EC slashes UK growth forecasts but hikes eurozone; markets fall - as it happened
European Commission says Brexit uncertainty will hurt UK investment, but the rest of Europe is doing 'significantly better than expected'
- Latest: EC cuts UK growth forecast to 1.5% in 2017
- Growth expected to slow to 1.3% then 1.1% in 2019
- Eurozone growth forecast hiked to 2.2%
- Moscovici: Best euro growth in a decade
Earlier:
5.11pm GMT
European stock markets have closed, with losses across the board.
Here's the damage:
European Closing Prices:#FTSE 7484.1 -0.61%#DAX 13182.56 -1.49%#CAC 5407.75 -1.16%#MIB 22641.31 -0.83%#IBEX 10141.1 -0.86%
Stocks in Europe sold-off as the sudden and severe decline in the Nikkei 225 overnight trigged fears around the world. Lately stock markets in Europe have been lacklustre as there has no major change to the economic or political outlook. The low volatility was interrupted today by the rapid drop in the Japanese market, which got traders out of their comfort zone in Europe.
The sell-off is broad based, and when you look back at how much ground was made in 2017, dealers don't need much of an excuse to exit the market.
4.50pm GMT
As ever nothing is easy in Greece. Just when prime minister Alexis Tsipras was sounding an optimistic note on the investment front earlier, the Canadian company, Eldorado Gold, has announced that it will freeze one of the biggest investment projects in the country.
Sounding a defiant note, George Burns, Eldorado's President and CEO said the Vancouver-based firm was not only freezing further investment in its gold copper deposit at Skouries but taking legal action Greece's ministry of energy and environment,
"As a consequence we are now taking the necessary legal action to enforce the Company's rights while continuing efforts to resolve outstanding matters through ongoing dialogue."
3.43pm GMT
The mood in the stock markets has "really soured this afternoon", says Connor Campbell of SpreadEx.
With Wall Street follows Europe into the red, there's not much optimism on the trading floors today.
Despite the European Commission promising the best Eurozone growth for a decade in 2017, the region's indices were in a bad mood this Thursday. That's because the euro attracted most of the buzz; while the currency rose 0.3% against both the dollar and the pound the DAX and CAC plunged, dropping 1.3% and 1% respectively.
An acute retail headache, and a red-soaked set of mining stocks, meant the FTSE failed to take advantage of the pound's losses against the euro (and flat performance against the dollar).
3.06pm GMT
An influential House of Lords Committee have urged the government to agree a Brexit transitional deal before the end of this year, or risk losing City jobs overseas.
Having taken evidence from City experts, the EU Financial Affairs Sub-Committee has concluded that ministers need to act now, before banks trigger their own contingency plans.
"The clock is relentlessly ticking. Witness, after witness, told us that financial services industry won't be able to continue servicing cross-border clients after 2019 if a transition period is not agreed by the end of this year. The UK's financial services industry will be severely hit - as will EU counterparties.
"The more the Government waits, the more the value of such a period irreversibly declines. A trickle of banks and insurers have started to implement their contingency plans ahead of access to the Single Market being suspended in March 2019. The Government must urgently negotiate a transition period to stop this trickle turning into a flood."
EU Committee calls for urgent agreement of post-#Brexit transition period for #financialservices in letter to @PhilipHammondUK: https://t.co/HYoqD1io5h
2.36pm GMT
Wall Street has joined the global stock market selloff.
The Dow Jones industrial average has dropped by 103 points, or 0.4%, at the start of trading in New York.
Dow falls 100 points from record after weak earnings https://t.co/tI6j4Y32E2 pic.twitter.com/2BmR6zMoBQ
2.30pm GMT
The long-running saga of Saudi Arabia's attempt to float oil giant Aramco has taken another curious twist today.
The UK government has confirmed it is close to handing Aramco a $2bn credit line. It means British taxpayers will effectively be lending the company money to encourage it to buy goods and services in the UK.
HMG guaranteeing a loan to ARAMCO would be a further lurch in descent to mercantilism. Mr Gladstone will be turning in his grave. #stateaid
Related: UK denies $2bn Aramco deal linked to possible London listing
1.55pm GMT
Just in: The number of Americans signing on for unemployment benefit has risen, and by more than expected.
Some 239,000 US citizens filed 'initial claims' last week, as the jobs market got back to normal after the hurricane season.
US 'Initial Jobless Claims' rose last week $USD pic.twitter.com/mfS6fanlBj
1.21pm GMT
The EC's upbeat eurozone growth forecasts haven't brought much cheer to the region's stock markets.
Every major index is down today, although not massively. The FTSE 100 has shed around 40 points, or 0.55%, while Germany's DAX has lost nearly 1%.
"Maybe there's a bit of a view out there that it's as good as it's going to get in bond markets so it's worth taking a bit of profit."
12.33pm GMT
The European Commission's forecasts are more pessimistic than other forecasts.
For example, the IMF predicts that the UK will grow by 1.7% this year, and by 1.5% in 2018.
This comes just a week after the BoE projections pointed to growth of 1.6% next year and 1.7% in 2019. Although the BoE's growth path is a little higher, the key point is that very few forecasters currently expect the UK to grow at sustained rates in excess of 2%.
Just as fans of the English national football team used to regard "only" reaching the quarter finals of the World Cup as a failure, they would happily accept such an outcome today. In a similar vein, for the foreseeable future UK policymakers who used to regard 2% GDP growth as being too slow, might look back on the halcyon days of such growth as a golden era.
12.06pm GMT
Looking back at the UK housing market.... rating agency Moody's has warned that mortgage borrowers in Northern Ireland, East Midlands, East Anglia and the South West are most vulnerable if UK interest rates keep rising.
In a new report, Moody's analyst Steven Becker says:
"In the event of a rate increase to 1.25%, borrowers in East Midlands, East Anglia and Northern Ireland are up to 2x more likely to face financial stress and go into arrears than a borrower in Scotland."
11.59am GMT
The EC predicts that Greece will grow by 1,6% this year, a little faster than the UK.
This is expected to jump to 2.5% in both 2018 and 2019 (a lot faster than the UK!).
"Greece for certain has emerged from crisis, Greece has crossed the rubicon of crisis," he told the conference describing the country as an especially attractive place for investment because of low acquisition and labour costs.
11.34am GMT
Did the EC consider a hard Brexit scenario when drawing up today's forecasts?
No, we had a purely technical approach based on the 'ongoing status quo', replies commissioner Pierre Moscovici.
...the Commission has penciled in 0.3% quarterly growth for the UK every quarter until the end of 2019: pic.twitter.com/pUgIrBc0yK
10.58am GMT
Importantly, these new forecasts are based on the assumption that the EU and the UK maintain the current 'status quo' in 2019.
So if Britain doesn't hammer out a transition deal, today's forecasts could prove to be too optimistic.
10.57am GMT
In another blow, the EC has warned that Britain's budget deficit is going to rise in the current financial year.
After "several years of improvement", the UK's general government deficit is expected to rise to 2.5% of GDP in the 2017-2018 fiscal year, up from 2.3%.
Risks to the forecast point to upward pressure on the general government deficit, particularly in case of a Brexit-related trade shock during the forecast period.
10.42am GMT
On the UK, the European Commission says that growth has been slowing as rising inflation hits consumers and Brexit uncertainty spooks businesses.
Today's report states:
Economic growth in the UK has been slowing since the start of the year, as higher consumer prices constrained private consumption growth. Based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the UK, growth is still expected to remain subdued over the forecast horizon.
Consumption growth is projected to be modest, in line with weak real wage growth, while uncertainty continues to weigh on business investment. However, net exports are expected to provide some support to growth, and the labour market is projected to show continued resilience.
10.36am GMT
But....the EC also concedes that too many people across the eurozone are out of work.
Unemployment in the euro area is expected to average 9.1% this year, its lowest level since 2009, dropping to 8.5% in 2018 and 7.9% in 2019.
10.30am GMT
European Commissioner Pierre Moscovici is presenting today's forecasts now.
Sounding upbeat, Moscovici says the eurozone is expected to post its fastest growth since the financial crisis, adding:
We have entered a new phase of the economic recovery, with stronger growth driven by resilient consumption, the global upswing, loose financing conditions and falling unemployment.
10.27am GMT
Here's a chart from the new EC economic forecasts, showing which countries are expected to post the strongest and weakest growth (lighter = faster)
10.17am GMT
Having slashed the UK's growth forecasts, the EC has also raised its forecasts for the eurozone.
The Commission now believes that eurozone countries will expand by 2.2% this year, up from the 1.7% forecast earlier this year.
EU Commission Raises Euro Zone Economic Growth Forecast For 2017 To 2.2%, Fastest In A Decade, From 1.7%
"The European economy has performed significantly better than expected this year, propelled by resilient private consumption, stronger growth around the world, and falling unemployment.
Investment is also picking up amid favourable financing conditions and considerably brightened economic sentiment as uncertainty has faded,"
European Commission has just updated its economic forecasts!
Euro area GDP expectation:
+2.2% in 2017
+2.1% in 2018
(up from 1.7% and 1.8% in the spring forecasts) #bullmarket
10.12am GMT
Newflash: The European Commission has slashed its forecast for UK growth, warning that Brexit uncertainty will hurt business investment.
It now expects Britain's economy to grow by just 1.5% this year, down from 1.8% previously. The EC also predicts that growth will slow to 1.3% next year, and just 1.1% in 2019.
"Investment growth is forecast to weaken in 2018, as many firms are likely to continue deferring investments in the face of uncertainty.
"Given the ongoing negotiation on the terms of the UK withdrawal from the EU, our projections for 2019 are based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the UK."
#BREAKING EU slashes UK growth forecast for 2017 due to Brexit 'uncertainty'
UK joint lowest in bloc with Italy at 1.5%, down from 1.8% in spring forecast. Compared with sharply upgraded 2.2 percent for eurozone #DespiteBrexit
10.06am GMT
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9.57am GMT
RICS has surveyed chartered surveyors and estate agents from across the UK to gauge the state of the market.
A number of them are particularly gloomy (although others less so). Here's a selection from today's report:
Prolonged political uncertainty and weak direction from government is hampering sentiment amongst buyers and sellers. We are in for a long winter.
The market has slowed in the last month, albeit after a frenetic period in July and August when stock levels of available houses fell as a result of strong sales. There is a noticeable seasonal slowdown and the lack of supply is also holding back activity
A surprisingly busy month for sales and buyer enquiries. However, there is a lack of properties coming on to the market which has been a worrying trend for some time. Vendors appear unwilling to commit in the present climate of uncertainty.
Although as we approach Christmas you would expect a downturn but this reduction in market activity is well beyond this, generally so quiet!!
A slowing market with Brexit and economic uncertainty having an effect so that it could be a long winter.
There is life in the market at the right price! Buyers are offering lower than guide prices and sales are doing the same up the chain. Stamp duty levels have had a considerable impact on the number of potential instructions coming to the market.
Continued political and economic uncertainty is negatively influencing the market place. Actively levels have fallen - has winter come early?
A very busy period in the market across all sectors. This appears to be benefitting the rural lifestyle type properties most of all. No signs of depreciation at present.
We usually have buyers registering keen to move before Christmas. So far we are registering 80% less than normal during October. Vendors more receptive to price drops and some are agreeing to 10% reductions, which are then attracting interest.
The sales market has dramatically changed and technically crashed across the board. In E2 the difference between asking and sale price is a staggering 20%.
Autumn/winter slowdown in evidence. Strong interest for market leading homes but generally things are slower.
Supply remains very restricted however new enquiries are lower, the normal September lift was not seen.
9.37am GMT
PSA, the firm which owns Vauxhall and Opel, has announced a wide-ranging cost-reduction plan including voluntary layoffs.
It's an important development for UK workers at Vauxhall's plants near Liverpool, and at Luton, as well as Opel factories across Europe.
"Opel is facing a dramatic situation. There is no time to waste" This dramatic situation is getting worse day by day. We have a significant opportunity to rescue this company."
Opel boss: "Reduction of cost in all areas including labour cost will be part of our future plan. It is necessary and unavoidable."
Says no compulsory redundancies.
So Opel won't close plants - but it WILL reduce plant space by 25 per cent.
9.13am GMT
RICS's gloomy survey of the UK housing market gets plenty of coverage this morning.
In the Financial Times, Chris Giles says:
Estate agents have become more pessimistic over the housing market, saying prices have not risen at all in the past three months, newly agreed sales are down, and prices are likely to fall in most parts of the country.
UK house price expectations, Brexit vote dip aside, weakest since mid-2012 - RICS https://t.co/OC0U8QBgpr pic.twitter.com/fA6zXU2J4p
More expensive homes are under significant downward price pressure, with 70 per cent of surveyors reporting that offers for homes in the 1m plus bracket are coming in below asking price.
Some 60 per cent also reported lower offers for homes on the market priced between 500,000 and 1m.
"Demand still weakening rapidly." @samueltombs on U.K. RICS Residential Market Survey, October #PantheonMacro
8.56am GMT
Shares in UK housebuilders are also falling this morning, following this morning's downbeat survey of chartered surveyors and estate agents.
Barratt Development are down 2.8% and Persimmon have lost 2.7%.
8.53am GMT
Lee Wild, Head of Equity Strategy at interactive investor, explains why Burberry's shares have slumped to the bottom of the FTSE 100 this morning:
It was crucial Burberry's new chief executive Marco Gobbetti got off to a good start after chief creative officer Christopher Bailey announced he'll be off next year. Unfortunately, the market appears unimpressed with Gobbetti's vision of Burberry's strategy, and his first address to the market since taking over has failed to prevent the loss of big share price gains made since September.
Gobbetti's aim to generate high-single digit revenue growth plus 'meaningful' operating margin expansion is ambitious, yes, but the big benefits don't come through until 2021.
8.33am GMT
Ouch! Shares in fashion chain Burberry have slumped by around 9% in early trading.
We will reshape our offer, increasing and invigorating the fashion content. We will create compelling luxury leather goods and accessories to attract new customers.
We will build on the strength of our apparel and re-energise it.
8.21am GMT
Germany's already sizeable trade surplus has widened further, as Europe's largest economy continues to export much more than it imports.
German #exports in September 2017: +4.6% on September 2016 #foreigntrade https://t.co/3ndOPi7PYv pic.twitter.com/HfuLBOvq7y
7.57am GMT
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"The combination of the increased cost of moving, a lack of fresh stock coming to the market, uncertainly over the political climate and now an interest rate hike appears to be taking its toll on activity in the housing market.
With both buyer enquiries slipping and sales expectations also subdued, the sense is that home owners are staying put and first time purchasers are increasingly focusing on that part of the market supported by the Help to Buy incentive.
Sainsbury's says online grocery up 7.2%, convenience up 8.2% & clothing up 6.8%
UK RNS today #1 - Sainsbury - hopes unch as lfls +1.6% but profits -9%; Burberry - retail comp store sales +4% and good cash flow but FY19/20 plans are for flat rev/margin as invest in business
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