Markets hit by fears of US June rate hike –as it happened

Shares fall in Europe and Asia as America's central bank signals it could raise interest rates next month

• June rate rise "reasonable expectation" - Fed member
• Moody's: Brexit could help 1st-time buyers
• UK retail sales beat forecasts
• Revenues leviosa at Bloomsbury
• Introduction: Fed puts June rate hike on the table

6.25pm BST

The increasing fear that the US Federal Reserve could raise interest rates next month, earlier than expected, has sent global markets tumbling. Following Wednesday's more hawkish than expected Fed minutes, a number of the central bank's key figures have lined up to suggest the June meeting is "live" in terms of a possible rate hike.

Joshua Mahony, market analyst at IG, said:

Anxiety is setting in for financial markets, as the proposition of another rate hike from the Fed draws the bears out once more. Today's US open has seen the Dow crash to a two month low, bringing the FTSE down with it as rate sensitive banks benefit at the expense of the wider market. The US dollar strength continues to be a running theme, as energy, metal and materials producers suffer at the hands of a yet another sea of red for the sector.

Yesterday's Fed minutes provided the latest clue that perhaps a June rate hike may not be such a crazy idea, with the markets now factoring in a 32% chance of action. This shift from 4% on Monday to 32% today goes a long way to explain the substantial rise in the US dollar this week. With a hawkish Fed and a three year high in US CPI, the potential implications of a strong jobs report in June is starting to click in the minds of investors.

6.21pm BST

If the US Federal Reserve is considering raising interest rates, then the Bank of England may be heading in the opposite direction. Katie Allen reports:

A top Bank of England policymaker has warned that even if Britain votes to stay in the EU, underlying weakness in the economy could require more support from the central bank.

Jan Vlieghe, one of the nine policymakers who vote on interest rates, has previously floated the idea of them being cut below zero. Speaking on Thursday, he again raised the prospect of rates coming down further from their record low of 0.5%, when he said the economy could require "additional monetary stimulus" if it does not rebound after a remain vote in the EU referendum on 23 June.

5.33pm BST

Helena also reports that Handelsblatt, the German financial daily, says lenders may agree to give Greece a much large tranche of bailout aid once the reform package is passed than earlier thought. "Instead of the scheduled a5.7bn, the ailing country could receive a9bn to a11bn."

That would be enough to keep it solvent until the end of the year - both delaying another potentially explosive financial review and allowing lenders to sort out their own differences over how to deal with Greece's staggering a321bn debt load

5.30pm BST

More from Athens where a war of words has broken out on the first day of debate over the controversial omnibus bill the government has brought to parliament outlining the latest reforms the country must take. Helena Smith reports:

At 7,500 pages the omnibus bill was never going to be passed lightly. And MPs, faced with the daunting task of reading it, have ensured that debate has got off to a tumultuous start.

Highlighting the explosive mood, the former prime minister Antonis Samaras accused the leftist-led government of legislating practically everything it had ever denounced. "It is increasing Enfia [property tax] that it said it would abolish " and heating oil which we reduced," said the ex-conservative leader listing the various levies his successor Alexis Tsipras has agreed to raise in return for further bailout funds.

Since being replaced by Tsipras in January 2015, Samaras has made few public interventions.

In a caustic statement released in the last ten minutes, Tsipras' office said: "Samaras should speak publicly more often so that citizens can remember his time in power when the country's GDP was destroyed [fell] by 25 %."

4.14pm BST

*DUDLEY: 2Q SEEMS TO SHAPING UP TO BE STRONGER THAN 1Q GDP #nothard

certainly compared with what we might have expected at the start of week that's a much bigger commitment to idea of a June hike from Dudley

*DUDLEY: FINANCIAL CONDITIONS ABSOLUTELY DO MATTER

*DUDLEY: SURPRISED MKT DIDN'T PAY MORE ATTENTION TO FED SPEAKERS

4.01pm BST

Back with the Fed, and New York Fed president William Dudley has added more comments about possible rate rises.

He has echoed the comments elsewhere that June is a live meeting, and that the Fed believes markets were underestimating the probability of a rate rise. He said a June or July move was a reasonable expectation, if his forecasts for the way the US economy is going appear on track. But again, he added that the risk of the UK leaving the EU was one that needed to be considered, and the probability of Brexit will influence the Fed's decision.

3.56pm BST

Over to Greece, and the International Monetary Fund has said debt relief negotiations for the country need to focus on extended maturity periods and very low interest rates.

IMF: Greek debt needs to be restructured with long grace period, extended maturities, very low interest rates

We have exchanged preliminary views with our partners on general principles regarding debt relief. We believe that it is possible to restore debt sustainability without upfront haircuts, although this would involve providing very concessional loan terms, including long grace and maturity periods and very low interest rates.

3.41pm BST

New York Federal Reserve president William Dudley has repeated that interest rate changes are very much dependent on the economic data at the time.

In a speech confirming the Fed's desire to help households and businesses understand how the economy is progressing and how that helps determine the Fed's decisions, he said:

When asked about the trajectory for the monetary policy stance, I always point out that it is data dependent. The Federal Open Market Committee calibrates the stance of monetary policy to best achieve our twin objectives of price stability and maximum sustainable employment, taking into account our forecast for how the economy is evolving. This forecast reflects the ongoing flow of the data. Data releases that are close to our expectations have little additional impact on the forecast, while data releases that deviate significantly from our expectations can lead to more significant revisions of the forecast. It is, therefore, important for market participants and households to be able to follow the data along with the FOMC and to understand how we are likely to interpret and react to incoming data.

3.10pm BST

The market fall is accelerating as Wall Street's losses increase, following the suggestion from the US Federal Reserve minutes that a June rate rise could be on the cards.

The Dow Jones Industrial Average is now down 159 points or 0.9%, while Germany's Dax has dropped 1.2% and France's Cac has fallen 0.58%.

A triple-top down to 5900 could on be the cards if #FTSE100 breaks decisively below 6050 pic.twitter.com/AvjpVheDzK

2.51pm BST

This time it's different? pic.twitter.com/sXrFgu61r3

2.47pm BST

The prospect of a US rate hike as early as June has helped push American markets lower at the start of trading.

With the oil price also falling - West Texas Intermediate is down around 2% at $47.15 a barrel - the Dow Jones Industrial Average has slipped 51 points or 0.32%. The S&P 500 and Nasdaq both opened around 0.4% lower.

2.30pm BST

Another Fed speaker, in the form of vice chairman Stanley Fischer, but there appear to be few clues to the next rate hike in his comments.

In a speech - entitled (Money), Interest and Prices: Patinkin and Woodford - at an economics conference in New York, he said:

Faster trend growth would increase the long-run equilibrium interest rate, and what we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth.

After all that anticipation - *FISCHER DOESN'T COMMENT ON CURRENT FED POLICY, U.S. ECONOMY

Fischer is a snoozefest - doesn't comment on monetary policy.
"Over to you Dudders...!"

2.06pm BST

There is a strong case for the US to raise interest rates in June, but there might be grounds to wait until July after the UK's EU referendum, according to Richmond Federal Reserve president Jeffery Lacker.

Lacker, a notable hawk but non-voting member at the moment, told Bloomberg Radio that a vote for the UK to leave the EU posed risks to the UK and Europe and could spill over to the US.

*LACKER: BREXIT MIGHT BE GROUNDS FOR FED TO WAIT UNTIL JULY

1.56pm BST

Meanwhile, there are only tenuous signs of growth according to the latest Philadephia Federal Reserve survey.

The current business conditions index came in at -1.8 in May compared to -1.6 in the previous month, and the consensus of +3.5. The Fed said:

Firms responding to the Manufacturing Business Outlook Survey continued to report tenuous growth this month. The indicator for general activity was essentially unchanged in May and remained slightly negative. Other broad indicators also reflected general weakness in business conditions. The indicator for employment improved but remained negative. Manufacturers' forecasts of future activity tempered slightly from last month, overall, but continue to suggest confidence in future growth.

The survey's indicators for general activity, new orders, shipments, and employment all remained negative. Though indicators for future conditions fell from last month, expectations for future growth continue to be positive.

1.42pm BST

Here are the weekly jobless claims:

1.35pm BST

Another sign of the strength of the US economy - and therefore another sign that the Federal Reserve may want to raise interest rates next month - has come from the weekly jobless claims.

The number of Americans filing for unemployment benefit fell by 16,000 to 278,000 last week, although analysts had been expecting a decline to 275,000. Still, the weekly rate has been below 300,000 for 63 weeks in a row, a sign of the strong jobs market.

1.32pm BST

Commenting on the minutes, economist Howard Archer at IHS Global Insight said:

The account of the 20-21 April policy meeting reinforces belief that the ECB is firmly in "wait and see mode" following March's delivery of a major package of stimulative measures. However, the minutes do indicate that the ECB is prepared to eventually act again if deemed necessary.

The account also brings out the ECB's determination to strongly defend itself from recent intensified German criticism over its highly expansionary policy.

1.30pm BST

The European Central Bank has followed the Fed's lead, and just released the minutes of its own April meeting.

"There was general agreement that there was a need to counter the perception that monetary policy could no longer contribute to a return of inflation (to the ECB's target)."

"In light of recent public criticism...in a Member State, it was viewed as important to reaffirm collectively the independence of the ECB in the pursuit of its mandate."

"patience was needed for the measures to fully unfold over time in terms of output and inflation".

"strongly reiterated the need for other policy areas to contribute much more decisively."

12.43pm BST

The old advice to 'sell in May and go away' worked quite well in 2015 - if you timed your entry back into the market right.

It's exactly a year since the Dow Jones hits its record high - closing at 18,312 points. It then suffered quite a dive in August, due to worries over China.

Today is the one-year anniversary of the Dow's last record high. (Intraday and closing)

(via @peterschack) @CNBC pic.twitter.com/P9VYqK7Jr9

12.30pm BST

Over in Frankfurt, ECB chief Mario Draghi will be breaking out the best Prosecco.

*EUR/USD DROPS BELOW 1.1200, FIRST TIME SINCE MARCH 29

12.25pm BST

Oh dear.... Asda, Wal-Mart's UK operation, has endured another shocking few months.

Like-for-like sales across Asda's stores slumped by 5.7% in the first quarter of 2016. That's only slightly better than the 5.8% drop in the final quarter of 2015.

Oooof! Asda 5.7% slide in like-for-likes. More sales pain for the UK Walmart owned supermarket

Asda sales in 13 weeks to 30th March fell 5.7% - 7th successive quarterly fall. No wonder they cancelled the quarterly press conference...!

12.06pm BST

Shares in supermarket giant Wal-Mart just jumped by 5% in pre-market trading, after it released better-than-expected results.

Wal-Mart posted earnings of $0.98 per share, compared to estimate of $0.88 per share. Revenues also beat forecasts:

Shares of $WMT soaring nearly 5% after reporting positive earnings https://t.co/sCJVgqeZ9L

11.51am BST

Wall Street is expected to join the selloff when it opens at 2.30pm BST (9.30am East Coast time)

Whilst Europe has seen a nasty US rate-hike chatter-inspired decline this morning (the DAX and CAC joining the FTSE with 1.5% and 0.9% plunges respectively), the Dow futures aren't quite as calamitous just yet. It looks like the US index will open just shy of half a percent lower after the bell, but with Philly Fed manufacturing index and jobless claims figures to come before the session begins. There are also speeches this afternoon from Fed vice-chair William Dudley and FOMC member Stanley Fischer, with investors likely keen to hear their take on the chances of a June rate-hike.

11.25am BST

Despite the hawkish tone of last night's minutes, most economists don't actually expect the Federal Reserve to raise interest rates next month.

Derivatives traders are now pricing in a 32% probability that the Fed hikes rates at its June 14-15 meeting. That's up from 4% last week.

Rate hike probabilities pulled forward following Wednesday's Fed minutes, market sees a 61.8% chance the next hike happens in September

"In my view June should be 50%-55% priced..." -- Citi's Steven Englander

10.55am BST

After three hours of trading, the FTSE 100 is in full-blown retreat - down almost 90 points or 1.4% at 6079.

Related: Royal Mail profits slump by a third

The Fed has put the market on notice for June, and for the moment the market doesn't like it. Equities have sold off heavily this morning as investors scramble to reallocate funds towards those areas likely to benefit from rising rates in the US - namely the US dollar, Treasuries and also US bank stocks.

As a result, the rug has been pulled from underneath European markets, with the news of the EgyptAir tragedy having an impact on airline and travel names.

10.29am BST

The battle over Britain's EU referendum has switched to that dinner party favourite - house prices.

Related: First-time buyers would benefit from Brexit, says Moody's

PROJECT FEAR GOES NUCLEAR ON BRITISH NEUROSES https://t.co/NyryVR3RiS

10.20am BST

Ben Brettell, senior economist at Hargreaves Lansdown, says the rise in UK consumer spending last month is reassuring:

'The UK economy's glass was beginning to look decidedly half-empty, so today's retail sales figures are a welcome tonic to the gloomy economic mood.

Diminishing confidence ahead of the EU referendum and weak pay growth were expected to take a toll on retail sales. Indeed market researcher GfK's consumer sentiment indicator hit a 15-month low in April, which looked ominous for today's figures, but in the event fears that the referendum would have a negative impact on consumer spending proved unfounded.

9.59am BST

The pound has hit a three and a half-month high against the euro.

Sterling has hit a1.305, up from a1.301 last night, thanks to those strong retail sales figures.

Everything must go! Another month of strong UK retail sales growth (4.3%y/y) coupled with price deflation (-2.8%y/y) pic.twitter.com/Vm6DDefUp1

9.47am BST

Here come the latest UK retail sales figures....and they've smashed forecasts!

The amount of stuff bought in the shops last month jumped by 4.3% compared with a year earlier, the Office for National Statistics reports. Sales volumes were also 1.3% higher than a month earlier.

So many economists claim higher inflation as an economic cure. Yet lower inflation has plainly boosted UK Retail Sales! #GBP #BoE

In a WORLD lacking DEMAND, one country stands alone, ready to do WHATEVER IT TAKES to buy everything https://t.co/2vOVjokw30

"Clothing stores remain the main drag on growth in the retail sector, with sales hampered by unseasonal weather. However, both the volume and value of sales increased in April compared with March as lower prices boosted sales.

9.32am BST

The selloff is gathering pace across Europe, with the main indices all losing ground this morning:

With multiple Fed speakers in recent days failing to convince markets of the possibility of June hikes, yesterday's Minutes seem to have finally done the trick. The Minutes showed Fed members would deem a June hike as "appropriate" so long as economic data continued to improve. With inflation data trending towards target and improving labour market conditions, the Fed's remaining issue was convincing markets a rise was a likely scenario.

9.24am BST

The first Harry Potter readers have long since left the classroom for the world of adult mugglehood.

Reviews were consistently good with the Telegraph saying the book was: "a triumph - a book so alive it seems to jump, explode and slither out of your hands as you read."

We sold rights in Jim Kay's illustrations in 28 languages. Our re-jacketed Jonny Duddle editions of the seven Harry Potter novels continued to perform strongly in all territories.

8.38am BST

Peter Fankhauser, chief executive of Thomas Cook, is also calling for a shake-up in the school holiday system to help parents get cheaper holidays.

"UK authorities should look across the pond to Germany and Switzerland where they agree a staggered start of school holiday dates. That relieves some of the pressure. If you had an agreement from local authorities in the UK to spread the dates... that would help us as well, it would help everybody."

8.24am BST

Shares in Thomas Cook have fallen by 15% to a three-year low, after it reported a 5% drop in summer bookings.

The holiday company warned this morning that underlying profits will hit the bottom of analyst expectations. It reported that tourists are shunning Turkey, where a suicide bomber killed 10 Germans in an Istanbul square in January.

Demand for Turkey - our second largest market last year - remains significantly below last year's levels. This has impacted our German Airlines business in particular.

It will be a tough summer for #ThomasCook: bookings for this year's holiday season are down 5% overall - shares down 15% in London.

8.10am BST

The London stock market has shed 50 points, or 0.8%, at the start of trading.

Mining shares are leading the selloff, with silver miner Fresnillo sliding by 5%.

8.03am BST

Most Asian stock markets are in the red today after the Federal Reserve put a June interest rate rise on the table.

The Singapore and Hong Kong indices are leading the selloff

"Markets have looked for government stimulus as a reason for investing rather than good company economics or fundamentals. Obviously therefore if there's less chance of stimulus people are left wondering what to do.

"Yes it will be a shock to people, and I'm sure there will be a knee jerk reaction but the reality is we are nowhere near normal rates."

7.31am BST

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

Coming up today...

"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the [Fed's] 2% objective, then it likely would be appropriate for the [Fed] to increase the target range for the federal funds rate in June."

Related: Interest rates could rise as soon as June, Federal Reserve suggests

Our European opening calls:$FTSE 6109 down 57
$DAX 9887 down 56
$CAC 4293 down 26$IBEX 8727 down 48$MIB 17611 down 102

**Today highlights**

UK Retail Sales, ECB Minutes, Initial Jobless Claims, Fed's Fischer, Dudley and BoE's Vlieghe

Deutsche Bank faces angry shareholders at today's AGM as stocks have underperformed under chairman Achleitner. pic.twitter.com/QV8wbv14TK