UK growth hits six-month low as Brexit looms - as it happened

Before we close for the day, here’s a quick summary of the main events:

The UK economy grew by 0.3% in the three months to November, which was the weakest in six months. Growth was held back by a shrinking British manufacturing sector, with car production bearing the brunt of the slump.

Flybe has urged its shareholders to accept a cut-price £2.2m takeover offer from a consortium led by Virgin Atlantic. If the offer of 1p per share is accepted, Virgin and co will inject £100m into the struggling airline.

Economists said Italy could be in a technical recession, predicting a 0.1% contraction in GDP in the fourth quarter of 2018, following a 0.1% fall in the third.

The pound rose after a report in the Evening Standard which quoted unnamed cabinet sources saying Brexit could be delayed. However, a spokesman for Theresa May said she had ruled out an extension to Article 50. The pound is now up 0.3% against the dollar at $1.2783, and down 0.3% against the euro at €1.1467.

Annual inflation in the US fell to 1.9% in the year to December from 2.2% in November, as a drop in petrol prices offset a rise in the cost of food.

Markets across Europe opened higher but momentum faded and all major indices are down. Having briefly broken through the 7,000 mark for the first time in 2019, the FTSE 100 is down 33 points at 6,909.

Wall Street is also down, with the Dow off 151 points at 23,850.

That’s all for today. Thank you for all the comments, and please join us again on Monday.

US markets fell after the opening bell, as Donald Trump edges closer to declaring a national emergency to fund his long-promised border wall with Mexico and end the political impasse that has led to the partial shutdown of the government.

• Dow Jones: -110 points or -0.5% at 23,892

• S&P 500: -12 points or -0.5% at 2,584

• Nasdaq: -41 points or -0.6% at 6,945

11 Jan 201909.31 EST

Helena Smith

Over in Greece, the German chancellor Angela Merkel is continuing to win over Greek hearts as she pledged “heart felt support” for the country almost 10 years after its debt crisis began.

Helena Smith explains:

The 64-year-old leader, whose two-day official visit ends this afternoon, has staged what is widely being seen as a victory tour of the eurozone’s weakest member state, five months after it exited its third EU-sponsored bailout and almost four years after coming close to crashing out of the single currency bloc.

The unexpected love-in between the leader, once deplored as the mother of austerity and Greece’s political elite, continued today with Merkel dispensing with her famous frostiness to unexpectedly announce that it is a “matter of the heart to support Greece” even on the question of reparations for Nazi war crimes.

Greek-German relations had now entered “a new phase,” she said, with Berlin being Athens’ “most significant trade partner” and Greek exports, last year alone, increasing by 18%. After holding talks with Merkel, Greece’s leftist prime minister Alexis Tsipras insisted that while much divided them ideologically they had overcome differences by building up “a relationship of trust” that had, he said, played a major role in preventing Grexit.

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The fall in US inflation reduces the urgency for further interest rate hikes by the Fed, according to Andrew Hunter at Capital Economics.

With real economic growth solid and the stock market continuing to rebound, we suspect that it’s still too soon to assume that the Fed’s tightening cycle is over.

But the continued stability of core inflation could give the Fed more room to pause, as officials assess the impact of the slowdown in global growth and tightening in financial conditions on the domestic economy. Regardless, we continue to expect that an economic slowdown later this year will force the Fed to start cutting rates again in 2020.

Annual inflation in the US fell to 1.9% in December from 2.2% in November, the Labor Department said.

A 2.1% drop in petrol prices over the 12 months offset a 1.6% rise in food prices, itself driven by an increase in the cost of fresh fruit and vegetables.

Core inflation – which strips out food and energy prices – was 2.2% in the year to December, unchanged from November.

Read our full story on this morning’s GDP figures here:

Professor Costas Milas of the University of Liverpool says today’s GDP data won’t deter the Bank of England from raising interest rates this year:

Although today’s economic data confirms that our economy is slowing down, the slump is fully in line with Bank of England’s most recent predictions.

With this in mind, we are still on target for the Bank of England policy rate rate to rise to 1% by the end of 2019 [from 0.75% now]. Unless, of course, Mrs May’s Brexit deal is rejected during next week’s Parliamentary vote which risks opening Pandora’s (economic) box and bring into the picture interest rate cuts instead.

Having briefly flirted above 7,000, the FTSE 100 is now back in the red as the earlier merriment appears to have evaporated.

The FTSE is down 19 points or 0.3% at 6,923.91.

Here’s how it looks elsewhere:

• Germany’s DAX: -0.4% at 10,873.44

• France’s CAC: -0.4% at 4,784.62

• Italy’s FTSE MIB: -0.3% at 19,239.44

• Spain’s IBEX: +0.4% at 8,893.60

• Europe’s STOXX 600: flat at 348.88

Away from the UK, Italy could be heading into recession according to economists at the Dutch bank ING.

They say that poor industrial production data for November, combined with soft confidence numbers, significantly increase the chances of Italy entering a technical recession in the fourth quarter.

The Italian economy is expected to shrink by 0.1% in the fourth quarter of 2018, following a 0.1% contraction in the third quarter.

With similar fears for Germany, it’s not looking so rosy for the eurozone’s major powers.

Paolo Pizzoli, senior economist at ING, says:

Industrial production data, just published by Istat, showed that the Italian economy shared the same difficulties as Germany and France in November.

Although a public holiday at the start of the month might have contributed to the worsening picture, we believe the impact is probably only minor.

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The pound has been boosted this morning by mounting speculation that Brexit could be delayed (or cancelled altogether).

According to a report in the Evening Standard, unnamed “cabinet ministers” said a Brexit date of 29 March was looking increasingly unachievable.

Here is an extract from the London paper:

A backlog of at least six essential Bills that must be passed before Britain leaves the European Union has left ministers convinced the timetable will be extended.

They include the much-delayed Immigration Bill.

Even asking MPs to sit at weekends and cancel their half-term holiday in February may not provide enough time to avoid asking for a delay, several sources have disclosed.

A senior minister said: “The legislative timetable is now very very tight indeed.”

The pound rose by a cent to a high of $1.285, but the gains narrowed when a spokeswoman for Theresa May said she had ruled out an extension to Article 50.

The pound is now up 0.4% or half a cent at $1.280. It is up 0.2% against the euro at €1.1526.