Federal Reserve likely to hold off interest rate rises as jobs falter

US non farm payroll data last week came as a rude shock to the markets at a paltry figure of 38,000 against an expected number of 164,000.

US non farm payroll data last week came as a rude shock to the markets at a paltry figure of 38,000 against an expected number of 164,000.

The US Dollar lost ground against most of its counterparts straight after the release and has now almost moved an interest rate hike in June off the table.

Analysts and hedge funds now expect the Federal Reserve to only raise rates once in 2016, against the initial mandate of the planned 3 or 4 rate hike dot curve for the year.

The EURUSD pair rallied up 2 cents though has pulled back a bit this morning as German Factory orders data have been released showing a decline to -0.2%.

Markets will now turn their attentions to Fed member Rosengren and Fed Chair Janet Yellen’s speeches later today and also keep a close eye on labour conditions data to try and determine if the non-farm payroll number was an outlier or if broader economic conditions are slowing.

Sterling is losing ground, pushed by the ‘leave’ campaign

The Pound has lost considerable ground against the board this morning as the ‘leave’ campaign continues to gather momentum in the UK’s Referendum polling.

YouGov telephone and online surveys have put the ‘Brexit’ campaign in the lead at 45% against the ‘remain’ side garnering 41% with 11% still undecided. Expect Sterling to be fairly volatile in the lead up to June 23 up to the date of the vote.

Meanwhile, investors will look towards market data comprising of BRC Retail Sales Index for interim direction though the main theme for the pound remains with the UK Referendum polls.

Sterling remains flat as Osborne delivered Budget 2016

It was a big day for the UK yesterday as George Osborne released the Government’s budget for 2016.

It was a big day for the UK yesterday as George Osborne released the Government's budget for 2016.In a coup for small businesses, middle class workers, savers and energy companies, Mr Osborne’s tax cuts have been widely criticised as an attempt to woo UK voters in his last statement ahead of the EU referendum in June.

The UK economy’s growth and productivity forecasts were downgraded disguising a £56 billion ‘’black hole’’ in the Government’s finances as Osbourne favoured the more crowd pleasing approach.

Osborne warned that amidst a backdrop of slowing global growth and turbulence in financial markets, a possible Brexit would only hurt UK business and consumer confidence further.

Despite the budget receiving much attention here in the UK, foreign exchange markets refused to take notice and Sterling remained steady against all major currencies over the course of the day.

Yellen ends US interest rate rise speculation

Last night the Federal Reserve’s FOMC met in the US. Janet Yellen’s resulting speech stated that interest rates would remain unchanged for the time being and was much more dovish in tone than expected.

With all the clues suggesting that, the Fed won’t be discussing interest rates again now until June, the US dollar came under pressure. However, despite dollar weakness and the worrying state of the global economy, Yellen suggested that US economic activity had been expanding at a moderate pace.

Today markets will be spending the majority of the day deciphering Janet Yellen’s press conference from last night.

Later in the trading session, we will receive EU CPI data and an interest rate decision from the Bank of England. From the US, the Philadelphia Fed manufacturing survey and weekly Jobless Claims will be of interest.

British academic Angus Deaton awarded Nobel economics prize

British academic Angus Deaton has been awarded the Nobel economics prize for 2015 for his analysis of consumption, poverty, and welfare.

British academic Angus Deaton has been awarded the Nobel economics prize for 2015 for his analysis of consumption, poverty, and welfareThe 69 year old professor of economics and international affairs at Princeton University was previously at Cambridge and Bristol universities.

His research focused on health, wellbeing, and economic development.

Professor Deaton had been in the running for the prize several times in past years.

The Nobel economic sciences committee said that individuals’ consumption choices must be understood before economic policy promoting welfare and reducing poverty could be formulated.

“More than anyone else, Angus Deaton has enhanced this understanding. By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics,” the committee members said.

The work for which Edinburgh-born Professor Deaton has been honoured revolves around three questions:

How do consumers distribute their spending among different goods?
How much of society’s income is spent and how much is saved?
How do we best measure and analyse welfare and poverty?

The secretary of the award committee, Torsten Persson, said Deaton’s research has “shown other researchers and international organizations like the World Bank how to go about understanding poverty at the very basic level.”

Persson praised Deaton’s work for illustrating how individual behavior affects a broader economy and demonstrating that “we cannot understand the whole without understanding what is happening in the miniature economy of our daily choices.”

Deaton, who was born in Edinburgh, and holds U.S. and British dual citizenship, said he was delighted to have won the prize and was pleased that the committee had awarded research that concerns the world’s poor.

“His research has uncovered important pitfalls when comparing the extent of poverty across time and place,” the committee said.

In his 2013 book, “The Great Escape,” Deaton expressed skepticism about the effectiveness of international aid.

He noted, for example, that China and India have lifted tens of millions of people out of poverty despite receiving relatively little aid money. At the same time, many African countries have remained mired in poverty despite receiving substantial aid.

“His view is that we don’t have these ready-made solutions, and money is not going to be the answer to many things,” Rodrik said.

The award includes prize money of 8m Swedish kroner (£637,000).

The economics award was not created by Alfred Nobel in 1895, but was added by Sweden’s central bank in 1968 as a memorial to the Swedish industrialist. The Nobel prizes will be given to winners on 10 December at ceremonies in Stockholm and Oslo.

PPI payout deadline finally considered by regulator

The Financial Conduct Authority (FCA) is finally considering a deadline for claims over mis-sold payment protection insurance (PPI).

The Financial Conduct Authority (FCA) is finally considering a deadline for claims over mis-sold payment protection insurance (PPI)The FCA anticipates that PPI customers would still though have at least until 2018 to claim compensation.

So far more than £20 billion has been paid out for PPI mis-selling to more than 10 million consumers. The policies were supposed to protect people against loss of income or sickness, but were often inappropriate.

The regulator will now launch a consultation, on whether there should be a deadline on compensation claims. It said there should be a window of at least two years after the deadline is set.

This would not be before the Spring of 2016 – meaning that consumers would have until the Spring of 2018 to make a claim through their bank or the Financial Ombudsman.

Shares in Lloyds, the bank most exposed to PPI, jumped by nearly 3% in early trading as it has set aside £13.5 billion to cover claims.

The banking industry welcomed the announcement, saying it provided further clarity for consumers.

Banks such as Lloyds have long argued privately that there should be a cut off point. They are convinced that many of the claims are bogus and are driven by claims management firms rather than by irritated customers.

Of course, many say that the banks are rightly reaping the effects of their appalling past behaviour.

The FCA move today is all about the “normalisation” of relations between regulators and the City.

As George Osborne signalled in his Mansion House speech earlier this year, the government is keen to see a new “settlement” with the financial services sector.

The former, combative head of the FCA, Martin Wheatley, was removed by the Treasury and the PPI deadline means another thorny legacy issue looks close to being dealt with.

The number of complaints about PPI is falling, but still runs in to hundreds of thousands every month.

In the first half of 2015 more than 883,000 customers complained about mis-selling, a fall of 16.6% on the same period in 2014.

The FCA said a deadline would “bring the PPI issue to an orderly conclusion, reducing uncertainty for firms about long-term PPI liabilities and helping rebuild public trust in the retail financial sector.”

The watchdog said too many people were taking too long to bring their claims, and that a deadline – along with an advertising campaign promoting any potential deadlines – would spur any outstanding claims to be brought.

Consumers who want to complain about PII should do so as soon as possible

In the first instance, complaints should be directed to the bank that sold the policy.

If customers do not receive a satisfactory response from their bank, they should take it up with the Financial Ombudsman Service.

Consumers do not need to use a claims management company to help them, advises the FCA, as such complaints are free.

UK economic growth increases to 0.7% in second quarter

UK economic growth increased in the second quarter of the year- helped by a big jump in oil and gas production.

UK economic growth increased in the second quarter of the year- helped by a big jump in oil and gas productionThe UK’s economy grew by an estimated 0.7% in the April to June period, the Office for National Statistics (ONS) said which compared with growth of 0.4% in the first quarter of the year.

Britain’s recovery strengthened, as the official figures suggested growth per head was finally back to pre-crisis levels.

Output in the economy during the second quarter was 2.6% higher than the same period a year earlier, the ONS said.

“After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years,” said ONS chief economist Joe Grice.

The UK’s economy has now seen 10 quarters of sustained economic growth.

The ONS stressed the first estimate was based on about 40% of the available economic data and is subject to revision.

It said manufacturing output experienced its first fall in two years with output dropping 0.3% in the quarter.

However, a surge in North Sea oil and gas production lifted overall industrial output by 1% – the biggest increase since late 2010.

The “mining and quarrying” component of the industrial output figures, which includes oil and gas extraction, rose by 7.8% in the quarter, the biggest increase since 1989.

The ONS said the increase, which came despite falling oil prices, was driven by tax cuts in March designed to support the sector.

Construction was flat in the period, the ONS said, recovering from a slight fall the previous quarter.

The UK’s dominant services sector recorded growth of 0.7%, following a rise of 0.4% in the previous three months.

Domestic demand is expected to remain strong, as wages rise and with the temporary effects of low inflation boosting consumer spending.

The ONS said there were also signs that businesses were finally increasing investment.

George Osborne, the Chancellor, said the figures showed Britain was “motoring ahead”. He tweeted: “We must stay on road we’ve set out on.”

The economy is now 5.2pc larger than its pre-crisis peak, and ONS said the 0.7pc expansion in the second quarter suggested that gross domestic product (GDP) per head was now “broadly equal to the pre-economic downturn peak” in the first quarter of 2008. This is expected to be confirmed by the ONS next month.

Mark Carney, the Governor of the Bank of England, has said that “sustained growth” of “around 0.6pc per quarter” will be needed for the remaining “spare capacity” in the economy to be eliminated and for rate setters to start tightening policy.

Mr Carney said in a speech this month that the decision to raise rates would come into “sharper relief” by “the turn of this year”.

UK government borrowing falls in June after record tax haul

UK government borrowing fell to £9.4 billion in June, down £0.8 billion from a year earlier- as income and corporation tax receipts rose to record levels.

UK government borrowing fell to £9.4 billion in June, down £0.8 billion from a year earlierThe Office for National Statistics (ONS) said income tax receipts rose to £11.5 billion, while corporation tax brought in £1.7 billion- both record monthly highs.

It was lowest borrowing figure for June since 2008. However analysts had been expecting it to drop further to £8.5 billion.

In the financial year so date UK Government borrowing has fallen by £6.1 billion to £25.1 billion.

The ONS figures showed government finances received a £117 million boost last month from a fine paid by Lloyds Banking Group over its handling of payment protection insurance (PPI) complaints.

In the summer Budget earlier this month, the Office for Budget Responsibility (OBR) forecast public borrowing would be £69.5 billion this year.

Public sector net debt at the end of June 2015 was £1.513 trillion, or 81.5% of annual UK economic output- up from 80.8% in May.

A Treasury spokesperson said the figures showed the UK government’s deficit reduction plan was working but added “the job is not done”.

The UK government is aiming to eliminate the budget deficit by 2019 and to run a £10 billion surplus in 2020 and in subsequent years.

Chancellor George Osborne announced £37 billion of spending cuts during this parliament in the summer Budget.

In November, the government’s spending review will set out £20 billion worth of departmental budget cuts over the next five years.

Global stock markets slide on Greece debt crisis

Stock markets in Britain, Europe and the US have fallen after Greece closed its banks and imposed capital controls.

Stock markets in Britain, Europe and the US have fallen after Greece closed its banks and imposed capital controlsThe moves by the Greek authorities came after the European Central Bank decided not to extend any extra emergency funding.

London’s FTSE 100 index was down 1.47% and Germany’s Dax index fell more than 2%. In the US, the Dow Jones fell nearly 1% early in the session.

Bank stocks are among the hardest hit, with shares of Deutsche Bank and Commerzbank both losing more than 4%.

The Athens Stock Exchange and Greek banks will be closed all week.

On the money markets, the euro lost ground against other major global currencies.

The London FTSE 100 share index was down 98.47 points at 6,655.23 with other European markets seeing even bigger falls. Earlier in Asia, Japan’s Nikkei index fell nearly 3%.

On the currency markets, the euro saw volatile trading in Asia, falling by 2% at one point. However, it has since recovered some ground, with the euro down 0.15% against the dollar at $1.1149.

The euro has weakened against the pound, with one euro now worth £0.7089, while the pound buys €1.4108.

Oil prices are heading lower. Brent crude oil futures fell more than 1.5% to $62.10 a barrel.

Bond yields (an indication of borrowing costs) for Italy, Spain and Portugal – which are considered some of the weaker eurozone economies – rose sharply.

In contrast, German bond yields fell. German bonds are seen as safer investments in times of crisis.

Greece was due to make a €1.6bn payment to the IMF on Tuesday – the same day that its current bailout expires.

Last week, talks between Greece and the eurozone countries over bailout terms ended without an agreement, and Prime Minister Alexis Tsipras then called for a referendum on the issue to be held on 5 July.

At the weekend, the Greek government confirmed that banks would be closed all week, and imposed capital controls, limiting bank withdrawals to €60 (£42) a day.

There is zero chance of the European Central Bank turning Emergency Liquidity Assistance back on – life-saving lending to banks – unless Greeks give an affirmative vote to a bailout proposal from the rest of the eurozone and the IMF, which Juncker sees as a proxy for Greece’s monetary future.

As for Athens, most of the Syriza government detests the bailout offer – for the way it pushes up VAT and cuts pensions.

So we will have the bizarre spectacle of a Prime Minister, Alexis Tsipras, arguing both against the bailout and for remaining inside the eurozone – so goodness only knows how he will vote.

And Greek people will be torn between fear and loathing of bailout proposals that will damage the living standards of many of them, and fear and loathing of abandoning the euro and seeing their banks closed.

UK government borrowing deficit falls in May

UK government borrowing debt fell to £10.13 billion in May, the Office for National Statistics (ONS) said, down from £12.35 billion a year earlier.

UK government borrowing debt fell to £10.13 billion in MayA rise in income tax and VAT receipts helped to cut UK government borrowing in May, official figures have shown.
It was the lowest borrowing figure in May for eight years.

Public sector net debt excluding public sector banks now stands at £1.5 trillion, the ONS said, which is 80.8% of gross domestic product (GDP).

“While the deficit in the financial year ending 2015 has fallen by more than a third since its peak in the financial year ending 2010, public sector net debt has maintained a gradual upward trend,” the ONS said in a statement.

Income tax receipts recorded their highest level for May in four years, rising £0.5 billion, or 5.3%, from a year earlier to £10.8 billion. VAT receipts rose by £0.6 billion, or 5.6%, to £10.7 billion.

The ONS also said that it now estimated total public sector borrowing in the financial year to March 2015 was £89.2 billion, or 4.9% of GDP.

While this figure was slightly higher than the previous estimate, it was still £9.3 billion lower than the previous year’s total.

Analysts said the drop in government borrowing during May was good news for Chancellor George Osborne at the start of the new fiscal year.

Last week, the chancellor said he would attempt to bind future governments to maintaining a budget surplus when the economy is growing.

However experts say that the rise in public sector debt above £1.5 trillion will be troubling for Mr Osborne.

UK government borrowing unexpectedly falls to £6.8 billion in April

UK government borrowing fell unexpectedly to £6.8 billion in April, down from £9.3 billion a year earlier.

UK government borrowing unexpectedly falls to £6.8 billion in AprilIt is the lowest April government borrowing figure since April 2008, when public borrowing stood at £2.5 billion.

The Office for National Statistics (ONS) also revised its previous estimate of borrowing for the full financial year up slightly to £87.7 billion, from £87.3 billion.

But that was still comfortably below the government’s target of £90.3 billion.

As it is the start of the financial year little can be gleaned from the public borrowing figures as yet.

And as the ONS itself warned last week, borrowing figures in the first few months of the financial year are often subject to revisions.

In his March Budget, Chancellor George Osborne forecast public sector net borrowing would amount to £75.3 billion this financial year.

Last month, official figures showed the economy grew by 0.3% in the three months to the end of March, compared with 0.6% in the last three months of the year.

Mr Osborne plans to hold a new Budget on 8 July, when he is expected to outline his strategy to eliminate the deficit by the end of 2017 and achieve a Budget surplus in 2018-19.

It is expected he will outline £30 billion of spending cuts to government departments, including £12 billion of cuts to welfare spending.

It is also possible the chancellor may revise the government’s borrowing targets.

A Treasury spokesman said the borrowing figures showed the government’s deficit reduction plan was working, with borrowing in April £2.5 billion lower than the same month a year ago.

“We have more than halved the deficit, but at just under 5%, it is still one of the highest in the developed world,” the Treasury official said.

“There is no shortcut to fixing the public finances, so we have to continue with the hard work of identifying savings and making reforms necessary to finish the job and build a resilient economy.”

UK economic growth slows to 0.3pc

The rate of economic UK growth has halved in the three months to the end of March- marking the slowest quarterly growth for two years.

UK economic growth slows to 0.3pcThe UK economy grew by 0.3% in the quarter according to the Office for National Statistics (ONS) said.

That compares with 0.6% in the last three months of 2014.

The figures, which come nine days before the general election, suggest a “temporary” slowdown in the economy, analysts said.

The ONS said the economy was 2.4% larger than the same period a year earlier.

Growth of 0.5% in the services industry was offset by a 1.6% fall in the pace of economic output in construction.

The UK services sector accounts for around three quarters of economic growth, with construction, manufacturing and production accounting for the remaining quarter.

The Chancellor, George Osborne, said: “It’s good news that the economy has continued to grow, but we have reached a critical moment. Today is a reminder that you can’t take the recovery for granted and the future of our economy is on the ballot paper at this election.”

Liberal Democrat Chief Secretary to the Treasury Danny Alexander, said the figures were still progress but a warning too.

He added it was vital his party were part of the next government to ensure the “fair and balanced approach needed to secure this recovery”.

For reasons no one can quite explain, construction in Britain has been lousy for six months.

The production industries have been especially hurt by the oil price collapse, which has led to something of a crisis in the North Sea. Excluding oil and gas, quarter-on-quarter growth would have been 0.1 of a percentage point higher at 0.4%.

But nor has manufacturing been sparkling: it showed growth of just 0.1%. And perhaps because of the strengthening pound, the growth rate of our manufacturers has progressively decelerated in a straight line from 1.4% a year ago

More unexpectedly, some service industries in which the UK is a world leader – finance, engineering and architecture – have had a poor few months.

One possible explanation of their slowing growth is that demand for our services and goods in important export markets – especially China and the US – may be a bit worse than official figures show. That could be a sign of trouble ahead.

So thank goodness for our domestic facing services.

Or to put it another way, if we weren’t a nation of shoppers and restaurant eaters, there would be very little growth at all. The output of distribution, hotels and restaurants increased by 1.2% in the quarter – only slightly slower than at the end of last year.

The figures represent a first estimate of economic growth and are based on less than half of the total data required for the final output estimate.

But the ONS said that while estimates are subject to revision as more data become available, the revisions are typically small between the preliminary and third estimates.