UK factory output in biggest fall since 2013, oil jumps after US data - as it happened

The crisis in Britain's steel industry has helped to drive manufacturing output down by 1.9% in the last year

• US crude stocks in surprise fall
• Manufacturing slowdown worsens
• Analyst: Recovery in doubt
• German backlash against the ECB
• Introduction: UK data in focus

5.48pm BST

It was a down day for European stock markets as investors decided to cash in after Tuesday's gains inspired by the signs of progress in the Greek financial crisis.

Some disappointing results from the US - notable Disney and Macy's - sent the US market lower and undermined sentiment elsewhere.

4.24pm BST

More signs that Greece may be heading in the right direction. Bloomberg reports:

The European Central Bank could discuss restoring Greek banks' access to its refinancing lines as soon as their June 2 policy meeting, people familiar with the matter said.

A new waiver on Greece's junk-rated debt will probably be proposed by the ECB board once a staff-level agreement between the government and auditors representing creditor institutions is reached, the people said, asking not to be named as the matter is confidential. A spokesman for the central bank declined to comment. The Governing Council doesn't have to accept board proposals.

3.48pm BST

Here's the complete comment from Fawad Razaqzada, technical analyst at FOREX.com, on the US inventory numbers:

The American Petroleum Institute got it completely wrong. Contrary to the API, the official data from the US Department of Energy, which has just been released, shows that crude stockpiles dropped by a surprisingly large 3.4 million barrels last week, not increase.

The drawdown may well have been due to the wildfires in Canada as the latter's main export market is the US. Indeed, US crude oil imports were down by a good 5,000 barrels per day from the previous week, according to the DoE. Imports are likely to fall further this week because of the significant reduction of oil output in Canada. News that US oil production also fell, down 0.3% week-over-week, provided further support to prices.

3.44pm BST

Brent crude is now up 1.7% at $46.33 a barrel following the fall in US oil inventories. David Morrison, senior market strategist at Spreadco, said:

Crude oil flew higher following the release of the latest inventory data from the EIA. This showed a fall of 3.4 million barrels compared with an expected build of 100,000 barrels.

Nevertheless, the charts suggest that crude is struggling to break above resistance which comes in around $46 for WTI and $48 for Brent. There's support for both contracts around the $42 per barrel level. Oil could be consolidating now ahead of another leg higher. Crude has put in an impressive rally since the beginning of the year and needs to build a base before it can push up further. However, an alternative view is that crude is losing its upside momentum.

3.41pm BST

#WTI oil has jumped on this surprise as you would expect. The draw may have been due to the fire in Canada (main oil export is to the US)^FR

Indeed, US crude oil imports were down by 5,000 barrels per day from the previous week, according to the EIA ^FR

3.38pm BST

These EIA figures do not match figures from the American Petroleum Institute, which on Tuesday reported a rise in inventories.

#CRUDE: API got it completely wrong. The official EIA data shows crude stockpiles DROPPED by 3.4 million barrels last week not increase! ^FR

3.36pm BST

Instead of an expected rise in weekly crude stocks, the latest report from the Energy Information Administration shows a surprise fall.

Crude inventories dropped 3.41m barrels to 539.98m compared to the expected 0.71m barrel increase.

3.25pm BST

Over in Spain, the country has received more than a10.5bn of demand for a a3bn 50-year bond it plans to issue.

3.24pm BST

Meanwhile Chancellor George Osborne has told a select committee that the Treasury and Bank of England are doing a "significant amount" of Brexit contingency planning.

A reminder you can follow the select committee on the EU referendum in the Politics live blog.

3.18pm BST

The NIESR has the UK GDP economic growth at 0.3% in the 3 months to April. Something for the Bank of England to think about as it votes!

3.13pm BST

UK economic growth slowed down in the three months to April, partly due to uncertainty over the EU referendum, according to the National Institute of Economic and Social Research.

It said UK GDP grew by 0.3% in the three months to April, compared to 0.4% in the first three months of the year and 0.6% late last year. Researcher Jack Meaning said:

UK economic growth continues to be subdued compared with the rates we saw at the end of last year.

Some of this slowdown is undoubtedly a result of heightened uncertainty around the impending EU referendum, and so is likely to be temporary should the UK decide to remain in the EU after June 23.

2.47pm BST

US markets have fallen back in early trading, with poor results from Disney and department store group Macy's weighing on sentiment.

The Dow Jones Industrial Average is currently down 84 points or 0.48% after a strong performance on Tuesday, while the S&P 500 has opened down 0.2%.

2.11pm BST

Just a reminder, Chancellor George Osborne is about to be questioned by the Treasury Select Committee on the European referendum.

My colleague Andrew Sparrow is following the hearing over at the Politics live blog:

Related: EU referendum: Osborne questioned by Treasury committee - Politics live

2.02pm BST

Italian Banks Are Crashing (Again) After Bad-Loan Writedowns Soar https://t.co/Q2gHT8YDDT

1.40pm BST

Shares in European banks are on the slide today, with Italian institutions under particular pressure following losses or falling profits from Banco Popolare and Banco Popolare di Milano.

The FTSE Italia banking index is currently down 3.68%.

Related: Quiet crisis: why battle to prop up Italy's banks is vital to EU stability

1.25pm BST

Back with UK interest rates, and a Reuters poll of economists shows they continue to expect the first hike - of 25 basis points - will not come until the first quarter of 2017.

They forecast rates will be 1% at the end of 2017 and 1.5% at the end of the following year, lower than previous expectation. In the last survey in April the figures were 1.25% and 1.75% respectively.

1.03pm BST

The oil price has recovered from its earlier falls, which were prompted by continuing concerns about oversupply as Canadian oil firms restarted production following the Fort McMurray wildfires.

But, ahead of the US weekly inventory data, Brent is now up 0.8% at $45.89 a barrel as Shell announced the closure of a key Nigerian pipeline, which is likely to push the country's production to its lowest level for more than two decades.

12.16pm BST

The poor UK data comes, of course, a day ahead of the latest Bank of England decision on interest rates. They are expected to be kept on hold but one former member of the Bank's monetary policy committee believes a cut would be in order:

Pretty clear MPC should now be cutting I would be voting for 50bp cut tmrw because of manufac recession bad PMIs lmkt & Brexit uncertainty

12.05pm BST

Hat-tip to the Independent's Ben Chu for this chart, showing how Britain's factory output has gone into reverse in recent months:

Charts that show Osborne's March of the Makers going nowhere & that demand is the problem: https://t.co/L7C4ySXYT0 pic.twitter.com/hENFaMIGPc

11.54am BST

Kallum Pickering of Berenberg Bank confirms that Britain's factory sector is in recession again:

This is the third time the industrial sector has entered a technical recession since 2008. After sharp declines during the Lehman-recession, in 2011 the sector contracted again for six quarters in a row.

Production industries are export oriented and are thus highly sensitive to changes in global demand and exchange rates. Since 2011, goods exports to the EU - the UK's largest export market - have fallen by 20%.

11.50am BST

Vestager says she weighed the commission's decision on 3-o2 deal and it weighs 2.56kg. "It's a very heavy decision" not affected by politics

11.36am BST

David Kern, chief economist at the British Chambers of Commerce, says Britain's manufacturing sector is in 'long-term decline'.

He blamed problems at home, and abroad:

"Despite a modest recovery in March, longer-term trends show that both manufacturing and total industrial output remain in negative territory.

While adverse global conditions remain a major challenge for manufacturing, this is now being exacerbated by a slowdown in the domestic economy

11.32am BST

Here's the Guardian's news story on the O2 takeover being red-carded.

Related: Three's takeover of O2 blocked by Brussels on competition concerns

11.22am BST

Newsflash from Brussels: The EC has decide to block the 10.5bn takeover of mobile phone operator O2.

Competition chief Margrethe Vestager has concluded that UK consumers would suffer if CK Hutchison, which already owns the Three network, also got hold of O2.

Why have we prohibited Hutchison's proposed acquisition of Telefonica UK? Factsheet: https://t.co/BbnqZTDdfC pic.twitter.com/rmpKQ9jdI3

10.30am BST

Britain's industrial sector is back in recession, for the third time in eight years.

Today's industrial production report shows that production shrank by 0.4% in January-March quarter.

Britain's industrial sector has fallen back into recession for the first time since 2012 https://t.co/DlPnA8bEUz pic.twitter.com/HquPQxxfZP

10.14am BST

We flagged up earlier that Germany, France and the Netherlands had also reported rough industrial production data this week.

So with Britain's manufacturing output falling 1.9% in the last year, there are concerns that the European recovery could be in trouble.

"There isn't too much in the data to lift economic spirits as a small increase in manufacturing output in March doesn't change the picture of an overall weak start to the year. As ever, it's a mixed picture across different sectors with a bit more evidence that the sectors hardest hit by the oil price collapse are now bottoming out while construction related sectors seem to be holding up.

"But, in line with the early warning signal from the PMI and the drop in consumer confidence, consumer facing sectors, including motor vehicles, are seeing weaker production trends at the start of the year. Whether this proves to be temporary is yet to be seen but UK manufacturers are far from alone in seeing this trend with other data from Europe suggesting that the industrial recovery is far from secure."

10.08am BST

This handy chart shows how Britain's industrial sector fared in the last three months -- not a pretty picture, alas:

UK production falls -0.4%q/q in Q1. Always a good sign when "miscellaneous" is your fastest growing sub-sector... pic.twitter.com/pn0so1exeb

10.04am BST

Today's report also shows that Britain's manufacturing output has shrunk by 0.4% over the last quarter.

That's a pretty rough start to 2016, suggesting that the slowdown in the global economy hurt factories.

The march of the makers was a veritable crawl in March and they went backwards over the first quarter!

9.46am BST

Britain's manufacturing sector has suffered its biggest annual fall in output in almost three years, in another signal that the economy is weakening.

Manufacturing output in March this year was 1.9% lower than in March 2015, according to the Office for National Statistics new healthcheck on the sector.

The largest contribution to the fall within this sub-sector came from the manufacture of basic iron & steel, which decreased by 37.3% compared with a year ago and contributed -0.3 percentage points to total production. Anecdotal evidence suggested shutdowns within the industry were contributing factors to the decrease.

9.25am BST

The boss of Britain's biggest housebuilder has warned that it could struggle to find workers if the UK leaves the European Union.

David Thomas, CEO of Barratt Developments, said this morning:

"We have a significant part of our labour force, particularly within the London market, coming from continental Europe - the free movement of labour in the European market is a positive from our point of view."

EU exit would hit workforce says Barratt chief https://t.co/UcwqJk9Nv8

9.21am BST

Oversupply fears are dragging the oil price down again this morning, and helping to push shares down too.

9.08am BST

Over in Germany, opposition is mounting against the European Central Bank's plan to stop making a500 notes.

A group called Stoppbargeldverbot -- Stop The Ban on Cash -- affiliated to the insurgent anti-euro Alternative for Germany party, has organized the Frankfurt demonstration for May 14. Its leaders see a creeping effort by the German government, commercial banks, the European Union and the ECB to eliminate cash and to subject citizens to the electronic surveillance of their financial affairs.

The ECB says printing of 500-euro notes is being halted because of concerns it facilitates criminal activities. The note will stay legal tender, other denominations will remain and Draghi has said cash will continue to have a role in payments.

9.00am BST

Today's UK industrial production report comes hot on the heels of some poor data from Europe.

Yesterday Germany, France and the Netherlands all reported disappointing figures; French factory output fell 0.3%, it was down 1.3% in Germany and an alarming 2.4% in the Netherlands.

Eurozone economic recovery showing signs of losing steam as industrial production down in both Germany & France in March

8.43am BST

European markets are falling in early(ish) trading, as City investors brace for today's UK industrial production report in an hour's time.

The Eurozone has had a pretty fantastic start to the week, the DAX crossing 10000 as investors displayed their relief at the signs of progress in regards to the Greek debt debate.

Yet the region's indices have begun to tick back this Wednesday, the DAX and CAC slipping 0.4% and 0.6% respectively. With little on the agenda until Friday's GDP data dump, and the post-Eurogroup enthusiasm unable to sustain itself for a third day in arrow, the Eurozone indices may struggle build on their early in the week spurt as the day continues.

8.26am BST

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

After two days of Greek debt drama, today looks rather quieter, I'm afraid.

We already know from the January and February data that manufacturing has come under pressure in recent months, with the Tata steel headlines keeping it in the forefront of the public's thinking, while the most recent PMI data has also been weak.