Federal Reserve leaves rate on hold, as UK construction and eurozone growth pick up - as it happened
- Fed decision
- US jobs data in line with forecasts ahead of Friday's non-farm figures
- Eurozone GDP jumps by 0.5%
- UK construction PMI beats forecasts
7.47pm BST
Many financial experts are concluding that the Federal Reserve is getting ready to raise interest rates in June, given the language in today's statement.
Here's Moody's:
#Fed is looking through the weakness in first quarter GDP and will likely raise rates in June. #FOMC Analysis: https://t.co/G0hn5imKo8
BBG runs the best summary of today's #FOMC decision. pic.twitter.com/LcjWi1iQF0
The FOMC statement was hawkish and the Fed has clearly given a message to the markets that they think the weakness in the economic data is only temporary.
This means that the Fed is more than happy with their current strategy and more rate hikes are coming this year - at least for now.
The Fed is in no rush to raise rates too quickly as it's fully aware that rising inflation is less of a threat than tightening too fast, noting that it will stabilise around its 2% target. On the whole, today's decision changes very little in the assessment for
monetary policy. All eyes now on the minutes from the meeting and jawboning from officials in the coming weeks."
On balance, we still think that the Fed will hike again in June, although that assumes employment growth rebounds in April and May. The drop off in core inflation is a concern, but the global economic backdrop is much stronger than it was last year. Furthermore, although the Fed hiked rates twice since late last year, financial conditions have actually loosened, with the dollar and bond yields both falling, while stock markets have performed strongly.
7.17pm BST
A late newsflash: America's central bank has left interest rates on hold.
The Federal Reserve also predicted that the slowdown in the first quarter of 2017 was probably only temporary. That could be a sign that the Fed could raise interest rates in June.
Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen even as growth in economic activity slowed. Job gains were solid, on average, in recent months, and the unemployment rate declined. Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid. Business fixed investment firmed. Inflation measured on a 12-month basis recently has been running close to the Committee's 2 percent longer-run objective.
U.S. markets climb, Dow turns positive after Federal Reserve holds rates steady https://t.co/8v1fjKErO3 pic.twitter.com/BlpFj9nLcK
5.45pm BST
With better than expected eurozone GDP figures, markets managed to edge higher for the most part. Exceptions were France, ahead of the country's presidential debate later, and the UK, with investors unsettled by the increasing testy relations between the country and the European Union. The final scores showed:
4.29pm BST
Sterling has slipped back after Theresa May accused the EU of attempting to influence the outcome of the UK general election.
The pound, which had earlier climbed as high as $1.2949 against the dollar, is currently down 0.26% at $1.2902. Jameel Ahmad, vice president at FXTM, said:
While the British Pound has hardly tumbled as of writing, the comments from Theresa May on Wednesday afternoon do go some way towards disclosing how strained relations with the European Union have become after invoking Article 50, and the risk of them becoming worse are significant when you consider how tense the negotiations with the EU are likely to get over the next two years.
Related: Theresa May accuses EU of meddling in UK general election
3.38pm BST
US crude inventories dropped last week, but not as much as analysts had been forecasting.
According to the Energy Information Administration, crude stocks fell by 930.000 barrels to 527.77m, but this was below forecasts of a 2.3m decline.
#UnitedStates EIA Crude Oil Stocks Change at -0.930M https://t.co/iEqHb9iXvN pic.twitter.com/EYJmTLxdPP
3.15pm BST
Here's what some of the respondents to the ISM report said:
ISM Non-Manufacturing Index increased to 57.5% in April https://t.co/0IAzCc7Bgy pic.twitter.com/qFQehs3daV
3.07pm BST
And the second of the day's surveys of the US service sector shows a similar picture.
The ISM non-manufacturing PMI rose from 55.2 in March to 57.5 in April, better than the expected 55.8.
3.00pm BST
US Services PMI: 53.1 vs exp 52.5; prev 52.5
Weakest rise in US service sector employment since July 2010 pic.twitter.com/uJ17RLgkUL
2.53pm BST
The US service sector unexpectedly rose in April, according to the first of two sector surveys.
The Markit services PMI came in at 53.1, compared to the initial reading of 52.5 and the final March figure of 52.8. The composite reading - manufacturing and services - rose from 53 in March to 53.2.
2.40pm BST
US markets have fallen back in early trading, not helped by Apple's latest update showing a surprise drop in iPhone sales.
The Dow Jones Industrial Average is down 35 points or 0.17% while the S&P 500 opened 0.27% lower and the Nasdaq Composite down 0.34%.
1.48pm BST
Following the US private employment numbers, analysts are looking forward to the official non-farm payroll figures on Friday. And there could be a bounceback after last month's disappointment, some believe. David Morrison, senior market strategist at Spreadco, said:
ADP for April showed the US added 177,000 private payroll jobs, pretty much as expected.
Last month the ADP number beat expectations by around 80,000 jobs. This led many analysts to upgrade their forecasts for the Bureau of Labor Statistics' Non-Farm Payrolls. But these missed even the unrevised predictions by over 70,000 raising concerns about the outlook for this Friday's number.
1.32pm BST
Here's Danske Bank on the US jobs numbers:
#US labour market continued tightening in April, according to #ADP jobs report pic.twitter.com/4VBcO8cPZw
1.28pm BST
Newsflash: America's companies created 177,000 new jobs last month.
That's down on the 255,000 created in March, and the lowest private sector job creation figure since October. The figures come from payroll firm ADP.
*ADP RESEARCH INSTITUTE SAYS U.S. ADDED 177,000 JOBS IN APRIL
1.20pm BST
European stock markets are still in the red, with the FTSE 100 down 22 points, or 0.3%, at 7227.
Wall Street is expected to follow suit in 80 minutes time:
US Opening Calls:#DOW 20911 -0.15%#SPX 2385 -0.19%#NASDAQ 5627 -0.27%#IGOpeningCall
12.49pm BST
Economists are predicting that the eurozone will have a decent 2017, following the news that GDP grew by a healthy 0.5% in the first three months of this year.
Here's some reaction....
"Despite the political headwinds facing the Eurozone in 2017, it produced a decent GDP print for the first quarter at 0.5%. In contrast to the more tepid performance in the UK and US, the Eurozone's performance does suggest that rest of the year is likely to be solid given the supportive PMI prints.
Despite some tightness in the German labour market, the relatively high level of unemployment for the Eurozone as a whole would indicate that there remains a significant amount of spare capacity, suggesting a period of above trend growth is possible."
ING Bank 1/2: Eurozone GDP growth came in at 0.5% QoQ in 1Q as the economy is proving to be resilient to uncertainty both abroad and at home
ING Bank 2/2: Bar a surprise at the French elections on Sunday, Eurozone growth is set for a strong 2017. #forex #fx
Eurozone March quarter GDP +0.5%qoq/1.7%yoy, Dec qtr revised up to +0.5% from +0.4%. Solid growth consistent with strengthening PMIs
12.40pm BST
One UK construction firm isn't doing too well today.
Shares in Galliford Try have slumped by over 9% today, after the company revealed it's taking a one-off charge of around 98m on two large building projects.
11.50am BST
Over in Athens, a shot has been fired across the bows of the Greek government's optimism following yesterday's breakthrough agreement in talks with creditors.
11.29am BST
Anyone getting over-excited about the eurozone's recovery should remember that it also started 2015 and 2016 strongly, but then faded over the summer.
Economist Rupert Seggins has the details:
Lots of excitement about #Euroboom2017. Before we get carried away, Eurozone has been here before. Past 2 yrs it outshone US & UK in Q1. pic.twitter.com/AtduBX3gJI
11.22am BST
Cathal Kennedy suspects that Germany outperformed the wider eurozone in the first quarter of 2017 (and also beat the UK).
Here's his take on the GDP report:
If the large euro area economies, only France and Spain publish growth estimates in advance of today's release. Taken alongside those, today's aggregate euro area number suggests that next week's German release will show expansion in the region of 0.7% q/q in Q1.
Early survey data for Q2 is consistent with the current pace of growth continuing into the second quarter. The April 'flash' PMIs are up on their, already elevated, Q1 average while the Economic Sentiment Indicator also rose from its Q1 average of 107.9 to 109.6 last month.
11.09am BST
Disappointingly, we'll have to wait until 12 May to find out how Germany, the eurozone's largest member, fared in Q1.
But today's solid-looking growth figures do suggest that the eurozone recovery is on track, raising the changes that the European Central Bank rethinks its current ultra-loose monetary policy stance.
Eurozone growth was a healthy 0.5% quarter-on-quarter in the first quarter of 2017, which matched the upwardly revised fourth-quarter 2016 performance.
No component breakdown was provided of the first-quarter Eurozone GDP, but we expect the healthy growth was very much domestic-demand led, with consumer spending and business investment playing a key role....
Pressure on #ECB rises to exit stimulus as Eurozone grows way above potential. 1Q GDP +0.5% on Qtr; +1.7% on Year, as expected. #QExit pic.twitter.com/TFnABQUHxI
#Eurozone GDP strong at 0.5%, although not as strong as soft indicators had recently suggested. pic.twitter.com/a4YloPqko6
10.08am BST
Breaking: The eurozone recovery continues!
GDP across the single currency grew by 0.5% in the first three months of 2017, new figures from Eurostat show.
9.57am BST
Experts are warning that British builders are worried about Brexit, even though construction output accelerated last month:
Here's Max Jones, global corporates relationship director for construction at Lloyds Bank Commercial Banking:
"As these figures reflect, the sector is currently in relatively confident mood with the next few weeks of uncertainty leading up to the general election seen by many as a reasonable trade-off given it will result in a government in place until 2022.
"Instead, some of the nervousness is coming from contractors with a focus on infrastructure, where the pipeline remains strong. The success of Crossrail has shown that mega-projects can be delivered on time and on budget but there are concerns about how government decision-making on infrastructure may be affected given the focus on Brexit negotiations.
"Despite recent robust performance across construction, we expect the sector to see anaemic growth in the short to mid-term as concerns about falling inward investment levels, thinning long-term order books and access to skills grow.
"The outcome of the Brexit negotiations will be particularly key for construction, given its reliance on migrant labour and raw materials from overseas. Further rises in input costs due to more expensive recruitment and import costs will squeeze margins that are already under pressure, pushing up the strain on prompt payments across the supply chain and potentially the number of business failures in the industry."
9.50am BST
The construction sector is looking resilient, says Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply:
"With the biggest rise in new orders since the beginning of the year, the sector is in a strong pre- election position buoyed up by a hardy UK economy and strong client confidence. The housing sector offered up the best news recovering from last month's minor blip and building on its strongest performance since the end of last year.
"Employment growth rose to its highest since May 2016, though continued disquiet about the lack of highly-skilled labour availability persisted and which must be addressed if the future strength of the sector is to be assured. Combined with the vexatious conditions of rising commodity and labour costs, low stocks of essential materials and longer delivery times frustrated buyers and added drag to the completion of planned projects.
9.40am BST
UK builders are also pretty upbeat about their prospects over the next year, suggesting little concern over Brexit.
Markit says:
Around five times as many survey respondents (49%) expect a rise in construction output over the year ahead as those that forecast a fall (10%). The degree of confidence was down fractionally since March, but still well above the post- referendum low seen in July 2016.
9.37am BST
Breaking! Britain's building sector expanded at its fastest pace in four months in April, as the construction industry picks up steam.
Markit's construction PMI, which measures activity across the sector, has jumped to 53.1 from 52.2 in March.
"April's survey reveals a positive start to the second quarter of 2017, with a robust upturn in civil engineering activity helping to boost the construction industry. There were also more encouraging signs from the house building sector, as growth recovered to its strongest so far this year. However, the performance of the commercial building sector remained subdued in the context of the past four years.
"UK construction companies noted that the resilient economic backdrop helped to drive up client spending in April. Greater workloads led to the fastest pace of job creation since May 2016 and a continued squeeze on sub-contractor availability
9.25am BST
Sterling has been rather volatile this morning, as the latest shots in the Brexit battle trouble traders.
The pound lost half a cent in early trading, following a report in the Financial Times that Britain's bill for leaving the EU could be a100bn.
"In a walk away circumstance there is nothing to be paid", David Davis says if UK fails to reach a deal with EU, the UK has no leaving fee.
Renewed concerns about Brexit have put sterling on the back foot, at least for now.
9.02am BST
After hitting 20-month highs on Tuesday, European stock markets have dipped in early trading.
That inertia is partly informed by investors waiting for the region's first quarter GDP reading - which is forecast to rise to 0.5% from Q4's 0.4% - before making any significant moves.
8.38am BST
Sainsbury's shares are also taking an early morning hit.
They've lost almost 3%, after the supermarket chain reported that profits fell to 503m in the last 12 months, down from 548m a year earlier.
"Argos has so far proved an effective 'get out of jail' card for Sainsbury's. But with inflation biting into consumer spending and the latest retail sales figures showing that the consumption boom is waning, Sainsbury's must get its core business in order before it comes off its catalogue crutches."
8.13am BST
In other surprise corporate news, Marks & Spencer has snaffled Halford's chief executive to revitalise its struggling clothing operation.
Jill McDonald will join M&S in the autumn as managing director for clothing, home and beauty. It's the latest piece in CEO Steve Rowe's turnaround plan.
8.04am BST
Big news in the City this morning: Adam Crozier, the boss of ITV, is leaving after a seven-year stint at the broadcaster.
Crozier, who led a turnaround at ITV after the post-credit crunch recession and successfully reduced the broadcaster's reliance on advertising revenue by building up its production arm, said he planned to build a portfolio of roles in the next stage of his career.
The company's finance director, Ian Griffiths, will step up to a new combined role of chief operating officer and finance chief and run the company for an interim period, while the chairman, Sir Peter Bazalgette, becomes executive chairman during that time.
That's a miss for ITV - chief executive Adam Crozier steps down - did a good turnaround job https://t.co/riqciFpAmr
7.42am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After years of slow growth, austerity and bailout drama, is Europe's economy now rattling ahead? We find out at 10am BST when eurozone GDP figures for the first three months of this year are released.
Euro area survey data has been universally strong since the turn of the year; the average composite PMI for Q1 was the highest in six years and is pointing to GDP growth of 0.5-0.6%.
However, harder data has yet to reflect the improved sentiment; outside Germany, industrial production is likely to be a drag on growth despite stronger manufacturing PMIs.
Related: Greece will avoid default after bailout deal - but faces more austerity
Our European opening calls:$FTSE 7239 -0.15%
$DAX 12513 +0.04%
$CAC 5304 0.00%$IBEX 10808 -0.12%$MIB 20742 +0.04%