Markets rally as Federal Reserve raises growth forecasts and cools rate rise fears – as it happened
Rolling coverage of the latest economic and financial news
- Latest: Wall Street at record close
- Jerome Powell dampens talk of tapering
- Fed predicts US will grow 6.5% this year
- Majority of Fed policymakers still don't expect rate rise before end 2023
- Powell: Love to see faster European growth, and smoother vaccine rollout
8.39pm GMT
And finally... here's a round-up of expert reaction to the Fed meeting.
Anna Stupnytska, global economist at Fidelity International, says the Federal Reserve sent a dovish message today (helping to push Wall Street to those fresh highs).
The combination of incredibly easy financial conditions, which hardly tightened over the past few weeks, accelerating vaccination campaign, another substantial fiscal package recently legislated and re-opening prospects on the horizon is certainly boosting Fed's tolerance to higher yields.
While inflation and growth forecasts were revised up over the forecasting horizon, the median dot remained unchanged, suggesting no hikes through 2023. This sends a dovish message, revealing that the Fed is serious about pursuing its new FAIT [flexible average inflation targeting] framework."
The updated economic projections released after the Fed's mid-March meeting show that officials expect strong economic growth this year to have only a transitory impact on inflation, which explains why most still aren't thinking about thinking raising interest rates.
Even if inflation proves more stubborn, we expect their new framework will allow them to justify leaving rates unchanged over the next few years.
As widely expected, the Fed's new growth forecasts were a major uplift to December's stale predictions, reflecting recent improvements in US macro momentum, the new administration's fiscal stimulus and vaccine-boosted reopening trends. Real GDP forecasts of 6.5%, 3.3% and 2.2% for 2021, 2022 and 2023 and Core PCE forecasts of at 2.2%, 2.0% and 2.1% were typically quite close to consensus expectations.
What was most interesting here was that, despite these forecasts and the Fed's projected decline in the unemployment rate from over 6% today to 3.5% in 2023, the consensus view from Fed governors is that they expect to keep interest rates on hold throughout 2023. While bond markets can take comfort from the Fed delivering on its promise to go slowly with rate hikes, despite inflation creeping above the 2% target, the monetary tide is nevertheless turning. Whereas, back in December, only five of 18 Fed officials predicted higher rates in 2023, seven now expect a rate hike in that year and a third of the committee expects that more than one will be needed. Four participants now project hikes for 2022, compared to just one in December.
Chair Powell had to walk a tightrope in the press conference, balancing a rosier outlook against the Fed's commitment to let the economy run hot. The recent swings in Treasury yields highlight that investors are still not fully comfortable with numerous aspects of the Fed's new target - what exactly their tolerance is for higher inflation, what inclusive full employment looks like in practice and how close to these goals the Fed needs to be before it begins to remove accommodation.
As growth picks up sharply in the coming months, all of these uncertainties point to the potential for ongoing volatility in bond markets. This may create periodic bouts of instability in risk assets but overall we expect the vaccines, stimulus cheques and consumers looking to make up for lost time to translate into strong corporate earnings in the second half of the year, which should propel stock markets higher by year end."
8.28pm GMT
Both the Dow and the S&P 500 have both closed at record highs, in fact, as worries about US interest rate hikes are soothed by the Fed.
Yet another new record high for the Dow Jones Industrial Average. For the first time ever, the Dow closed above 33,000 - specifically 33,015 - up 189 points. That's probably good news for your 401(k).
S&P 500, Dow jump to record highs after Fed maintains outlook for near-zero rates, quells inflation concerns https://t.co/PQ8KTLQwOY by @emily_mcck pic.twitter.com/mXHmx3YNQQ
8.11pm GMT
Stocks have closed higher on Wall Street, as concerns that the Fed was moving towards an earlier interest rate hike faded.
8.07pm GMT
The US dollar has fallen, after the Fed raised its growth forecasts and pushed back against suggestions that it could taper its bond-buying programme soon.
This has pushed sterling up by eight-tenths of a cent, to $1.396.
Dovish Fed weighs on the Dollar. Euro jumps to almost $1.20 as Fed sees inflation bump short-lived. pic.twitter.com/1B1CtxT62z
7.59pm GMT
Q: Are the supply chain bottlenecks getting better, or worse?
Jerome Powell saying it's impossible to say for sure.
7.55pm GMT
Q: Households are sitting on a lot of excess savings. How much will that affect inflation, and will it be transitory?
Powell says the Fed is looking at how people will spend when the economy reopens, and used very conservative, mainstream assumptions.
You can only go out to dinner once per night, but a lot of people can go out to dinner.
7.47pm GMT
More reaction....
Powell doing a fine job of keeping maximum employment sufficiently loosely defined to give FOMC wriggle room as US economy evolves. Smart policymaking - if disappointing for those looking to narrow down timing for lift off. Will be a theme again & again in 2021 press conferences
Honestly, people, as long as yields are rising because of stronger growth expectations and not inflation expectations, we just don't care very much - Powell, roughly.
7.45pm GMT
Jerome Powell does not sound concerned that achieving high employment could trigger a surge of inflation.
There was a time when there was a tight connection between unemployment and inflation, he says. That time is long gone, Powell insists [a nod to the demise of the Phillips Curve].
Now @AnnekenTappe Can you talk about the relationship about persistent unemployment and inflation?
Powell: Well, the Phillips curve is deader than this dude, so... pic.twitter.com/M8AB02Z519
7.33pm GMT
Here's the key message from a chuckling Jerome Powell today - it's not time to start talking about talking about tapering the Fed's stimulus programme.
Now is not the time to talk about tapering, Fed Chair Jerome Powell says. "When we see that we are on track to achieve substantial further progress, then we will say so well in advance of any decision to actually taper." https://t.co/wkAsg7UITW pic.twitter.com/JBzrI4wltF
7.26pm GMT
Jerome Powell is spending a lot of his press conference batting away questions about when the Fed might tighten policy.
His main point is that economic uncertainty is still high, so liftoff' will depend on outcomes which are currently highly uncertain.
The gist of Powell's answers so far has been that the economy has a lot further to go than inflation hawks realize. Currently passed fiscal stimulus has things headed toward liftoff" (propelled by fiscal support), but he hasn't yet mentioned escape velocity" (self-sustaining).
#Powell
-expect we will begin to make faster progress on labor mkts, #inflation as year goes on, will have to see it first
-we've laid off very clear guidance on rate liftoff
-will wait to hike until requirements are clearly met
- resisted quantifying comfort level for inflation
7.20pm GMT
Q: Given the problems in Europe's economy, could the eurozone drag the US recovery down?
Fed chair Jerome Powell agrees that the US and European recoveries are diverging, as happened after the financial crisis. As before, the US is leading the global recovery. He points out that the Fed's mandate is domestic - maximum employment and price stability - but it does monitor developments abroad. Very strong US demand, as the economy improves, is going to support global activity as well, he predicts, as it should mean the US imports more from abroad.
And Powell adds:
I'd love to see Europe growing faster. I'd love to see the vaccine rollout going more smoothly.
I think we're in a good place.
#FED Chair #Powell sends a not-so-friendly greeting to the #EU: I'd love to see Europe growing faster and I'd love to see the vaccine roll out going more smoothly." He is not the only one.. #Handelsblatt
"I'd love to see Europe growing faster and see the vaccine rollout going more smoothly"
--Powell
#Powell on diverging recoveries, U.S. v Globe, we can help the world with our demand, would love to see Europe growing strongly.
7.06pm GMT
Jerome Powell also cautions that it will take time for the labor market to recover from the pandemic.
Even with a rapid economic bounceback, there are 10 million people that need to get back to work, and it's going to take some time for that to happen.
Fed Chair Powell on the labor market still in dire straights:
"There are in the range of 10 million people who need to get back to work and it's going to take time for that to happen."
"Realistically, given the numbers, it's going to take time." pic.twitter.com/T4sV6x1tv5
Powell striking a balance on the outlook. He says there's no doubt we're moving in the right direction, but the virus isn't quashed yet and there are still ~10 million that need to figure out ways to get back to work. "The faster the better...but it's going to take some time."
7.06pm GMT
Powell points out that the US is still fighting the Covid-19 pandemic, and the path of the virus remains an important factor:
FED'S POWELL: THE PATH OF THE VIRUS CONTINUES TO BE IMPORTANT, WE ARE NOT ACTUALLY DONE YET.
7.00pm GMT
Here are the key points from the Fed today, via Bloomberg's Francine Lacqua:
#Fed from @business @TheTerminal
Median dot plot shows rates on hold through 2023
Seven of 18 officials see rate hike in 2023, up from five
Powell says economic recovery remains uneven'
Transient price bumps won't meet Fed's inflation goal
6.59pm GMT
On the dot plots, Powell insists that a strong bulk of the FOMC committee don't expect interest rates to increase during the current forecast period (before the end of 2023).
And he's pushing back against focusing too much about when the first US rate hike might come - pointing out that the state of the US economy in two or three years is highly uncertain.
The state of the economy in two or three years is highly uncertain, and I wouldn't want to focus on the timing of an exact rate hike that far into the future." -Powell
Powell says the Fed will keep rates low until employment goals are reached and inflation is on track to rise above 2%
"I would note that a transitory rise in inflation above 2% -- as seems likely to occur this year -- would not meet this standard" https://t.co/FICe1JQv0S
6.52pm GMT
Q: Is it time to start talking about talking about' tapering the Fed's bond-buying stimulus programme?
Jerome Powell plays down the suggestion.
Q: Is it time to start talking about talking about tapering yet?"
Powell: *laughs* not yet"
#Powell says the #Fed wants to see actual economic progress, not forecasted economic progress. Tapering conversation won't begin until then.
Talking about talking about tapering?
"Not yet" <Powell chuckles>
And that's all you need to know, for now.
6.42pm GMT
POWELL: #FOMC GDP FORECASTS HAVE BEEN REVISED UP NOTABLY - BBG
*That reflects recent fiscal policy as well as vaccinations.
6.40pm GMT
Federal Reserve chair Jerome Powell is holding a press conference now.
He explains that indicators of US economic activity and employment have improved recently, but cautions that no-one should be complacent.
Powell: No one should be complacent.
At the Fed, we will continue to provide the economy the support that it needs for as long as it takes". Further: recovery remains "uneven" and " far from complete" - path ahead still "uncertain".
6.26pm GMT
US Treasuries are recovering their earlier losses, with bond yields dropping back from their earlier 13-month highs.
Oh boy!
Median dot shows Fed ON HOLD through 2023
And yet, SEP shows 2.2% core inflation this year, 2% in 2022 and 2.1% in 2023
10-year yield knee-jerks lower. pic.twitter.com/k7l7pZzyfX
6.24pm GMT
But despite these stronger economic forecasts, the Fed is not itching to raise interest rates.
The latest dot plot shows that four policymakers expect the first interest rate rise to come next year (up from one previously).
FOMC @federalreserve Rate Decision and Fed Chair News Conference
- Median dot plot shows rates on hold through 2023
-Seven of 18 officials see rate hike in 2023, up from five
- Officials see inflation bump as short-lived
- Unemployment forecast signals rebound in hiring
#Fed's dot plot (expectations for fed funds rate)
> median expectations unchanged (red dot)
> 3 more participants see at least 1 hike in 2022 (4 in total)
> 2 more participants see at least 1 hike in 2023 (7 in total)
> 5 participants see at least 3 rate hikes in 2023 pic.twitter.com/Z4auYyx63V
6.15pm GMT
Here's some snap reaction to the Fed's upgraded economic forecasts:
#MORE The Fed expects the unemployment rate to fall 4.5% by end of year vs previous forecast for 5%
Core inflation is expected to rise to 2.2% this year but Fed will maintain its modified policy prioritizing employment recovery over inflation
Biggest takeaway from Fed statement is their economic expectations: 6.5% GDP growth in 2021 versus 4.2% in December, and unemployment at 4.5% by year end. It's 6.2% now. Even though balance sheet policies haven't changed, still a great outcome for equities.
Wow. The US economy is going to be absolutely flying in the next few years
The Fed reckons it'll hit economic growth of 6.5% this year
And thinks no rate rises till 2024! Markets will love that
But with more stimulus ahead is it heading for serious inflation?!
The Fed thinks unemployment will be down to just 4.5% by the end of this year- which would be extraordinary- pretty much as if the pandemic never happened
6.11pm GMT
The Federal Reserve has also raised its growth forecast for the US economy.
It now expects US GDP to grow by 6.5% this year, up from 4.2% forecast back in December. That's a pretty decent upgrade.
Fed officials upgraded their forecast for economic growth this year to 6.5%, up from their 4.2% estimate in Dec, while they now expect the unemployment rate to drop to 4.5% by the end of 2021. Also projecting a short-term burst in inflation this year, but just up to 2.4%.
The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak. Inflation continues to run below 2 percent. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.
6.03pm GMT
Here we go. The Federal Reserve has voted to leave US interest rates unchanged, and also not changed its quantitative easing stimulus programme....
The #Fed left interest rates unchanged in the 0.0%-0.25% range and made no changes to its QE program, as widely expected.
UnitedStates @federalreserve InterestRate at 0.25% https://t.co/K95qNOKuDQ pic.twitter.com/jp1Rm4QfL2
5.51pm GMT
Trading remains subdued on Wall Street, ahead of the Fed decision in around 10 minutes.
The Dow Jones industrial average is currently up 0.5% at 32,886 points, with chemicals firm Dow Inc (+3.5%) and construction equipment maker Caterpillar (+2.5%) leading the risers.
5.38pm GMT
A lot of attention will be paid to the Federal Reserve's new dot plot', where policymakers indicate where they think interest rates will be over the next few years.
Those dots are forecasts, not commitments, but they are a guide into Fed thinking.
Today is all about expectations, including the fabled dot plot of FOMC member forecasts. Former Fed Chair Greenspan once declared I know you think you understand what you thought I said, but I'm not sure you realize that what you heard is not what I meant."
Greenspan is no longer Fed chair, and so the dot plot was invented to replace that confusion.
The market is pricing rate hikes already for 2023 from #fomc #fed. A median dot shift for 2023 is not hawkish signalling. The hawkish risk today is 2022 dot. ONLY 1 member voted for rate hike as early 2022. Should this change , it brings forward both tapering & hike probabilities
5.18pm GMT
Ed Moya of OANDA predicts that the Federal Reserve will give an upbeat economic outlook today, while remaining dovish about the prospects of interest rate hikes.
Moya writes:
The improved outlook warrants rate hike talk but that won't likely force the Fed to move up their calls for a rate increase. Fed Chair Powell will be optimistic but patient and flexible in waiting to see how the recovery unfolds. It will be hard to justify the current level of accommodation much longer, but they should be able to get away with it for a couple more meetings.
Powell wants to avoid a communication mistake, like the moment Fed chief Ben Bernanke had in May 2013 when he triggered what is commonly called the taper tantrum" when he tipped their intentions.
Bernanke's moment triggered a bond market collapse that in a couple months sent the 10-year Treasury yield from 1.60% area to just under 2.50% in a couple of months. Powell will do his best to remain dovish and can still focus on the short-term virus variant risks to the outlook and uncertainty to how strong this economic recovery will be and last
4.49pm GMT
Back in London, the FTSE 100 index of blue-chip shares has closed down 0.6% as traders prepared for the Fed decision.
The FTSE lost 41 points to finish at 6762, having closed at a two-month high yesterday.
4.45pm GMT
Disneyland is reopening on April 30 to a limited number of guests, in another sign that the US economy is returning to normality.
"I am absolutely thrilled to say that we are going to be welcoming our guests on April 30th back to Disneyland." Disney CEO Bob Chapek announces the reopening of Disneyland, and the experience guests can expect. https://t.co/TTt6mtpXgz pic.twitter.com/rftqbDvYUW
Just announced! Magic is finally returning to the Disneyland Resort theme parks! Disneyland Park & Disney California Adventure Park are planning to officially reopen to California Residents on April 30, with limited capacity. Details on @DisneyParks Blog: https://t.co/B1Rk2iAtmv pic.twitter.com/BkD9Cq2MKh
4.27pm GMT
Rising energy prices should be on the Fed's radar today:
INFLATION ALERT: U.S. retail regular gasoline prices have now risen for **45 consecutive days**, according to AAA data. That's the longest non-stop daily streak in at least 16 years (and probably even longer -- I only have data handy from 2004 onward) | #OOTT #inflation
4.14pm GMT
Here's another chart, showing how the yield (interest rate) on longer-dated US government bonds has also risen to its highest in over a year:
Good morning, long bonds just having a casual pre-FOMC tantrum.
30-year yield is now the highest since November 2019. pic.twitter.com/z6vhrsVgLe
4.13pm GMT
Treasury yields extended gains ahead of the Federal Reserve's policy decision later Wednesday - Bloomberg pic.twitter.com/9BfbMANRmV
3.55pm GMT
US government bond yields are continuing to climb ahead of the Fed decision later today.
The 10-year Treasury yield has risen to a new one-year high of 1.68% today, as bond prices extend their recent losses.
Don't freak out
but here's the 10-year yield
pic.twitter.com/n8GBjZY494
Government bond yields are on the rise again, as the market looks to put further pressure on the Fed to take action. However, it remains to be seen if the central bank will announce any changes at this particular meeting.
Today's policy decision might come too early for yield curve control or Operation Twist, the simultaneous buying of longer-term maturing bonds and selling bonds of shorter-term maturities to twist" the yield curve and lower long-term borrowing costs.
3.26pm GMT
Cryptocurrency news: CNBC is reporting that Morgan Stanley is the first big U.S. bank to offer its wealth management clients access to bitcoin funds -- with some restrictions.
CNBC's Hugh Son has the story:
The investment bank, a giant in the wealth management with $4 trillion in client assets, told its financial advisors Wednesday in an internal memo that the bank is launching access to three funds that enable ownership of bitcoin, according to people with direct knowledge of the matter.
The move, a significant step for the acceptance of bitcoin as an asset class, was made by Morgan Stanley after clients demanded exposure to the cryptocurrency, said the people, who declined to be identified sharing details about the bank's internal communications. Bitcoin's rally in the past year has put Wall Street firms under pressure to consider getting involved in the nascent asset class.
NEW: @MorganStanley is first big U.S. bank to give wealth management clients direct access to bitcoin. The firm just told financial advisors via internal memo that it will allow access to funds from Galaxy Digital and FS Investments, ppl tell me. https://t.co/iZ7CUr5LJK
@CNBC reporting that Morgan Stanley will offer wealth management clients access to #Bitcoin, first large US bank to do so, although there are restrictions, including $BTC ownership limited to more than 2.5% of total client assets, and limited to wealth clients.
looks like maybe #bitcoin responding to the MS news pic.twitter.com/JADHcxN2V9
Wow.#Bitcoin pic.twitter.com/RI1tGFT3qG
2.31pm GMT
Thousands of workers at Heathrow Airport, including security staff and firefighters, are to stage a series of fresh strikes next month, the Unite union says.
It's the latest industrial action in a long-running dispute over pay and conditions, which has already seen strikes called in December and February (before last month's walk out was suspended after unions proposed a peace offer.).
Unite said 41 strikes will be held over a 23-day period from April 2 to 23, involving different groups of workers.
The union has accused Heathrow of planning to fire and rehire" its entire workforce, cutting their pay and conditions.
#Breaking Thousands of workers at Heathrow Airport, including engineers and firefighters, are to stage a series of fresh strikes in the coming weeks in a long running dispute over pay and conditions, Unite announced pic.twitter.com/utnuDmYTev
Unite plans 23 days of strikes at Heathrow over 'fire and rehire' plans https://t.co/0J9C1DcfmK pic.twitter.com/amMgiCd0k9
2.18pm GMT
Back in the UK, outsourcing company Capita has today outlined plans to close more offices and extend flexible working for its staff, alongside a restructuring push to cut costs.
My colleague Joanna Partridge explains:
Capita, one of the major providers of outsourced services to the UK government, aims to raise 700m by selling off assets and cutting costs.
In its 2020 annual results announcement, Capita said its experience with Covid-19 had enabled it to take steps to sustain some of the benefits and cost savings, mainly in travel and property".
Related: Capita to close more offices as working from home options increase
Call centres are to some extent, a historic capability today. There's no reason why you need to put 2,000 people in a warehouse in the UK. Those people can work from home.
It isn't dead, but there's certainly going to be a lot less of them.
1.46pm GMT
U.S. stocks were mostly lower at the start of Wednesday's session as a rise in long-term Treasury yields appeared to weigh on tech shares.https://t.co/vsmbzbICB2 pic.twitter.com/ZtvLu2BUOY
1.44pm GMT
Chemicals firm Dow Inc is the top riser on the DJIA, up 3.8%, followed by investment bank JP Morgan (+2.1%) and aerospace firm Boeing (+1.9%).
Other gainers include construction equipment maker Caterpillar (+1.4%) and fast food operator McDonalds (+1.2%), who should also benefit from the recovery.
1.38pm GMT
Wall Street has opened cautiously ahead of the Fed decision, with technology stocks (as predicted) under pressure.
Here's the early prices:
1.18pm GMT
European markets are still subdued as investors anticipate the Federal Reserve's monetary policy decision later today.
The UK's FTSE 100 index is now down 42 points, or 0.6%, at 6761, down from the two-month high seen yesterday.
Futures on the Nasdaq Composite fell 1% as Treasury yields rose yet again, putting pressure on growth stocks. https://t.co/AdmawGUVfQ
The Federal Reserve looks to take centre stage today, with traders seeking to gauge their outlook in the face of rising inflation and treasury yield expectations. The ECB may have decided to act in a bid to dampen the rise in yields, but Powell has shown little desire to target that trend.
Inflation looks to be a key topic for markets going forward, with reopening efforts expected to bring a sharp surge in prices. While the Fed and BoE are both aware of the short sharp rise in inflation that could be coming over the coming months, the big question is just how tolerant these central banks will be until they decide to tighten policy. The Fed dot plot will be crucial today, with Joe Biden's success on the stimulus and vaccination front since December meaning we are likely to see many members adjust their interest rate forecasts accordingly.
1.03pm GMT
Over in America, the number of new house-building projects and permits for new builds have both tumbled, as bad wintery weather hits construction.
Housing starts fell by 10.3% month-on-month in February, to an annual rate of 1.421m.
Supply-side issues and the winter storm affected #housing activity in a bad way during February, with starts falling 10.3% to a 1.42 mm unit pace and #building permits falling 10.8% to a 1.68 mm unit pace. That permits are well above year earlier levels (+17%) is encouraging. pic.twitter.com/3asJCNBj8K
US building permits (Feb):
1.682mln v 1.75mln exp. (prev 1.886mln)
-10.8% vs. -7.2% est. & +10.4% in prior month
US housing starts (Feb):
1.421mln v 1.560mln exp. (prev 1.580mln)
-10.3% vs. -1.3% est. & -5.1% in prior month
Starts may be weather related. Permits? pic.twitter.com/ewW9fc9z30
lumber!
U.S HOUSING STARTS (MOM) (FEB) ACTUAL: -10.3% VS -6.0% PREVIOUS
12.41pm GMT
Speaking of the eurozone... inflation in the single currency block was unchanged in February, at 0.9% per year.
Rising services and food prices were offset by cheaper energy costs compared to a year ago.
Euro area annual #inflation stable at 0.9% in February https://t.co/r3XUjYIJ05 pic.twitter.com/flpvuZ9e3J
12.18pm GMT
Here's Reuters take on the GCEE lowering its growth forecasts for 2021:
The German government's council of economic advisers said on Wednesday it expected Europe's largest economy to shrink by roughly 2% in the first quarter of this year due to lockdown measures to contain the COVID-19 pandemic.
The council cut its full-year 2021 gross domestic product growth forecast to 3.1% from 3.7% previously. It expects the economy to reach its pre-crisis level at the turn of the year 2021/22 and to grow by 4% next year.
German economic advisers expect GDP to shrink by 2% in first quarter https://t.co/KiZVrYW927 #Germany #economy #GDP #coronavirus #COVID19
12.17pm GMT
German Council of Economic Experts member Veronika Grimm says Germany needs to speed up its vaccination rollout programme:
For Germany to reach the EU target of vaccinating 70% of the population by the end of September 2021, the current number of daily vaccinations in vaccination centers must be increased by 50%.
In addition, this would require general practitioners and specialists to be involved in the vaccination."
12.06pm GMT
Updated Economic Outlook: @GCEE_en has revised its growth forecast for 2021 downwards and expects a GDP growth of 3.1% in Germany. The detailed analysis can be found here: https://t.co/FzJEZ7aLyg@GrimmVeronika @AchimTruger @WielandVolker @MonikaSchnitzer pic.twitter.com/1aA10Yu6T8
12.03pm GMT
The German government's top economic advisers have cut their growth forecasts for this year, warning that the latest wave of Covid-19 is hurting the economy.
In their latest outlook, the German Council of Economic Experts now expect GDP to only rise by 3.1% in 2021, down from 3.7% previously forecast.
Economic activity in the euro area is being curbed by the heightened infection rates and the resultant restrictions.
The greatest risk going forward is posed by further developments in the coronavirus pandemic. Progress on vaccinations will be one of the key factors determining how swiftly the economy can normalise.
Related: Benefits of Oxford/AstraZeneca vaccine outweigh any risk, says EMA
Once we manage to get the level of infections under control and vaccinate larger sections of the population, the services sector that has been hit hard by the contact restrictions and closures - such as hospitality and stationary retail - is likely to bounce back. This should help to boost growth,".
The greatest risk to the German economy is posed by a potential third wave of infections, especially if it were to lead to restrictions or even plant closures in industry,".
11.40am GMT
The lawyers who brought the landmark court case against Uber say they will be examining its proposal on minimum wage, holiday pay and pensions closely.
Paul Jennings, partner at Bates Wells, says the move is very positive', but fears Uber could be cherry-picking' parts of the Supreme Court ruling (as co-claimant James Farrar told us earlier).
This is a stark change of tack by Uber, who in the immediate wake of the Judgment stated that the ruling only applied 25 drivers.
It is obviously very positive that Uber will now honour basic social protections such as the national minimum wage and access to pensions; but important questions remain as to how Uber is proposing to calculate working time.
We do however note that Uber's new announcement does not fully adhere to the Supreme Court judgment in terms of what constitutes working time.
The Supreme Court was clear that drivers' working time begins when the app is on in the territory not just when they have a passenger in the car - it may well be that Uber consequently has to further change its business model to reconcile this conflict.
11.29am GMT
Uber has said its UK drivers will be at least 15% better off after being classified as workers, and entitled to the minimum wage and holiday pay (when they're transporting passengers...).
Reuters has the details:
Drivers will be at least 15% better off as a result of the changes that we are announcing today if they opt into the pension plan," Jamie Heywood, the app's Northern and Eastern Europe boss, told Sky News, declining to put a figure on the total cost to the firm.
We are committed to remaining absolutely competitive on pricing."
11.15am GMT
The union which took Uber to court over its treatment of drivers is pledging to press on with its legal fight, arguing that the ride-hire firm is still short-changing them'.
Last night Uber announced it would pay its UK drivers a minimum hourly wage, holiday pay and pensions - seen as a landmark moment in the gig economy world.
Related: Uber to pay UK drivers minimum wage, holiday pay and pension
It doesn't change anything for us."
The parallel I would use is think of somebody working for Starbucks, we don't say to a barista we will only pay you now for when you are making the coffees, and any other time you are there, and you will be required to be there, we won't pay you.
We don't say to people working for Marks & Spencer we will pay you less on a Monday as it's less busy and pay you more on a Saturday as there are more customers,"
Uber has come here now with something that is a day late and dollar short, we would never accept that. As a trade union we can't accept something that's below legal minimums,"
TBC we're not accepting Uber's below legal minimums offer. Uber must accept the SC ruling and pay for all hours logged in not just the time on trip. Me, @Yaseenaslam381 and our team @PHJennings1760 @galbraithmarten Rachel Mathieson & Sheryn Omeri will be back in court v Uber soon
The devil's in the detail here. Looks like Uber is only offering min wage for the time that drivers are transporting a passenger; Supreme Court said it should be for the whole time they are logged in for work. https://t.co/EWa3EwQ6uc
Uber drivers who brought the case complained Uber hires too many drivers, so they are all hanging around unpaid a lot between trips. This won't actually change that dynamic.
10.50am GMT
Back in the markets, the yield on benchmark US government debt has hit a new 13-month high, as investors brace for the Federal Reserve decision (6pm UK time).
The 10-year US Treasury yield has risen above 1.64%, up from 1.62% last night, which is its highest level since February 2020.
1.64%+, fresh high in the 10-year US Treasury #yield! pic.twitter.com/TJEiHgeOyg
Chair Powell will need to strike a balance between the improved economic outlook and the Fed's commitment to keep rates on hold until substantial further progress" has been achieved. What is at stake is two-fold: maintaining favourable financing conditions by capping the recent rise in real interest rates, while preserving the Fed's credibility and commitment to its new Average Inflation Targeting mandate.
We expect Powell to acknowledge that the passage of President Biden's $1.9tn Covid-19 relief package, combined with substantial progress on the vaccination rollout, warrant an upward revision to growth and inflation forecasts. However, the Fed will also reiterate that there remains considerable slack in the US economy and more importantly in the labour market (an estimated 10m jobs have been lost in the pandemic so far).
BREAKING:
*U.S. 10-YEAR TREASURY YIELD RISES TO NEW 13-MONTH HIGH AT 1.646% pic.twitter.com/Yd2LwTyOIm
10.33am GMT
Two of Germany's carmarkers have, ahem, motored to the top of the DAX leaderboard in Frankfurt today, amid optimism over their electric car plans.
BMW are up 4% after predicting a significant year-on-year increase in group profit in 2021.
BMW finance chief Nicolas Peter shows how profitability bounced back last year.
Final quarter's margin was the best for two and a half years. pic.twitter.com/6gcD2q3lxh
Mini will go fully electric from "early 2030s" says BMW CEO Oliver Zipse.
Last ICE Mini will be launched in 2025.
A "fully electric" Rolls-Royce is also planned.
Next models to go electric are BMW 7 series, X1, 5 series and Mini Conutryman. pic.twitter.com/YuqrAr3O3f
Frank Weber: "It's not us who decides on end of ICE, but the markets."
Of the major markets, US will "be ambivalent for the longest period of time".
Expects "corners in the US" with big ICE sales "for a long time to come".
NB: BMW is yet to set a final ICE date. pic.twitter.com/wlrt1lKmyZ
Production head Milan Nedeljkovic says Oxford plant is "secured for Mini" when brand goes fully electric (although also has Mini production in Leipzig and China).
BUT doesn't answer question whether BMW need to make batteries in the UK. (Currently imports from Germany). pic.twitter.com/ehHZHTLv2M
10.18am GMT
Russ Mould, investment director at AJ Bell, says SSP's 475m rights issue shows the uncertainty in the travel sector over the pandemic:
A lot of people are desperate to get back on a plane for a week in the sun and others want to get on a train see friends and family. However, much uncertainty remains over when travel restrictions will be lifted in the various countries in which SSP operates. Then there is the question as to whether a many people will feel confident mixing in crowded spaces so soon after the crisis.
Assuming wings get back in the sky and wheels start to turn again later this year, SSP would then have some money left over from the fundraise to invest for its future.
10.00am GMT
Foodservice company SSP, another firm battered by the pandemic, has announced plans to raise 475m from shareholders.
These measures will protect the business if the global travel sector experiences a more prolonged recovery from the pandemic.
The impact of the pandemic on working practices may have a longer term impact on both business travel in Air and commuter travel in Rail, although the impact on the Group is mitigated by its bias toward leisure travel.
9.46am GMT
After a year of disruption, P&O Cruises is restarting its domestic holidays -- with some short breaks around the UK.
But, passengers will need to be vaccinated before hopping on board at Southampton, in search of warm weather. P&O's Britannia will be cruising along the south coast of England, while Iona will head to Scotland's Inner Hebrides.
All guests of all ages must be vaccinated to come on board with us"
President of P&O cruises Paul Ludlow tells #BBCBreakfast anyone wanting to take its trips this summer, will need to have had two vaccines https://t.co/DrfcPD6n6x pic.twitter.com/De9GH6xmo6
After its fleet has been grounded for over a year, P&O is dipping its toes back in the water by offering passengers short sailings on two of its ships around the UK coastline. Coronavirus restrictions mean the ships will not call at any ports, although there will be the usual onboard dining and entertainment programme.
Two vessels, the Britannia and the Iona, will take passengers on voyages of between three and seven nights around the UK, departing from Southampton between late June and September.
Related: P&O to restart UK cruises this summer - but only for vaccinated passengers
9.25am GMT
The IEA has also pushed back against concerns that oil prices could surge this year.
In its latest monthly report, the energy agency argues that the sector is still awash with oil, with production curtailed, so a pick-up in economic demand shouldn't cause prices to spike [reminder, oil hit a 14-month high last week].
#IEA SEES NO #OIL #SUPERCYCLE AS SUPPLIES REMAIN PLENTIFUL -- this from the latest IEA report is in line with our view. Too much spare capacity on the sidelines that should keep oil markets well supplied. #OPEC estimated spare capacity: pic.twitter.com/4NOP3wrgXC
Oil's sharp rally to near $70 a barrel has spurred talk of a new supercycle and a looming supply shortfall. Our data and analysis suggest otherwise," the IEA said in its monthly report.
For a start, oil inventories still look ample compared with historical levels despite a steady decline ... On top of the stock cushion, a hefty amount of spare production capacity has built up as a result of OPEC+ supply curbs," it said.
OIL MARKET | The message from the @IEA this morning on its 5-year ahead outlook is pretty damn clear: no peak oil demand in the short-term. The agency sees global oil consumption >4m b/d higher in 2026 than it was in 2019 | #OOTT https://t.co/pVQ920sfDP pic.twitter.com/oWEPb97LBo
And yes, there's a permanent loss of demand, due to the impact of covid (as there's a GDP permanent loss). But, as the @IEA says, "in the absence of more rapid policy intervention and behavioural changes, longer-term drivers of growth will continue to push up oil demand" | #OOTT
9.13am GMT
The world's oil demand could exceed pre-Covid 19 levels within the next two years unless concrete government action and legislation leads to a much stronger move towards clean energy, according to the International Energy Agency.
Figures from the global energy watchdog threaten to dash hopes that the world's consumption of oil may have peaked in 2019, before the coronavirus pandemic caused oil demand to plummet by 9m barrels a day.
Related: Global oil demand 'could exceed pre-Covid levels without clean energy moves'
8.59am GMT
Mining stocks and property companies are pulling the FTSE 100 down this morning, as traders hunker down.
Iron ore, coal, and precious metal producer Anglo American (-2.1%), and commercial property firms British Land (-2%) and Land Securities (-1.9%) are among the top fallers.
After some vaccine heat at the start of the week, investors can get back to their other recent preoccupation - bond yields, interest rates and rising inflation.
The spotlight is going to be put on the issue by this evening's Federal Reserve meeting, and Thursday's Bank of England chaser.
8.41am GMT
The Fed could significantly hike its growth forecasts for the US today, the Financial Times flags up:
The Federal Reserve is poised to upgrade its forecasts for the US economy on Wednesday, pointing to an acceleration of America's recovery from the pandemic that will test the central bank's willingness to maintain ultra-loose monetary policy in the years ahead.
At the end of a two-day meeting of the Federal Open Market Committee, economists are expecting the central bank to make a significant upgrade to its December prediction that the US would grow by 4.2% this year, with core inflation at 1.8% and the unemployment rate dropping to 5%.
Fed poised to upgrade forecasts for US economic growth https://t.co/OBKmOxCNa0 via @financialtimes
8.28am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The financial markets are in an edgy mood, as they wait to hear from the US central bank tonight.
GS projections for Fed's latest set of dots. Expects 11 participants to show at least one hike in 2023 vs 7 showing no hikes. Of those showing at least one hike, most will show just one, but a handful will show two or more, in line with market exp of 3 rate hikes via @zerohedge pic.twitter.com/a4esqcOAzr
Given the uncertainty over the Fed meeting we would recommend reducing risk going into the meeting. Our base case is that Powell would not push back against the recent rise in rates and the dot plots would validate market's thinking that the Fed is behind the curve.
It could be a modest disappointment for investors seeking a more dovish intervention from the Fed.
There is a risk that pampered markets might consider the Fed as not dovish enough: a) Forecasts for the US economy may be upgraded. b) The rise in U.S. yields not yet ''disorderly''. The Fed isn't yet at the ''enough is enough'' point in terms of rising U.S. yields, in my view.
European Opening Calls:#FTSE 6787 -0.25%#DAX 14536 -0.15%#CAC 6049 -0.11%#AEX 683 -0.17%#MIB 24256 -0.02%#IBEX 8652 -0.07%#OMX 2177 -0.13%#STOXX 3844 -0.18%#IGOpeningCall
The Fed is expected to raise its forecasts for economic growth but at the same time retain its accommodative stance. Its previous assertion that the current inflation effect is transitory will need to be reiterated in order to avoid further uncertainty in the bond markets while for equities, any hint of a rise in interest rates earlier than expected would be unsettling.
While the current consensus is that rate rises are unlikely before 2023, the recent rise in inflation expectations will need to be addressed in view of more recent economic data suggesting that an economic recovery is already under way.
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