And finally.... the US stock market has closed in the red, following Europe’s lead.

Despite the Fed’s newfound dovishness, the Dow Jones industrial average finished 140 points lower at 25,746.

The broader S&P 500 shed 0.3%, while the Nasdaq was a teensy 0.1% higher when the closing bell rang.

On that note, goodnight! GW

Financial markets usually perk up when central banks turn dovish, as it offers the chance of more easy money and higher asset prices.

But they may also worry that this dovishness means tougher times ahead. Neil Birrell, Chief Investment Officer, Premier Asset Management, explains why the Fed may make some investors anxious:

“There was no surprise in the Fed’s decision to leave its interest rate unchanged; as it stands there is unlikely to be any change this year. However, the longer term outlook for rates is interesting; only one increase is being signalled in 2020, which is less than expected.

“This could well have investors fretting over economic growth and is likely to be negative for the dollar, but loose monetary policy has driven equity and bond markets for the last decade and that remains in place. In the short term those markets will have some support, but attention will turn to weaker growth and the peak of the cycle approaching.”

Jerome Powell wraps up his press conference, by re-reiterating that the Fed is in no rush to change monetary policy.

Investors are reacting - by predicting that American interest rates will head DOWNWARDS next year (if not earlier...)

US interest rates may have reached the peak of the current cycle, predicts Nick Maroutsos, Co-Head of Global Bonds at Janus Henderson.

“Our core view is that the Federal Reserve will keep rates on hold for the balance of 2019. We believe that if the Fed is done hiking, other central banks will follow suit. Furthermore, it is our expectation that the next move by the Fed will be to cut interest rates.

“The global environment is fraught with heightened geopolitical risk and threats to economic growth, including – but not limited to – U.S.-China trade tensions, European political challenges and Brexit negotiations.

Q: How worried are you about Brexit?

Jerome Powell says the Fed is watching Brexit carefully, and hopes it can be resolved in an orderly way.

America’s financial system is prepared for the full range of outcomes, he adds, and have enough capital to cope.

Powell is now explaining that inflation remains low, a good reason not to raise interest rates.

Jay Powell also warns that America’s debt mountain needs reining in.

Our debt can’t grow faster than our economy indefinitely, the Fed chair says sternly, adding that “We will have to deal with it eventually”.

Powell also insists that “deficits matter”; possibly a veiled criticism of the MMT movement.

Q: You’ve gone from predicting two rate hikes this year to none, so is a rate cut possible?

Powell reiterates that the Fed will be patient before doing anything.

Q: Why are your growth forecasts so much gloomier than the White House’s ones?

Powell ducks a direct comparison, speaking instead about the need to raise labour force participation across America and boost productivity too.

“There’s no resolution of Brexit, there’s no resolution in the trade talks”, Powell adds, explaining why the Fed sees no reason to move interest rates anytime soon.

Another important point: The Fed is now planning to unwind its stimulus programme more slowly.

From May, it will slow the pace of its bond sales (selling assets bought after the financial crisis), and will stop altogether in September.

Financial blogger Frances Coppola says it’s another dovish move.

Fed chair Jerome Powell is speaking to reporters now, explaining today’s decisions.

He says the US economy is in a good place, with a strong jobs market.

But there are issues in the global economy that mean the Fed is taking a ‘wait and see’ approach.

Donald Trump has criticised the Fed repeatedly for raising interest rates in 2018, and (previously) planning more in 2019.

He’ll be delighted to see that a growing band of investors now predict the next move will be a CUT.

Some reaction to the new, lower, growth forecasts:

The Fed has also trimmed its growth forecasts, which helps explain why it no longer expects to raise borrowing costs this year.

• 2019: 2.1%, down from 2.3% in December
• 2020: 1.9%, down from 2%
• 2021: 1.8% (unchanged)

Economics professor Justin Wolfers points out that the Fed still has an optimistic view of the US economy:

Kevin Doran, chief investment officer at AJ Bell, is rather scathing about the Fed’s dovish new interest rate forecasts -- saying the bank has caved into pressure from Donald Trump.

In an email titled “Fed continues to kowtow to markets (and Trump)“, he says:

“It’s clear now that, despite the initial bravado accompanying Jay Powell’s appointment, the Fed - just like every other major central bank - has found itself backed into a corner on policy. Despite protestations to the contrary, it seems evident that the Fed is kowtowing to stock market reaction to the prospect of higher interest rates and increasing levels of political interference.

“It is all too obvious that nothing of significance is likely to happen on rates until such time that the asset price inflation being stoked by the current economic backdrop seeps its way into ‘real world’ inflation on the high streets. Maybe we should cut out the middle-man and leave Trump to announce rates on Twitter?”

Wall Street is applauding the Federal Reserve’s new guidance.

The Fed’s prediction that rates will stay on hold this year is pushing shares higher in New York. It’s also weakening the dollar.

Here’s Reuters’ take on the pound’s travails today:

Sterling fell on Wednesday after British Prime Minister Theresa May’s request to delay Brexit until June 30 faced resistance from parts of the European Union.

With no consensus in Britain’s parliament over how to leave the EU, May was forced to seek an extension from the EU beyond the scheduled departure date of March 29.

The delay requested is shorter than some in the market had been expecting and the prime minister said a no-deal Brexit was still possible, keeping sterling traders on edge.

France then threatened to reject May’s request unless she can guarantee to get her twice-rejected departure plans through parliament.

British media reported that May could make a statement later on Wednesday. Downing Street had no comment on the rumours.

Markets have largely priced out the chances of a no-deal Brexit but uncertainty about how and when Britain will leave the EU have capped any rally in the pound.

A European Commission document seen by Reuters said the Brexit delay should either be several weeks shorter, to avoid a clash with European elections in May, or extend at least until the end of the year, which would oblige Britain to take part in the elections.

Viraj Patel, an analyst at financial advisory firm Arkera, said the best hope for sterling “is that May’s deal gets over the line” as it would lower uncertainty.

The pound dropped to as low as $1.3147 as investors worried about the EU opposing May’s extension request. It fell nearly 1 percent on the day before recovering to around $1.3170.

It had been trading around $1.3220 before May addressed parliament, having rallied to a 9-month high of nearly $1.34 last week.

Against the euro, sterling fell 1 percent to 86.39 pence, the lowest since March 12.

An extension, which will need approval from EU member states, leaves the Brexit divorce uncertain, with options including leaving with May’s deal, a longer delay, a disruptive exit or even another referendum.

Market volatility gauges in the pound remained firm even as other gauges, such as one-month euro volatility indexes, fell.

“Until some clarity emerges, we do not advocate taking directional views on sterling and advise hedging downside risks, but we note that sterling has tended to react positively to events that point to a substantial delay,” UBS strategists said.

British government bond yields also fell, with the 30-year gilt yield hitting its lowest since September 2017 after May spoke to parliament.

Earlier, official data showed British inflation ticked up last month but stayed close to January’s two-year low. As with most economic data releases, the numbers had little impact on a pound preoccupied with Brexit headlines.

As if to back up Prof Milas’s point, the pound has just bounced back over $1.32 as European Council president Donald Tusk spoke in Brussels.

Tusk told reporters that a short Brexit delay should be possible, but only if MPs back the PM’s Withdrawal Agreement.

Tusk also said that Europe can’t give up seeking a positive solution on Brexit (before ruling out reopening the current deal)

Shares in UK housebuilders have taken a thump, since Theresa May announced she was only seeking a short Brexit extension.

Persimmon has slid by 3.6%, with Taylor Wimpey and Berkeley Group both losing 3%.

Catherine McGuinness, policy chair at the City of London Corporation, hopes the EU helps the UK avoid the “catastrophic own goal” of a no-deal Brexit.

We urge the EU to agree to an extension. But even if this is granted, it should not simply paper over the cracks as we risk facing another cliff-edge just around the corner.

“More than ever, politicians on both sides of the Channel need to be pragmatic and co-operate in order to find a long-term solution to the current impasse. We cannot continue driving down this road to nowhere.”

Andy Scott, associate director at risk management consultancy JCRA, says today’s Brexit developments have spooked some investors:

Theresa May formally requested an extension to the Brexit process until June 30 and ruled out a longer delay. The EU Commission said that this would be legally and politically difficult, suggesting either a short delay until May 23, or until at least the end of 2019.

“This latest differing on views comes at a time where the EU and many UK MPs are increasingly frustrated with Theresa May’s uncompromising approach to Brexit. While her spokesman says this shows the strength of her resolve and determination to deliver Brexit, it increases the risk of the UK crashing out of the EU next week (though still unlikely) and that Theresa May is forced out of Downing Street (growing more likely).

“The market became very optimistic last week, when hard Brexit risks had all but disappeared after the UK parliament rejected a no-deal outcome. This lead to Sterling reaching its highest level in almost a year. The market may have to reassess the no deal risk as without even short a pier to walk on to, the cliff edge remains a real danger! We expect GBP to remain very volatile in the remaining days until the current deadline of March 29 as the market continues to react to Brexit headlines.”

Here’s Hamish Muress, currency analyst at OFX, on the pound’s wobble (it’s still down a whole cent against the dollar).

“The pound has continued to tumble today as the conflict between the European Union and Theresa May over the length of the Brexit extension has come to the fore. Reports that the EU are already finding the date of June 30th difficult to swallow has seen investors’ confidence in Theresa May’s current approach plummet.

How likely is she to get further concessions out of the EU at this stage?

Despite the House of Commons rejecting the notion of a ‘no deal’ Brexit last week, there is still the possibility of the UK accidentally crashing out of the EU next week, which could mean further significant losses for the pound”

Here’s my colleague Philip Inman on the slowdown in the UK housing market:

House prices grew at the slowest rate since 2013 in January, according to official figures that signalled the UK was heading later this year for the first fall in property values since the financial crash.

Average house prices in the UK increased by 1.7% in the year to January 2019, down from 2.2% in December 2018 and 5.1% in October 2017, the Office for National Statistics said.

If the trajectory of sliding prices over the past two years continues, the UK is expected to suffer its first fall in prices since the post-crash property slump of 2011 before the end of this year.

The pound is dropping further, as Theresa May tells MPs that she is seeking to extend Brexit until 30 June.

Sterling has now lost almost three quarters of a cent, dipping below $1.32..

That suggests traders are disappointed the government isn’t seeking a longer extension, and concerned that Britain could yet crash out of the EU.

Here’s the letter which the PM has sent to Donald Tusk.

Our Politics Live blog has all the details:

The CBI’s monthly survey of UK factories shows how activity and output has slowed in the last few months.

But as you can see, industry actually held up well after the EU referendum -- partly due to the weaker pound helping exports.

Nicole Sykes of the CBI explains why UK bosses are in despair over Brexit:

Potential first-time buyers will be pleased to hear that house price growth is cooling.

But after several years of housing inflation, homes will still be unaffordable to many....

House prices could suffer sharp falls if Britain crashes out of the EU without a deal, predicts economist Howard Archer.

He writes:

• A longer delay to Brexit could very well see house prices stagnate over 2019 or fall slightly due to persistent uncertainty
• If the UK ultimately leaves the EU without an approved Brexit “deal”, house prices could fall by around 5% in 2019 amid heightened uncertainty and weakened economic activity

Brexit uncertainty is hurting London’s housing market too, says Mark Harris, chief executive of mortgage broker SPF Private Clients:

London continues to see the largest annual price fall as those worried about the Brexit fallout err on the side of caution.

That said, the year has got off to a remarkably good start on the lending front despite ongoing political uncertainty. Clearly, some people have had enough with situations they can’t control and are getting on with their lives

John Goodall, CEO of buy-to-let specialist Landbay, reckons potential buyers are fleeing London in search of cheaper houses.

“House price growth is off to a very slow start for the year, echoing December’s stagnant figures and reaching the lowest annual rate since June 2013. However, problems with affordability and supply remain.

At a regional level, price rises in London continue to lag behind the likes of the East Midlands and East Anglia, a sign that demand in the capital is cooling as many buyers migrate away in search of something more affordable.

The rise in UK inflation is a small blow to households, as it erodes real wages (reminder, basic pay is rising by 3.4%).

This chart shows how food and alcohol were the main culprits. According to the ONS, bread, cereal and vegetables all pushed inflation up.

Computer games (part of the recreation category) also pushed the cost of living higher.

As you can see, London’s housing market is a lot weaker than the rest of the country:

There’s also clear signs of a slowdown in recent months:

It appears that rising food and alcohol costs helped to push UK inflation up from January’s two-year low.

The Office for National Statistics says:

Rising prices for food, alcohol and tobacco, and across a range of recreational and cultural goods produced the largest upward contributions to change in the rate between January and February 2019.

The largest, offsetting, downward contribution came from clothing and footwear, with prices rising between January and February 2019 but by less than between the same two months a year ago.

The pound is dropping against the US dollar, now down almost half a cent at $1.3226.

Traders are getting jittery about the chances of the UK getting a Brexit extension, and this sort of thing isn’t helping!

A flurry of takeover action has driven shares in UK satellite operator Inmarsat up 16%.

Inmarsat has told the City last night that it’s talking to a private equity-led consortium about a $3.3bn cash deal.

This is the third take-over approach in around a year for Inmarsat, which offers mobile and internet services via a network of satellites orbiting the globe.

After hitting a five-month high yesterday, European stock markets have dropped back this morning.

German pharmaceuticals firm Bayer is the region’s biggest faller, down 12% after a US court ruled that its glyphosate-based Roundup weed killer caused cancer.

Conner Campbell of SpreadEx blames those trade jitters too:

The reason for Europe’s red start is the same as what gave the Dow Jones a headache on Tuesday. Namely a Bloomberg reporting suggesting China are pushing back on some US trade demands, despite Trump’s insistence that the two countries are making progress.

Mining companies are under pressure this morning, as trade war worries mount again.

Copper miner Antofagasta is leading the selloff, down 4.2%, followed by Rio Tinto (-3.3%), Glencore (-2.9%) and Anglo American (-2.2%).

This has pulled the FTSE 100 down by 8 points, to 7315.

Investors are concerned by those reports that talks between Washington and Beijing are struggling.

Neil Wilson of Markets.com says:

The deadly duo of Lighthizer and Mnuchin are heading to China next week, with the aim of sealing a deal by the end of the month. But there are still a large chasm between the two sides.

Shares in Kingfisher have jumped 1.5% at the start of trading, making it the best-performing member of the FTSE 100.

Kingfisher’s latest financial results, also just released, help explain why it’s looking for a new CEO.

Like-for-like sales fell by 1.6% in the last year, helping to drive statutory earnings down by over 50%.

Underlying pre-tax profits down 16% due to weakness in Castorama France and losses in Russia & Romania.

Soon-to-be former CEO Véronique Laury said:

“During the year, the UK, Poland and Brico Dépôt France performed well, leveraging the benefits of our transformation. However, Castorama France has been disappointing and we are implementing a clear plan to sustainably improve its performance.

Anxiety over the US-China trade talks is building again today.

Yesterday, Bloomberg reported that talks between the two sides had soured, with China refusing to accept some US demands.

They said:

Chinese officials have shifted their stance because after agreeing to changes to their intellectual-property policies, they haven’t received assurances from the Trump administration that tariffs imposed on their exports would be lifted, two of the people said on condition of anonymity.

Beijing has also stepped back from its initial promises over data protection of pharmaceuticals, didn’t offer details on plans to improve patent linkages, and refused to give ground on data-service issues, one person familiar with the U.S.’s views said.

This is fuelling concerns that the trade war could escalate further, and lead to even more tariffs being imposed on exports between the two countries.

According to the Wall Street Journal, top US officials including Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will fly to Beijing next week for fresh talks....