Rolling coverage of the latest economic and financial news, as China sets its lowest growth target in almost three decades
- Latest: UK company workforces fall at fastest pace since 2012
- China cuts 2019 growth target to 6-6.5%
- Premier Li warns of tough struggle
- What the experts say
Strong demand indeed….
At around midday order books for #Greece‘s 10-year #bond were in excess of 11.3 billion euros, final yield has been set at 3.9%
This is the first #Greek 10-year bond since before the beginning of the country’s #bailout era
Reuters says there is “strong demand’ for Greece’s new 10-year bond, which is being auctioned right now.
That should mean Athens raises at least the €2bn it is aiming for. Plus, the more bids it receives in today’s auction, the lower the interest rate it must pay (as Greece can cherry-pick the best offers).
Here’s our news story on February’s weak UK PMI reports:
It’s a red-letter day in Greece, which is holding its first 10-year debt auction since the eurozone debt crisis began.
“In that sense, it’s a big bet because of everything that hangs on it.”
I sincerely hope the 10yr bond issue is successful. The fact remains that markets anticipate political change in #Greece. The coming @neademokratia government will deliver investment grade status within 18 months.
The Bank of England has also fired a shot at the EU – saying the City is ready for a no-deal Brexit, but Europe isn’t.
The Bank’s Financial Policy Committee says that UK banks are prepared for even a disorderly Brexit, following its work since 2016.
The biggest risks of disruption in a no-deal Brexit to financial services used by UK households and businesses have been dealt with.
Major UK banks and insurers are strong enough to deal even with a worst case disorderly Brexit and could continue to serve households and businesses.
The Bank of England is taking new steps to protect the UK economy from Brexit.
The UK central bank is launching new weekly loans of euros to eligible banks and building societies, to prevent their currency reserves running short.
ECB and Bank of England activate currency swap arrangement for possible provision of euro to UK banks https://t.co/AgWV4ksOgd
Sensible stuff from the ECB and the Bank of England here. It also gives an answer to the question posed by @SkyNews and @EdConwaySky “And some have raised the question over whether the ECB or Federal Reserve would actually consent to the scheme” https://t.co/WV90tmYqHG
The PMI reports don’t usually cause much of a stir at Westminster. But today’s news has alarmed John McDonnell MP, Shadow Chancellor.
“This is a signal of plummeting business optimism in the wake of the government’s bungling of Brexit.
“The signs of falling UK private sector employment are worrying, against the backdrop of dropping business investment, downgraded growth forecasts, and a manufacturing recession.
Chris Williamson, Chief Business Economist at IHS Markit, fears the UK economy will barely grow this quarter:
“The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK’s scheduled departure from the EU. The data suggest the economy is on course to grow by just 0.1% in the first quarter.
Brexit indecision struck another blow to Britain’s economy in February, says Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.
He’s concerned that new orders and employment fell last month:
Job losses continued in February, as businesses held back on hiring without the confidence of new pipeline work and ability to recruit skilled candidates. Staffing levels were down at the fastest rate in over seven years. In signs of more economic stress, intense competition and discounting strategies prevented output price inflation gathering pace, falling to its lowest for five months.
Consumer and client confidence disappeared from the sector, as the hesitancy to place orders also rippled out from Europe. Survey respondents said anxious international clients cancelled contracts and delayed decisions.
Just in: Britain economy was “close to stagnation” last month, as anxious companies cut staff ahead of Brexit.
Data firm Markit reports that UK business activity only rose “marginally” in February, while new orders dipped.
Reports from survey respondents suggested that Brexit- related uncertainty remained by far the most prominent factor acting as a brake on business activity growth in February. There were widespread reports that political uncertainty had encouraged delays to corporate spending decisions and a general rise in risk aversion among clients….
The rate of decline in private sector employment was the fastest since September 2012 as lower payroll numbers at manufacturing firms and service providers more than offset a modest upturn in construction sector workforces
UK car sales have risen, for the first time in five months.
The Society of Motor Manufacturers and Traders (SMMT) reports that 81,969 new cars were registered on UK roads last month, a 1,164 increase on February 2018.
We have encouraging news from the eurozone.
Private sector growth across the euro area has hit a three-month high, data firm Markit says, led by Ireland and Spain.
“The final PMI for February indicated a slightly improved performance compared to the flash estimate, lifted higher than January in part due to the further easing of one-off dampening factors such as the yellow vest protests in France and new auto sector emissions rules. However, the survey remained subdued as other headwinds continued to increasingly constrain business activity. These include slowing global economic growth, rising geopolitical concerns, trade wars, Brexit and tightening financial conditions.
“Measured overall, the survey shows the quarterly rate of GDP growth picking up to 0.2% in February from 0.1% in January, meaning the first quarter could see the eurozone economy struggle to beat the 0.2% expansion seen in the fourth quarter of last year.
France 50.2, up from previous 49.8 (out of recession territory)
Germany 55.3, up from previous 55.1
It looks like 1Q 2019 could be better than expected, after a difficult 4Q 2018…@graemewearden
A media scrum is building outside the Toyko Detention Centre, as journalists anticipate their first sighting of Carlos Ghosn in many months.
Here’s my colleague Lily Kuo on the Chinese growth targets:
Li appeared to hurry through the GDP targets, spending most of his nearly two hour speech on pledges to boost employment, cut taxes, and lower costs for businesses.
“Li Keqiang’s main purpose seems to have been to mollifying two constituencies that have been grumbling the loudest: the domestic private entrepreneurs and the foreign business community,” said Damien Ma, co-founder of the thinktank MacroPolo at the Paulson Institute.
Ouch. Struggling UK retailer Debenhams has just issued a fresh profits warning.
The department store is blaming macroeconomic uncertainties, increased financing, and the disruption as it tries to negotiate a restructuring plan with its lenders.
Debenhams issues a profit warning after 6.2% slump in UK sales, says refinancing talks are progressing well and will lead to 50 store closures
“We are making good progress with our stakeholder discussions to put the business on a firm footing for the future. We still expect that this process will lead to around 50 stores closing in the medium term.
These tax cuts can’t come soon enough for China’s companies.
Growth in China’s services firms fell sharply last month, new data shows, dragging the services PMI down to 51.1, from 53.6. That’s close to the 50-point mark showing stagnation.
Caixin China Services PMI 51.1 -2.5 VS previous A big miss median forecast
It seems obvious reason for CPC on lending to small to medium size private Corp pic.twitter.com/DEY9BNK2LG
Dan Wang, China analyst at The Economist Intelligence Unit, says Bejing is right to cut its growth target to between 6 and 6.5%, as 2019 will be tough.
“This revision is consistent with our forecasts. China’s manufacturing overcapacity, high debt and excessive deleveraging campaign means the corporate sector needs time to recover and adjust. Uncertainty in the trade war talks has already lowered the appetite for investment in 2019. The lowering of the growth targets signals a difficult year for employment, especially for newly graduated students and technology sector.
Under this expectation, monetary and fiscal support will stay strong, while restrictive policies such as environment requirements will be further relaxed. Resource intensive sectors, such as construction and metal, may see a mild revival in the coming year.”
The growth target is 6‐6.5%, a 2trn yuan tax cut was announced (vs 1.1trn last year) though the overall deficit only increases by 0.2ppt, further targeted rate cuts were signalled.
Whether or not this is “enough” depends on one’s view on how bad the underlying slowdown is in the Chinese economy. But there is nothing overnight to substantially change one’s view.
Tax cuts, increased lending and infrastructure spending, rather than continuing along the deleveraging route, will get some quick wins for China. However, this may be a dangerous route in the long run. High levels of debt are a problem, which will only be exasperated as growth slows.
Whilst shares across Asia were broadly lower, the plans to increase spending boosted shares in China. The CSI300 hit a 9-month high in early trade before giving back some gains. As more details over the economic package are released over the coming days, we could see Chinese shares extend their rally.
China is also planning to increase its military budget by 7.5% to 1.2 trillion yuan.
Although that’s down from last year’s 8.1% rise, it shows Beijing won’t allow its slowing economy to undermine its defence capabilities, such as stealth fighters, aircraft carriers and anti-satellite missiles.
“We will implement the military strategy for the new era, strengthen military training under combat conditions, and firmly protect China’s sovereignty, security and development interests.”
China’s tax cuts have been well-received by traders in Shanghai.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
“We will face a graver and more complicated environment as well as risks and challenges … We must be fully prepared for a tough struggle.”
“Downward pressure on the Chinese economy continues to increase, growth in consumption is slowing, and growth in effective investment lacks momentum. The real economy faces many difficulties.”
China’s 2019 economic targets just out:
-GDP growth target 6-6.5% (6.6% in 2018)
-CPI target around 3%
-Budget deficit 2.8% (from 2.6%)
-fiscal spending 6.5%
Also confirmation of tax cuts:
-3 percentage point cut to top VAT bracket
-2 trillion yuan tax cuts #TwoSessions2019
More Chinese infrastructure spending coming up:
– plans to sell 2.15 trillion yuan in special local government bonds in 2019
…takes augmented budget deficit from 2.8% of GDP to closer to 5%
Also, deleveraging, arrested- China says leverage in economy ‘basically’ stable in 2019
Link : UK firms cut staff; Greece launches debt auction – business live