European markets fall on concerns over UkraineItaly slides back into recession UK factory output misses forecastsGerman factory orders drop unexpectedly 10.44am BST Plus ça change. There are protests in Greece this morning. Members of the armed forces and emergency services are protesting in central Athens against plans to merge their auxiliary pension funds with others. eKathimerini reports:The merger is part of a multi-bill that MPs are due to vote on later in the day. Greece needs to pass the legislation to receive its next bailout sub-tranche of 1 billion. 10.38am BST Some reaction to the UK data. David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:Despite encouraging progress seen by the manufacturing sector over the past year, its total output is still more than 7% below its pre-recession level in 2008 in contrast to services that are now more than two percent higher. Manufacturing exporters are also trying to cope with a strong pound at a time when demand in the eurozone our biggest trading partner remains weak. There are a number of uncertainties still facing the economy, and we would urge the MPC not to jump the gun on interest rates. Our view remains that the risks to the economy of raising rates too early are much greater than the risks of waiting just that little bit longer. 10.28am BST Factory output in the UK, however, was lower than expected in June. Larry Elliott writes:Output from Britains factories rose by a smaller than expected 0.3% in June and remains more than 7% below its pre-recession peak, according to official figures.Although the economy as a whole has now made up the ground lost in the so-called Great Recession of 2008-09, data from the Office for National Statistics showed manufacturing still struggling. 10.25am BST Back in the UK, the appetite for new cars continues apace, with sales accelerating for a 29th month in July, prompting a second upward revision to the 2014 forecast. Angela Monaghan writes:The number of new cars registered last month jumped 6.6% to 172,907, extending the longest run of growth for the industry since records began in 1959 according to the Society of Motor Manufacturers and Traders. It compared with a 6.2% increase in June.Such high levels of demand for new cars have taken the trade body by surprise, prompting it to revise up its forecast for the full year for the second time this year. 10.23am BST Jamie McGeever at Reuters points out that Italys economy is a long way off regaining the level it reached before the financial crisis. 10.17am BST Commentators suggest the news could dent the popularity of Italian prime minister Matteo Renzi, who came to power in a party coup in February. Reuters reports:Renzi has announced ambitious labour and tax reforms to revive growth as well as a sweeping overhaul of the justice system, the bloated public administration and Italys system of government. But beyond an 80 a month tax break for millions of low income workers, he has yet to translate his promises into action. 10.12am BST Italy has slid back into recession in the second quarter as GDP shrank 0.2%. Economists polled by Reuters had been targeting a gain of 0.2%. Preliminary estimates show GDP down 0.3% compared with the same period last year. 10.07am BST Russian shares hit a three month low after president Vladimir Putin ordered retaliatory measures against Western sanctions. Markets are dropping even lower. 9.59am BST The Polish prime minister says the threat of a direct intervention by Russias military in Ukraine has risen over the last couple of days, Reuters is reporting. Donald Tusk told a news conference:We have been receiving such information in the last several hours - that the risk of a direct intervention [by Russias military in Ukraine] is for sure higher than it was several days ago. 9.50am BST Standard Chartered warned on Wednesday that if faced fresh fines from the US authorities for breaches of money laundering rules as it posted a 20% fall in first half profits, writes Jill Treanor. Fined $340m for scheming with Iran for hiding billions of pounds of transactions from the US authorities, the London-listed Asian focused bank said that new issues had now arisen which could lead to fresh penalties from the New York State Department of Financial Services.The revelations about the potential for fresh penalties and the possible extension of a two year deferred prosecution agreement (DPA) with the US authorities - which have installed a monitor in the bank - could put fresh pressure on chief executive Peter Sands who admitted that the first half results were clearly disappointing. 9.41am BST Brewer SABMiller has found a replacement for its former chairman Graham Mackay, who died last year. It announced this morning that Rio Tinto chairman Jan Du Plessis will take on the role, on top of his job at the mining group. Du Plessis, 60, will join the brewers board as a non-executive director from September 1, and take over from interim chairman John Manser as SABMillers chairman at the annual meeting in July next year. He said:Todays announcement does not in any way diminish my strong commitment to Rio Tinto. I am excited about the excellent work that Sam Walsh and his management team are doing to deliver greater value for shareholders. I have assured the board of Rio Tinto that I would like to serve as chairman for several more years, subject of course to the board and shareholders wishing me to do so. 9.27am BST Standard Chartered banks pre-tax profits dropped 20% last year, as expected. More from Jill Treanor soon... 9.16am BST Italys industrial output rose 0.9% in June, the largest increase in five months and beating analyst forecasts of a 0.7% rise. That is a big improvement on the 1.2% drop in May. But the country is expected to announce later today that it has fallen back into recession. Italian newspapers reported this morning that the statistics agency will post a 0.1% contraction in the second quarter, compared with economist forecasts of 0.2% growth. 8.55am BST More on UK house prices. The Halifax survey out this morning (see below) show house prices rising at their strongest rate since the three months to September 2007. Howard Archer points out that this reading contrasts with several other surveys reporting a recent moderation in house price growth which appears to be a consequence of a recent overall slowdown in housing market activity. The Nationwide reported a rise of just 0.1% month-on-month in July. Archer writes: On balance, we take the view that house prices will keep on clearly rising over the coming months but there will be some moderation from the recent peak levels. More stretched house prices to earnings ratios, the prospect that interest rates will soon start to rise (albeit gradually) and tighter checking of prospective mortgage borrowers by lenders will likely have some dampening impact on buyer interest. Even so, with the economy seen holding up pretty well going forward, employment high and rising, consumer confidence elevated and earnings growth likely to improve, and with housing supply remaining tight in many areas, house price growth will probably slow gradually. 8.30am BST A couple of big bid stories fell apart last night. Rupert Murdochs 21st Century Fox scrapped its $80bn bid to take over Time Warner. 21st Century Fox will buy back $6bn of its shares after Murdoch said Time Warner refused to engage with them over offer. Dominic Rushe writes that the deal would have created a media behemoth and was widely seen as the crowning deal of Murdochs mogul career.The move is a rare setback for Sprints Japanese parent SoftBank Corp, whose billionaire founder Masayoshi Son had seen the acquisition as key to taking on U.S. market leaders AT&T and Verizon Communications. 8.20am BST The UK housing market is looking perky. House prices in the three months to July were more than 10% higher than the same period last year, beating economist forecasts. Prices rose 1.4% in July after a 0.4% drop in June. Stephen Noakes, mortgages director at Halifax, said:While supply remains low, housing demand continues to be supported by a continuing economic recovery, growth in employment, improving consumer confidence and low mortgage rates. However, earnings growth is still lagging behind consumer price inflation. 8.10am BST In corporate news, US drugstore chain Walgreens is set to announce the takeover of the group behind high-street retailer Boots the Chemist. Zoe Wood writes:Walgreens bought a 45% stake in Alliance Boots for £4.3bn in a 2012 deal that included the option to buy the remainder within three years. Confirmation of the decision to proceed is expected to come on Wednesday. The terms of the transaction are expected to follow the same formula as the original, with the 55% stake expected to be valued at around £5bn.[This] would have required a renegotiation of an existing deal agreement with Alliance Boots, something the British retailer was unwilling to accommodate. 8.10am BST Markets have opened lower as expected... 7.51am BST Theres some bad economic data out of Germany this morning. While a stagnation of the German economy in the second quarter seems hard to avoid, the industrial engine is losing some fuel. Todays data shows that downside risks for the German economy do not only come from geopolitical tensions but also from longer-than-expected weak demand from Eurozone peers.In our view, the direct impact from the sanctions on Germany will be rather limited. It is rather the possible reaction from Russia, which could affect German growth in the second half of this year. Up to now, however, all of this remains pure speculation. 7.51am BST Asian markets dropped on Wednesday as investors took money off the table on signs of rising tensions between Ukraine and Russia. The Polish foreign minister Radoslaw Sikorski said last night that Russia had gathered military forces at the border with Ukraine either to put pressure on its neighbouring country or to invade. Continue reading...
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