Davos 2016: FTSE 100 in bear market as global economic fears grow - live

Discussion in 'Market News' started by Lily, Jan 20, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    There’s a gloomy feeling in the air as world leaders and business chiefs gather at the World Economic Forum in Davos

    3.22pm GMT

    Canada’s new prime minister, Justin Trudeau, has urged Davos attendees to invest more in his country, in one of his first appearances on the international stage since winning power.

    Like him or not, @JustinTrudeau does good job pitching #Canada, incl this one: "Davos is lovely but you've got to come to Whistler" #wef

    Low oil prices are a challenge but the Canadian economy is a lot more than just natural resources: @JustinTrudeau #wef

    3.02pm GMT

    We’ve also collared Dennis Nally, chairman of PricewaterhouseCoopers, to talk about the turmoil in the markets.

    “I don’t know whether we are heading for another crash but unquestionably the environment is clearly having an effect on markets, on everything that is going on here and on the attitudes that exist here in Davos.

    “There needs to be more dialogue about how [bring] to stability back into the system. I believe there is a disconnect between government, regulators and business”.

    3.00pm GMT

    Bob Diamond, the banker who was forced out of Barclays during the Libor rigging crisis, says there’s no comparison between the situation today and in 2008.

    Diamond, who has now founded a banking operation called Altas Mara which is expanding across Africa, says:

    “It Is a correction, a heathy correction. A lot of people are trying to compare it to 2008, but during the last quarter of 2008 and the first quarter of 2009 we probably had the deepest economic correction I have seen. I don’t see us going into that position.

    The US economy is still strong, Europe is doing surprising well - the easier monetary policy led by governor [of the European Central Bank Mario] Draghi has sown some positives. There is a correction in China.. If china slows down to 6 or 7% (growth) is that a success? That’s fine”

    “A lot of people are taking about where is the liquidity, where are the buyers? Basel three, Volcker rule, ring fenced banks, buffer upon buffer of capital. Are we surprised there is less liquidity from the banks?”

    2.44pm GMT

    Here’s one jot of good news, Nouriel Roubini, Davos’s own doctor doom and the economist who predicted the last crash doesn’t think it is going to be that bad this time.

    “It is not going to be like 2008-09. There is not the excessive leverage in the financial system that there was last time.”

    ”The big thing that should happen is China should stop kicking the can down the road and get on with some serious structural reforms”.

    #WEF16 insight: inequality is rising due to technology, trade, globalization, winner take all effects, power of elites. What to do about it?

    #WEF16 debate. Tech innovation is capital-intensive, skills-biased, labor-saving. So it increases income and wealth inequality.

    2.38pm GMT

    To no one’s great surprise, the US markets have followed the rest of the world and moved sharply lower in early trading.

    The Dow Jones Industrial Average is down 271 points or 1.7% while the S&P 500 has fallen more than 1% and Nasdaq has lost 1.5%.

    2.32pm GMT

    Sir Roger Carr, chairman of BAE Systems, said:

    I think we’re witnessing a collision of events which has provoked an immediate sense of crisis. Whether it’s commodities, China, oil prices, terrorism, geopolitical turbulence, all have landed particularly in the month of January and there is an immediate impact which is reflected in the stock market.

    At the moment what is being discounted are some of the positives that come out of low oil prices in economic terms. It is only being looked at in the lens of bad news.

    2.30pm GMT

    Back in Davos and Gavin Patterson, chief executive of BT, was asked if we were on the brink of another crisis. He replied:

    On the balance of probabilities no, but it is very finely balanced.

    It is an unstable environment. In terms of doing business, I’ve just been at a lunch and most of the CEOs there say most of the underlying businesses are pretty good. If there is contagion in financial markets into the business markets that is going to affect confidence and that’s when we could see a slow down.

    We’ve got to be used to a period of time when the world is just more volatile and we have to be able to live and manage through those sort of conditions. I don’t think it’s going to go away. There could be quite significant swings but the underlying number when it’s evened out will be fine.

    We need the financial markets to settle down and hope that confidence remains strong and that it doesn’t affect people’s underlying desire to do business. What is really going in China is a big [concern], elections and referendum around the world is an issue and the state of things in the Middle East which have a knock on effect.

    1.57pm GMT

    The US inflation figures suggest there may only be one Federal Reserve rate rise this year, says Rob Carnell of ING Bank:

    US CPI for December fell 0.1% month on month versus a consensus 0.0% month on month expectation. Energy prices were down 2.4% month on month, and food prices also fell for a second consecutive month.

    But it is the weakness in the service sector inflation component that probably caught the consensus out the most. At only +0.1% month on month, this was down on the trend 0.2-0.3% growth in service sector prices over recent months, and may reflect a slightly weaker growth profile in residential rents, though it has to be said that the weakness in services was not confined to rentals, and was reflected also in areas such as recreation and education. Goods (commodities prices) were as ever, very weak (down 0.1% month on month excluding food and energy, down 2.1% year on year).

    1.47pm GMT

    In the US, the consumer price index fell 0.1% month on month in December after being unchanged the previous month. Analysts had been expected the index to also remain flat in December, but the falling oil price helped push it lower.

    But the year on year figure rose 0.7%, following a 0.5% gain in November. The core CPI, which strips out energy and food costs, rose 0.1% month on month after rising 0.2% for the previous three months, and 2.1% year on year.

    1.15pm GMT

    Goldman Sachs has reported a drop in profits for the fourth straight quarter, hit by a $5bn settlement related to sales of mortgage bonds during the financial crisis.

    The bank’s fourth quarter earnings fell 71.8% to $574m, with its results also affected by the plunge in oil prices, the slowdown in the Chinese economy and US rate rises.

    12.56pm GMT

    The slump in oil prices has sent the rouble to a new record low. The Russian currency fell to 80.92 to the dollar before recovering to 80.85, still down 2.8% on the day.

    The fall comes amid fears that the commodity-dependent Russian economy could be further hit by the continuing slide in crude prices.

    12.41pm GMT

    London’s leading index has fallen into bear market territory, defined as 20% below its recent peak.

    The FTSE 100 has fallen to 5688, down more than 3% as the oil price continues to slide amid concerns about oversupply and lack of demand. Worries about the outlook for China have rattled global markets, not helped by gloomy comments from the World Economic Forum in Davos.

    12.13pm GMT

    Just grabbed a word with Philip J. Jennings, general secretary of UNI Global Union, about the turmoil in the markets.

    Are we heading into a crash?

    Yes, we are heading for a crash, I’m worried about it.

    Emerging markets were meant to pull us through this crisis. but China is slowing, and the impact will ripple out across the developing economy. And the jobs situation across the global economy will not improve

    We are worried abut the economic climate - how deep the crash will be. Those RBS analysts [who said to sell everything] may be right - “cataclysm” could be the right word to use.

    We need leadership. The G20 needs to fulfil the promise they made at the last financial crisis, to not just save the banking sector but to also put the economy back on track.

    The private sector need to understand that lack of investment isn’t helping, and we need to push wages higher. The G20 needs to put demand back in the economy.

    12.11pm GMT

    Some customers at Italy’s Monte dei Paschi bank have started withdrawing their savings, according to its chief executive. The bank is struggling with its bad loans and has seen its stock market value have this year. Reuters reports:

    Chief executive Fabrizio Viola did not say how much money savers had withdrawn, or when the outflow began, though he said the fall in deposits was “limited” and that the bank could cope with it as he sought to reassure customers and investors.

    Italian bank shares have lost 20% so far this year as investors, already rattled about global economic growth, have sold out of a sector with low profitability and about 200 billion euros ($218 billion) of loans that are unlikely to be repaid.

    “Of course clients turning to our local branches are worried about what they read,” Viola said in a statement.

    “At present the size of the funding lost due to clients who decided to move part of their savings elsewhere is limited and anyway below levels seen during the previous crisis the bank faced in February 2013 which was overcome brilliantly.”


    11.56am GMT

    Here’s some words of comfort amid the gloom.

    European economics commissioner Pierre Moscovici does not believe there will be a repeat of the financial crisis, nor does he think the eurozone’s growth outlook will be changed in the next EC forecasts.

    Central banks still have more firepower they can use to counter a slowdown in global growth, which does not change the outlook for recovery in the eurozone, European Economics Commissioner Pierre Moscovici said on Wednesday.

    In an interview with Reuters Television at the World Economic Forum in Davos, Moscovici said he did not believe there would be any return to an international financial crisis, despite turmoil in world markets during the first few weeks of 2016 triggered by China’s slowdown and low oil prices.

    Moscovici said he did not expect any major change in the euro zone’s growth outlook when the European Commission issues an updated forecast in early February, despite the sharp slowdown in China and tumbling stock and commodity markets.

    The EU executive last forecast in November that the euro zone would grow by 1.8 percent this year and 1.9 percent in 2017 after an estimated 1.6 percent last year.

    11.51am GMT

    The IMF has also weighed in on migration, saying it can be positive.

    A new report predicts a short-term boot to GDP in countries who take refugees in, and long-term benefits if migrants are integrated well.

    Related: IMF says refugee influx could provide EU economic boost

    Lagarde: native workers wage declines in face of migration likely to be limited and temporary pic.twitter.com/b5s6b9YHsT

    10.59am GMT

    More on capital flows. The amount of money flowing out of emerging markets, especially China, was much worse than expected last year, according to a report from the Institute of International Finance.

    In October the finance industry group forecast net outflows from emerging markets of $540bn.

    Net capital outflows from emerging markets in 2015 were even larger than we previously thought.

    We now estimate total net capital outflows (including unrecorded flows captured by net errors and omissions) at $735 billion, up from outflows of $111 billion in 2014.

    10.59am GMT

    HSBC CEO Stuart Gulliver spoke to reporters after he had finished talking about climate change.

    Asked about the financial market turmoil, he said that part of the movement was “self fulfilling” as investors liquidated positions to make margin calls on positions.

    “You always get an overshoot in times of significant sell offs”.

    “I think we will see further adjustments before we hit equilibrium. We’ll see a little more sell offs before we see equilibrium but we’re closer equilibrium than we were a couple of weeks ago, we’re towards the end of this sort of sell off”.

    10.53am GMT

    Nariman Behravesh, chief economist of IHS, has some interesting thoughts on China, where he thinks policy makers in Beijing will respond to pressure on the yuan by quietly bringing back capital controls.

    “There has been a massive amount of capital flight - around $1 trillion since last summer” Behravesh said. “That puts huge downward pressure on the exchange rate. The question is what happens next.”

    “The first thing that policy makers could do is to let the currency go. That would result in a devaluation of 15-20%. That would have horrible consequences. It could trigger a global currency war and a global recession.”

    The second thing they could do is keep using foreign currency reserves, but there are limits to that.”

    10.51am GMT

    #WEF16 #Davos Gauck talks about Germany's post WW2 migration history. Tune in https://t.co/JodISXnT8V pic.twitter.com/Nlw7zqccCz

    Joachim Gauck, the president of Germany, is addressing the Davos Congress Hall now.

    #migration is always hope - and can be a chance for new and old homeland says #Germany's #Gauck @Davos #wef16

    Related: Angela Merkel faces party rebellion over Germany's stance on refugees

    The president of Germany says that limiting the number of refugees entering Europe is necessary and “morally acceptable” if the continent is to continue to provide help to those in need.

    While stressing the “humanitarian responsibility” of taking in victims of persecution, Joachim Gauck told a conference in Davos, Switzerland, that Germany and European countries must limit the numbers of people who want to come in to avoid being overwhelmed.

    10.44am GMT

    My colleague Jill Treanor has spoken to HSBC’s CEO Stuart Gulliver - he has admitted that the bank may not have a decision on whether it is moving its bank out of the UK by next month’s financial results.

    Stuart Gulliver says will be update on hq decision by hsbc results on 22 Feb

    HSBC's boss says he did not know if there would a decision on hq by 22 feb #davos

    10.33am GMT

    Al Gore, former US vice-president, says last month’s Paris agreement showed that the world is prepared to do what’s needed to tackle climate change.

    195 nations said yes, we will change. The direction of travel has been established....and that message has been received by the World Economic Forum.

    “The Paris agreement had to be unanimous, if there was one country that didn’t agree with the carbon price in 2015 had that been rammed down the throat we would not have had a Paris agreement.”

    10.30am GMT

    The stock market sell off is getting worse. The FTSE 100 is now down 170 points or 2.8% at 5706 - only around 20 points off a bear market (20% off its peak).

    Germany’s Dax is down more than 3% and France’s Cac has fallen 3.3%.

    10.24am GMT

    Sir Martin Sorrell, chairman of advertising giant WPP, has added his voice to those warning that the world faces slowing growth.

    The new normal is a low-growth world. Inflation is under too much control, we could do with a bit more of it.

    That scenario will continue. The system couldn’t sustain pre-Lehman growth rates because it blew up in September 2008.

    For the next year there is going to be a lot of risk in China and the emerging markets, but not such elevated risks for Europe and the US.

    10.11am GMT

    Climate change is a big theme at Davos, especially after Leonardo DiCaprio attacked the greed of the energy industry last night.

    Stuart Gulliver, boss of HBSC, has told one panel that the bank sets tougher lending criteria for coal-fired power stations in emerging markets than those in developed economies.

    "The maths do work" says HSBC's Stuart Gulliver when asked about financing of green fuel at #davos "The public wants to do this"

    10.06am GMT

    Ngozi Okonjo-Iweala, former Nigerian finance minister, has backed the ebola agreement between Gavi and Merck announced today.

    There was a “shared terror” in Africa last year, she says, during the ebola outbreak in which more than 11,000 people died.

    9.55am GMT

    Amira Yahyaoui, the Tunisian journalist who is co-chairing this year’s meeting, says the rise of smarter machines (the 4th industrial revolution), should spur humans to understand what makes them human.

    Speaking on a panel, she says humans are no longer in a monopoly on planet Earth. We are in competition with things that might be better than we are.

    We are the ones destroying the planet, we are the ones killing humans. So this 4th industrial revolution should maybe be a revolution of values.

    Eighteen percent of this forum are women, 18 is nothing. I come from a country supposed to be very anti-woman and we are more than 33% women in parliament and we have parity in every election.

    It’s not by improving the candle that we created electricity, and it’s time to create electricity.

    9.55am GMT

    Geraint Johnes, professor of economics at Lancaster University, said:

    All regions except London experienced a fall in the unemployment rate, suggesting that the recovery is now well and truly being felt nationwide.

    The construction industry has continued to play a leading part in the recovery - the number of jobs in this sector has increased by some 77000. Administrative and business support functions have also seen considerable growth - of 50000 jobs - over the latest period.

    9.53am GMT

    And here’s chancellor George Osborne on the day’s data:

    .@ONS stats show the UK #employment rate is the highest since records began in 1971. Read the Chancellor’s response: pic.twitter.com/KuB9BvgB5v

    9.53am GMT

    Continued weakness of UK pay growth still looks odd given the tightening labour market. pic.twitter.com/W3inYrcgeq

    9.51am GMT

    UK unemployment hits 5.1%, same as 2000-07 average, yet no inflation in sight. pic.twitter.com/oiwpKQ1PZS

    9.46am GMT

    On the jobs data, James Knightley at ING Bank said:

    The UK labour data looks pretty decent with employment growth in the three months to November rising 267,000 and the unemployment rate falling to 5.1%, both are better than the 235,000 and 5.2% consensus predictions. However, wage growth did slow close to expectations (ex bonus the three month average is now 1.9% year on year although the single month reading did rise to 2.1% from 1.6%). Consequently, it is an encouraging report that should keep consumer confidence and spending running at healthy levels.

    However, with Bank of England Governor Mark Carney suggesting there is little appetite for a rate hike any time soon and with the prospect of a Brexit vote set to weigh on activity it looks as though November remains the earliest possible opportunity for a rate rise.

    9.44am GMT

    Here’s are the average earnings:

    9.42am GMT

    The government’s plans to cut back the public sector show through in the jobs data. For September 2015, 17.1% of people in employment worked in the public sector, the lowest proportion since comparable records began in 1999.

    9.39am GMT

    Here’s the Reuters take on the UK data:

    Wage growth in Britain in the three months to November was its slowest since February, official data showed on Wednesday, the latest sign the Bank of England will take its time before raising interest rates.

    The slowing in wage growth came even as Britain’s unemployment rate unexpectedly fell to 5.1 percent, its lowest since early 2006, from 5.2 percent in the three months to October.

    9.36am GMT

    The unemployment rate of 5.1% was below forecasts of a 5.2% figure.

    #Unemployment rate 5.1% for Sep-Nov 2015, down from 5.8% a year earlier https://t.co/JHtQT8CKWi pic.twitter.com/hykSwTBxUs

    9.36am GMT

    Total weekly earnings rose 2%, compared to expectations of 2.1%. This is also the weakest growth since February.

    9.35am GMT

    On the wages front, average weekly earnings excluding bonuses rose 1.9% in the three months to November, compared to expectations of a 1.8% rise. This was the weakest growth since February last year.

    The November figure was 2.1% year on year.

    9.34am GMT

    For September to November 2015, 74% of people aged from 16 to 64 were in work, the highest employment rate since comparable records began in 1971, according to the Office for National Statistics.

    9.33am GMT

    The UK December claimant count has fallen 4,300 compared to expectations of a 2,500 rise.

    The jobless numbers fell 99,000 to 1.675m in the three months to November, meaning the unemployment rate is 5.1%, its lowest since the three months to January 2006.

    9.06am GMT

    With crude still tumbling - Brent is now down 2.8% at $27.88 a barrel - Shell has spelled out the damage the slump in oil prices is doing to its business. Our energy editor Terry Macalister reports:

    Shell has warned that its fourth-quarter profits may be 50% lower than last time with full year write-offs as high as $7bn (£5bn), underlining the damage being wreaked on the industry by low crude prices.

    In the first preliminary results to be reported this year by any of the large oil companies, Shell said it expected earnings to come in at between $1.6bn and $1.9bn and full-year numbers as low as $10.4bn.

    Related: Shell warns of 50% cut in profits amid plunging oil price

    8.55am GMT

    Gavi, the vaccine group, is announcing a new deal with drugs company Merck to get access to its ebola vaccine.

    Under the scheme, Merck will make 300,000 doses of the vaccine available in the next few months, for clinical trials and in case there is another outbreak. The vaccine not been fully licenced yet, but testing last year found it was 100% effective in providing protection against ebola.

    The scale and speed of the firestorm in Africa reminded us that mother nature is the best terrorist.

    It showed that we need to prepare in advance, and also respond quickly when a crisis occurs.

    8.41am GMT

    Anand Mahindra, director of Indian company Mahinda and Mahindra, is one of the speakers on a panel about the transformation of tomorrow.

    “I was scared” he said when having dinner in New York and the young girls sitting next to him didn’t talk to each other for 15 minutes while they used their phones.

    “Men still run the world and I’m not sure it’s going that well”.

    8.24am GMT

    Facebook’s CEO, Sheryl Sandburg, is discussing the future of technology now:

    "No place for hate and intolerance on our platform" Sheryl Sandberg of Facebook tells #davos

    8.08am GMT

    In the wake of falls on Asian markets, investors in Europe are seeing heavy losses at the start of trading.

    The FTSE 100 is down 110 points or 1.8% 5766, its lowest level since November 2012 and less than 100 points off a bear market (down 20% from its all time high last April).

    7.42am GMT

    The head of Swiss banking giant UBS, Axel Weber, has added to the angst in Davos by warning that we are stuck in an era of low growth.

    “Last year the forecast of the IMF for that year was 2% lower than the forecast three years out. It’s just a sign of the fact we are and have moved to a lower growth environment, where the rebound of growth rates we’ve seen in the past we are unlikely to see again soon. We are coming out of biggest global crisis in many decades and it will take time to heal”.

    One of the reasons why growth cannot be reignited is the central banks also have a difficulty to reignite inflation rates. Most of the central banks tell you (their target) is to have inflation rate of around 2%, quantitative easing and massively expanding the balance sheet does not lead to an uptick of inflation close to target at least on the time horizon of one to two years out”.

    “We are seeing a low growth, low interest rate environment with low interest rates. We will have to get used to the lower growth environment and low interest rate environment”.

    7.41am GMT

    Tuesday’s market rally has proved shortlived, with Asian markets down sharply and Europe forecast to follow suit.

    After rising on talk of growing Chinese demand for oil and hopes of more central bank stimulus to boost the world’s second largest economy, crude is falling back once more. That appears to be a belated reaction to the International Energy Agency saying the market could “drown in oversupply.”

    The inability of US markets to hold onto most of its gains was the first clue as oil prices slipped back off their highs once again. Furthermore it is this inability to sustain rebounds for any length of time that continues to gnaw away at investor sentiment in the short term, and keep the pressure on the downside.

    Related: Asia Pacific stock markets in full retreat as bears take control

    7.35am GMT

    Business leaders in Davos are rather gloomier this year, according to a new report from PricewaterhouseCoopers last night.

    Terrorism, oil, and China, mean bosses are more worried than at any time in the last 5 years:

    Related: Davos 2016: worries mount for world's business leaders

    7.17am GMT

    Good morning from Davos, Switzerland, where the 2016 Annual Meeting of the World Economic Forum is getting underway.

    There’s a bit of snow in the air this morning, and more than a bit of anxiety as global leaders, business chiefs, campaigners, celebrities and the media converge on the small ski resort.

    Another risk-off day: Asia stocks tumble w/ Japan down almost 4% on global growth concerns and another #oil crash. pic.twitter.com/czmHl7TMSt

    The somewhat mystifying 3%+ rally in Mainland equities yesterday has proved short-lived and this is likely to punish commodities on European and US exchanges.

    Some more of the Chinese GDP data has filtered out today and concerns about Chinese economic growth seeing a very weak Q1 in 2016 are growing.

    Continue reading...

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