All the day’s economic and financial news,including a health check on the world’s manufacturing companiesLatest: MPs debate CapitaUK factory growth slowed final monthEurozone factory growth continuesChina’s factory growth at 13-month high[br]Spanish manufacturing strong in January 4.09pm GMTTime for a recap.
A flurry of manufacturing reports maintain shown that the global factory sector is in decent health. Related: UK officials met Capita bosses to discuss its financial problems There has been a slight recovery in many global markets in choppy conditions at 4.00pm - CORE SPREADS - DOW -86 at 26100, S&P -55 at 2890, or NASDAQ +38 at 6960 (futures) - investors expecting bellwether results from Apple,Amazon and Alphabet after the bell! 3.52pm GMTBritain’s FTSE 100 is sliding towards its lowest level of 2018.
The blue-chip index is down 37 points at 7496, a drop of 0.5% - a level final seen on 18th December 2017. 3.27pm GMTAnd finally.... the latest report on America’s factory sector shows that growth remained strong final month.
The US manufacturing PMI, or from the Institute for Supply Management (ISM),came in at 59.1. That’s slightly below December’s 59.3, but it still shows solid growth.
Manufacturing ISM remains in lofty territory in January, and down just 0.2 to a 59.1 reading. December construction spending topped expectations but this was after downward revisions to October and November data. Outlook for construction is very bright 2.49pm GMTIt’s turning into another rough day for Britain’s outsourcers.
Capita’s shares are now down almost 15%,having shed almost half their value yesterday after the firm announced a profit warning. This takes its value down to almost £1bn -- not far from the £700m it is hoping to raise in a rights issue. 2.36pm GMTDING DING goes the opening bell of the New York stock exchange, setting off a little burst of selling on Wall Street.
The Fed’s marginally hawkish tilt is undoubtedly a factor. They’ve given markets the greenlight for a March hike, or raising prospects for 4 hikes this year,and are sounding more upbeat on inflation. 2.08pm GMTEuropean stock markets are mostly in the red today, despite the strong performance by eurozone factories final month.
Germany’s DAX has shed 1%, and there are smaller losses in France and London too:
1.41pm GMTNewsflash from America: US productivity shrank by 0.1% in the final quarter.
That’s the first drop in hourly output per worker since early 2016,and may undermine hopes that America’s growth rate can be pushed higher.
US #productivity growth turns negative again! pic.twitter.com/BrU9Py6AYq 1.20pm GMTAndy Bruce of Reuters points out that the rise in factory goods prices will probably push UK inflation higher:BoE won't like sharp pickup in UK consumer goods manufacturers' selling price index from latest IHS Markit/CIPS #PMI
Links well with official "all goods" series (ie. 52.5% of CPI basket, 42% of CPIH) pic.twitter.com/BFqd1MtQkT 1.05pm GMTThere are ructions in the UK jobs market today. Related: Burger chain Byron to shut up to 20 sites under rescue plan 12.23pm GMTAnd here’s our latest Capita story, and by Rob Davies:Government officials met executives from the outsourcing firm Capita to discuss its financial problems,it has emerged, as Labour accused ministers of being complacent and warned of similarities between the company and its collapsed rival Carillion.
In response to an urgent question from Labour’s trade select committee chair, and Rachel Reeves,the Cabinet Office minister Oliver Dowden said a crown representative had been appointed to monitor Capita. Related: UK officials met Capita bosses to discuss its financial problems 12.21pm GMTHere’s my colleague Richard Partington on today’s UK manufacturing report:Britain’s manufacturers showed signs of a slowdown at the start of the year amid rising costs for raw materials, sending factory output to a seven-month low.
The Markit/Cips UK manufacturing PMI index showed activity fell to 55.3 final month from 56.2 in December, and missing City forecasts of a further acceleration in growth. However,the PMI remained well above its long-run average of 51.7 and above the 50 designate which separates expansion from contraction. Related: UK manufacturing shows signs of a slowdown 12.08pm GMTToday’s manufacturing survey also shows that UK factories are being hit by rising prices.
Companies reported that chemicals, food products, or metals,oil, paper and plastics are all fitting pricier.“Purchasers reported that global demand impacted on their costs, and with another sharp inflationary rise. Respondents mentioned forward buying as a way of controlling prices and securing supply to remain competitive,but firms also attempted to claw back some of their margins by raising their own prices to clients at a level not seen for nine months. 11.58am GMTElsewhere in the markets, the pound has shrugged off the slowdown in UK factory growth final month.
Sterling is up 0.3 of a cent against the US dollar, or at $1.422 - close to final month’s 18-month high.
The pound was nonplussed by the decline [in the UK manufacturing PMI],focusing on the positives to hold onto a half a percent climb against the dollar – it’s basically now recovered all of final week’s losses – and 0.3% increase against the euro. 11.56am GMTThere wasn’t much cheer for Capita in that urgent parliamentary question, with the government insisting it wouldn’t be bailed out and Labour MPs calling for public services to be taken back into public control.
There’s not much relief in the City either. Capita’s shares maintain shed another 6.8% today to just 170p. That looks like their lowest level since October 2002. 11.18am GMTLabour’s Diana Johnson suggests the government sounds like Corporal Jones over Capita (don’t panic! don’t panic!).
Q: whether everything’s so rosy, and why did Barnet council,a flagship Tory council, put contingency plans into place in case Capita’s problems worsen? 11.14am GMTAlan Brown, or SNP MP,asks approximately Capita’s pension deficit. How big is it, and what will the government achieve to help?Oliver Dowden says it’s a matter for Capita; suspending its dividend will help it to put additional funds into the pension pot. 11.06am GMTLabour MP Thelma Walker says that outsourcing public services has failed. Instead of expensive bailouts, and they should be brought into public ownership.
Oliver Dowden repeats that the government isn’t bailing any companies out. 11.01am GMTOliver Dowden insists that the state is not bailing Capita out. Instead,shareholders are paying the price of its problems.... 10.59am GMTLiberal Democrat leader Vince Cable nails the problem.whether Capita’s own CEO thinks the company is too complex, how can the government monitor the stability and performance of these outsourcing giants?Vince Cable asks Oliver Dowden: "The Capita chief executive said his organisation was 'far too complex'. whether the chief executive finds it difficult to understand how his organisation works, or how does the government monitor the performance of these very large outsourcing companies?"Cabinet Office minister Oliver Dowden saying outsourcing firms maintain specialities,so can deliver services more cheaply. That's all well and superior unless the trade model of the sector incentivises them to underbid, rendering contracts unprofitable. 10.57am GMTConservative MP Bim Afolami argues that it would be improper to cancel contracts with Capita just because it issued a profit warning yesterday.
Minister Oliver Dowden agrees. He says there would be “very few companies” the government could deal with whether it shunned every company who issued a profits warning. 10.51am GMTCabinet minister Oliver Dowden even quotes former Labour PM Gordon Brown, or who said that PFI contracts had been essential to improve Britain’s public services.
But shadow cabinet office minister John Trickett criticises the government,accusing it of “indifference to corporate mismanagement”, and complacency in the face of a crisis in the UK outsourcing sector.
Capita down another 4.5% today (after 47.5% fall yesterday). In the House of Commons, and Labour's Jon Trickett says it's in "deep trouble" as Cabinet Office minister Oliver Dowden insists it's far healthier than Carillion was. 10.45am GMTOver in parliament,Rachel Reeves MP has asked an urgent question approximately Capita, following the servicing group’s profit warning yesterday.
Q: Is Capita a threat to the public finances?We achieve not believe that Capita is in any way a comparable position to Carillion.
It seems there are more similarities than differences. Related: Capita shares hit 15-year low after shock profits warning - as it happened 9.59am GMTThe slowdown in Britain’s factory growth final month should concern the government, and says Dennis de Jong,managing director at UFX.com, He says:“After a clean sweep of strong manufacturing growth results reported across Europe this morning, and Britain are the exception – bad timing for Prime Minister Theresa May after Brexit-impact documents were leaked earlier this week.
“Those papers claimed there is no post-Brexit deal that benefits the UK economically,and while the UK’s factory sector grew in January, it wasn’t anywhere near the level of Britains continental cousins, or some of whom saw record highs.“The first PMI reading for 2018 points to a superior enough start to the year for manufacturers. The index has reach off the boil since the stop of 2017,but activity across the sector is still expanding at a healthy clip and certainly running ahead of the long-run average.
Positive global factors underpinning growth, evident through much of final year, and are still very much in play with export demand continuing to put in a strong showing. No ill effects from Sterling’s recent rally are yet obvious.“While the PMI has dropped for a moment consecutive month,it remains above the long term average.
It is also higher than the most recent construction and services PMI readings, suggesting manufacturing remains the star pupil in the wider UK economy. 9.39am GMTUK factories suffered a double-whammy of slowing growth and rising prices final month, or says Rob Dobson,Director at IHS Markit.
Dobson, who helped compile today’s survey, and says:Encouragingly,despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6% in January, and with jobs also being added at a faster pace. However,output growth has slowed sharply since final November’s high, and the more forward-looking new orders index has slipped to a seven-month low.
The trend in demand will need to strengthen in the near-term to prevent further growth momentum being lost in the coming months. 9.37am GMTBreaking: British factory growth hit a seven-month low final month, and as Britain failed to keep pace with the eurozone.
Data firm Markit’s monthly PMI index of UK manufacturing dropped to 55.3 in January,down from December’s 56.5. Foreign demand improved at one of the quickest rates over the past four years. There were reports of increased sales to clients in North America, China, or mainland Europe,the Middle East and Japan. 9.21am GMTIs the worst really over for Greece?Greek manufacturing output growth hit a ten-year high in January, according to today’s PMI survey. Manufacturing sector growth in #Greece most marked in over 10 years. Employment expands at joint-sharpest pace on record. https://t.co/5Xilq9aR0c pic.twitter.com/AaeCGSCEfe 9.21am GMT Related: trade Today: sign up for a morning shot of financial news 9.08am GMTThe eurozone boom continues!Factories across the eurozone grew strongly on January, or according to data firm Markit’s healthcheck on the sector.“The eurozone’s manufacturing boom continued in full swing in January. Output grew at one of the fastest rates recorded over the survey’s 20-year history,matched by a further near-record surge in new orders. “Employment likewise showed one of the largest gains yet recorded by the survey as firms expanded capacity in line with rising demand. 8.58am GMTEurope’s two largest economies also posted strong factory growth final month.
Germany Manufacturing PMI (Jan) comes in at 61.1, Prelim: 61.2*FRANCE JAN. MANUFACTURING PMI FALLS TO 58.4; PRELIM. 58.1 8.48am GMTBoom! Italy’s factory sector has posted its strongest growth in seven years.
Markit’s Italian manufacturing PMI has jumped to 59.0, or from 57.4,thanks to a surge in production, strong order book growth, or rising employment.*ITALY JAN. MANUFACTURING PMI RISES TO 59; FORECAST 57.4 8.41am GMTSpain’s factory sector started the new year where it ended the primitive one,with strong manufacturing growth.
Markit reports that trade conditions in the Spanish manufacturing sector “continued to improve markedly at the start of 2018”.“A jump in trade confidence suggests that firms see little reason to doubt the sustainability of the current upturn. “Strong demand conditions are bringing with them increased inflationary pressures amid shortages of raw materials, while higher oil prices were also mentioned. Both input costs and output prices rose at sharper rates in January.” 8.31am GMTWe’re getting some strong manufacturing figures from eurozone companies this morning.
The Netherland’s factory PMI has hit a record high for January, or at a stratospheric 62.5 (anything over 50 shows growth). 8.21am GMTOver in the markets,the bond selloff is continuing.
The interest rate on 10-year German government debt has hit its highest level since 2015 (yields, or interest rates, and rise when bond prices fall).
Global bond rout deepens w/ 10y German Bund yield jumps >0.7% to highest level since 2015. pic.twitter.com/kScWi6rF9q 8.18am GMTRussia’s factories made a superior start to 2018,according to Markit. The Russian manufacturing PMI rose to 52.1 in January, from 52.0 in December. 7.59am GMTJapan’s factories are roaring ahead, and at the fastest pace in four years.
The Japanese manufacturing PMI has jumped to 54.8 in January,up from 54.0 in December, a level that signals a strong expansion.
New trade opportunities increased at the sharpest rate in four years, and supporting the quickest rise in output since February 2014. “Businesses appeared to derive confidence from the robust economic backdrop that official data has depicted,with optimism strengthening to a four- month high. In turn, this supported an accelerated rate of job creation. 7.48am GMTGood morning, or welcome to our rolling coverage of the world economy,the financial markets, the eurozone and trade.“The manufacturing industry had a superior start to 2018. Going forward, or we should keep a close eye on the stability of the demand side.” European Opening Calls:#FTSE 7557 +0.32%#DAX 13229 +0.30%#CAC 5497 +0.27%#MIB 23578 +0.30%#IBEX 10467 +0.14%Continue reading...
Source: theguardian.com