UK economy risks 'deepening downturn' as Brexit hits service sector - as it happened
UK services sector suffers contraction in March as "intense political uncertainty" hurts business
- Breaking: Services sector suffers first contraction since July 2016
- Services PMI fell to 48.9 in March, weaker than expected
- Markit: Economy is stalling, and could soon shrink
- Experts: Brexit is hurting businesses
5.27pm BST
And finally, European stock markets have closed higher.
Germany's share traders had a solid day, with industrial companies surging following stronger-than-expected Chinese service sector data.
Related: Brexit: May faces second ministerial resignation over no-deal refusal - live news
3.30pm BST
Andy Bruce of Reuters has spotted that this morning's UK PMI data has weakened to levels usually associated with interest rate cuts...
WELCOME TO CUTSVILLE, INTERESTRATELAND!
Weakest 3-months for the IHS Markit/CIPS UK services #PMI since the Double Dip scare of late 2012.
I doubt this will come as a surprise to the Bank of England.
https://t.co/myaAbt1XYm pic.twitter.com/aKRk8brT6P
3.28pm BST
Back in the UK, the group representing London's financial industry says the contraction in Britain's service sector highlights the urgent need to resolve Brexit.
Catherine McGuinness, Policy Chair at the City of London Corporation, says:
"The slump in the services sector is an extremely worrying development, demonstrating the real strain that continued uncertainty is putting on the economy. Businesses up and down the country are cutting back on investment amid the Brexit limbo that has gripped the country since 2016.
"This is a timely reminder that a thriving services sector is crucial to a healthy UK economy. It accounts for 80% of the UK economy and it is high time that this is recognised by politicians. We therefore welcome today's talks between the Government and Opposition and hope that they can put their differences aside to find a pragmatic solution that puts people and business first, commits to protecting the services sector and provides much needed certainty."
3.26pm BST
Just in: America's service sector slowed in March, but still outpaced China and the eurozone.
The ISM's monthly PMI index of US services companies has dipped to 56.1, down from February's rollicking 59.7.
The ISM Non-Manufacturing PMI index slumped to 56.1 in March from 59.7 in February, below expectations of 58. The reading pointed to the weakest expansion in the services sector since August of 2017, amid a slowdown in production and new orders. Trading Economics.
1.52pm BST
Newsflash: American companies only created 129,000 new jobs last month, fewer than expected, and the weakest since September 2017.
That's according to the monthly ADP report, tracking private sector job creation.
ADP Shows Weakest Job Gains Since Sept 2017 As Manufacturing, Construction Shrink. Awaiting NFP on Friday. pic.twitter.com/3Gk5n8ZduB
1.37pm BST
The US stock market is expected to follow Europe and Asia's lead by rallying, when New York opens in an hour's time:
US Opening Calls:#DOW 26290 +0.42%#SPX 2881 +0.48%#NASDAQ 7549 +0.64%#IGOpeningCall
1.00pm BST
Back in the markets, shares are still up across Europe today on hopes of a breakthrough in the US-China trade talks in Washington later today.
"News reports that both the US and China are close to a resolution of the trade dispute buoyed Asian equity markets this morning. In addition, the latest Chinese PMI data shows that the service sector is running at its fastest pace in 14 months.
Recent monetary and fiscal policy easing is starting to filter into the economy.
12.25pm BST
Here's my colleague Richard Partington on the growing risk that Britain's economy starts shrinking this year:
The British economy is at risk of sliding into a deepening downturn after stalling in the first quarter, following the weakest performance in the private sector in almost seven years as Brexit approaches.
In the latest sign the gridlock over leaving the EU is extracting a high price from the economy, the survey from IHS Markit and the Chartered Institute of Procurement and Supply showed that overall business activity stalled in March.
Related: UK economy at risk of shrinking as Brexit chaos hurts service sector
12.05pm BST
Economists at Danske Bank point out that the slowdown in the eurozone hasn't made life easier for UK firms.
PMI composite signals the #UK stagnated in Q1. Lots of anecdotal evidence #Brexit uncertainty has hit demand in recent months - weakness in rest of Europe does not help either. $EURGBP pic.twitter.com/5koPXdhfBw
11.43am BST
Italy's service sector outperformed the UK last month - quite an achievement, given its economy is in recession.
Italy Services business activity increased quickly in March, as new order growth rose to the fastest in six months, but new export sales declined further. More: https://t.co/5Asjc8M5Nr pic.twitter.com/PggP8ILQPx
11.10am BST
The AFP newswire blames "Brexit turmoil and flat economic growth" for the news that Britain's "vital services sector" has shrunk for the first month in almost three years.
The March 2019 reading shocked economists because market expectations had been for a drop in the index - which is regarded as a crucial barometer of UK business activity - to 50.9 [not the 48.9 recorded]
"The latest UK services PMI makes it clear that the economy is being hit hard by all the uncertainty in surrounding Brexit," noted ING economist James Smith.
11.01am BST
Alpesh Paleja, the CBI's principal economist, agrees that Britain's services companies are now struggling:
Both the PMIs and @CBItweets growth indicator are consistent with activity slowing to a halt in Q1. The anecdote from both is the same: Brexit uncertainty holding back pipelines of work, corporate sending decisions and household confidence. https://t.co/ki6paCY11K
10.49am BST
The UK's service sector slump comes just as rival firms across the Channel are picking up.
Germany's services economy, for example, grew at its fastest rate in six months. Its latest PMI index came in at a punchy 55.4 this morning, much stronger than the UK's 48.9 [reminder: 50 points = stagnation].
10.39am BST
This week's PMI reports show that the services sector is underperforming the rest of the economy.
While the UK service sector contracted unexpectedly in March (with a PMI of just 48.9), manufacturing expanded much faster thanks to stockpiling (its PMI jumped to 55.1).
10.27am BST
Worryingly, UK services companies have now reported falling new orders for three months running.
That hasn't happened since 2009 -- when the world economy had plunged into recession.
#UK #services #PMI shows new business contracted for 3rd month in a row in March; 1st time for this since Q1 2009. Businesses reported to be deferring or cancelling spending amid intense #Brexit uncertainties, #consumers limiting discretionary spending. Export demand fell
10.21am BST
Some service sector companies will be doing well out of Brexit uncertainty -- such as lawyers, whose billable hours must have spiked as clients seek advice.
But many others are hunkering down, explains Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking,
"Although there are still sub-sectors that are doing well in the current circumstances - such as some parts of professional services that thrive amid uncertainty - many others are opting to conserve cash, limit investment and keep a tight eye on costs until the fog lifts.
"Only when firms do get some greater clarity and can begin to plan properly again will we see how much of the current challenges are caused by underlying trends, such as slowing global growth, and how much is down to a temporary stall in confidence."
10.11am BST
Simon Harvey of Monex Europe says the services reports shows that Brexit anxiety is hurting UK businesses:
Services sector hindered by lack of investment due to Brexit and a tight labour market. Discounting the July 2016 result, this was the joint lowest services PMI of the decade. @graemewearden this doesn't make for good reading as Brexit continues to drag.
Sharp drop in UK services #PMI will heighten concerns #Brexit uncertainty is beginning to weigh more heavily on growth. Markit noted it was consistent with stagnating growth in Q1. One caveat is that sentiment also fell sharply around the referendum but activity did not. #GBP pic.twitter.com/SSIGEXEdvc
Britain's economy looks likely to shrink over the coming months after Brexit worries caused the dominant services sector to contract for the first time in nearly three years.
UK headed for downturn as Brexit worries hammer services sector: PMI https://t.co/jyt0O0mNYc pic.twitter.com/fBqiXt6Zhv
10.10am BST
The PMI report also shows that some UK firms have been forced to slash prices to boost sales.
Good news for consumers, but a worrying sign for economic growth....
Stalling UK economic growth has been accompanied by the weakest rise in selling prices for goods and services since July 2016, according to the #PMI surveys. March saw an increased number of firms offering discounts to stimulate demand. Suggests #CPI will fall in coming months pic.twitter.com/7i7yg2P8vn
9.55am BST
Duncan Brock of the Chartered Institute of Procurement & Supply is very alarmed by the contraction in the UK service sector last month:
He blames the Brexit deadlock:
New orders fell for the third consecutive month and a drop in overall business activity for the first time in two and a half years has left the services sector facing a bleak near-term outlook.
"Worried consumers fearful of rising living costs stayed away from discretionary spending and corporate clients held back on major decisions, preferring to defer big ticket projects until the Brexit deadlock is lifted.
9.52am BST
This chart explains why IHS Markit fears Britain's economy could soon be shrinking.
9.44am BST
Aside from the brief dip seen after the EU referendum, today's service sector PMI is the joint- weakest seen over the past decade.
It equals the previous low point recorded in December 2012.
9.37am BST
Newsflash: Britain's service sector contracted last month, for the first time since the 2016 EU referendum.
Data firm Markit reports that service sector business activity shrank in March. They blame a lack of new work as corporate clients resisted signing up to new contracts due to "intense political uncertainty".
*U.K. MARCH SERVICES PMI FALLS TO 48.9 VS 51.3; EST. 50.9
"A drop in service sector activity indicates that UK GDP contracted in March, with the economy stalling over the first quarter as a whole and at risk of sliding into a deepening downturn in coming months. Both the services and construction sectors are now in decline and manufacturing is only expanding because of emergency stockpiling ahead of Brexit.
"The underlying picture of demand is even worse than the headline numbers suggest. Service sector order books have contracted at the steepest rate since the height of the global financial crisis in 2009 so far this year, with companies reporting that Brexit uncertainty has dampened demand and led to cancelled or deferred spending, exacerbating a headwind from slower global economic growth.
9.24am BST
Back in the markets, shares in fashion chain SuperDry have slumped by 12% after the company's co-founder won a seat back on its board -- and the rest of the board resigned.
Against such a backdrop it is difficult to be optimistic about the group's prospects until the dust settles, which means it will be incumbent on any new management to steady the shop quickly or risk further share price declines towards the five year lows we saw at the end of 2018 at 354p.
Since January last year the share price has fallen off a cliff from peaks of 2101p, a decline of over 75%, so it is clear that radical surgery is required. The big question is whether Julian Dunkerton is the man to do it.
This was not the scenario we envisaged when we made Superdry our "Tip for 2019", but recovery hopes spring eternal (ahead of the pre-close update on May 9th) and we look forward to the Dunkerton camp putting their money where their mouth is and topping up their shareholdings.
Related: Superdry: Julian Dunkerton wins battle to rejoin firm - and entire board resigns
9.10am BST
Newsflash: The Eurozone service sector has grown at its fastest rate in four months.
It's another sign that the global economy may have turned a corner, after several weak months.
Good news for Eurozone business morale.
Services PMIs rebound in March: Spain 56.8 (prev 54.5, exp 55.0); Italy 53.1 (prev 50.4, exp 50.9); Germany 55.4 (prev 54.9, exp 54.9); France 49.1 (prev 48.7, exp 48.7); Eurozone 53.3 (prev 52.7, exp 52.7) @graemewearden
"The final eurozone PMI for March confirms the sluggish end to the first quarter, with business growth ebbing to one of the most lethargic rates seen since 2014.
"Only at the turn of the year, when business was hit by headwinds such as widespread 'yellow vest' protests in France and an auto sector struggling with new emissions regulations, has growth been slower over the past four years. The rebound from these temporary headwinds has clearly been disappointing and is already losing momentum, led by a deepening downturn in manufacturing. The goods producing sector reports that global growth worries have intensified, meaning customers continue to pull back on spending.
9.00am BST
European stock markets have followed Asia's lead, with strong gains in most markets.
Germany's DAX is leading the charge, up 1.3%, with Italy's FTSE MIB gaining 1%.
US President Trump's trade taxes hurt US listed companies. This caused the equity market to underperform the economy dramatically last year. Hopes of an end to those taxes have caused a remarkable equity rally this year. Now Chinese Vice Premier Liu arrives in Washington to try and do a deal. Markets already expect a deal.
8.53am BST
In another encouraging sign, China's private sector has expanded at its fastest rate in nine months.
The latest PMI data from China shows that manufacturers and service sector firms posted a stronger performance in March. Service companies led the way, with the fastest surge in new orders in 14 months.
Chinese companies also saw an upturn in foreign client demand at the end of the first quarter. In the service sector, new export sales rose at the second-strongest rate since December 2017 amid reports of greater activity in international markets. Meanwhile, manufacturing firms signalled a fractional increase in new export orders, following a decline in February
8.35am BST
Theresa May's call for a Brexit compromise is "huge news", says Jim Reid of Deutsche Bank.
He believes it could lower the change of a general election this year -- unless May's administration is brought down by internal infighting over the plan.
She is seemingly now prepared to back down on her prior red lines and also prepared to let Parliament decide on the outcome if she and Mr Corbyn can't. Recall that the customs union option came within 3 votes of passage on Monday.
If parliament could muster the votes to pass that plan or an even softer outcome, PM May has now, for the first time, implied that she would negotiate that with the EU without calling for elections. The removal of that risk and that of hopes of a compromise supported the pound as it rallied +0.88% off its intraday lows after her words. In theory this is very positive news for the pound assuming the Conservative government survives the shrapnel from the internal party in-fighting that this will bring.
Related: Theresa May calls for talks with Jeremy Corbyn in attempt to save Brexit
8.17am BST
The pound has hit a one-week high, following Theresa May's dramatic decision last night to reach out to the opposition Labour party for a Brexit compromise.
The move, with barely a week until Britain could crash out of the EU, has enraged May's Conservative party. But it's been received more positively in the City, as it could potentially lead to a softer Brexit.
Some Tories clearly angry with Theresa May but she really had no other choice - the ERG have scuppered her deal and Parliament has the will and the power to prevent No Deal and secure a delay. There is no other magic option
As ever with Theresa May she waited to make her move until she really had no other options - one of the reasons we are where we are today!
8.02am BST
Former Nissan chairman Carlos Ghosn's battle with the Japanese authorities has taken an intriguing twist today.
Ghosn has taken to Twitter to declare he's preparing to reveal "the truth" about recent events and announced that a news conference would be held on 11 April.
"I'm getting ready to tell the truth about what's happening. Press conference on Thursday, April 11."
I'm getting ready to tell the truth about what's happening. Press conference on Thursday, April 11.
7.54am BST
The Financial Times has cheered the markets by reporting that the US and China are 90% of the way towards a trade deal.
They say:
Top US and Chinese officials have resolved most of the issues standing in the way of a deal to end their long-running trade dispute but are still haggling over how to implement and enforce the agreement, people briefed on the talks have said.
Liu He, China's vice-premier, was preparing to meet Robert Lighthizer, the US trade representative, and Steven Mnuchin, the US Treasury secretary, for a potentially climactic negotiation session starting Wednesday in Washington. The talks are the latest in a series of meetings over the past four months.
US and China draw closer to final trade agreement https://t.co/xSmmn2KWRd
7.45am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
"We expect to make more headway. I can't report any of the details, but it's a larger, grander discussion than anything we've had before in U.S.-China trade relations, and there's a certain amount of optimism.
European Opening Calls:#FTSE 7401 +0.14%#DAX 11850 +1.44%#CAC 5461 +1.02%#MIB 21721 +0.92%#IBEX 9440 +1.06%
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