US consumer confidence slips after Brexit vote
US GDP growth lower than expected
European growth slows, unemployment steady, inflation rises
UK mortgage approvals at more than one year low
Spanish economy continues to grow
French GDP flat in second quarter
Bank of Japan disappoints on stimulus as it holds interest rates
3.05pm BST
US consumers were less confident in July than the previous month, according to a new survey, partly due to the Brexit vote.
The University of Michigan consumer sentiment index came in at 90 for July, lower than the 90.5 expected but up on the preliminary reading of 89.5. The final figure for the previous month was 93.5. The survey’s chief economist Richard Curtin said:
Although confidence strengthened in late July, for the month as a whole the Sentiment Index was still below last month’s level mainly due to increased concerns about economic prospects among upper income households.
The Brexit vote was spontaneously mentioned by record numbers of households with incomes in the top third (23%), more than twice as frequently as among households with incomes in the bottom two-thirds (11%). Given the prompt rebound in stock prices as well as the tiny direct impact on U.S. trade, it is surprising that concerns about Brexit remained nearly as high in late July as immediately following the Brexit vote.
USA Chicago PMI announcement - Actual: 55.8, Expected: 54.0 pic.twitter.com/2kaIjr8fQH
2.42pm BST
Following the weaker than expected US GDP figures, as well as disappointing results from Exxon and Chevron, it is no surprise that US markets have opened lower.
The Dow Jones Industrial Average is currently down 27 points or 0.15% while the S&P 500 opened 0.08% lower. But Nasdaq edged up 0.14% after positive updates from Alphabet and Amazon.
2.34pm BST
Meanwhile over in Ireland, three bankers from banks that almost bankrupted Ireland have been sent to jail today by a Dublin court, writes Ireland correspondent Henry McDonald:
The trio from the now defunct Anglo Irish Bank and the taxpayer rescued Irish Life & Permanent were given prison sentences for their part in a conspiracy to inflate the accounts of financial institutions by €7.2 bn.
Ex-Anglo Irish Bank chief risk officer Willie McAteer has been sentenced to three and a half years. Former Anglo Irish Bank treasury official John Bowe was handed down a two year prison sentence. Denis Casey, the former Irish Life & Permanent chief executive was sentence to two years in jail
2.26pm BST
Here’s our report on the US GDP figures:
The US economy grew by just 1.2% from April to June, the US Department of Commerce announced on Friday, as cut backs by businesses wiped out a rise in consumer spending.
The lower-than-expected figure is the latest in a series of disappointing economic numbers attributed to growing uncertainty among consumers and businesses, both of whom are keeping a tighter rein on spending.
Related: US economy grows by just 1.2% in second quarter
2.20pm BST
US GDP +1.2% (ann.) in Q2 - broadly in line with our PMI (the flash of which points to more weak growth in July) pic.twitter.com/n7pYNR95rh
2.13pm BST
And here’s a chart showing how US GDP has been revised in the past:
Charting The Difference Between The Original And Revised GDP https://t.co/EhVvZA2mRz pic.twitter.com/PQ51Ad1sdi
2.12pm BST
Alex Lydall, senior sales trader at foreign exchange business Foenix Partners, also believes a US rate rise is now unlikely this year:
Janet Yellen will continue to sit on the fence with interest rates for the foreseeable future on disappointing news this afternoon that US GDP increased to a sluggish 1.2%, on preliminary figures where analysts had expectations of an uplift to 2.6%. Rhetoric from the Federal Reserve lately has been somewhat cautious, meaning the significant miss of growth figures will put the bearish committee members back in the driving seat. With global risk appetite tentative on the back of the EU Referendum results, the global powerhouse of the US is often seen as a precursor to global performance. If these preliminary figures signify a shift on the downside for the domestic economy in the US, not only will rate hikes be unlikely this year, but the benchmark for global risk will be adversely affected in the medium term.
2.05pm BST
Dollar taking a bit of a belated pounding now after the GDP release, two week high in gold.
The pound is now up 0.5% against the US currency at $1.3232. The dollar has weakened against the euro to $1.1132, a level last seen on 15 July while the yen has also extended its gains against the US currency.
1.59pm BST
Despite a weaker than expected US GDP number, the underlying picture is more mixed, said economist James Smith at ING Bank:
The US economy grew by less than expected in the second quarter, growing by just 1.2% quarter on quarter (annualised). That said, the underlying picture is on balance slightly more encouraging than this headline suggests. Consumption in particular was very strong, increasing by 4.2% quarter on quarter(annualised) and follows some solid retail sales data over the past few months. There was also a large drag from inventories, which shaved -1.16% from the headline, which given that this in the most part is simply noise, the underlying growth picture was probably closer to 2% in the second quarter.
However, business investment continues to provide some cause for concern...There were also a series of negative backward revisions to overall GDP, suggesting that trend growth has been slightly lower over the past year or so than previously thought.
Overall though, this release is probably fairly neutral for the Fed, with strong consumer activity balancing out with the fall in investment. Indeed, with recent evidence tentatively suggesting that the recent shortfall in job creation was a temporary blip and inflation gradually moving in the right direction, there is fairly minimal cause for concern regarding the domestic economic picture.
However, the Federal Reserve Open Markets Committee has got its eye firmly on “global economic and financial developments”, which we think refers to uncertainty following Brexit and forthcoming political developments in the US and Europe. Thus, whilst the domestic economic picture may be sufficiently strong for another hike, the Fed will likely maintain its current cautious (although broadly positive) stance in September and ahead of the US Presidential Election in November. That said, assuming the domestic economy continues to head in the right direction, then we think there is a strong likelihood of a rate hike in early 2017. We may see FOMC speakers trying to guide markets closer to this point over coming days and weeks.
1.52pm BST
Pointing out the US GDP figures were subject to revision, the Bureau of Economic Analysis, said:
The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures and exports that were partly offset by negative contributions from private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
1.46pm BST
Clearly an economy in need of higher rates... https://t.co/7cZWcXImIV
1.37pm BST
US GDP badly disappoints with 1.2% – USD slides https://t.co/BfrP6KNKA8 #forex, #forextrading
US Q2 GDP 1.2% is a big miss on consensus of 2.6%, but the market was already positioned down at 1.8% where the AtlantaFed tracker was
1.35pm BST
Further mixed signals from the US economy, with second quarter annualised GDP growth coming in at 1.2%, much lower than the 2.6% expected by analysts but up from the 0.8% seen in the first quarter.
The figures back up the Federal Reserve’s decision not to raise interest rates this week. And they may not necessarily rule out an increase later in the year although they do seen to make it less likely.
1.09pm BST
Ahead of US GDP data here are the expected openings on US markets:
US Opening Calls:#DOW 18417 -0.20%#SPX 2167 -0.09%#NASDAQ 4730 +0.22%#IGOpeningCall
12.15pm BST
Back with the markets, and European shares are trying to edge higher following the eurozone GDP figures, with Germany’s Dax up 0.37% and France’s Cac climbing 0.07%.
But the FTSE 100 has dipped 0.2%, not helped by a near 10% plunge in education group Pearson reported a bigger than expected 7% fall in half year sales and said it would cut 4,000 jobs as part of a restructuring programme.
11.52am BST
Ahead of the results of the latest European banking stress tests, one of the most troubled of a troubled Italian banking system is seeking a solution to its difficulties:
An eleventh hour rescue deal has been tabled for Italy’s Monte dei Paschi di Siena (MPS), the world’s oldest bank, as investors and pensioners alike brace for the result of an official assessment of its financial health.
European regulators release the results of a so-called stress test of MPS, Italy’s third largest bank, and 50 other banks across the EU which are being assessed after the close of US markets on Friday.
The results of the stress tests have already been sent to the banks but will only be made public at 9pm London time.
There is concern that an acute banking crisis in Italy, led by troubles at MPS but possibly other banks as well, could ignite European and global banking crises.
Related: Monte dei Paschi considers rescue bids as European banks await stress test results
11.24am BST
Domestic demand in the eurozone is likely to help offset any problems caused by the UK’s Brexit vote, said economist Marco Valli at UniCredit Research:
The high volatility of GDP data in the first half of the year probably mainly reflects temporary factors (supportive in the first quarter of 2016, negative in the second quarter), while the underlying growth trend seems to have remained reasonably steady, at least when looking at the most informative survey indicators.
Therefore, today’s data do not change the fundamental story. We expect signs of moderate slowdown to emerge in the coming months, mainly reflecting the Brexit fallout via the trade channel and, to a lesser extent, the confidence channel. However, the resilience of eurozone domestic demand on the back of improved fundamentals for consumption and investment is likely to provide a good buffer.
Data released today by Eurostat showed that the pace of quarter-on-quarter GDP expansion across the Eurozone slowed to 0.3% during the second quarter of 2016. This confirms Cebr’s view back in April that first quarter’s impressive 0.6% growth was yet another false dawn for the currency bloc. Importantly, today’s release refers to economic growth in the three months to June, ahead of the UK’s vote to leave the EU which is widely expected to negatively impact on the currency bloc. Cebr expects growth to weaken further over the remaining quarters of this year and next....
We maintain our view that monetary policy has largely reached its limits in terms of the support it can provide to the recovery and that it needs to be complemented by non-monetary stimulus measures in order to succeed. In that respect, this week’s decision to by-pass the rules of the Stability and Growth pact and not fine Spain and Portugal for breaching the 3% deficit threshold is a welcome move by the European Commission. Further flexibility, leniency, and initiative on other levers of economic policy, particularly among those economies that can afford it, will be key in ensuring a sustainable recovery for the Eurozone going forward.
10.40am BST
The eurozone GDP figures show the economy is still growing but inflation remains uncomfortably low, says Peter Vanden Houte at ING Bank. And the second quarter growth figure of 0.3% is likely to be revised, he adds:
After the strong growth in the first quarter (+0.6%), which was helped by some temporary factors like the mild winter weather, it was no surprise that there would be some pay-back in the second quarter.
The disappointing 0% growth in France, largely due to a decline in inventories, was one of the culprits behind the weaker Eurozone growth performance. Bear in mind though, that in a number of big member states, comprising Germany and Italy, GDP figures still have to be published, implying that today’s figure is prone to revision.
10.28am BST
The European Central Bank president Mario Draghi is probably pleased that eurozone inflation is creeping up, although it is still far shy of his 2% target. Alex Lydall, senior sales trader at Foenix Partners, said:
A subtle smile will likely creep across Mario Draghi’s face this morning as an uplift in eurozone CPI figures for July (0.2%) gives an element of breathing space which perhaps market participants were not expecting.
In what is now a post-Brexit era, little has been noted of the impact on the eurozone, rather focus has largely been on the UK, so solid GDP figures this morning and the inflation rise will give hope that the eurozone is (at least) starting this era on an improved status. Negative sentiment is rife and global impacts largely unknown at present, but as Draghi recently pointed out, the initial headwinds have been dealt with efficiently, and the rest remains to be unknown. One step at a time, but for now, measurable success is emanating from the eurozone.
ECB President Mario Draghi will be relieved to see the encouraging inflation data released today, which swiftly followed strong numbers from the two pillars of the eurozone, Germany and France.
Yet Draghi will know that hitting his own two per cent yearly growth target for the eurozone off the back of strong German and French economies alone will be difficult.
10.23am BST
The eurozone GDP figures do not really include any effects of the Brexit vote, of course. Dennis de Jong, managing director at UFX.com, said:
After a strong first quarter for eurozone GDP it comes as little surprise that second quarter growth has slowed. The effect of the UK’s Brexit vote hasn’t set in yet, although many will expect numbers to continue to slide.
We’ve already seen the Bank of Japan underwhelm the markets this morning with just a modest expansion of its stimulus programme, and it will be the Bank of England’s turn to announce its policy decision next week.
10.19am BST
There are also inflation and unemployment figures out from the European Union.
Eurozone inflation came in higher than expect in July, up 0.2% from 0.1% in June according to the initial estimate from Eurostat. It said:
Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in July (1.4%, compared with 0.9% June), followed by services (1.2%, compared with 1.1% in June), non-energy industrial goods (0.4%, stable compared with June) and energy (-6.6%, compared with -6.4% in June).
Eurozone CPI Estimate Y/Y (Jul) +0.2% versus +0.1% expected, previous +0.1% | Core Y/Y (Jul A) +0.9% versus +0.8% expected, previous +0.9%
The euro area seasonally-adjusted unemployment rate was 10.1% in June 2016, stable compared to May 2016 and down from 11.0% in June 2015. This remains the lowest rate recorded in the euro area since July 2011.
The EU28 unemployment rate was 8.6% in June 2016, stable compared to May 2016 and down from 9.5% in June 2015. This remains the lowest rate recorded in the EU28 since March 2009.
Eurozone Unemployment Rate (Jun) 10.1% versus 10.1% expected, previous 10.1%
10.10am BST
In the wider European Union, the 28 member states saw GDP rise by 0.4% quarter on quarter, down from 0.5%. Year on year, EU GDP came in unchanges at 1.8%.
10.02am BST
The eurozone economy slowed in the second quarter, but performed slightly better than expected.
GDP growth came in at 0.3% quarter on quarter, down from 0.6% in the first three months of the year but in line with forecasts.
9.58am BST
Oil continues to come under pressure on worries of a supply glut and slowing demand. On Thursday West Texas Intermediate - the US benchmark - entered bear market territory by falling 20% below its June high. Now Brent crude has followed suit:
Brent crude #oil enters bear market (down 20% from high for year) and drops below 200-day moving average #OOTT pic.twitter.com/qtuKk6avVl
9.40am BST
In the weeks leading up to the EU referendum, UK mortgage approvals fell to their lowest level since May 2015.
But lending to consumers rose at its fastest pace for nearly 11 years, according to new Bank of England figures.
9.11am BST
German retail sales for June seemed to have held up in the run-up to the UK’s referendum. Reuters reports:
German retail sales fell by 0.1 percent on the month in June but a stronger-than-forecast yearly rise suggested consumer spending, which is expected to drive growth this year, remains a pillar of support for the economy as foreign trade weakens.
The volatile indicator, which is often subject to revision, was in line with expectations in a Reuters poll for a 0.1 percent monthly drop, data from the Federal Statistics Office showed on Friday.
9.09am BST
France’s economy could weaken further after the Brexit vote, says ING economist Julien Manceaux:
French GDP growth slowed to 0.0% in the second quarter. This is in line with expectations that first quarter’s consumption rebound could not last without more signs of higher employment growth. Government actions to boost corporate investment seem to have been less effective in the second quarter while net exports remained the weak spot of the French economy. If employment growth fails to accelerate, the risks materializing from the Brexit shock could lead to further weaknesses in the second half of this year.
...It should be noted that the US and the UK were large contributors to growth last year, which helped limiting the negative net export growth contribution of 2015 to -0.3%. With the Brexit risk materializing and a weaker US dollar, this position will probably deteriorate further in the second half of the year.
After the Brexit shock, we have revised our GDP growth forecast downwards to 1.4% in 2016 after 1.2% in 2015, and to 1.1% in 2017. With no room for manoeuvre left as far as reforms are concerned, the French economy can only count upon the stimulus added by recent policies (lowering labour costs and giving investment tax breaks). We think this will not be enough to secure a stronger recovery path before the 2017 Presidential election, especially if employment growth does not accelerate strongly in the near term.
Once again, Spanish figures remain strong and GDP growth rate of 3.2% year on year leaves Spain as a solid leader among large Eurozone countries.
Looking at the economic situation, nearly everything seems to continue in the right direction...While the detail about GDP components is not available yet, we suspect consumption to be at the heart of the recovery, as households still benefited from the same cocktail of rising real earnings, decreasing unemployment and rebounding housing prices. The second good news of today is that the inflation rate continues to move towards the positive territory. The harmonized CPI went progressively from -1.2% year on year in April to -0.9% in June and -0.6% in July.
Looking at the political situation, nearly everything seems to go wrong. After two election rounds, no concrete solution is on the table and even if Rajoy would like to see a government in the beginning of August, it seems unlikely.
All in all, political turmoil has barely scratched GDP growth and job creation in the first semester and Spain has appeared more resilient than expected. The effect of Brexit and national political uncertainty can still suddenly come into play but with current tailwinds, GDP growth in 2016 is set to hover around 3%. However until the end of the year, slippages are possible, caused by political events be it in Barcelona or in Madrid.
8.48am BST
The French GDP figures could be a bad omen for the forthcoming eurozone GDP figures, says Capital Economics:
Stagnation in France's GDP in Q2 largely down to slower h'hold spending & suggests EZ Q2 GDP (10am BST) also weak. pic.twitter.com/xJLw5Auj7m
8.41am BST
Another warning about the UK property market - London in particular - in the wake of the Brexit vote, this time from estate agency Foxtons.
Related: Foxtons profits down sharply as London property market cools
8.34am BST
Despite a second election in six months during the second quarter, Spain’s economy still managed to show steady growth.
Spain’s GDP rose by 0.7% quarter on quarter between April and June, in line with expectations and up 3.2% year on year.
Spanish GDP (QoQ) Q2 P: 0.7% (est 0.70%; prev 0.80%)
-GDP (YoY) Q2 P: 3.20% (est 3.10%; prev 3.40%)
8.13am BST
Contrary to expectations, the FTSE 100 has fallen in early trading, down 14 points or 0.2%.
Barclays is leading the risers, up 4% after its results while British Airways owner International Airlines Group is down nearly 2% after it reported a lower than expected 4.7% rise in second quarter profit and said it no longer expected to grow 2016 profits by €900m as it had forecast in February.
8.05am BST
Ahead of the eurozone GDP figures, Unicredit analysts say they expect a modest expansion in the second quarter:
After a strong first quarter, GDP growth likely weakened in the second quarter of 2016: we forecast +0.3% quarter on quarter, with risks tilted to the downside. Hard data suggest that private consumption and construction investment slowed substantially, while the trade channel is unlikely to have picked up the slack. On the output side, industrial production lost traction.
7.53am BST
Back to the French GDP numbers, and in volume terms growth was flat in the second quarter after a 0.7% rise in the previous three months. Household expenditure fell sharply from 1.2% to flat, while imports dropped by 1.3% and exports declined by 0.3%.
Year on year, GDP grew by 1.4% compared to 1.3% previously but below forecasts of a 1.6% increase.
French GDP Q/Q (Q2 A) 0.0% versus +0.2% expected, previous +0.6% revised +0.7% | GDP Y/Y (Q2 A) +1.4% versus +1.6% expected, previous +1.3%
7.37am BST
Here are the forecasts for the European market open.
Our European opening calls:$FTSE 6734 up 12
$DAX 10336 up 61
$CAC 4447 up 27$IBEX 8526 up 47$MIB 16618 up 95
7.35am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The eurozone economy will be in the spotlight today with growth figures for the second quarter - the run up to the UK’s Brexit vote - expected to show a slowdown. But bear in mind that UK second quarter GDP ended up being better than forecasts despite the concerns about the referendum.
Not quite what traders were looking for...#BOJ disappoints and markets react: #USDJPY down 2% #Nikkei down 1.1%
Related: Bank of Japan blames Brexit as it unleashes more monetary stimulus
The Bank of Japan has eased policy but it hasn’t impressed markets...The Japanese yen has rallied against every major currency following the BOJ announcement, taking USD/JPY down 200 pips to 103. Further declines for another test of the key 100 level appear likely. It was a missed opportunity for the BOJ to have done more at its first meeting after Prime Minister Abe was re-elected with a new mandate to expand Abenomics.
Even the Japanese stock market, which is the single biggest beneficiary of the policy change saw shares drop, with the Nikkei choppy before falling nearly 1%. The shift into the yen, typically perceived as a haven asset will have repercussions on demand for risky assets including European stocks.
SuperFriday! Lots of very important data coming from Europe tomorrow. {BI ECON} on the terminal for timely analysis. pic.twitter.com/Fdx0nmCXOa
In Q2 2016, French GDP levelled off: In Q2 2016, GDP in volume terms* was stable : 0.0% after +0,7% in Q1.
... https://t.co/VlHeZGzf2c
Related: Hinkley Point C in doubt after British government delays approval
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