Qatar market tumbles after Gulf states cut ties, as UK services sector growth slows - as it happened

Shares in Qatar plunge 8% amid diplomatic crisis, as UK service companies report that new business growth weakened last month

• US service sector survey disappoints
• Shares slide in Qatar
• Qatar crisis: Four neighbours cut ties over terrorism links
• UK services sector slows as general election hits demand...
• ....but eurozone growth sticks at six-year high

5.43pm BST

Stock markets made a downbeat start to an important week, which sees the UK election, the latest meeting of the European Central Bank, and the testimony of former FBI director James Comey on Donald Trump's alleged links with Russia.

Markets were also unsettled by volatility in sterling, reacting to the latest opinion polls, as well as the terror attack in London. And the diplomatic crisis in the Gulf, which sparked a rise then fall in the oil price, added to the uncertainty. Jasper Lawler, senior market analyst at London Capital Group, said:

Markets softened at the beginning of what could be a game-changer of a week in politics and monetary policy. Last week's soft US jobs report, another terror attack in London in the run up to the UK election and volatile oil prices all played a role in the downbeat tone.

5.16pm BST

Ahead of next week's eurogroup meeting over Greece, some positive noises from the IMF. A report in Germany's Handelsblatt () says:

The managing director of the International Monetary Fund, Christine Lagarde, is willing to participate in a Greek bailout and give European creditors more time to settle an ongoing dispute over debt relief, she told Handelsblatt in an exclusive interview.

"If the creditors are not yet at that stage where they can agree on and respect our assumptions, if it takes them more time to get there, we can acknowledge that and give them a bit more time," she said.

4.37pm BST

Here's our report on how the diplomatic crisis in the Gulf is affecting Qatar. Kareem Shaheen writes:

The tiny Gulf state of Qatar has been literally and figuratively isolated by the escalating row with its Arab neighbours, with land, sea and air routes closed off in an unprecedented crisis in the Arabian peninsula that threatens longstanding trade deals.

The closure of the only land route into Qatar as well as the airspaces of Saudi Arabia, the United Arab Emirates and Bahrain in effect established a blockade on Doha, which relies almost entirely on imports to feed its population.

Related: Qatar blockade could hit state airline, al-Jazeera and World Cup

3.54pm BST

The pound is continuing its recent volatility, something which is likely to continue this week in the run up to the UK election as various polls emerge but with little in the way of consistency.

Sterling is currently up 0.3% against the dollar at $1.2929 and 0.6% against the euro at a1.1491. Connor Campbell, financial analyst at Spreadex, said:

The pound remained the day's main mover, seemingly still dining out on this morning's Guardian/ICM poll.

Sterling gradually widened its growth, taking 0.3% off the dollar and pushing 0.6% higher against the euro; in reality, however, this has done little to change the currency's standing. Cable still has a bit to go before it has clawed back all of the losses it suffered this time last week, while the pound has barely escaped its 7 week lows against the euro....Today's rather dreary, pound-heavy trading is likely the template for the rest of the week, as there is nothing in the run-up to the election that can topple it from its dominant perch. In fact, all of the week's points of interest come on Thursday: alongside the UK vote there is the month's ECB press conference and, perhaps most excitingly, the reappearance of former FBI chief James Comey for his testimony in front of the Senate intelligence committee.

Despite a weakening in [the UK] services PMI for May to 53.8 from 55.8 in April the pound has held up rather well in the wake of the weekend terror attacks. If financial markets are nervous about Thursday's election and a weakening of economic activity they don't appear to be showing it, with opinion polls still showing divergent results.

YouGov appear to be doubling down on their recent survey by suggesting that the Conservatives will fall short of a majority by 21 seats, while the latest ICM poll shows a lead of 11 points. Markets appear to be taking the view that the YouGov poll is an outlier and unreliable which when you look at the margin for error on it, and the balance of probabilities right now, seems a sensible conclusion.

3.20pm BST

And here's more detail from the survey itself:

3.17pm BST

Here are some of the comments from the respondents to the ISM survey:

3.08pm BST

The second service sector survey is not only lower than expected, but also lower than the previous month's figure.

The ISM non-manufacturing PMI fell from 57.5 in April to 56.9 last month, just below the expected level of 57.

2.56pm BST

The surveys show that the US economy is enjoying steady if unspectacular growth, said Chris Williamson, chief business economist at IHS Markit:

Although service sector business activity picked up in May, the PMI surveys for manufacturing and services collectively indicate only a modest pace of economic growth so far in the second quarter.

Historical comparisons with GDP indicate the PMI is signalling second quarter GDP growth of just over 2%, suggesting there may be some downside risks to IHS Markit's current forecast of a GDP growth rebound to just over 3% in the second quarter.

2.50pm BST

The first of the day's two US economic surveys has shown a month on month improvement in the service sector, albeit not as much as earlier expected.

The final Markit services PMI reading for May came in at 53.6, up from 53.1 in April but lower than the initial estimate of 54. It was still the highest level since February.

2.34pm BST

Ahead of the latest service sector surveys (from Markit and ISM), US markets have indeed slipped back at the open.

After hitting another record high on Friday, the Dow Jones Industrial Average is currently down 17 points of 0.08%. while the S&P 500 opened down a similar amount and the Nasdaq Composite dipped 0.01%.

2.27pm BST

Wall Street is about to open and the forecast is for a slight fall in initial trading:

Futures point to a slight dip to start the week https://t.co/ryRkqjH3d3 pic.twitter.com/uWVz5kUqDR

2.17pm BST

Meanwhile the oil price has lost its early gains, which were made on the back of the Qatar news. Strength in the dollar - which makes oil less affordable for international buyers - seems to be outweighing the prospect of supply shortages following the Gulf dispute. In any case, Qatar is not a major producer of oil, rather it specialises in liquefied natural gas (LNG). Clement Thibault, senior market analyst at Investing.com, said:

According to the latest data, five of the top 10 oil producers in the world are Gulf countries (Saudi Arabia, Iraq, Iran, UAE, Kuwait). Together, they are responsible for over 24 million barrels of crude a day, or over two and a half times the US's crude production.

However, Qatar is a minor player among the OPEC big boys. Its strength is aligned with LNG. Indeed, it's the world's largest LNG producer, supplying almost 30% of global production. By land, Qatar is completely blocked by Saudi Arabia. By sea, its exporting tankers have to pass through the Strait of Hormuz, situated between Iran and the UAE, putting it in a precarious situation any way it turns. Asian customers such as Japan, India, and South Korea would be the most affected by a disruption in NG service, since they are the major importers of Qatari gas...

1.51pm BST

After a rough session of heavy losses, the Qatar stock market has closed down 7.27%.

The Qatar Stock Exchange has closed down 7.27 per cent. All 44 stocks were in the red. https://t.co/G2UqSz5VDP

1.41pm BST

After a fairly quiet morning in London, the FTSE 100 has dropped by 22 points to 0.3% to 7525.

Mining stocks such as Antofagasta (-2.7%) and BHP Billiton (-1.8%) are among the fallers, tracking a 1% drop in the copper price.

The pound's gains also ignored an unexpectedly weak services PMI. The figure fell from 55.8 to 53.8 month-on-month, the slowdown due to the dual pressures of rising inflation and pre-election jitters.

The FTSE ended up bearing the brunt of the bad news, falling 0.3%; the index wasn't helped by its mining stocks, which dropped between 1.5% and 2.5% thanks to copper's own 1% decline.

"Geoff Ho is an absolutely first class reporter and a fine and decent man and our thoughts are with him and his family at this time.

"We are all hoping and praying for a speedy recovery."

Thank you every one for the best wishes. I got out of surgery yesterday and am on the mend.

Sunday Express business editor Geoff Ho injured after confronting London Bridge attacker https://t.co/ki2rTkCX4t pic.twitter.com/ZkQ3W70XXt

So upset to find out this morning that Geoff Ho @FinanceHog was caught up in last nights attacks. Praying for speedy recovery #LondonBridge

Wishing a full and speedy recovery to Geoff Ho aka @FinanceHog - a top business hack, always a pleasure to deal with https://t.co/K2tmovmZro

12.49pm BST

Reuters is reporting that some Egyptian banks have suspended links with their counterparts in Qatar:

SOME EGYPTIAN BANKS HALT DEALINGS WITH QATARI BANKS AFTER CAIRO CUTS TIES WITH QATAR - BANKERS

RTRS - UAE CENTRAL BANK HAS NOT SO FAR ISSUED ANY GUIDELINES TO BANKS ON DEALING WITH QATAR -SOURCE FAMILAR WITH THE MATTER

12.26pm BST

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11.39am BST

Some photos from today's Qatar stock market have arrived, showing the scene of the biggest selloff since the financial crisis.

11.26am BST

Every blue-chip share on the Qatar stock market has fallen sharply this morning.

Many stocks - including property and energy companies - have slumped by 10%, which is the maximum daily move allowed by regulators.

11.05am BST

The pound has inched back over $1.29 this morning, up around 0.2%.

Sterling rose after a new Guardian/ISM poll showed the Conservatives with an 11-point lead ahead of Thursday's election.

Latest Guardian/ICM polling figures - https://t.co/FEHvs1a2l0 pic.twitter.com/dlnNVXiOXx

10.32am BST

The diplomatic crisis between Qatar and its neighbours could have serious political and economic implications, says Mitsubishi UFJ Financial Group in a new research note.

MUFG's Ehsan Khoman explains:

Whilst the GCC [Gulf Cooperation Council] has been hit by severe internal turmoil in the recent past (revival of memories of a similar spat in May 2014, when Saudi Arabia, the UAE and Bahrain united against Qatar for its support of the Muslim Brotherhood and severed ties for 8 months), the current wave is particularly worrying. Indeed, a divided GCC will bring further instability in the region at a time of full confrontation between the Saudi-led alliance and Iran. A possible thaw between Iran and Qatar could, in theory, lead to a confrontation with the US, as the latter has an immense military base currently in the GCC (most notably in Qatar where the country hosts the largest US military presence in the GCC - CENTCOM Forward Headquarters). Thus, a rapprochement between Iran and Qatar would be a vast security risk to the US military.

Saudi Arabia has announced this morning that it has pulled all Qatari troops from the ongoing Yemen war.

A full-fledged confrontation will, without any doubt, put pressure on the current compliance rate of OPEC members to the adherence of the 9 month agreement to cut production. Whilst Qatar's pledge was only to cut 30,000 barrels to 628,000 barrels (as part of the OPEC agreement), there are potential risks of Qatar leaving OPEC which could significantly impact oil prices - Brent prices are up 1.7% today to USD50.7/b.

The closure of land/sea/air contacts could have surmountable implications for the airlines, shipping and road freight industries - Etihad Airways, said it would suspend flights to and from Qatar beginning Tuesday morning (the last flight from Abu Dhabi to Doha will depart at 02:45 local time on Tuesday, the airline's spokesman said in an email). There have been no other announcement by the major airline carriers or corporates have been made thus far.

10.22am BST

Yemen's state news agency is reporting that it has also cut ties with Qatar.

Yemen also supports the decision to remove Qatari soldiers from the Saudi-led coalition in the country.

10.03am BST

Back in the Gulf, the cost of insuring Qatari sovereign debt against default has hit a two-month high this morning.

That underlines concerns that Saudi Arabia, Bahrain, Egypt and the UAE have all cut ties with Qatar today.

Five-year credit default swaps for Qatar rose 2 basis points(bps) from Friday's close to 61 bps, the highest level since early April.

The coordinated move from the Gulf states dramatically escalates a dispute over Qatar's support of the Muslim Brotherhood, the world's oldest Islamist movement, and adds accusations that Doha even backs the agenda of regional arch-rival Iran.

9.46am BST

Breaking: Growth across Britain's service sector slowed last month, which could reinforce worries about the state of the UK economy.

Markit's UK service sector PMI has fallen to 53.8 for May, down from April's 55.8 (a four-month high).

"The powerhouse driving UK GDP lost some of its force this month, with the weakest performance since February, revealing a fragility out of sync with the other sectors which were fired up and running.

"It was clear that slower new business growth let the side down, impacted by caution around the General Election, and a tightening of purse strings. Not even stiff competition between businesses absorbing higher prices for food and the effects of the National Living Wage, could tempt consumers to spend.

9.33am BST

UK car sales have fallen, and this week's UK general election may be partly to blame.

The number of new car registered in May fell by 8% year-on-year to 186,265, according to the latest figures from the Society of Motor Manufacturers and Traders.

We expected demand in the new car market to remain negative in May due to the pull-forward to March - which was an all-time record month - resulting from VED reform. Added to this, the general election was always likely to give many pause for thought and affect purchasing patterns in the short term.

Although demand has fallen, it's important to remember that the market remains at a very high level and, with a raft of new models packed with the latest low emission and connected technology coming to market this summer, we expect the market to remain strong over the year.

9.07am BST

Breaking: The eurozone's private sector has kept growing at its fastest pace since the financial crisis.

And this may mean that the region's economy is entering a real growth spurt.

"The final PMI readings add to mounting evidence that the eurozone is enjoying a strong second quarter, consistent with GDP rising at a 0.7% rate.

"Encouragingly, both the hard data and the surveys are revealing a broad-based upturn. So far in the second quarter the PMI surveys are running at levels indicative of 0.7% GDP growth in France and Germany, with nearly 1% being signalled for Spain and 0.5% in Italy.

8.59am BST

Another solid performance from Germany...

German May Markit Services PMI comes in at 55.4 (f'cast 55.2) vs 55.4 in April

8.52am BST

France's services sector firms racked up decent growth in May:

#France Markit Services PMI Final at 57.2 https://t.co/sLS1CFOZ9c pic.twitter.com/ScFbjjQkwb

8.46am BST

*ITALY MAY SERVICES PMI FALLS TO 55.1; FORECAST 55.3

8.43am BST

Back in the eurozone, Spain has posted strong service sector growth last month.

Markit's Spanish services PMI has come in at 57.3 in May, down on April's 57.8, but still showing a sharp increase in activity.

#Spain #services #PMI dips to 57.3 in May from 57.8 in April but still points to buoyant activity. New business accelerated

8.41am BST

The Gulf is now facing its most serious diplomatic crisis in years, says my colleagues Ben Doherty and Patrick Wintour.

They explain:

Qatar has long faced criticism from its Arab neighbors over its support of Islamists. The chief worry among them is the Muslim Brotherhood, a Sunni Islamist political group outlawed by both Saudi Arabia and the UAE as it challenges the nations' hereditary rule.

Gulf countries led by Saudi Arabia fell out with Qatar over its backing of then-Egyptian president Mohammed Morsi, a Brotherhood member. In March 2014, Saudi Arabia, the United Arab Emirates and Bahrain recalled their ambassadors from Qatar over the rift.

Related: Saudi Arabia, UAE, Egypt and Bahrain break diplomatic ties with Qatar over 'terrorism'

8.33am BST

Qatar's stock market is suffering its biggest slump since the financial crisis, with shares now down 8%.

Qatari stocks plunge 8% after Saudis and other Gulf states cut diplomatic ties. Biggest fall since Dec 2009. pic.twitter.com/xDZZAQRsWa

8.31am BST

Marc Ostwald of ADM Investor Services says:

"[There are] rising tensions in the Gulf, as Egypt, Saudi Arabia and U.A.E. sever ties with Qatar over its alleged sponsorship of 'terrorism', only serving to raise the temperature on the geo-political heat map."

8.26am BST

Qatar has hit back at Saudi, Bahrain, the UAE and Egypt, accusing them of lying over their decision to cut diplomatic ties today.

In a statement, the Qatari foreign ministry says:

"The campaign of incitement is based on lies that had reached the level of complete fabrications."

8.18am BST

Jasper Lawler of CMC Markets explains why crude prices have risen today:

The price of oil could be on the verge of another recovery with political tensions between Saudi Arabia and Qatar a potential threat to supply out of the Strait of Hormuz.

8.09am BST

A wave of selling has swept through Qatar's stock market at the start of trading, sending its benchmark index tumbling by 6%.

Qatar benchmark stock index plunges 5.5% after Saudi, U.A.E., Egypt and Bahrain sever ties with the country.https://t.co/3ZOukO5ZI3

8.03am BST

The oil price has jumped this morning after a group of Gulf states cut diplomatic relations with Qatar.

In a dramatic development Saudi Arabia, Egypt, the United Arab Emirates and Bahrain all announced early today they were severing ties with Doha and calling their diplomatic staff home.

Saudi Arabia, Bahrain, Egypt cut diplomatic ties with Qatar, escalating crisis over Qatar relationship with Iran, Muslim Brotherhood support

Saudi Arabia said it took the decision to cut diplomatic ties due to Qatar's "embrace of various terrorist and sectarian groups aimed at destabilizing the region" including the Muslim Brotherhood, al-Qaida, the Islamic State group and groups supported by Iran in the kingdom's restive eastern province of Qatif. Egypt's Foreign Ministry accused Qatar of taking an "antagonist approach" toward Egypt and said "all attempts to stop it from supporting terrorist groups failed."

The tiny island nation of Bahrain blamed Qatar's "media incitement, support for armed terrorist activities and funding linked to Iranian groups to carry out sabotage and spreading chaos in Bahrain" for its decision.

Oil jumps after Saudi Arabia, Egypt, United Arab Emirates & Bahrain severed their ties w/ Qatar, accusing Gulf state of supporting terrorism pic.twitter.com/69eD7aep37

Middle east tensions see crude prices jump over 1% as several nations cut ties with Qatar.

7.51am BST

China's service sector has posted its fastest growth in four months, in an encouraging signal following some weak factory data last week.

Data firm Caixin reports that Chinese firms were boosted by a jump in new business last month, as client demand strengthened.

"The improvement in the services sector bolstered the Chinese economy in May. However, the rapid deterioration in the manufacturing industry is worrying. We need to closely monitor whether the diverging trends in manufacturing and services will widen further."

7.36am BST

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

Investors are bracing for a barrage of data showing how service sector companies in Europe and America performed last month.

On the data front the picture was more positive with manufacturing PMI's continuing to be resilient in May, with the hope that today's services PMI numbers will be similarly good.