Philip Green: Arcadia rescue on the brink as vote dramatically delayed - business live

Graeme Wearden

from Economics | The Guardian on 2019-06-05 17:45 (#4GHGZ)

Crucial CVA that would have saved Arcadia from administration has been postponed for a week as some landlords refuse to help Philip Green

VOTE ADJOURNED
Green delays vote - did he face defeat?
Creditors were voting on Arcadia deal today
Choice between some store closures, and administration
Landlords: It's job cuts or administration

8.09pm BST

Sir Philip Green tried to bully his landlords, and it has backfired, says our financial editor Nils Pratley:

8.07pm BST

Without wishing to panic anyone, it would probably be wise to use up any Arcadia gift cards in the next few days.

Just in case creditors don't approve the company's restructuring next week - in which case such cards might prove useless.

6.45pm BST

If you're just tuning in, here's our news story on the Arcadia rescue:

Sir Philip Green's Arcadia fashion empire is teetering on the brink of administration after a crucial vote to rescue the business and secure 18,000 jobs was postponed - when the billionaire appeared to be losing the support of his landlords.

Green's Arcadia business - which includes Topshop, TopMan, Miss Selfridge, Evans, Wallace and Dorothy Perkins - said another vote would be held next Wednesday, in a bid to push through proposals for store closures and rent cuts. Arcadia needed 75% support to win approval and stay in business.

6.36pm BST

In another blow to the UK economy, Ford is planning to close its Bridgend engine plant in Wales.

The move would put more than 1,500 jobs at risk, my colleague Jasper Jolly explains:

The company is meeting worker representatives at the south Wales plant on Thursday. A source with knowledge of the process said the plant would close.

A Ford spokesman said the company was "not going to comment on speculation".

6.24pm BST

Feel for the 18000 Arcadia staff who now face an extra week of anxiously waiting to find out if business will survive or not. Talks ongoing

6.16pm BST

Here's a breakdown of the structure of Arcadia, which is actually owned by Lady Tina Green of Monaco.....

6.10pm BST

Writing in the Independent, Jim Moore says Arcadia has proved an old City rule -- never call a vote you can't win.

He explains that landlords called Sir Philip Green's bluff - refusing to wave through another insolvency deal to allow a retailer to shed unprofitable stores and cut the rent on others....

Landlords, including big ones, have been getting increasingly fed up of retailers putting the burden of their difficulties on to their shoulders.

They also reasoned that if Sir Philip secured the big rental discounts he's after then other tenants would demand the same, and perhaps threaten to follow him down the CVA route in time.

Quick comment on Sir Philp Green/Arcadia in wake of creditors meeting being adjourned without agreement. Thousands of jobs still at risk...
For @TheIndyBusiness https://t.co/PxOQGwGwL4

5.57pm BST

The landlords who voted against Arcadia CVAs today would not have done so lightly, says Stephanie White, real estate expert at legal firm Stevens & Bolton LLP.

If Arcadia does not survive then some significant brands will disappear from our shopping centres and some landlords could be facing 4 of 5 vacant units in a row. That result would have a serious impact on the value of the landlord's estate, it would impact on other tenants, and in time it would create a potential business rates liability that the landlord needs to manage.

"Obviously, landlords would support a rescue plan if they thought it would leave them better off, but the trend for retail CVAs to lean on the landlord in every case is not sustainable. The landlords who voted against the CVA are choosing to send a message that they will not pick up the bill for every failing retailer on the high street whilst the other creditors walk away unscathed."

5.40pm BST

More reaction to the delay to the vote on Arcadia's future:

Exclusive: The fate of Sir Philip Green's high street empire now rests in the hands of landlords including Land Securities and Aberdeen Standard Investments, both of which will hold further talks with Arcadia ahead of next Wednesday's second CVA vote.

Gosh, can Green/Grabiner turnaround the landlords to get a chance to turnaround #Arcadia? Decision postponed to 5pm today, didn't happen, now Arcadia CVAs adjourned to 12th June. Who is in, who is out..? #retail #HighStreet https://t.co/JfCGyeuygH

5.33pm BST

Sunday Times City editor Oliver Shah (who wrote the book on Philip Green), says the Arcadia rescue looks to be in trouble:

Wow. This doesn't smell good. "Arcadia Group announces the decision to adjourn today's creditors' meetings in order to conduct further dialogue with a few landlords, with a view to securing a final decision on the seven CVAs."

Clearly the vote on Arcadia's CVA proposal was not going the way the retailer wanted. Although it has been postponed til next week, it shows that landlords are fighting back and that other retailers considering a CVA cannot expect guaranteed approval.

So with a week's adjournment for #Arcadia and #SPG then we have to assume that the CVA was going to fail. Clearly at least some landlords are playing hardball and are going to demand some tough terms to let this pass. #howthemightyhavefallen pic.twitter.com/cy9Ta8OLtD

5.27pm BST

Arcadia's chief executive, Ian Grabiner, has claimed that there is a 'reasonable prospect' that the restructuring will be approved next week.

It is in the interests of all stakeholders that we adjourn today's meetings to continue our discussions with landlords.

We believe that with this adjournment, there is a reasonable prospect of reaching an agreement that the majority of landlords will support.

5.20pm BST

Creditors were actually voting on seven different Company Voluntary Arrangement deals to rescue Arcadia today.

It appears that some of those CVAs were going to be rejected by creditors-- forcing Philip Green to dramatically pause the voting, to try to persuade landlords such as Intu (who voted against) to change their mind.

Good to see that some landlords were prepared to call PG's bluff that Arcadia would go into adminstration tonight if the CVA wasn't railroaded through...

5.16pm BST

This is quite extraordinary. The future of Sir Philip Green's retail empire, including Top Shop and Miss Selfridge, could hand in the balance for another week.

The vote has now been delayed until Wednesday 12th June, meaning we could go through this drama again in a week's time.

5.11pm BST

The decision to adjourn today's crunch meeting is a very strong signal that landlords had not backed Sir Philip Green's proposal to restructure Arcadia.

He needed 75% of creditors to back the plan -- but as we've already heard, some were unwilling to accept the proposed rent cuts.

Arcadia CVA meeting adjourned until 12 or poss June as it holds more talks with landlords.. clearly had been set to fail pic.twitter.com/KT2FhMeC83

5.09pm BST

NEWSFLASH: The creditors meeting to decide the fate of Arcadia and its 18,000 staff has just been dramatically adjourned.

More to follow!

5.03pm BST

Retail analyst Mark Faithfull says landlords face a tough choice -- but surely letting Arcadia collapse would do more damage to their business than agreeing to rent cuts.

Landlords are caught between a rock and a hard place but while yet another CVA is very undesirable it would surely undermine confidence even more to potentially let the whole operation fall into administration.

5.01pm BST

The BBC's Simon Jack points out that UK landlords are running out of patience with retailers demanding a rent cut.

Sir Philip Green - will this be the moment landlords fight back? They have been waiting for a moment to hold the line against a tide of insolvency proceedings that leave them taking the brunt of cost cutting at struggling retailers. My blog. https://t.co/ZtQ2HhW24S

4.56pm BST

Property Week's David Parsley has heard that Green has been "begging" landlords to support the rescue deal.

ARCADIA LIVE: Vote count has been postponed until 5pm as Sir Philip Green, who did not show up at the creditor's meeting, calls creditors. One landlord tells @PropertyWeek he is "begging for their support".

4.56pm BST

The future of 18,000 jobs hangs in the balance, as we await news from the creditors meeting.

This is from Ben Martin of The Times:

The rumour is that Arcadia landlords Aviva, M&G and Intuitively have not backed a rescue package of Sir Philip Green's retail empire. However, the overall outcome of the creditor vote is unknown

4.47pm BST

Still waiting for the delayed result of the Arcadia CVA vote. Hoping it will come arrive 5pm. Reports the vote is close. If Arcadia's rescue plan doesn't pass, big questions over what happens to the owner of brands like Topshop, Topman - administration could follow

4.46pm BST

The result of the Arcadia vote seems to have been delayed.

Sarah has heard that Philip Green is phoning creditors trying to persuade them to back the proposal - even though the voting actually happened a couple of hours ago....

Those waiting for the Arcadia CVA vote outcome - now not expected until 5pm - rumour that Philip Green is still trying to persuade key landlord Land Securities to back the deal.. even though the vote has officially happened..

4.37pm BST

Arcadia is just the latest in a string of UK retailers to battle for survival.

House of Fraser, for example fell into administration last summer - a journey which Debenhams also took two years ago, as the high street crisis deepened.

4.23pm BST

It's understood that British Land and Hammerson - two major Arcadia landlords - were planning to vote in favour of the Arcadia structuring.

British Land has 24 Arcadia stores, I believe, while Hammerson owns 18 of its shops.

ARCADIA UPDATE: Creditors meeting adjourned for 45 minutes so landlords can discuss 20% Green is offering them in the business to get the vote through. So far understood Intu, M&G & Aviva voting NO, with Hammerson and British Land YES. Landsec position remains unknown.#arcadia

Joining up reports from @lauraonita @ITVJoel @MarkKleinmanSky @BBCEmmaSimpson
Voting for Arcadia CVA :Hammerson (16 stores), British Land (24) and Land Sec (12).
Against: Intu (35) and Aviva (?)

4.19pm BST

Here's some photos of Arcadia's chief executive, Ian Grabiner, arriving at County Hall in central London for today's vote.

4.07pm BST

The Telegraph's Ashley Armstrong has heard that the mood among Arcadia's creditors was "fairly fatalistic", as they voted on whether to accept the restructuring plan.

Apparently only 3 questions from landlords during Arcadia CVA. Landlord says the mood was fairly fatalistic about the support

4.04pm BST

The BBC's Jamie Robertson says a decision on Arcadia could be imminent....

Arcadia CVA decision by its creditors expected in next half hour. Future of Topshop, Topman, Miss Selfridge et al in the balance - or so the company says

3.56pm BST

One of Arcadia's biggest landlords has decided to oppose the restructuring deal, according to Sky News.

It reports that Intu Properties, which owns Manchester's Trafford Centre and Lakeside in Essex, is to vote against Arcadia's company voluntary arrangements (CVAs) today.

A source close to Arcadia confirmed that Intu - which declined to comment - had informed it of its decision not to support the proposed overhaul of Sir Philip's company, which would involve steep rent cuts at more than 150 stores, and the closure of about 50 more.

Other major landlords, including British Land, are understood to be leaning towards backing the CVA plans, although many will not make their decisions until the meeting in Central London gets under way.

Revealed: Fresh doubt cast over the future of Sir Philip Green's high street empire as Intu Properties, Arcadia Group's second-biggest landlord, decides to oppose a restructuring to be voted on by creditors later today. https://t.co/9HO255LH6d

I'm told that Aviva Investors, another Arcadia landlord, may also be voting against the retailer's CVA proposals at today's crunch meeting of creditors; a spokeswoman for the asset manager says, however, that it is not commenting on its voting decision.

3.53pm BST

Oliver Buhus, operations director of clothing supplier Paragon, is also attending the CVA meeting.

He told us that said if Arcadia collapsed it would have "severe implications for the industry as a whole."

"I believe in the CVA and the plans for the business as a whole."

"It's a storm that needs to be weathered. The ship needs to be renavigated and hopefully to come out the other side in a better place."

3.51pm BST

My colleague Sarah Butler is outside today's crunch meeting on Arcadia's future.

She spoke with Julian Lochrane who attended the meeting to vote on behalf of three landlords. Lochrane told her that they had all backed the restructuring deal as there was "not much alternative"

"They threatened administration and [if that happened] we don't get even what they are offering at the moment."

3.49pm BST

The Sunday Times's Sam Chambers also suspects today's vote will be very close:

Hearing Arcadia CEO Ian Grabiner emailing landlords yet to vote pleading them to back the CVA.
Looks like it's going to the wire

3.43pm BST

Back in London, the future of Sir Philip Green's Arcadia retail empire is hanging in the balance.

3.37pm BST

The International Monetary Fund has weighed in on the US-China trade dispute, warning that it will cost the world economy deeply.

In a new blogpost, IMF chief Christine Lagarde warns that more than $450bn will be wiped off global output if Washington and Beijing impose tariffs on all reciprocal trade, as has been threatened.

The International Monetary Fund has called for a speedy end to the deepening trade war between the United States and China after calculating that the tit-for-tat tariffs will cost $455bn (357.5bn) in lost output next year - more than the size of South Africa's economy.

Christine Lagarde, the IMF's managing director, underlined her organisation's growing concern at the most serious outbreak of trade tension since the 1930s and said "self-inflicted wounds" had to be avoided.

3.26pm BST

The latest surveys of America's services sector paint a rather contradictory picture.

Data firm Markit has just reported that services growth hit a three-year low last month, with companies reporting a slowdown in new orders and meagre output growth.

The US service sector joins manufacturing in the slow lane. @IHSMarkit PMI surveys point to marked slowing of GDP in Q2 (1.2% grwoth signalled in May) and weakening jobs growth. Read more at https://t.co/DCtciPz8Y6 pic.twitter.com/wffyCpTAFf

US services, both ISM and Markit ---> Read More: https://t.co/6FVIyXJyAm pic.twitter.com/pfvOjjtVS2

2.54pm BST

I mentioned in the opening post that investors are treating bad news as good news this week.

2.27pm BST

One of the leading players in Italy's government has hit back at the EU, suggesting that Rome is being treated unfairly.

"We will go to Europe and sit around a table with responsibility, not to destroy but to construct.

"But it's very annoying that every day a new way is found to speak badly about Italy and this government."

1.43pm BST

Getting back to Italy.... the EC's main concern is that its debt is 'snowballing', as its deficit grows and asset sales fail to bridge the gap.

Bloomberg explains:

"Italy's public debt remains a major source of vulnerability for the economy," the commission said in its report.

The ratio of the nation's debt to gross domestic product will "rise in both 2019 and 2020, up to over 135%, due to a large debt-increasing 'snowball' effect, a declining primary surplus, and underachieved privatization proceeds," according to the report.

1.33pm BST

Newsflash from America: Job creation by US firms fell sharply, and unexpectedly last month.

There were just 27,000 new hires by private sector companies in May, according to the closely watched payroll report from ADP.

US private sector employment growth slumps to lowest since March 2010, ADP data show. Likely to fuel US slowdown/rate cut/possible recession expectations... pic.twitter.com/oIgrDIe2Hi

1.11pm BST

Green party MEP Sven Giegold says Germany should also face the wrath of the EU -- for not spending enough!

Giegold argues that it's wrong to penalise a country for running a budget deficit, without penalising those who also run large surpluses (they are, after all, part of the same situation).

"The Commission must end its selective approach to dealing with transgressions in the Eurozone. The excessive current account surplus of Germany is destabilising the Eurozone, just as the excessive budget deficit of Italy does.

This Janus-faced approach to dealing with instability in the Eurozone only serves to undermine the long term stability of the whole project."

Unfortunately, Italy continues to flaunt the rules of the Stability Pact, so an excessive deficit procedure is logical. A common currency needs common rules, and we will only have stable Eurozone if the rules are adhered to.

"However, while the Commission is forced to act, it must ensure that the Italian people do not suffer at the will of the market or the whims of their fractious government. Prime Minister Conte's appeal to revise common budget rules should be listened to carefully, as governments need more scope for spending during crises and incentives for investment as well as binding rules for reserves during the good times."

1.08pm BST

Markus Ferber, an MEP representing Germany, has welcomed the Commission's recommendation to plunge Italy into an excessive deficit procedure.

Ferber says Italy deserves everything it gets -- and wants France to also face disciplinary action for failing to cuts its borrowing.

"Italy deliberately decided to ignore the European fiscal rules and it feels like groundhog day. Unlike before, the European Commission has to be tough this time. The Italian government does not seem to understand any other language after all. Had the European Commission not backed off the last time, the current escalation could have been avoided.

It is a mistake only to look at Italy though. The European Commission's own Spring Economic Forecast predicted that France will also miss the deficit threshold. If the European Commission wants to be a credible defender of the Stability and Growth Pact, it has to treat all offenders equally and that means also launching a procedure against France."

1.04pm BST

This chart shows how Italy is only at the start of the excessive deficit procedure process (the bottom of the pyramid).

The identification by the @EU_Commission of a breach of either the deficit or the debt criterion by a Member Stat is the very first step of an Excessive Deficit Procedure (#EDP) - from the Vade mecum on the Stability and Growth Pact, 2019 ed. pic.twitter.com/TJicuxW7bS

12.53pm BST

Today's Commission report on Italy shows that its public debt stood at 132.2% of GDP in 2018, far above the EU's 60% limit.

Many other countries have debt piles over 60% of GDP too, but the EC is unhappy that Italy's deficit isn't falling fast enough (in its view).

"Moreover, Italy is not projected to comply with the debt reduction benchmark in either 2019 or 2020 based on both the government plans and the commission 2019 spring forecast."

.@EU_Commission report recommends launch of a debt-based Excessive Deficit Procedure (#EDP) against Italy. pic.twitter.com/3SgP9DFU56

.@EU_Commission report on : "Based on notified data and the Commission 2019 spring forecast, Italy did not comply with the debt reduction benchmark in 2018 (gap of some 7 % of GDP)." pic.twitter.com/KB2IUCrZP0

"Moreover, based on both the government plans and the Commission 2019 spring forecast, Italy is not expected to comply with the debt reduction
benchmark either in 2019 (gap of some 5% and 9% of GDP, respectively) or in 2020 (gap of some 4 % and 9 1/4% of GDP respectively)." pic.twitter.com/gdvPAfKysJ

12.37pm BST

The EC has good news for Madrid -- it recommends that Spain should be removed from its excessive procedure, having brought its deficit into line.

Spain was sanctioned back in 2016, and threatened with fines unless it lowered its deficit (leading to tax rises and spending cuts).

I would like to congratulate #Spain as we are proposing to abrogate the Excessive Deficit Procedure for the country! #EuropeanSemester pic.twitter.com/kDhBNZDQjf

Today, the Commission recommends that the Excessive Deficit Procedure (EDP) be abrogated for Spain

Press release https://t.co/TUe3DgDpvX #EuropeanSemester pic.twitter.com/uPWpsIJAGL

12.19pm BST

Italy's stock market has fallen into the red, as traders digest the EC's recommendation.

The FTSE MIB is now down 163 points, or 0.8%, to 20,065, with banks stocks falling by 1.7%.

12.08pm BST

European commissioner Pierre Moscovici is making more conciliatory noises towards Rome - suggesting that sanctions can yet be dodged.

Speaking alongside Dombrovskis in Brussels, he says Italy's government can still avoid being dragged into an excessive deficit procedure:

"As always with all member states, we are ready to look at new data that could change this analysis..... My door is open.

12.05pm BST

Journalist Dave Keating has also flagged up that Italy hasn't been hit by disciplinary action yet -- but the process has certainly moved closer.

Important to point out that EDP sanctions haven't been applied to Italy *yet*. This is just the Commission recommending them. The final decision needs to be taken by the 27 other EU governments in #EUCO, and they share the same concerns about Salvini using this for political gain

12.00pm BST

Valdis Dombrovskis, the EC's vice-president for the euro, is explaining today's decision - and putting the boot into Italy.

He tells reporters that Italy has not complied with Europe's debt rules. That's because its deficit is forecast to hit 2.5% of GDP this year, over the target of 2%.

For #Italy, there is a path to recovery and growth. Other countries have already taken it, with success. This path follows a renewed reform effort to address long-standing structural weaknesses in its economy. #EuropeanSemester pic.twitter.com/TsrwvtFyKw

11.50am BST

In theory, an excessive budget deficit procedure could end with Italy being fined by Brussels, and being forced to accept stricter oversight of its tax and spending plans. We're not there yet, though.

11.41am BST

The EC says disciplinary action is warranted against Italy, because it has only made limited progress in hitting European budget targets.

It also says Italy has backtracked on structural reforms, a criticism of its coalition of right-wing and anti-establishment parties who took power last year.

11.35am BST

NEWSFLASH: The European Commission has escalated its battle against the Italian government over its debt levels, recommending that disciplinary procedures are launched.

11.22am BST

The drop in UK car sales last month is another sign that the Brexit crisis is acting like an anchor on economic growth.

Jonathan Moss, partner and head of transport at law firm DWF says:

"New car registrations figures have again declined 4.6% in part because of the current economic and political ambiguity around the impact of Brexit and uncertainty around the changes in political leadership.

"From an industry perspective, the current market also puts a significant strain on manufacturers, who are dealing with increasing pressure on carbon emission standards in the face of significant uncertainty and declining registrations numbers."

11.12am BST

Here's our news story on the weak UK purchasing managers reports.

11.06am BST

It's still early (barely 6am in New York), but there are signs that Wall Street will rally again today.

The Dow Jones industrial average is up almost 145 points on the futures marker, following Tuesday's 512-point spike (the second-biggest jump of 2019).

The Dow rebounds more than 500 points on Tuesday. We'll see if the rally continues today. Dow futures are up 145 points right now.

10.52am BST

One of Britain's largest service sector companies has just announced a sweeping office closure plan, as it tries to cut costs.

BT is slashing its UK offices from 300 to just 30, shrinking its property footprint and obviously worrying its staff.

The company has announced the first eight locations for its UK workforce, which is being whittled down to about 75,000.

London, Manchester, Cardiff, Edinburgh, Belfast, Bristol, Ipswich and Birmingham have been named as "key locations" for BT maintain a presence.

10.47am BST

UK purchasing managers index for May slips closer to stalled economy: manufacturers losing export orders: construction down and with lowest optimism since 2013: services and manufacturing more upbeat on outlook as Brexit worries eased. For now.@IHSMarkitPMI

10.44am BST

There are bright spots in today's PMI report, despite the slowdown in growth.

For example, business optimism has hit its highest level in eight months. That may suggest companies are less worried about a no-deal Brexit, now that Article 50 has been extended until at least the end of October.

There were reports citing cautious optimism about the outlook for customer demand, as well as confidence regarding forthcoming business expansion plans.

Some firms also commented on efforts to mitigate rising staff costs through improved productivity. However, survey respondents also noted that domestic political uncertainty remained a key factor holding back their growth expectations for the year ahead.

Despite slightly faster services growth, @IHSMarkit /CIPS 'all-sector' UK #PMI fell from 50.9 in April to 50.7 in May, indicative of the economy more or less stalled when compared to official GDP data. However, optimism about the year ahead hit an 8-month high. pic.twitter.com/gqrudL351z

10.21am BST

Britain's economy will only managed "muted growth" in the current quarter after a "difficult May", predicts economist Howard Archer of EY Item Club.

Here's his take on the latest PMI report:

10.17am BST

Sam Tombs of Pantheon Economics suggests the PMI surveys are being dragged down by the political uncertainty which has gripped Britain for months (and may not relax its grip for some time).

The UK PMIs remain at levels that have persuaded the MPC to cut rates before. But the pick-up in their fwd-looking components, their tendency to understate growth when pol. uncertainty is high and exclusion of the still-growing retail & public sectors suggest the MPC won't budge pic.twitter.com/7u6lc9q4po

9.57am BST

Economists are concerned that Britain's economy lost momentum in May, even though the services sector grew a little faster. Here's some snap reaction:

May's IHS Markit/CIPS services #PMI rose from 50.4 in April to 51.0, and was thankfully not as bad as the manufacturing and construction surveys. Nonetheless, the all-sector PMI fell from 50.9 to 50.7, suggesting the economy has lost momentum since the start of the year. pic.twitter.com/cAoYijSKXd

Services pickup more than offset by sharp slowdown in manufacturing + construction says @IHSMarkitPMI all sector PMI at 50.7 down from 50.9 in April pic.twitter.com/GPath1XSFz

bounce in service sector activity prevents economy flatlining in May according to latest PMI survey - has diverged from official data of late (sentiment vs reality?) but overall evidence pointing to slower growth Q2 vs Q1

Good News! The UK Services PMI improved to 51 in May from 50.4. This meant that the Composite output PMI at 50.7 showed growth albeit not very much #GDP

9.42am BST

Newsflash: Britain's economy is close to stagnation, despite a pick-up in service sector growth last month.

Data firm Markit has just reported that its composite PMI index, which tracks activity across the UK private sector, fell last month to just 50.7, from 50.9.

"Although service sector business activity gained a little momentum in May, with growth reaching a three-month high, the pace of expansion remained disappointingly muted and failed to offset a marked deterioration in manufacturing performance and a fall in output of the construction industry during the month. As a result, the PMI surveys collectively indicated that the UK economy remained close to stagnation midway through the second quarter as a result, registering one of the weakest performances since 2012.

"Companies reported that activity, order books and hiring were all subdued by a combination of weak demand - both in domestic and overseas markets - and Brexit-related uncertainty.

UK May Services PMI 51.0; Median 50.6; Apr 50.4 pic.twitter.com/Pj8AsTScqz

9.29am BST

Back in the UK, car registrations have fallen in another sign that economic confidence is weak.

Modest growth in registrations of petrol (1.0%) and alternatively fuelled vehicles (11.7%) was not enough to offset the significant decline in demand for diesels, which fell for the 26th consecutive month.

Ongoing anti-diesel sentiment and the forthcoming introduction of low emission zones continues to affect buyer confidence.

9.20am BST

Just in: The eurozone economy grew a little faster than expected last month, despite geopolitical worries.

Data firm Markit reports that European service sector firms expanded solidly last month.

Germany's service sector continues to defy the same fate as its manufacturing economy, growing solidly in May. (Services PMI at 55.4), only slightly below April's 7-month high. More: https://t.co/C0bfcM4bvg pic.twitter.com/4qNgSLqLTG

9.12am BST

Newsflash: The International Monetary Fund has cut its growth forecast for China, and warned that the trade war with the US is hurting.

The Fund now expects China's economy to grow by 6.2% this year, down from 6.3% previously. That reverses a small upgrade earlier this year.

"The near-term outlook remains particularly uncertain given the potential for further escalation of trade tensions."

Everyone loses in a protracted trade war. If tensions escalate, China's growth could be significantly affected & stimulus would be needed. But China needs to focus on expanding social safety net rather than expanding infrastructure -Kenneth Kang, IMF Deputy Director pic.twitter.com/9aUJ9M6TPt

9.02am BST

European stock markets have also risen in early trading.

Britain's FTSE 100 has gained 30 points to a one-week high of 7,244.

Powell gave the markets what they wanted to hear, and the result was a spectacular rally, as traders increased their bets of a rate cut happening before the year end.

Jerome Powell's speech followed similar comments from other Fed officials earlier in the week. This is usually a sign that the Fed wants to prepare investors for a shift in policy.

8.52am BST

100% chance of a rate cut in the states, monetary policy is too tight says Michael Howell CEO @crossbordercap on @SquawkBoxEurope #rates #fed

8.42am BST

The US Federal Reserve's dual mandate is to keep American inflation steady and unemployment as low as possible.

But... it often feels like there's a third mandate - keep the stock markets up.

"The market wanted to hear from Powell. When Powell says 'we are watching the market' - whether it's right or wrong - the market starts believing in a Powell put," said Keith Lerner, chief market strategist at SunTrust Private Wealth. He also noted "sentiment became extremely negative on a short-term basis."

These comments come amid increasing expectations for a Fed rate cut. The CME FedWatch tool indicated a 90% chance of a September rate cut. Expectations for a second rate cut in December were also above 80%.

Wow - "These comments come amid increasing expectations for a Fed rate cut. The CME FedWatch tool indicated a 90% chance of a September rate cut. Expectations for a second rate cut in December were also above 80%." https://t.co/xQEoYyyK3N

8.30am BST

Government bond prices are also being driven higher, by the prospect of interest rate cuts.

This has pushed down the yield (effectively the rate of return) on Japan's sovereign debt today. Two-year Japanese bonds are now deeper into negative territory, meaning an investors is guaranteed to lose money if they hold them until they mature.

#Japan's 2-year bond yield falls to -0.22%, the lowest since March 2017. pic.twitter.com/u1lbmlSnuB

The #Fed leaning towards cutting rates isn't just affecting #US markets. 10-year JGB yields have fallen to their lowest since August 2016 as #BOJ rate cut odds rise. https://t.co/4p6wZ9VR3f pic.twitter.com/SExdKncYYU

8.18am BST

Japan's stock market has matched last night's Wall Street rally, by jumping by 2% as well.

How much truth there was in the big rally for markets yesterday and how much was dramatised is open for question.

Indeed, the last 24 hours has seen a marked change in sentiment and although it's hard to completely attribute the move to Powell's comments at the Fed conference yesterday, the fact that the Chair seemingly didn't push back on very dovish market pricing did at least fill investors with a bit more confidence.

7.57am BST

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

DOW JONES closing at 25332 +512 Points Up.... pic.twitter.com/S290D6C874

We do not know how or when these issues will be resolved.

"We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion...

@AP Dow Jones industrials gain 512 points after Fed signals it could cut interest rates if US trade conflicts slow economy

US stocks recorded their second best day of the year on Tuesday. The Dow closed up 512 points, or 2.1%. The S&P 500 ended 2.1% higher. The Nasdaq closed 2.7% higher, erasing its losses after a steep selloff on Monday driven by worries about tech regulation https://t.co/WahQuztSUw

Equity investors love cheap money, and U.S. stocks posted their best day in five months Tuesday as traders lifted themselves off the mat after Chair Powell suggested a willingness to lower interest rates if the economy slows in response to escalating tariffs.

The odds were doubtlessly in favour of rate cuts from the Fed in 2019 but overnight and ahead of the upcoming June FOMC meeting, Chair Powell changed the Fed messaging just enough to avoid signalling a shift from patient to panicked. And while falling well short of confirming the markets overly dovish expectations, it was music to U.S. investors ears who have been starved of positive news of late.

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