Article 4ACT5 UK firms cut staff; Greek debt auction success; Carney on Brexit - as it happened

UK firms cut staff; Greek debt auction success; Carney on Brexit - as it happened

by
Graeme Wearden
from on (#4ACT5)

Rolling coverage of the latest economic and financial news, as China sets its lowest growth target in almost three decades

5.26pm GMT

That's all for today. Here's a very quick summary

Bank of England governor Mark Carney has predicted that Brexit could help the world economy emerge from its slowdown, or make it worse. He told the House of Lords Economic Affairs Committee that Britain's exit from the EU was a test for globalisation, as is the US-China trade war.

5.11pm GMT

Q: How do your scenarios change if Britain ends up leaving the EU without a deal, but in May or June rather than on the 29th March?

It all depends on what progress are made on critical projects, Mark Carney replies.

Transition is when you know where you're headed. Waiting to find out where you're headed is not transition, it's just heightened uncertainty.

4.58pm GMT

Mark Carney is then asked about activist investor Edward Bramson, who has used a $1.4bn loan from Bank of America to buy his stake in Barclays (and agitate for a board seat),

Q: Would that loan affect his ability to meet the City's 'fit and proper person's test'?

4.51pm GMT

Earlier in the hearing, Mark Carney suggested that that City has underestimated future interest rate hikes.

The governor pointed out that Bank of England's most recent economic forecasts - based on market expectations of borrowing costs - showed inflation above the BoE's target over its three-year forecast period

"In other words, the path of interest rates is not firm enough, it's not quite high enough for us to be fulfilling our mandate, which sends a broad signal in terms of the stance of policy."

4.46pm GMT

The Lords turn Mr Carney's attention to their work on Britain's hotch-potch of inflation measures (and the government's use of discredited Retail Prices Index for student loans and gilt repayments).

Carney says that CPI serves the UK well, while CPIH (a new measure that includes housing costs) is promising.

4.42pm GMT

Mark Carney says the markets have blundered several times when valuing assets whose value has been hit by climate change.

He cites European diesel carmakers, US coal factories, German utilities, coastal real estate.

4.34pm GMT

Q: Have we reached the limits of globalisation?

Carney says that globalisation could use a reboot -- a greater focus on globalisation of services, and on helping small and medium-sized firms trade across borders.

4.30pm GMT

Q: Might UK bank capital rules be changed after Brexit?

I sense Mark Carney could discuss bank capital rules all day. But the upshot of his (long) answer is that the current rules should give banks enough strength to survive any crisis. He thinks the system is "about right" at present.

4.19pm GMT

Q: Why is the UK employment market looking so strong (with wages rising, and unemployment at a 43-year low)?

Companies have decided it's better to hire new staff than to invest in new technologies, Carney replies.

4.18pm GMT

Asked about risks from rising corporate debt, Mark Carney says the US is a bigger concern than the UK.

The UK itself is relatively insulated from the rising risks from risky lending to companies, he says.

4.10pm GMT

The scale of damage caused by a no-deal Brexit depends on the extent to which we're in control of events - if it's an accident, or a deliberate act - Mark Carney continues.

He tells the Economic Affairs Committee that:

"Falling into a no-deal scenario at the last second is more likely to be a disorderly event than a disruptive one."

4.09pm GMT

Some good news: Mark Carney has said that Britain's preparations for no-deal Brexit could help cushion the blow for the economy from leaving the EU without a deal.

While maintaining that crashing out without a deal would trigger a "material shock" for the economy, the Bank of England governor said that steps taken in recent months would help to "pull back" some of the impact on GDP.

"My point being there has been progress in preparedness and that reduces the level of the economic shock."

3.57pm GMT

Mark Carney also warns that a no-deal Brexit would be a "material economic shock".

Half UK businesses aren't ready for a no-deal Brexit. And half of those who are prepared say that they're as ready as they can be - some still expect disruption, he explains.

3.50pm GMT

Q: You think it's better to be a rule-setter than a rule-taker?

Yes, within a framework of defined outcomes and international standards, governor Carney replies. Ideally, nations states would take agreed standards and beef them up at home if needed.

3.48pm GMT

On the global outlook, Mark Carney says the world economy has experienced a fairly broad-based slowdown in the last six months.

Investment growth has slowed, and is stagnant in some economies, and trade growth has slowed too.

Which way Brexit goes in the coming weeks and months has the potential to provide a boost to the global economy, and alternatively has the potential to further slow the global economy.

The same can be said of the trade talks between the US and China which are by some reports coming to a head.

3.39pm GMT

Bank of England governor Mark Carney is testifying at the House of Lords Economic Affairs Committee. It's being streamed live here.

3.36pm GMT

Back in Tokyo, prosecutors have failed to overturn the decision to grant Carlos Ghosn bail.

This means the former Nissan boss could be released soon (it's just passed midnight in Tokyo). Bloomberg, though, point out that he could be rearrested on fresh charges....

Update: #CarlosGhosn granted bail, court rejects appeal by prosecutors!
Ghosn says he's "grateful to the NGOs and human rights activists in Japan and around the world who fight for the cause of presumption of innocence and a fair trial. I am innocent..."https://t.co/wYwevFrrgA

3.24pm GMT

America's services sector has surged back to strong growth, new figures show.

Firms reported that business activity and new orders both rose sharply in February.

Fortunately, the US is a #services-driven economy! US ISM Non-Manufacturing rises to a massive 59.7. pic.twitter.com/K7ecelC9oq

The ISM Composite PMI, which blends services and manufacturing, improved to a three month high of 59.7. Historically, this level is consistent with 3.5% real GDP growth. Something to consider given Q1 tracking estimates in the sub-1% range. pic.twitter.com/0QJqtGdYFC

2.02pm GMT

Boom! Greece has successfully held its first sale of 10-year government bonds in a decade.

Athens has raised a2.5bn through today's auction, after receiving a11.8bn worth of offers from investors keen to take part.

Over in Greece officials are saying that investor demand for the country's new ten-year bond has exceeded all expectations - in what will be seen as a boost for the country's economic prospects .

"We never expected such massive participation in a paper with such a long maturity following our county's exit from bailout oversight," said one well-placed insider requesting anonymity.

#Greece's new March 2029 #bond issue size set at 2.5 billion euros, order books in excess of 11.8 billion euros @WSJmarkets

1.43pm GMT

Auto makers are fielding question about Brexit at the Geneva Motor Show, which kicked off today.

BMW has bad news for its Oxford workforce - if Britain leaves the EU without a deal, it could be forced to shift Mini production out of its Cowley car plant.

BMW may stop making Mini at Cowley if there is no-deal Brexit https://t.co/roNZemztSA

Carlos Tavares, head of Vauxhall's parent group PSA, tells ITV News there will be no further investment in Ellesmere Port - such as the introduction of electric cars - until the outcome of Brexit is decided https://t.co/FXNVPsfNj9 pic.twitter.com/UeJOXyM7KJ

1.25pm GMT

Ouch. Sterling is suddenly sliding against other major currencies.

The pound has lost almost a cent against the US dollar, from $1.32 to barely $1.31. It's also down half a eurocent at a1.158.

ANALYSTS SAY STERLING DOWN ON LABOUR'S MCDONNELL'S COMMENTS THAT FEW LABOUR LAWMAKERS WILL BACK PM MAY'S BREXIT DEAL IN VOTE

Asked what will happen to Labour frontbenchers who rebel next week on Brexit votes, John McDonnell says they will be treated with "the usual....good humour and comradeship"

(sounds like a bit of a free pass again)

12.43pm GMT

Commodities are having a better day, boosted by China's planned tax cuts.

Copper is up 0.8% at $6,461 per tonne, according to Reuters' data, close to February's seven-month high.

12.35pm GMT

After a weak morning's trading, European stock markets are mostly in the red as traders nip out for a spot of lunch (or munch a sandwich at their desks).

The Stoxx 600 has nudged down 0.2%, as the trade war optimism that pushes markets up on Monday fades.

Related: Trump ejects India from $5.6bn tariff deal over 'negative' trade barriers

12.07pm GMT

Back in the UK, campaigners are celebrating after the financial watchdog cracked down on the rent-to-own market.

New rules will protect consumers who by items through small regular payments, rather than paying the full ticket up front. Those payments often work out as a very expensive way of shopping - but can still appeal to families who only have small disposable income each month.

"This is a much-needed step in the right direction that will help households ensure that their finances are as resilient as possible.

"The FCA should now implement its proposals on other forms of high-cost credit urgently, including overdraft fees, doorstep lending and catalogue credit."

The rent to own market- an insidious example of the extra costs of being poor, with goods like fridges & cookers costing far more than if people had the money to buy them upfront. We welcome @TheFCA cap that will start to tighten the grip on this injustice https://t.co/BuNE1z5S5j

Today @TheFCA confirmed it will cap the cost of rent-to-own goods starting next month. This is a victory for hundreds of thousands of people struggling with the runaway costs of these high-interest agreements. Read our full response https://t.co/VzWkfSZGjR pic.twitter.com/bd8ITRCbaX

Long awaited Rent-to-own cap begins in April! https://t.co/7H0nJ4N9TQ

11.27am GMT

Strong demand indeed....

At around midday order books for #Greece's 10-year #bond were in excess of 11.3 billion euros, final yield has been set at 3.9%
This is the first #Greek 10-year bond since before the beginning of the country's #bailout era

11.25am GMT

Reuters says there is "strong demand' for Greece's new 10-year bond, which is being auctioned right now.

That should mean Athens raises at least the a2bn it is aiming for. Plus, the more bids it receives in today's auction, the lower the interest rate it must pay (as Greece can cherry-pick the best offers).

11.23am GMT

Here's our news story on February's weak UK PMI reports:

Related: UK economy close to stalling amid Brexit uncertainty

11.08am GMT

It's a red-letter day in Greece, which is holding its first 10-year debt auction since the eurozone debt crisis began.

"In that sense, it's a big bet because of everything that hangs on it."

I sincerely hope the 10yr bond issue is successful. The fact remains that markets anticipate political change in #Greece. The coming @neademokratia government will deliver investment grade status within 18 months.

11.04am GMT

The Bank of England has also fired a shot at the EU - saying the City is ready for a no-deal Brexit, but Europe isn't.

The Bank's Financial Policy Committee says that UK banks are prepared for even a disorderly Brexit, following its work since 2016.

The biggest risks of disruption in a no-deal Brexit to financial services used by UK households and businesses have been dealt with.

Major UK banks and insurers are strong enough to deal even with a worst case disorderly Brexit and could continue to serve households and businesses.

10.50am GMT

The Bank of England is taking new steps to protect the UK economy from Brexit.

The UK central bank is launching new weekly auctions of euro loans to eligible banks and building societies, to prevent their currency reserves running short.

ECB and Bank of England activate currency swap arrangement for possible provision of euro to UK banks https://t.co/AgWV4ksOgd

Sensible stuff from the ECB and the Bank of England here. It also gives an answer to the question posed by @SkyNews and @EdConwaySky "And some have raised the question over whether the ECB or Federal Reserve would actually consent to the scheme" https://t.co/WV90tmYqHG

Related: Banks given extra funds to calm nerves if UK crashes out of EU

10.21am GMT

The PMI reports don't usually cause much of a stir at Westminster. But today's news has alarmed John McDonnell MP, Shadow Chancellor.

"This is a signal of plummeting business optimism in the wake of the government's bungling of Brexit.

"The signs of falling UK private sector employment are worrying, against the backdrop of dropping business investment, downgraded growth forecasts, and a manufacturing recession.

10.11am GMT

Chris Williamson, Chief Business Economist at IHS Markit, fears the UK economy will barely grow this quarter:

"The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK's scheduled departure from the EU. The data suggest the economy is on course to grow by just 0.1% in the first quarter.

10.02am GMT

Brexit indecision struck another blow to Britain's economy in February, says Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.

He's concerned that new orders and employment fell last month:

Job losses continued in February, as businesses held back on hiring without the confidence of new pipeline work and ability to recruit skilled candidates. Staffing levels were down at the fastest rate in over seven years. In signs of more economic stress, intense competition and discounting strategies prevented output price inflation gathering pace, falling to its lowest for five months.

Consumer and client confidence disappeared from the sector, as the hesitancy to place orders also rippled out from Europe. Survey respondents said anxious international clients cancelled contracts and delayed decisions.

9.48am GMT

Just in: Britain economy was "close to stagnation" last month, as anxious companies cut staff ahead of Brexit.

Data firm Markit reports that UK business activity only rose "marginally" in February, while new orders dipped.

Reports from survey respondents suggested that Brexit- related uncertainty remained by far the most prominent factor acting as a brake on business activity growth in February. There were widespread reports that political uncertainty had encouraged delays to corporate spending decisions and a general rise in risk aversion among clients....

The rate of decline in private sector employment was the fastest since September 2012 as lower payroll numbers at manufacturing firms and service providers more than offset a modest upturn in construction sector workforces

9.30am GMT

UK car sales have risen, for the first time in five months.

The Society of Motor Manufacturers and Traders (SMMT) reports that 81,969 new cars were registered on UK roads last month, a 1,164 increase on February 2018.

UK new car market stable in February, as EVs shift up a gear https://t.co/UeQuMn5xpU pic.twitter.com/qnr7cF69zp

9.26am GMT

We have encouraging news from the eurozone.

Private sector growth across the euro area has hit a three-month high, data firm Markit says, led by Ireland and Spain.

"The final PMI for February indicated a slightly improved performance compared to the flash estimate, lifted higher than January in part due to the further easing of one-off dampening factors such as the yellow vest protests in France and new auto sector emissions rules. However, the survey remained subdued as other headwinds continued to increasingly constrain business activity. These include slowing global economic growth, rising geopolitical concerns, trade wars, Brexit and tightening financial conditions.

"Measured overall, the survey shows the quarterly rate of GDP growth picking up to 0.2% in February from 0.1% in January, meaning the first quarter could see the eurozone economy struggle to beat the 0.2% expansion seen in the fourth quarter of last year.

France 50.2, up from previous 49.8 (out of recession territory)
Germany 55.3, up from previous 55.1

It looks like 1Q 2019 could be better than expected, after a difficult 4Q 2018...@graemewearden

9.19am GMT

A media scrum is building outside the Toyko Detention Centre, as journalists anticipate their first sighting of Carlos Ghosn in many months.

Related: Carlos Ghosn, former Nissan chairman, granted bail in Japan

9.05am GMT

Here's my colleague Lily Kuo on the Chinese growth targets:

Li appeared to hurry through the GDP targets, spending most of his nearly two hour speech on pledges to boost employment, cut taxes, and lower costs for businesses.

"Li Keqiang's main purpose seems to have been to mollifying two constituencies that have been grumbling the loudest: the domestic private entrepreneurs and the foreign business community," said Damien Ma, co-founder of the thinktank MacroPolo at the Paulson Institute.

Related: China warns of 'tough struggle' as it cuts growth target to lowest since 1990

8.58am GMT

Ouch. Struggling UK retailer Debenhams has just issued a fresh profits warning.

The department store is blaming macroeconomic uncertainties, increased financing, and the disruption as it tries to negotiate a restructuring plan with its lenders.

Debenhams issues a profit warning after 6.2% slump in UK sales, says refinancing talks are progressing well and will lead to 50 store closures

"We are making good progress with our stakeholder discussions to put the business on a firm footing for the future. We still expect that this process will lead to around 50 stores closing in the medium term.

8.48am GMT

These tax cuts can't come soon enough for China's companies.

Growth in China's services firms fell sharply last month, new data shows, dragging the services PMI down to 51.1, from 53.6. That's close to the 50-point mark showing stagnation.

Caixin China Services PMI 51.1 -2.5 VS previous A big miss median forecast
It seems obvious reason for CPC on lending to small to medium size private Corp pic.twitter.com/DEY9BNK2LG

8.38am GMT

Dan Wang, China analyst at The Economist Intelligence Unit, says Bejing is right to cut its growth target to between 6 and 6.5%, as 2019 will be tough.

"This revision is consistent with our forecasts. China's manufacturing overcapacity, high debt and excessive deleveraging campaign means the corporate sector needs time to recover and adjust. Uncertainty in the trade war talks has already lowered the appetite for investment in 2019. The lowering of the growth targets signals a difficult year for employment, especially for newly graduated students and technology sector.

Under this expectation, monetary and fiscal support will stay strong, while restrictive policies such as environment requirements will be further relaxed. Resource intensive sectors, such as construction and metal, may see a mild revival in the coming year."

The growth target is 6"6.5%, a 2trn yuan tax cut was announced (vs 1.1trn last year) though the overall deficit only increases by 0.2ppt, further targeted rate cuts were signalled.

Whether or not this is "enough" depends on one's view on how bad the underlying slowdown is in the Chinese economy. But there is nothing overnight to substantially change one's view.

Tax cuts, increased lending and infrastructure spending, rather than continuing along the deleveraging route, will get some quick wins for China. However, this may be a dangerous route in the long run. High levels of debt are a problem, which will only be exasperated as growth slows.

Whilst shares across Asia were broadly lower, the plans to increase spending boosted shares in China. The CSI300 hit a 9-month high in early trade before giving back some gains. As more details over the economic package are released over the coming days, we could see Chinese shares extend their rally.

8.18am GMT

China is also planning to increase its military budget by 7.5% to 1.2 trillion yuan.

Although that's down from last year's 8.1% rise, it shows Beijing won't allow its slowing economy to undermine its defence capabilities, such as stealth fighters, aircraft carriers and anti-satellite missiles.

"We will implement the military strategy for the new era, strengthen military training under combat conditions, and firmly protect China's sovereignty, security and development interests."

8.17am GMT

China's tax cuts have been well-received by traders in Shanghai.

7.59am GMT

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

"We will face a graver and more complicated environment as well as risks and challenges " We must be fully prepared for a tough struggle."

"Downward pressure on the Chinese economy continues to increase, growth in consumption is slowing, and growth in effective investment lacks momentum. The real economy faces many difficulties."

China's 2019 economic targets just out:
-GDP growth target 6-6.5% (6.6% in 2018)
-CPI target around 3%
-Budget deficit 2.8% (from 2.6%)
-fiscal spending 6.5%
Also confirmation of tax cuts:
-3 percentage point cut to top VAT bracket
-2 trillion yuan tax cuts #TwoSessions2019

More Chinese infrastructure spending coming up:
- plans to sell 2.15 trillion yuan in special local government bonds in 2019
...takes augmented budget deficit from 2.8% of GDP to closer to 5%
Also, deleveraging, arrested- China says leverage in economy 'basically' stable in 2019

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