US growth and trade data disappoint but Trump promises 'revved-up economy' - as it happened

Nick Fletcher

from on 2017-02-28 14:49 (#2E6VR)

2.49pm GMT

Ahead of the much anticipated address to the US Congress by President Trump later and following slightly disappointing trade and GDP figures, Wall Street has slipped back from its record highs.

If the Dow Jones Industrial Average closes at a new record high, it will equal its best ever winning streak of 13 days. But in early trading the Dow is down 18 points or 0.09%, while the S&P 500 opened down 0.16% and the Nasdaq Composite 0.12%.

2.47pm GMT

Here is our story on the BHS pension scheme, from Graham Ruddick:

Sir Philip Green has agreed to pay up to 363m into the BHS pension scheme as part of a cash settlement with the Pensions Regulator.

BHS collapsed into administration last April, leading to the loss of 11,000 jobs and leaving a 571m pension deficit.

2.40pm GMT

Sir Philip Green has agreed to pay 363m to rescue the BHS pension scheme from the pension protection fund.

Green says BHS settlement "significantly better outcome" than entering Pension Protection Fund for pensioners

2.13pm GMT

The slightly underwhelming US data is not likely to hinder further rate rises from the Federal Reserve this year, according to the Centre for Economics and Business Research, but perhaps not in March. Its senior economist Oliver Kolodseike said:

Although slightly disappointing, the release in unlikely to significantly change the mood at the Federal Reserve Bank. With durable goods orders and retail sales data beating expectations, thereby adding to signs that the US economy is picking up pace again at the beginning of this year and inflation nearing a five-year high, Cebr is pencilling in three rate hikes in 2017 and we see May as the most likely starting point for the process of normalising monetary policy.

We believe that Fed chair Janet Yellen will use the March meeting instead to prepare markets for a move at the following meeting, after the Fed last year faced some criticism for some unclear communication about interest rates.

1.50pm GMT

The US trade deficit was also worse than expected.

The advance January goods trade balance came in at -$69.2bn, compared to estimates of -$66bn and December's figure of $64.4bn.

1.39pm GMT

The US economy grew by less than expected in the final three months of 2016, according to new figures from the Commerce Department.

With Donald Trump promising a "revved up" economy, the last growth figures under the old administration showed GDP rising by an annualised 1.9% in the fourth quarter. This was in line with initial estimates, but less than the 2.1% expected by economists and well below the 3.5% seen in the third quarter.

The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local government spending. These increases were partly offset by negative contributions from exports and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the fourth quarter primarily reflected a downturn in exports, an acceleration in imports, and a downturn in federal government spending that were partly offset by an upturn in residential fixed investment, an acceleration in private inventory investment, and an upturn in state and local government spending.

12.45pm GMT

The Dow Jones Industrial Average closed at a record high for the twelfth trading day in a row on Monday, and is two days off its longest ever winning streak.

If it closes higher on Tuesday it will equal the 13 day run in January 1987, and a similar move on Wednesday will see it set a new record.

Economists have been forecasting a growth rate of 1.6% for 2016, something which the current government has constantly criticised as being too pessimistic. The trade deficit is also expected to widen to $66 billion, from $65 billion in December, which may be used by the administration as supporting arguments for protectionism.

12.05pm GMT

More from Trump:

Trump doubles down to @FoxNews says "I'm not touching Social Security" when it comes to budget cuts

12.02pm GMT

Back with Trump, and in his Fox interview he is asked how he will fund the extra spending on defence.

He is told that saving money from the environment and state department budget is not enough to cover his proposed increases.

.@POTUS expects he'll be able to get some of the $54B increase in military spending "from a revved up economy" pic.twitter.com/OJKMAs7geM

EXCLUSIVE: @POTUS previews his address to Congress tonight, says he'll discuss health care, the military, and the border pic.twitter.com/fyKF2gd2jU

11.22am GMT

As flagged earlier, the British Chambers of Commerce is holding its annual meeting in London at the moment, and our politics live blog is covering the appearances from George Osborne and John McDonnell, and the other attendees.

You can follow all the action here:

11.16am GMT

President Trump is giving an interview on Fox News ahead of his address to Congress later.

In the pre-recorded interview, he was asked whether the $54bn increase in defence spending he was proposing was enough, and he said it could be $30bn more, but he would be involved in negotiating the contracts. "There are many boats and planes we are, individually spending too much on...We will get a lot more product for our buck....We saved $700m plus on a F35 after I got involved... We saved a lot of money on aeroplanes and that money will substantially increase."

"We will be having the greatest military that we ever had by the time I finish." -@POTUS pic.twitter.com/Nt6AouQfsZ

11.01am GMT

Over in Greece bailout monitors are resuming a stalled compliance review that recently reignited fears over the country's ability to remain in the euro. From Athens, Helena Smith reports:

In a long-awaited moment for Greece, the anxiously awaited return of monitors has finally begun. This morning, inspectors representing the European Commission, euro zone bailout fund, IMF and European Central Bank all filed into the finance ministry to discuss energy reforms, fiscal issues and privatizations.

Testing Athens' compliance with agreed reforms is at the heart of the review, a review that once completed will be key to releasing the a7bn plus the country requires to honour debt repayments in July. But, so too, are differences over a raft of new reforms that creditors want Athens to adopt once its current three-year a86bn rescue programme in August 2018.

Without further pension cuts and tax hikes, the IMF does not think Greece will be able to achieve the high primary surplus of 3.5 % that eurozone lenders are demanding as of next year. The monitors, who are backed by technical teams, are keen to make enough progress so that the IMF - which has advised but not formally signed up to the bailout - finally participates in the programme.

For leading lenders such as Germany and the Netherlands, IMF oversight is key to easing concerns in an electoral year that good money is not being thrown after bad when it comes to Greece. Prime minister Alexis Tsipras believes the review can be concluded by March 20 when the eurogroup next meets. Auditors have signalled they do not wish to be in Athens for more than a week.

10.39am GMT

In South Korea, more problems for Samsung. Justin McCurry reports:

The acting head of Samsung is to be indicted on bribery and embezzlement charges connected to a corruption and cronyism scandal centring on South Korea's impeached president, Park Geun-hye.

Lee Jae-yong and four other Samsung executives will almost certainly face trial over accusations that South Korea's biggest conglomerate donated millions of dollars to foundations run by a close friend of Park's in exchange for government favours.

10.18am GMT

Over in Europe and there has been a strong rise in Italian inflation, which is likely to boost the overall eurozone figure:

Likelihood of #Eurozone #consumer #price #inflation rising in Feb (1.8% in Jan) lifted by #Italian HICP inflation jumping to 1.6% from 1.0%

10.10am GMT

Here's Reuters' first take on Charlotte Hogg's appearance at the Treasury Committee:

Bank of England Deputy Governor Charlotte Hogg, who will join the central bank's top policy committees next month, said on Tuesday she would be able to stand up to BoE Governor Mark Carney if required.

Hogg, who is currently the Bank's chief operating officer, also said she did not think there was a culture of group-think at the Bank.

9.47am GMT

BoE's Hogg: When Unwinding QE, BoE Will Do So In A Way That Is Mindful Of The Need To Maintain Orderly Markets

BoE's Hogg: MPC Must Be Clear About Its Intentions When Unwinding QE In Order To Avoid An 'Unintended Move' In Gilt Yields

9.43am GMT

Charlotte Hogg is up before MPs being quizzed about her appointment as the Bank of England's deputy governor.

(There is a live link here)

BoE's Hogg: 'GroupThink Is Not Alive And Well' At BoE

BoE's Hogg Says She Is Able To Challenge BoE's Carney Publicly

BoE's Hogg: Fwrd Guidance Must Cover Things Like BoE Statements On How To Exit QE

BoE's Hogg: Structural Elements To Low Interest Rates

9.20am GMT

The prospect of an imminent US rate rise is supporting the dollar, and putting a dampener on any chance of the pound regaining lost ground.

Sterling is currently virtually flat at $1.2440 having earlier fallen to $1.2413. Against the euro the pound is down 0.05% at a1.1743.

9.16am GMT

Back with the US, and the chances of an interest rate hike at the Federal Reserve's March meeting are increasing, whatever Donald Trump may announce about his tax and spending plans.

On Monday, Dallas Fed president Robert Kaplan - who had previously said a rise should come sooner rather than later - clarified his point at a meeting in Oklahoma:

Sooner rather than later means in the near future.

For the last few weeks markets have been weighing up the prospect of whether the US Federal Reserve will look to raise rates at its March meeting.

The odds of a move have fluctuated between lows of 24% at the beginning of February and a peak of 44% in the wake of Fed Chief Janet Yellen's testimony to US lawmakers on Capitol Hill when she said that it would be "unwise" to wait too long before raising rates.

9.08am GMT

Improving its product range - away from just sausage rolls and pasties and on to healthier items - has helped food retailer Greggs beat expectations with its full year figures.

But signs of a slowdown in like-for-like sales so far in the current year have knocked its shares back more than 3% to 980p - albeit they have risen 10% in the past three months.

Current like for like trading in the 8 weeks of the year-to-date has been subdued relative to recent years, with company managed like for like sales up 2.0% (said to be 2.9% excluding the New Year trading pattern), which is said to be inline in-line with management expectations. However, total sales are reported up 5.8% which is ahead of our full year expectation of 4.8%, so Greggs are a little ahead of our expectations at this still early stage of the year.

8.28am GMT

Another big faller in Moneysupermarket.com, down 11% after its final results.

It reported a 16% rise in profits but warned revenues in the current year were below those in 2016, partly due to low interest rates weakening savings and current account switching, and falling trade in the energy business. Liberum analysts said:

MoneySupermarket has reported 2016 results this morning and given the full year trading update in January there were no surprises with regards to headline numbers. Our concern with Moneysupermarket has always been that revenue growth is linked to marketing spend and therefore margins could come under pressure going forward as competition in the price comparison website space intensifies. These results have realised our concerns, increased marketing spend drove the majority of the 520 basis point decline in gross margins to 74.8%. Trading for 2017 is behind 2016.... management has also guided gross margins to be 73% for 2017 which is 300 basis points below Liberum estimates of 76%.

8.20am GMT

Bus and train operator Go-Ahead has warned on its outlook, mainly due to the continuing strike actions on Southern Rail.

It said its full year expectations were lowered due to "challenges in GTR [which runs the Thameslink, Great Northern, Southern and Gatwick Express rail franchises] and a slowdown in passenger numbers in regional bus." On the strike, which has inconvenienced and angered commuters for months, it said:

Lengthy and significant industrial relations issues at GTR related to the modernisation of working practices, required by the contract, have caused months of disrupted travel. We are working towards a resolution so we can provide a reliable service for customers.

Go-Ahead has reported half year results broadly in line with our forecasts at the divisional level, with the exception of GTR which was weaker due to industrial action. However, expectations for the full year have been lowered given the slowdown in passenger volumes in Regional Bus, higher insurance costs and additional costs and delays to expected efficiencies for GTR as the industrial action is ongoing. We therefore reduce our forecasts, cut our target price to 2300p and lower our recommendation to add.

8.07am GMT

As expected, the record close on Wall Street has given a lift - albeit a slight one - to European shares.

The FTSE 100 is up 0.06% in early trading, Germany's Dax has opened 0.2% higher, France's Cac has climbed 0.4%, Spain's Ibex 0.5% and Italy's FTSE MIB 0.3%.

7.57am GMT

Over in France, and the country's economy grew by 0.4% in the final quarter last year, in line with initial estimates.

So overall for 2016, it grew by 1.1%, also unchanged from the first estimates.

French Consumer Spending (MoM) Jan: 0.60% (est 0.60%; rev prev -1.00%)
-(YoY) Jan: 1.40% (est 1.60%; rev prev 1.30%)

7.46am GMT

A positive start is expected in Europe after yet another record breaking run in the US:

Our European opening calls:$FTSE 7269 up 16
$DAX 11841 up 19
$CAC 4855 up 10$IBEX 9485 up 21$MIB 18967 up 53

7.45am GMT

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

The US is in focus today, with trade figures for January and the final reading for fourth quarter GDP. The trade deficit is expected to widen to $66bn from $65bn in December, something which is likely to exercise President Trump with his protectionist tendencies. As for GDP, analysts expect an annualised rate of 2.1% for the quarter, up from 1.9%. Overall the US economy is forecast to have grown at 1.6% in 2016, a growth rate Trump's team have consistenty criticised as too slow.

There are certain limits, irrespective of whoever sits in the White House.

Was there any disappointment yesterday when some details were released ahead of Mr Trump's most anticipated speech? Well, yes. It turns out that we are not going to receive any details about the anticipated tax plan and the timeframe for said plan is also vague. All we know is that it will happen sometime after a new healthcare bill replacing Obamacare has been introduced, again, something we have yet to receive a date for.

This was not something the markets were expecting especially after rousing the rally by describing his tax plans as "phenomenal". What we saw last night was disappointment across the board when the news hit. But it would be wrong to write off Mr Trump yet, as he is never short of surprises. Despite his lack of information, the market rallied, recording another record high.

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