UK economy shrunk by 0.1pc in August, but July's figures were stronger than expected
Europe swings to a loss after early gains ahead of key US-China trade talks
Wall Street climbed for the first time in three days
Hargreaves Lansdown boosts customer numbers despite Woodford fallout
British Airways chief Willie Walsh hits back at 'flight shamers'
Ambrose Evans-Pritchard: Germans living in 'cloud cuckoo land' as economic decline sets in
Manufacturing sector shrinks again,
Manufacturing output figures released alongside those GDP numbers show the sector is still oscillating between growth and contraction.
The ONS says:
The main contributor to gross domestic product (GDP) growth in the three months to August 2019 was the services sector, which grew by 0.4pc. This was driven by widespread strength across the services industries in June and July, following a period of largely flat growth in the previous three months. Meanwhile, the production sector fell by 0.4pc in the same period, while construction output grew by 0.1pc.
Here's what that rolling three-month growth figure looks like:
ONS GDP head Rob Smith adds:
Growth increased in the latest three months, despite a weak performance across manufacturing, with TV and film production helping to boost the services sector.
Snap reaction: Has the UK swerved a recession?
Those figures only add to the question marks over whether the UK is heading towards a recession. Despite the contraction in August, over the June-to-August period there was an overall GDP increase of 0.3pc
That signals things may be healthy enough to avoid a technically recession, unless September's result is particularly horrible.
The services sector drove most of the growth that occurred during the month, according to the Office for National Statistics:
- Office for National Statistics (@ONS) October 10, 2019
Here's some reaction:
UK economy contracts by 0.1% in Aug. Bit worse than expected. But July GDP growth revised up from 0.3% to 0.4%. At a glance it looks like the UK might have avoided recession. But much now depends on the final GDP figs for Q3, which we get in early Nov https://t.co/dwZCagVEep
- Ed Conway (@EdConwaySky) October 10, 2019
A mild contraction ion UK GDP in August -0.1% (0.0% exp) but a revision higher on July to +0.4% (+0.3% previous) still suggests that UK is bumping along with negligible growth.
Little reaction on #GBP with a couple of ticks lower on #GBPUSD.#Forex
- Richard Perry (@HantecRich) October 10, 2019
UK GDP grew by 0.3%q/q in the 3 months to August. Main contributions came from the information & communications (0.1%) and professional services (0.11%) sectors. Manufacturing still the biggest drag (-0.1%). pic.twitter.com/RdVoaA5zcZ
- Rupert Seggins (@Rupert_Seggins) October 10, 2019
UK economy shrunk 0.1pc in August
Just in: The UK's economy shrunk by 0.1pc in August. Analysts had been expected a flat figure of 0pc, so that is likely to rattle markets. However, July's figures were revised up to 0.4pc growth.
Apologies for the delay to the last couple of posts, it looks like the Telegraph tech gremlins were adding some new features.
Trade tensions bubble ahead of summit
As trade talks between the US and China prepare to kick off, there are signs of bubbling tensions between the countries.
Adding to tensions today, Beijing has claimed the US smeared China by placing sanctions on companies and individuals linked to the claimed persecution of Muslims including the minority Uighur group in China's Xinjiang province. US Secretary of State Mike Pompeo has called the situation an "enormous human rights violation".
That could cause a rift between negotiators, with further pressure coming from Washington's attempts to crack down on CHinese contraband goods.
There are also signs of hope, however: in particular, multiple outlets have reported that the two countries are considering formulating a currency pact, and that the US may allow Chinese tech giant Huawei to supply non-sensitive parts to US firms.
Coming up: UK growth figures for August
At 9:30am, we'll get the latest GDP figures for the UK, which will show how much the economy grew in August.
Britain's economy underwent a contraction during the second quarter amid a post-Brexit-delay winding-down period, shrinking by 0.2pc. If it slips again in the third quarter, the UK will be deemed to have entered a technical recession.
July's performance was more bullish however, with a 0.3pc overall increase. Analysts expect August's figures to show stagnation.
SpreadEx's Connor Campbell says:
After a better than forecast reading for July, August's monthly GDP reading is set to act as a reminder, if it was needed, that the UK economy is struggling with the uncertainties of pre-Brexit. Analysts are expecting a dreary 0.0pc reading, a sharp comedown from the previous 0.3pc - let's just hope it doesn't turn negative.
July's numbers was a positive surprise, but news since then has been mixed: consumer spending appears to still be strong, but activity across factories and the service sector has shown a marked slowdown according to purchasing managers' index surveys.
FTSE whipsaws to a fall, European stocks drop
The FTSE, which opened slightly higher, has reversed course and is now down about 0.45pc. The pound is slightly higher against the dollar, which may be increasing pressure on the blue-chip index.
The Europe-wide STOXX 600 is down about 0.5pc, with investors apparently showing signs of nerves ahead of those US-China talks, and with Brexit on a knife's edge.
Later today, Prime Minister Boris Johnson will meet his Irish counterpart Leo Varadkar for last-ditch talks ahead of next week's European summit. Expectations are not particularly high for the meeting, given the deadlock reached over recent weeks.
CMC Markets' Michael Hewson said:
The Asia session doesn't tell us the whole story given that we've seen some significant swings between negative and positive territory, on news chatter that the talks had either stalled, or may well get cut short on the negative side of the ledger, as well as reports that next week's tariffs may get delayed on the other side.
European markets initially opened higher, however the positive tone has started to disappear over concern that there is unlikely to be any indication that these talks will show any significant sign of progress, or that next week's tariffs won't kick in as scheduled.
Hargreaves Lansdown shares volatile after boosting customer numbers
Hargreaves Lansdown shrugged off any reputational damage from its support for troubled investor Neil Woodford's funds by boosting customer numbers in the third quarter, my colleague Michael O'Dwyer reports. He writes:
The investment platform added a total of 35,000 customers net in the three months to September and eclipsed the £100bn barrier for assets under administration for the first time.
The value of assets invested with the firm rose 3pc from the end of June to £101.8bn. The increase helped boost net revenue 6pc against the same period in 2018 to £128m.
But the FTSE 100 company warned it had "seen new business in the period being impacted by weak investor sentiment arising from continuing Brexit and political uncertainty in the UK and wider global macro issues such as trade tariffs".
Read more here: Hargreaves Lansdown boosts customer numbers despite Woodford fallout
The company's shares initially rose around 2pc, but have since pared down to stand more or less flat.
Philip Hammond: Post-Brexit trade deals 'are of very limited potential value'
Today's Telegraph front page splash is one not to miss: former Chancellor Philip Hammond has said Brexiters should give up on their ambitions of striking post-Brexit trade deals, saying such arrangements would be of "very limited" value.
In an exclusive interview with Europe Editor Peter Foster, Mr Hammond said:
We all know these trade deals are of very limited potential value and likely to be very hard to negotiate without serious domestic economic and political consequences.
As you'd expect from 'Spreadsheet Phil' he's not making it up - he's run the numbers. (See research by LSE, HMT, @jdportes and others).
They are mad:
UPSIDE from FTAs all FTA is less than 0.5% additional GDP by 2030
DOWNSIDE of Canada minus deal? Negative 4-7% 'lost' GDP /3 pic.twitter.com/0so5wnAfez
- Peter Foster (@pmdfoster) October 10, 2019
You can read Peter's full interview and report here: Exclusive: Philip Hammond suggests new Brexit plan as he slates 'do or die' pledge and questions free-trade deals
Agenda: US and China get set for trade talks
Good morning. Today is a big day - though immediate shifts are unlikely, the arrival of Chinese envoys in Washington puts us on the road to a possible breakthrough on one of the biggest issues casting a cloud over markets.
The FTSE 100 managed a moderate rally yesterday, closing up 0.33pc amid a broader burst of relief across European stocks after some sharp falls on Tuesday. The day was light on major Brexit news, and traders had little macro news to move on.
5 things to start your day
1) The boss British of Airways owner IAG has slammed "flight-shaming" environmental campaigners who want to curb air travel. Willie Walsh said holidaymakers and workers should not feel ashamed about boarding a plane - and insisted that commercial flying is a force for good which has lifted the horizons of millions of people.
2) Renting can conjure up images of damp walls, dodgy boilers and recalcitrant landlords but the age of Jeremy Corbyn and Brexit has helped foster a very different and altogether more niche market: the super-rich renter. Upmarket estate agent Knight Frank keeps a close eye on the top end of the London rental market and it notes rising demand from well-heeled customers for so-called "super-prime" tenancies, where renters pay £5,000 a week or more.
3) UK drivers on Shell's loyalty scheme will soon be able to offset their environmental impact by planting more trees as Big Oil responds to fears about climate change. From next week, customers can opt into the carbon credit initiative, which will see Shell invest £10m towards the restoration of forests to atone for drivers' emissions.
4) Homeowners looking to sell their property are shunning the market amid political turmoil over Brexit - dragging new listings down to a three-year low. The housing market stumbled again in September as new sales fell to within a whisker of their lowest level since the European Union referendum, according to the Royal Institution of Chartered Surveyors (RICS).
5) But Britain, while on the podium, is not the world champion in cashless. That title goes to Sweden, where demand for notes and coins is so limp that cash is literally disappearing: the amount in circulation has fallen from 80bn kronor (£6.6bn) to Skr58bn (£4.8bn) in the last four years, a reduction of 27.5pc. The same period has seen ATM withdrawals fall by more than half.
What happened overnight
MSCI's broadest index of Asia-Pacific shares were flat, while both Japan's Nikkei gained 0.3pc. Shanghai shares also rose 0.35pc.
US S&P 500 mini futures traded down 0.2pc, with a big part of early losses cut after the New York Times reported Washington will soon issue licences allowing some US firms to supply non-sensitive goods to China's Huawei.
Another report, from Bloomberg, that the White House is looking at rolling out a previously agreed currency pact with China also raised hopes of a partial deal and helped to lift assets.
In Hong, the Hang Seng index has added 0.32pc as investors cautiously await the resumption later in the day of high-level trade talks between China and the United States.
Earlier, US stock futures slumped as much as 1.3pc, as the South China Morning Post (SCMP) reported the Chinese delegation, headed by Vice Premier Liu He, was planning to leave Washington after just a day of minister-level meetings, instead of on Friday, as originally planned .
Coming up today
Two announcements worth paying particular attention to today: a trading update from Dunelm, and interim results from Hargreaves Lansdown.
"It's difficult not to like Dunelm," says CMC Markets' Michael Hewson. Solid results have allowed it to post strong results so far this year, which have been matched by outperformance in its share price. There's reason to believe "that the good news may be priced in", however, says Hewson, so even meeting expectations might lead to a mixed response from investors.
"As it continues to invest in securing its online position in homeware, there is a risk that profits may well start to flat line, as profit margins shrink," he says.
Investment supermarket Hargreaves Lansdown's shares have had a tough few sessions of trading - registering as the FTSE 100's biggest faller at several points last week. The fall followed some critical analyst commentary that said Hargreaves' core product was struggling to justify its price premium over rivals in a heated sector. Investors will look for reassurance the group's strategy is paying off in today's results.
Interim results: Hargreaves Lansdown
Trading update: Dunelm, Mondi, Sabre Insurance
Economics: GDP, RICS house price balance, industrial and manufacturing production, construction output, trade balance (UK), CPI inflation, jobless claims (US)