Carney warns fall in migrant workers could push up wages and inflation - as it happened
All the day's economic and financial news, as world share prices touch new record levels
- MSCI World Index hits new alltime peak
- Why markets have rallied...and can it last?
- Portuguese upgrade boosts stocks
- Investors upbeat ahead of Fed meeting on Wednesday
- US central bank expected to hold interest rates
- Coming up: Eurozone inflation & Mark Carney speech
6.09pm BST
Stock markets have begun the week on a positive note, as investors shrugged off any lingering worries about geopolitical tensions and central bank actions.
They seemed reassured that there were no further developments in the North Korea situation over the weekend, presumably on the basis that no news is good news. And despite the recent hints from the Bank of England that a UK rate rise could come as soon as November, new comments from Bank governor Mark Carney that any increases were likely to be gradual and limited saw the pound come of its recent highs. This in turn helped lift the FTSE 100, given that a weaker pound benefits exporters.
4.25pm BST
A sharp fall in migrant workers coming to Britain as a consequence of Brexit could push up wages and cause a spike in inflation in the short term, according to Mark Carney, the governor of the Bank of England, writes my colleague Richard Partington.
Setting out his view on inflation days after the Bank's rate setting panel indicated it could raise the cost of borrowing for the first time in a decade, the governor said the rapid deceleration of migrant labour could lead to shortages for employers, pushing up wage growth and inflation in the short term. However, in the long-term, higher levels of immigration do not have an impact on wages or inflation, he said.
4.23pm BST
Carney also warned that a fall in immigration in the wake of Brexit could push up wages and inflation:
Abrupt decreases in migration could result in shortages in some sectors that have become reliant on migrant labour, and contribute more materially to inflationary pressures.
In addition, the ease with which UK employers have been able to source labour from abroad and move operations offshore as a result of globalisation may have weighed on wage growth - though the size of such contestability effects is difficult to judge.
4.11pm BST
Brexit is likely to push up inflation, Bank of England governor Mark Carney has said, as he repeated his view that interest rates were likely to rise in the coming months.
But in his 2017 IMF Michel Camdessus Central Banking Lecture in Washington, he suggested rises would be limited, and he warned of risks to the UK economy.
Any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent, and to be consistent with monetary policy continuing to provide substantial support to the economy.
There remain considerable risks to the UK outlook, which include the response of households, businesses and financial markets to developments related to the process of EU withdrawal. The MPC will respond to these developments as they occur insofar as they affect the behaviour of households and businesses, and the outlook for inflation.
Carney, making a speech at the International Monetary Fund's headquarters in Washington, said the process of globalisation that has led to deeper integration in the world economy in recent decades had pushed down price growth.
But Brexit represented the opposite for Britain, at least in the short term, as less openness to foreign markets and workers was likely to push up inflation and reduce productivity, he said.
4.00pm BST
Bank of England governor Mark Carney is set to give the 2017 Michel Camdessus Central Banking Lecture, and it can be viewed live here now.
3.33pm BST
US markets continue to fly higher:
#MondayMotivation
S&P: All-Time High
Dow: All-Time High
Nasdaq: All-Time High
NYSE: All-Time High
Global Dow: All-Time High pic.twitter.com/ynBGMwMtTj
3.20pm BST
The pound has slipped back against the dollar after last week's rises in the wake of suggestions of a UK interest rate rise in November.
Part of this is due to an uptick in the dollar ahead of this week's US Federal Reserve meeting, and part to new concerns over Brexit. Sterling is currently 0.26% lower at $1.3556. Paresh Davdra, chief executive of RationalFX, said:
The pound has moved lower against its peers ...following its surge on Friday. The pound remained strong over the weekend, still buoyed by investor anticipation of an interest rate rise later this year, but has cooled off as traders turn their attention to Prime Minister Theresa May's speech on Europe, this Friday. Despite slipping against the dollar this morning, sterling is still much stronger than the weak levels seen in recent weeks.
The pound may have also been weighed down slightly by the renewed political controversy over the 'Britain will have 350m a week more to spend outside the EU' claim from Foreign secretary Boris Johnson over the weekend. In the months since the election, political disunity has made traders cautious, therefore any suggestion of dissent within the government could slow the gains the pound could make off of the prospect of a rate rise. With the Prime Minister in Canada to discuss trade deals, analysts will be looking at more political drivers for the pound this week, in addition to data releases.
3.07pm BST
With investors turning their attention to supposedly riskier assets such as shares, there have been some falls among the traditional havens.
Gold fell to a two and a half week low of $1311 an ounce while among equities, there are also falls in defensive stocks like tobacco - Imperial Brands is down 2% - and water companies.
2.35pm BST
Records are indeed being broken on Wall Street in early trading.
The Dow Jones Industrial Average has climbed to a new peak of 22,332, up more than 0.22%, while the S&P 500 is up 0.13% to a new high of 2,503. Easing tensions over North Korea are playing a part, while investors are awaiting the latest Federal Reserve meeting on Wednesday.
2.21pm BST
Looks like more records are on tap https://t.co/QxOldo0gl2 pic.twitter.com/qIp2SzToNK
2.15pm BST
European markets are holding on to their gains ahead of Wall Street opening shortly.
The FTSE 100 is currently up 0.3%, while Germany's Dax is 0.25% better and France's Cac has climbed 0.16%.
2.00pm BST
Over in Washington, IMF managing director Christine Lagarde is promising a new crackdown on corruption.
As we assist our members in fighting public corruption, we also are committed to looking at transnational private actors who influence public officials. Private actors may help generate corruption through direct means such as bribery, but they also can facilitate corruption through indirect means, such as money laundering and tax evasion.
The recent example of the "Panama Papers" highlights the importance of these facilitators, and underscores the pernicious way corruption can quietly spread across borders.
1.20pm BST
1.01pm BST
The oddest story of the day is that tens of thousands of euros have been found the toilet at a Geneva branch of UBS.
The discovery, a few months ago, has baffled Swiss prosecutors - especially as more euros were discovered clogging the pipes of near by restaurants too.
I really want to know why someone flushed thousands of euros down a toilet. It's got to be great https://t.co/CiV9ZCYW5G by @marabernath
12.44pm BST
The stock markets are increasingly being driven by greed this week, says CNN:
Futures higher again. Dow, S&P 500 and Nasdaq at all-time highs. @CNNMoney Fear & Greed index shows extreme greed. https://t.co/rqJZ7Ec96a pic.twitter.com/W0hSLZQxbc
12.27pm BST
The US stock market is expected to hit new highs when trading begins in two hours time.
The S&P 500 index is called up 0.2%, extending Friday's rally, as anxiety over conflict in the Korean peninsula abates.
"....as long as the situation does not escalate into military conflict, market participants may continue to place less and less emphasis on North Korean developments."
Dow, S&P 500 line up for fresh records to start the week https://t.co/Fc96UXxCgN
11.52am BST
A reminder of how the markets have rallied strongly over the last 18 months.....
From Feb 2016 Lows
MSCI Emerging Markets: +65%
Nasdaq 100: +53%
MSCI Asia: +45%
S&P 500: +38%
MSCI World: +36%
US Dollar: -9%#FOMC
11.19am BST
British arms manufacturer BAE has jumped to the top of the FTSE 100 leaderboard this morning, after announcing a big sale to Qatar.
"This is an important moment in our defence relationship and the basis for even closer defence co-operation between our two countries."
Last month, Goldman Sachs added the stock to its conviction buy list, citing Saudi Arabian contracts as the reason behind the move, and now they are selling to Qatar too.
10.24am BST
Here's a chart showing how the MSCI All Country World Index hit a new record high this morning.
"Central banks have underpinned equity market valuations since the financial crisis, with excess liquidity and low interest rates both providing the stimulus and the foundations for higher valuations.
What global central banks and in particular the Federal Reserve does next is therefore hugely important for investors.
PORTUGUESE BOND YIELDS SET FOR BIGGEST DAILY FALL SINCE FEB 2016, DOWN 22 BASIS POINTS pic.twitter.com/qVasgEegIA
Debt service ratios are only so low because interest rates have been falling so much.
There is a certain circularity in all this that points to the risk of a debt trap: the protracted decline in interest rates to unusually low levels, regardless of the strength of the underlying economy, creates the conditions that complicate their subsequent return to more normal levels.
Related: Growing risk of 'debt trap' if interest rates stay low, say central bankers
10.04am BST
Just in: Prices across the eurozone rose by 1.5% per year last month, up from 1.3% in July, stats body Eurostat says.
That confirms the 'flash' reading from two weeks ago, and means inflation is still below the ECB's goal of close to, but below, 2%.
Euro area annual inflation confirmed at 1.5% in August 2017 (July 1.3%) #Eurostat https://t.co/rcCZSYalGk pic.twitter.com/jslpebQ5Nm
9.04am BST
That ripping noise you can hear is HSBC tearing up its sterling forecasts.
The bank has ditched its forecast that the pound would have hit $1.20 by the end of 2017, and languished there through 2018. Now it believes sterling will cling onto today's $1.35, and only slide slightly next year.
"We were wrong"
Massive changes to HSBC's sterling forecasts. Now sees cable ending this year $1.35 v $1.20. No longer sees EUR/GBP parity. pic.twitter.com/i2GiEaGPcq
HSBC abandons call for no UK rate hike this year or next. Now sees rate hike in November and another in May 2018.
8.58am BST
Meanwhile, the pound is slipping back from Friday's one-year high.
Sterling is down almost half a cent at $1.354, having surged last week when the Bank of England dropped several clanging hints that interest rates are going up soon.
Related: Boris Johnson left isolated as row grows over 350m post-Brexit claim
8.42am BST
The markets are also benefitting from optimism that Portugal is putting the eurozone debt crisis behind it.
Portugal's bond prices have hit a one-year high this morning, after credit rating agency Standard & Poor's upgraded the country back to investment grade.
Portugal bonds and equities rallying after the country earned back its investment grade rating with S&P. https://t.co/S9sxXJfe0h pic.twitter.com/tQAV1wkcKF
Market reaction to S&P upgrade of Portugal suggests that the #euroboom regime shift has yet to be fully priced in.
8.35am BST
Britain's FTSE 100 is also clawing back some of last week's losses (triggered by the stronger pound).
Having been battered in the wake of last week's sterling super surge, the FTSE is using a quiet Monday morning to claw back some of its losses.
8.30am BST
European stock markets have joined the rally, sending the Stoxx 600 index up to a six-week high.
Hussein Sayed, chief market strategist at FXTM, agrees that investors are focused on Wednesday's Federal Reserve meeting.
Upbeat U.S. inflation data was not enough to move markets' expectations of an interest rate hike in December. The odds for an interest rate hike by the end of year stands at 56%, according to CME's FedWatch; whether this is about to change on Wednesday, relies on the Fed dot plot and Chair Janet Yellen's speech.
8.07am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
World stock markets have hit a new alltime high this morning, as traders regain their appetite for risky assets.
Markets anticipate that the Fed will keep rates unchanged (with a December rate hike now seen as 50/50), but announce that it will commence balance sheet reduction at a pace of $10bn per month in Q4.
The statement will doubtless keep the option of a December rate hike clearly on the table, but markets will as ever hone in on the 'dot plot', with many expecting the likes of Brainard to perhaps adjust their trajectory lower
Short of shots being fired, these tensions are likely to have fairly short term and short lived effects, which helps explain the positive start to the week for Asia shares this morning which in turn is likely to lead to a positive start to this week's European trading session.
The #Thailand SET 50 Index is up 1.3% today $THD pic.twitter.com/QBp3jitjF6
European opening call @LCGTrading $FTSE +29 points at 7244$DAX +77 points at 12595$CAC +27 points at 5240#EuroStoxx +15 points at 3530
Follow Monday's #CamdessusLecture with @BankofEngland Governor Mark Carney and @Lagarde here: https://t.co/SREKlXVLr4 pic.twitter.com/gOAXtDeXTN
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