Stanley Fischer resigns from the Fed; Canada raises interest rates - as it happened
All the day's economic and financial news, as the Bank of Canada and Stanley Fischer both surprise the markets
Earlier:
- Wolfgang Schiuble criticises ECB
- Deutsche Boss John Cryan warns of financial bubbles
- German factory orders fall in July
- Markets nervous as South Korea meets Russia
5.29pm BST
Time for a quick recap.
Canada has been experiencing a period of above-trend growth, underlined by 4.5% annualised GDP expansion in the second quarter, with more timely data suggesting that economic momentum remains strong. The BoC sees the composition of growth as broad-based and self-sustaining, despite some cooling in the housing market.
This backdrop appears to have strengthened the central bank's view that the output gap has all but closed, meaning it was prepared to tighten policy despite core inflation running about 0.5% below its target.The move sent the Canadian dollar up by over 1.4% to a two-year high.
The loonie jumped above 82 cents US earlier today (now back at around 81.89) pic.twitter.com/WiTBHALxNw
It seems clear that risk appetite is struggling to gain a foothold as the market deals with hurricanes, North Korea, administrative struggles in Washington and the surprise resignation of the deputy Fed chair.
Flight to safety in government bonds has driven yields lower, and when combined with yesterday's dovish comments from Fed policymaker Brainard, the result has been to put severe pressure on bank stocks.
4.47pm BST
Intriguingly, Stanley Fischer's resignation comes a few weeks after he criticised efforts to roll back financial regulations.
He told the FT that there are worrying signs of a return to the status quo that preceded the financial crisis of 2008.
"It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude. And now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really, extremely dangerous and extremely short-sighted.
"One can understand the political dynamics of this thing, but one cannot understand why grown intelligent people reach the conclusion that [you should] get rid of all the things you have put in place in the last 10 years."
Fed vice-chair and economics legend Stan Fischer resigns. Wonder if tied to his defence of regulations in FT?
https://t.co/1RurGJULYZ
4.29pm BST
The US dollar has hit an eight-day low following Fischer's resignation, and the Canadian rate hike.
4.23pm BST
Mark Carney, governor of the Bank of England, has paid Stanley Fischer a rather lovely tribute:
"It has been an extraordinary privilege - and exceptionally good fortune - for me to have worked closely with Stan Fischer. The combination of his encyclopaedic knowledge of economics, outstanding judgment, quiet leadership and his perennial good humour has helped policymakers around the world to navigate one of the most challenging periods in the global economy.
In the years ahead, students and practitioners of macroeconomic policy will continue to draw inspiration from Stan's contributions at the Federal Reserve and the Bank of Israel, his earlier stellar career at the IMF and his many and varied academic contributions".
4.15pm BST
Stanley Fischer's resignation has sent a ripple of excitement through the financial markets.
Johan Javeus, chief strategist at SEB Group, says Fischer's replacement will be significant for monetary policy:
Feds Fischer resigns due to age (73). He is a centrist so shouldnt affect policy much. Interesting to see who Trump appoints as replacement pic.twitter.com/pjRVmpv7Tp
#Fed Vice Chair Fischer resigns, effective 13 Oct - #Trump now has to fill four vacant seats => higher uncertainty! #FOMC #USD pic.twitter.com/VmmxGTcyq2
Stan Fischer's term would have run out summer of 2018. He gave his credibility to Yellen, saw little reason to do the same for succesor
Fischer not only a great economist but holds a better claim than anyone alive to be the godfather of central banking https://t.co/Toa7TX9cVa
Guy supervised PhDs of Blanchard, Mankiw, Draghi and Bernanke, before he'd even taken up a policy role.
3.53pm BST
Newsflash! Stanley Fischer, the vice chair of America's Federal Reserve central bank, has tendered his resignation.
In an unexpected move, Fischer will leave the Fed in mid-October. His term officially expired next June.
Yep looks like dollar getting pushed down as opens up more for control for @realDonaldTrump
3.42pm BST
Here's Dutch Bank ING's snap take:
With back to back 25bp rate hikes, the Bank of Canada has fully reversed the 2015 policy easing that was spurred by the downturn in commodity prices.
How quickly times change. It was just three months ago the Bank's officials were sounding relaxed about the monetary policy stance, suggesting that there was no hurry to raise rates.
Two years don't half make a difference - our take on today's rate hike by the Bank of Canada.https://t.co/6y3MvTmx6u#BOC #Canada
3.41pm BST
Canadian dollar having its best day in 18 months, now +1.4% after surprise Bank of Canada rate hike.
3.34pm BST
Here's Bloomberg's explanation of today's Canadian rate hike:
The Bank of Canada is trying to strike a balance between bringing interest rates up to more normal levels amid the strongest growth spurt in more than a decade, and acknowledging the persistence of low inflation and subdued wage pressures.
It may also be attempting to restrain market expectations it will get too far ahead of the Federal Reserve.
The loonie is going bananas. https://t.co/pNceC6UUvF pic.twitter.com/bnsBvNwCsE
3.31pm BST
The Canadian 'loonie' (so named for the bird that adorns the coin) surged by 1.5% against the US dollar after the rate hike was announced.
3.25pm BST
This is the second Canadian interest rate rate in under two months, and comes after Canada posted its strongest growth in 17 years.
In a statement, the Bank of Canada says:
"Recent economic data have been stronger than expected, supporting the bank's view that growth in Canada is becoming more broadly based and self-sustaining."
3.12pm BST
Boom! Canada's central bank has voted to hike interest rates to 1%, from 0.75%.
It's a surprise move, which has sent the 'Loonie', or Canadian dollar, soaring against the US.
2.30pm BST
Over in America, the trade gap has widened slightly, and the deficit with China has hit an 11-month high.
The Commerce Department has reported that the difference between US imports and exports rose by 0.3% in July to $43.7bn, from June's $43.5bn.
US Trade deficit widens in July #USD pic.twitter.com/B0YnFL4cv7
U.S. trade gap edges up; deficit with China at 11-month high https://t.co/88b2hGGSmc
1.57pm BST
Despite this pressure from Germany, the European Central Bank will be reluctant to trim its bond purchase programme at tomorrow's meeting.
But....waiting too long has its own dangers, and could allow the 'bubbles' which John Cryan warned about to get even larger.
In July, the European Central Bank President Mario Draghi said that the Governing Council would discuss the future of its a60 billion monthly purchases programme in the autumn. Technically, autumn in the Northern Hemisphere will not start until Friday September 22, so there is a possibility that the topic of QE tapering may not be discussed at this week's meeting.
However, many analysts reckon that an announcement would be made a bit early at this meeting because it coincides with the new ECB staff forecasts. There are a number of reasons why the ECB would want to reduce QE purchases, not least because of bond scarcity. But more importantly, the consequences of acting too late could be very damaging as inflation could spiral out of control.
1.49pm BST
Sky News's Ian King has a good explanation of why the ECB is under fire from Germany's finance minister, and one of its top bankers, today:
Pressure is building on the European Central Bank (ECB) to bring Quantitative Easing (QE) to an end - with one of the eurozone's most prominent bankers today adding to the calls.
In an attempt to stimulate demand in the single currency area, the ECB began buying assets in March 2015 at the rate of a60bn per month, paying for it with newly-created electronic money.
Pressure builds on ECB chief Mario Draghi over QE programme https://t.co/2TAa8vS98L
1.39pm BST
Newsflash: Sports Direct's chairman has narrowly survived efforts to oust him at today's AGM.
Around 53.2% of independent shareholders backed Keith Hellawell's reappointment, with 46.7% opposing it.
Sports Direct chairman Keith Hellawelll safe in his job after 53.24% of independent shareholders back him..
Simon Bentley, senior independent director at Sports Direct also re-elected by independent shareholders with 55% of the vote..
12.56pm BST
Britain's employers have been falling over each other to criticise the government's leaked immigration plans.
The proposals, reported by the Guardian yesterday, would dramatically cut the number of low-skilled migrants after Brexit by only allowing them to stay for two years.
Related: Leaked immigration plans 'catastrophic' for industry, say employers
12.19pm BST
Over in parliament, Labour's Jeremy Corbyn has asked prime minister Theresa May to condemn Sports Direct's failure to end zero hours contracts.
She rather ducked the question, though, pointing out that the Conservatives have taken action against unfair use of zero hours contracts in the past.
Corbyn asks about Sports Direct and zero hours contract, and "archiving" manifesto promises on energy cap. PM answers about Corbyn & Trident
Related: PMQs live: Theresa May faces Jeremy Corbyn for first time since summer recess - Politics live
12.12pm BST
Sports Direct's AGM has wrapped up - now we wait for the results of the shareholder vote.
Crucially, chairman Keith Hellawell has promised to step down if a majority of investors don't back him today.
Result of shareholder vote not going to be available for abt an hour..
11.55am BST
Heads-up! Germany's finance minister, Wolfgang Schiuble, has backed John Cryan's call for an interest rate hike in the eurozone.
Speaking (via satellite) at the banking conference in Frankfurt, Schiuble took another swipe at the current ultra-loose monetary policy.
A pivotal moment! Herr Schauble in the house pic.twitter.com/tiPF9EcTJm
Unusual monetary policy implies it is not usual or normal - we should get back to a normal monetary policy.
We have come back to a normal situation much quicker than people thought.
11.43am BST
We have another no-show at the Sports Direct AGM -- senior independent director Simon Bentley.
Under pressure senior independent director Simon Bentley also not in attendance at Sports Direct AGM for "personal reasons..
Hellawell says doesn't see need for "outside body" to look at workplace problems
Hellawell says corporate governance review is "ongoing"
11.19am BST
John Cryan has also warned that many bank jobs will be lost as the industry embraces automation.
The FT's Laura Noonan has the details:
Cryan warns that a "big number" of Deutsche's staff could be at risk as the bank moves to "robots behaving like humans"
Cryan says some accountants in Deutsche "spend a lot of time basically being an abacus". #ouch
11.11am BST
Alas, Sports Direct founder and chief executive Mike Ashley isn't gracing today's AGM with his presence.
That's not against the rules -- handling the shareholders is the responsibility of the chairman. SPD has blamed "conflicting demands" on Ashley's time....
No Mike Ashley but the new staff rep Alex Balacki is in attendance at Sports Direct agm pic.twitter.com/dFT9a9FURh
10.59am BST
Deutsche Bank's John Cryan also took a swipe at the ECB's policy of charging negative interest rates on commercial bank deposits.
This policy was introduced in Jun 2014; Cryan argues that it's gone on quite long enough, saying:
"It can't be forever that deposit taking is a loss making" for banks."
10.43am BST
Over in Derbyshire, unions are protesting outside Sports Direct's headquarters ahead of today's shareholder AGM.
They're pointing out that SPD hasn't delivered on the promises made after its 'Victorian' working practices were revealed.
Unite protestors out in force as Sports Direct shareholders head to Shirebrook for annual meeting.. pic.twitter.com/JuedToyLFS
Unite to challenge Sports Direct on promises made last year.. pic.twitter.com/OfsD8OgdAF
10.04am BST
One of Europe's top bankers has urged policymakers to end the era of 'cheap money' and start raising interest rates.
John Cryan, CEO of Deutsche Bank, warned that the European Central Bank is helping to fuel a dangerous bubble in the financial markets.
"The era of cheap money in Europe should come to an end - despite the strong euro."
We are now seeing signs of bubbles in more and more parts of the capital market.
"There is only one European city which can fulfil these requirements and that city is Frankfurt."
9.43am BST
City traders are "on edge" due to the North Korean crisis, says David Madden of CMC Markets.
Investors aren't running scared, but they are a touch on the nervous side, and while the situation keeps rumbling on, dealers could be reluctant to start a fresh round of buying.
9.27am BST
Now this is more encouraging.
German shoppers boosted their spending in August, suggesting that consumer confidence is still robust.
Germany shoppers are on fire right now - retail PMI pic.twitter.com/AoAZw9x4ox
Retailers in #Germany see rebound in like-for-like sales growth in Aug'. Headline #PMI up to 53.0 from 50.7 in Jul'. https://t.co/6lCvUngZOM
9.09am BST
European stock markets are falling in early trading, as Germany's weak factory orders and the North Korean crisis worry investors.
Britain's FTSE 100 has lost 25 points, or 0.33%, with similar falls in France and Germany following the selloff in Asia.
8.50am BST
Attention, travellers! Budget airline Ryanair has shaken up its luggage policy in a bid to deter customers from taking two bags onto their flight.
Ryanair customers will have to pay 5 for priority boarding from 1 November if they want to carry a wheelie bag on board, as the airline attempts to reduce boarding and flight delays caused by a shortage of overhead cabin space.
Priority boarders will still be able to carry on two bags, but all other passengers will only be allowed to take one smaller bag on board the aircraft.
Related: Ryanair: pay 5 for priority boarding to carry on wheelie bags
8.35am BST
Sports Direct has reiterated its bold pledge to become the "Selfridges of Sport" retailing.
As it prepares for a potentially bruising AGM meeting today, SPD told the City that:
The Company is pleased to confirm ahead of today's AGM that trading in our new generation flagship stores continues to exceed our expectations as Sports Direct moves towards the 'Selfridges' of sport.
8.26am BST
German consumer goods makers had the toughest July, suffering a 3% drop in new orders.
Capital goods (heavy duty machinery) dropped by 0.7%, while intermediate goods orders fell by 0.4%.
8.20am BST
This is the first drop in German factory orders in three months, as this chart shows:
Oops! Germany factory orders unexp fall for 1st time since Apr. Manufacturing orders slipped 0.7% MoM, when mkt had exp them to grow by 0.2% pic.twitter.com/VMlBuDqmjm
8.04am BST
Just in: Germany's factories suffered a surprise drop in new orders in July, suggesting Europe's powerhouse economy could be running out of steam.
New government figures show that factory orders dropped by 0.7% during the month, missing City forecasts of a 0.3% rise.
#Manufacturing in July 2017: New orders -0.7% seasonally adjusted on the previous month https://t.co/Wfg3FvoPK5 pic.twitter.com/7TcsyOXOU9
Order activity remains on a very high level....
7.48am BST
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"The global political situation has become very serious due to North Korea's repeated provocations."
Related: Plea for Putin to help 'tame' North Korea as regime threatens more 'gift packages'
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