UK public finances worse than expected; oil edges higher - live (2024)

US markets have made a bright start to trading following the better than expected third quarter GDP figures.

The Dow Jones Industrial Average is currently up around 53 points or 0.3%, helping to support European markets which had been tending to drift a little before the US open.

The FTSE 100 is now up 42 points or 0.7% while Germany’s Dax is up 0.45% and France’s Cac has climbed 0.37%.

Spain’s Ibex, after Monday’s 3.6% fall in the wake of the inconclusive election, is now up 0.85%.

On that note, it’s time to close for the day. Thanks for your comments, and we’ll be back tomorrow.

Following the poor UK public finances figures and the reasonable US GDP numbers - which show why the Federal Reserve was happy to raise US rates - the pound has fallen back.

Sterling has fallen to an eight month low of $1.4860, down 0.2% on the day. Against a basket of currencies it is down 0.3% to a ten week low.

US corporate profits fell by 1.6% in the third quarter, compared to a 3.5% rise in the previous three months.

The US economy continues to grow at a healthy pace, although by slightly less than first expected.

The latest revision to the third quarter figures showed GDP growth of 2% on an annual basis, down from the 2.1% previously reported. But this was better than the 1.9% analysts had expected. Strong consumer and business spending offset attempts by business to reduce inventories.

It was a slowdown from the 3.9% growth reported between April and June, but still marks a reasonable outcome.

The US Federal Reserve raised interest rates last week on the basis the country’s economy was strong enough to accommodate dearer borrowing costs.

European shares are drifting after a bright start.

The FTSE 100 is currently 0.75% higher despite worse than expected public finance figures, but Germany’s Dax is virtually unchanged while France’s Cac is up just 0.2%.

Even though concerns remain about the economic outlook in Spain and the future of its reforms following the weekend’s inconclusive election, the Ibex has recovered some of Monday’s fall and is now up 0.8%.

Shortly investors will be presented with the revised third quarter GDP figures from the US.

Turkey’s central bank has kept interest rates unchanged, confounding expectations of an increase in borrowing costs.

The overnight rate is held at 7.25% despite forecasts of a 25 basis point increase while the repurchase rate is 7.5% compared to expectations of a rise to 8%.

The central bank had suggested previously it would raise rates in tandem with the US Federal Reserve, but today’s decision to keep them on hold comes despite the Fed lifting its own rates last week.

Investors had called for a rate rise to curb inflation and put a floor under the struggling lira.

Despite all the concerns about the Spanish economy following the weekend election and the subsequent uncertainty about the country’s future government, the country’s central bank has raised its growth forecasts for this year and next.

The Bank of Spain said it expected the country’s economy to grow by 0.8% in the fourth quarter, the same level as in the previous three months, and it lifted its growth forecast for 2015 from 3.1% to 3.2%. For 2016 it is now predicting growth of 2.8%, up from its previous estimate of 2.7%.

But it warned about policy concerns in the wake of the inconclusive election, as well as concerns about a worse than expected slowdown in emerging markets. It said:

Internally the main source of uncertainty is associated with the evolution of economic policies, given how much the reform agenda and budget policies in particular affect confidence.

Tata Steel is in discussions to sell its struggling UK businesses to investment group Greybull Capital which could safeguard thousands of jobs.

The companies have signed a letter of intent and have entered exclusive talks. The deal involves Tata’s Long Products Europe division, including its Sc*nthorpe steelworks, mills in Teesside and northern France, an engineering workshop in Workington, a design consultancy in York, and associated distribution facilities. It also includes Tata Steel’s Scottish mills in Dalzell and Clydebridge which are currently being mothballed.

In a statement Karl Koehler, chief executive of Tata Steel’s European operations, said: “This is an extremely critical time for the whole industry, and we have been working hard to explore all options that could provide a future for the Long Products Europe business.

In all, around 4,700 staff work for the Long Products division.

Greybull last year rescued struggling airline Monarch.

Britain’s steelmakers have been struggling with high costs and increased competition, leading to the collapse of Caparo Industries and the closure of SSI’s Redcar plant.

George Osborne’s plan to repair Britain’s public finances has received a fresh setback from official figures showing that the budget deficit in November was 10% higher than in the same month in 2014, writes our economics editor Larry Elliott.

The Office for National Statistics said the gap between spending and revenues last month was £14.2bn - an increase of £1.3bn on November 2014.

Officials said that one reason for the deterioration was that last November had seen the payment of fines by financial institutions totalling £1.1bn, which had not been repeated in November 2015.

Even so, the figures came as an unwelcome shock to the City, which had been forecasting a drop in net borrowing – the government’s preferred measure of the deficit – to £11.8bn.

Shares fell after the ONS released the data amid fears that the chancellor would now struggle to meet his deficit reduction targets for 2015-16 and to move the public finances into surplus by the end of the parliament.

Borrowing during the first eight months of 2015-16 has been £66.9bn, only £2bn short of the total expected by the Office for Budget Responsibility for the whole of the financial year.

Analysts said it would require a big improvement in the remaining four months of the year to hit the OBR forecast. In the same months of 2014-15, the government borrowed £16bn.

The full report is here:

Economist Howard Archer at IHS Global Insight said:

If the pattern of the first 8 months of fiscal year 2015/16 continued over the rest of the year, PSNBex would come in at £81.2 billion. This compares with the target of £68.9 billion contained in November’s Autumn Statement.

The Chancellor now faces a massive task to meet his fiscal targets for 2015/16 and it is frankly hard to see how he can make it –even allowing for the fact that (1) public finances can be volatile from month to month (partly due to the timing of expenditures) and can be revised significantly; and (2) the OBR argues that there should indeed be a substantial improvement in the public finances over the final months of 2015/16 due to a number of factors. This particularly includes an expected jump in self-assessment tax receipts in January resulting from past policy measures. The OBR also expects spending cuts to have an increasing impact as pressure to meet budget targets mounts on departments subject to Treasury controls

Gradual progress but much more needed is the verdict of David Kern, chief economist of the British Chambers of Commerce:

Although we saw a minor setback in November, gradual progress is being made with reducing the deficit. The public finances are likely to be better this year than in the previous financial year, but the improvement may not be as large as the OBR suggested in the Autumn Statement.

The underlying message remains that our budget deficit is still too high, and greater efforts are needed, through reducing current public spending and generating sufficient tax receipts.