Report indicates wages will rise above inflation in all sectors except Brexit-hit constructionBritish workers are set for the biggest annual pay rise in a decade, according to forecasts from the Bank of England’s agents, as the rising minimum wage and staff shortages finally begin to lift wages above inflation.Companies expect to increase pay by 3.1% in 2018, compared with 2.6% last year, according to the latest survey of private-sector employers by the Bank’s network of agents across the country. A total of 368 businesses responded to the survey carried out between late November and mid-January, accounting for 845,000 UK employees. Continue reading...

Mounting mortgage and other domestic costs will hit families hard if interest rates riseBritons will spend almost a third more on their mortgages and other household debts over the next five years, according to new data, sparking fears many may struggle to cope with mounting costs if interest rates rise as predicted.The projection, revealed by a freedom of information request to the Office for Budget Responsibility, found household debt servicing costs were set to climb 29% by 2023, the vast majority of which are likely to be mortgages.Inflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common. Continue reading...

All the day’s economic and financial news, as Britain’s UK consumer prices index remains close to a six-year high

Expectations dashed that rate would fall as effects of Brexit vote on pound fadeBritish households remained under significant pressure last month from rising prices as the rate of inflation stayed at its highest level for almost six years, continuing the squeeze on consumers.The consumer price index (CPI) held steady at 3% in January for the second month running, according to the Office for National Statistics, confounding economists’ expectations that the rate would fall to 2.9% as the effects of the post-EU referendum drop in the pound begin to fade.Inflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common. Continue reading...

Wall Street follows European markets higher after worst week for two years2.57pm GMTAfter a week which saw some $4tn wiped off the value of global stock markets, there is a better mood among investors at the moment.European markets have moved higher, with the FTSE 100 up 1.3% , Germany’s Dax 1.7% higher and France’s Cac climbing 1.5%.2.33pm GMTThe recovery in US markets seen late on Friday is continuing as Wall Street opens, despite the continuing strength of US bond yields.The Dow Jones Industrial Average is up around 300 points or 1.25%, while the S&P 500 and Nasdaq Composite are both up around 1%.1.53pm GMTHere’s IG’s opening calls for the US markets:US Opening Calls:#DOW 24483 +1.18%#SPX 2650 +1.13%#NASDAQ 6481 +1.12%#IGOpeningCall1.00pm GMTShares may be moving higher in the wake of Friday’s rebound on Wall Street, but US bond yields are also on the rise.Normally bond yields fall when markets rise, but 10 year US treasury yields remain at four year highs. Fawad Razaqzada, technical analyst at Forex.com, said:Have stocks and bond yields decoupled again? Friday’s reversal and today’s bullish follow-through in the stock markets have not been supported by rising government bond prices. As bonds have continued to sell-off, yields have pushed further higher. The benchmark 10-year Treasury yield has now climbed to above 2.9% for the first time since early 2014.Should yields march further higher – which is quite possible with the upcoming US inflation and retail sales data to look forward to on Wednesday – then there is a possibility the equity markets could be in for another volatile week. Indeed, we think that far too much technical damage has been incurred in the indices for the bulls to make a quick comeback and with all guns blazing...So, Friday’s bounce may well prove to be a mere dead-cat bounce for stocks.12.19pm GMTMeanwhile, Greece is watching the markets carefully with an eye to launching more bond sales before its final bailout program ends in August. Helena Smith reports from Athens:After successfully raising €3bn from its sale of a seven-year bond last week, Athens is now looking to complete at least two more bond sales as part of wider steps to reinforce market access and show investors it can go it alone.The Greek finance minister Euclid Tsakalotos has hinted that future issues could include a three-year bond – launched around the time of the March 4 general elections in Italy – and a ten-year bond. The government has announced plans to build a €19bn cash buffer that would allow the debt stricken country to cover debt repayments once the bailout programme expires.11.44am GMTThe stock market falls we have been seeing are not unusual but did take longer than expected to happen, says Richard Stammers, investment strategist at European Wealth Group. And things are likely to remain volatile, he says:We expect the short term to remain bumpy - possibly very bumpy. The definition of a correction is 10% off from the recent high and of a bear market, 20% off from the year high. So, whilst we are not in bear market territory, we need to recognise for every short term bounce there could be an equal and opposite slide back. Could we see lows of 15%? Quite possibly so, if we do, what should we do?We stand by our view that the next bear market will be triggered by an expectation of the end of the business cycle. We may now be late cycle, and the end may now be sooner than many had expected, but we don’t think it is imminent. So, with the global economy broadly strong, and many companies delivering robust earnings, we think this is a buying opportunity.11.31am GMTHere is Reuters on the interest rate comments from Bank of England policymaker Gertjan Vlieghe:Vlieghe said on Monday that a further rise in British interest rates was likely to be appropriate if a strong global economy and a labour market pick-up continued to offset Brexit headwinds.“A further rise in interest rates is likely to be appropriate if all those trends continue and we are on a trajectory. It wasn’t just one hike in November and then we take a very long break,” he said at a panel discussion hosted by the Resolution Foundation, a think tank.11.10am GMTAnother 4,418 jobs at collapsed Carillion have been saved, says the Official Receiver.The staff involved are at prison facilities management, defence bases catering, and cleaning services. So far around a third of Carillion’s staff have had their employment confirmed.11.05am GMTVlieghe says “I really am” at last seeing evidence of wage growth coming through, meaning it’s “likely to be appropriate” to raise interest ratesDavid Cheetham, chief market analyst at online trader XTB, said:MPC voting member Gertjan Vlieghe has been speaking this morning on a panel discussing household debt in London and remarks such as “there is increased evidence that tighter labour markets are beginning to have upwards effect on wages” and that “if there is less credit headwind to the UK economy then we maybe ready for rate hikes” are certainly erring on the side of being hawkish. The comments are even more noteworthy given that Mr Vlieghe is deemed one of the most dovish voting members.10.48am GMTMore from my colleague Richard Partington who is listening to the Bank of England’s Gertjan Vlieghe speak at the Resolution Foundation’s debt conference:Vlieghe says banks are now well capitalised so next crisis (whenever it comes) the “collateral damage” to the economy won’t be as greatHe also says the idea that low interest rates are to blame for rising house prices versus income “can’t be right” as US, Germany, Japan have had low rates and haven’t seen the same increasesVlieghe says UK is in a disruption where it is “appropriate to put up interest rates”He also says for unwinding QE by cutting the Bank’s balance sheet that “nothing has changed” on the idea that rates must rise before cutting. Closer to 2% bank rate is requiredBut. The Bank needs headroom to cut rates by about 1.5%. And if the lower bound is now close to zero as opposed to 0.5%. Then rates “don’t have to be” as close to 2%. Also says will watch the Fed unwinding closely for lessons.The lower bound having changed when th BOE decided to cut rates from 0.5% to 0.25% in the August emergency rate cut following the Brexit vote10.32am GMTCity firms need to do more to mitigate the risks of algorithmic trading, according to the UK’s financial watchdog.Automated trading was suggested as on of the causes of the recent stock market turmoil, with computerised selling accelarating as share prices tumbled.Automated technology brings significant benefits to investors, including increased execution speed and reduced costs. However, it can also amplify certain risks. It is essential that key oversight functions, including compliance and risk management, keep pace with technological advancements. In the absence of appropriate systems and controls, the increased speed and complexity of financial markets can turn otherwise manageable errors into extreme events with potentially wide-spread implications. As a result, algorithmic trading continues to be an area of focus for the FCA and other regulators across the globe.In general, we are encouraged that firms have taken steps to reduce risks inherent to algorithmic trading. However, further improvement is needed in a number of areas. For example, some firms lacked a suitable process to identify algorithmic trading across their business and did not have appropriate documentation in place to demonstrate suitable development and testing procedures are maintained. In these cases, firms also lacked a robust and comprehensive governance framework.10.13am GMTVlieghe says there is increased evidence that tight labour markets are beginning to have an upward effect on wages [another reason for a possible rise in rates]. He adds:Gertjan Vlighe of the MPC says that households should be able to cope with higher rates, given that balance sheets are in better shape. But we still have much to learn about such relationships.10.07am GMTThe Resolution Foundation is holding a seminar on household debt at the moment, with speakers including the Bank of England’s Gertjan Vlieghe:Resolution Foundation chief economist Matt Whittaker says minority of borrowers “are set to suffer even with quite modest moves” in interest rates... up next, Gertjan VliegheVlieghe says households are on average releveraging (taking on more debt) after a period of deleveraging (cutting borrowing levels) at a time of eroding slack in the economy — therefore, there is a case for raising interest ratesVlieghe says a continuation in rising debt levels would be unsustainable10.00am GMTThe removal of some of the market’s recent complacency is no bad thing, says Joseph Amato at investment management group Neuberger Berman:Before last week, the last meaningful market correction took place in 2016, when investors were concerned about the potential for a US recession, a China hard landing and low oil prices. But weakness was short-lived and markets have generally advanced since then.The most recent pullback seems to have been triggered by the 2.9% wage inflation reading in the US and resulting fears the Fed would accelerate interest rate increases. But the loss was exacerbated by excessive investor complacency – something that has clearly been removed over the past week – as well as technical factors. This removal of complacency is a healthy development, as is the reduction in equity valuations...On balance, we still expect global equity markets to rise this year. However, we expect the rate of increase to moderate. The risk of an outright bear market remains low, as bear markets normally coincide with recessions. We see a low risk of recession currently and expect growth in the global economy to continue gathering momentum.However, we continue to think the market has under-estimated the scope for a rise in inflation this year – both in the US and globally. We also think the market has potentially misjudged the Fed’s desire to normalise interest rate policy. That said, rates should likely remain low, in absolute and historical terms.9.16am GMTThe Vix volatility index, which had been pretty dormant for several months before surging last week, has slipped back this morning.It hit as high as 50 last week but is now down 10% at 26 as some calm returns.8.50am GMTOne of the sparks for the recent sell-off was the stronger than expected growth in US wages, which led to speculation that the Federal Reserve could raise interest rates more often than previously expected.So one of the key events this week is likely to be the latest US inflation data, which could go some way to either easing or confirming those concerns. Rebecca O’Keeffe, head of investment at interactive investor:Investors are breathing a sigh of relief after the torrid times last week, with European equity markets rallying this morning. Buying the dip has been a very difficult call in recent days, with every attempt at engagement punished in subsequent market moves, so investors will be hoping that this is a genuine buying opportunity. The key event of the week is US Consumer Price data on Wednesday, with investors anxious to determine whether the inflation fears that have helped to drive recent market moves have been overdone or if these concerns are justified.A softer print on Wednesday would go some way to easing current investor fears. Wage inflation did not emerge in 2017 and even if you believe the data last week is a sign of things to come, usual lags mean this will not be evident in consumer prices until toward year-end or even into 2019.8.39am GMTOne of the world’s biggest advertisers is warning it might take action against tech companies over online harassment, hate speech and other issues:The consumer goods multinational Unilever is threatening to withdraw its advertising from online platforms such as Facebook and Google if they fail to protect children, promote hate or create division in society.In a speech later today, Keith Weed, the Unilever chief marketing officer, will say that, as a brand-led business, Unilever “needs its consumers to have trust in our brands”.Related: Marmite maker Unilever threatens to pull ads from Facebook and Google8.35am GMTEuropean markets are holding on to their early gains, and with US futures suggesting a positive open on Wall Street, there is some cautious optimism around. But Connor Campbell, financial analyst at Spreadex, warned:As proven time and again, these things can turn on a dime, and it is way, way too early to treat the day’s initial growth with anything but caution. Still, the FTSE climbed more than 1% after the bell, taking it towards 7170, with the CAC up 1.2% and the DAX leading the charge thanks to a near 1.7% surge, one that leaves the German index back above 12300. Importantly the Dow Jones currently looks set to follow in Europe’s footsteps, with the index’s futures pointing to a 170 point rise later this afternoon.The forex markets were slightly more subdued. Both the pound and euro tried to claw back some of their recent losses against the dollar; the former rose 0.2%, but is still the wrong side of $1.385, while the latter jumped 0.3% to tease $1.227. Against each other, meanwhile, there was nothing to separate the two, with sterling flat around €1.128.8.05am GMTAs forecast, European markets are benefitting from the rebound on Wall Street and have started the week on a brighter note after the recent turmoil.The FTSE 100 is up 0.8% while Germany’s Dax has added 1% and France’s Cac has climbed 0.9%.7.55am GMTWith the prospect of rising UK interest rates, Brexit concerns, and the continuing squeeze on real wages, UK consumers appeared to have kept their money in their pockets last month, according to a Visa survey. Reuters has the details:British shoppers spent less last month than the year before, causing spending in January to fall for the first time since 2013, according to a survey which underscored many households’ caution about their finances and the approach of Brexit.Visa, whose debit and credit cards are used for a third of payments in Britain, said on Monday that consumers stayed away from the traditional post-Christmas sales last month.“Consumer spending entered the new year on a downbeat note, falling for the eighth time in the past nine months, as Britons continued to cut back on spending,” Visa’s chief commercial officer, Mark Antipof, said.A fall in car sales weighed on the overall sales figures too. But there was better news for hotels and restaurants - as well as for hair salons and sellers of beauty products, as consumers looked for small treats for themselves.7.43am GMTGood morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.After last week’s market turmoil, which saw Wall Street enter correction territory (losing 10% from its recent peak) and some $4trn wiped off global share values, investors will be hoping for some respite this morning.European Opening Calls:#FTSE 7165 +1.02%#DAX 12290 +1.51%#CAC 5140 +1.19%#MIB 22510 +1.55%#IBEX 9740 +1.05%For a market that has enjoyed steady gains and fairly low volatility over the course of the past two years the steepness of the falls speaks to a complacency that has been prevalent for a while now and which appears to have been shattered in the wake of a surge in volatility.How this plays out over the coming days depends on whether the rebound we saw on Friday can translate into some form of base for a continuation of the uptrend that has been in place for the last nine years. This may well depend on whether we see further increases in bond yields, or a rise in interest rate expectations from other central banks around the world.There had been a lot of complacency built up in markets over a long time, so we don’t think this shakeout will be over in a matter of days. We’ll probably have a much bigger shakeout coming.Related: 'Big shakeout coming': markets stem losses as hedge fund sounds warning Continue reading...

Almost half of low-income families are believed to be in debt distress alreadyThe Bank of England’s warning that it plans to raise interest rates from as early as May will hit millions of low-income families who have only survived financially for a decade by using cheap credit.The Resolution Foundation said almost half of low-income families were in debt distress before Threadneedle Street said last week that it needed to increase the base rate at an accelerated pace over the next two years. Continue reading...

After $4 trn losses last week, Australian shares fall 0.4% on Monday as US investor says markets have become ‘complacent’Financial markets are braced for more volatility this week amid predictions from the world’s biggest hedge fund that a “big shakeout” is coming.The Australian stock market was the first to test the water on Monday morning and one point was down 0.7%.Related: Test of nerve for markets as 10 years of cheap money come to an endBest & worst stocks after the first hour of trade on the #ASX 200. Source Bloomberg #ausbiz pic.twitter.com/lQaPktcr6ZBloomberg’s world market cap chart has looked rather scary for awhile.

As economics prevents adult offspring leaving home, might England be moving towards a tendency to favour more authoritarian governments, wonders Dr John RicherSonia Sodha’s article (8 February) alludes to the effect of cultural differences on the ways families are structured, how members care for each other and government policy. In 1983 the French sociologist Emmanuel Todd published La Troisième Planète, translated into English in 1985 as The Explanation of Ideology: Family Structures and Social Systems. Todd sought to explain, by considering family structures, why different areas adopt different political systems. Two key differences were: 1. Inheritance patterns: equal or unequal division of the estate (equality v inequality). 2. Offspring tending to leave young or to stay at home into adulthood under the paterfamilias (liberty v authority). He characterised countries or areas by one of the four possible combinations. England and a few other places were characterised by liberty-inequality, and had the most stable democratic systems. Germany tended to authority-inequality and had tended to rightwing authoritarian governments, in Russia there was authority-equality and so tended to leftwing authoritarian (communist) governments.The book sometimes seems inclined not to let facts spoil an interesting idea, and events after its publication do not entirely support its thesis. But Todd’s interesting point is that family structures influence political systems. Continue reading...

The unnecessary policy of austerity pursued over the last few years has done more damage to the UK growth rate than any of the Brexit scenarios, argues Professor Tony ThirlwallThe way you (and other newspapers) have reported the Treasury estimates of the potential costs of Brexit to the UK as a whole, and to the regions, under different Brexit scenarios is very misleading (Revealed: the £80bn cost of hard Brexit, 8 February).The reported average estimated cost of 10% or so is not of a “hit to growth” (as you put it) but of the potential reduction in the level of output over a period of 15 years compared with staying in the EU. A reduction in output of 10% over a 15-year period is a “hit” to the growth rate of less than 0.5% per annum (compound), which is within the margin of error, and takes no account of compensatory domestic policy. Continue reading...

The improving world economy means rising employment and pay – and thus rising inflation and interest ratesChristine Lagarde had good news to tell when she turned up in Davos three weeks ago to announce the International Monetary Fund’s latest economic forecasts. The global economy was doing better than expected pretty much everywhere, the IMF’s managing director said.There was, though, another message, a warning not to get too carried away about a recovery that had left out large numbers of people and was not based on particularly solid foundations. “There is also significant uncertainty in the year ahead,” Lagarde said. “The long period of low interest rates has led to a buildup of potentially serious financial sector vulnerabilities.”Why are stock markets falling?Related: Test of nerve for markets as 10 years of cheap money come to an endInflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common.Related: 1950s prosperity or 1970s crash? Two ways a US interest rate rise could go Continue reading...

A glance at Britain’s history with Europe reveals that, then as now, we are worse off outside a union than we are inside itWhen I was a schoolboy it was common practice to go to the cinema (or “the pictures”, as we used to say) and arrive well after the start of a double bill. We would then stay until the action in the first film had reached the point where we had come in.As this country becomes the laughing stock of the world in regard to the so-called “negotiations” about Brexit, we find that, hey presto, this is where we came in.In our 45 years of membership, we have built up tens of thousands of links that it is absurd to try to remove Continue reading...

With economic signals positive and interest rates set to rise, recent turmoil is just the start of a rollercoaster ride for sharesStock markets are heading for a wild ride this year as central bankers strap on their bullet-proof vests and test investors’ willingness to accept higher interest rates. Last week’s share price crashes, which in two days wiped $4 trillion off the value of markets around the world, was just a foretaste of the battle to come.In the days following Monday’s crash, share values have recovered strongly only to dive again as competing theories about the path of interest rates and the likely impact on economic growth fight for attention.Related: Donald Trump says stock market is making a 'big mistake' after drop Continue reading...

An interest rates expert ponders outcomes for the US economy as the central bank looks set to end the era of cheap moneyRemember Quantum Leap? In the sci-fi show, time traveling scientist Sam Beckett would wake up in another era and have to work out where he was in history before solving this week’s mystery. Well, that’s the position the world’s economists and traders are in this week.Since the end of the last recession, interest rates have been at a historic low. Now, with wages rising and the global economy booming, central banks look set to end the era of cheap money. As stock markets panic about the short-term impact on share prices, Richard Sylla, the co-author of the seminal A History of Interest Rates, poses a longer-term question: where are we? The 1950s or the 1970s?Everything tells me the trend is going to be up. The question is, what sort of trend will it be?Related: Making millions from chaos: the fund cashing in on the stock market collapse Continue reading...

Texas hedge fund Artemis plucks millions from investments designed to benefit from turmoil and volatilityStock markets gyrated wildly this week, and a lot of people lost a lot of money. But Chris Cole, a 38-year-old hedge fund manager from Texas, wasn’t one of them. He made millions from his fund’s bet on a financial apocalypse.From his office overlooking the Colorado river in Austin, Texas, Cole runs Artemis Capital, a hedge fund that, since 2012, has been betting on a repeat of the 1987 Black Monday stock market crash.Related: By betting on calm, did investors worsen the stock market fall? | Nils Pratley Continue reading...

Philip G Cerny and John Airs respond to the Labour peer and former transport secretary’s article denouncing Chris Grayling’s handling of Virgin Trains East CoastAndrew Adonis makes excellent points about rail nationalisation (Grayling’s rail bailout echoes the grave errors of New Labour, 8 February). However, this is not just about outsourcing in general. It is about the longstanding contrast in economic theory between public goods and private goods, as developed by Paul Samuelson in the 1950s, and between specific and non-specific assets, as developed by Oliver Williamson in the 1970s, both leading to Nobel prizes. Public goods and specific assets are inherently indivisible – monopolistic, non-competitive and unprofitable, characterised by structurally determining economies of scale, especially if they cannot exclude particular customers. This is particularly true of what are called “natural monopolies”. Private goods and non-specific assets can be efficiently provided by the market, but public goods cannot. Here the public interest requires regulation and state control. The problem is where to draw the boundary between the two categories, as many sectors are mixed. The answers are found in neither neoliberalism nor socialism as such, but in a well-regulated social capitalism. Privatisation has unfortunately been applied far too often in sectors characterised by public goods and specific assets. Rail is a key example.

European markets still in the red despite positive start on Wall Street, while UK trade, construction and manufacturing figures present mixed picture2.55pm GMTStock markets are ending the week on another volatile note.After overnight falls on Wall Street and in Asia, European markets headed lower, although the falls were reduced once US markets opened in positive territory.2.32pm GMTAfter the latest plunge in US markets drove them into correction territory, Wall Street has got off to a better start, as indicated by the futures earlier.The Dow Jones Industrial Average is currently up 310 points (although not all the constituents are trading yet), while the S&P 500 opened up 1% and the Nasdaq Composite added 1.1%.1.55pm GMTIt may be too early to buy the dips, and more wild swings are possible, sayd Jasper Lawler, head of research at London Capital Group:US benchmark share indices falling into correction territory (down over 10% from record highs) has ignited concern the bull market has ended. There has been a spike in volatility, which has resulted in a blow-up in low-volatility strategies and a sharp dive in negatively correlated US index ETFs. The question is whether this is the technical trigger for wider market contagion or just a long overdue “healthy” pullback for an over-extended market.We would make the point that the stock market can deviate massively from economic fundamentals in the short term. Fear of rising bond yields can easily produce a bear market (down 20% from 52-week highs) despite a healthy global economy. In fact, that is usually how it happens because the stock market is a future-discounting mechanism. Another argument for a bigger move lower is that much of what has helped keep the stock market moving higher is momentum, which is now reversing. We would liken the outlook for the US stock market to making a tackle in sports, “the bigger they are the harder they fall.”1.47pm GMTHere’s a reminder of the falls we’ve seen through the bull market, from analyst Barry Ritholtz:Memory is famously short during bull markets. There have been a bunch of corrections in this one https://t.co/u7YxBFEvhs via @gadfly pic.twitter.com/beKn1Kh2TJ1.26pm GMTThis market fall is a dose of reality after “greed ran unchecked”, says Mark Dowding, co-head of investment grade at BlueBay Asset Management:The equity market reversal this week, may well serve to be a healthy event. Greed was running unchecked in January and so markets were due a dose of reality, or else the party risked getting out of hand.. this is no bad thing at all and may well serve to make life easier for investors over time.1.09pm GMTThere could be worse to come for the pound following today’s falls, suggests Jeremy Cook, chief economist at WorldFirst:Every single bit of optimism afforded to the pound on the back of Governor Carney’s comments on interest rate increases and upgraded growth and wage forecasts has been lost this morning following the comments from Michel Barnier that the transitional period is ‘not a given’. For sterling, nothing is more important in the short term than a transitional deal that extends the UK’s membership of the Single Market and Customs Union. The CBI has been vocal on the need for clarity for its members and small and medium sized businesses who we speak to every day have echoed those sentiments.So far, the broad swings in equity and volatility markets that have made headlines this week have not been felt in currency markets but if they do there are a fair many more currencies that would be seen as a ‘safer’ bet than sterling given the political atmosphere.12.49pm GMTThe market falls appear to be getting worse in Europe, as the Dow futures lose much of their earlier gains.The FTSE 100 is now down 61 points or 0.86%, while Germany’s Dax has dropped 1.7% and France’s Cac 1.6%.12.36pm GMTThe pound is coming under pressure on the latest Brexit developments.A post-Brexit transition deal is not a given, according to the EU’s chief negotiator Michel Barnier after the latest set of talks.If these differences persist, a transition is not a given. If these disagreements were to persist there would undoubtedly be a problem. I hope we will be able to resolve these disagreements in the next round.The sooner the UK makes its choices, the better.12.17pm GMTBut economies and markets do not necessarily go hand in hand, says Justin Urquart-Stewart of Seven Investment Management:Fundamentally the market jet stream has changed. Thus get used to more weather fronts buffeting the indices. Underlying economies still fine. Economies & Markets do not usually walk in step12.07pm GMTThe UK economy grew by 0.5% in the three months to January, according to the National Institute of Economic and Social Research.The think tank said this was the same as the official figures for the final quarter of 2017. Up until now surveys had suggested a slowdown at the start of the year.We estimate that economic growth was steady at 0.5 per cent in the 3 months to January. Activity picked up in the second half of 2017 after a period of subdued growth in the first half of the year. The recovery was driven by both the manufacturing and the service sectors, supported by a buoyant global economy, while construction output continued to lag.We are forecasting GDP growth of close to 2 per cent this year assuming a soft Brexit scenario. At this speed the economy could start to overheat unless the Bank of England withdraws some of the stimulus that it has injected by raising the policy rate. Our forecast assumes a 25 basis point increase in May and then every 6 months until Bank Rate reaches 2 per cent by mid-2021. If instead, Brexit talks fail, the UK economy will in our view suffer a marked slowdown with damaging longer term consequences.11.38am GMTThe Dow futures are off their best but are still indicating a higher open on Wall Street after the latest plunge. But the futures have not been the best guide to what happens. Craig Erlam, senior market analyst at Oanda, said:US futures are trading slightly in the green ahead of the open on Friday, a day after stock markets once again tumbled leaving indices in correction territory.As we saw on Thursday, this isn’t necessarily indicative of calm returning to the markets. The Dow recorded declines of more than 1,000 points for the second time this week, having never done so before, despite futures prior to the open being relatively unchanged on the previous days close.Markets haven’t been too concerned about the prospect of a shutdown since the start of the year despite two having now taken place so I don’t expect to see any boost now that a deal has been reached. This is merely just another self-inflicted risk that’s been temporarily averted.10.46am GMTBank of England deputy governor Ben Broadbent seems relatively relaxed about the recent stock market falls.In his tour of BBC studios, he told the Today programme:Equity markets go up and down, you have a correction of this size roughly every 18 months on average, so it’s not terrifically unusual....If you’re suggesting that this is somehow parallel to what happened in 2007, then I would say no.I think there are some very big differences and as I pointed out, the equity markets, particularly in the US, have risen a lot over the last 12 months and indeed, even today, we are roughly back where we were a couple of months ago.10.29am GMTHere’s a useful chart of the UK trade figures:Trying to figure out the #trade figs is a messy business - but hopefully this chart helps! Substantial net imports of erratic components meant net trade in goods dragged on GDP in Q4. Excluding oil and erratics, net trade in goods prvided a boost to GDP. pic.twitter.com/Cso31JnZHm10.22am GMTEuropean markets remain fairly calm, although of course that may all change once Wall Street reopens. David Madden, market analyst at CMC Markets UK, said:European stocks are lower this morning, but are holding up relatively well when you consider the magnitude of the declines in Asia overnight and in the US last night. Investor are clearly nervous in this part of the world, and there are still concerns things could turn sour again. The erratic moves that have taken place in the US are unsettling investors here, and the sentiment in Europe could change when trading in New York resumes.10.14am GMTHere’s the British Chambers of Commerce on the day’s UK data. Its head of economics Suren Thiru said:The sharp deterioration in the UK’s net trade position in December was disappointing and means that trade is likely to have been a drag on UK growth in the final quarter of the year. This deterioration reflects a significant increase in imports in the quarter, more than offsetting the rise in exports.Although there was a surprise pick-up in construction output, the sector remains a concern and together with the widening in the UK’s trade deficit and weakening industrial output indicates that economic conditions are becoming more sluggish. While many exporters are benefiting from stronger growth in key trading markets, imports continue to grow at a solid pace with businesses continuing to report little in the way of import substitution despite their high cost. If this trend continues as we expect, the contribution of net trade to UK GDP growth over the near term is likely to be limited at best.10.07am GMTThe UK data has been little help to the pound:#GBPUSD was already off $1.40 before Dec factory data. Actually bounced as high as $1.3987 ahead of release. Now tests $1.3914/393 support that was formerly resistance ^KO pic.twitter.com/UX4Hh0pUN99.57am GMTBack with the UK data, and economist James Knightley at ING Bank says the latest figures suggest fourth quarter growth could be revised downwards:Softer December trade and production data coupled with downward revisions suggest the potential for fourth quarter GDP growth to be revised down to 0.4% quarter on quarter [from 0.5%]UK industrial production fell 1.3% month on month in December, worse than the 0.9% consensus while there was a 0.1 percentage point downward revision to November. The December softness relates to the shutdown of the North Sea Forties pipeline for unplanned maintenance (oil and gas output fell 24.2% month on month) and should rebound in January, but it does suggest the risk of a very modest downward revision to fourth quarter GDP.9.52am GMTHere’s the latest view from Chris Iggo, chief investment officer fixed income at AXA Investment Managers, on the current markets:Volatility is back and those that bet on it never coming back have had a tough week. Why is it back? It’s back because the macro fundamentals are evolving in a way that many of us have expected but some have denied. Growth is strong, inflation is not dead and interest rates are rising. This is spooking the bond market and the bond market spooks everyone else.The veracity of the moves in equities are explained by the existence of structured trades, algorithms and leverage, but the reason that valuations are being challenged is because the discount rate is rising and is not going back down any time soon. Bond investors might start to be tempted to buy US Treasuries as we approach a 3% yield but the cat is out of the bag – we are in a higher yield environment than we have been for the last three years and that is a bit of a problem – not a terminal problem – but a bit of a problem for equities.

December figures ‘pretty poor’ given weakness of pound since Brexit vote, City analysts saysBritain’s trade position with the rest of the world worsened in December as rising global oil prices pushed up the cost of importing fuel, while the continuing weak pound failed to lift sales of UK-made goods abroad.The difference between the total value of goods and services imported to Britain and sold overseas widened by £1.2bn from November to £4.9bn in December, according to the Office for National Statistics. While there was an increase in goods export volumes, it came at less than half the pace of imports. Continue reading...

Another day of wild swings in the financial markets saw a loss for the day of over 4%Wall Street was on Thursday heading for its toughest week in more than two years after fears of higher interest rates led to a fresh plunge in New York stocks.Another day of wild swings in the financial markets saw more than 1,000 points wiped off the Dow Jones industrial average – a loss for the day of over 4%. It was the third drop of more than 500 points for the Dow in the last five days and the Dow is now down 10% from its peak on 26 January, a fall known as a “correction”.1,175.21, 5 February 2018

The most memorable comments on the cryptocurrency from senior figures in world finance•ECB official backs bitcoin clampdown

The government should shed its Brexit paralysis and stem the escalating crisis. Reform of council funding must come quicklyThe wonder is that it’s taken so long for councils to tumble over the cliff. This is their eighth year of brutal cuts, while the cost of caring for frail elderly people and needy children sky-rockets.The Daily Mail’s front page on Thursday blasts away at councils for a “thumping rise in council tax” of 6%, with nine out of 10 councils set to burst their budgets. They quote the TaxPayers’ Alliance calling for councils to “step up a war on wasteful spending”. The real war has been central versus local government.Related: Council tax rises on the way as local authorities try to stay afloatTake the cap off council tax for higher-value properties, which have not been revalued since 1991Related: Northamptonshire’s cash crisis is a taste of things to come for councils | Patrick Butler Continue reading...

Yves Mersch joins growing list of experts calling for restrictions on cryptocurrencies• What the experts have said about bitcoin

Grounds are being laid to end the flow of easy money sooner than expected

Decision to hold rates now came with heavy caveats that a rise is likely in May to tackle inflation

FTSE gained nearly 2% but Dow Jones recovery failed to last with index falling back by close to end more than 19 points downEuropean stock markets have rallied after sharp losses earlier in the week, with London’s leading share index gaining almost 2%.The FTSE 100 index of the most valuable companies listed in London rose 138 points to 7,279 on Wednesday, still well below its all-time closing high of 7,779 on 12 January.Related: Dow recovers from early falls as European shares rebound - as it happened Continue reading...

Leave-voting heartlands of north-east and West Midlands would be worst hit, report findsA no-deal Brexit would blow an £80bn hole in the public finances, with the leave-voting heartlands of north-east England and West Midlands worst affected, according to new detail from the government’s own secret economic analysis.The Guardian has learned that the secret papers, which assess the economic impact of leaving the bloc, predict that if there is no deal, the government will need to borrow £120bn more over the next 15 years. Continue reading...

Hanna Chalmers from Ipsos Mori responds to Liza Featherstone’s article which claimed that focus groups are ineffectiveAs someone who has spent nearly 20 years observing, leading and analysing focus groups, I found Liza Featherstone’s crushing take on the traditional focus group (The long read, 6 February) to be completely at odds with the world I inhabit. She makes it clear she views the “culture of consultation”, or to put it another way, asking how people feel about things, to be a bad thing. But how can that be? Is it better not to ask? Of course, market research is concerned with increasing the bottom line, reshaping brands and launching new ones. But in my experience, clients are highly receptive to understanding flaws in the service or products that audiences alert them to – not resistant, as Featherstone asserts.There remains an important role for the traditional focus group in enabling companies, politicians or service providers to observe and listen to the attitudes of the very people they wish to understand better. But let’s not forget focus groups also sit alongside a wealth of other valuable techniques such as ethnography and passive metering which enable us to understand how people behave. Continue reading...

President reminisces about the good ‘old days’ after Dow Jones industrial average lost 1,175 points on MondayThe stock market is making a “big mistake”, Donald Trump said on Thursday, days after a record-breaking sell-off on the US exchanges.“In the ‘old days,’ when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!” Trump wrote on Twitter in his first public comment on the sell-off.Why are stock markets falling?Dow, S&P 500 and Nasdaq all finished the day at new RECORD HIGHS! pic.twitter.com/wJyB9d00hh Continue reading...

Forecaster says strength of world economy and weak pound will help offset effect of Brexit vote

The Dow Jones has surged by 567 points as the US stock market roared back from its slump on Monday, but European stocks had a bad day

Analysts are still attempting to explain the mood swing that caused Monday’s dramatic slide. We look at five key factors

Britain’s industrial base has been whittled away because the country has been in ideological hock to the City – whose bankers, lawyers and accountants rake in huge fees in takeover battlesIn 2016 Theresa May launched her campaign to become Conservative party leader and Britain’s prime minister with a speech that promised to do “something radical” about corporate takeovers. She warned that “transient shareholders … are not the only people with an interest when firms are sold or close. Workers have a stake, local communities have a stake, and often the whole country has a stake.” Fast forward 18 months and Mrs May, drained of authority, has no proper industrial strategy.Yet a real test of her words has emerged in the City, where a £7bn hostile battle appears to pit financial engineering against real engineering. Melrose, whose holding company is staffed by about 50 executives skilled in the arts of law and finance, has launched a corporate raid for GKN, a British manufacturing giant employing 56,000 people and a world leader in automotive and aircraft technology. Melrose wants to purchase GKN by borrowing £1.4bn and offering that as a sop to shareholders. If successful, that loan will be added to GKN’s debt, diverting cash away from useful investment and obligations to its 32,000 pensioners. This doesn’t seem to trouble Melrose’s top four bosses. They plan to split up and sell parts of the industrially vital business, no doubt minimising taxes and cutting costs, within five years. If successful, the bosses could share an absurd £285m in bonuses. Continue reading...

Investors fear the era of cheap money is coming to an end, but shares are likely to bounce back

Statistics show that UK economy entered new year on a downbeat noteBritain’s retailers battled through “tough” trading conditions in January as consumers preserved their cash for essential food shopping and shunned big ticket purchases.Non-food sales declined by 1.2% in the three months to the end of January with furniture sellers, shoe shops and high street clothing retailers recording their worst performance since 2009, according to British Retail Consortium (BRC) and KPMG data.Related: UK services sector growth falls to 16-month low Continue reading...

Focus groups make us feel our views matter – but no one with power cares what we think. By Liza FeatherstoneIn the early 1950s, the Betty Crocker company had a problem: American housewives liked the idea of cake mix, but they weren’t actually buying it. And so the company approached Ernest Dichter, a Viennese psychologist who had pioneered a new kind of market research, and asked him to find out why.At the same time, the relatively new processed-food industry was determined to push ready-made food. Frozen foods had enjoyed a boost during the war because of tin rationing, and the first frozen ready meals were launched in 1952. More women were working outside the home, making the convenience of these meals especially appealing. Incomes were rising, too, during this postwar period, which gave families more money to spend on convenience items, and on trying out new dishes. Not all such products were new – cake mix, after all, had been around for decades – but in this postwar climate, the food industry assumed there would be a much larger market for them. And yet, cake mix sales were slow.Related: From inboxing to thought showers: how business bullshit took over Continue reading...

The Dow Jones industrial average dropped 4.6% as investors fled amid fears of rising interest rates: ‘This was volatility unleashed’

Fears of interest rate rises in the US aimed at taming inflation are making markets nervous

When it comes to the end of work as we know it, ableism is surely at the core of this flawed perspective, writes Bella Milroy. Plus Patrick O’Sullivan says local communities must become self-reliantWant to radically rethink the concept of work? Start talking to disabled people. As vitally important as the case for a universal basic income is, as Larry Elliott observes (Robots will take our jobs. We’d better plan now, before it’s too late, 1 February), a debate that focuses solely on the concept of paid work will only take us so far, and fails to acknowledge the millions of disabled people, as well as millions of carers, who go unpaid for the work they do every day.When it comes to the end of work as we know it, ableism is surely at the core of this flawed perspective. Disabled people have been redefining the idea of what it means to work, to create, to find purpose and to contribute to society since the dawn of time, the majority of which goes unpaid. Continue reading...

Demand weakens for services such as restaurants and hotels amid ongoing Brexit uncertaintyThe UK services sector grew at its slowest pace in January since the aftermath of the EU referendum as the economy got off to a sluggish start in 2018.The latest health check of a sector that includes hotels, restaurants, transport and the City from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) found that a loss of clients and lingering Brexit uncertainty had led to a dip in activity. Continue reading...

The 30% of Bradfordians under 20 face a perfect storm of problems, from youth unemployment to racial tension. But many of them insist it’s not all doom and gloomWhen it comes to grim urban statistics in Britain, the city of Bradford tops many lists. Police statistics name Bradford as having the highest crime rates in West Yorkshire, while a 2014 YouGov poll named it Britain’s “most dangerous city”. Bradford also has one of the highest levels of youth unemployment in the UK: 26% of young people were out of work in 2015, up from 11.3% in 2004.

Weak dollar, rising inflation, recession memories fading, new hand at the Fed … and meltdown?It is August 1987 and the US economy is humming along. Memories of the deep recession earlier in the decade are fading fast. Tom Wolfe is about to publish The Bonfire of the Vanities, which captures perfectly Wall Street’s greedy bullishness.The financial markets have Paul Volcker to thank for rising share prices. As chairman of America’s central bank, the Federal Reserve, Volcker had given the US economy shock treatment to rid it of its inflationary excesses. Record-high interest rates triggered the worst recession in the US since the 1930s, but once inflation started to come down borrowing costs were cut sharply and the economy recovered. Continue reading...

Renewed interest in philosopher fires celebrations of 200 years since his birth on 5 May 1818A spectre is haunting Europe in 2018 – to borrow from one of his catchier one-liners – the spectre of Karl Marx himself.Two hundred years after the philosopher’s birth, a small industry is gathering pace, from plans for major events in Trier, the city on the Moselle where he was born, to a new tour of the Manchester streets that he and Friedrich Engels walked as they discussed the condition of the city’s emerging working class. The bicentenary on 5 May will be marked with exhibitions, lectures, conferences, histories and novels. Continue reading...

Britain’s reluctance to invest in national improvement is just one consequence of this seemingly endless era of austerityThere are measures of how broke the UK has become wherever you look. And it’s not just the public sector that is showing the strain.The vast sums needed to keep up with 21st century developments are also absent from a private sector that has become reluctant to take any big bets without a large slug of government support behind it.The UK is expert at boxing clever to give a show of modernity without spending vast sums of money Continue reading...

If you’re planning to remortgage, do it now – a little-known change could push up ratesThere’s going to be an interest rate rise on 28 February. In just a few weeks you are going to see about 0.25% added to mortgage and savings rates. But you won’t see a press release from the Bank of England that the base rate has gone up. Instead, for the first time in years, banks are going to be scrambling to offer savers better rates – and the losers will be anyone taking out a new mortgage.So what’s happening? On 28 February an extraordinary financial measure, put in place in the days after the Brexit vote, will end. Continue reading...

Worries over rising bond yields and inflationary pressures have hit shares this week.

Apple, Visa and Exxon among biggest fallers as American and European stock markets tumble from record highsWall Street ended its worst week in two years on Friday with another sharp fall as markets in Europe also continued to tumble from the record-high levels reached less than a month ago.Investors headed for the exits amid growing fears over a bond market rout, triggered by early signs of inflation in the US as economic growth accelerates and wages appear to finally be rising after years of stagnation. US government bond yields, which rise as prices fall, hit the highest level since January 2014. Continue reading...

Construction activity falls for first time since immediately after EU referendum following company’s liquidationThe collapse of Carillion has dragged the British construction industry to the brink of stagnation, as housebuilding activity fell last month for the first time since immediately after the EU referendum.The slowdown in home construction is likely to embarrass the chancellor, Philip Hammond, after he unveiled tax cuts for first-time buyers and extra support for housebuilding at the budget in November.Carillion relies on major contracts, some of which have proved much less lucrative than it thought. Continue reading...