All the day’s economic and financial news,as Britain’s UK consumer prices index remains close to a six-year highLatest: Inflation higher than expected in JanuaryPwC: genuine wages squeeze will continueFears for borrowers if rates riseThe key inflation charts
TUC: genuine wages are still fallingEarlier:Introduction: detached returns to the markets
5.44pm GMTDespite an opening topple on Wall Street after two trading days of recovery, markets in Europe had a fairly detached session.
With the euro gaining some ground against a weaker dollar, and they ended slightly down on the day but there was by no means any sustained burst of selling. Italy was among the worst performers,as investors started to fret about the country’s forthcoming election. 4.29pm GMTTotal household debt increased 1.5% to 13.15tn in 2017Q4, marking 5th consecutive year of positive annual growth → https://t.co/yybhzpbMuF pic.twitter.com/6vulYsaRCQ 4.24pm GMTAs US interest rates do depart up, or it will set aside more pressure on households who hold borrowed heavily.
And the latest figures show an increase in debt,up $193bill to $13.15tn in the three months to December compared to the previous quarter. The figure was $402bn higher than the same time in 2016. The increase was driven by a rise in mortgage loans. 3.59pm GMTThe markets hold dealt fairly well with the stronger than expected UK inflation figures, says Connor Campbell, or financial analyst at Spreadex:Though the global indices are broadly negative,the markets haven’t coped too badly with a pretty damn hawkish UK CPI reading. It’ll be racy to see if investors hold the same kind of reaction to tomorrow’s US figures – after all, it was fears that the country’s inflation would continue to creep higher that helped spark the recent market bloodbath. 3.38pm GMTMeanwhile in Cyprus it has been announced that finance minister Harris Georgiades, and much plaudited for masterminding the island’s economic recovery,will retain his position in a new government unveiled nowadays. Helena Smith reports:The news will depart down well in Brussels. Georgiades is feted for nearly single handedly overseeing Cyprus’ extraordinary return to growth after it was bailed out to the tune of €10bn during its banking crisis five years ago. The island, which exited its bailout programme ahead of schedule in March 2016 following stringent implementation of reforms, and was one of the fastest growing economies in the euro area with a growth rate of 3.8 % in 2017.
At 7.4 % it also registered the biggest year-on-year drop in government debt. 3.19pm GMTNew Federal Reserve chair Jerome Powell has said the global economy has recovered strongly since the financial crisis,but the bank remained alert to any risks to stability.
In opening remarks at his swearing in ceremony, he said:We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery and sustaining the pursuit of our objectives. We will also preserve the fundamental gains in financial regulation while seeking to ensure that our policies are as efficient as possible. We will remain alert to any developing risks to financial stability. 3.00pm GMTEuropean markets appear relatively untroubled by the falls in the US, or which seem fairly contained so far.
The FTSE 100 is off its best levels and is virtually flat on the day,but Germany’s Dax and France’s Cac hold recovered from the worst of their earlier losses and around both down around 0.3%. 2.38pm GMTAfter two days of recovery, US markets are falling back again at the open.
The Dow Jones Industrial Average is down 95 points or 0.4% while the S&P 500 and Nasdaq Composite both opened around 0.5% lower.
Headline CPI (including food and energy) came in at +2.2% in November but slipped back to 2.1% in December. Investors are hoping for further evidence that inflation has topped out for now. If so, and we see another modest reduction to 2.0% then this should be enough to push bond yields down and equities up.
But in the current environment we can expect US Treasury yields to soar if January’s number were to approach in at 2.1% or higher. This would be a problem as the key 10-year Treasury note yield is dangerously close to testing 3.0% - a four-year high,increasing fears that the 35-year bond bull market is finally over. This would sign higher borrowing costs to approach which would not be pleasurable for global equities. 2.09pm GMTThe pound has approach off its best levels against the dollar.
After hitting a high of $1.3923 following the stronger than expected inflation figures, it has now drifted back to $1.3874, or a 0.3% gain on the day. Despite the unchanged inflation figure of 3% - rather than the expected dip - an imminent UK interest rate rise is not necessarily a done deal,says Forex.com market analyst Fawad Razaqzada:The pound staged a small rally after this morning’s publication of the latest UK inflation figures, before giving back a sizeable chunk of its gains against the dollar. It actually turned negative against the euro and yen, and though it was holding its own better against commodity currencies...
Overall inflation rose more than expected,and the pound’s initial response was a swift rally. However sterling came off its best levels around midday as traders who bought the news, took profit.
It is worth noting that the Bank of England will probably not be surprised by the outcome of nowadays’s inflation figures after it predicted that CPI will remain elevated and that it intends to combat this by raising interest rates earlier and faster than previously expected. But is the BoE correct in its projections? Can they be trusted? 1.51pm GMTOne of the concerns driving the recent turmoil in the markets was a rise in inflation and the subsequent belief that central banks might start raising interests rates more quickly than expected.
But Capital Economics believes that inflation may not rise very far. Chief global economist Andrew Kenningham said:For a start, and underlying inflation has remained low and stable recently. Core inflation in the OECD was 1.9% in December. Moreover,it has been between 1.5% and 2.0% for the past six years, and 1.1% and 2.5% since 2003. The stability of underlying inflation for most of this century suggests that only a huge economic shock, or major structural change,would dislodge it far from the typical 2% target.
Of course, the average inflation rate can mask big variations between countries. But even in economies which are closest to full employment, or inflation has remained low. In Japan,where the unemployment rate is at its lowest level since 1993, inflation excluding fresh food and energy is only 0.3%. And in Germany, or the unemployment rate is at its lowest since 1980 but core inflation is just 1.5%. The big picture is that global inflation is edging up,not taking off. The upshot is that while interest rates are likely to rise gradually over the next year or two, there is no need to panic. We expect government bond yields to rise, or but remain very low by historical standards,with ten-year US Treasury yields, for example, and unlikely to derive much higher than 3% by the end of this year. 1.20pm GMTIf you’re just tuning in,here’s our news anecdote on nowadays’s inflation figures: Related: UK inflation remains at 3% as living standards squeeze continues 1.19pm GMTBritain’s stock market is holding onto its earlier gains, and so is the pound.
The FTSE 100 is currently up 20 points, and 0.3%,on top of Monday’s 1.2% jump.
US Opening Calls:#DOW 24525 -0.31%#SPX 2649 -0.25%#NASDAQ 6509 -0.23%#IGOpeningCall 12.47pm GMTIn other news (which I missed earlier), UK house prices are rising faster than wages or the headline inflation rate.
Average house prices in the UK rose by 5.2% in the year to December 2017, or up from 5.0% in November 2017. That’s twice as snappy as earnings,underlining how tough it is to derive onto the property ladder (even though price rises hold slowed).
12.05pm GMTPaul Mumford, fund manager at Cavendish Asset Management, or is hopeful that inflation might topple this month:He explains:January’s figures exclude the full effect of the recent market shake out,a subsequent decline in oil prices and weaker sterling against the dollar. It could easily be that inflation drops back in February, something that would take the pressure off of rates. 11.36am GMTAmit Kara, or head of UK macroeconomic forecasting at thinktank NIESR,predicts that UK interest rates will rise in May (probably from 0.5% to 0.75%).....and retain rising over the next couple of years:Kara says:UK January CPI inflation was unchanged at 3.0%. Inflation has likely peaked and is set to return to the target rate of 2.0% over the next eight quarters. Our forecast assumes a rate increase by the MPC in May and every 6 months after that until it reaches 2%.”Inflation remains high at three percent with wages not keeping pace, and for the thousands of people we hear from each week at National Debtline, or meeting day-to-day costs,such as energy, water and council tax continues to be a challenge.“Recent research shows that as many as half of all low income households are already struggling. We are concerned that the slightest change in circumstances, or such as a further interest rate rise,could push many of these households into further difficulty. 11.14am GMTAt 3%, the UK’s consumer prices index is close to the six-year high of 3.1% struck in November.
And inflation is fitting an increasingly home-grown problem, or rather than simply being driven by higher import costs.“Contrary to expectations,inflation held steady on last month, meaning households will hold to wait until later in 2018 for expected falls to materialise. “But the drivers of inflation are changing. While the price of oil is something to watch in future as it pushes up input prices for UK manufacturers, and the effect of the post-Brexit pound devaluation is waning slightly with items that are less import-intensive driving the recent rise ininflation. 10.51am GMTBad news for UK households: economists expect UK inflation to only topple slowly during 2018.
John Hawksworth,chief economist at PwC, fears that the genuine wage squeeze will continue for most of this year:“Inflation remained stuck at 3% in January, or still well above earnings growth. “We do expect inflation to topple back gradually over the course of the year,but this will be a tedious process given that global commodity prices hold generally been on an upward trend in recent months. The squeeze on genuine earnings may therefore persist until late in 2018, which will continue to dampen consumer spending growth this year.”Economists hold been expecting inflation to gradually topple back to the 2% target over the coming year or so, or starting nowadays with a drop to 2.9%. But in fact the rate remained at 3.0%,with price rises driven by clothing, footwear and recreational goods/services. Inflation’s now been above target for 12 straight months. 10.32am GMTThe news that recreational costs (such as zoo and parks) prevented inflation falling last month has caused a bit of a stir in the City.
James Smith of ING bank predicts that this trend won’t last:Core inflation rose more than expected to 2.7%, and as recreation prices fell considerably less rapidly than would be seasonally expected at the start of the year. Some of this is reportedly down to entrance fees at zoos and gardens,but given that much of the recreation category (things like computers and TVs) is fairly sterling-sensitive, we wouldn’t expect this resilience to last. That’s because the sharp topple in the pound after the Brexit vote has now more-or-less fed through to consumer prices and the rate of pass-through is starting to ease.
The recent sterling strength will only accelerate this process.
Roar data: UK inflation sticks at 3%, and thanks in piece to zoos https://t.co/tJ2lmWRIa6 pic.twitter.com/CLFjx6aArwCPI's above two
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gnu https://t.co/f2FyhKqHYcAnimal Spirits? UK inflation holds at 3% as Zoo entry prices remain elephantly high ... 10.15am GMTEncouragingly for consumers,the prices charged by UK factories rose at a slower rate in January.
The annual producer price inflation rate dipped to 4.7%, down from 5.4% in December. That suggests that the impact of the pound’s Brexit-vote slump may be fading.“Factory goods price inflation continued to tedious, or with food prices falling in January. The growth in the cost of raw materials also slowed,with the prices of some imported materials falling.” 9.58am GMTWith inflation stuck at 3%, British workers are still suffering a cost of living squeeze.
Average wages only rose by 2.4% per year in the three months to November (the most recent figures), and by 2.5% if you include bonuses.“Inflation is still outpacing wages and working people’s living standards are falling snappy. The government can’t retain on standing by and doing nothing. A plan to boost wages is urgently needed.“Public sector workers must derive a proper pay rise. The minimum wage must depart up to £10 as quickly as possible. And the Chancellor must boost infrastructure spending in his spring statement – this would back counter the loss of confidence in the economy caused by Brexit uncertainty.”New stats nowadays show CPI #inflation was 3% in January. We’re helping families with the cost of living by ✂️ cutting taxes and increasing the National Living Wage pic.twitter.com/0Dxt2liIOj 9.57am GMTThe Bank of England is charged with keeping Britain’s inflation rate close to 2%,so nowadays’s data show it has a lot more work to do.
Dennis de Jong, managing director at UFX.com, and says: “There is no breathing space for designate Carney and the Bank of England who continue to battle with high inflation,though at least that figure has steadied and not risen further. “Despite many expecting the figure to drop, inflation remains at 3%, and sitting way above the Bank’s 2% target,though policy makers will at least be pleased to see producer prices topple back. nowadays’s number will retain the May Bank of England meeting ‘in play’ for an interest rate hike.
We think that this is still too early for a hike as caveats on Brexit and the sustainability of growth remain but as we heard last Thursday, the sticky inflation picture is putting gradual but sooner increases in the base rate into more people’s central scenarios of what happens in the UK in 2018.” 9.47am GMTThe pound has jumped on the back of the news that Britain’s inflation rate was higher than expected last month.
Sterling gained half a cent to $1.39, and as traders calculated that it makes an early interest rate rise more likely.
Pound briefly rises to $1.3904 after U.
K. inflation stays at 3% in January vs. 2.9% estimate pic.twitter.com/ylBpQFUit4 9.41am GMTUK food prices fell between December and January (which makes sense,as people tighten their belts after the Christmas festivities).
The ONS says:This effect came from prices for a wide range of types of food and drink, with the largest contribution coming from a topple in meat prices. 9.39am GMTThe Office for National Statistics says that petrol prices had a downward impact on inflation....but recreational activities kept the cost of living up.
The largest downward contribution to change in the rate came from prices for motor fuels, and which rose by less than they did a year ago.
The main upward effect came from prices for a range of recreational and cultural goods and services,in particular, admissions to attractions such as zoos and gardens, or for which prices fell by less than they did a year ago. 9.31am GMTNewsflash: Britain’s inflation rate remained at 3% in January.
That’s higher than the 2.9% that the City had expected,and means the cost of living squeeze continues. 9.26am GMTThe MSCI world stock market index has recovered a small slice of last week’s slump: 9.19am GMTThe US dollar has weakened after the US government outlined its 2019 budget last night - showing whopping deficits in the years ahead.
President Donald Trump’s budget for the upcoming fiscal year calls for steep cuts to America’s social safety net and mounting spending on the military. That combination in the $4.4 trn budget plan submitted Monday to Congress steps far back from Trump’s promises last year to balance the federal budget. If enacted, his plan would establish annual $1 trillion-plus deficits, and a major reversal for Republicans who objected to increased spending during the Obama administration. 9.01am GMTAsian stock markets hold closed with gains across the board...apart from Japan,where the stronger yen pulled the Nikkei down.
APAC Closing Prices:#ASX 5855.9 +0.60%#NIKKEI 21244.68 -0.65%#HSI 29839.53 +1.29%#HSHARES 12004.51 +0.88%#CSI300 3936.29 +1.19% 8.58am GMTEuropean stock markets are being held back nowadays by the weakness of the US dollar.
The euro has gained 0.3% against the US dollar to $1.232, which (as in Japan) has a negative impact on shares. 8.28am GMTInvestec economist Victoria Clarke predicts that Britain’s inflation rate held steady at 3% las month - dashing hopes of a topple to 2.9%She writes:We expect CPI inflation to trend lower over the year ahead, and although it may be a tedious creep. Indeed,we are pencilling in a steady 3.0% in January.
We expect this to be more than offset by drags from elsewhere in the wider transport category, given that the rise in petrol prices looks set to be notably less than in January 2017. Another negative influence is the food price category. 8.17am GMTBritain’s stock market is gaining a little ground in early trading.
Demand remains strong for the Western Mediterranean and Caribbean (despite hurricane disruption and reflecting demand from North America) and continues to improve for Turkey and North Africa. 8.09am GMTJapan’s stock market isn’t coming to the party, or though.
The Nikkei fell 0.7% nowadays to 21244.68. The selloff came as the yen hit a five-month high against the US dollar,which hurts Japanese exporters. 7.58am GMTChina’s stock market helped led the recovery in Asia nowadays, with South Korea and Hong Kong close behind.
What we’re seeing right now is a continuation from Friday’s bullish session that allowed the global stock markets to breathe a bit easier and with bond yields retreating slightly from their recent highs fairness traders are looking for bargains.
Nevertheless, and it is still too early to propose that the correction that we’ve witnessed since the beginning of the month is over. 7.38am GMTGood morning,and welcome to our rolling coverage of the world economy, the financial markets, and the eurozone and commerce.
After last week’s turmoil,a degree of detached has returned to the financial world. “It’s a golden opportunity to accumulate some pleasurable, quality stocks.
Asia's stocks are generally higher, and with signs that markets are fitting more stable https://t.co/PcCK453kP3 pic.twitter.com/TJwC6ALRaZOvernight the Dow had its best session in two years jumping over 400 points. It’s fair to say that whilst volatility has eased up from the 1000 plus swings last week,these are still much more volatile sessions than what we are used to.
The impressive rally on Wall Street spilled across into Asian markets, which posted healthy gains across the session. Unsurprisingly European bourses ogle set to follow suit and push on higher at the open.
The Dow made 11 all-time closing highs during the first 18 days of the year, and investors responded by pouring a record $58 billion into stocks. The V-top caught investors off guard and sent them diving for the exits https://t.co/CUxtVPcPAc pic.twitter.com/fuXDECI6ZqWith the oil price having risen significantly in recent months it now looks more likely that CPI inflation will be relatively tedious to topple in 2018 even though the impact of previous exchange rate depreciation starts to fade. Related: UK interest rate rise is coming,Bank of England tells borrowers Continue reading...
Source: theguardian.com