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European stocks jump on ECB stimulus and higher oil prices – business live

Discussion in 'Market News' started by Lily, Mar 11, 2016.

  1. Lily

    Lily Forum Member

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    12.46pm GMT

    Wall Street’s late recovery overnight - the Dow Jones Industrial Average finished down just 5 points after falling nearly 180 points at one stage - was one of the reasons European markets got off to a good start today.

    And the US futures are suggesting a bright start when trading begins in a couple of hours time, with the Dow forecast to open up around 150 points.

    12.10pm GMT

    Turning to the UK budget next Wednesday lunchtime, the HSBC analysts say that

    A lot has changed since chancellor George Osborne delivered his upbeat autumn statement last November. The pace of growth has slowed somewhat, nominal GDP is lower than we thought it was – thanks to revisions – and even public sector borrowing looks likely to have overshot in the current fiscal year (possibly by around GBP5bn).

    Complicating matters further, the UK’s EU referendum looms large. While we had expected the chancellor to be forecasting a boost to revenues from pensions tax reforms, widespread media reports suggest this will no longer be the case. So, if he is to keep to his own ambitious fiscal goals, he will likely have to introduce further cuts, probably to departmental spending. With oil prices back on the rise, he may also see this as his last chance to increase fuel duties.”

    12.07pm GMT

    Aside from the budget on Wednesday, the other highlight in the UK next week will be the Bank of England’s monthly meeting. The decision and the meeting minutes will be released at noon on Thursday.

    The City is not expecting any changes to the Bank rate at 0.5% and the asset buying programme of £375bn. Investec economist Chris Hare is wondering whether we will see a more dovish tone from the monetary policy committee.

    The MPC has been sounding remarkably dovish of late. Not as dovish as the rates market, which is now not pricing-in a rate rise until 2020, but dovish nonetheless. Indeed, since the last meeting, the survey data has been disappointing, suggesting the pace of activity in the UK could be slowing.

    The most recent releases of CPI inflation (February) and wage growth (December) were actually a touch higher than the BoE had expected, and oil prices in sterling terms are up 18% since the last meeting. But this is unlikely to outweigh the backdrop of a volatile global climate, slowing domestic activity and the imminent referendum on the UK’s EU membership. We expect all nine MPC members to vote to keep rates on hold.

    11.54am GMT

    Not only has Sports Direct’s founder Mike Ashley berated a parliamentary committee for trying to force him to give evidence, accusing MPs of being “deliberately antagonistic,” but he has also sacked Newcastle United coach Steve McClaren (Ashley owns the football club).

    It hasn't ended well for Steve McClaren at #NUFChttps://t.co/Bfol3L6FvK

    11.48am GMT

    Oil giant BP has scrapped its long-term sponsorship of Tate Britain, in light of the recent oil price rout.

    11.42am GMT

    Meanwhile, the Economist has looked at a kitschy animated video about China’s latest five-year economic plan. “Every five years in China, man; They make a new development plan,” goes the country-style ditty. You can read the piece here.

    11.37am GMT

    Time for a look at the markets. The FTSE 100 in London is holding on to its gains, trading 1.6% higher – a gain of nearly 100 points – at 6134.35.

    All the main European stock markets are recording strong gains. The Dax in Frankfurt and the CAC in Paris are both 2.8% ahead while Spain’s Ibex bounced 2.9%, and Italy’s FTSE MIB jumped more than 4%.

    Why Euro-Area Inflation Will Be Low for Years, According to #Draghi https://t.co/eskhgLhepY by @jeannasmialek #ECB pic.twitter.com/u9qwQ96mp1

    10.39am GMT

    Back to the ECB. Here’s a good (and fun) explanation of what happened yesterday from Jim Reid, head of global fundamental credit strategy at Deutsche Bank.

    I suppose if I was trying to explain yesterday’s ECB meeting to a child it might go something like this. Imagine you were expecting a trip during school holidays in a caravan around the country but instead you can take 2 weeks off school, fly first class to Disneyworld, have a go in the cockpit on the way, stay at a hotel made of chocolate, and then be able to go on every ride every day without queuing and have a private play session with the real Mickey Mouse as each day draws to a close.

    However if the market was the same kid its reaction yesterday was “do I not get unlimited spending money, and where are we going for our summer holidays then?”

    10.35am GMT

    The Royal Statistical Society also welcomed the final report of the independent review led by Bean, and called on the chancellor to implement its recommendations in next week’s budget to ensure gaps in the official statistics are plugged.

    Mike Hughes, chair of the RSS national statistics advisory group, said:

    The Bean Review is a substantial and important piece of work. It shows how the UK can have the data we need to drive our economy. We now look to the chancellor to allocate the resources in next week’s budget to make this happen.”

    10.32am GMT

    Sir Andrew Dilnot, chair of the UK Statistics Authority, welcomed Bean’s recommendations.

    The Authority welcomes Sir Charles’s recommendations, which set out a compelling vision for economic statistics and alongside the Authority strategy Better Statistics, Better Decisions, will help to deliver high quality economic statistics

    The Authority will now take time to read and consider the report and its findings.”

    10.28am GMT

    The UK’s economic growth rate would be higher if its official statistics fully captured all the activity in the economy – including the digital boom, according to former Bank of England deputy governor Charlie Bean.

    “Take economic statistics back to the future,” he says in his review of government statistics. He recommended that the Office for National Statistics set up a new research centre to come up with better ways of measuring digital activity.

    "Take economic statistics back to the future" says Charlie Bean report into uk stats. https://t.co/WWSd12udzu pic.twitter.com/rFxVCYMaz0

    10.17am GMT

    The Shanghai Stock Exchange has said it had reached a preliminary agreement with the London Stock Exchange on a framework for a planned stock trading link.

    The two exchanges will now conduct more detailed studies into the feasibility of a Shanghai-London scheme.

    10.15am GMT

    Over in Greece, industrial output rose 4.6% in January from a year earlier, following a 6.2% increase in December, according to the country’s statistics service ELSTAT.

    Manufacturers boosted output by 5.% but mining output slumped 13.6%, while electricity production went up 6.8%.

    10.12am GMT

    Here is some reaction to the UK trade data from Samuel Tombs, chief UK economist at Pantheon Macroeconomics, who says trade is likely to be a drag on overall economic growth again in the first quarter.

    January’s trade figures show that the UK’s economic recovery remains worryingly unbalanced. The volume of goods imports in January was 0.4% above its Q4 average, while the volume of goods exports was 1.1% below it Q4 average.

    Admittedly, imports have been very volatile from recently, and the 20.8% month-to-month surge in food, beverage and tobacco import volumes in January likely will be reversed in February.

    10.08am GMT

    France’s top public auditor has branded EDF’s £18bn Hinkley Point project in Somerset as potentially risky.

    The Cour des Comptes – the French equivalent of the UK’s National Audit Office – said EDF, which is 85% state owned, should take a close look at the risks associated with the £18bn project to build two nuclear reactors at Hinkley Point.

    Even though the [Hinkley Point] deal has not been finalised, the complexity of the deal and especially the way it could impact the responsibility of EDF suffice to raise serious questions.”

    9.57am GMT

    Meanwhile, the UK’s construction industry had a bad start to the year. Output unexpectedly dropped by 0.2% in January after rising 2.1% in December, confounding expectations of an increase.

    However, in the fourth quarter of last year construction output grew by 0.3%, rather than falling 0.4%, according to revised figures from the statistics’ office.

    9.50am GMT

    The UK trade figures are out. They are a mixed bag: Britain’s trade in goods deficit shrank to £3.5bn in January from a revised £3.7bn in December, according to official figures.

    However, the shortfall with the European Union ballooned to a record high of £8.1bn from £7.4bn as Britain imported more from Europe.

    9.30am GMT

    Sports Direct’s founder Mike Ashley has accused MPs of being “deliberately antagonistic”, claiming they are abusing parliamentary procedure by trying to force him to give evidence to a committee, my colleague Sean Farrell writes.

    In a letter to Iain Wright, chairman of the business, innovation and skills committee, Ashley said he was disgusted by the MPs’ approach. On Wednesday, the committee warned Ashley publicly that he risked being in contempt of parliament if he failed to appear.

    9.27am GMT

    The British Chambers of Commerce has cut its forecasts for UK economic growth, blaming the weaker global economy, and described Britain’s performance as “mediocre” compared to the past.

    The BCC now expects GDP to rise by 2.2% this year and 2.3% in 2017k similar to growth in 2015 and down from its estimates of 2.5% for 2016 and 2017 in December. Other forecasters have made similar downgrades this year.

    The UK’s economic performance is reasonably good when measured against our main competitors, but it’s only mediocre when compared against long-term trends.”

    9.18am GMT

    The International Energy Agency has called the bottom of the oil price rout, in a significant shift from last month’s outlook.

    There are signs that prices might have bottomed out. For prices there may be light at the end of what has been a long, dark tunnel.”

    9.01am GMT

    David Kohl, chief currency strategist and head economist Germany at Swiss private banking group Julius Baer, has concluded:

    The ECB delivered as much as it could do and even managed to surpass expectations. The unconvincing financial market reaction points to a diminishing power of central banks over asset prices.”

    8.45am GMT

    The FTSE 100 index is now some 90 points ahead at 6127.21, a gain of more than 90 points, underpinned by a recovery in oil prices. Germany’s Dax and France’s CAC have jumped more than 2%.

    Connor Campbell, financial analyst at Spreadex, says:

    Effectively wiping the slate clean after its last minute plunge on Thursday evening the FTSE surged 1.5% this morning, lifted by a recovery from Brent crude that sees the commodity back nearing its recent highs after plunging past the $40 mark following yesterday’s breakdown in talks between OPEC and non-OPEC members. That left the oil and mining stocks in a healthy shade of green, the usual 2016 pre-requisite for the FTSE posting any growth.

    Still to come are the UK trade deficit figures, expected to widen to £10.3 billion from last month’s £9.9 billion, something that could slightly knock the FTSE’s morning confidence as the day goes on.

    8.37am GMT

    Eurozone bond markets have stabilised after yesterday’s sell-off, triggered by ECB president Mario Draghi saying he did not anticipate further rate cuts, which rapidly dampened enthusiasm for the central bank’s big package of stimulus measures.

    The ECB sprang a surprise on markets by cutting all main interest rates and boosting its quantitative easing programme to €80bn from €60bn a month. It said it would start buying corporate debt and offered to pay banks for lending to companies in the eurozone in an attempt to boost economic growth and ward off deflation. But then Draghi sent markets into a tailspin with the comment that rates may have reached the bottom.

    8.27am GMT

    On a light day for corporate news, Old Mutual has said it would split up the company into four main units to save money. Shares in the Anglo-South African financial services group have risen 1.5% on the news.

    British pubs group JD Wetherspoon has seen first-half pretax profits dip nearly 4% and chairman Tim Martin complained once again that government tax policy was penalising pubs and restaurants, struggling to compete with supermarkets selling cheap booze.

    8.08am GMT

    And we’re off. The FTSE 100 in London has jumped nearly 1.7% to 6136.84 in the first few minutes of trading, a gain of about 100 points, no doubt helped by the rise in oil prices. Brent crude has gained 1.6% to $40.69 a barrel.

    There aren’t any fallers on the UK benchmark index at the moment – only risers.

    8.03am GMT

    It’s a light day for economic news. The highlight will be UK trade and construction data for January at 9.30am GMT.

    In December, the goods and services trade deficit shrank to £2.7bn, from £4bn in November. But Investec economist Chris Hare said:

    Despite the narrowing in the overall deficit last month’s numbers do not fill us with optimism, at least for the near term. In part, that is because the turnaround was driven by a 3.6% fall in import values, while exports fell by 0.8%. Within that, services exports fared particularly poorly.

    Lingering effects of past rises in the pound could be playing a role here, as could the challenging global environment. Recent falls in sterling should help boost net trade going forward, but this might take a few months to come through meaningfully.

    7.36am GMT

    It’s the day after the European Central Bank unveiled an unprecedented package of growth-boosting measures, including rate cuts and a boost to its asset-buying programme. Stock markets initially surged and the euro plunged as ECB president Mario Draghi “overdelivered” – only to go into reverse when he suggested that interest rates may have hit the bottom.

    Analysts termed it “Draghi shoots down his own bazooka” (Investec) or “Draghi’s bazooka misfires” (CMC Markets UK).

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