Britain’s FTSE 100 has shaken off its earlier losses to end the day slightly higher.

The blue-chip Footsie has closed 9 points higher at 6,721.

Those dovish comments from New York Fed chair John Williams seem to have provided a smidgen of festive cheer. The Dow is still up, a little, too.

Connor Campbell of SpreadEx says:

The Dow Jones attempted to put a star on top of December’s rotting Christmas tree on Friday afternoon.

The thrust of the Dow’s sizeable gains came following a somewhat reassuring interview with Federal Reserve Bank of New York President John Williams on CNBC. Williams claimed that the Fed is ‘listening’, and that ‘there are risks to that outlook that maybe the economy will slow further’.

Investors seemingly took this to mean that the central bank could hike rates less frequently than forecast in 2019, sending the Dow 300 points higher and back to 23150, having hit a 14 month nadir of 22600 at its lowest point on Thursday.

That may be all for today. We’ll be back on Monday, when traders will hope to finally see a Santa Rally. GW

Newsflash: Federal Reserve Bank of New York President John Williams has said that the central bank could reassess its interest rate policy and balance sheet reduction in the new year if the economy slows.

Williams told CNBC that:

“We are listening, there are risks to that outlook that maybe the economy will slow further.”

That could be a signal to the markets not to panic, after the Fed predicted two interest rate hikes in 2019 -- more than investors expected.

William’s comments are going down well on the New York stock exchange -- the Dow is now up 350 points, or 1.55%. at 23,210.

European stock markets are ending the week on a low note.

The Stoxx 600 is down 0.33%, on track for a new two-year closing low.

Guy Foster, Head of Research at Brewin Dolphin, said:

“The market has been weak during the final quarter of 2018, as volatility has picked up. We see this as a symptom of monetary policy being tightened at an accelerating pace, which occurred simultaneously across the world’s major economies. That has drawn liquidity away from global equity markets, causing stocks to fluctuate further from their fundamental valuations than they had when monetary policy was loose. However, in our view, interest rates and bond yields still represent poor compensation for risk relative to equities.

Oil is also suffering in the rout, with Brent crude down 2% at just $53.26 per barrel, That’s its lowest level since September 2017 -- a boost to consumers.

Foster explains how a weak oil price can help the global economy:

“Meanwhile, falls in energy costs will act as an effective tax cut to consumers and businesses around the world, as it did during the last bout of volatility in 2016. Lower cost inflation should therefore set the stage for a recovery in economic activity and further profit growth into 2019.

Capital Economics also believe the US Federal Reserve blundered on Wednesday when it raised American interest rates to up to 2.5%.

They say:

The clear view in financial markets in the wake of the December FOMC meeting is that any further rate hikes over the coming months are likely to be reversed in 2020.

Our long-held forecast is that a sharp slowdown in economic growth next year will prompt the Fed to cut rates by 75bp in the first half of 2020, more than markets are currently pricing in.

Bloomberg’s Lisa Abramowicz explains why Wall Street is worried about Washington gridlock....

A trillion here, a trillion there, and eventually all these stock market losses add up....

New economic data just released has confirmed that the US economy grew pretty steadily in the third quarter of 2018.

Q3 GDP growth has been revised down very slightly to an annualised rate of 3.4%, from 3.5%.

That’s more rapid than the UK, whose quarterly growth of 0.6% equates to 2.4% on an annualised basis. It’s nearly three times as fast as France.

Lukman Otunuga, Research Analyst at FXTM, says risk-taking is off the menu this Christmas, as investors digest Donald Trump’s threat to shut down the US government:

The pain felt across global equity markets intensified today as growing fears of a U.S. government shutdown crippled risk sentiment.

It has been a remarkably terrible trading week for financial markets amid concerns over rising U.S. interest rates, decelerating global growth, Brexit uncertainty and chaos in Washington. The absence of appetite for risk was clearly reflected in Asia this morning as stocks closed broadly lower. In Europe, shares are trading in a depressed fashion and this negative mood is likely to infect Wall Street this afternoon. With geopolitical risk factors weighing heavily on investor confidence, financial markets remain at threat of concluding 2018 on a risk-off tone.

Two days after the Federal Reserve raised US interest rates, a growing band of investors reckon the Fed will be forced to CUT in 2020.

That suggests pessimism over the outlook for the American economy, amid chatter of a slowdown, or even a recession.

Wall Street is expected to suffer further losses when trading begins in a couple of hours.

The S&P 500 is being called down 0.5% in the futures market, as investors worry that the US government could face a partial shutdown.

The US Senate is expected to reject a finance bill that includes $5.7bn funding for a wall on the Mexican border -- as long-demanded by Donald Trump. That’s because the measure needs a 60 votes to pass, and the Republicans only have 51 seats at present.

President Trump is awake and tweeting that he would refuse to sign the spending bill unless the Senate passes the bill (which was rapidly reworked yesterday)

These tweets are from yesterday, but they largely sum up the mood in the markets today:

Back in the financial markets, shares are deeper in the red as the sell-off gathers pace.

All the European indices are now down today, hitting new two-year lows.

Mihir Kapadia CEO and Founder of Sun Global Investments, says gloom is everywhere as a grim week draws to a close.

“As Christmas approaches, market sentiment remains very negative. Global stocks have had a terrible December (S&P 500 and Dow are down 10% and 12% in in the month) as issues such as the ongoing US-China trade dispute as well as the prospect of a US government shutdown have added to the pessimism.

Following a slide on Wall Street in yesterday’s session, Asian markets have traded lower, with European stocks following suit on opening.

Economist Sam Tombs has spotted another warning sign in today’s data dump:

There’s been quite a deluge of UK data this morning.

The latest national accounts (the growth figures) and public finances (borrowing) were both being released, plus breakdowns of business spending and consumer trends.

Our cup runneth over..... rather too messily for the FT’s Chris Giles:

Still, here’s what we’ve learned:

• Real UK gross domestic product (GDP) is estimated to have increased by an unrevised 0.6% in Quarter 3 (July to Sept) 2018, while real GDP growth in 2017 has been revised up from 1.7% to 1.8%.
• Households, corporations and government all continue to be net borrowers in Quarter 3 2018, borrowing or running down their savings to finance their spending and investment, financed by the rest of the world being a net lender to the UK.
• The current account deficit widened to 4.9% in the latest quarter, financed primarily by a net inflow of portfolio investment, mainly reflecting equity investment, while there has been a divestment of the net acquisition of financial assets and the net incurrence of financial liabilities in each of the last two quarters.

Better news: Britain’s budget deficit (the gap between government spending and income) has narrowed.

The UK borrowed £7.2bn to balance the books last month, £900m less than in November 2017. That’s the smallest deficit for any November since 2004.

This means that the UK has borrowed £32.8bn so far this year, £13.6bn less than in the same period in 2017, and the lowest year-to-date for 16 years.

It’s a brighter picture than the current account deficit.....

Howard Archer of EY Item Club is concerned by today’s data:

The slump in business spending suggests bosses are unwilling to buy new warehouses, offices and machinery until they have clarity about Brexit.

This chart, from the ONS, shows how UK business investment contracted last quarter -- by 1.1% to £46.9bn.

Over the last 12 months, business investment has declined by 1.8%. It has contracted for three quarters in a row; the first time in a decade.

Some early reaction to the UK’s disappointing balance of payments:

Good news! Britain was one of the best-performing major economies in the last quarter.

Bad news! That’s not as impressive as it sounds....

Not a good sign for 2019 growth...

Today’s GDP report also show that Britain’s services sector grew by 0.5% in the last quarter (revised up from 0.4%).

Industrial production rose by 0.6% (revised down from 0.8%) and construction grew by 2.3% (revised up from 2.1%).

Business investment fell, though, by 1.1%.

The Office for National Statistics has confirmed that the UK economy grew by 0.6% in the third quarter of this year, matching earlier estimates.

That’s a relief; there were concerns that growth could have been downgraded.

It’s been a tough year for stock pickers.

Britain’s stock market has shed around 13% of its value this year, taking a bite out of many portfolios.

Russ Mould, AJ Bell Investment Director, explains:

“For the year to date, just six of the 39 industrial groupings which make up the FTSE All-Share are showing a gain and the best performer, Technology Hardware, has a market cap of less than £1 billion, so it is so small as to be barely relevant.

Here’s the damage:

Santa has better get his stakes on, if he’s going to bring any cheer to the City.

As Connor Campbell of SpreadEx puts it:

Santa remained on holiday this Friday, the European markets opening in a Christmassy shade of red following yet another disastrous session for the Dow Jones.

With the Dow now under 23000 for the first time in 14 months, Europe stood little chance of bucking the bah humbug trend as trading got underway.

The biggest fallers in London this morning include utility company Severn Trent (-1.9%), communications group Vodafone (-1.8%) and consumer goods giant Reckitt Benckiser (-1.5%).

Housebuilders are having a better morning, with Barratt Development, Taylor Wimpey and Persimmon all gaining at least 1%.

At the risk of overdoing the gloom, UK consumer confidence has hit its lowest level in five years.

Brexit uncertainty is being blamed after the GfK index of consumer morale fell to -14 in December, down from -13 in the previous month and -10 in October.

People are particularly anxious about economic prospects - expectations for the economy over the next 12 months tumbled to its lowest since December 2011.

European stock markets have opened in the red, as the sell-off continues.

The Stoxx 600 index has lost another 0.35%, following last night’s losses on Wall Street.

Only Britain’s FTSE 100 is defying gravity; it’s up by 6 measly points.

Another blow: French business confidence has fallen to a two-year low this month, according to statistics body INSEE.

INSEE’s survey of business morale dropped to 102 this month, down from 103 in November, which is the weakest reading since November 2016.

It suggests that the protests that have gripped Paris in recent weeks have worried business leaders, coming on top of trade war worries.

It’s been a “horrible” quarter for the financial markets, says Craig Erlam of City firm OANDA.

He points out that many markets have fallen from record highs into correction territory (-10%) or even a full-blown bear markets (-20%).

We’ve gone from undeterred optimism to widespread pessimism in such a short period of time – as is often the case – and there clearly isn’t much appetite just yet to try and catch this particular falling knife.

The Trump administration’s continued hard-line approach with China isn’t helping matters and the prospect of a government shutdown isn’t doing the situation much good either.

Chinese investors have endured a rough December:

They’re not alone either... al the major indices have suffered this autumn:

This is a worrying sign: the VIX volatility index, which measures how fearful investors are, has hit its highest level since February.