Markets remain nervous on Paris fears - as it happened

Discussion in 'Market News' started by Lily, Nov 18, 2015.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Investors concerned after German football match cancelled and police operations in northern Paris

    2.55pm GMT

    Here’s a quick run through of the day’s main events.

    Markets remain under pressure again on continued nervousness in the wake of the French attacks, with the police actions in the north of Paris unsettling investors. Travel and leisure shares have slipped back after Tuesday’s recovery. But an opening rise on Wall Street has seen European markets recover from their worst levels.

    2.40pm GMT

    The US market has moved ahead in early trading, giving some support to nervous investors in Europe.

    The Paris attacks and their aftermath, including the day’s raids by police in the north of the French capital, continue to cast a shadow over shares.

    2.17pm GMT

    More Fed speakers, and more softening up for a rate rise.

    Federal Reserve Bank of New York president, William Dudley, said he did not expect a huge surprise or big market reaction when the rise does happen.

    1.44pm GMT

    Clearly there is no period of purdah for Fed members ahead of the release of the minutes.

    1.34pm GMT

    A new paper from the International Monetary Fund suggests quantitative easing should have been put in place in the eurozone earlier than it actually happened, following the problems seen with several members of the single currency. Larry Elliott writes:

    Blanket austerity across the crisis-hit countries of the eurozone was self-defeating. Germany’s analysis of what needed to be done was wrong. The European Central Bank (ECB) was slow to come up with a stimulus package designed to offset the demand-sapping impact of wage cuts.

    Those were the main messages of an important International Monetary Fund (IMF) intervention into the debate about how the eurozone should have responded to the problems that affected five of its members: Greece, Ireland, Portugal, Spain and Italy. This quintet accounts for 30% of eurozone output.

    Related: IMF's hindsight says it was right to advocate QE in the eurozone

    1.28pm GMT

    Ahead of the Fed minutes later, Richmond Fed President Jeffrey Lacker has been speaking. He was the only Fed member to vote for an increase in rates at the October meeting (he wanted a 25 basis point rise), and he still seems to be on the hawkish trail. The key is how many others will follow him in December.


    Fed’s Lacker: Improvement In Labour Mkt Has Been Substantial – CNBC -Maintains His Rate View

    Fed’s Lacker Says There Is A Chance Fed Could Be Behind The Curve -Fed Will Have To Move More Aggressively If They Wait Longer – CNBC

    1.11pm GMT

    Germany is not the only eurozone member to sell bonds with a negative yield. It’s been happening in Portugal too, despite the collapse of the government last week.

    Now investors pay even Portugese state for holding its debt. #Portugal sold 1y bonds at -0.006%, 1st neg yield ever.

    What political risk? *PORTUGAL MAY 2016 BILL AVG YIELD -0.018 VS 0.006% ON SEPT. 16

    12.04pm GMT

    More on the protests in Athens from Helena Smith:

    Clashes have erupted between an estimated 6,000 protesting farmers and riot police in a courtyard in front of parliament.

    Security forces, which admit to being taken aback when farmers pushed their way towards the parliament and appeared poised to storm it, have resorted to firing tear gas as the clashes continue.

    Farmers clash with police in front of Greek parliament, Wednesday

    Levies on profits will be gradually increased from 13% to 16% at the behest of eurozone creditors.

    The clashes come on the eve of parliament voting on the next multi-bill of “prior actions” also demanded by lenders and show the degree of opposition the leftist-led government is going to face in implementing the measures.

    11.47am GMT

    Over in Greece, and more protests today:

    #greece extraordinary scenes outside parliament where police have fired tear gas on protesting farmers attempting to storm building

    11.37am GMT

    The Chinese president, Xi Jinping, has tried to give reassurances that the country’s economy will keep growing despite a recent slowdown. AP reports:

    In a speech to a business conference on the sidelines of the Asia-Pacific Economic Cooperation summit, Xi said China is committed to overhauling its economy and raising the living standards of its people.

    China’s growth fell to a six-year low of 6.8% in the latest quarter as Beijing tries to shift the economy away from reliance on trade and investment. The slowdown, which has been unfolding for several years, rippled around the world, crimping growth in countries such as South Korea and Australia that were big exporters to China.

    11.07am GMT

    The result of the German bond auction was poor, but not a great surprise given record low yields.

    German 2y auc failed:Got €4.4bn bids <€5bn offer as not enough investors want Berlin pay 0.38% for holding it's debt

    10.43am GMT

    In Germany, the debt management office has sold €4bn of two-year Schatz [Treasury] notes with a negative yield.


    Negative is the new normal: #Germany sells 2yr notes at yield -0.38%, lowest on record.

    10.37am GMT

    And a regional breakdown:

    10.34am GMT

    Here’s some charts from the Annual Survey of Hours and Earnings:

    9.45am GMT

    Sterling makes limited gains after Broadbent's comments downplaying BOE's inflation forecasts based on market interest rate expectations

    Markets are currently not fully pricing in BOE rate hike until Q1 2017; consensus for economists is Q2 2016 (we forecast a May hike)

    9.39am GMT

    Weekly earnings for UK full time employees rose 1.8% to £528 in April 2015, much higher than the 0.2% rise seen the previous year. (This of course also has implications for UK rates and when they might increase).

    This figure is from the Annual Survey of Hours and Earnings. The Office for National Statistics summarises the main points as:

    9.35am GMT

    Speaking of UK rates, fewer than a quarter of households expect dearer borrowing costs in the next six months.

    A survey from Markit said 23% of households polled expected rates to rise within six months, the lowest figure since October 2013 and down from 34% in October.

    9.19am GMT

    Ben Broadbent, the deputy governor of the Bank of England for monetary policy, has warned investors about “focusing too obsessively” on the inflation targets when considering when interest rates may rise.

    In a speech to a Reuters event at Canary Wharf in London he said:

    The outside world seems increasingly interested in only one particular nugget: the Monetary Policy Committee’s central inflation forecast two years ahead. This forecast is derived assuming that interest rates follow the path priced into financial markets. Comparing the two, commentators often make very precise inferences from the MPC’s projections about future policy.

    When it’s above the 2% target, our two-year forecast is said to indicate that interest rates will rise faster than the market expects; a sub-2% forecast is said to mean the opposite. Recently, given the intense focus on the prospective date of the next rate change, this simple inference has been refined even further: as long as the forecast is close to 2%, this must mean the MPC is “endorsing” not just the general shape of the market path of interest rates but the particular “lift-off” point it seems to imply.

    Too often, it seems to me, what we communicate about the path of future policy, whether that’s direct or something backed out from forecasts, is treated as something close to an unconditional promise. But it can’t be. That’s because it’s the job of policy to respond to things that are unpredictable, in order to offset their effects, as best we can. So even if it’s the MPC that sets interest rates, in some narrow sense, it’s ultimately the economy that determines them. And our forecasts are intended not as some reliable guide of a particular policy path, but to help people understand how we see the nature and distribution of economic risks over the future.

    For those in the audience wanting me to give a direct and unequivocal promise as to when Bank Rate will change, you will, I’m afraid, be disappointed. I can’t. But you should look on the bright side. If there is any value in listening to people like me, it is to help you with what is the best way to try and predict future interest rates - to forecast the economy yourselves (which is probably more interesting). After all, if the future were perfectly predictable we wouldn’t have to bother trying.

    8.37am GMT

    Travel and leisure shares are slipping back again. Here are the biggest fallers in the Stoxx Europe 600 Travel and Leisure index:

    8.25am GMT

    Despite the hawkish tone of the last US Federal Reserve statement, Deutsche Bank believe the chances of a rate rise in December could actually be falling. Deutsche’s Craig Nicol explains:

    The focus of today will be on the Federal Open Market Committee minutes from the October 27 and 28 meeting, due out at 7pm GMT. Remember that the hawkishness of the statement that followed that meeting was the start of a big swing in December liftoff expectations.

    In fact, prior to that meeting December hike expectations were sitting at around 35%, before rising to 50% or so immediately after the statement. Currently we’re sitting at 66% which is just shy of the 69% high point earlier this month.

    8.17am GMT

    Another item for the agenda: the Annual Survey of Hours and Earnings will be released by the UK’s Office for National Statistics at 9.30 GMT.

    The report should be available here.

    The Annual Survey of Hours and Earnings is a closely watched indicator of the UK’s economic health. Each year it shows how much UK workers earn on average and how that compares with the previous year. Policymakers study the Office for National Statistics’ report, especially Bank of England (BoE) officials who set interest rates.

    8.06am GMT

    An official report into the near collapse of trouble bank HBOS is due tomorrow and will put the spotlight on both regulators and directors. In a preview, Jill Treanor writes:

    The bleakest days of the 2008 banking crisis risk being revived on Thursday when a long-awaited report into what went wrong at HBOS is expected to put fresh scrutiny on the bank’s former bosses and regulators in the runup to the bank’s near-collapse.

    A separate analysis to be issued alongside the 500-page official report will analyse why only one former HBOS executive, Peter Cummings, was formally investigated. Cummings, who ran the commercial arm, was banned from working in finance and fined £500,000 for his role in the events that led to the emergency rescue of the country’s biggest mortgage lender and savings institution.

    Related: HBOS report expected to put fresh scrutiny on former bosses

    8.03am GMT

    As expected, shares are slipping after Tuesday’s rebound:

    8.01am GMT

    Back with Greece, and last night saw a march to the US Embassy in Athens to commemorate the 42nd anniversary of the 1973 student uprising against the military junta. Towards the end of the march there were some clashes between police and marchers in the Exarcheia district of Athens:

    7.55am GMT

    The Federal Reserve is not the only central bank in focus. The Bank of Japan will hold its latest meeting later tonight (in the early hours of the morning UK time in fact). But here’s a preview from UniCredit Research:

    The BoJ meeting tonight has become another close call, after Japanese GDP disappointed in the third quarter of 2015, contracting by 0.8% in annualised terms. It is conceivable that the central bank may want to wait before taking any action, to get a better sense of the fiscal measures that will be introduced in the next fiscal year. It is really difficult to forecast the BoJ’s actions given its confusing assessment of the economy. Another steady outcome is thus unlikely to have any greater impact on the yen. Should, however, the BoJ decide to expand its QQE [quantitative and qualitative easing] program, we would expect a sizeable and broad-based negative yen reaction, as investors are not heavily yen-short at the moment.

    7.48am GMT

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

    After Tuesday’s rebound on global markets – based on the belief that the Paris attacks would not have a lasting impact on the world economy and, even if they did, central banks would step in with further stimulus measures – the nervousness has returned.

    Our European opening calls: $FTSE 6253 down 16 $DAX 10895 down 76 $CAC 4908 down 30 $IBEX 10268 down 96 $MIB 22160 down 150

    [The Hanover reports] saw US markets pull back sharply off their intraday highs as the fear factor reasserted itself, and look like translating into a slighter weaker European open this morning, despite the alert being a false alarm.

    Continue reading...

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