UK construction takes Brexit hit; Wall Street closes lower - as it happened
British builders report that Brexit anxiety is creating delays in new projects, and making it harder to get materials
- Latest: New York stock market in the red
- Latest: UK construction PMI hits 11-month low
- Stockpiling creates shortfall of building materials
- Introduction: US and China 'close in' on trade deal
8.44pm GMT
Brian Nick, the chief investment strategist at Nuveen, reckons investors have already 'priced in' a trade deal between Washington and Beijing.
That would explain why the markets haven't rallied more strongly today.
8.12pm GMT
7.34pm GMT
Today's sell-off rather bucks the trend of 2019, which has seen shares rise steadily.
The Dow ended Christmas Eve at just 21,792 points, after several weeks of losses. But since then, it's mostly been moving upwards, back over 26,000 points (until today).
The stock markets have slumped today. For once, investors have not bought the "close" headlines in reference to US-China trade deal.
However, the dollar has remained supported for now, despite US President Donald Trump's latest criticism of the Fed's Chairman Jay Powell.
7.18pm GMT
Wall Street isn't taking too much comfort from today's report, in the Wall Street Journal, that the USA and China are 'closing in' on a trade deal.
We've seen these headlines many times; investors want concrete proof that tariffs will be lifted.
Reports that Trump and Xi Jinping could meet at some point in March in what, on paper at least, would be a significant step towards easing the trade tensions between the 2 superpowers were treated with a certain level of wariness by investors, who are perhaps sick of speculation and rather more keen to see some actual action.
7.13pm GMT
It's turning into a choppy day on Wall Street, as the market heads lower.
United Health Group is the biggest faller on the Dow, down 4%, followed by Walgreens Boots (-2.7%), McDonalds (-2.5%) and Boeing (-2.2%).
US futures off their lows:#DOW 25717.35 -1.19%#SPX 2780.92 -0.81%#NDX 7117.78 -0.47%#VIX 15.53 +14.44% pic.twitter.com/FoZ1YAgpgl
5.40pm GMT
Back on Wall Street, shares have taken a sudden shift downwards.
The main indices have lost more than 1% - without any obvious trigger either.
A massive turnaround in US markets so far today. The S&P500 opens at new highs for the year, then promptly reverses back to last week's low. Should be an interesting week. pic.twitter.com/Y2caAYXh9g
5.21pm GMT
The news that Britain's construction sector shrank in February didn't help sterling today.
The pound has dipped against the US dollar to $1.318, as traders took a cautious view.
Despite a strong start for the pound, dismal construction sector data and a strengthening dollar, saw cable drop below $1.32. The UK construction sector slipped into contraction in March, dropping to 49.5. This is the weakest reading for the sector since March last year. Brexit uncertainty slowing business decisions, holding up investment and builders unable to get the materials required amid increased stockpiling are hitting the sector. The pound dropped lower on the release, falling below $1.32. It is currently encountering resistance at $1.3180, a meaningful break through this level could open the doors to $1.3160.
With manufacturing and construction showing the impacts of Brexit, traders will look towards the service sector PMI tomorrow. The dominant service sector grinded to a halt in January and the expectation is that February wasn't much different. Given broad weakness across all sectors of the UK economy, it is difficult to see how Britain will avoid a contraction in the first quarter.
4.01pm GMT
Here's our news story on the slowdown in UK construction:
Related: UK construction activity falls amid Brexit uncertainty
3.50pm GMT
America's construction industry has also hit a speedbump.
US construction spending shrank by 0.6% in December, an unexpected decline, after rising 0.8% in November.
US Construction Spending slipped 0.6% in December. Overall private residential construction grew 3.3% in 2018, the smallest advance since 2011. https://t.co/hFL9RfzLP9 pic.twitter.com/DSOnUSVsnW
3.24pm GMT
Soybean, corn and crude oil prices have all jumped today too, thanks to trade war optimism.
3.13pm GMT
Dr. Heather Skipworth, senior lecturer in logistics, procurement and supply chain management at Cranfield School of Management, has a good take on the raw materials shortage gripping UK construction:
"A Supply Risk Report, due to be published by Dun & Bradstreet and Cranfield School of Management later this month, has found an uncharacteristically high dependency on suppliers in the construction sector with a 40% increase in 'supplier criticality' in Q4 of 2018.
More than 80% of relationships analysed for the report were classified as critical or key, indicating a high reliance on current suppliers and a high level of exposure to supply chain risk.
2.49pm GMT
Over in New York, stocks have opened higher as Wall Street responds to the latest trade war optimism.
The fact that a full-blown trade war between the world's two largest economies appears to have been averted is clearly a good thing. But the abrupt ending of talks between President Trump and Kim Jun Un last week serves as a timely reminder that enthusiastic briefing ahead of summits doesn't necessarily translate into policy action.
More fundamentally, even if a deal between the US and China on trade is ultimately agreed we don't expect that a trade truce will now provide a substantial shot in the arm to the global economy.
2.06pm GMT
Back in Greece, former EU commission president Jose Manuel Barroso has admitted that both sides made mistakes in the country's debt crisis.
Attending the annual Delphi Economic Forum at the weekend, Barroso said Greece had come "very close" to exiting the euro zone at the height of its debt crisis.
"There were mistakes from the Greek side but also from the European [side] too. Some countries should have been more generous and shown greater solidarity."
1.41pm GMT
Construction firms aren't the only ones suffering from Brexit, of course.
Across the company, companies are stockpiling goods (locking up precious capital), and scrutinising their legal position in case Britain crashes out of the EU without a transition agreement
We're 25 days from exit day, there's no sign of a plan that will deliver a deal, and businesses... not super happy.
The @CBItweets Brexit and @CBI_Economics teams were in Edinburgh, Newcastle, Nottingham and Leeds last week talking to companies and... some observations (1/x)
1af There's no sign of contingency plans abating or slowing down, even if Article 50 is extended.
We hear of stockpiling all over the place. 8million spent by one firm on parts of heavy machinery, companies in construction, retail, even housing associations (2/x)
Not just stockpiling though. Logistics firms adjusting to ensure duties can be paid more easily by clients, tech and professional services firms doing what they can to advise clients, reserving cash etc.
Lots of money being spent in, ultimately, not super productive ways (3/x)
2af What's changing more recently is the fact no deal is happening. Right now. It's impacts are being felt by people today.
- The agency workers only being offered 1 month contracts instead of 6 month contracts
- The leather company who's lost one of their biggest supplier (4/x)
- The energy biz seeing clients waiting for the to crash before spending money, and having to lay people off due to the lack of orders
- The Universities redeploying EU staff to bases in
- The drinks firm that's stopped exporting to the EU until there's certainty (5/x)
If Article 50's extended, the wait for investment and contracts will just go on. And those firms that have planned for a March no deal will have to extend contingency costs through to July.
The message is clear that's still better than no deal, but every day has real cost (6/x)
3af There's the start of the realisation that any A50 extension eats into FTA negotiating time and transition.
For agri-firms on a 18mo production cycle, cosmetics firms on a 4 year product cycle, financial services firms facing hugely complex negotiation, that's a new worry (7/8)
So we're running out of time and the costs to jobs and our economy are worsening day by day.
It's the same message as ever to politicians. Sort yourselves out. Compromise. Expect to hear the same in Belfast, Lisburn, Bridgend, Bury St Edmunds and St Helens this week (8/8)
1.20pm GMT
Investors across the eurozone are feeling more optimistic - or at least less pessimistic.
Research group Sentix has spotted a "ray of hope" in its latest assessment of investor confidence. Its morale index has risen to -2.2 this month; a fairly poor reading, but better than February's -3.7.
"It is too early to give the all clear.
However, a ray of hope emerges when looking at the economic expectations."
In March, the #sentix #economic indices are sending signs of stabilisation in the #eurozone #economy. In the search for the starting point of a new upswing, the region #Asia ex Japan moves into focus. https://t.co/7XskSELTt6 #sentixtop3 pic.twitter.com/cIJIbkqABB
11.50am GMT
Over in the eurozone, Greece is preparing a new bond issue -- a fitting way to mark having its credit rating upgraded.
The sale of 10-year debt could raise between a2bn and a2.5bn, according to strategists at Danske Bank A/S including head of fixed income Arne Lohmann Rasmussen. Greece last sold similar maturity debt in November 2017 as part of a bond exchange totaling almost 25 billion euros.
Greece mandates six banks as lead managers for a new 10-year bond https://t.co/4j8xIVN6rs pic.twitter.com/VWAfgD783y
11.21am GMT
In a separate piece of bad news, the company behind the Giraffe and Ed's Easy Diner restaurants is planning to shut 27 outlets, putting hundreds of jobs at risk.
10.53am GMT
Britain's struggling builders need help from the government, says economist Howard Archer of the EY Item Club.
That means some clarity over Brexit (MPs will hold crucial votes on Theresa May's deal, no-deal, and an article 50 extension next week). It also means more support to spur on major construction projects, and housebuilding.
10.39am GMT
On the employment front, some building firms have decided not to replace staff who have left - due to concerns about the business outlook.
Others. though, say they took on trainees to cover skills shortages. That might be due to the drop in EU migration since the Brexit vote.
10.08am GMT
Economist Rupert Seggins shows how UK civil engineering and commercial property construction both contracted last month (dropping below the 50-point mark on the monthly PMI index).
1. UK construction PMI hit 49.5 in Feb, down from 50.6 in Jan. Commercial and civil engineering construction were the drivers, with both recording falls. In a by now fairly familiar pattern, house building did better than those other two areas and continued to grow. pic.twitter.com/wr4oQLJzo3
"Construction firms have their heads down in contingency planning for every outcome, but what this means for the long-term health of the sector is uncertain. It seems as though many businesses are in defensive mode and do not have the confidence or clarity to make future plans.
10.01am GMT
Britain's construction could soon be dragged into recession, fears Markit's Chris Williamson.
UK #Construction #PMI indicates renewed decline and increased likelihood of sector falling into recession in first quarter. Apart from March 2018, the latest PMI was the worst for almost 1 years. Snow could not be blamed this time!https://t.co/94jWUWXCv1 pic.twitter.com/2iWGjntiP2
9.57am GMT
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, says Brexit is hurting UK builders -- by spooking clients, and creating shortages of key materials.
Commercial and civil engineering activity was pushed into the red, as client uncertainty over placing new orders left its mark. This meant the relatively weak residential building sector was the best performer. However, with consumer confidence also waning, housing is likely to follow suit in the coming months.
The domino effect of stockpiling by other sectors such as manufacturing impacted on supplier performance, as builders competed for dwindling supplies of raw materials, while transportation availability also became a problem, leading to supply chain bottlenecks. This meant that purchasers were subjected to the second- longest delivery times since March 2015, affecting work already in-hand.
9.40am GMT
Newsflash: Activity across Britain's construction industry has declined as Brexit uncertainty hits confidence, and leave builders struggling to get their hands on materials.
Data firm Markit reports that business activity levels fell during February, the first decline in 11 months.
"The UK construction sector moved into decline during February as Brexit anxiety intensified and clients opted to delay decision-making on building projects. Risk aversion in the commercial sub-category has exerted a downward influence on workloads throughout the year so far. This reflects softer business spending on fixed assets such as industrial units, offices and retail space. The fall in commercial work therefore hints at a further slide in domestic business investment during the first quarter, continuing the declines seen in 2018.
"There were also reports that the more fragile housing market confidence has begun to act as a brake on residential work, which adds to signs that house building has lost momentum since the end of last year. This leaves the construction sector increasingly reliant on large-scale infrastructure projects for growth over the year ahead.
9.30am GMT
Get your diaries out. A US-China trade deal could be signed by presidents Xi and Trump on 27 March.
9.26am GMT
China is reportedly even offering to buy 50 million litres of Jack Daniels whiskey, to help smooth a trade deal.
That's a canny idea, politically. Jack Daniels is one of the US products targeted by Beijing last year when it announced retaliatory tariffs against American goods - hurting farmers in the Tennessee region.
The fact that China want 50m litres of Jack Daniels should probs to you this will be a trade deal with the foundations of BluTack.
Presumably as sheep-dip https://t.co/EaO0qwruRy
8.52am GMT
China's parliamentary spokesman Zhang Yesui says Beijing hopes to achieve a 'win-win' trade deal with America.
Zhang told reporters that officials have conducted "fruitful and intensive consultations and made important progress on many issues of common concern."
"We hope that the two sides will continue to hold consultations and reach a mutually beneficial and win-win agreement."
8.34am GMT
Optimism that the US and China are inching towards a trade deal sent shares sharply higher in Shanghai today.
China's stock market jumped by over 1% this morning, to their highest level since mid-June.
Markets update:
- Chinese stocks rose to their highest level since June
- Shanghai Composite Index ai 1.1%
- Hong Kong's Hang Seng Index ai 0.7%https://t.co/hsn0KKrJYd
The wind is blowing in favour of a trade deal between the US and China, and in favour, at the moment, of the UK achieving a 'soft Brexit' which is probably mostly priced in for now.
8.11am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
As part of a deal, China is pledging to speed up the timetable for removing foreign-ownership limitations on auto ventures, and to reduce tariffs on imported vehicles to below the current rate of 15%, the WSJ reported.
A senior administration official cautioned on Sunday that a decision had not yet been made over lifting the U.S tariffs. The official also said a debate was continuing inside the administration with Trump unlikely to make a decision before a deal was closer to being done, likening to situation to the debate over what to do with U.S. sanctions in the lead-up to last week's summit with North Korea's Kim Jong Un.
I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions....
....and I did not increase their second traunch of Tariffs to 25% on March 1st. This is very important for our great farmers - and me!
Global stocks started week on front foot w/ China's bourses leading advance on signs US & China were close to striking a tariff deal to end their trade war. Bond yields continue to rise w/US 10y at 2.76%. Pound gains as May receives boost from pro-Brexit hardliners. Gold <$1.3k. pic.twitter.com/ihgmXGDS7a
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