UK service sector growth hits seven-month low, but US powers on – as it happened

UK companies report that new business has weakened as anxiety over Brexit and the global economic outlook rise

European stock markets never threatened to get anyone’s blood pressure soaring today.

So after a subdued day, the FTSE 100 has closed 9 points higher at 7,103, a gain of 0.14%.

Over in Brussels, eurozone finance minister are urging Italy to compromise in the row over its 2019 budget.

Several eurozone finance ministers have come out to back Brussels in a row with Italy’s populist government over a budget that has been deemed to break the rules of the common currency bloc.

France’s finance minister, Bruno Le Maire, warned that the future of the euro was at stake as he urged the Italian government to reach an agreement with the European commission.

Related: Eurozone ministers line up behind EU in Italy budget dispute

Economist Rupert Seggins has pulled together a neat Twitter thread on today’s UK data:

1. Some rougher-looking data on the UK economy this morning. Starting with new car sales, down -2.9%y/y in October. Growth figures have been hit by a couple of events over the past couple of years: the new VED regime and the more recent new emmissions testing regime.

2. As Howard points out here, the impact of the new emmissions testing regime is still working its way through the figures.

3. Next up, we have a fall in the PMI services figure from 59.3 to 52.2 in October. Still saying growth, just not as much as before. Caveat: the PMIs are a bit noisy and the correspondence to the official output statistics is only rough. Markit highlighting Brexit uncertainty.

4. A few other possible influences. As Chris Giles highlights, there may be some weather-related unwiding going on here. What the sun giveth, the rain taketh away.

5. Simon also highlighting Q3 as being a blip, with UK growth rate in Q4 looking weaker than what we saw in the middle of this year.

6. Shaun puts a figure on what that weaker Q4 growth may look like.

7. Samuel brings in another important point whigh is that the UK economy is not disconnected with what is going on over the Channel.

8. Andy’s nice colour-coded table here really helps illustrate the extent to which the UK and Euro Area PMI indicators move together.

Here’s Andrew Hunter of Capital Economics on the strong US service sector growth:

October’s reading was above the consensus forecast of 59.3. The modest decline was driven mainly by the business activity index, which fell from 65.2 to 62.5, and the employment index which dropped from 62.4 to 59.7.

That said, the latter remains at a strong level by past standards and goes some way to explaining the 250,000 surge in non-farm payrolls last month.

America’s service sector has posted another month of strong growth.

The monthly US Services PMI report, from the US Institute of Supply Management, came in at 60.3, indicating output rose sharply again.

Did US ISM N-MFG PMI just peak?

Energy company Chevron (+3.65%) is leading the Dow risers in New York, followed strong results last Friday.

The US market has made a mixed start to trading.

While the Dow gained 75 points (0.3%) at the open, the Nasdaq dippped by 0.3%, as Apple shed 2%.

Global markets are on edge today as investors brace for tomorrow’s Midterm US elections.

With Donald Trump and Barack Obama both in full-on campaign mode, turnout is likely to be high.

Related: Trump and Obama press importance of midterms in last-ditch campaign effort – live

Should the Democrats make significant gains in the House of Representatives, there is a high possibility recent US dollar strength will abate. Democrats are not proponents of President Donald Trump’s low-tax regime and would likely frustrate plans for further cuts and deregulation, which have been recent drivers of the strong economy and currency.

While a weaker US dollar would provide much needed relief for emerging markets, US equities may encounter some headwinds.

A quick recap.

Growth across Britain’s service sector companies has hit a seven-month low. Firms say new orders are drying up, as Brexit uncertainty hits confidence.

Any readers have a bad day at work can take comfort – at least you haven’t lost control of a massive train full of iron ore.

That’s what happened to one poor driver employed by mining giant BHP Billiton in Western Australia. All was well, until the driver apparently got out of the train to check one of its 268 wagons.

Related: Runaway BHP train derailed after travelling 57 miles with no driver

UK insurance group Hiscox have fallen to the bottom of the FTSE 250 this morning, following its latest financial results.

Hiscox disappointed investors by predicting that growth will slow in the next few months, following a challenging year dominated by US hurricanes, typhoons in Japan, and higher UK subsidence claims following the dry summer.

Our preparations for Brexit are well advanced….

Our plans have always assumed a worst-case scenario ‘hard Brexit’ and we are prepared, irrespective of the outcome of the government’s negotiations.

Here’s our news story on the slowdown at Britain’s service sector companies last month:

Related: UK services growth hits seven-month low amid Brexit uncertainty

European stock markets have shrugged off this morning’s procession of bad news.

The main indices remain flattish, while Italy’s market is stuck in the red as the budget standoff between Rome and Brussels fizzles on.

The Caixin survey of Chinese service sector slipped to 50.8 – its lowest reading in one year. This adds weight to the argument that China’s economy is cooling.

Overnight, China’s Xi Jinping talked about boosting global trade, and warned about the downside of protectionist policies, but the update failed to boost investor sentiment.

In another blow, eurozone investor confidence has fallen to a two-year low.

Sentix, the German research group, reports that its eurozone investor morale index has dropped to just 8.8, from 11.4 in October.

“The reasons for this development are manifold. There are external factors such as the U.S. president’s trade policies as well as European issues.

“The discussion about the future of the car industry in Germany, the weakness of the banking sector and the budget issue in Italy come to mind.”

Here’s economist Sam Tombs of Pantheon on today’s PMI report:

The PMIs have overstated the impact of Brexit uncertainty on GDP before (most obviously in Q3 2016), so should we trust them now? The fact that the EZ PMI has fallen sharply too bolsters the case for thinking they will be accurate this time (and suggests Brexit isn’t only issue)

Britain isn’t the only economy which found October tough.

Factories around the globe reported a slowdown in activity last month:

Synchronized global slowdown…

The drop in UK service sector growth last month is “thoroughly disappointing”, says economist Howard Archer of EY Item Club.

The slowdown in new business growth (to a 27-month low) “bodes ill” for future growth, Archer says, adding:

Brexit uncertainties and concerns over the UK and global economies weighed on demand for business services.

Additionally, demand for consumer services was reported to be subdued, which ties in with other signs that consumers reined in their spending at the start of the fourth quarter after splashing out over the summer

Jeremy Thomson-Cook, chief economist at foreign exchange firm WorldFirst, says Brexit delays and wider fears over the global economic outlook are hurting UK service sector firms.

He fears the situation will get worse, until the UK and EU reach an agreement.

Services PMI shows that until a Brexit deal is done, business confidence and sentiment will only move lower. Whether this is enough to take the sector out of its recent morass will only be felt in time however.

In another blow, business confidence across the services sector is its lowest since July 2016, today’s PMI report shows.

Firms are growing increasingly anxious about the risk of Brexit-related disruptions (predictions of long queues and delays at the ports if Britain leaves the EU without a deal)

“A reluctance to commit was the message coming through loud and clear from service providers in October as the sector checked in with its worst performance since March and lowest optimism since July 2016.

“Many of the respondents attributed this poor performance and the biggest softening in new order growth since July 2016 to continuing ambiguity around the Brexit negotiations. There were also concerns over the weakness in the UK and global economies which affected client confidence and consumer spending.

Chris Williamson, chief business economist at IHS Markit, says UK services companies are suffering badly from Brexit uncertainty.

UK manufacturing growth hit a 25-month low in October (we learned last week), indicating the UK is only expanding sluggishly.

“The disappointing service sector numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy.

Combined with the manufacturing and construction surveys, the October services PMI points to the economy growing at a quarterly rate of just 0.2%, setting the scene for GDP growth to weaken sharply in the fourth quarter.

NEWSFLASH: Growth across Britain’s service sector has slowed to a seven-month low.

Service sector companies have reported that new business growth weakened in October, as nervous clients have cut back, according to data firm Markit.

Newsflash: British car sales have fallen again.

The new car market declined in October by -2.9% to 153,599 units with overall market down -7.2% over the year to date. It’s hoped the gap will narrow slightly as supply issues resulting from regulatory changes ease.

The pound has hit a two-week high against the US dollar, as the Brexit talks approach a climax.

Britain is hoping to make progress on the thorny issue of the Northern Ireland Backstop this week, so that an emergency summit could be called before the end of November.

Related: Theresa May’s chances of striking Irish border deal ’50-50′, say EU officials

European stock markets have started the new week in a subdued mood.

The FTSE 100, German DAX and French CAC are all basically unchanged this morning. Spain’s IBEX has risen by 0.35%, but Italy’s FTSE MIB has dipped a little.

Further evidence that China’s economy is starting to wilt under the trade war pressure – the country’s latest private sector-assessing Caixin PMI dropped to a 28 month low following a services sector slump – led to a pretty muted open in Europe this Monday.

Over in Shanghai, President Xi has vowed that America cannot sink China’s economy.

Xi Jinping has promised to lower import tariffs and improve access to the Chinese market in remarks meant to portray his country as a champion of globalisation as it remains locked in a trade war with the US.

“Protectionism and unilateralism is rising. Multilateralism and the free trade system are under threat … China will not close its door to the world and will only become more and more open”, the Chinese president said on Monday at the beginning of a trade fair in Shanghai.

Related: Xi Jinping promises to open Chinese markets in trade war joust with Trump

Anxiety over the US-China trade war ripped though Asian stock markets again today.

The tumble in China’s services PMI suggests that the escalating trade war with the US is taking “a massive bite out of the economy”, says Stephen Innes of foreign exchange firm OANDA.

Here’s more reaction:

China’s services sector (now bigger than industrial sector) back to lows of recent years, according to Caixin PMI. To be seen if it rebounds again. Note that India’s economy (and service sector PMI) have gone in the opposite direction.

China’s Services PMI hits 13-month low @50.8 from 53.1

Same trajectory as last week’s manufacturing PMI.

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

The slowdown was broad-based by sector, with both services and manufacturing noting weaker performances compared to the previous month.

Notably, manufacturing production stagnated, following increases in each of the preceding 27 months.

“The Caixin China Composite Output Index dipped to 50.5 in October from the previous month, reaching its lowest level since June 2016, indicating mounting downward pressure on China’s economy.

The subindex for new orders fell, pointing to softening overall demand conditions. The employment subindex edged up despite staying in negative territory, which could possibly be due to government efforts to stabilize the labor market. The subindex for input costs remained unchanged from the month before, while the one for output charges inched up, indicating easing pressure on company profit margins — though upward price pressure remained. The subindex for future output edged down, reflecting weakening confidence among companies.”

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