Thursday, March 31, 2016

BBC News - Energy price slump keeps eurozone in deflation

EurosImage copyright Images
Consumer prices in the eurozone fell for the second month running in March thanks again to falling energy prices.
Prices were 0.1% lower than a year ago.
The figure was a small improvement on February, when deflation was running at 0.2%, but it maintains pressure on the European Central Bank (ECB) to act further to boost prices.
Deflation can be damaging for economies, particularly if consumers put off buying products in the belief that prices will fall further.
The official figures, from the Eurostat agency, showed energy prices were 8.7% down on a year ago.


The ECB is charged with keeping inflation close to, but below, 2%.
Core inflation, which excludes energy prices, was running at 0.9% in March, slightly above February's 0.8%, but still well below the ECB's target rate.
Earlier this month the central bank increased its effort to boost economies of the eurozone.
The ECB cut its main interest rate from 0.05% to 0% and cut its bank deposit rate, from minus 0.3% to minus 0.4%.
The bank also expanded its quantitative easing programme from €60bn to €80bn a month.
It hopes those moves will encourage banks to lend

Wednesday, March 30, 2016

Bloomberg News - London Prime-Home Values Fall on `Brexit' Fears, Stamp Duty Hike

Home values in London’s best districts fell for the third consecutive quarter as financial-market turmoil and the risk that the U.K. may vote to leave the European Union damped demand, according to broker Savills Plc.
Properties in neighborhoods defined as prime central London declined 0.8 percent in the first three months of the year, Savills said in a statement on Wednesday. Values probably won’t rise this year, according to Lucian Cook, the broker’s head of residential research.
Home sales, which have slowed since the government increased stamp-duty sales tax for the most expensive properties in 2014, will continue to suffer as potential buyers await the outcome of a referendum in June to determine whether Britain will withdraw from the European Union. Such a move that could cause companies to cut investment and relocate workers from London.
“Unlike other parts of the London housing market, the prime markets remain fairly price sensitive and increasingly dominated by needs-based buyers,” Cook said. “Given historic levels of price growth, the increased tax burden and political uncertainty stemming from the pending mayoral election and EU referendum, our view is that we are unlikely see any price growth over the course of 2016 as the market continues its adjustment.”
Prices in London’s best neighborhoods, including Belgravia, Chelsea, Knightsbridge and Mayfair, have surged 17.6 percent in the last five years and are expected to rise 21.5 percent by the end of 2020, according to Savills. Values have dropped 6.7 percent from the peak in the third quarter of 2014. The government in December of that year changed stamp duty sales tax so it escalates to 12 percent on every pound a buyer spends above 1.5 million pounds.
Prime home prices across all of London were down 0.3 percent in the first quarter, marking a 1.2 percent decline since the 2014 peak.

Explore Housing Prices in London

Tuesday, March 29, 2016

BBC News - US economic growth revised upward

The US economy grew at an annualised rate of 1.4% in the fourth quarter of 2015, according to official figures.
US shopper
The US Commerce Department revised its fourth quarter GDP to upward from an initial estimate of 0.7%.
Overall, the US economy is estimated to have grown at a rate of 2.4% for all of 2015.
One reason for the revised figure was greater consumer spending than officials initially thought, boosted by an improving labour market.
Analysts had expected the fourth quarter growth rate to remain unchanged from the last estimate of 1%.
"It's especially good that we saw a boost in consumption, however we are only talking about 1.4% growth, which is still anaemic compared to the 3.5% we would like to see," said Dan North, chief economist at Euler Hermes North America.
"The economy is still running in low gear," he said.
Increased employment has helped to slowly boost wages and housing prices, while low oil prices have increased discretionary spending by US households.
The stronger growth rate could increase the chances of an interest rate hike when the Federal Reserve meets in April. The central bank left rates unchanged at its meeting in March, saying the slowing global economy raised risks for the US market.
US corporate profits dipped 11.5% for the fourth quarter compared to the same October through December period in the previous year.
Companies were hurt by low oil prices, with some industrial and petroleum linked companies forced to cut their workforces or file for bankruptcy.

Friday, March 18, 2016

Bloomberg News - Osborne Faces More Criticism Over U.K. Budget-Surplus Target

U.K. Chancellor of the Exchequer George Osborne came under further criticism from economists for pegging his policies to a legally-binding fiscal target to balance the books, calling his economic credibility into question.
A day after the chancellor delivered his eighth budget, the independent Institute for Fiscal Studies criticized the plans for breaking two of Osborne’s three principal rules and placing undue importance on his goal of achieving a 10 billion-pound ($14.4 billion) surplus by 2019-2020.
“Whether or not he gets into surplus in 2019-2020 is economically irrelevant,” IFS Director Paul Johnson told a news conference in London Thursday. “If the surplus isn’t gone by 2020, it will be very nearly gone unless we have some dreadful economic news.”
In his budget on Wednesday, Osborne unveiled forecasts that allowed him to meet his legally binding commitment to deliver a surplus by the end of the decade. Facing the loss of billions of pounds of tax revenue because of downward revisions to growth projections, the chancellor rescheduled capital investment, promised post-dated spending cuts and shifted a one-time boost to corporation-tax receipts into 2019. The move led to accusations by some economists he was resorting to accounting tricks to meet his own targets.
While predicting a 10.4 billion-pound surplus in 2019-20, the Office for Budget Responsibility, which issues the U.K.’s official forecasts, assessed the chance of Osborne getting the national accounts into the black at all at slightly above 50 percent, “given the size and distribution of past forecasting errors.”
A shift from a budget deficit in 2018-2019 to a surplus in 2019-2020, as forecast by the OBR, would be equivalent to 1.5 percent of gross domestic product. That would make it one of the biggest such moves since World War II, IFS economist Gemma Tetlow told reporters.

Under Pressure

Osborne has already failed on two of three self-imposed targets. Instead of falling as promised, debt is set to rise as a share of GDP this year. Meanwhile, a decision to ditch controversial cuts to income top-ups for the low-paid forced him to breach his cap on welfare spending. That puts him under pressure to meet his budget-surplus target. Whereas the fiscal charter requires him only to balance the books by the end of the decade, Osborne has pledged to go further with the 10 billion-pound objective.
“The surplus rule really is the last rule standing,” said Johnson. “He is really running out of wriggle room” to deliver on the 10 billion pounds, he said.
Speaking a few hours earlier, Osborne rejected accusations his figures did not reflect a true picture of Britain’s fiscal trajectory.
“If you hold to the course, if you deliver those plans, if the economy grows as expected, then we will have a surplus towards the end of the Parliament,” he told BBC Television. “We wouldn’t need anything extra like small spending cuts or more tax increases.”
The IFS noted austerity had now been extended to 2020-2021, as opposed to the end of the decade. The chancellor said a deteriorating economic picture had forced him to adjust his plans.
“In the space of four or five months, things have got materially worse in the global economy,” Osborne told BBC Radio 4. “As a result, I have made adjustments to my plans to make sure that debt does fall as a proportion of national income in the coming year. I’ve made adjustments to my plans to make sure that we are going to live within our means and get that surplus.”
The OBR estimated his latest policy measures will raise 13.7 billion pounds in 2019-20 and 13.1 billion pounds in 2020-21. Without them, the public finances would have been in deficit after cheaper debt costs failed to make up for the loss of tax revenue.
“This really is pretty egregious accounting gimmicks and smoke and mirrors,” said Jonathan Portes, an economist at the National Institute of Economic and Social Research. "If you’re going to do this, why have a fiscal target at all. It means you have no credibility.”

Thursday, March 17, 2016

Reuters News - Dollar swoons as Fed scales down rate hike forecasts

The dollar tumbled on Thursday, lifting world shares to their highest level of the year, after the Federal Reserve scaled down its own expectations of the number of U.S. rate hikes likely over the next nine months.
The Fed, via its 'dot plot' system, which charts what rate moves policymakers expect, effectively chopped those forecasts in half, from four hikes to two for the year.
It was a signal that triggered a slump in the dollar and a surge in risk appetite that rolled from Wall Street to Asia and then into Europe, where London .FTSE, Frankfurt .GDAXI and Paris .FCHI opened 0.5 to 0.8 percent higher and bond yields fell. [GVD/EUR]
Commodity markets cheered too. Brent oil jumped over $41 a barrel as a number of large producers also nailed down a date for an output freeze meeting. Industrial metals such s copper CMCU3 saw their biggest rise in two weeks. [MET/L]
But it was the currency markets that really grabbed the attention as the dollar sank to one-month and three-week lows against the euro EUR= and yen JPY=, and emerging market and oil and commodity-linked currencies surged. [FRX/]
"Risk is thoroughly on," said Societe Generale global head of currency strategy Kit Juckes. "All the chit chat was that they (the Fed) were going to be hawkish, and they weren't."
"The dollar is obviously the loser, but it's good for shares, it's good for oil, and good for debt too, I would say."
Europe's .FTEU3 solid start saw MSCI's 46-country All World share index .MIWD00000PUS climb over 1 percent on the day to reach its highest since Jan 4. the opening trading day for most major markets of the year.
For emerging markets, the news was even better, as a more than 2 percent surge took the volatile asset class's stocks MSCIEF to their highest since mid-December as currencies and debt rallied too.
One outlier was South Africa, though, ahead of a meeting of its central bank after another week in which the rand has been hammered by political worries.
The Malaysian ringgit MYR=, Indonesian rupiah IDR= and South Korean won KRW= all rose more than 1 percent against the dollar as a clutch of Asian currencies hit multi-month peaks. [EMRG/FRX]
"In the past, when the dollar weakened after the Fed was dovish, the dollar weakness lasted for maybe about three to four months," said Tan Teck Leng, FX strategist for UBS chief investment office Wealth Management in Singapore.
"But is this the end of the strong dollar? We don't think so," he said, adding that the Fed could start sounding hawkish again around June and July to pave the way for a rate rise, possibly in September.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS climbed to a two-month high as Australian stocks added 1 percent, South Korea's Kospi .KS11 rose 0.9 percent and Shanghai .SSEC was up 1 percent.
The jump in the yen meant Japan's Nikkei .N225 lost out though, as it closed down 0.2 percent.
World growth concerns, particularly regarding China, have rattled markets through much of this year, and this was seen to have influenced the Fed's shift in position as it cited the "global risks" facing the U.S. economy.
The dollar index slipped to a one-month low of 95.038 .DXY as European trading settled, and the euro was eyeing $1.13 EUR= for the first time since mid-January as the dollar also slid below 112 yen JPY=.
Commodity-linked currencies rose strongly as products such as oil and iron ore soared after the Fed's decision.
The Australian dollar, which had already jumped 1.2 percent overnight, caught a fresh lift from an upbeat local jobs report and rose to an eight-month high of $0.7620 AUD=D4.
The Canadian dollar was firm at just under C$1.30 to the U.S. dollar CAD=D4 after rallying nearly 2 percent to a four-month peak of C$1.3094 overnight.
U.S. crude oil rose to a three-month peak of $39.54 a barrel CLc1 after surging nearly 6 percent overnight. Brent LCOc1 was up 95 cents at $41.27 a barrel. [O/R]
Three-month copper on the London Metal Exchange CMCU3 traded up 1.5 percent at $5,065 a tonne. A weaker greenback tends to favor commodities traded in dollars by making them cheaper for non-U.S. buyers. [MET/L]

(Reporting by Marc Jones; Editing by Kevin Liffey)

Wednesday, March 16, 2016

BBC News - Budget 2016: George Osborne prepares Budget 'for long term'

George OsborneImage copyright
Image captionIt will be George Osborne's eighth Budget as chancellor
George Osborne will set out £4bn in extra spending cuts and announce investment in the UK's infrastructure when he presents his Budget to MPs.
The Budget will "choose the long term" the chancellor will say, warning that the "storm clouds are gathering again".
His eighth Budget will include a £1.5bn education package to turn all state schools in England into academies and allow some to open later in the day.
Shadow chancellor John McDonnell called for an end to "cruel cuts".
Mr Osborne will deliver his Budget at 12:30 GMT, after Prime Minister's Questions, setting out the latest economic forecasts and the state of the public finances.
In his biggest Parliamentary test to date, Labour leader Jeremy Corbyn will deliver the Opposition's response.
The chancellor is expected to say that the UK is economy "strong" but warn that "storm clouds are gathering".
"Our response to this new challenge is clear. A Budget where we act now so we don't pay later," he will say, with a pledge to "put the next generation first".
BBC political editor Laura Kuenssberg said people might wonder where the "sunshine chancellor" has gone.
Mr Osborne had "time and again" said the government had "fixed the roof while the sun was shining but "today the metaphors will feel very different", she added.
Mr Osborne's statement comes with three months to go before the UK votes on its EU membership. The government is campaigning to remain in the EU, and the chancellor will be keen to avoid antagonising either side in the debate with his announcements.

Budget 2016 on the BBC

The TreasuryImage copyright
A special edition of the Daily Politics presented by Huw Edwards starts at 11:30 GMT on BBC2 and the BBC News Channel, also including Prime Minister's Questions at noon. BBC Radio 5 Live Daily will also cover all the action. For full coverage online please visit the BBC's Budget 2016 in-depth section.

As well as eliminating the deficit by 2019-20, the chancellor has set himself a target of having debt falling as a share of GDP every year.
Sluggish growth since his November Autumn Statement - when cuts to tax credits and police budgets were watered down - could mean more spending cuts and tax rises are needed to achieve his surplus target.
He has already warned that global uncertainty and the state of the world economy means the UK has to "act now rather than pay later" in making further spending reductions.
The £4bn extra cuts would be "equivalent to 50p in every £100" of public spending by 2020, which was "not a huge amount in the scheme of things", he has said.
Media captionRoss Hawkins looks at what to expect from the 2016 budget
Suggested tax rise options include a claim by the insurance industry that another increase in Insurance Premium Tax is planned, while capitalising on low oil prices to raise fuel duty would be opposed by many Conservative MPs.
On the investment side, Mr Osborne is also set to commit £300m for transport projects, with the government funding the start of work on the Crossrail 2 rail line and new High Speed 3 link across the north of England.
Almost half of the transport money committed was announced in the Autumn Statement.
The government has also announced a 'Help to Save' scheme under which would give low-paid workers a top-up if they put savings aside.

No longer the 'lucky chancellor'?

11 Downing StreetImage copyright

Analysis, by BBC political editor Laura Kuenssburg

If George Osborne was the "lucky chancellor" in November when the Treasury found an extra £27bn down the back of the Commons green benches, what will he be today?
How does he respond practically and politically to the fact that the numbers he based his plans on at the Spending Review have turned out to be wrong?
George Osborne is going to have to fess up - the pages and pages of numbers the independent Office for Budget Responsibility provided as the basis of his sums won't add up any more.
We know too - as he told me a few weeks ago - that means extra government cuts are likely, probably an additional £4bn billion a year by 2020.
Jeremy Corbyn will be responding to the chancellor's speech, but the opposition that really troubles Mr Osborne right now is those on his own benches - and if he's not the "lucky chancellor" any more, what they'll be calling him by the end of today.

Under the education package of reforms, every state school in England will have to become an academy - meaning they are independent of local authority control - by 2020 or to have a plan in place by that date to do so by 2022.
The move would end the century-old role of local authorities as providers of education.
Schools will also be able to bid to be allowed to change their hours to suit their pupils' needs.
Justice Secretary Michael GoveImage copyright
Image captionJustice Secretary Michael Gove arrives for the pre-Budget cabinet meeting
Home Secretary Theresa MayImage copyright
Image captionHome Secretary Theresa May also makes her way to Downing Street
Education Secretary Nicky MorganImage copyright
Image captionEducation Secretary Nicky Morgan
There have also been calls for tax cuts, with suggestions of an increase in the level at which the higher rate of tax kicks in, while Business Secretary Sajid Javid told MPs this week there were "lots of reasons to cut beer duty".
Mr McDonnell called for "straight talking" from the chancellor.
He said: "Only three months ago he came to the House Commons and said our economy was in robust health.
"Now he's coming to the House of Commons to tell us what serious problems we're facing. I want no more press releases about infrastructure projects or housing projects that aren't delivered and aren't properly funded."
The shadow chancellor told his opposite number to "stop targeting groups within our society" saying women and disabled people were being unfairly hit by cuts.
"I want him to tell us how he's going to prepare our economy for the long-term future," he added.

Tuesday, March 15, 2016

BBC News - EU Referendum: CBI survey suggests most members favour staying in

CBI finds businesses want Britain to remain a member of the EUImage copyrightLEON NEAL/AFP/Getty Images
Britain's biggest business lobbying group says 80% of members questioned in a survey want to stay in the EU.
The CBI said the majority of nearly 800 firms taking part felt Britain remaining in Europe was "better for business, jobs and prosperity".
But the group said it would not align itself with either side of the debate.
Vote Leave chief executive Matthew Elliott said: "It's welcome news that the CBI has seen sense and won't be seeking to campaign in the referendum."
Carolyn Fairbairn, director-general of the CBI, said: "The message from our members is resounding - most want the UK to stay in the EU because it is better for their business, jobs and prosperity.
"Walking away makes little economic sense and risks throwing away the many benefits we gain from being part of the EU."
The survey of 773 companies questioned by polling company ComRes found that large organisations within the CBI were more likely than small and medium-sized companies to want to remain in the EU.
Overall, 5% of businesses that took part in the survey thought that it would be in their company's best interests for Britain to leave Europe while 15% were unsure.

'Respect and reflect'

Ms Fairbairn said the CBI would now set out the economic case for the UK remaining in Europe ahead of the referendum on 23 June but said that it would not align itself with any side in the campaign, adding: "It is not our place to tell people how to vote."
She added: "A minority of members want to leave the EU. We will continue to respect and reflect their views and campaign for EU reform to get a better deal for all businesses.
"However, most CBI members are unconvinced that alternatives to full membership would offer the same opportunities. We have yet to see those who seek to leave the EU present a compelling vision of what this would mean for jobs and growth."
John Longworth, director general of the British Chambers of Commerce (BCC), recently resigned after being suspended for saying the UK's long-term prospects could be "brighter" outside the EU.

'Voice of Brussels'

The BCC said Mr Longworth had breached the group's non-partisan position on the referendum. It had decided it would not campaign for either side in the forthcoming UK referendum on EU membership.
Vote Leave said the CBI had "consistently misrepresented the views of business on the issue, acting as little more than the Voice of Brussels".
It said the survey was too skewed in favour of big companies to be seen as reflective of British business attitudes towards the EU, pointing out that just 0.1% of UK businesses had more than 250 employees.