Graeme Wearden 

Wall Street hits another record high as US spending jumps – as it happened

Rolling coverage of the latest economic and financial news as European businesses grow gloomier, but US growth figures cheer investors
  
  

Traders work on the floor at the New York Stock Exchange (NYSE) in New York
Traders work on the floor at the New York Stock Exchange (NYSE) in New York Photograph: Brendan McDermid/Reuters

And finally, shares in Alphabet are dropping in after-hours trading after the owner of Google released its financial results.

Alphabet has missed revenue estimates, posting a 17% rise in sales to $36.3bn, below forecasts of $37.3bn.

Shares are down 5% - but of course it’s too late to move the Wall Street indices today...

On that note, goodnight! GW

Wall Street closes at new record high

Boom! America’s stock markets have closed at a new record peak, extending recent gains in another solid session.

The S&P 500 index, the broad measure of the market, closed 3 points higher at 2,943, a new record close. The Nasdaq also claimed a new peak, up 0.2% at 8,161 points.

The Dow also inched higher, up 0.04%, but not at a new record.

So far this year, the Dow is now up 13% while the S&P 500 has gained 17% -- bringing strong gains to investors who had the foresight to buy shares after last autumn’s sell-off.

Earlier today the boss of Boeing faced down questions about his future, following the two fatal 737 Max crashes that claimed 346 lives.

CEO Dennis Muilenburg dismissed calls for him to resign, saying:

“My clear intent is to continue to lead.”

Muilenburg also spoke of the need to regain the trust of regulators and passengers.

“We know we have work to do to earn and re-earn that trust.”

But...he also walked out of the press conference before many journalists had a chance to probe him on the disasters.

More here:

Why are the US markets touching record highs again? A few factors are combining to keep shares at elevated levels, reversing last autumn’s sell-off.

1) First-quarter US GDP was stronger than expected, with headline growth of 3.2% per year (data released last Friday showed). That has eased recession fears.

2) Inflation is weak, as shown by today’s PCE prices report (showing a fall from 1.7% to 1.6% per year). That takes pressure off the Federal Reserve to raise interest rates - we’ll hear more from the Fed on Wednesday

3) Hopes of a US-China trade deal haven’t been crushed. Talks resume on Tuesday, and many analysts expect an agreement will be reached, allowing both sides to lift tariffs.

Wall Street continues to head towards another record closing high tonight.

It’s a fairly quiet session, with the S&P 500 up 7.61 points at 2,947 - beating its previous intra-day high. The Nasdaq is also enjoying new heights, as 2019 continues to be a good year for tech firms.

Entertainment firm Disney is helping to push Wall Street higher, after its new Avengers movie absolutely smashed box office records.

The superhero mega-epic has taken $1.2bn (£929m) in global ticket sales over its first weekend, the first film to ever do a billion dollars so quickly.

European stock markets have ended the day with small gains across the board.

The cautiously optimistic mood we noted before the markets opened managed to last the day, with even Spain’s market closing a little higher despite political uncertainty following yesterday’s inconclusive election.

Here’s the closing scores:

  • UK’s FTSE 100: Up 12 points at 7,440, up 0.17%
  • German DAX: up 12 points at 12,328, up 0.1%
  • French CAC: up 11 points at 5,580, up 0.2%
  • Italian FTSE MIB: up 50 points at 21,788, up 0.23%
  • Spanish IBEX: up 11 points at 9517, up 0.1%

Updated

IMF chief Christine Lagarde is speaking right now at the Milken Global Conference in Los Angeles, on Brexit, trade wars, income inequality and her own future:

Senior market analyst Fiona Cincotta of City Index also believes that America’s Federal Reserve is unlikely to raise interest rates soon, given recent economic data:

Wall Street opened modestly higher on Monday, boosted by the improved sentiment as a strong earning season continues and by supportive US inflation data. PCE, the Fed’s preferred measure of inflation showed that prices declined to 1.6% in April, down from a downwardly revised 1.7% in March and below the 1.7% forecast. The data comes following Friday’s mixed GDP data. A GDP release that saw the headline figure demonstrating impressive growth of 3.2%. However, this was driven principally by a large accumulation of unsold merchandise as the inventory component of the report was high and consumer spending noticeably weak.

Weak inflation and “the not quite as impressive as the headline figures suggest” GDP report are unlikely to encourage the Fed to take their finger off the pause button, even though other data across the month, such as retail sales, home sales and manufacturing have all seen improvements. According the CME Fed funds, the market is still pricing in a 65% probability of a rate cut before the end of the year. This is keeping the dollar under pressure ahead of the US Federal Reserve rate announcement on Wednesday. Meanwhile stocks are moving cautiously higher, with the S&P and Nasdaq reaching fresh all-time highs on hopes of lower rates for longer.

Wall Street has now pushed a little bit higher, with the S&P500 gaining 7 points or 0.25% to 2,946, a new all-time peak.

Toymaker Mattel is the top rise, up 6.5% - it posted better-than-expected results late last week. Manufacturing group Ingersoll Rand is close behind, following reports that it will sell a division to rival Gardner Denver.

Bank stocks are also doing, with Bank of New York Mellon and Citigroup gaining around 2.5%.

Investors seem to be cheered by the rise in US consumer spending today, and reassured that the drop in core inflation cuts the chances of interest rates being raised anytime soon.

Another UK mining firm, coal producer Bisichi, has angered one of its major shareholders by handing its managing director a chunky pay rise, despite protests over its pay policies.

Andrew Heller (son of the chairman Sir Michael Heller) picked up £1.073m last year. His basic salary rose from £450,000 to £495,000, while his bonus jumped from £350,000 to £500,000.

That’s a decent chunk of the company’s profits, which swelled from £3.7m to £8.6m during 2018 thanks to a strong performance by Black Wattle, its South African coal business. You can read the report here.

Paul Mumford of Cavendish Asset Management, which owns 18% of the company’s stock, is furious.

He’s issued a rare public blast at the company’s board for allowing such large salaries, and for not reacting to last year’s backlash.

Mumford says:

If last year’s remuneration package was indecent, this year’s really takes the biscuit. For executives who supposedly subscribe to The Quoted Companies Alliance (QCA) code, the Hellers seem to have gone out of their way to ignore shareholder concerns. Shareholders of 29.28% voted against last year’s package and we still haven’t heard a thing from the directors. Not only have they disregarded the code by not responding, they’ve driven a coach and horses through last year’s vote by increasing their remuneration package this year from £1.63m to £2.16m.

“We’ve come to expect this from a management team that clearly isn’t interested in the shareholders, only themselves. And this goes beyond remuneration. The QCA guidance that the company allegedly follows states that members should sit on the board for a maximum of 9 years. Outside of Sir Michael Heller, two others have been sitting on the board for over 18 years. How can the board claim to be independent when some of the members have been associated with the company for decades? For shareholders of Bisichi, and its parent company London and Associated Properties, this raises serious questions about the company’s management.”

Back in London, Ukranian mining company Ferrexpo has revealed that its chief financial officer cashed in more than £400,000 of shares last week....just before its share price plunged after its auditors quit.

My colleague Jasper Jolly explains:

Chris Mawe sold 150,000 shares worth a total of £402,045 on Thursday, hours before accounting firm Deloitte resigned as auditor following a scandal surrounding potential misappropriation of money paid by Ferrexpo to a charity called Blooming Land, which supports local social and health projects in Ukraine.

Deloitte’s resignation triggered a 28% fall in Ferrexpo’s share price on Friday. At the time of writing Ferrexpo’s share price was £2.07, about 23% below the £2.6803 price at which Mawe sold.

More here:

But when you’re already at an all-time high, any increase is a new record :)

Wall Street has opened extremely cautiously, with shares very slightly higher:

Gregory Daco of Oxford Economics reckons today’s data shows the sugar rush of Donald Trump’s tax cuts has now faded:

Last month’s 0.9% jump in US consumer spending is the biggest increase in almost 10 years, Reuters points out.

US spending jumps, but income growth slows

Just in: Americans ate heavily into their savings last month to support their spending, as income growth slowed.

Personal incomes only grew by 0.1% in March, new figures from the Commerce Department show, weaker than the 0.4% growth which economists expected.

However, personal spending jumped by 0.9% during the month, stronger than the 0.7% forecast.

How was this lack of belt-tightening achieved? By a sharp fall in the US personal savings rate, from 7.3% to just 6.5%.

But despite this, core inflation actually fell -- to an annual rate of 1.6%, from 1.7%. That’s a 14-month low.

This could reinforce talk that America’s central bank’s next move will be to cut borrowing costs, rather than raise rates, given the lack of inflationary pressure (a tune president Trump has been humming ever louder for some time).

Andrew Hunter of Capital Economics says:

The surge in real personal spending in March suggests that consumption growth will be at least 3% annualised in the second quarter, after slowing sharply in the first quarter. But the Fed may be more concerned by the renewed weakness of core inflation, which slipped to only 1.6%.....

That will reinforce the concerns of several officials that inflation is still too low to be consistent with the 2% target and, if we’re right in expecting activity growth to slow over the course of this year, makes it all the more likely that the Fed will be seriously contemplating interest rate cuts before too long.

Updated

Happily, the latest eurozone money supply figures pain a more encouraging picture.

Money supply grew by 4.5% year-on-year in March, up from 4.2% in February, indicating a pick- up in activity. It’s the quickest increase since early 2018 - when the eurozone economy started to falter.

A narrower measure of money in circulation plus money on short-term deposit grew even faster. This could be signalling that growth will pick up this summer, as economist Shaun Richards explains here:

Updated

It’s been a testing morning for Britain’s new Caledonian Sleeper trains, whose launch today has been punctuated by a battalion of glitches.

My colleague Gwyn Topham rode the new overnight service from London to Glasgow today -- and reports that it crawled in THREE HOURS late, shortly after 10am.

The service was even worse the other way - rocking into Euston at 10.27am (after the first daytime train from Scotland, apparently). Signalling problems have been blamed.

Some teething troubles must be expected, of course, but today’s problems included a water leak, booking mix-ups, a missing driver (held up on another delayed service), and no butter for the toast.

But even so, many passengers say the service was a delight. Plus, Gwyn was accidentally served three “delicious” game pies. So let’s not grouse too much.

There’s really little to cheer in today’s European confidence report. Most of the main indicators worsened, suggesting the economy is still bogged down.

  • Economic Sentiment: 104, down from 105.6, worst since September 2016
  • Industry: -4.1, down from -1.6
  • Services: 11.5, unchanged from March’s 11.5
  • Consumer: -7.9, down from -7.2
  • Business Climate: 0.42, down from 0.54

Eleswhere in the markets, music streaming site Spotify has hit a milestone -- 100 million paying customers.

This has helped the company, which floated a year ago, to narrow its losses -- handy as it embarks on an epic investment splurge in podcasting.

European stocks have now turned negative today, as today’s disappointing fall in industrial confidence disappoints investors.

Bloomberg’s William Horobin is concerned that Europe’s economy is faltering, as companies are buffeted by problems at home and abroad.

Here’s his take on the economic (lack of) confidence data for April:

Economic confidence in the euro area dropped for a 10th month in April to the lowest in more than two years, indicating the region may struggle to pick up from its recent slump.

The European Commission’s monthly survey showed an industrial morass is increasingly entrenched as companies continue to struggle with the global slowdown and homegrown difficulties, notably the upheaval in Germany’s car industry.

The headline index, which assesses the mood of households and businesses, fell sharply to its lowest level since September 2016. Confidence in industry was particularly weak as managers become more pessimistic about production expectations, order books and stocks. In Germany, the reading hit its lowest level in three years.

More here: Euro-Area Economic Confidence Slips to Lowest Since 2016

Europe’s economy doesn’t look in great shape...

Analysts at currency firm BP Prime are concerned by the slide in eurozone industrial confidence this month:

Across the wider EU, economic confidence fell notably in both the UK and Poland.

The European Commission explains:

The decline of the headline indicator for the EU (−1.5) reflects the strong deterioration of sentiment in the largest non-euro area EU economies, the UK (−1.5) and Poland (−3.7).

In line with the euro area, EU industry confidence took a blow and consumer sentiment weakened. While the deterioration of EU confidence in retail trade was less marked than in the euro area, EU confidence in construction worsened more strongly.

European economic confidence hits two-year low

Newsflash: Eurozone economic sentiment has fallen for the 10th month in a row, highlighting the weakness of Europe’s recovery.

Figures from the European Commission show that managers across European industrial firms became more pessimistic this month. Retail bosses also grew more downbeat, dragging the EC’s measure of economic optimism down to a two-year low.

The EC says managers became more pessimistic views about their production expectations, the current level of overall order books and the stocks of finished products.

It adds:

Manufacturers’ assessments of the past production deteriorated significantly, too, whereas there was some relief in the appraisals of export order books.

Consumer confidence also fell this month, the EC warned, explaining:

This reflected households’ more pessimistic expectations about their future financial situation and, in particular, the general economic situation, while their assessments of their past financial situation and their intentions to make major purchases remained broadly stable.

There was a brighter spark, though - service sector confidence was unchanged.

But overall, the EC’s economic sentiment indicator fell in the euro area (by 1.6 points to 104.0) and the EU (by 1.5 points to 103.7).

That suggests that growth remains weak, after slowing sharply in 2018 (we get first-quarter GDP figures for some eurozone economies tomorrow). Reaction to follow....

Updated

Spanish stocks dip after election

Spain’s stock market is bucking today’s trend, falling after Sunday’s general election delivered a hung parliament.

The IBEX has lost 0.5%, with utility stocks the biggest fallers. There are predictions that the socialist PSOE party (which won the most seats) may be forced to rein in their support for the renewables sector.

Since taking power last year, the Socialist government has taken specific steps toward closing nuclear plants in Spain - which may now be curtailed under a new coalition government.

Forestry firm ENCE, which produces eucalyptus pulp for use in biomass power stations, has shed almost 5% this morning. Endesa, which is boosting its investment in renewables, has shed 1%.

Financial shares are rallying, though, with Bankia up 2.3% to the top of the IBEX risers, as the prospect of new taxes fades.

The left-wing Podemos party had pledged to impose a transaction tax on Spain’s banks. However, it and PSOEW haven’t won enough seats to govern without support from other parties.

Ocado shares singed after robot fire report

Shares in online grocery firm Ocado have dropped this morning, after it revealed that a recent serious fire at its Hampshire warehouse was caused by a robot catching fire.

Following an investigation, Ocado has concluded that an electrical fault in a battery charging unit had caused the plastic lid on top of one of its bots to catch alight. The resulting conflagration caused serious damage to the warehouse, as 200 firefighters were scrambled to put it out.

Ocado is now taking action -- installing more sprinklers and heat sensors, and removing the errant plastic lids from the robot.

Shareholders are concerned, though, that the incident could hurt Ocado’s efforts to sell its technology to supermarkets around the world. Ocado shares were down over 2% in early trading.

Updated

The IMF has also spotted that social unrest is also rising in the Middle East - although we’re not back at Arab Spring levels of anger.

They say:

In several countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region, social tensions are rising in the context of lower growth and reform fatigue, threatening macroeconomic stability. Such tensions may also derail much-needed reforms, potentially spilling over into conflict and further regional uncertainty

IMF warns of Iranian recession

The International Monetary Fund has published a new report into the Middle East and central Asia, and it doesn’t make cheery reading for Tehran.

Iran’s economy is predicted to shrink by 6% this year, following a 4% contraction in 2018. That follows America’s recent sanctions -- but doesn’t factor in president Trump’s decision to end a waiver allowing certain countries to buy Iranian oil.

Jihad Azour, the IMF’s Mideast and Central Asia department director, warned that Iran’s economy is struggling badly, even before the US tightens its oil embargo.

“The removal of waiver will affect more the recession.

A negative growth of 6% has an impact on poverty, social protection and also on jobs.”

The wider picture is that political uncertainty and volatile oil prices will hit growth across the region this year. The IMF predicts that growth in 21 countries - from North Africa across the Persian Gulf to Afghanistan - will slow to 1.5% this year, down from 2%.

It warns that geopolitical tensions, the US-China trade war and the eurozone slowdown can all have dangerous knock-on impact on middle east markets.

Italy leads European markets higher

European stock markets have begun the new week cautiously, led by a bounce in Italy.

Italian bank shares have jumped 1%, after S&P affirmed Italy’s BBB credit rating on Friday night.

Rome’s government debt is also rallying, on relief that Italy isn’t being downgraded despite falling into recession last year.

Chinese industrial profits rebound

China’s factories have bolstered confidence in the markets today, by reporting a pick-up in earnings.

Profits in March rose 13.9% year-on-year to 589.52 billion yuan (£67bn), the National Bureau of Statistics (NBS) reported. That reverses a 14% in the first two months of 2019, and may show that economic conditions are brightening.

Introduction: Asian markets higher after US GDP boost

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

There’s an upbeat mood in the markets today after Wall Street surged to another record close on Friday night.

Investors are taking their cue from Friday’s stronger than expected growth figures from the US. The news that US GDP expanded at a 3.2%/year rate sent the S&P 500 to new heights at the end of last week, extending its strong run since the year began.

Asian investors picked up the baton and sprinted away with it this morning. China’s benchmark CSI 300 index is up 1.3%, Hong Kong’s Hang Seng has gained 0.9%, and South Korea’s Kospi 200 is almost 2%.

Fears that the world’s largest economy was faltering have receded, even much of America’s growth in the last quarter was due to inventory building and a drop in imports (boosting net trade).

Perennial hopes of a breakthrough in the US-China trade war are also helping the markets – officials are due to resume negotiations tomorrow.

Konstantinos Anthis, head of research at ADSS, says traders are in optimistic mood -- perhaps too optimistic....

For stock traders, it seems that the important catalysts are pointing higher: the US sees strong domestic growth, low inflation keeps the Fed at bay and could potentially trigger a rate cut so it seems that equities have nowhere to go but higher - at least in the short term.

Truth be told, we think that investors should employ a more cautious approach, with the US markets near record highs and 10-year yields dropping below 2.5%, suggesting that a selloff may be around the corner. In any case, market participants don’t seem to share our skepticism and equity futures in Europe and the US are pointing towards a positive opening bell.

Also coming up today

Traders in Spain will be digesting last night’s election results, which saw the ruling socialist party scoop up the most seats...and solid gains for the far-right Vox party.

Bank of England governor Mark Carney is giving the keynote speech at a fintech conference in London today -- we’ll watch out for any fireworks.

One of Donald Trump’s regular mantras is that US inflation is very low. We’ll find out if he’s right later today, when the latest PCE core inflation data is released. Economists predict it will dip to 1.7%, from 1.8%, which might boost the president’s push back against interest rate hikes.

The agenda

  • 9.10am BST: BoE governor Mark Carney speaks at Innovate Finance Global Summit
  • 10am BST: Eurozone consumer and industrial confidence data
  • 1.30pm BST: US core inflation data

Updated

 

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