BoJ slowdown warning and weak US manufacturing add to economic worries - as it happened
Rolling coverage of the latest economic and financial news
- Interserve rescue rejected
- Introduction: BoJ points to global slowdown
- How will it ever get inflation to 2%?
- Kuroda: MMT is 'extreme'
- European stock markets at five-month highs
5.39pm GMT
And finally, European stock markets have closed at their highest level since last October.
That means they've recovered almost all the losses suffered in last autumn's sharp selloff.
The return of complacency: Fear Index VDax has dropped to lowest since Sep. Low volatility good for Hedgers & Speculators. pic.twitter.com/41ecYRteht
4.57pm GMT
Here's our news story about the threat of job losses at Arcadia:
Related: Philip Green's Arcadia turnaround plan could trigger heavy job losses
4.36pm GMT
The pound is staging a late mini-rally, as traders cling onto hopes of a Brexit breakthrough over the weekend.
Government ministers have been holding fresh talks with Northern Ireland's DUP party, whose support could be vital to getting Theresa May's Brexit deal over the line.
DUP meetings pretty intensive - Michael Gove, David Lidington, Julian Smith and Mark Sedwill this morning, before lunch with Smith and Philip Hammond
DUP emerge from #Brexit discussions with Govt describing them as 'significant and constructive.'
-1bn was price of propping up Theresa May.
-How much this time?https://t.co/skOWEYfTmw
3.21pm GMT
Some better US economic news - consumer confidence has picked up, as Americans welcomed the end of the government shutdown.
US: University of Michigan consumer confidence recovers in March 2019, driven by rising expectations. #USeconomy pic.twitter.com/D8mt3KWt6v
2.36pm GMT
Here's Capital Economics on the decline in US factory output last month.
The further decline in manufacturing output in February confirms that the global industrial slowdown is now weighing more heavily on US producers.
With tighter fiscal and monetary policy constraining domestic demand, the weaker external environment is another reason to expect a sustained slowdown in economic growth this year.
US manufacturing is no longer defying China's gravitational pull. The next few months are going to be tough. pic.twitter.com/reDIdP13vE
2.33pm GMT
Ouch. America's factory sector has shrunk for the second month running, adding to fears that the US economy is slowing.
US manufacturing activity dropped by 0.4% in February, new figures from the Federal Reserve show, driven by falling output of motor vehicles, machinery and furniture.
Oops! US production came in weak: US IP has risen just 0.1%MoM in Feb vs 0.4% exp, though prior revisions were revised two-tenths higher to -0.4%. Manufacturing fell -0.4% vs 0.1% exp but also saw a four tenth positive revision. pic.twitter.com/gszRcZOBlD
2.12pm GMT
R3, the trade body for Insolvency Professionals, has a handy guide to pre-pack administrations here.
2.11pm GMT
Simon Underwood, business recovery partner at accountancy firm Menzies LLP, reckons Interserve's collapse won't cause as much disruption as the Carillion crisis 14 months ago.
Like Carillion, Interserve has limited capital and slim operating margins, therefore opting for compulsory insolvency may become the most suitable approach.
"The fact that a large proportion of Interserve's public sector contracts are in non-critical areas, such as building maintenance, means its failure is unlikely to cause chaos on the same scale as Carillion. On the other hand, with a number of important infrastructure projects, such as the M5 Junction 6 improvement works, resting on Interserve's continued trading, the Government may well need to intervene.
"With suppliers vying to get their contracts resolved with administrators, it is essential that they seek third-party advice at the earliest possible opportunity and ensure cash-flow protection is at the top of their agenda. As well as attempting to renegotiate payment terms with their own suppliers, entering into 'Time to Pay' arrangements with HMRC may help them to ease the cash-flow burden and minimise operational disruption.
1.41pm GMT
As expected, Interserve will have to apply for administration & government will have to take control of services & construction provision. Another main contractor/support services failure & subcontractors will feel the brunt of it as with Carillon.#ukconstruction #Interserve
1.31pm GMT
The Telegraph's Ben Marlow makes an excellent point -- thousands of small investors have been wiped out, because two large hedge funds refused to support the Interserve rescue.
He's referring to Coltrane, of course, and Farringdon Capital Management (a Dutch hedge fund which owned around 7%).
Worth stepping back for a moment to consider that the actions of two hedge funds have effectively just wiped out 16,000 small shareholders in Interserve by blocking the rescue deal. Many of those work are regular people - builders, cleaners etc - that work for the firm
1.25pm GMT
Here's our news story on the Interserve collapse:
Related: Interserve to go into administration after rescue deal rejected
1.21pm GMT
Labour MP Rachel Reeves says Interserve's collapse shows the government should stop outsourcing vital services to the private sector.
First Carillion and now Interserve. The gov't model of outsourcing services to cut costs has failed. It is time to bring these contracts back in-house. https://t.co/yjfvTqBmpo
Interserve had a string of PPP/PFI deals on its books, incl a lossmaking one with @MoJGovUK. Philip Millward said: "What happens in these deals is suppliers are squeezed so much on cost they end up 'buying' large govt procurement contracts." @PPLvsPFI https://t.co/WnuInSxAUz
It really was just a matter of time. I wonder how many more will follow? BBC News - Interserve: UK outsourcing giant loses rescue vote https://t.co/yMMIbtuBWN
Interserve will 'likely' go into administration after shareholders rejected a debt-for-equity swap that would have kept it as a publicly listed company. Interserve is adamant operations will carry on as normal. Shareholders, though, have been completely wiped out now.
12.58pm GMT
Interserve's fate was sealed once its biggest shareholder, hedge fund Coltrane Asset Management, opposed the deal.
It wasn't prepared to see its 28% stake shrunk to just 1.5%, through the debt-for-equity plan drawn up with its creditors.
12.50pm GMT
Interserve's shares have now been suspended - although not before tumbling to 6.2p, down a third today.
Shareholders had already suffered huge losses, as the company's financial position deteriorated:
That's it. Interserve almost definitely going into administration after shareholders voted against a debt-for-equity swap. pic.twitter.com/wburgpLzY8
12.43pm GMT
Earlier today at the emergency general meeting, the press asked an advisor to Coltrane how the US hedge fund had voted. He said: "I voted for Donald Trump".
Pretty flippant when you consider this company employs 45,000 people in the UK and manages key public services.
12.37pm GMT
NEWSFLASH: Shareholders in UK outsourcing firm Interserve have voted AGAINST the company's rescue plan.
Over 60% of investors rejected the debt-for-equity scheme, which would have almost wiped them out and handed the company to its creditors.
The board of directors of the Company is convening an urgent board meeting to consider its options. In the absence of any viable alternative, it expects to implement an alternative deleveraging transaction, which is likely to involve the Company making an application for administration and, if the order is granted, the immediate sale of the Company's business and assets (i.e. the entire Group) to a newly-incorporated company, to be owned by the existing lenders. This transaction would achieve substantially the same balance sheet and liquidity outcomes for the Group as the Deleveraging Plan.
The alternative transaction will be implemented very quickly and via a carefully-managed process and the administration and sale is expected to be completed this evening, ensuring that the business will continue to operate as normal for customers and suppliers.
12.33pm GMT
After a wild week, the Brexit crisis has calmed down today. MPs will be holding meetings (and conversing on WhatsApp) about the way ahead, now that parliament has voted to seek an Article 50 extension.
#Breaking The DUP is holding "ongoing and significant discussions with Government" over Brexit, the Press Association understands
The uncertainty around the Brexit outcome remains very high and will continue to weigh on investment, hiring and spending decisions, which is credit negative for UK debt issuers
While the EU authorities have signalled that they will certainly consider a request to extend the Brexit process, it is not certain that they will agree to an extension
12.06pm GMT
Back in the UK, Sky News are reporting that Arcadia - Philip Green's retail empire - is about to be shaken up -- and that could mean job losses.
Sir Philip Green is accelerating efforts to restructure his Arcadia retail empire through a programme that could involve announcing significant numbers of store closures and substantial job losses as soon as next month.
Sky News has learnt that the billionaire tycoon and his advisers are working on proposals to unveil a Company Voluntary Arrangement (CVA) - a form of insolvency mechanism - within a matter of weeks.
EXCLUSIVE: Sir Philip Green's retail empire, which includes Top Shop and Dorothy Perkins, is drawing up plans to launch a Company Voluntary Arrangement within weeks that would - if approved by creditors - trigger store closures, rent cuts and job losses. https://t.co/ZJIxeCMIXA
11.15am GMT
China's premier Li Keqiang is also concerned about the state of the global economy.
Speaking in Beijing today, Li says that China has "encountered new, downward pressure, and promised to do more to help the economy.
"Of course, we are faced with many uncertain factors this year....
We can deploy quantity-based or price-based policy tools such as reserve requirements and interest rates. This is not monetary easing but to more effectively support the real economy."
Pompeo on a meeting with Trump & Xi: "Whether it's the beginning or middle of April or even take as couple weeks longer we ought to get this right. Hopeful the two leaders can come together to get a trade deal that will benefit not only America but the rest of the world as well."
10.58am GMT
One for the chartists...
European indices moving higher, no new news but key longer-term levels being broken... pic.twitter.com/xvOczl5aEa
10.56am GMT
Back to Japan... and Uhuru, the Japanese-based IoT [Internet of Things] company backed by Softbank, reckons the Bank of Japan is being "typically conservative".
CEO Takashi Sonoda tells us:
"The Bank of Japan is being typically conservative and basing outlook on historical data. The general mood in Japan is one of confidence. This is especially true in the area of technology.
Japan is positioning itself to be at the forefront of the data distribution economy and is confident this will grow rapidly."
10.45am GMT
UK outsourcer Interserve, which handles thousands of government contracts including cleaning hospitals and prisons and providing school meals, may be about to fall into administration.
A pre-pack administration would allow the firm to keep operating:
Ahead of the crunch vote on the financial restructuring of government contractor Interserve, i'm told largest shareholder Coltrane is refusing to budge and will vote against. Means a pre-pack administration is on the cards.
It sounds bad but is unlikely to result in disruption to the many public services run by Interserve, at least if you believe the company and the Cabinet Office. But it does speak to underlying problems in outsourcing and construction industries.
Related: Interserve could enter administration as it fights for restructuring
10.39am GMT
Overnight, German carmaker Volkswagen and its former chief executive Martin Winterkorn have been accused of defrauding US investors.
My colleague Jasper Jolly explains:
The US Securities and Exchange Commission is suing Volkswagen and its former chief executive, accusing them of defrauding investors by making "deceptive" claims about the environmental impact of its cars.
The regulator said that from 2007 until 2015, VW carried out a "massive fraud" when selling securities and half a million cars it described as clean diesel, when executives knew about the extent of the cheating, the SEC alleged. The cars emitted 40 times more harmful nitrogen oxides than allowed under US rules.
Related: US SEC sues Volkswagen and ex-CEO over diesel scandal
10.24am GMT
Vincent-FrAdAric Mivelaz of Swissquote Bank says the Japanese economic outlook has deteriorated.
Economic headwinds forced the BoJ to revise exports and production downward. January exports dropped -9% (prior: -5.80%), their lowest in three years and the third consecutive drop while imports have rebounded 0.50% (prior: -2.20%) in the same period.
There was an unexpected pick up in the January current account balance of JPY 600.4 billion (prior: JPY 452.8 billion) amid a sharp rise in investment income due to an expansion phase in financial markets, yet the drop in January machine orders by 5.40% suggests further slowdown in Q1.
10.12am GMT
As I was saying....
Haruhiko Kuroda, who owns half of the Japanese government bond market, says Modern Monetary Theory sounds like an extreme idea https://t.co/KhP5yR0vbR pic.twitter.com/a9rgFePZLG
9.43am GMT
Japan's stock market rallied today, as investors calculated that the BoJ won't tighten monetary policy soon given the weak global outlook.
European stock markets have also picked up pace, hitting their highest level in five months this morning.
A report that more progress had been made in trade talks between US and China calmed market jitters and lifted Asian markets overnight. Sentiment was also supported by news that the UK Parliament voted to postpone Brexit.
9.00am GMT
In an ironic twist, the Bank of Japan governor also criticise Modern Monetary Theory, claiming the idea is extreme.
Asked about MMT (very broadly speaking, the idea that government deficits aren't intrinsically bad, unless they fuel inflation), Kuroda told reporters:
I think it is an extreme argument that won't be accepted widely.
The government holds responsibility over fiscal policy and Japan's public debt is very high. It's important to improve Japan's fiscal health in the long term."
Kuroda finally chimes in on modern monetary therory, saying it seems like an "extreme idea".
Of course Japan has basically been living MMT for the past three decades, with one crucial exception - you have to *pretend* that you actually do care about the debt even if you don't. pic.twitter.com/Y1hoGo2z9k
8.31am GMT
Bjirn T Sillemann, analyst at Danske Bank, points out that Japan's manufacturing has weakened recently (activity shrank last month for the first time since 2016).
@Bank_of_Japan_e recognises economy is affected by overseas slowdown, but domestic demand remains firm. They will likely be reluctant to ease further. Side effects from the current policy is already the centre of much discussion. BoJ is likely to stay on the side-lines for long pic.twitter.com/PyKpX6hnft
8.23am GMT
BoJ governor Kuroda insisted that he's not giving up on getting Japan's inflation rate up to 2%.
He told reporters:
"I don't think there is a need to make any changes to our price target."
"Over the longer term, the BOJ will probably have to reconsider again what the best policy framework is, given that it will take a very long time to hit the price target."
8.16am GMT
There's a danger that economic weakness could drag Japan close to recession again (it shrank in the third quarter of 2018, before expanding in Q4).
Darren Aw, Asia economist with Capital Economics, reckons the BoJ may be forced to boost its stimulus programme later this year.
There is a good chance that Japan's economy will contract again in Q1, for a third time in five quarters.
Given this, the key question for the Bank of Japan is no longer when it might retreat from its ultra-loose policy stance but whether it can do any more to support the economy."
7.55am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
"It is true Japan's exports and output are being affected by lean overseas growth. On the other hand, domestic demand continues to grow. We maintain our baseline view that the economy is expanding moderately.
"It is likely to take longer to achieve our price target.However, the output gap is improving ... Most board members think it's more appropriate to patiently maintain our current stimulus programme."
The BOJ also downgraded its assessment of exports, factory output and overseas economies. The gloomier take on the economy was also largely expected after a raft of weak data over the past month.
BoJ fails to stir growth and inflation w/ all the money printing. Global gloom forces #Japan's central bank to temper its outlook https://t.co/y1bqtqt01b pic.twitter.com/BP0QQbvbpL
The chance of overseas economies worsening further is low. It's a risk. However, the baseline scenario is for overseas economies to pick up in the latter half of this year,particularly areas that are currently witnessing signs of weakness such as China and Europe."
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