Wall Street suffers worst opening this year after Trump allegations – as it happened

Graeme Wearden (until 2.15) and Nick Fletcher

from on 2017-05-17 16:26 (#2PRCE)

US markets slide after latest Trump revelations
Oil climbs as US crude stocks decline
UK jobless rate lowest since 1975
Basic pay slows to 2.1%, lagging behind inflation
Prices rising TWICE AS FAST as public sector pay
Employment rate hits new high

5.26pm BST

After all the talk of record highs and low volatility, it was almost inevitable that something would turn up to rock the boat. Equally, it was almost inevitable that something would be the latest Donald Trump developments. The newest controversy involved accusations the president had asked former FBI James Comey to drop his investigation into former national security adviser Michael Flynn. That prompted all sorts of disquiet, and even talk of possible impeachment.

Not surprisingly, that sent investors heading for the exits, both for the chaos such a move would cause and also the prospect that even if things did not escalate that far, Trump and the White House would be distracted from their market-friendly tax reforms and infrastructure spending plans. So as Wall Street slumped, European markets followed suit, although the FTSE 100 managed to hold fairly firm, helped by a rise in safe haven gold miners' shares.

It says a lot for how quiet markets have been that today's selloff, which has been rather dramatic relative to the recent past, is being trumpeted in some quarters as the beginning of the next big pullback. There are justifiable reasons for thinking we are due a drop, some of which I have alluded to over the past few weeks - weaker US data, declining participation on indices, and others could all be cited as the culprits. Now is not the time to panic however; the S&P 500 has fallen by 30 points as of 4pm London time, but is still up more than 6% for the year so far. We are not in correction territory just yet, and may not even get there anyway.

US banks are some of the hardest hit this afternoon, having been consistent underperformers for two months now. It looks like investors are already beginning to worry that a June rate hike is looking less likely, while the sight of the words 'Trump' and 'impeachment' hint at the possibility that regulatory reform is now off the agenda.

4.39pm BST

And more on the dollar falling:

"I think our dollar is getting too strong, and partially that's my fault because people have confidence in me." - D Trump, April. pic.twitter.com/8LI89Aikdq

4.33pm BST

While the Dow Jones Industrial Average, Germany's Dax and France's Cac are all down more than 1%, the FTSE 100 is off just 0.2%.

FTSE is on drugs. World is collapsing on Trump impeachment story and FTSE says 'That's nothing mate, you should try Brexit...'

4.27pm BST

Pressure on #dollar coming from #Trump concerns sees #pound sniffing US$1.30 for first time in almost 8 months. #Euro at US$1.115

4.15pm BST

The US dollar has now lost all the gains it made since Donald Trump was elected president. The dollar index shows:

The decline in the US dollar has wiped out all the gains it has made since Donald Trump was elected. The speculation about his impeachment is rising and the dollar is falling in tandem. The decline in UK unemployment gave the pound a boost, and the steady inflation rate from the eurozone gave traders a minor reason to buy the respective currencies, but the moves were magnified by the weaker greenback. Make no mistake, the drop in the US dollar is the reason behind in move in the GBP/USD and the EUR/USD.

3.43pm BST

US crude inventories declined by 1.75m barrels last week, a sign of increasing demand, even though the fall was lower than the expected 2.4m barrel drop.

The news has pushed the oil price higher again, with West Texas Intermediate up 1.6% at $49.48 and Brent crude 1.7% better at $52.54.

3.31pm BST

European markets have seen their falls accelarate after Wall Street's slide.

Germany's Dax is down 121 points and France's Cac has lost 68 points. The FTSE 100 has fared a little better, falling 26 points. Connor Campbell, financial analyst at Spreadex, said:

After the brief morning distraction of the UK jobs report, focus turned firmly back to Trump's latest foul-up following the US open.

The Dow Jones set the tone this afternoon, the index plunging more than 200 points as the bell rang on Wall Street. That leaves the Dow at its worst price since April 25^th, the day investors first got a sniff of Trump's tax plan. The dollar fared no better; it slid 1.4% against the Japanese yen and 0.3% against the pound, while remaining at a 6 month low against the euro.

3.27pm BST

Here is the damage to the Dow:

Dow -200pts; most since 21 Mar (-237), 11 Oct (-200) and 29 Sept (-196)

Lots of red out there today. Only 2 of the Dow 30 stocks are up right now. $UNH $WMT. Biggest Dow losers? Banks. $GS $JPM off more than 2%.

3.11pm BST

Banks are among the fallers as the US market decline continues. The S&P 500 banking index is down 1.8% with Bank of America off 2% and JP Morgan 1.7% lower. Meanwhile the Dow is now down 215 points or just over 1%.

With #Dow down 200 & #financials underperforming,watch for the tug of war between the unwinding of crowded trades & the buy on dips strategy

2.42pm BST

Meanwhile the VIX volatility index - the fear index - has moved higher after hitting a 24 year low earlier this week. It has jumped 20% to 12.69 in the wake of the latest Trump revelations.

2.35pm BST

US markets have made their worst start to the year following the latest allegations about Donald Trump trying to interfere with a federal investigation.

After news of a leaked memo from sacked FBI director James Comey, the Dow Jones Industrial Average has dropped 180 points or 0.88%. The S&P 500 opened 0.8% lower and the Nasdaq Composite down 0.94%. Of course both the S&P and Nasdaq have been at or close to their record highs until now.

it's a good day for gold, up $20 today as Trump's political woes deepen, sending investors for cover into safe havens.

2.19pm BST

Back in the US, and the Dow Jones Industrial Average is now forecast to open around 170 points lower, as investors fret about the latest shennanigans in the White House. But it doesn't seem to be panic level yet.

Dow off 170 points. Means Wall Street is troubled, but not full blown panicked yet over Trump https://t.co/6vqS717Ish via @LaMonicaBuzz

2.07pm BST

Time for a quick recap.

Britain is facing a new cost-of-living squeeze after wages failed to keep up with rising prices.

1.53pm BST

Now this might surprise you...

Allowing for some individual volatility, the overall pattern for the last few years has been for gently falling unemployment rates. The highest unemployment rate in the UK for January to March 2017 was for London at 6.1%. This follows a period of a number of years when the highest unemployment rate was consistently the North East.

For the first time since 2012, London now has the highest unemployment rate in the UK

1.22pm BST

The latest stunning developments from the Trump White House are likely to weigh on the US stock market today.

The Dow Jones industrial average, and the wider S&P 500 index, are both expected to fall by around 0.75% when trading begins in around one hour.

Should be an interesting US session: overnight trading has brought S&P500 down to the May lows, 2380/82: pic.twitter.com/MoQjBjhp4T

With the latest bombshell developments in the Trump saga seen as an obstacle that may delay the proposed fiscal spending further, Wall Street should follow the bearish cues from Asian and European markets this afternoon.

1.10pm BST

The pound has gained half a cent today, to $1.296, as traders applaud the latest rise in UK employment.

Sterling is also benefitting from the political upheaval on the other side of the Atlantic, following those reports that Donald Trump had pushed former FBI director James Comey to drop investigations into Michael Flynn, former national security advisor.

The $1.30 level is again coming into sight, with the dollar weighed down by worries that President Trump could find it trickier to forge ahead with his intended economic reforms amid reports of interference into an FBI investigation into links between his campaign team and Russia.

12.52pm BST

Over in Greece, clashes have broken out between demonstrators and riot police during protests against the country's austerity programme.

Raw Video: Protesters fire flares at police outside Greek parliament#Greece #Vouli pic.twitter.com/u8xbR8Pqm9

"Essentially a class war is underway .. these harsh unpopular measures, the fourth memorandum along with all the previous memorandums, should be thrown in the basket of history."

"For some the pension cuts that these policies will bring will amount to the loss of two pensions while the lowering of the tax [threshold] will mean the loss of a monthly salary. Some of us are not going to accept that without a fight."

11.58am BST

Britain's poor productivity and weak pay are inextricably linked, argues the CBI, which represents UK businesses.

"Rising employment continues to reinforce the importance of the UK's flexible labour market.

"However, weakening productivity and slower pay growth, coupled with rising inflation, will continue to squeeze real household earnings.

11.36am BST

If Britain's jobless rate is really at a 40-odd year low, why doesn't it feel like a nation at full employment?

Our economics editor Larry Elliott has highlighted three reasons:

One reason for the weakness of earnings growth is the ferocious squeeze on public sector pay, which - stripped of bonus payments - is rising at just 1.3% a year.

A second factor is that employers are able to buy in cheap labour from overseas. Migration from other EU countries has not fallen off a cliff despite the result of last summer's referendum: according to the Office for National Statistics, the number of non-UK nationals from the EU working in the UK rose by 171,000 to 2.32 million between the first quarter of 2016 and the first quarter of 2017. This continues a trend, which has seen the number of workers from the other 27 EU countries double since the recession of 2008-09.

11.13am BST

Here's John McDonnell, Labour's Shadow Chancellor, on today's labour market report:

"These figures bring home the Tories' total failure to improve the living standards of working families.

"Real wages are lower than they were in 2010 and, after seven years of the Tories, they are now falling again.

11.11am BST

New productivity figures have also been released this morning, and they're a shocker.

Productivity across the UK economy shrank by 0.5% in the first three months of 2017, the first fall since the end of 2015.

Britain: really depress yourself this morning - look at the dreadful productivity figures pic.twitter.com/cojHEh5YT5

10.46am BST

The decline fall in real wages is particularly painful for workers, because pay packets hadn't clawed back all the losses since the financial crisis.

10.40am BST

The Liberal Democrats are blaming the Brexit vote for the slump in real wages.

"This squeeze on living standards is almost certainly caused by the falling pound since the Brexit vote.

"If Theresa May is allowed to pursue her extreme Brexit agenda, we can expect further weakening of the economy and erosion of people's living standards.

10.22am BST

Britain's wage squeeze threatens to undermine the economic recovery, warns Suren Thiru, head of economics at the British Chambers of Commerce.

If the disparity between pay and price growth continues to increase as we predict, household spending is likely to slow further, weakening overall economic activity.

"The next government must do more to close the skills gap, including improving the transition from education to work by guaranteeing universal experience of work in all schools for under 16s, and delivering a future immigration regime based on economic need, rather than an arbitrary migration target. This will help firms compete on the global stage, boosting UK productivity and growth."

10.13am BST

Dutch bank ING says that Britain enjoyed an "astonishing" jump in employment last month.

The real standout in today's UK jobs report was the surge in employment growth. The three month on three month average came in well above consensus at 122k, lifted by a huge 340k "single month" increase in jobs - the highest in 2 years.

This is hard to square given recent survey data, which suggests the outlook for hiring is more muted.

It's also hard to ignore the fact that wages are now growing at a noticeably slower pace than prices. The key measure of wage growth, which excludes bonuses, came in at 2.1%. When taken together with yesterday's acceleration in inflation to 2.7%, real wages are now falling. We've already seen measures of consumer activity slow through the first quarter.

ING: "Astonishing rise in UK employment won't mask fall in real wages. This already appears to be dampening consumption." No hike before '19

10.10am BST

The slump in real wages last quarter means Britain is facing its worst decade for pay since the Napoleonic Wars, says the Resolution Foundation.

It fears the situation will get worse this year. Stephen Clarke, their economic analyst, explains:

"Britain kicked off the year with another welcome record on employment, and another big fall in unemployment. This welcome jobs boost will provide a much needed boost to family incomes.

"However, the good news on jobs is not feeding through to positive news on pay growth, which turned negative at the start of the year and looks set to remain below inflation throughout most of 2017.

10.06am BST

10.00am BST

Here's Professor Geraint Johnes, Director of Research at the Work Foundation, on today's jobs figures:

"The latest employment figures indicate remarkably strong performance, with unemployment falling by 53000 over the first quarter of the year to a rate of 4.6%. Indeed, unemployment has fallen in every region except London and the South East. This has been primarily due to a large increase in the number of full-time employees in employment (some 196000 across the UK). The number of part-time employees has meanwhile fallen (by 61000). There has been little change in the number of self-employed workers over the quarter.

"On pay, the data are less encouraging. In the first quarter of the year, the year-on-year growth in total pay amounted to 2.4%. This is below the current rate of price inflation and indicates a renewed squeeze in real pay. The pay data indicate a collapse in wage settlements in the construction industry, and this is significant because much of the employment growth in the last part of 2016 came from that sector. While welcoming the strong employment growth evidenced in the first quarter's figures, sustaining this into the longer term may therefore prove challenging."

9.59am BST

Duncan Weldon of the Resolution Group says some of the charts in today's labour market report are "astonishing".

1. The employment rate just keeps getting higher. pic.twitter.com/aqjYSvDRuM

2. There's been a huge shift away from public sector employment. pic.twitter.com/6rZmv0aZ0u

3. The picture for real wages is just grim. pic.twitter.com/2B5kZJO59D

9.50am BST

Britain is still creating jobs. It just isn't paying people enough to protect them from the rising cost of living.

Today's labour market report shows that the number of people in work in the UK increased by 122,000 in the 3 months to March 2017 to 31.95 million.

9.44am BST

This chart shows how the gap between inflation (2.7% in April) and basic pay growth (2.1% in January-March) has widened, driving real wages into the red.

The gap between UK inflation (2.7% and rising) and wage growth (2.1%) is widening. Real wages falling at fastest rate in 3 years. pic.twitter.com/YmNIKe2Q4m

9.37am BST

Breaking! Britain's unemployment rate has hit its lowest level since 1975.

The jobless rate fell to 4.6% in the January-March quarter, down from 4.7% a month ago, the Office for National Statistics reports. That's lower than expected, and implies that the jobs market is holding up in the face of Brexit.

The recent increase in consumer price inflation including owner occupiers' housing costs has seen the annual rate of real wage growth (excluding bonuses) turn negative for the first time since the 3 months to September 2014.

9.26am BST

Stand by your desks! UK Unemployment, Employment and Wages data is due at 9:30 am

9.26am BST

Jobs newsflash: Furniture retailer IKEA has announced it is opening new stores in Sheffield, Exeter and Greenwich.

This will swell IKEA's workforce by 1,300, to 11,700.

9.16am BST

Over in Greece, workers have downed tools as a general strike against austerity gets underway.

Public transport is disrupted, leading to long queues in the capital. Air traffic controllers are holding a four-hour strike, while ferry workers have been on strike since Tuesday.

9.08am BST

The UK government is patting itself on the back after finally extricating itself from the Lloyds Banking Group share register.

Britain has sold its final tranche of shares in Lloyds, more than eight years after rescuing the bank during the financial crisis of 2008

Please to say Lloyds bailout has now been fully repaid and all taxpayers' money returned. 21.207B paid back on 20.313B injected.

There are a number of ways of calculating the cost of the bailout. The calculations by Lloyds do not include the 3.6bn cost of borrowing funds in the depths of the 2008 crisis, while the Office for Budget Responsibility has used other methodology to show the government will ultimately break even.

8.58am BST

Shares in cybersecurity firm Sophos have hit a new record high, up 8%, after beating City forecasts this morning.

Sophos posted an operating profit of $38.3m after growing revenues by 10%, with "exceptionally strong" cash flow growth.

Sophos waters down 'NHS is totally protected' by us boasthttps://t.co/qCTqArFhMW pic.twitter.com/e8h3jPePV3

8.42am BST

The gold price has hit a two-week high this morning, as the dollar weakens and investors seek a safe haven for their money.

8.38am BST

There's a 'risk off' mood in the City today, says Naeem Aslam of Think Markets, after the New York Times reported that Donald Trump had asked James Comey to end the inquiry into Michael Flynn.

What investors are worried about is that the impeachment could take place over in the US as the odds are showing more than 50 percent for such an event after the New York Times released its article. If such scenario does become a reality, we could literally say good bye to Trump's reflation trade.

8.27am BST

Anxiety over the unfolding political crisis in America has his European stock markets.

The main indices are all falling in early trading, with Britain's FTSE 100 dropping back from yesterday's record high.

The question for markets is "can the current administration get anything done?" if this climate persists. The importance of international investors in US markets hints at overshooting - international investors tend to understand politics less well than domestic investors. This is why market political risk was always higher in the US than in Europe.

8.08am BST

The US dollar has been hit by the latest revelations to strike Donald Trump's White House.

The greenback has fallen to a six-month low against the euro, sending the single currency over $1.111 for the first time since November. It's also hit a two-week low against the yen.

Euro at $1.1111

"I hope you can see your way clear to letting this go, to letting Flynn go."

.@jasoninthehouse requests any and all communications between Former FBI Director Comey and President Trump.

a(C) pic.twitter.com/mOBXjEHUSQ

"As reporting intensifies on Trump's potential mishandling of classified information, and renewed speculations on the rationale of his dismissal of Comey, markets are becoming concerned whether key legislation on tax reforms could be deferred or derailed."

Flutter of applause please for Citi: "James and the Giant Impeachment"

7.52am BST

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

The squeeze on living standards is a key issue in Britain today, after inflation hit a four-year high on Tuesday.

The March labour data are likely to show a third consecutive month with the unemployment rate at 4.7%. That would mean a very modest change in the level of employment on a 3m/3m basis after the large gain of 92k 3m/3m in January and the still impressive +39k last month.

Similarly on the average earnings front, there is limited scope for sharp changes in pay growth rates. Our UK economists are looking for unchanged average earnings growth of 2.3% 3m/y including bonuses and 2.2% 3m/y excluding bonuses. So with the headline figures expected to move sideways broadly speaking, one area of potential interest will be the split between full- and part-time employment. In the last couple of reports there has been a clear shift in favour of full-time work; if repeated this time, it would arguably be a sign that some of the remaining slack in the labour market is being eroded.

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