All the day’s economic and financial news, as analysts claim that petrol could soon be cheaper than bottled water.
- Europe closes lower but Wall Street up in early trading
- Bank of England leaves rates unchanged
- Police visit Renault offices
- The agenda: $30 oil rocks markets
- RAC: Cheaper petrol on the way
5.33pm GMT
A rally on Wall Street after Wednesday’s slump helped European shares come off their worst levels, but they still ended the day in the red. Oil recovered some ground after falling below $30 a barrel, with Brent crude currently 2% higher at $30.94, but investors are clearly still worried about the weakness in commodities and the outlook for China.
More worries for the car industry, with Renault being raided, added to the downbeat mood and helped push the Dax and Cac – which have a number of listed carmakers – lower.
We’ve got UK construction statistics due for release in the morning and these will be closely followed as they may offer some respite from the swathe of downbeat economic prints we’ve seen of late. Also, US retail sales and consumer confidence numbers will be under scrutiny as the market looks for clues of any impact from the Federal Reserve’s rate hike. It’s been a rollercoaster session, but it’s certainly good to be finishing with losses that are so limited.
4.25pm GMT
With the US rally helping to pull European shares away from their worst levels, Chris Beauchamp, senior market analyst at IG, said:
Markets remain stuck in a closely-fought contest between the optimists and pessimists, and while in Europe the latter still appear to be in charge, on Wall Street the buyers are back. Just as US markets yesterday torpedoed a nascent rally, today our American cousins are doing their best to stymie any further bearish momentum. Car makers dominate the news today, with Fiat Chrysler, Peugeot and Renault all hit hard, with the latter two due to an emissions investigation that doubtless has its roots in the VW scandal of 2015. As with banks, investors are learning that scandals do not tend to stop at one firm, and with car firms so prominent on the French and German exchanges, it is no surprise that the CAC and DAX remain firmly in the red.
Oil prices are enjoying a rare pause in their downward slide, but it still looks to be only a matter of time before they continue their exploration of the $20 zone. The combination of bearish factors remains the key driver, with no hint of real production cuts coming from the key producers
4.03pm GMT
A rebound in oil prices is helping markets recover some of their early losses. Brent crude is now up 2% at $31 a barrel.
3.39pm GMT
Did we mention volatile? The Dow Jones Industrial Average is now 161 points higher, helping pull European markets off their worst levels.
3.18pm GMT
The European Central Bank could cut its deposit rate further after last month’s reduction, according to the minutes of the December meeting, with inflation in danger of missing its targets.
They said:
A cut in the deposit facility rate of 10 basis points was seen as unlikely to trigger material negative side effects and was also seen as having the advantage of leaving some room for further downward adjustments.
The ECB’s latest Meeting Account reveals something of a rift within the Governing Council. However, while we already knew that support for action was not unanimous, the debate itself was not as‘binary’ as some might have assumed. In particular, at least some of those who argued against the proposed measures still favoured providing further stimulus of some kind. Thus, while we continue to judge that monetary policy settings will remain on hold at the forthcoming meeting, the actual policy debate looks set to remain as lively as ever, not least in the context of the renewed downside risks to inflation.
3.09pm GMT
After a brief attempt at a rally as Wall Street opened, US markets are following the rest of the world lower.
The Dow Jones Industrial Average is currently 59 points or 0.3% lower despite the oil market stablising.
2.54pm GMT
James Bullard, one of the members of the US Federal Reserve, has been keen to raise interest rates and got his way in December.
But with many analysts believing the current market rout and worries about the Chinese economy should delay any further rises from the Fed, even Bullard is sounding more cautious. Reuters reports:
The continued rout in global oil markets may have caused a “worrisome” drop in U.S. inflation expectations that will make it harder for the Federal Reserve to reach one of its key policy targets, St. Louis Fed President James Bullard said on Thursday.
Since the dramatic fall in oil began in 2014 Fed officials have insisted the impact on U.S. price levels would be temporary, bottoming out at some point and allowing inflation to rise to the Fed’s 2 percent target.
2.21pm GMT
Over in the US, and the number of Americans claiming unemployment benefit rose unexpectedly last week.
Initial jobless claims climbed by 7,000 to 284,000, compared with forecasts of a fall to 275,000.
1.50pm GMT
Martin Beck, senior economic advisor to the EY ITEM Club, also reckons the BoE won’t raise rates in the next few months:
He argues that there’s simply not a strong reason to hike borrowing costs, given inflation is almost zero and wage growth just 2%.
“The outcome of January’s meeting points firmly away from a majority of the MPC favouring a rate rise anytime soon. Notably, none of the three criteria for considering a rate rise as set out by the Governor in a speech in July last year – quarterly GDP growth in excess of 0.6%, a convincing pick-up in core inflation and a sustained rise in wage growth – are currently present.
“Therefore, we stick with our view that the first hike is most likely to come towards the end of the year. If anything the recent global financial turmoil emphasises that the risks are skewed towards a longer period of inaction.
1.46pm GMT
So if not today, when might UK interest rates rise?
Ian Kernohan, economist at Royal London Asset Management, reckons the Bank of England will sit tight until the EU referendum has been held – perhaps in June, or September.
The recent decline in the oil price will have played a part in the MPC’s thinking, not so much because they see it as a signal of poor global growth prospects, but because it will keep inflation lower in 2016 than they would have expected a few months ago. On top of this, there have been some signs of weakness in the average earnings figures, which is an indicator on their key watch list.
“Looking ahead, lower sterling should lead to rising import cost inflation, while the bulk of the labour market data is still relatively strong. There will be no interest rate hike ahead of the Brexit referendum however, given the uncertainties which the vote is already creating.”
1.08pm GMT
Here’s our news story about the Renault raids that have given the markets a shunt:
Related: Renault shares plunge after police raids on sites
12.25pm GMT
The UK government’s plan to hold a referendum on EU membership may have helped weaken the pound this year, the Bank of England says.
This is the key section from today’s minutes:
The sterling effective exchange rate index (ERI) had fallen by around 3% since the fifteen-day average starting point used in the November Inflation Report projections. This appeared in part to be a reaction to the ECB policy decision on 3 December 2015. Since the start of 2016, however, some market contacts had additionally cited the forthcoming UK referendum regarding EU membership as a possible explanation for the depreciation of sterling.
Option-implied sterling volatilities had risen and there had been an increase in the price of protection against the risk of sterling depreciation compared with the price of protection against an appreciation.
Brexit fears may be responsible for the weaker pound – MPC minutes pic.twitter.com/eKGeTjvPif
12.12pm GMT
The Bank of England also flags up that UK workers aren’t getting large pay rises, with wage growth slowing to 2% last month.
Despite continued reductions in the rate of unemployment, pay growth remains restrained and appears to have dipped slightly in the most recent data.
12.08pm GMT
The Bank of England’s minutes are online here.
12.08pm GMT
The Bank of England admits its latest inflation forecasts now look too optimistic, thanks to the tumbling oil price.
In the minutes from today’s meeting, it says:
Twelve-month CPI inflation rose to 0.1% in November and is likely to rise modestly further in the coming months as some of the large falls in energy and food prices a year earlier drop out of the annual comparison.
But the 40% decline in dollar oil prices means that the increase in inflation is now expected to be slightly more gradual in the near term than forecast in the Committee’s November Inflation Report projections.
Recent volatility in financial markets has underlined the downside risks to global growth, primarily emanating from emerging markets.
12.02pm GMT
Bank of England maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at £375 billion…
12.01pm GMT
Breaking: UK interest rates have been left unchanged at 0.5%, extending a run dating back to March 2009.
But it wasn’t unanimous. The Bank of England’s rate-setting committee was split 8-1, with Ian McCafferty continuing to push for higher borrowing costs.
11.58am GMT
The prospect of a new chapter in the car emissions scandal has gone down very badly in Europe.
The German DAX and French CAC are now both down at least 3%:
11.32am GMT
Euro up, auto makers down. German Dax down 3.42%.
11.30am GMT
Shares in other European automakers are taking a tumble too:
Good morning! @flacqua @tomkeene pic.twitter.com/OSS8xbFv7H
11.25am GMT
The Renault raids suggest that the emissions scandal which began at Volkswagen last year is spreading.
French unions officials have confirmed that police visited Renault’s offices last week, and seized several computers.
11.13am GMT
Renault getting crushed pic.twitter.com/bx31ERR7p3
11.12am GMT
Renault is declining to comment on those reports of a fraud raid, Reuters says.
11.09am GMT
Shares in French carmaker Renault just plunged 15%.
The newswires are citing reports that the company’s offices were raided by police last week.
11.07am GMT
Sterling has hit its lowest level against the euro in a year, as traders continue to anticipate that UK interest rates aren’t being hiked anytime soon.
One pound is now worth €1.3147, a level last seen in mid-January 2015. That means one euro is worth 76p.
So there we have it Mr Carney…get the pound to plummet. That’s what would make the business world happier. But of course central banks don’t target exchange rates now, do they…?
Blog’s up! https://t.co/XNXw1gKvLr Something for the BOE to chew on… pic.twitter.com/cxpt30TT88
10.56am GMT
Next week is Davos time, when politicians, policymakers, business leaders and other members of the ‘global elite’ gather for their annual meeting in Switzerland.
The report, prepared by the WEF in collaboration with risk specialists Marsh & McLennan and Zurich Insurance Group, comes a month after the deal signed in Paris to reduce carbon emissions. The WEF said evidence was mounting that inter-connections between risks were becoming stronger. It cited links between climate change and involuntary migration or international security, noting that these often had “major and unpredictable impacts”.
Cecilia Reyes, Zurich’s chief risk officer, said: “Climate change is exacerbating more risks than ever before in terms of water crises, food shortages, constrained economic growth, weaker societal cohesion and increased security risks.
Related: Climate change disaster is biggest threat to global economy in 2016, say experts
10.34am GMT
New York’s stock market may stabilise today after Wednesday’s rout wiped 364 points (-2.2%) off the Dow Jones industrial average.
10.27am GMT
In around 90 minutes time, investors and economists will be poring over the minutes of today’s Bank of England meeting.
In the current climate of tumbling oil prices, crashing stock markets and a likely next leg lower for inflation expectations, it is clear the UK rate hike forecasts continue to push further back day by day.
Since the last meeting, oil markets have slumped – crude oil traded below $30 a barrel for the first time in 12 years overnight – global growth has slowed, equity markets have dipped and fears, rightly or wrongly, of a recession have increased…..
This time last year, following a slump in oil prices, Ian McCafferty decided to stop voting for a rate increase having done so since the autumn. This is probably the key development in today’s meeting. McCafferty has shown that he is willing to change his mind when the data changes – something of which there is a woeful lack of in central banking – and a unanimous vote for a hold at 0.5% will solidify pound at these low levels.
10.24am GMT
Although Brent crude is clinging on above $30 this morning, its earlier tumble to $29.73 per barrel continues to pull markets down.
Jasper Lawler of CMC Markets says it’s turning into a bad morning for the City (unless you’ve shorted the market, of course):
A strong Christmas performance from Tesco has not been enough to counter a wave of fear striking the FTSE 100 as oil prices slumped and travel stocks were sold off following terrorist attacks in Jakarta. Adding to concerns, the offshore Chinese yuan fell despite the PBOC setting a higher fix for the onshore rate as traders bet on future depreciation.
There had been signs that the recovery was petering out in the past day or so but equities finally succumbed when Brent crude prices hit a 12-year low early Thursday.
10.08am GMT
Glad to see my typos are causing amusement….
Spotted on Teh Grauniad… 😉 https://t.co/liAqauV8uE pic.twitter.com/y3i0kmWJAd
Do we have data for the Eurozoen? https://t.co/BGDGrSflbN
9.57am GMT
The attacks in Jakarta today (liveblog here) may also be weighing on shares today, although worries over the global economy appear to be the main driver.
Mike van Dulken, head of research at Accendo Markets, says:
Investors have once again realised that nothing has changed and a bounce wasn’t really warranted. A depressed oil price remains hindered by global oversupply and the prospect of it getting worse as Iran returns to market, while China jitters continue to shake everything from commodities to financials. Attacks such as those overnight in Jakarta are also becoming much too frequent even if markets have developed thicker skin.”
9.55am GMT
Today’s selloff has pushed the FTSE 100 down to a five-month intraday low.
The blue-chip index hit 5836 this morning, a level not seen since the Great Fall of China last summer.
9.44am GMT
Germany’s economy has recorded its fastest growth since the early days of the
eurozoen
German economy continues to grow in 2015: the price-adjusted #GDP rose 1.7% https://t.co/t1XfVZNQHC pic.twitter.com/b5FA7eE8of
It was yet another year in which the German economy defied earlier swan songs and, despite many headwinds like the Greek crisis, the slowdown in emerging markets and China and increased geopolitical uncertainties, continued the recovery.
Without any new structural reforms and investments it is hard to see any sharp acceleration of the economy any time soon.
For first time since 1961, #Germany govt had fiscal surplus in 2 consecutive years: 0.5% of GDP in 2015 after 0.6% (ht: @Berenberg_Econ)
8.54am GMT
The FTSE 100
is flirting with
The blue-chip index is down 110 points right now at 5849, a loss of almost 1.9%.
8.47am GMT
The turbulent market conditions don’t appear to be going anywhere fast, warns analyst Tony Cross of Trustnet.
Yesterday’s modest gains on the FTSE-100 have already been eclipsed as investors become increasingly nervous over the outlook for crude oil.
Wall Street sold off heavily into the close last night and this is very much setting the pace, leaving the vast majority of London’s blue chip equities trading squarely in the red.
8.37am GMT
Europe’s markets are bathed in electronic red ink this morning, with major indices all losing at least 1%.
8.27am GMT
Several UK retailers are defying the selloff.
Tesco jumped almost 7% to the top of the FTSE 100 leaderboard after surprising the City with a jump in Christmas sales.
Argos sales threaten Home Retail profits – not a great bid defence? shares up over 6% at one stage https://t.co/4Xt2G7mEK0
8.16am GMT
UK FTSE 100 starts the day below 5900 as the effect of last night’s equity reversal in the United States impacts….
8.14am GMT
And we’re off! European market are falling sharply at the start of trading.
In 2016, UK indices have suffered their worst start since 2008.
There is plenty to worry about globally; China, emerging markets, commodity prices, monetary tightening, negative earnings momentum, high valuations and a tired looking bull market.
8.04am GMT
Over in the City, the Bank of England’s policymakers are gathering to set monetary policy.
But there’s no chance of a rate rise, given the recent market turbulence and weaker economic data that has sent the pound to its lowest level against the US dollar since 2010.
Investor sentiment towards the Sterling continues to weaken ahead of the anticipated Bank of England (BoE) rate decision today, in which markets broadly expect rates to be left unchanged at the record 0.5% low.
Since the MPC’s December meeting, the overall outlook for the UK economy has dimmed considerably with a downwards revision of Q3 GDP and a decline in industrial productions renewing concerns around the potential slowdown in economic momentum in the United Kingdom.
BOE ‘change rates’ button ready for yet another exciting day. pic.twitter.com/1hveDGCbP9
7.55am GMT
There’s mixed news from fashion chain Burberry this morning.
On the upside, its sales in mainland China are growing again after a worrying slide last year. That helped send retail revenue up 1% in the last three months on 2015.
Burberry comparable sales unchanged year-on-year, an improvement from 4% fall in Q2 as China returns to growth
While Burberry was impacted by the ongoing challenges facing the luxury sector, headwinds in Hong Kong and Macau masked an otherwise stronger performance in many markets.
7.45am GMT
Home Retail has warned that poor sales at its Argos chain would hit group profits.
That’s significant, as the company only recently rebuffed a takeover bid from Sainsbury’s.
Argos posted a 2.2% fall in like-for-like sales in the 18 weeks to 2 January, worse than analysts had expected. Walk-in sales slumped 13% in December, with shopping centre and high street stores badly hit, which was only partly offset by 10% growth in digital sales.
Home Retail’s other chain Homebase enjoyed 5% growth, boosted by kitchen and bathroom products. The company confirmed that is in advanced discussions to sell the DIY chain to Australia’s Wesfarmers for £340m.
7.40am GMT
City analysts are impressed with Tesco’s Christmas performance:
Tesco UK like-for-like sales up 1.3% in six weeks ending January 9. Group like-for-likes up 2.1%.Beats consensus from City analysts.
Impressive that Tesco even managed positive like for like growth over Xmas in Extra stores.
Coming off coupons impacted the quarter -1.5%. But Christmas was positive. Well deserved tesco. They had a wonderfully cohesive store plan.
Tesco UK LFL Xmas +1.3% much much better than expected. Together with SBRY & Morrison’s suggests Britins spent more at Xmas
7.38am GMT
On a busy morning for retail news, Tesco is grabbing the headlines.
Britain’s largest supermarket has defied its critics by reporting a 1.3% rise in sales over the Christmas period. It suggests CEO Dave Lewis is making good progress in his labours to turn the company around.
Tesco cheered the City with news of a much stronger than expected performance over Christmas, pushing sales in its core UK supermarkets business up by 1.3%. Most analysts had been expecting sales to fall.
Chief executive Dave Lewis said the group, Britain’s biggest retailer, had benefitted from lower prices on what he called “an outstanding range of products.”
Related: Tesco beats forecasts with Christmas sales rise
7.34am GMT
Brent crude is bobbing around $30.50/barrel this morning, after hitting $29.73 last night.
“With no apparent end in sight to the free-falling price of oil, motorists can expect some really low fuel prices in 2016.
“Breaking through the pound a litre price point for both petrol and diesel was clearly a welcome landmark, but it looks as though there is more to come.
7.30am GMT
Angus Nicholson of IG has warned that “a negative feedback loop of self-perpetuating fear seems to have gripped global markets”, as shares dive across Asia.
Today’s selloff is also being driven by renewed fears over the situation in China, and the possibility that Beijing will devalue the yuan sharply.
China’s poor communication of FX (foreign exchange) policy and concomitant selloff in its equities appear to have lit a fire of negativity beneath global market sentiment. The threat of a dramatic devaluation by the Chinese government to ease its deflationary and debt-related pressures hangs heavy on markets like a Sword of Damocles.
Despite China’s successful efforts this week to regain control over the offshore renminbi, the possibility of a major one-off devaluation in the currency is probably far higher than a black swan tail risk event. The fact that it is reportedly even being discussed by People’s Bank of China (PBoC) advisors likely assigns it a probability as high as 20%.
7.22am GMT
Pessimism has swept through Asia today, sending markets down to a three-year low.
The sight of Brent crude oil below $30/barrel prompted big losses across the major indices.
7.07am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
US stocks fell heavily on Wednesday, with the Standard & Poor’s 500 falling 2.5% to take the index below 1,900 points for the first time since September, due to growing concerns about the falling oil price, which dipped below $30 a barrel for the first time in nearly 12 years.
The S&P 500, which closed at 1,890 points, suffered its worst day since September and has fallen by 10% since its November peak taking it into “correction” territory, something that has not happened since August 2014.
Related: Oil and US share prices tumble over fears for global economy
Our European opening calls: $FTSE 5887 down 74 $DAX 9845 down 116 $CAC 4333 down 59 $IBEX 8805 down 130 $MIB 19899 down 241