Markes nervous amid weak UK construction and US jobs figures - as it happened

Graeme Wearden (until 12.15) and Nick Fletcher

from on 2016-05-04 17:07 (#1CR39)

6.04pm BST

Continuing concerns about the state of the global economy after a series of disappointing data from around the world continued to send shares lower. Poor UK construction figures and lower than forecast US private sector job numbers from ADP were the latest repots to unsettle investors.

Meanwhile oil slipped back from its early highs after a higher than expected increase in US crude stocks, while metal prices suffered on worries about China after its recent weak manufacturing figures. So commodity companies were among the biggest fallers.

5.38pm BST

In its statement, the ECB said:

It has decided to permanently stop producing the a500 banknote and to exclude it from the Europa series, taking into account concerns that this banknote could facilitate illicit activities. The issuance of the a500 will be stopped around the end of 2018, when the a100 and a200 banknotes of the Europa series are planned to be introduced.

5.34pm BST

As expected, the European Central Bank has said it will no longer produce or issue a500 notes.

It added that existing notes will still remain legal tender and retain their value.

5.21pm BST

UK prime minister David Cameron is giving evidence to a Commons committee on the EU referendum, and my colleague Andrew Sparrow is covering the meeting, beginning here.

4.15pm BST

The mixed picture from the day's US economic figures does not mean a June rate rise is completely off the table. Joshua Mahony, market analyst at IG, said:

Today's abundance of US data has made for a difficult trading environment, with contrasting data points providing mixed expectations for monetary policy implications. The overwhelmingly positive release of services and composite PMI readings helped paint an encouraging picture for US business, with improved factory orders and trade balance helping raise rate hike expectations for the June meeting.

However, the picture has been muddled by a shockingly poor April ADP non-farm payrolls number, which at 156,000 fell to the lowest level in over two years. The ADP reading is the only figure of the day that has a second bite at the cherry and if Friday's headline figure confounds today's ADP weakness, we are likely to see a significant rise in June rate hike expectations.

3.42pm BST

US crude stocks rose by more than expected last week, according to the latest figures from the Energy Information Administration.

Inventories climbed by 2.8m barrels compared to forecasts of a 750,000 increase. Crude prices have come off their best levels following the figures, but even so, Brent is still up 0.8% at $45.33 a barrel. Earlier in the day it had climbed as high as $46.01.

EIA Weekly Oil Inventories (Apr 29)
Crude +2.78 Mln v +0.75 Mln exp, prev +2.00 Mln
Cushing +0.24 Mln v -0.25 Mln exp, prev +1.75 Mln

Gasoline +0.54 Mln v -0.25 Mln exp, prev +1.61 Mln
Distillate -1.26 Mln v +0.40 Mln exp, prev -1.70 Mln

3.30pm BST

And here's the agenda for Monday's Eurogroup meeting, including talks on the Greece's debt:

The Eurogroup will hold an extraordinary meeting to discuss the state of play of the macroeconomic adjustment programme for Greece.

Discussions will cover a comprehensive package of policy reforms as well as the sustainability of Greece's public debt. Both elements need to be in place in order to finalise the programme's first review and unlock further financial assistance to Greece.

3.26pm BST

Over in Greece, and efforts are continuing to reach a deal between the country and its creditors ahead of a proposed Eurogroup meeting next week. Greek newspaper Kathimerini reports:

Deputy eurozone finance ministers, known as the Euro Working Group (EWG), will hold a conference call on Wednesday aimed at bridging differences between the government in Athens and foreign creditors ahead of a crucial eurogroup meeting on Monday, May 9.

The teleconference is expected to focus on an additional 3.6 billion euros' worth of contingency measures that Greece is being asked to implement should it miss budget targets in 2018.

3.09pm BST

And here are some of the comments made by the survey's respondents:

3.08pm BST

Here are the details of the ISM survey:

3.04pm BST

And here's is confirmation of a stronger US services sector.

The ISM non-manufacturing purchasing managers index has climbed from 54.5 in March to 55.7 last month, better than the forecast level of 54.7. This is the highest level since December.

2.57pm BST

In line with ADP report, Markit PMI services employment index suggests #US jobs growth slowed in April. pic.twitter.com/Rec3hVi5GE

2.54pm BST

The first set of US services data is out and is slightly better than expected.

The Markit services final PMI has come in at 52.8 for April, up from the initial reading of 52.1 and March's level of 51.3.

2.51pm BST

Not surprisingly US markets are once more following their global counterparts lower.

The Dow Jones Industrial Average is currently down 106 points or 0.6%, following the weaker than expected ADP jobs data. The disappointing figures added to the general unease about a whole spate of releases pointing to a slowdown in the global economy.

1.41pm BST

More from the US.

The country's trade deficit fell by more than expected in March, down 13.9% to $40.4bn, as imports fell to their lowest level since 2010.

US Non-Farm Productivity (Q1 P) -1.0% v -1.3% exp, prev -2.2% rev -1.7% | Unit Labor Costs (Q1 P) +4.1% v +3.3% exp, prev +3.3% rev +2.7%

1.40pm BST

Mark Zandi, chief economist of Moody's Analytics which helps compile the ADP jobs data, said:

The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.

1.26pm BST

The poor ADP jobs data adds to the feeling the US Federal Reserve may not be in a rush to raise interest rates but the report is worrying for the US economy, says David Morrison, senior market strategist at Spreadco. He said:

The US dollar fell sharply in the immediate aftermath of the release as poor jobs data reduces the likelihood of a rate hike next month from the US Fed.

Investors see the ADP data as a "heads-up" ahead of the official Non-Farm Payroll report which is due out this Friday. It certainly is effective in measuring the overall trend in the data, but it can be patchy on a month-by-month basis. This is because the government's number tends to be considerably more volatile, and of course it is this volatility that traders look for and react to. So the fact that today's release was so far away from trend will have traders scratching their heads. It may be positive for risk assets for the Fed to hold off from hiking rates, but it sends a grim message about the US economy.

1.19pm BST

USA ADP employment report announcement - Actual: 156.0k, Expected: 196k pic.twitter.com/WdZUAMhyvb

1.16pm BST

Ahead of Friday's US non-farm payroll numbers, the monthly survey of private sector jobs from ADP came in much lower than expected.

ADP said US employment increased by 156,000 private sector jobs in April, compared to 194,000 last month and expectations of a rise of between 195,000 and 200,000 this time round.

US ADP Employment Change (Apr) +156K versus +195K expected, previous +200K revised +194K

12.49pm BST

London Stock Exchange shares have dropped more than 7% after Intercontinental Exchange ruled out a bid, leaving the way clear for LSE's proposed merger with Deutsche Birse.

New York stock exchange owner ICE said in March it was considering an offer for the LSE, but now says:

Following due diligence on the information made available, ICE determined there was insufficient engagement to confirm the potential market and shareholder benefits of a strategic combination.

12.32pm BST

Greek manufacturing edged higher in April, but still showed a contraction for the third month in a row.

Markit's manufacturing purchasing managers index came in at 49.7, up from 49 in March but still below the 50 level which signals expansion. Markit said:

The downturn in the manufacturing sector of Greece continued during April. Incoming new orders fell for a further month while outstanding business levels deteriorated. However, job creation was still evident in the sector and volumes of production stabilised after three months of contraction.

The downturn in the manufacturing sector of #Greece continued during April as #PMI posts 49.7 (49.0 in March) https://t.co/yEa6VeGwGd

April survey data was mixed for Greek goods producers. On the one hand, the headline PMI remains below the crucial 50.0 no-change mark, thus signalling a further downturn in the manufacturing sector of Greece. Incoming new orders are still on the decline and outstanding business levels again deteriorated at a substantial pace, with a downturn in the construction sector hampering economic growth according to panellists.

However, production stabilised for the first time during 2016 and job creation was still evident, highlighting firms' intentions to invigorate future output with increased manpower. Likewise, purchasing activity rose for the first time since August 2014, highlighting that there are some encouraging signs pointing to a revival in the manufacturing sector of Greece over the coming few months.

12.03pm BST

China has been forced to dip into its emergency pork reserves after seeing prices hit record highs.

Policymakers have good reason to want to keep pork prices under control: China produces and consumes more pork than any other country on Earth, and the meat factors heavily into the CPI basket used to calculate overall consumer inflation.

In March the official consumer price index rose 2.3 per cent year on year, with a rise of 28.4 per cent by pork prices during the period contributing 0.64 percentage points.

#China going whole hog: Beijing taps emergency pork reserves as prices hit record high https://t.co/4lV8iH4t8M pic.twitter.com/gbZQ5Oc3Vx

11.40am BST

European stock markets have suffered another morning of hefty losses, as economic worries ripple through trading floors again.

The FTSE 100 has hit a new three-week low, down 76 points or 1.2% at 6109 points, while France and Germany are both down around 0.75%

Global manuf PMI edged down to 50.1 in Apr. On past form, consistent with world GDP growth of just 2%. Weak! pic.twitter.com/QRneLChVq6

Trump selloff pic.twitter.com/G0v9RmloBR

''A decline in US stocks last night has been followed by another weak day in Asian Indices today, as commodities and bonds are also selling off. Investors appear to remain generally uneasy about the state of the global economy, with the latest agitation coming from the Reserve Bank of Australia deciding on Tuesday to cut its benchmark rate to 1.75%, reflecting soft inflation and, like many others, general economic malaise. A contributing factor to Australia's economic woes has been a drop in demand from a weary China, which has its own problems as its economy looks to be losing steam on the back of some weak manufacturing data.

Another country with weak manufacturing data is the UK - reports suggesting manufacturing activity contracted in April for the first time since March 2013. The slowdown in the oil industry is certainly hitting production, with firms also blaming soft domestic demand combined with a fall in foreign business.

11.25am BST

Here's our news story on the construction slowdown:

11.13am BST

Last Friday, we got terribly excited by the news that the eurozone had grown by 0.6% in the first quarter of 2016, outpacing Britain and America.

But perhaps this was premature...

Weak Eurozone retail sales data in March are first warning that strong GDP growth in first quarter could become subject to downward revision

10.53am BST

The BBC's Kamal Ahmed and Sam Tombs of Pantheon Economics are both concerned by the slowdown in UK construction growth.

More evidence of weakening UK economy - construction PMI weakest for three years. "New order volumes stagnating" says the Market/CIPS survey

Another UK survey; another multi-year low. April #Construction PMI weakest since Jun 2013, pointing to aoutput: pic.twitter.com/Jthlrvq9AH

10.37am BST

This drop in construction growth comes as Barclays unleashes a no-deposit mortgage on the market.

Technically, a parent does need to provide a 10% deposit, but that will be returned - with interest - if their little darling manages to keep up the monthly payments.

Nothing to see here... pic.twitter.com/TkfnXfz9nd

9.54am BST

David Noble of the Chartered Institute of Procurement & Supply also blames Brexit fears for the slump in construction sector growth.

"Fears over weaker UK and global economic growth dealt a blow to confidence in the construction sector, leading to delays in new spending commitments. The prospect of the EU referendum and its outcome in June are likely to add to uncertainty too, with many construction firms preferring to wait and see what happens before making any decisions.

"Construction companies adopted a more cautious approach to purchasing and hiring, leading to a rise in sub-contractor usage to tide them over until the outlook becomes clearer. The slowdown in new order growth in April suggests that though spring may be in the air, sunnier times may still be a way off for the construction sector, at least for the time being."

9.39am BST

Breaking: Growth across Britain's construction sector has slowed to a near three-year low.

Fears over Britain's EU referendum, and weakness in housebuilding are to blame -- as concerns about the strength of the UK recovery grow.

"UK construction firms reported their worst month for almost three years in April, meaning that the first quarter slowdown is unlikely to prove temporary.

"Stalling new order volumes not only set the scene for further weakness ahead, but are already weighing on staff hiring and input buying across the construction sector.

9.32am BST

Howard Archer of IHS Global Insight agrees that the eurozone PMIs are 'lacklustre', but remains hopeful that growth will pick up.

While they have firmed recently, oil and commodity prices and the euro are still at levels that are supportive to Eurozone growth. Major ECB stimulus that was enhanced in March will increasingly kick in over the coming months, while the fiscal stance across the Eurozone is gradually becoming more growth orientated with increasing fiscal stimulative measures being introduced in a number of countries (along with increased public spending to deal with the influx of migrants).

Meanwhile, generally improved job markets across the Eurozone are supportive to consumer spending along with the boost to purchasing power coming from negligible deflation/inflation.

9.14am BST

Europe's private sector continued to recover in April, although the revival is less than spectacular.

That's according to data firm Markit, whose composite PMI (which measures private sector growth) has come in at 53.0 in April. That's only a smidgen below March's 53.1, and means 34 months of unbroken growth.

"The final PMI data confirm the earlier flash estimate that the eurozone economy grew at a steady but unspectacular annual rate of 1.5% at the start of the second quarter. Prices charged also continued to fall, indicating that growth is being partly fuelled by price discounting.

"However, while still tepid, the sustained eurozone growth contrasts with slowdowns in the US and UK, suggesting the ECB's more aggressive stimulus is helping to drive a steady recovery. The survey numbers also indicate that domestic demand within the eurozone is picking up which, alongside the weaker currency, is helping to offset sluggish external demand.

8.59am BST

German service sector growth has slowed; its PMI has dipped to 54.5, from 55.1in March.

That still shows expansion, but the slowest rate since last winter.

#Germany's service sector continued to grow at a steady pace at start of Q2, despite index dropping to 5-month low https://t.co/DRjgl6ONkk

8.52am BST

France's service sector has clawed its way back to growth, with the PMI rising to 50.6 from 49.9 in March.

French Service PMI (Apr F) 50.6 versus 50.8 flash, previous 49.9

8.46am BST

The first eurozone service sector data is out, and it shows that Spanish companies continued to grow last month.

The Spanish Services PMI, which tracks activity across the sector, has dipped slightly to 55.1, from 55.3. That's comfortably over the 50-point mark that separates expansion from contraction.

Latest #PMI data suggest that economic growth in #Spain remained marked at start of Q2 https://t.co/DD8HaCYAVb pic.twitter.com/TUc4IzCXZa

Spanish PMIs - Political crisis? What political crisis?

8.43am BST

Mining shares are being hit this morning, pulling the London stock market into the red.

Worries over the global economy are being blamed as BHP Billiton sheds 5% and Anglo American loses 3%.

The elevated concerns over the health of the global economy complimented with the incessant declines in oil prices have soured investor risk appetite, consequently leaving the FTSE100 vulnerable to further losses.

8.21am BST

The ongoing supermarket price wars have hit profits at supermarket chain J Sainsbury's.

8.12am BST

Next's warning on sales and profits could spell bad news for other retailers too.

James McGregor, partner at Retail Remedy retail consultants, explains:

It was inevitable that the weather would feature in some way in Next's trading update and we have not been disappointed. If Next have been challenged by the unseasonal weather this season, then we can assume that the majority of fashion retailers are really suffering.....

To lower Next's full price sales guidance range to -3.5%, indicates a sense of nervousness. Ever cautious, we are not surprised to hear Lord Wolfson warn of difficult trading ahead. His caution is understandable though, poor sell throughs are costly. The weather is finally going the right way but the customer might yet hold off buying her beachwear.

7.51am BST

Retail group Next has got the morning off to a bad start, by cutting its sales guidance for the second time in two months.

Though sales have improved in the past few days as weather has improved, the company said demand for clothes could stay weak.

In the three months to 2 May Next's total sales fell by 0.2% and full-price sales dropped 0.9%, at the low end of full-year sales guidance of -1% to 4%.

7.32am BST

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

After yesterday's jitteriness, traders in Europe are pretty cautious as they wait for a flurry of economic news.

The Spanish economy has been notable for its outperformance in recent months despite continuing high levels of unemployment and today's latest numbers are expected to come in at 55.1, while Germany is expected to remain unchanged at 54.6.

On the downside the French numbers have consistently underperformed, though we are expecting to see a pick up to 50.8 as the French services sector strives to shake off the after effects of the November attacks in Paris.

Our European opening calls:$FTSE 6182 down 4
$DAX 9921 down 6
$CAC 4361 down 11$IBEX 8745 down 20$MIB 17950 down 16

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