referendum on EU membership could also weigh on the outlook. Continued efforts are needed to complete the post-crisis repair, promote growth, and further bolster resilience.
3.23pm GMT
Christine Lagarde, the head of the International Monetary Fund, has just weighed in on the EU referendum.
And she's not a fan of Brexit, warning that Britain and the EU would both suffer.
"Uncertainty is bad in and of itself.
No economic player likes uncertainty. They don't invest, they don't hire, they don't make decisions in times of uncertainty."
"My hunch ... is that it is bound to be a negative on all fronts.
For those that stay, because there are fewer of them, and for those who go, because they lose the benefit of [that] facilitation of exchange."
Lagarde on a potential #Brexit --> "My hunch is that it is bound to be a negative on all fronts" https://t.co/JNOomSOv4P
3.08pm GMT
Yuk. Two pieces of rather grim economic data just landed from America, showing that its economy may be weakening.
First, data firm Markit has reported that activity across the US services sector is contracting, for the first time in 14 months.
Recession alert: US services sector contracts in February for first time since Oct 2013, according to Markit PMI flash estimate.
Markit's #PMI shows significant risk of US economy falling into contraction. Full analysis: https://t.co/usD7YYrXsC pic.twitter.com/pjijgDOtzq
January's figure was the lowest since October and missed forecasts of a 520,000 annual rate from economists surveyed by MarketWatch. It was 5.2% lower than the same period a year ago.
2.39pm GMT
The US stock market is following Europe lower, as Wall Street trading begins.
The Dow Jones industrial average has lost 1.1%, or 184 points. at 16,247 points.
Opening Bell US stocks open lower oil slides 3.8% https://t.co/UX23M9rj9x pic.twitter.com/ZsQwNfKQ6k
1.49pm GMT
Ryanair is already cracking on with its campaign to keep Britain in the EU:
1.04pm GMT
Ryanair has a somewhat patchy reputation for customer service - despite a recent commitment to be nicer to the punters.
So it's not clear that O'Leary's intervention will have a dramatic impact on the referendum. At least, not the way he hopes....
@graemewearden Great, I might have to reconsider my yes vote now.
@graemewearden Getting more even: Farage+Galloway vs O'Leary
12.39pm GMT
Breaking news: Ryanair, the budget airline, has called for a "Big Yes vote" to stay in the European Union, in the June referendum.
Leaving Europe won't save the UK money or red tape because like Norway the UK will still have to contribute to Europe, and obey its rules if it wants to continue to trade freely with Europe, so it's clear that UK voters should vote Yes to Europe and Yes to the reformed Europe, that David Cameron has delivered.
Ryanair, our people and I hope the vast majority of our customers, will all work together over the coming months to help deliver a resounding Yes vote on June 23rd."
Breaking: boss of @Ryanair tells @itvnews "I don't believe leaving the EU will cause airfares to rise" Although he doesn't want Brexit.
12.21pm GMT
The London stock market is falling in sympathy with the pound.
Warnings from a variety of sources, including HSBC (here), Sir Martin Sorrell (here), Airbus (here) and hedge-fund Man Group (here), about the pound-plaguing, growth-sapping issues the UK would suffer if the 'out' vote prevails in June's referendum have only exacerbated the nascent jitters that appeared during yesterday's trading, helping send the FTSE nearly 80 points lower.
If anything the Eurozone indices were even nervier than their UK counterpart, the DAX and CAC plunging 230 and 90 points respectively. Of course the main causality in the increasingly heightened debate over Britain's place in the EU is sterling, the currency hitting levels not seen since March 2009
11.23am GMT
The pound is continuing to slide today, as Conservative ministers clash over the EU referendum.
It just fell below $1.39 for the first time since March 2009, a drop of 0.9% or 1.2 cents since last night.
Brexit headlines are hitting sterling hard, with talk of a Cabinet split weighing heavily on the pound.
It's going to be a very bumpy ride for sterling in the run up to June's referendum, and we can expect new lows and increased instability as the rhetoric heightens, polls are released and rumours abound."
Gove is correct; Number 10 is not.
Nothing in the deal is, by itself, binding. https://t.co/ki2EmR1PIj
Related: EU referendum: Attorney general says Gove wrong on EU deal - Politics live
11.01am GMT
Britain's most powerful marketing and advertising boss has warned that the EU referendum is spooking his clients, and could force him to move some operations abroad.
Sir Martin Sorrell, the head of WPP, says Britain faces "a period of unstability and uncertainty" ahead of June's vote, and confidence is already being hit.
I think it is really important to be inside the tent, trying to reform and change Europe, rather than being outside the tent in a completely unknown situation, where it will be very hard for several years to work out Britain's role in the world.
Clients will be postponing investment decisions, postponing trade decisions and considering alternative scenarios - like we all are - about what we will do if the country decides to leave the EU.
The thing that worries me most is that our biggest trading block, whether we like it or not, is Europe.
Its GDP is roughly equivalent to the United States...If access to that is restricted, or limited, that will exacerbate the issues.
Any structural change [in Britain's relationship with Europe] will force us to look very closely at how we are organised.
10.34am GMT
The Brexit uncertainty isn't helping the mood in the City today.
Europe's stock markets are all in the red this morning, as investors get another bout of jitteriness over the global economy.
All sectors are trading in the red. Materials and energy stocks lead losses in London given that oil and commodity prices face rising selling pressure.
US oil gave back the $2 it gained yesterday as Iran called the Saudi-Russia agreement to freeze production 'ridiculous' and Saudi Oil Minister made it clear for everybody: there will be no such thing as a production cut. Hence the possibility of a slide to $25 could be kept on the table.
9.58am GMT
Andy Scott, economist at currency firm HiFX, confirms that the pound is suffering from Brexit fears again.
He says:
"Sterling fell to a fresh 7-year low against the Dollar on Wednesday, below the psychologically important $1.40 level, as polls remained tight over the outcome of June's EU referendum.
With investor sentiment souring again after oil prices retraced gains made at the beginning of the week, Sterling once again came under pressure due to the risk of a 'Brexit'."
9.56am GMT
Airbus, the planemaker, says it doesn't believe its UK operations would benefit from Britain leaving the EU.
"If Britain leaves, I cannot imagine that this would have positive consequences for our competitiveness in Britain."
9.34am GMT
Here's another slide from today's HSBC's note on the UK's EU referendum:
9.19am GMT
The pound has just fallen to a new seven-year low, hitting $1.3926 against the US dollar.
9.12am GMT
Investment bank HSBC has issued a stark warning about the impact of Brexit on the UK economy.
In a new research note, HSBC predicts that the pound would tumble, and the economy would grind to a near-standstill next year. It also fears that banks would face new pain, and that London's property market would suffer too.
HSBC on Brexit scenarios:
Sterling -20% vs dollar
GDP growth -1.5pp
Inflation +5pp
BoE could cut rates
Our central case in the event of a vote for Brexit is that uncertainty grips the economy. This could take around 1.0-1.5 percentage points off the GDP growth rate by the second half of 2017. This would push our 2017 growth forecast, currently 2.3%, into the 0.8-1.3% range.
And if sterling were to fall by around 15-20% (as our currency strategists predict), UK inflation could rise by up to 5 percentage points (our end-2017 inflation forecast is 1.8%). In the event of a vote for Brexit, concerns about deflation could swiftly give way to worries of stagflation.
8.40am GMT
The cost of protecting against sharp swings in the value of the pound has jumped, to the highest level since 2011.
The move suggests heightened concern over the strength of sterling, and the possibility of significant volatility over the next few months.
Six-month implied sterling/dollar volatility, derived from options that cover the June 23 referendum date, hit 13.35% on Wednesday as investors sought protection against further big falls in the pound.
That was its highest since September 2011.
8.26am GMT
A leading City hedge fund manager has warned that Britain could face serious repercussions if it leaves the EU.
Manny Roman, chief executive of the London-listed hedge fund Man Group, cautioned that:
"Whilst it is hard to say exactly what the impact would be, the uncertainty and potential negative consequences of Brexit for the UK's economy should not be underestimated."
8.22am GMT
Worth noting that the pound is holding up better against other currencies, rather than the US dollar.
Sterling is only at a two-year low on a trade-weighed basis (against a basket of currencies). That's partly due to the relative weakness of the euro, which is likely to also suffer from a Brexit.
For all the bluster of a weak pound, GBP is still above its trade-weighted average since the beginning of the GFC pic.twitter.com/zV4r05UBS9
8.13am GMT
Jeremy Cook of FX firm World First also fears the pound will keep falling:
There are a lot of news pieces floating around this morning asking how low can the pound actually fall?
"How low can X go?" pieces are normally a sign of a bottom but you'd be a braver man than I to begin betting on an immediate bounce back for the pound.
8.04am GMT
There's a few reasons why Brexit would be bad for the pound:
7.50am GMT
A poll of City economists has found that most expect the pound to suffer steep losses if Britain votes to leave the EU:
How Low Could Pound Go in a #Brexit? Economists See 1985 Levels. https://t.co/IEO70TgrKP pic.twitter.com/9XBvdnlUVA
7.42am GMT
This morning's selloff means the pound has now lost four cents, or over 3%, since David Cameron secured his new settlement with the EU on Friday night.
Many analysts believe it could keep falling, perhaps as low as $1.30.
"A vote for Brexit would hit sterling hard."
7.20am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Fear and uncertainty over Britain's upcoming EU referendum continue to loom over the City today.
Pound Weakens Below $1.40 for First Time Since March 2009 pic.twitter.com/dSN1dMT5PJ
The market is pricing in around a 40% chance of 'Brexit' and the bookies slightly less.
However, if we do see an exit, it promises to get very messy indeed, specifically given the current positioning within the Tory party and the fact the party will effectively be all over the place.
Related: Bank of England says City expects more sterling volatility before EU poll
Our European opening calls:$FTSE 5947 down 16
$DAX 9394 down 23
$CAC 4226 down 13$IBEX 8242 down 26$MIB 17118 down 45
