Rolling business and financial news: stock markets are volatile and oil falls further to four-year low amid global growth fears, as the five-year anniversary of the eurozone crisis looms 11.03am BST Greek 10-year bond yields rose by one percentage point today 8.86%. 11.03am BST The euro has sunk to the days low of $1.2756, down 0.6%. Against the yen, it hit an 11-month low of 134.98 yen. 11.02am BST European banks and construction stocks are the worst hit, as they are sensitive to economic conditions. The eurozones banking index tumbled 5.2% while the European construction index lost 3.2%. 10.50am BST its all kicking off again. German ten-year Bund yields have hit a new record low of 0.718%. Germanys Dax has lost 0.9%, Frances CAC has slid nearly 2%, Italys FTSE MiB has tumbled 3.5% and Spains Ibex has fallen 2.8%. The FTSEurofirst 300 has tumbled 2.5% and it hits worst level since early September last year.FTSE Eurofirst is now down 10.6 per cent this month - a technical correction. Europe fear index at two-year high. 10.45am BST The Footsie continues on its downward path, now down more than 130 points at 60821.73, a fall of over 2%. There are only four risers on the index. 10.39am BST In volatile trading, the FTSE 100 is now down 1.1%, a fall of more than 70 points, at 6137.44 having started the day up 1.1%. 10.32am BST Returning to the 0.3% inflation figure for the eurozone, ING economist Martin van Vliet says:The very low inflation reading for September will reinforce concern that the Eurozone remains on a slippery slope to deflation. Until recently the consensus view was that headline inflation in the Eurozone would gradually start to pick up again from Q4 onwards. But now that oil prices have tanked, headline inflation may stay close to zero for longer and not reach 1% before Q4 of next year (if at all). Financial markets also seem increasingly concerned that Eurozone inflation could get stuck below the ECBs 2% target ceiling. Indeed, the ECBs favourite gauge of inflation expectations, the five-year, five-year forward inflation-swap rate is currently trading at a record low of 1.72%, which will not be received with much enthusiasm at the ECB. All in all, with the cushion against deflation getting smaller and smaller and economic growth in the Eurozone stagnating, pressure on the ECB to extend its purchase programmes by adding government bonds may become overwhelming over the next few months. 10.24am BST Oil extended yesterdays heavy losses and dropped more than $1 a barrel to a four-year low. Growing worries over the global economy sent Brent crude, the global benchmark, to $82.72 a barrel earlier this morning, the lowest since November 2010. It is now at $83.09 a barrel. Brent has lost more than 28% since June when it hit a high of $115.71.Analysts at JBC Energy said:The $30 fall since June has led to an intense discussion whether prices could be in for a new norm. 10.18am BST Markets are all over the place today. The FTSE 100 index has moved into the red, trading nearly 40 points lower, or 0.6%, at 6174.91. Germanys Dax and Frances CAC are also in negative territory. 10.16am BST More from the BBA conference. Jill Treanor reports:Andrea Leadsom, City minister, has told the BBA conference that she wants to move the debate forward, away from banker bashing of the past. A former member of the Treasury select committee, Leadsom is a former banker and did plenty of bashing of bankers when she sat on the committee until taking her current post in April. 10.14am BST Separate Eurostat figures show the eurozone recorded a trade surplus of 9.2bn in August, up from 7.3bn a year earlier, but down from Julys revised figure of 21.6bn. Seasonally adjusted exports dropped 0.9% while imports tumbled 3.1%. 10.05am BST Annual inflation in the 18-nation eurozone has come in at 0.3% for September, a five-year low (in August it was 0.4%). Eurostat confirmed an earlier flash estimate. Economists worry that price growth could soon turn negative, with the eurozone stuck in a feeble recovery. This is adding pressure on the European Central Bank to act. 9.55am BST UK government bond prices edged lower today after yesterdays stellar gains when a market panic drove investors into safe haven assets.Yields on ten-year gilt yields rose to just over 2% while 30-year yields increased to 2.77%. The latter hit a record low of 2.704% yesterday, while ten-year yields lost more than 18 basis points. 9.42am BST Legendary investor Warren Buffett has sold more Tesco shares, after admitting earlier this month that he had made a huge mistake. Sean Farrell has all the details. 9.38am BST In the meantime, UK drugmaker Shire whose US suitor AbbVie abruptly changed its mind after the Obama administration got tough on tax inversions put out a terse statement:The board of Shire notes the announcement by AbbVie of its boards decision to withdraw its recommendation of the offer for Shire.The board of Shire is considering the current situation and a further announcement will be made in due course. 9.36am BST Back to the BBAs annual conference. Jill Treanor reports:Cathy Jamieson, shadow financial secretary to the Treasury, has put banks on notice that Labours aim is to create two new challenger banks and introduce a market share test for competition to bolster competition on the high street. Labour also intends to tell banks to publish the number of employees earning more than £1m, she said. 9.34am BST Bowler concludes:The closing months of 2014 mark the five-year anniversary of the end of the greatest economic slump since the 1930s. While we at The EIU are not expecting another worldwide crash, we have once again lowered our estimate for global GDP growth in 2014 and our forecast for 2015. What began as a promising year for the global economy will end on a sombre note. 9.34am BST The bleak conditions in the euro zone continue to be the greatest drag on global growth according to The Economist Intelligence Unit, which has further lowered its 2015 global GDP forecast from 2.4% to 2.3% and its eurozone GDP growth forecast from 1.2% to 1.1%. According to John Bowler, director at The Economist Intelligence Unit:Despite the fact that weakness is apparent on a number of fronts, Europe is at the heart of the latest global slowdown. Only a handful of member states in the European Union, led by Poland, have seen output recover to the level reached before the recession. While Germany, France and the UK have regained what they lost, Italy, Spain, the Netherlands and Ireland remain in negative terrority. Germany, traditionally the engine of the European economy continues to be hurt by the Russia sanctions, with its August industrial production falling by the fastest rate since January 2009. Global financial markets have been retreating as fears of the slower economic growth take hold. The crippling slowdown in Europes economy and the unsettled state of emerging markets are pushing some investors close to panic. Of the four traditional asset classes (stocks, bonds, currencies and commodities), the most worrying is the price of oil, which has consistently been above US$100/barrel for the last two years. Weak growth, particularly Europe and China, is curbing demand for energy at a time when production, especially in the US, is rising rapidly. As a result the EIU has reduced its forecast for the price of oil (dated Brent) to US$97.60/barrel in 2015 from US$102.50 previously. 9.30am BST Anthony Browne, boss of the British Bankers Association, has kicked off the annual conference of the industrys lobby group by discussing what he calls the $100bn question, our banking correspondent Jill Treanor reports. Browne said:One question that is particularly topical that we have today called the $100bn question - is the level of fines coming out of the US. So Im looking forward to the discussions of the impact those huge fines are having on banks behaviour as they try to derisk their businesses, ending services that could expose them to balance sheet altering penalties. 9.10am BST Yields on Greek 10-year government bonds have topped 8% for the first time since February, amid concerns over early elections and Athens plans to wean itself off international aid. 9.09am BST Reuters is reporting that the European Central Bank has reduced the haircut it applies on bonds submitted by Greek banks as collateral to borrow funds, to boost their access to liquidity.A Greek central bank official told Reuters:The move was decided late on Wednesday evening after talks between the government, the ECB and Greeces central bank governor. Its a supportive move given the pressures in the last two days. 8.59am BST The recovery in European stocks has already petered out, less than an hour into trading. Some indices are tumbling again, such as Italys FTSE MiB which is now down 1.1%, and Spains Ibex has lost 1.3%. Frances CAC has also turned negative, and is trading 0.7% lower.The FTSE 100 index is still in positive territory but has pared gains, trading 18 points higher at 6230.10, a 0.3% increase. Germanys Dax is flat. 8.34am BST The AbbVie-Shire deal is the biggest so far to be wrecked by new US rules on tax inversions, designed to make it harder for American multinationals to shift their tax base abroad to cut their tax bills....so whither AbbVie? Its an embarrassing, and costly, failure for boss Rick Gonzalez especially because he had insisted that the deal wasnt just about tax savings.With reputation at stake and possible litigation to face, why did AbbVies board have such a dramatic change of heart? Perhaps it hopes to recoup its costs by suing the US government. Its intention is possibly hinted by ...impact of the U.S. Department of Treasurys unilateral changes to the tax rules...target specifically a subset of companies that would be treated differently than either other inverted companies or foreign domiciled entities... in this mornings press release. 8.33am BST The only consolation for Shire is that it will get a big break fee of $1.6bn. But its executives are losing out on retention payments worth £19m. Where next for the rare diseases specialist? Panmure Gordon analyst Savvas Neophytou says:In our view the fundamentals of the [Shire] business remain strong and valuation now looks attractive. We upgrade our recommendation to Buy (from Hold) and set a new price target of £42.Investors will worry that Shires defence plans are too ambitious. As part of its defence, Shire made a compelling case to revenue base of $10bn by 2020. For a company growing consistently in double digit range, the implied CAGR [compound annual growth rate] of 12-13% appears achievable. The company remains acquisitive... It is possible that the loss of four months strategic direction may have damaged those plans. Key staff may have made their own exit plans. However, Shires rare diseases business remains an attractive asset and we expect Shire to have multiple suitors. 8.10am BST European stock markets have bounced back more strongly than expected. The FTSE 100 index in London gained more than 60 points, a 1.1% rise, to 6280 in the first few minutes of trading. Shares in Shire are the only loser: theyve slumped another 11% to £35.68 after yesterdays 22% drop, after the UK drugmaker was spurned by US rival AbbVie. After the surprise news yesterday that it was reconsidering its agreed £34bn takeover of Shire, the AbbVie board called on shareholders to reject the deal in a statement this morning. Shire makes hyperactivity drugs and treatments for rare diseases, while AbbVie produces the worlds top-selling medicine, Humira for rheumatoid arthritis. 7.59am BST Oil prices have fallen further today. Brent crude is down 0.85% at $83.07 a barrel while New York light crude has lost 1.4% to $80.67 a barrel. 7.51am BST Paul Ashworth, chief US economist at Capital Economics, believes the panic in financial markets is overdone.The growing sense of market panic evident in the sharp declines in equity prices and the strong rally in US Treasury bonds over the past week is hard to square with the solid outlook for US economic growth. We would still argue that the declines in oil prices and long-term interest rates will provide a net boost to real US GDP growth, even after allowing for the sell-off in stock markets. While the prospects for economic growth in the euro-zone have deteriorated, the outlook for global economic growth hasnt changed that much at all. The impact of that eurozone slowdown on the US economy will be modest anyway. 7.41am BST Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone.European stock markets are expected to open slightly higher today after yesterdays sell-off. Poor US economic data triggered fresh fears over global growth, compounded by the rapid spread of Ebola in west Africa. US, UK and German bond yields also fell sharply and the price of oil hit a four-year low.The Fed Beige Book overnight did manage to paint a fairly positive outlook for the US economy, but that doesnt appear to be enough anymore to keep stocks at the levels weve become used to in recent weeks. Continue reading...
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