European markets edge lower again
Cuts to the European Commission’s growth forecasts, a rise in the US trade deficit and the supposed spats at the ECB have all combined to send shares lower again. So despite the Japanese market hitting a seven year high overnight, investors ended up in cautious mood once more. The final scores showed:
- The FTSE 100 finished down 34 points or 0.52% at 6453.97
- Germany’s Dax dropped 0.92% to 9166.47
- France’s Cac closed 1.52% lower at 4130.19
- Italy’s FTSE MIB lost 2.24% to 18,934.63
- Spain’s Ibex ended down 2.12% at 10,154.4
On Wall Street the Dow Jones Industrial Average is currently 13 points or 0.08% lower.
And on that note it’s time to close up for the evening. Thanks for all your comments, and we’ll be back tomorrow.
Over in Greece, senior officials are admitting that far from being erased, corruption - widely seen as the root cause of the nation’s lack of competitiveness - is still rampant. Helena Smith reports from Athens:
It was the affliction that, more than any, was meant to have been eradicated with the enforcement of reforms demanded in return for bailout funds. But attending the opening of new offices for the country’s recently appointed anti-corruption czar today, the deputy prime minister Evangelos Venizelos announced that the scourge was not only alive, it was still pervasive at the highest echelons of power in Greece.
![Evangelos Venizelos. Photo:(AP Photo/Petros Karadjias](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415122015864/3654d058-c4fa-4f1c-abe6-73cb07d5de04-620x372.jpeg)
“There is corruption, organized and extensive [corruption] …. which resides in power, in the public administration and the state sector, and the private sector,” he admitted adding that the creation of a post dedicated to crushing the practice was a landmark event. “It will be a new, exceptionally ambitious and, I want to hope, effective institution that is further confirmation of of our faith in the campaign against corruption.”
Greece’s troika of creditors had hoped that the scourge – widely blamed for holding the country back and deterring international investors – would be effectively tackled as Athens overhauled its economic system. Instead, new rules appear to have only incited Greeks to have come up with new ways to circumvent them - even newly appointed tax officials are now on the take.
The lack of punishment meted out to crooked officials (only one government minister has been imprisoned for accepting kickbacks) is believed to have played a major role in keeping the practice alive.
And some commentary on the supposed Draghi disputes. Christopher Vecchio, currency analyst at DailyFX said:
While we weren’t expecting a Fed-styled, sovereign QE program from the ECB this week, the rumours emerging today are nothing short of astounding. Reports have surfaced that ECB President Mario Draghi faces a small scale mutiny, with many national central banks feeling that they’ve been left out of the loop for determining monetary policy. This is important because there could be up to 10 policymakers (of the 24 reps) that would vote against a sovereign QE.
Even as recent economic data has slowed its rate of erosion, the spectre of additional stimulus from the ECB has remained as a heavy burden for the euro. Traders have piled into euro short positions in recent weeks, and now there is the second largest short position among speculators since July 2012 – the week before euro/dollar bottomed at $1.2041. If a Fed-styled QE program is now seen as even more unlikely given president Draghi’s recently revealed unpopularity, we must not discount the potential of a euro short covering rally around the ECB rate decision on Thursday and the US non-farm payrolls report on Friday.
More from the Reuters story on Mario Draghi, and there is some interesting colour in the tale:
At times, Draghi has appeared to pay little attention to national governors’ comments in the monthly rate-setting meeting after chief economist Peter Praet and board member Benoit Coeure report on the economic situation and financial markets.
“He sits there with these three mobile phones in front of him and sometimes he’s sending text messages or going out to make or take phone calls,” one source usually in the room said. On at least one occasion, a national governor has skipped his turn to speak because Draghi was not present.
“This has got a bit better. He’s paying a bit more attention now,” the source said.
And apparently German chancellor Angela Merkel tried to mend bridges between Draghi and Bundesbank chief Jens Weidmann. Their relations hit a low point in October after the German publicly criticised ECB policy, but Merkel privately urged both to mend their relationship:
After her intervention, Draghi and Weidmann met last week to try to clear the air but they did not resolve all their policy differences, the source said.
Merkel’s office declined comment on her reported meeting with Draghi, and neither the ECB nor the Bundesbank would comment on whether Draghi and Weidmann met last week.
ECB's Draghi in dispute with fellow central bankers - report
Ahead of the European Central Bank’s meeting this week, there are reports of disagreements between some members and ECB president Mario Draghi.
It had been widely suggested that Germany was not keen on some of Draghi’s proposals for stimulus measures to boost the flagging eurozone economy. But now Reuters writes:
National central bankers in the euro area plan to challenge European Central Bank chief Mario Draghi on Wednesday over what they see as his secretive management style and erratic communication and will urge him to act more collegially, ECB sources said.
The bankers are particularly angered that Draghi effectively set a target for increasing the ECB’s balance sheet immediately after the policy-making governing council explicitly agreed not to make any figure public, the sources said.
“This created exactly the expectations we wanted to avoid,” an ECB insider said. “Now everything we do is measured against the aim of increasing the balance sheet by a trillion (euros)... He created a rod for our own backs.”
Irritation among national governors who hold a majority on the 24-member council could limit Draghi’s space for bolder policy action in the coming months as the bank faces crucial choices about whether to buy sovereign bonds to combat falling inflation and economic stagnation.
Some members intend to raise their concerns with Draghi at the governors’ traditional informal working dinner on Wednesday before their formal monthly rate-setting meeting on Thursday, the sources interviewed by Reuters said.
The ECB declined comment on the matter.
![Mario Draghi. Photo: Reuters/Ralph Orlowski](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415117215422/e16662bd-d7b6-413b-a857-ad64e0c25b1d-620x372.jpeg)
— MineForNothing (@minefornothing) November 4, 2014ECB press conference on Thursday will be interesting
Updated
And to catch up some earlier news, Chinese e-commerce business Alibaba has reported a better than expected 54% rise in revenues for the three months to the end of September.
The company, which floated in September and is now worth more than Facebook at nearly $250bn, said net profit grew 16% to $1.1bn. But after a rise in share based compensation costs, profits fell 39% to $494m. Nor would the company give guidance for future earnings.
Alibaba’s shares have added around 2.5% following the figures, its first since the flotation.
![Alibaba headquarters in Hangzhou, Zhejiang province, China. Photo: EPA/Long Wei](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415114867041/5e07673b-d6de-48b6-bd29-c23c4ed1adad-620x372.jpeg)
In the corporate world, Rolls-Royce has just announced 2,600 job cuts and the departure of its finance director. My colleague Rupert Neate writes:
Rolls-Royce has announced it is cutting 2,600 jobs – mostly in its aerospace division – within the next 18 months as well as the sudden departure of its finance director.
The company, which employs 24,800 workers in Britain out of 55,200 worldwide, said technological changes had enabled it to “increase output and improve efficiency”.
The job cuts come three weeks after the company issued a major profit warning, which wiped £2bn off its market value. The company said that finance director Mark Morris had decided to leave the company after 27 years.
Full story here:
Rolls-Royce to axe 2,600 jobs
Back with the US trade figures, and overseas weakness rather than dollar strength is more likely to be responsible for the dip in exports, said Rob Carnell at ING Bank. He said:
The US trade deficit slipped back a bit wider in September – following months where the trend has been for narrowing. This was not a petroleum story - the ex-petroleum deficit widened from $26.863bn to $29.028bn, more or less the same move as the total deficit ($39.991bn in August out to $43.032bn in September). This could strip off 0.2 percentage points from the 3.5% advance third quarter GDP release, assuming no offsetting moves from other aspects of the GDP release.
The wider deficit was mainly the result of weak exports, not strong imports, and most of this occurred on the goods side, not services. It is possible that the dollar’s strength has already begun to weigh on exports, but in our view, overseas economic weakness is a far more plausible explanation for the export dip. This back-step in the trade data may take the shine off the dollar for a short while, though the underlying story for dollar strength remains intact, and is likely to be bolstered by data out later in the week, including, importantly, non-farm payrolls on Friday.
Afternoon summary: growth cut again
Time for a round-up.
The European Commission has warned that the eurozone economy is struggling to grow, after slashing its GDP forecasts over the next two years.
In its autumn forecasts, the EC now expects growth of just 0.8% this year (down from 1.2%), rising to just 1.1% in 2015 (down from 1.7%).
Marco Buti, director general of Economic and Financial Affairs, warned:
In the second half of this year, GDP growth in the EU is set to be very modest, while in the euro area it will almost stagnate.
Buti warned that Europe’s big four economies all face serious problems:
Among the largest euro area Member States, we see growth increasing in Spain where unemployment remains very high, growth coming to a stop in Germany after a very strong first quarter, protracted stagnation in France, and contraction in Italy.
The full report is online here (pdf)
And this map shows how many countries will struggle to grow this year:
![EU growth forecasts, autumn 2014](https://webarchive.library.unt.edu/web/20141114114941im_/http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2014/11/4/1415110455824/e202ccf5-4b97-45b4-b0ce-224d7d66a6c3-540x472.png)
- Italy is now expected to contract by 0.4% this year, down from 0.6% growth expected six months ago.
- Germany’s growth forecast for 2014 was slashed to 1.3%, from 1.8%. And next year’s growth has been almost halved, from 2% to 1.1%.
- It’s a grim picture in France too -- where the commission sees growth of just 0.3% this year (from 1%), rising to just 0.7%, from 1.5%.
- But Ireland is expected to shine, with growth of 4.6% this year. The UK’s GDP is tipped to grow by 3.1%.
The EC also warned that the region’s jobless crisis remains intense, with little progress expected over the next two years:
![Eurozone growth forecasts](https://webarchive.library.unt.edu/web/20141114114941im_/http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2014/11/4/1415112508383/78da217a-444e-4f4d-89cf-a22784cd5a76-540x434.png)
Commissioner Jyrki Katainen admitted that:
The economic and employment situation is not improving fast enough.
He told a press conference in Brussels that he could see a gradual recovery on the horizon, and blamed financial markets for fuelling the eurozone crisis by recklessly lending to some countries (highlights start here).
As the forecasts were released, chancellor Angela Merkel was warning that the eurozone is not fixed.
She told a meeting in Berlin that:
“The situation in the euro zone remains extremely fragile.”
But Merkel also hit out at pressure to spend and borrow more, declaring:
We want to stick to the Stability and Growth Pact. This is also about growth and that is why we must reject a debate about austerity against growth. This is mistaken and takes us no further.”
![German Chancellor Angela Merkel speaks at a congress of the German Federation of Employer.](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415113177388/43e7123e-80a8-485a-a508-c4c935167e9d-620x544.jpeg)
In other news....
Growth in the UK construction sector has hit a five-month low, but remains quite strong - with workers managing to push up their pay.
The US trade gap has widened unexpectedly.
Hugo Boss has hit investors with a profits warning.
Japan’s Nikkei has hit a seven-year high, as investors applauded the Bank of Japan’s new stimulus programme
And a video clip showing CNBC presenter astounded to hear that Ireland uses the euro is worth watching....
Updated
![Dublin Web Summit](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415109942643/89ad81a1-bc15-42ef-85be-327f7992ae33-620x463.jpeg)
Over in Dublin’, “Desperate Housewives’ actress Eva Longoria has declined to endorse Hilary Clinton as the Democrats next Presidential candidate.
Henry McDonald explains:
Longoria was one of the star speakers at today’s Web Summit in Dublin where she shared a stage with Jemima Khan.
Khan asked if her if she would back Hilary Clinton for the presidency given that she had supported her husband and then President Obama.
“It’s far too early, I am supporting the President now,”
![Dublin Web Summit](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415110029838/c0dbb304-4a45-4e39-b904-ae672c3dc7a4-620x515.jpeg)
Updated
Enda Kenny has also appeared on CNBC, and claimed that the closure of the notorious double-Irish tax loophole* in 2020 won’t hurt the economy.
— CNBCWorld (@CNBCWorld) November 4, 2014Irish PM on ending "double Irish" tax loophole: "We want companies who are incorporated here, won't have impact on investment"
Back in Dublin, prime minister Enda Kenny has arrived at the Web Summit and will be (remotely) ringing the opening bell of the Nasdaq exchange later.
— Enda Kenny (@EndaKennyTD) November 4, 2014Just arrived at @WebSummitHQ to ring the @NASDAQ bell. Tune in live from 2.00pm https://t.co/jVtiWMuO3A #websummit pic.twitter.com/2FNuMIsRSV
US trade deficit widens as exports drop
Just in... the US trade deficit has widened unexpectedly after exports fell to a five-month low.
The gap between what America imports and exports jumped by 7% in September to $43.03bn.
It was due to a wide-ranging dip in shipments of goods and services overseas.
Exports to the European Union fell by 6.5% in September, while those to China dropped by 3.2%. Exports to Japan tumbled almost 15%.
Imports were unchanged.
— Markit Economics (@MarkitEconomics) November 4, 2014US #trade deficit increased 7.6% to $43.03 billion in September ($39.99 billion in August)
— RANsquawk (@RANsquawk) November 4, 2014US-China Sept trade deficit record USD 35.56bln
The data suggests America is suffering from the weakness of the global economy. The strong dollar (which hit a four-year high this week) will also be weighing on exports.
Updated
Merkel: Eurozone is still extremely fragile
![German Chancellor Angela Merkel speaks during the German Employers' Conference in Berlin, Germany, 04 November 2014.](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415106977305/42d9a8df-7bb6-44af-b028-d8c63ee3000c-620x426.jpeg)
German chancellor Angela Merkel has warned that the eurozone remains a fragile place, but continues to resist pressure to spend more to encourage growth.
Speaking at the German Employers’ Conference in Berlin, Merkel said progress has been made since the height of the crisis, as Ireland, Portugal, and Greece had completed or were close to exiting their bailout programmes.
However, she added that:
“The situation in the euro zone remains extremely fragile.”
And insisted that structural reforms needed to be implemented in some countries.
Merkel also hit back at claims that Germany should abandon its plan of a balanced budget, even though it is now on the brink of recession.
She said:
“Investment is needed but not with new borrowing,”
“[The goal of a balanced budget] is seen as excessive saving. But in light of the demographic challenges in Germany, it’s ... simply sensible behaviour.”
Nicholas Ebisch, currency analyst at Caxton FX, says the EC has now recognised that its economic growth situation is worsening -- something investors realised some time ago....
This news today has not affected the currency markets much, as euro weakness has already been priced into the market. The dovish rhetoric from the ECB over the last month or two has lowered expectations for the Eurozone, so this news of a downgrade have not lead to significant selling.
CNBC: They use euros in Ireland?!
On a lighter note..... there are red faces at CNBC today after their business show anchor, Joe Kernen, was baffled to learn that Ireland uses the euro.
In a toe-curling exchange (scroll forwards to the seven minute mark), Kernen appears genuinely amazed that Ireland isn’t using the pound. After all, it’s good enough for the Scottish.
IDA Ireland chief executive Martin Shanahan does his best, as this transcript from the Irish Times shows:
- CNBC: What has the weaker euro meant in terms of tourism?
- Shanahan: So, I think, em, Ireland is a very globalised economy so we look to what is happening here as much as we do to what is happening in Europe and we look to what is happening in...
- CNBC: You have pounds anyway don’t you still?
- Shanahan: We have Euros.
- CNBC: You have Euros in Ireland?
- Shanahan: Yes. We have euros, which is eh...
- CNBC: Why do you have euros in Ireland?
- Shanahan: A strong recovery....
- CNBC: Why do use euros in Ireland?
- Shanhan: Why wouldn’t we have euros in Ireland?
- CNBC: Huh. I’d use the pound.
- Shanahan: We use euro.
- CNBC: What about Scotland? I was using Scottish eh...
- Shanahan: Scottish pounds.
- CNBC: Scottish pounds.
- Shanahan: They use Sterling.
- CNBC: They use sterling?
- Shanahan: They use sterling. But we use euro.
- CNBC: What? Why would you do that?
- Shanahan: Why wouldn’t we do that.
- CNBC: Why didn’t Scotland? No wander they wanted to break away.
- Shanahan: They are part of the UK we are not.
- CNBC: Aren’t you right next to er?
- Shanahan: We are very close but entirely separate.
- CNBC: It is sort of the same, same island isn’t it?
- Shanhan: And in the North of Ireland they have sterling.
- CNBC: They do?
- Shanhan: And in the North of Ireland they use sterling.
- CNBC: It is just too confusing... <end>
If only the euro had been, er, you know, in the news recently....
Updated
Jubilation that Ireland will be the fastest growing member of the EU this year was tempered by an embarrassing glitch on day one of the Web Summit in Dublin’s RDS conference centre (preview here)
Henry McDonald reports that:
The event’s free wi fi system is not up to speed and many participants are complaining they cannot get on line.
Web Summit founder co-founder Paddy Cosgrove admits “it’s incredibly disappointing” and has put the blame on the RDS for the wi fi breakdown.
On a brighter and bigger note there will be some relief in Government buildings in Dublin over the news from Brussels this morning regarding Ireland’s growth prospects.
The EU has predicted Irish growth will be the highest in Europe this year at 4.6%, which will come as some relief to Enda Kenny (due to attend the Web Summit tomorrow) and his ministers after the battering they have been taking lately over the imposition of water charges.
Today’s EC Autumn Forecast is quite gloomy about Germany, whose growth forecast in 2015 has been almost halved, from 2% to 1.1%.
The EC is concerned that private investment has slowed - one reason that growth went into reverse this spring.
The EC says:
“Geopolitical tension and concerns about economic developments in important trading partners may have triggered a wait-and-see attitude among firms,”
“However, as domestic and external demand pick up, geopolitical and other external uncertainty decreases and favourable financing conditions hold, corporate investment should resume its recovery in 2015.”
See the new EC forecasts here
The European Commission’s new Autumn Forecasts are online here - and there’s even a Vine to accompany them.....
Updated
Is Europe’s €300bn investment plan really big enough to stimulate growth in the region?
Commissioner Katainen says that politicians must ask why private firms are not prepared to invest in Europe -- reforming their economies might make them more attractive.
I won’t say that this €300bn plan it will change the world, Katainen adds, but it is part of the story.
And that’s the end of the press conference.
— Tony Connelly (@tconnellyRTE) November 4, 2014.@jyrkikatainen: Even though medicine was bad tasting, very hard for ordinary citizens, Ireland did what was necessary, regained confidence
![Commissioner Katainen](https://webarchive.library.unt.edu/web/20141114114941im_/http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2014/11/4/1415099575626/6069463c-f6ba-4f5e-abca-e0863397d856-620x354.png)
Another fine question -- what lessons can we learn from the fact that Finland, one of the main supporters of eurozone austerity, is now expected to grow very slowly next year?
Katainen (Finland’s prime minister during the crisis) defends the decisions of the past.
Looking back a few years - who would have lent money to the countries at risk if they had not committed to reducing their borrowing?
Those who say the budget consolidation was wrong -- who do they think would have lent to those countries?
Today, though, Europe’s overall budget plans are broadly balanced, he argues.
How can we trust these new forecasts, given the previous ones were wrong?
Excellent question.
Commissioner Katainen looks slightly irked about having to defend the forecasts of his predecessors, but he insists that they are drawn up by experts.
And these new projections are “more or less in line” with forecasts from the OECD and the IMF.
But still, all these forecast have been “more or less wrong” in the past, he concedes.
Nobody really knows if these new ones are any better. It is up to us and member states to make changes to these forecasts, hopefully positive ones, he adds.
Moscovici is a bit kinder to the Brussels’ numbercrunchers - saying he thinks these forecasts are accurate.
— Peter Spiegel (@SpiegelPeter) November 4, 2014Can we trust @EU_Commission economic forecasts? "Nobody knows," says @jyrkikatainen optimistically.
— Peter Spiegel (@SpiegelPeter) November 4, 20141st public dispute between @pierremoscovici & @jyrkikatainen? Mosco seems to think @EU_Commission econ forecasts may be reliable this time
Updated
Pierre Moscovici says he is planning to visit Greece soon, probably before the next meeting of eurozone finance ministers in early December.
That eurogroup meeting could be a significant moment in the crisis - ministers might agree a new precautionary credit line for Athens, to kick in when its bailout ends next year.
Commissioner Katainen adds that he’s also hoping to visit Greece too -- perhaps we could go together, Pierre?
— Open Europe (@OpenEurope) November 4, 2014#Moscovici: my first bilateral visit will be to Greece, before 8 Dec, #Katainen adds he will also go
Commissioners Katainen and Moscovici argue that there is enough flexibility in the eurozone rules for struggling countries.
— Peter Spiegel (@SpiegelPeter) November 4, 2014.@pierremoscovici says @EU_Commission thinks #eurozone not facing "exceptional" econ sit. No "get out of jail free" for #France, #Italy then
— Open Europe (@OpenEurope) November 4, 2014#Katainen: rules are relatively flexible depending on economic environment in member states, core flexibility around structural adjustment
Next question -- Can Germany still be a growth engine for the eurozone?
Commissioner Katainen says that Germany can still play a significant role in stimulating the European economy.
However, we can’t just rely on one growth engine. We need several.
— Pierre Moscovici (@pierremoscovici) November 4, 2014Nous devons prendre nos responsabilités à Bruxelles et ds les pays membres,pour la croissance et l'emploi #ECForecast pic.twitter.com/x9fXG7LO8S
— Rik Winkel (@RikWinkel) November 4, 2014#Katainen cannot really explain why €area is performing so weakly.
Pierre Moscovici says the recent European elections show that the public can lose faith in the European project:
— Gavin Hewitt (@BBCGavinHewitt) November 4, 2014EU Commissioner Moscovici warns 'people could despair of European project'. Stabilisation necessary but Europe needs results on growth/jobs
Commissioner Katainen: Financial markets to blame for eurozone crisis
Bruno Waterfield of the Daily Telegraph asks why membership of the eurozone leads to higher unemployment and lower growth rates.
Commissioner Jyrki Katainen denies that the euro itself is to blame. Instead, he pins the blame on the financial markets.
He says:
The financial markets did not do their job properly...they were lending money to all member states at similar rates.
A Spanish reporter points out that the EC has also cut its growth forecast for Spain next year, from 2.1% to 1.7%.
— Tony Connelly (@tconnellyRTE) November 4, 2014Moscovici: we will be working at full speed to put in place the EU's €300bn investment program which will be of decisive importance
Moscovici concludes his statement in Brussels by insisting there is no ‘magic bullet’. Governments must work closely together, and their first priority is to boost investment and kick start growth.
— Pierre Moscovici (@pierremoscovici) November 4, 2014EU governments must mobilise both demand and supply-side policies to support the recovery in growth and employment. #ECForecast
Commissioner Moscovici explains that France and Italy will only see very modest recoveries next year.
France will suffer from a ‘subdued pace’ of private consumption, and contracting investment.
In Italy, growth won’t return until early next year.
— Gavin Hewitt (@BBCGavinHewitt) November 4, 2014EU sees v modest recovery in France/Italy. 'Very slow growth' in France in 2015 of 0.7%. Italy will return to growth next yr but only 0.6%
— Gavin Hewitt (@BBCGavinHewitt) November 4, 2014Over-view of EU economy. Reduction in deficits set to continue. Debt to reach peak next year but strong risks of stagnation.
Pierre Moscovici: no simple solution to Europe's woes
Commissioner Pierre Moscovici (the former French finance minister) has warned that there is no “single, simple answer” to the challenges facing the European economy.
Moscovici adds:
“We must all assume our responsibilities, in Brussels, in national capitals and in our regions, to generate higher growth and deliver a real boost to employment for our citizens.”
— Open Europe (@OpenEurope) November 4, 2014#Moscovici: low investment has been on of the main causes of low growth, still considerably lower than pre crisis
The EC has also slashed its growth forecast for this year, to just 0.8%
— Pedro da Costa (@pdacosta) November 4, 2014EU cuts eurozone growth forecast for this year to 0.8% from 1.2%, and 2015's to to 1.1% from 1.7% http://t.co/81OCWmU0z0
Updated
Katainen says that the UK will probably grow at 3.1% this year, or almost four times faster than the eurozone average of 0.8%.
Ireland will be the fastest-growing member of the EU, he adds, at 4.6%.
— Tony Connelly (@tconnellyRTE) November 4, 2014Acc to @EU_Commission autumn forecast Irish real GDP growth will be 4.6pc in 2014, 3.6pc in 2015 and 3.7pc in 2016
Updated
European commissioner Jyrki Katainen is explaining today’s autumn forecasts now.
He says eurozone growth forecasts were revised down due to the weakening European economy, and the impact of geopolitical crises (such as Ukraine, I imagine).
But he remains confident that growth will pick up, citing the impact of easier monetary conditions in the eurozone.
“Looking ahead we can see a gradual recovery”
EC slashes growth forecasts
Over in Brussels, the European Commission has just slashed its forecasts for growth and inflation.
It also warned that unemployment will remain at its current high levels for longer than previously hoped.
However, the EC still believes that the eurozone can avoid another recession.
It now expects growth of just 1.1% in 2015, down from 1.7% previously.
And it blamed problems in the eurozone’s three largest economies, Italy, France and Germany.
Marco Buti, the director general of the Commission’s economics department, said in a statement that:
“The slowdown in Europe has occurred as the legacy of the global financial and economic crisis lingers,”
“We see growth ... coming to a stop in Germany ... protracted stagnation in France and contraction in Italy,”
— Peter Spiegel (@SpiegelPeter) November 4, 2014Among biggest #eurozone forecast 2015 GDP downgrades from @EU_Commission: #Germany, from 2% to 1.1%. Also #France, from 1.5% to 0.7%.
The EC also cut its inflation forecast for 2015, to just 0.8% from 1.2%.
Updated
![A trainee bricklayer.](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415095343087/e172afc8-0498-4cd5-8bb1-5e479e2b077b-620x413.jpeg)
Despite the slowing growth in UK construction, sub-contractors managed to drive up their hourly pay rates at a “near-record” pace, according to CIPS.
That underlines that bricklayers, electricians, plasterers et al are in strong demand.
Earlier today, the boss of housebuilder Persimmon, Jeff Fairburn, warned that a lack of tradesmen holding back housebuilding.
He told Reuters:
“With the volume increases we’ve been achieving, it’s naturally putting a strain on the trades that are available.”
“The turnover ... is very quick and we’re struggling to put more stock on the ground.”
David Noble, CEO at the Chartered Institute of Procurement & Supply, points out that UK builders still face a challenge getting new supplies -- a sign of robust demand.
“This month the construction sector maintained an impressive growth trajectory and true grit with continuing strong levels of new business, albeit at a slower pace.
“Though it appears that the euphoria of the last few months is now settling down to a slightly more modest level of expansion, delivery times continue to lengthen and suppliers of raw materials are in high demand, making the completion of construction projects more challenging and showing how the number of available suppliers has not yet reached pre-recession levels.
And on a long-term view, Britain’s construction sector is still enjoying one of its best periods in years (the higher the PMI, the stronger the growth)
— Ashley Perry (@AshleyPerryUK) November 4, 2014UK construction hits 5-month low! But, look at the last 10 years instead? http://t.co/fzFhsYHVzl pic.twitter.com/mZCNpXBPeo
Markit: chill winds are hitting housebuilders
There is good news in today’s survey -- UK construction firms still took on more staff last month. And more than half expect to grow their output over the next 12 months.
But still, the slowing growth suggests that the tighter mortgage lending rules, and the prospect of interest rate rises, are hitting housebuilders.
As Tim Moore, senior economist at Markit, puts it:
“October’s survey provides the first indication that the chill winds blowing across the UK housing market have started to weigh on the booming residential building sector.
“House building activity still increased at a strong pace overall, but the sharp growth slowdown since this summer reflects greater caution towards new development projects amid tighter mortgage lending conditions and renewed uncertainties about the demand outlook.”
— TimesBusiness (@TimesBusiness) November 4, 2014Pound drops after the weaker-than-expected construction data pic.twitter.com/aOuxKfEdyG
UK construction growth hits five-month low
Growth in the UK construction sector has hit a five-month low, as housing activity growth slows sharply.
That’s according to the monthly Purchasing Managers Index survey just released by data firm Markit’s.
Its PMI survey, which measures activity in the sector, has fallen to 61.4, down from 64.2 in September.
![UK construction output, to October 2014](https://webarchive.library.unt.edu/web/20141114114941im_/http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2014/11/4/1415093648437/92c96bd4-c082-43f5-a43d-920a328ee80f-460x458.png)
Any reading of 50 or more shows growth, but this is quite a slowdown.
Markit reports that:
- Construction output expands at weakest rate since May...
- ..led by sharp slowdown in residential building growth
- New business volumes increase at slowest pace for five months
The rise in housing activity was the weakest for 12 months and much slower than in September, so perhaps Britain’s housing boom is coming off the boil?
Reaction to follow.....
The Geek shall inherit the Irish earth this week with the opening of one of the biggest tech-summits on the planet in the Republic’s capital, as Henry McDonald reports from Dublin:
Some of the biggest players in the technology world will be at the Web Summit in Dublin this morning with more than 18,000 visitors from 109 countries attending.
Among those mingling with the hi-tech industry will be U2’s Bono, ‘Desperate Housewives’ star Eva Longoria and Rio Ferdinand.
— Colm Tobin (@colmtobin) November 4, 2014Rumours that Bono is standing outside the RDS with free copies of the U2 album are proving to be unfounded so far. #WebSummit2014
The Republic’s tourism body Failte Ireland estimate that the influx of techno-entrepreneurs, inventors and investors will generate €79 million in advertising revenue alone for the country as well as an injection of millions in hotel bookings with 13,000 rooms booked across 87 venues in Dublin.
A number of new foreign investments into the Irish hi-tech sector are expected to be announced this week at the summit by Taoiseach Enda Kenny.
Such is the importance Ireland’s Industrial Development Authority is placing in the three day conference at Dublin’s RDS conference centre that it has recalled its international representatives from its offices in New York, Silicon Valley, Frankfurt and London for the event.
The IDA and the Irish government will be hoping that the proposed end of tax incentives for hi-tech giants such as the controversial “double Irish” scheme will not put off fresh investors establishing the Republic as their European beach heads.
Updated
IPO plans are a tonic for the City
![City of London and Canary Wharf](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/9/26/1411743719299/City-of-London-and-Canary-012.jpg)
Stock market flotations are back on the agenda in the City, in a sign that confidence is returning after last month’s volatility.
Virgin Money, which put its IPO on ice as markets tumbled in October, has announced that the float is now rattling on all cylinders again.
“Given more stable market conditions, we now plan to move forward with our IPO.”
The leverage ratios announced by the Bank of England last week, which weren’t as restrictive as expected, also helped Virgin to return to the markets.
And Fever-Tree, purveyor of “premium drink mixers” to “gastronomes” (think tonic water, lemonade, lashings of ginger beer, etc etc) has priced its own float this morning.
It will sell shares at 134p this morning, valuing the company at £154m.
— Ashley Armstrong (@AArmstrong_says) November 4, 2014Posh tonic maker #Fevertree puts extra fizz in IPO market - announces £154m Aim float
Updated
— Michael Hewson (@mhewson_CMC) November 4, 2014*SPAIN OCT. JOBLESS DATA SHOW ECONOMIC IMPROVEMENT, GUINDOS SAYS
Seasonally-adjusted Spanish unemployment falls again
The number of unemployed people in Spain rose by 79,000 in October, according to figures released this morning, worse than the 73,000 expected.
But on a seasonally adjusted basis, it actually fell by 19,393 people. That’s the biggest decline for an October in 16 years, according to the Labour Ministry.
This is the largest decrease in seasonally adjusted unemployment in the month of October since 1998.
— Edward Hugh (@Edward_hugh) November 4, 2014Spain unemployment continues to fall, sa drop of 19k in Oct. Unadjusted UP 79k. pic.twitter.com/9nghcrrvFv
During the first ten months of 2014, registered unemployment has fallen by 174,534 people, which is also the biggest decline since 1998.
But that still leaves 4,526,804 adults out of work, or around 24% of the labour force.
Updated
The unseasonably warm UK autumn hasn’t hurt discount fashion chain Primark, unlike some of its more upmarket rivals.
Primark’s sales and profits are up around 10% in the last six weeks, according to the boss of its parent company, AB Foods.
George Weston told Reuters that:
“I’m really not concerned (by the weather) and we haven’t had to delay or cancel any orders,”
“Yes, there’s been an (weather) effect, but ... every year you get unseasonal weather at some point.”
Last week, Next warned that its profits have suffered from the rare sight of a hot, glowing object in the autumn skies over Britain. Tomorrow we find out how Marks & Spencer fared....
Hugo Boss shares slide after profit warning
![A man looks at a shop window outside the Hugo Boss showroom inside a shopping mall in Mumbai.](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415088887099/929f826d-9ac2-4967-bbc6-15222116fd07-620x472.jpeg)
Shares in German fashion group Hugo Boss have tumbled by 6.5% in early trading after it hit investors with a profit warning.
Hugo Boss blamed the “substantial slowdown” in Europe, and economic problems beyond, as it slashed its sales and operating profit targets.
CEO Claus-Dietrich Lahrs explained:
“Over the last few weeks, our business has been increasingly feeling the effects of the weak performance of the sector in Europe and uncertainties in Asia.”
The company now only expects to achieve sales growth of 6-8% and profits growth of 5-7% in 2014, a downgrade on previous estimates that were in the high single digits.
Shares dropped to €98.03 at the start of trading, down from €105.15 last night.
![Hugo Boss shares price, November 4 2014](https://webarchive.library.unt.edu/web/20141114114941im_/http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2014/11/4/1415089467353/102e7fbc-9079-456f-98d8-10a04f2263e9-620x287.png)
Full story: Hugo Boss issues profits warning
Updated
There’s a new sheriff in town. Well, in Europe’s banking sector, anyway.
The European Central Bank has just taken “supervisory responsibility” for banks in the euro area, following last month’s stress tests and asset quality reviews.
It plans to “rebuild trust and bolsters the safety and soundness of the banking system”, according to its new website.
— Nicolas Veron (@nicolas_veron) November 4, 2014Today the @ECB becomes direct supervisor of most of Europe's banking system #RegimeChange #BankingUnion
Japanese PM backs new stimulus
The Tokyo stock market rally came as prime minister Shinzo Abe welcomed the Bank of Japan’s new stimulus measures.
He told a parliamentary session that the BoJ’s plan to create an additional 10 to 20 trillion yen per year had been “broadly welcomed” by the financial markets.
He also conceded that the depreciation in the yen would have some negative impact on Japan, as well as positive ones (helping exporters and pushing inflation up).
Abe pledged to do “whatever we can do to respond to the change in the yen’s value”.
QE boost drives Nikkei to seven-year high
![Pedestrians stand in front of stock market boards along the pavement in Tokyo on November 4, 2014.](https://webarchive.library.unt.edu/web/20141114114941im_/http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2014/11/4/1415087819500/78e3096b-0a1a-4e02-b7c5-aa7c25fdd3fc-620x363.jpeg)
The Japanese stock market has surged to new seven-year highs today, as the stimulus measures announced by the Bank of Japan on Friday cheer investors.
The Nikkei index surged over the 17,000 point mark for the first time since the credit crunch struck the global economy in autumn 2007.
It closed at 16,862, up 2.73%, adding to Friday’s near 5% leap (Monday was a public holiday in Japan).
— Kevin Van Campenhout (@Beursparels) November 4, 2014Inflatie. #Print RT @W7VOA: #Japan’s benchmark stock index closes the day at 7-year high after 536 point surge (~3.3%). #Nikkei
Exporters led the gainers, following the sudden depreciation in the yen since last Friday morning (to over ¥113 to $1). Sony’s share jumped 11%.
Traders said the BoJ’s decision to boost its asset purchase scheme was pushing money into equities.
Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo, told Bloomberg that:
“The impact of the BOJ’s additional easing was big, so it couldn’t be priced in during just one day....There is a risk in not holding Japanese shares, and those that sold them off will have to buy them back.”
The Nikkei was also driven up by the news that the Government Pension Investment Fund is changing its investment strategy, to buy more shares.
Gavin Parry, managing director of Parry International Trading in Hong Kong, says this means “a sea-change” in investment decision making.
“This is changing the risk-weighting psyche. You can’t ignore a $1.2 trillion fund.”
Updated
Coming up: EU growth forecasts and UK construction
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone.
Coming up today....
The new team at the European Commission will get down to business today, by releasing their latest economic forecasts at 10am GMT.
Commissioners Pierre Moscovici (ex French finance minister) and Jyrki Katainen (former PM of Finland) will be discussing the outlook for growth and jobs in the EU (neither look too rosy right now).
— European Commission (@EU_Commission) November 4, 2014Autumn Economic Forecast #ECForecast press conference at 11:00 today. Live on EbS http://t.co/FQNuo9xswh w. @jyrkikatainen @pierremoscovici
European stock markets are expected to dip at the open, for the second day running.
There’s a lot of interest in commodities -- the oil price continued to dip last night, and iron ore is now at its cheapest since the 2009 recession.
— Global Markets Forum (@ReutersGMF) November 4, 2014Equities set to extend dip, resource-related shares in focus as iron ore drops to near 5-yr lows and Brent crude falls to $84 a barrel.
We get a new healthcheck on the UK construction sector at 9.30am; economists predict that growth remained pretty rapid in October.
And overnight, the Australian central bank has left interest rates unchanged at their current record low of 2.5%.
Governor Glen Stevens said the strength of the Australian dollar meant less pressure to raise borrowing costs:
“On present indications, the most prudent course is likely to be a period of stability in interest rates.”
I’ll be tracking all the main developments though the day....
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