UK public finances worse than expected; oil edges higher - live

UK public sector borrowing rises 10% in November to 14.2bn, putting pressure on chancellor's full year target

2.37pm GMT

US markets have made a bright start to trading following the better than expected third quarter GDP figures.

The Dow Jones Industrial Average is currently up around 53 points or 0.3%, helping to support European markets which had been tending to drift a little before the US open.

2.11pm GMT

Following the poor UK public finances figures and the reasonable US GDP numbers - which show why the Federal Reserve was happy to raise US rates - the pound has fallen back.

Sterling has fallen to an eight month low of $1.4860, down 0.2% on the day. Against a basket of currencies it is down 0.3% to a ten week low.

2.09pm GMT

GDP revisions look mildly better after excluding net exports and inventories, but slumping corp. profits serve as reminder to hike slowly.

2.09pm GMT

US corporate profits fell by 1.6% in the third quarter, compared to a 3.5% rise in the previous three months.

1.44pm GMT

1.34pm GMT

The US economy continues to grow at a healthy pace, although by slightly less than first expected.

The latest revision to the third quarter figures showed GDP growth of 2% on an annual basis, down from the 2.1% previously reported. But this was better than the 1.9% analysts had expected. Strong consumer and business spending offset attempts by business to reduce inventories.

1.18pm GMT

European shares are drifting after a bright start.

The FTSE 100 is currently 0.75% higher despite worse than expected public finance figures, but Germany's Dax is virtually unchanged while France's Cac is up just 0.2%.

12.32pm GMT

#Turkey Lira weakened after central bank left its benchmark rate on hold at 7.50%, vs consensus of a hike to 8.00%. pic.twitter.com/xBA0Ktpfte

12.29pm GMT

Turkey's central bank has kept interest rates unchanged, confounding expectations of an increase in borrowing costs.

The overnight rate is held at 7.25% despite forecasts of a 25 basis point increase while the repurchase rate is 7.5% compared to expectations of a rise to 8%.

11.22am GMT

Despite all the concerns about the Spanish economy following the weekend election and the subsequent uncertainty about the country's future government, the country's central bank has raised its growth forecasts for this year and next.

The Bank of Spain said it expected the country's economy to grow by 0.8% in the fourth quarter, the same level as in the previous three months, and it lifted its growth forecast for 2015 from 3.1% to 3.2%. For 2016 it is now predicting growth of 2.8%, up from its previous estimate of 2.7%.

Internally the main source of uncertainty is associated with the evolution of economic policies, given how much the reform agenda and budget policies in particular affect confidence.

10.58am GMT

Tata Steel is in discussions to sell its struggling UK businesses to investment group Greybull Capital which could safeguard thousands of jobs.

The companies have signed a letter of intent and have entered exclusive talks. The deal involves Tata's Long Products Europe division, including its Scunthorpe steelworks, mills in Teesside and northern France, an engineering workshop in Workington, a design consultancy in York, and associated distribution facilities. It also includes Tata Steel's Scottish mills in Dalzell and Clydebridge which are currently being mothballed.

10.41am GMT

George Osborne's plan to repair Britain's public finances has received a fresh setback from official figures showing that the budget deficit in November was 10% higher than in the same month in 2014, writes our economics editor Larry Elliott.

The Office for National Statistics said the gap between spending and revenues last month was 14.2bn - an increase of 1.3bn on November 2014.

Officials said that one reason for the deterioration was that last November had seen the payment of fines by financial institutions totalling 1.1bn, which had not been repeated in November 2015.

Related: Latest borrowing figures threaten Osborne's deficit target

10.27am GMT

Economist Howard Archer at IHS Global Insight said:

If the pattern of the first 8 months of fiscal year 2015/16 continued over the rest of the year, PSNBex would come in at 81.2 billion. This compares with the target of 68.9 billion contained in November's Autumn Statement.

The Chancellor now faces a massive task to meet his fiscal targets for 2015/16 and it is frankly hard to see how he can make it -even allowing for the fact that (1) public finances can be volatile from month to month (partly due to the timing of expenditures) and can be revised significantly; and (2) the OBR argues that there should indeed be a substantial improvement in the public finances over the final months of 2015/16 due to a number of factors. This particularly includes an expected jump in self-assessment tax receipts in January resulting from past policy measures. The OBR also expects spending cuts to have an increasing impact as pressure to meet budget targets mounts on departments subject to Treasury controls

10.24am GMT

Gradual progress but much more needed is the verdict of David Kern, chief economist of the British Chambers of Commerce:

Although we saw a minor setback in November, gradual progress is being made with reducing the deficit. The public finances are likely to be better this year than in the previous financial year, but the improvement may not be as large as the OBR suggested in the Autumn Statement.

The underlying message remains that our budget deficit is still too high, and greater efforts are needed, through reducing current public spending and generating sufficient tax receipts.

10.21am GMT

The UK public finances are not improving as much as hoped, said James Knightly of ING Bank:

UK public sector net borrowing (excluding banking groups ) came in at 14.2bn in November versus expectations of 11.8bn. This is actually higher than in November last year (12.9bn). While we have to acknowledge there does tend to be a lot of volatility in the month to month figures, the cumulative borrowing fiscal year to date suggests that Chancellor Osborne is going to struggle to hit his target. So far, 2015-16 to date borrowing is at 66.9bn, which is only $6.6bn lower than in in the same period of 2014-15. The OBR's full financial year forecast is 73.5bn [see earlier] but barring a dramatic improvement in the trend, it is looking likely to be missed by possibly more than 5bn.

In terms of the breakdown, there have been good improvements in tax revenue with full year to date figures showing a 4.6% increase in income taxes, 4.1% improvement in VAT and a 6.4% increase in corporation tax, which is confirmation of the good growth and employment figures we have seen over the year. Stamp duty collection is disappointing though while fuel, alcohol and vehicle duties have shown little change on the year. Overall, central government receipts are up 3.1% full year to date while government expenditure is up 1.2%. Here, we have seen falling debt interest costs, but net investment is up 8.7%, social benefits are up 1% and department spending is up 1.2%.

Things are moving in the right direction, just more slowly than hoped. The new, lower forecast borrowing numbers - a 27bn improvement was announced in the Autumn Statement over the course of the Parliament - look difficult to achieve at this rate. A surplus of 0.5% of GDP in 2019/20 looks a real struggle.

10.10am GMT

Here's a comparison of net borrowing with the forecast from the Office for Budget Responsibility:

9.57am GMT

UK budget deficit = 66.9b, lowest YTD since 2008-9 but not much breathing room for @George_Osborne b4 hits 68.9b target.January key month

9.53am GMT

The UK market does not like these borrowing figures.

The FTSE 100, which had earlier climbed as high as 6089, is now marginally in negative territory at 6033. Other European markets have also come off their best levels, to be fair.

9.49am GMT

Here's a chart from the ONS spelling out the debt position:

9.46am GMT

The increase in borrowing excluding banks to 14.2bn in November was partly due to 1.1bn of foreign currency fines paid by financial institutions in the previous year which were not repeated, according to the Office of National Statistics.

For the first eight months of the year, public sector net borrowing was 8.9% lower than the same period in 2014 at 66.9bn. But this is already close to chancellor George Osborne's target of 68.9bn for the full year. He plans to turn the deficit into a surplus by the end of the decade, but has struggled to make much headway in recent months.

9.33am GMT

Breaking news:

Bad news for chancellor George Osborne. UK public finances have come in worse than expected, with public sector net borrowing excluding banks rising 10.1% in November to 14.2bn compared to a year ago.

9.26am GMT

Fastjet, the African focussed airline where Sir Stelios Haji-Ioannou's easyGroup is a major shareholder, has seen its shares fall nearly 8% after it warned revenues for 2015 and 2016 would be below expectations.

It blamed challenging market conditions and currency headwinds for the shortfall. In particular it said the presidential election in Tanzania led to reduced government and civil service traffic, and lower demand for travel generally across the country.

9.16am GMT

A quick summary of commodities this year:

Having a look at commodities YTD, WTI and Brent both down >30%, gold & silver down almost 10%...sugar & cotton only majors in +ve territory

9.11am GMT

After Japan's Toshiba said it would cut nearly 7,000 jobs after a $1.3bn accounting scandal, Moody's has cut the company's credit rating. Moody's said:

Moody's Japan K.K. has downgraded Toshiba Corporation's long-term senior unsecured bond ratings to Ba2 from Baa3. Moody's has also downgraded Toshiba's subordinated debt rating to B1 from Ba2, and short-term rating to Not Prime from Prime-3...

"The downgrades were prompted by Toshiba's announcement of its structural reform plan and financial forecast for the fiscal year ending 31 March 2016 (FYE3/2016)," says Masako Kuwahara, a Moody's Vice President and Senior Analyst. "The announcement indicated that earnings and cash flow generation will be significantly below our previous expectations."

9.00am GMT

Next year will see a calmer time in the Greek crisis, according to the Economist's forecast:

The World in 2016's forecast for Greece https://t.co/RPj7CHg5Ld pic.twitter.com/yaJHphANsv

8.54am GMT

Here are the Fitch comments on Spain:

The inconclusive outcome of Spain's general election increases the related risks of prolonged political uncertainty, and potentially a looser fiscal policy stance and/or a reversal of structural reforms...

In the short run political uncertainty is likely to have limited impact on fiscal policy as the 2016 budget was approved before the elections. We maintain our baseline assumption that any new government will keep public debt/GDP declining in the latter half of the decade, consistent with eurozone and Spanish fiscal policy rules, although the election increases risks of slippage. But an extended period of political uncertainty and the possibility of a partial reversal of reform and consolidation measures could damage economic confidence and reverse the current benign macro-fiscal dynamics.

8.50am GMT

The uncertain outcome of the Spanish election may remain uncertain for a while longer, it seems:

Don't expect things in #Spain to move fast: #Rajoy is going on holidays tomorrow, according to @ESdiario_com. https://t.co/sB8vy5FRi1

#Spain's risk premium over #Italy widens after rating agencies Fitch and Moody's have warned over reform backlash. pic.twitter.com/OJPhxsJR4J

8.36am GMT

Oil prices may be edging higher - Brent crude is currently up 0.8% at $36.67 - but recent weakness has been due to fears of a glut, especially when Iran re-starts exports after sanctions are finally lifted.

In a report on Iran, the International Monetary Fund has put a figure on the effect of the country re-entering the oil market:

The expected increase in oil supply from Iran would put downward pressure on global prices, by an estimated $5-$15 per barrel, boosting global GDP by an estimated 0.3 percentage point. While part of this impact may be already discounted in futures markets, a further decline could materialise when Iran's exports rise, depending on how other OPEC producers react. The potential for Iran to increase its non-oil trade is also large, with estimates from a gravity model suggesting that Iran's exports, at about 20 percent of GDP, are less than half of their potential.

8.27am GMT

Commenting on the UK market's opening rise, analyst Tony Cross at Trustnet Direct said:

After last night's sharp sell off for London equities, the picture is looking a little more upbeat this morning but with traders heading away from their desks and little fundamental news on the agenda, it's difficult to try and attribute too much to the early rebound. Only a few stocks are currently in negative territory with ITV bottom of the pile, retracing some of yesterday's bid-inspired gains, whilst retailers are again feeling the pressure with concerns building over Christmas sales...

Natural resources stocks are once again dominating the upper end of the index, but the potential upside is looking relatively limited and it's difficult to believe this is down to anything more than some opportunistic bargain hunting.

8.13am GMT

In Japan, the government is planning nearly $800bn of spending next year to boost its struggling economy.

The move is part of a budget due to be unveiled this week which should also see the country promising to cut back its huge debts. Reuters reports:

Finance Minister Taro Aso on Tuesday vowed to boost growth and achieve fiscal reform with government budget spending worth 96.7trn yen ($797.53bn) for the next fiscal year that starts in April. This is up a touch from the 96.3trn yen spending set for the current year's initial budget.

Confirming figures reported by Reuters last week, Aso said tax revenue is estimated at a 25-year high of 57.6trn yen in fiscal 2016.

8.11am GMT

In the wake of Spain's election result at the weekend, which saw gains by anti-austerity party Podemos, Italian prime minister Matteo Renzi has warned in an interview with the Financial Times that the policies which many see as being imposed by Germany are having a detrimental effect on governments. The FT reports ():

Renzi, Italy's centre-left prime minister, has warned that German-driven eurozone austerity policies are fanning the flames of populism, leading to political paralysis and electoral setbacks across the continent for incumbent governments.

In an interview with the Financial Times at his Rome office the day after voters in Spain slashed the majority in parliament enjoyed by centre-right prime minister Mariano Rajoy, leaving him struggling to form a new government, Mr Renzi said there was one main lesson to be learnt.

8.09am GMT

As forecast, European markets have taken their cue from Wall Street's overnight gains and a steady performance in Asia following the comments from China about further possible stimulus.

The FTSE 100 is up 43 points or 0.7% while Germany's Dax is up 1%, France's Cac 0.7% and Italy's FTSE MIB 0.9%.

7.46am GMT

European markets are expected to open higher after another volatile day on Monday - not helped by thin trading in the run up to the Christmas break.

Shares ended lower in Europe, losing their early gains as the falling oil price again hit sentiment, and the Spanish market dropped 3.6% following the country's inconclusive election result at the weekend.

Our European opening calls: $FTSE 6074 up 39 $DAX 10578 up 80 $CAC 4604 up 38 $IBEX 9436 up 71 $MIB 21273 up 173

7.42am GMT

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

After hitting 11 year lows on Monday, oil prices have shown some signs of recovery. A glut of supply as Iran restarts exporting following the lifting of sanctions, along with fears of slowing demand, mean the cost of crude is on course for its biggest monthly fall since the collapse of Lehman Brothers in October 2008.

November generally tends to be a weak month in any case with December usually a little stronger as the tax year deadline gets closer. Even allowing for that the Chancellor looks set to fall short of his borrowing target for this tax year unless tax receipts start to improve substantially.

The public finances are expected to show that the public finances saw year-on-year improvement in November but to also highlight that the Chancellor will need sharply higher tax receipts in January if he is to meet the fiscal target for 2015/16 contained in November's Autumn Statement. Specifically, we expect Public Sector Net Borrowing excluding banks (PSNBex) to have narrowed to 11.5bn in November from 13bn in November 2014. We also estimate that the total PSNB narrowed to 10.7bn in November 2015 from 12.2bn in November 2014.

The Office of Budget Responsibility argues that there should...be a substantial improvement in the public finances over the final months of 2015/16 due to a number of factors. This particularly includes an expected jump in self-assessment tax receipts in January resulting from past policy measures. The OBR also expects spending cuts to have an increasing impact as pressure to meet budget targets mounts on departments subject to Treasury controls.