Jittery markets steady as Fed governor calms rate hike fears - business live
Rolling coverage of the latest economic and financial news, as Britain's balance of payments worsens, and markets fluctuate at the end of a tricky week
- Latest: NY Fed governor says economy may slow further
- UK balance of payments weakens
- UK Q3 growth confirmed at 0.6%, but business investment dips
- Introduction: Markets keep falling
4.50pm GMT
Britain's FTSE 100 has shaken off its earlier losses to end the day slightly higher.
The blue-chip Footsie has closed 9 points higher at 6,721.
The thrust of the Dow's sizeable gains came following a somewhat reassuring interview with Federal Reserve Bank of New York President John Williams on CNBC. Williams claimed that the Fed is 'listening', and that 'there are risks to that outlook that maybe the economy will slow further'.
Investors seemingly took this to mean that the central bank could hike rates less frequently than forecast in 2019, sending the Dow 300 points higher and back to 23150, having hit a 14 month nadir of 22600 at its lowest point on Thursday.
3.19pm GMT
Newsflash: Federal Reserve Bank of New York President John Williams has said that the central bank could reassess its interest rate policy and balance sheet reduction in the new year if the economy slows.
Williams told CNBC that:
"We are listening, there are risks to that outlook that maybe the economy will slow further."
Dow extends jump, up more than 315 points after Fed's John Williams says on CNBC that balance sheet runoff is not inflexible & that the Fed could reevaluate its view in 2019 https://t.co/xCFzj3PnR4 pic.twitter.com/1Qp1FWGHbt
3.16pm GMT
European stock markets are ending the week on a low note.
The Stoxx 600 is down 0.33%, on track for a new two-year closing low.
"The market has been weak during the final quarter of 2018, as volatility has picked up. We see this as a symptom of monetary policy being tightened at an accelerating pace, which occurred simultaneously across the world's major economies. That has drawn liquidity away from global equity markets, causing stocks to fluctuate further from their fundamental valuations than they had when monetary policy was loose. However, in our view, interest rates and bond yields still represent poor compensation for risk relative to equities.
"Meanwhile, falls in energy costs will act as an effective tax cut to consumers and businesses around the world, as it did during the last bout of volatility in 2016. Lower cost inflation should therefore set the stage for a recovery in economic activity and further profit growth into 2019.
2.56pm GMT
Capital Economics also believe the US Federal Reserve blundered on Wednesday when it raised American interest rates to up to 2.5%.
They say:
The clear view in financial markets in the wake of the December FOMC meeting is that any further rate hikes over the coming months are likely to be reversed in 2020.
Our long-held forecast is that a sharp slowdown in economic growth next year will prompt the Fed to cut rates by 75bp in the first half of 2020, more than markets are currently pricing in.
2.44pm GMT
Bloomberg's Lisa Abramowicz explains why Wall Street is worried about Washington gridlock....
Traders don't really care about the impending government shutdown, but they're worried about what such gridlock means for the debt-ceiling battle early next year. https://t.co/ruHQVJSaww
2.39pm GMT
Ding ding! Wall Street is open for business, on the final day of a brutal week for stocks,.
The Dow Jones industrial average has risen by around 0.5% in early trading, or 121 points to 22,981.
Wall Street bank sums up the mood in pre-open note: "Sentiment still miserable; more Washington chaos"
2.15pm GMT
A trillion here, a trillion there, and eventually all these stock market losses add up....
GLOBAL STOCK MARKET CAP LOSS SINCE JANUARY IS $16.7 TRILLION - BAML
1.40pm GMT
New economic data just released has confirmed that the US economy grew pretty steadily in the third quarter of 2018.
Q3 GDP growth has been revised down very slightly to an annualised rate of 3.4%, from 3.5%.
U.S. GDP grew 3.4% in third quarter instead of 3.5% https://t.co/HzPI58gA2Q
1.15pm GMT
Lukman Otunuga, Research Analyst at FXTM, says risk-taking is off the menu this Christmas, as investors digest Donald Trump's threat to shut down the US government:
The pain felt across global equity markets intensified today as growing fears of a U.S. government shutdown crippled risk sentiment.
It has been a remarkably terrible trading week for financial markets amid concerns over rising U.S. interest rates, decelerating global growth, Brexit uncertainty and chaos in Washington. The absence of appetite for risk was clearly reflected in Asia this morning as stocks closed broadly lower. In Europe, shares are trading in a depressed fashion and this negative mood is likely to infect Wall Street this afternoon. With geopolitical risk factors weighing heavily on investor confidence, financial markets remain at threat of concluding 2018 on a risk-off tone.
1.10pm GMT
Two days after the Federal Reserve raised US interest rates, a growing band of investors reckon the Fed will be forced to CUT in 2020.
Market-based probability of #Fed cutting rates in 2020 gaining momentum pic.twitter.com/Qn6BdtVC8B
12.42pm GMT
Wall Street is expected to suffer further losses when trading begins in a couple of hours.
The S&P 500 is being called down 0.5% in the futures market, as investors worry that the US government could face a partial shutdown.
No matter what happens today in the Senate, Republican House Members should be very proud of themselves. They flew back to Washington from all parts of the World in order to vote for Border Security and the Wall. Not one Democrat voted yes, and we won big. I am very proud of you!
The Democrats, whose votes we need in the Senate, will probably vote against Border Security and the Wall even though they know it is DESPERATELY NEEDED. If the Dems vote no, there will be a shutdown that will last for a very long time. People don't want Open Borders and Crime!
Shutdown today if Democrats do not vote for Border Security!
12.16pm GMT
These tweets are from yesterday, but they largely sum up the mood in the markets today:
"The tone [this am] isn't so much bullish or bearish but rather defeated and demoralized. The Fed on Wed was the SPX's last hope for 2018 and with the decision disappointing there isn't a single towel not now lying on the mat, bloodied and exhausted." - JPM trading note
There it is. pic.twitter.com/tHaYzt0FcI
12.14pm GMT
Back in the financial markets, shares are deeper in the red as the sell-off gathers pace.
All the European indices are now down today, hitting new two-year lows.
"As Christmas approaches, market sentiment remains very negative. Global stocks have had a terrible December (S&P 500 and Dow are down 10% and 12% in in the month) as issues such as the ongoing US-China trade dispute as well as the prospect of a US government shutdown have added to the pessimism.
Following a slide on Wall Street in yesterday's session, Asian markets have traded lower, with European stocks following suit on opening.
*EURO STOXX 50 EXTENDS LOSSES, SET TO ENTER BEAR MARKET
11.57am GMT
Economist Sam Tombs has spotted another warning sign in today's data dump:
Remember those kind strangers who invested in the U.K. #DespiteBrexit? Well, they aren't any longer. Investment in the UK by non-residents fell in Q2 and Q3. We still need the finance (current account deficit = 5% of GDP), but we now have to sell overseas assets to pay for it pic.twitter.com/JTwJ0rVU0d
11.36am GMT
There's been quite a deluge of UK data this morning.
The latest national accounts (the growth figures) and public finances (borrowing) were both being released, plus breakdowns of business spending and consumer trends.
Having waded through all these releases from @ONS today, there has to be a better way of releasing this information
- the number of clicks needed is absurd
- sometimes it's vital to go to the PDF, others not - crazy
- far too much information for one day
Please think again
At the very least - ONS could have scheduled public finances on a different day to national accounts
Both are complicated releases
The split of quarterly national accounts from the sectoral accounts is unhelpful. A balanced set of GDP figures on one day in one release is what users need
Business investment details, flow of funds, balance of payments can be done on different days. That would be helpful
I have made these points before to @ONS and was told it was useful feedback and they would think again. (That was September 2017)
But it is becoming clear that "think again" meant "la la la, we're not listening"
Sometimes you wonder who ONS think they are trying to serve
11.18am GMT
Better news: Britain's budget deficit (the gap between government spending and income) has narrowed.
The UK borrowed 7.2bn to balance the books last month, 900m less than in November 2017. That's the smallest deficit for any November since 2004.
Festive cheer for #Chancellor as November budget deficit (measured in terms of Public Sector Net Borrowing excluding Banks) narrowed to 7.2bn from 8.1bn a year earlier; lowest November shortfall for 14 years. Also helping #Hammond October's deficit was revised down markedly (1
10.59am GMT
Howard Archer of EY Item Club is concerned by today's data:
Disappointing & potentially worrying news saw #UK #current #account deficit widen markedly to 2-year high of 26.5bn (4.9% of GDP) in Q3 from 20.0bn (3.8% of GDP) in Q2 & 17.8 bn (3.4% of GDP) in Q1. This was the largest deficit for 2 years
10.51am GMT
Another alarming development: UK real household disposable income stagnated in the last quarter, even though earnings rose.
The ONS reports that inflation and increased payments of self-employment tax offset strong wage growth in July-September. This meant households didn't actually have any more money to spend
Households spent more than they earned in Q3 2018, for the eighth quarter in a row https://t.co/pM6VG3RTgW pic.twitter.com/xGcuVb0Ko2
10.38am GMT
The slump in business spending suggests bosses are unwilling to buy new warehouses, offices and machinery until they have clarity about Brexit.
This chart, from the ONS, shows how UK business investment contracted last quarter -- by 1.1% to 46.9bn.
10.05am GMT
Some early reaction to the UK's disappointing balance of payments:
Are the benefits of sterling's post-referendum depreciation wearing off? UK current account is heading deeper into deficit. 4.9% of GDP in Q3 https://t.co/KF7cenxCKE pic.twitter.com/BAEO4Prpw2
UK current account in surplus for the first....just kidding. It's a deficit. And a big one. -4.9% of GDP as both trade & income deficits widen. Services trade bedind the widening trade deficit, while on the income side, it was foreign-owned UK companies repatriating profits. pic.twitter.com/lUbPqOKy9z
9.51am GMT
Ouch! Britain's current account deficit has widened to its worst level in over two years.
New figures show that the gap between what the UK trades with the rest of the world, plus investment flows, widened by 6.6bn to 26.5bn in July to September.
9.41am GMT
Good news! Britain was one of the best-performing major economies in the last quarter.
Bad news! That's not as impressive as it sounds....
UK GDP growth unrevised at 1.5%y/y (or 0.6%q/q) in the third quarter of 2018. UK the third fastest growing of the G7 economies in Q3 behind the US and Canada, but since 5 of the 7 make up the slowest growing OECD economies, that's not a high bar. pic.twitter.com/Q9wTptlcJv
9.40am GMT
Not a good sign for 2019 growth...
UK business investment fell 1.1% in Q3. Third fall in a row - the first time we've had three successive quarters of shrinking biz investment since the financial crisis pic.twitter.com/dRHA3v5gFa
9.37am GMT
Today's GDP report also show that Britain's services sector grew by 0.5% in the last quarter (revised up from 0.4%).
Industrial production rose by 0.6% (revised down from 0.8%) and construction grew by 2.3% (revised up from 2.1%).
9.32am GMT
The Office for National Statistics has confirmed that the UK economy grew by 0.6% in the third quarter of this year, matching earlier estimates.
That's a relief; there were concerns that growth could have been downgraded.
9.28am GMT
It's been a tough year for stock pickers.
Britain's stock market has shed around 13% of its value this year, taking a bite out of many portfolios.
"For the year to date, just six of the 39 industrial groupings which make up the FTSE All-Share are showing a gain and the best performer, Technology Hardware, has a market cap of less than 1 billion, so it is so small as to be barely relevant.
9.10am GMT
Santa has better get his stakes on, if he's going to bring any cheer to the City.
As Connor Campbell of SpreadEx puts it:
Santa remained on holiday this Friday, the European markets opening in a Christmassy shade of red following yet another disastrous session for the Dow Jones.
With the Dow now under 23000 for the first time in 14 months, Europe stood little chance of bucking the bah humbug trend as trading got underway.
9.09am GMT
The biggest fallers in London this morning include utility company Severn Trent (-1.9%), communications group Vodafone (-1.8%) and consumer goods giant Reckitt Benckiser (-1.5%).
Housebuilders are having a better morning, with Barratt Development, Taylor Wimpey and Persimmon all gaining at least 1%.
8.54am GMT
At the risk of overdoing the gloom, UK consumer confidence has hit its lowest level in five years.
Brexit uncertainty is being blamed after the GfK index of consumer morale fell to -14 in December, down from -13 in the previous month and -10 in October.
Related: Consumer confidence hits five-year low as Brexit uncertainty bites
Horrible UK consumer morale numbers.
Economic confidence weakest since 2011.https://t.co/kcRNWfzgiS pic.twitter.com/j8NjyxWfMb
This isn't an erratic reading.
Here's the GfK survey overlaid with the % of people who think the economy locally is going to worse, from the latest Thomson Reuters/IPSOS consumer sentiment survey. pic.twitter.com/owljDZZB2e
8.37am GMT
European stock markets have opened in the red, as the sell-off continues.
The Stoxx 600 index has lost another 0.35%, following last night's losses on Wall Street.
8.29am GMT
Another blow: French business confidence has fallen to a two-year low this month, according to statistics body INSEE.
INSEE's survey of business morale dropped to 102 this month, down from 103 in November, which is the weakest reading since November 2016.
8.15am GMT
Disappointing news: French growth in the third quarter of 2018 has been revised down, from 0.4% to 0.3%.
That's still faster than the eurozone average, of just 0.2% in July-September, but it won't please policymakers in Paris.
#France #GDP Growth Rate QoQ Final at 0.3% https://t.co/YZQGQp1rmQ pic.twitter.com/rfhuHIm9Qe
8.07am GMT
It's been a "horrible" quarter for the financial markets, says Craig Erlam of City firm OANDA.
He points out that many markets have fallen from record highs into correction territory (-10%) or even a full-blown bear markets (-20%).
We've gone from undeterred optimism to widespread pessimism in such a short period of time - as is often the case - and there clearly isn't much appetite just yet to try and catch this particular falling knife.
The Trump administration's continued hard-line approach with China isn't helping matters and the prospect of a government shutdown isn't doing the situation much good either.
7.50am GMT
Chinese investors have endured a rough December:
Chinese stocks drop, with the large-cap CSI 300 Index falling for a sixth day https://t.co/gBvGirCAHt pic.twitter.com/n0er8TBMef
Since 2/10/18 Global indices have lost following values - DJIA -14.7%, S&P -15.6%, NASDAQ -18.4%, FTSE -9.6%, DAX -13.6%, CAC -14.1%, Hang Seng -5.4%, Shanghai Comp -11.3%, NIKKEI -16.9% - Quite a correction!
7.46am GMT
This is a worrying sign: the VIX volatility index, which measures how fearful investors are, has hit its highest level since February.
fear in markets is back @markets #markets pic.twitter.com/XimUfUDdB3
7.34am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Stocks usually end the year with a flourish. But investors worry global economic growth is cooling and the U.S. could slip into a recession in the next few years.
After "years of outperformance," U.S. markets are working off "overvaluation in some areas" such as major tech companies, said Shane Oliver of AMP Capital in a report.
European Opening Calls:#FTSE 6689 -0.34%#DAX 10551 -0.57%#CAC 4675 -0.37%#MIB 18486 -0.49%#IBEX 8564 -0.38%
The latest fall in US markets comes as Donald Trump is threatening a government shutdown unless Congress agrees to fund his border wall with Mexico. Trump has appeared to back away from a shutdown but is now indicating he will not sign off on a stopgap budget unless there is funding for the wall.
"At this moment, the president does not want to go further without border security, which includes steel slats or a wall," the White House press secretary, Sarah Sanders, said. Trump "is continuing to weigh his options", she added.
Related: US stock markets drop amid interest rates hike and looming shutdown
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