Markets mixed despite better than expected Chinese GDP - as it happened

Nick Fletcher

from on 2015-10-19 14:01 (#QXJF)

World's second largest economy continues to see slowing growth

Elsewhere:

3.01pm BST

Economists are increasingly convinced the European Central Bank will hold fire on expandingits quantitative easing programme at this week's meeting. ING Bank said:

With markets gradually having doubts about a first rate hike in the US, market expectations about more ECB QE have increased recently. Indeed, the stronger euro might be one of the "unwarranted tightening" factors about which the ECB has always warned. In our view, however, the ECB will refrain from more QE, at least at the current juncture, and will rely on its often-used verbal intervention skills. Technical difficulties to step up QE and too many uncertainties about the future path of growth and inflation should motivate the ECB to postpone any decision on more QE. However, the past has shown several times that the ECB's ability to talk the talk without eventually having to walk the walk is rather limited.

2.47pm BST

US markets are falling in early trading following the disappointing results from Morgan Stanley.

The Dow Jones Industrial Average has lost more than 60 points or nearly 0.4% while the S&P 550 is down 0.35%.

2.43pm BST

Back with Greece, and the recapitalisation of the country's four major banks should be completed by the end of the year, according to Daniile Nouy, chair of the supervisory board of the European Central Bank.

In a speech to the European Parliament's economic and monetary affairs committee, she said:

In early summer, the uncertainty surrounding the Greek programme was for us, just as for you, at the centre of our attention. For Greek banks, these developments implied a renewed very intense and stressful episode. We therefore monitored the developments very closely and took supervisory actions where needed. We were relieved that an agreement was reached at the Euro Summit in July. In the follow-up to the Summit, we are now conducting a comprehensive assessment of the four Greek significant institutions, to help determine the recapitalisation needs. The recapitalisation should be concluded by the end of the year. Thus it is important that the necessary funds will be available on time.

2.22pm BST

The latest reports from China show conflicting signs about the state of the world's second largest economy, writes Phillip Inman:

China is on the road to recovery. Or maybe it isn't, at least not for some time, say the contradictory reports on the world's second-largest economy.

The latest GDP figures, showing a growth rate in the third quarter of 6.9%, down from 7% in the second quarter, have done little to lay this particular debate to rest.

1.20pm BST

Here's a full report on Oprah Winfrey's deal with Weight Watchers:

12.49pm BST

Meanwhile Weight Watchers shares have jumped around 40% in pre-market trading following the news that Oprah Winfrey will invest and join the board.

That's a nice return already on her investment.

12.13pm BST

More news from the US, and Wall Street bank Morgan Stanley has just reported a 42.4% fall in third quarter earnings to $939m.

It was hit by turbulence in bond, currency and commodity markets following the concerns about the Chinese economy.

12.09pm BST

Over in the US, Oprah Winfrey has linked up with Weight Watchers International, buying a 10% stake in the business - with an option for another 5% - and is joining the board.

Winfrey said: "I believe in the program so much I decided to invest in the company and partner in its evolution."

11.42am BST

As Chinese president Xi Jinping begins his state visit to the UK, British people expect China to overtake Europe as our most valuable trading partner in 20 years. A poll by YouGov also shows Brits are enthusiastic about closer economic co-operation with the Chinese.

Of those surveyed, 40% said our most valuable trading partner was Europe, with 23% choosing China. But in the next two decades this is expected to change, with 29% predicting China will be our top partner and 22% forecasting it will still be Europe.

The British public seems to have a pragmatic approach to economic relations with China, but there is not much evidence of great affection for the country. Of the 12 biggest economies by GDP excluding the USA and those in Europe, China comes in at 8^th in terms of net positive impressions (29% positive, 55% negative).

11.11am BST

Ireland has moved to cut back on one and two cent coins, with plans to launch a nationwide scheme to allow retailers to round bills to the nearest five cents - with the consent of shoppers. PA reports:

Since the euro was introduced in 2001 Ireland has spent a37m issuing one and two cent coins - minting the coppers at three times the rate of the rest of the eurozone.

But the initiative to reduce the need for coppers is voluntary and consumers will retain the right to pay the exact bill and request their exact change.

10.47am BST

Back to China, and the weak GDP figures show that the stimulus measures introduced by the country's central bank have had a limited effect, said Professor Kamel Mellahi at Warwick Business School. He said:

If there is one thing to take away from the third quarter figures it is the limited short-term impact of financial and economic stimulus packages on the Chinese economy. The Chinese Government has introduced a number of measures to stimulate economic growth, but so far the needle hasn't moved much.

Right now it's very important the Chinese Government is focused on the long-term economic fundamentals and resists the temptation to take unnecessary actions simply to meet short-term economic growth targets.

10.38am BST

The 0.2% fall in eurozone construction in August compared to July was due to civil enginering declining by 0.3% and building construction by 0.2%, according to statistics office Eurostat.

In the wider European Union, construction output fell by 1.2% month on month.

10.31am BST

Eurozone construction output came in weaker in August, new figures have just revealed:

Eurozone Construction Data (Aug): Construction Output M/M -0.2%, prev +1.0% rev +0.4% Construction Output Y/Y -6.0%, prev +1.8% rev -0.3%

10.02am BST

More on the Chinese figures and their accuracy or otherwise. Real growth could be closer to 3% to 4% according to Russ Mould, investment director at broker AJ Bell. He said:

Chinese headline GDP growth looks healthy at 6.9% but underlying metrics suggest the real growth rate could be nearer 3% - 4%. If you look at growth in rail cargo traffic, electricity consumption and demand for loans, three metrics favoured by Prime Minister Li, the picture is not so healthy.

Credit growth still looks promising but freight shipments and electricity demand growth look to be sagging, so the so-called Li Keqiang index does raise a few questions.

9.54am BST

One of the disadvantages of being a stock market index laden with commodity companies is that the sector often has a disproportionate influence on events.

So it is today. With the weak Chinese data mining companies have come under pressure on concerns about slowing demand from the world's second largest economy. With the likes of Anglo American and Glencore down between 2% and 4%, this means the FTSE 100 has slipped back into negative territory, while other European markets are still moving higher.

Overall growth in China in the third quarter was a respectable 6.9%, while strength in consumer spending will allay some fears about a slowdown. However, the figures will do nothing to dispel the idea that this particular growth bonanza has come to an end.

Big name mining stocks are in the red again this morning, with the sector at its lowest level in nearly two weeks. It looks increasingly like the bounce of early October was a false dawn, and barring some kind of sustained revival in risk appetite, perhaps via fresh monetary stimulus, the sector is heading lower once again.

9.38am BST

Nowotny repeats #ECB's call for looser fiscal policy. But with #Germany likely to resist, onus will remain on more #QE to sustain recovery.

9.37am BST

One of the main economic events this week is the latest meeting of the European Cental Bank, due to take place in Malta.

Despite the weakness of the global economy and continued low inflation, the bank is widely expected to keep its quantitive easing programme unchanged but suggest it is ready to act further if necessary. Many economists believe an expansion of the programme - which involves a60bn of asset purchases a month and is due to run until at least September 2016 - could be unveiled in December.

In my view it's too early to talk about (adjusting the asset purchases) because we still have almost a year of the programme ahead of us.

[Nowotny] remarked that Fed policy was not a "decisive aspect" in ECB decision-making, and that one should also not overestimate the impact of a slowdown in China. His more hawkish tone contrasts with the dovish tenor to his remarks from last week, where he acknowledged the clear weakness in domestic inflationary trends.

In latest interview Nowotny says too early to think about adjusting QE and ECB needs to remain calm while current policy kicks in

Looks ever more likely that ECB will sit tight on Thursday while adopting a dovish tone to highlight it is fully prepared to act further

9.20am BST

The service sector is now the biggest part of the Chinese economy:

The key facts from China's Q3 GDP data: http://t.co/U8p2xFFjy9 pic.twitter.com/ZUgVI9peyt

9.09am BST

One of the shares pushing the German market higher is Deutsche Bank.

It has jumped more than 3% after unveiling plans over the weekend to split its investment bank in two, and removing a number of top executives as part of an overhaul by chief executive John Cryan. Earlier this month the bank announced a record loss of a6bn in the third quarter.

8.59am BST

European markets are now making a better fist of it after an uncertain start, as traders take a more positive view of the Chinese data (it was disappointing but not as bad as expected).

The FTSE 100 is up 0.2%, Germany's Dax has added 0.9% and France's Cac is up 0.8%.

8.46am BST

Over in Greece, and the country's creditors will be reviewing its finances and the progress of reforms to release the next tranche of the a2bn rescue package. The move follows the successful passing of measures through parliament early on Saturday, despite protests against the package.

Representatives of Greece's lenders - the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund - are expected to return to Athens on Tuesday to start a review that, Greece hopes, will end successfully, paving the way for the launch of talks on debt relief.

The auditors are to scour Greece's finances too, following the presentation of the draft budget. Finance Minister Euclid Tsakalotos is expected to request flexibility, arguing that the recession estimates in the draft budget - 2.3% of gross domestic product this year and 1.3% next year - are overly pessimistic.

8.23am BST

Despite the weak Chinese numbers, Tim Condon at ING Bank believes the Chinese central bank is unlikely to cut interest rates any further. He said:

The third quarter GDP data on its own implies a revision in our full-year forecast to 6.9% from 6.8%. However, our previous forecast was based on an acceleration in fourth quarter growth from reduced financial market turbulence and the impact of the stimulus implemented in response to the turbulence. We think the argument still applies and we are revising our full-year forecast to 7.0% (Bloomberg consensus 6.8%).

We see the September economic data, including the money and credit data released last week, as enabling the PBOC to remain on hold. We are revising our forecast of one 25 basis point policy interest cut in the current quarter to no more cuts.

8.15am BST

One of the biggest UK fallers so far is pharmaceutical group Shire.

Its shares are down 1.8% after the US Food and Drug Administration said late on Friday that it would not approve the company's new dry eye drug, lifitegrast, based on current data. Chief executive Flemming Ornskov said he was disappointed but still hoped to launch the treatment in 2016. If results from a new phase 3 trial due by the end of the year are positive, Shire planned to refile a submission to the FDA in the first quarter of 2016. Ornskov said:

We are committed to working with FDA to expeditiously provide the evidence required to deliver a new prescription treatment option for the 29 million adults in the US living with the symptoms of this chronic and progressive disease. This is an area of unmet medical need for which there has been no new FDA-approved treatment in over a decade.

8.09am BST

The weak Chinese GDP data has seen European shares get off to an uncertain start for the week.

The FTSE 100 is up 0.15% but Germany's Dax, France's Cac and Spain's Ibex have dipped 0.2%.

8.01am BST

On the corporate front, ITV has agreed to pay 100m for the television business of Northern Irish broadcaster UTV in a long expected deal.

It means the long-gestating consolitation of the independent television network is getting into its final stages, with 13 of the 15 licences now in the hands of ITV. Analysts at Liberum:

We see the deal as a strategic plus, especially if ITV can charge retransmission revenues for the main channel where we expect more newsflow before Christmas. We reiterate ITV as our top pick in media sector.

7.53am BST

More suggestions the official Chinese GDP figure may be an overestimation:

Bloomberg's #China GDP indicator at around 6.6% in Sep after to 6.9% in Jun - a better reflection of where we are than the official data

7.48am BST

The Chinese data comes as the country's president, Xi Jinping, begins his first official state visit to London.

There are likely to be deals signed and co-operation agreements made, but the visit is controversial. It is likely to be marked by protests against human rights abuses, and concerns that the UK may be jeopardising national security by allowing Chinese state companies to invest in British nuclear power plants.

7.44am BST

In Asia the Shanghai Composite is currently down 0.48%, while the Nikkei is 0.88% lower and the Hang Seng is down 0.54%.

7.43am BST

European markets are expected to make an uncertain start after the mixed messages from the Chinese data. Here are the opening forecasts from IG Index:

Our European opening calls: $FTSE 6373 down 5 $DAX 10088 down 17 $CAC 4696 down 7 $IBEX 10220 down 12 $MIB 22297 down 41

7.36am BST

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

China is in the spotlight once more, with news of a slowdown in economic growth in the third quarter. The world's second largest economy grew by 6.9%, compared to 7% in the previous quarter, and the lowest rate since the 6.2% recorded in 2009 during the global recession.

Last week's China trade balance numbers showed that while exports improved slightly, the sharp drop in imports suggested that internal demand remains constrained by the weakness in commodity prices, as well as lower domestic consumption, raising concerns that the Chinese government could well find it difficult to hit its 7% GDP target for this year.

This morning's Chinese Q3 GDP was expected to reinforce these concerns, but came in rather conveniently slightly better than markets had been expecting at 6.9%, and above some of the more pessimistic expectations of 6.7%.

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