European markets bounce back
After Terrible Thursday came Fantastic Friday. Or maybe Freaky Friday, since many commentators were puzzled by the strong recovery today after the slump yesterday which followed ECB president Mario Draghi seemingly playing down further interest rate cuts. Part of the revival came as investors had second thoughts and decided to concentrate on the positive elements of Draghi’s announcement, namely the rate cut he did unveil, the plan to buy corporate bonds and the fact the ECB will be paying banks to lend to companies in an effort to boost the flagging eurozone economy.
On top of that, markets were buoyed by a rise in crude as the International Energy Agency said the oil price might have bottomed out and hopes grew that producers would come to an agreement to freeze output. Brent is currently up 0.9% at $40.41.
With the ECB stimulus measures outweighing the problem of negative interest rates stretching their balance sheets, banks were among the days main gainers with the Euro Stoxx Banks index ended 6.7% higher at 115. The final scores showed:
- The FTSE 100 finished up 1.7% or 103.09 points at 6139.79, albeit down 0.99% on the week, its first weekly fall since the middle of February
- Germany’s Dax jumped 3.5% to 9831.13
- France’s Cac closed 3.2% higher at 4492.79
- Italy’s FTSE MIB soared 4.8% to 18,987.73
- Spain’s Ibex ended up 3.69% at 9090.6
- In Greece, the Athens market added 0.37% to 566.20
On Wall Street, the Dow Jones Industrial Average is currently 217 points or 1.2% higher.
On that note it’s time to close for the day. Thanks for all your comments, and we’ll be back next week for, among other things, the UK budget and the latest interest rate decisoins from the Bank of England and the Federal Reserve.
Tony Cross, market analyst at Trustnet Direct, said:
After markets tanked on Thursday it was bounce-back Friday. On the one hand this feels like a bet on central bankers and how far they are willing to go in their pursuit of pumping up the economy. On the other hand it feels like a desperate play; where else do investors put their money to gain a decent income?
Markets have given a - belated - vote of confidence to the ECB stimulus package, says Chris Beauchamp, senior market analyst at IG:
Investors seem more willing to give Mario Draghi the benefit of the doubt today, having sulked yesterday afternoon. Markets in the UK, Europe and the US are racing higher, with the plan apparently being to put the madness of Thursday’s session firmly behind them. Overall it looks like the ECB has been given a vote of confidence, even if it took 24 hours for the result to come through.
The session has been somewhat spoiled as oil has failed to hold on to its gains for the day, but the resilience of crude prices this week has come as a rude shock to those that thought a sell-off would develop. Dip buyers in both equities and crude oil continue to be rewarded for their bravery, so it look like these price moves are set to extend into the second half of March.
Brent crude, by the way, is still in positive territory - up 0.8% at $40.37 a barrel -but off its earlier highs of $41.03.
Despite concerns that the ECB - and indeed other central banks - might be running out of ammunition in their attempts to stimulate economic growth, this is not the case according to bond manager Pimco.
Commenting on Thursday’s ECB package Andrew Bosomworth, head of Pimco’s portfolio management in Germany, said:
The ECB’s decisions sent three signals. First, negative interest rates as a tool of monetary policy are effectively exhausted. Second, asset purchases and credit easing will do the heavy lifting of policy stimulus going forward. And third, the ECB is focused on the domestic credit channel to kick-start growth rather than lowering the euro.
While the ECB has yet to provide details on its expanded purchase programme, our initial thoughts are that it will purchase about €4 billion in non-financial corporate bonds per month. By adding corporate bonds to its list of government, agency and covered bonds as well as asset-backed securities, the ECB is now firmly in the realm of credit easing.
Although we acknowledge the marginal efficacy of monetary policy is declining, we disagree with the view the ECB has run out of ammunition. There remains a large amount of assets outstanding that the ECB could theoretically purchase. And now that it has started with corporate bonds, blue-chip equities are not a far step away, if ever needed. We concur with President Mario Draghi’s response to the question about helicopter money: We think the ECB is a long way from contemplating forms of monetization, and if history is any lesson, investors aren’t keen on monetization, either.
The full commentary is here:
Not Giving Up
The UK government has announced Tom Scholar as the new permanent secretary to the Treasury:
Tom Scholar succeeds Sir Nick Macpherson to one of the most important jobs in Whitehall: Permanent Secretary at HM Treasury.
— Faisal Islam (@faisalislam) March 11, 2016
Scholar is currently the Prime Minister’s adviser on European and Global Issues and Head of the European and Global Issues Secretariat in the Cabinet Office.
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This will come as no real surprise, but the Wall Street Journal is reporting that the Bundesbank was opposed to the bigger than expected stimulus package unveiled by ECB president Mario Draghi on Thursday. It said (£):
Germany’s Bundesbank opposed the European Central Bank’s stimulus package as structured Thursday and fears a “doom loop” of high market expectations followed by disappointment, people familiar with the matter said.
Worth remembering of course that because of the ECB’s rotation policy, Bundesbank president Jens Weidmann had no vote at Thursday’s meeting.
Meanwhile CNBC has suggested that Draghi’s later comments at the press conference suggesting rates would not fall further could have been an olive branch to dissenters (presumably the Bundesbank).
Much of the future direction of the oil price depends on the outcome of any talks between producers to freeze output, says Dougie Youngson, head of oil and gas research at FinnCap:
Brent finally broke through $41 a barrel, its highest level since December last year. The key question now is this recent surge sustainable? Forecasts from both the IEA and EIA are showing that non-OPEC production if declining over this year and next. This decline being driven by output losses in Iraq and Nigeria as well as Iran’s post sanction impact not being a large as originally thought. Crucially, US production is now showing monthly declines which may in time lead to a greater dependence upon imports. The IEA is now forecasting that demand will increase by 1.2mmbbl/d this year. We are therefore seeing supply and demand approaching parity which would be very good news for the oil price and would hopefully see prices being more fundamentally driven.
So in terms of what is being forecast, things are looking better. However, forecasts can change and I do think that there is quite a lot of hope priced into the oil price on the “big freeze” idea with Saudi, Russia and a few of the other more junior members of OPEC. We are still awaiting confirmation that the freeze will occur, but this is not expected for a few weeks yet.
If as the market expects, the freeze does occur we can hope to see further strengthening of the oil price as we move into the second half of this year. Hope springs eternal…
Wall Street surges at open
US markets have followed the lead from Europe, and are moving sharply higher in early trading.
The Dow Jones Industrial Average is up 179 points or just over 1%, while the S&P and Nasdaq have also recorded similar percentage gains.
The recovery came as investors had second - and more positive - thoughts about the European Central Banks stimulus measures announced on Thursday.
A rise in the crude price, with Brent currently up 2% at $40.85, also helped sentiment. The International Energy Agency said today the oil price may have bottomed out, while there are continuing hopes that producers may agree to act to curb the supply glut.
In the UK, MPs have criticised a member of the Bank of England’s Financial Policy Committee for not mentioning the risks posed by Brexit in her evidence at a hearing for her reappointment.
The Treasury committee said Dame Clara Furse’s written evidence was a cause for concern, but it still approved her re-appointment, as well as that of Richard Sharp. Committee chairman Andrew Tyrie said:
As with her appointment hearing in 2013, parts of Dame Clara’s evidence were a source of concern to the Committee. The Committee was in agreement that Dame Clara did not appear to have taken enough care with her written evidence. The Committee found it surprising that Dame Clara had not only omitted any reference to the financial stability risks posed by Brexit but, when asked why, appeared unable to provide a clear explanation [for neglecting it].
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Negative rates have their limits - ECB
Here’s Reuters take on the comments by ECB vice-president today, in the wake of the market volatility caused by president Mario Draghi announcing a bold stimulus package only to undermine it almost immediately by saying that there may be no more rate cuts:
The European Central Bank’s negative deposit rate is facing limits, the ECB’s vice-president said on Friday.
“Naturally, all policies have limits,” Vitor Constancio said in an opinion piece published on the bank’s website and entitled ‘In defence of Monetary Policy’.
“In the case of the instruments we are now using, this is particularly true of negative interest rates on our deposit facility.”
ECB President Mario Draghi sent the euro and yields on short-term government bonds rallying on Thursday when he said the bank did not anticipate any further rate cut after the ones he had just announced.
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“A succession of scares haunted global markets in the first six weeks of 2016” – but “one by one these concerns are now being debunked by reality and policy makers,” writes Holger Schmieding, chief economist at German bank Berenberg.
He concludes: China – no hard landing. Oil prices – no reason to worry. US – on track. ECB – good for banks, good for the economy. On the latter point:
The ECB did not just exceed expectations with its comprehensive policy package of 10 March. Its new stimulus is designed to ease the much overdone concerns about the banking system. One aspect of the package apparently irritated markets for a while: the ECB increased the penalty for banks to park deposits at the ECB by just 10bp from -0.3% to -0.4% and suggested that it is reluctant to go into more negative territory for rates.
But that is good rather than bad news for banks. The ECB more than offset the small extra penalty for excess deposits by its cut in the refi rate, the scaling up of its asset purchases and the very generous design of its new four-year injections of long-term liquidity. The ECB has shown that it will do its utmost to prevent even a whiff of a new banking crisis and get the economy back to trend growth. Do not bet against Draghi.”
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ECB vice president Vítor Constâncio has published an “opinion piece” on the ECB website, entitled “In Defence of Monetary Policy” – an unusual step the day after an ECB decision.
Malcolm Barr at JPMorgan Chase says he can’t recall any instances of senior ECB officials putting pen to paper (as opposed to giving interviews) so soon after an ECB decision. In his view, two things in this piece stand out. One he would welcome, the other he finds thoroughly confusing.
- A reality check on fiscal policy and structural reform. Constancio points out that there are significant legal and political constraints on the ability of countries to use fiscal policy to stimulate growth. In his words “countries that could use fiscal space, won’t; and many that would use it, shouldn’t”. The hint that these constraints may be at least a little unhelpful reflects the drift of opinion on this issue we have been seen of late from the leadership of the ECB. What Constancio has to say about structural reform, however, cuts somewhat against the grain. Pointing out that structural reforms tend to be deflationary in the first instance, he states: “Structural reforms are essential for long-term potential growth, but it is difficult to see how they could spur growth significantly in the next two years, especially when the current problem is lack of global demand”. We agree, and it is refreshing to see the ECB acknowledge this so openly.
- Why the bound at -0.4%? Having argued that monetary policy has had to step into the void left by other policies, Constancio argues that monetary policy has boosted growth by around two-thirds of a percentage point over the last two years. But “all policies have limits. In the case of the instruments, we are now using, this is particularly true of negative interest rates on our deposit facility. The reasons are more fundamental than just the effect on banks”. At this point Constancio cites a recent blog by Cecchetti and Schoenholtz, before pointing out that bank returns on equity in the Euro area went up in 2015 despite negative rates. But if it is not the impact on bank profitability that sets a limit to the usefulness of negative rates, then what is the “more fundamental” reason?
Updated
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.
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.”
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.
Analysts at HSBC say:
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.
The US Federal Reserve is also meeting next week and will announce its policy decision at 18:00 GMT on Wednesday. Again, no change is expected.
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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 #NUFC ⚽ https://t.co/Bfol3L6FvK
— BBC News (UK) (@BBCNews) March 11, 2016
Oil giant BP has scrapped its long-term sponsorship of Tate Britain, in light of the recent oil price rout.
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.
Market round-up
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%.
The continued recovery in oil prices has helped, with Brent crude up 2% to $40.85 a barrel. The International Energy Agency said today that oil prices may have bottomed.
Traders also seem to have concluded that yesterday’s sell-off was overdone. It is worth noting that the European Central Bank sought to mitigate the impact of negative interest rates banks’ balance sheets by offering to pay them for lending to companies in the eurozone.
Why Euro-Area Inflation Will Be Low for Years, According to #Draghi https://t.co/eskhgLhepY by @jeannasmialek #ECB pic.twitter.com/u9qwQ96mp1
— Alessandro Speciale (@aspeciale) March 11, 2016
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?”
Given that Draghi over-delivered on most measures one can only wonder what the market reaction would have been if he had under delivered and stuck to the caravan trip. In reality he probably didn’t help matters by suggesting the ECB saw no need to cut rates further early in his press conference...
However to give that comment some perspective when does a central banker ever say “we’re not sure if this will work so we may have to do more further down the road”? So that specific reaction was a little surprising.”
Updated
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.”
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.”
Former BOE official: UK growth stats missing out on digital boom
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.
Bean’s conclusions, published here, build on his interim findings from last year. Current statistics were designed over 50 years ago when the economy was dominated by goods, not services.
It argues that the digital revolution has changed the way many businesses operate such as Amazon and Skype; given rise to new ways of exchanging and providing services (Airbnb, TaskRabbit); and has muddied the waters between work and leisure, and made it far harder to accurately measure economic output. Many businesses also operate across national borders and depend on intangible assets, which makes it harder to capture their output.
"Take economic statistics back to the future" says Charlie Bean report into uk stats. https://t.co/WWSd12udzu pic.twitter.com/rFxVCYMaz0
— Katie Allen (@KatieAllenGdn) March 11, 2016
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.
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%.
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.
But we expect the trade deficit to remain bloated this year. Past experience suggests it will take at least a year for sterling’s recent depreciation to boost exports. By contrast, the weaker exchange rate will boost import prices relatively swiftly, thereby worsening the trade deficit in the near-term. With global trade flows weak too and the UK’s recovery likely to remain heavily dependent on consumers, we expect net trade to continue to impede the economic recovery this year.”
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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.
The auditor said:
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.”
You can read more here.
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.
Updated
UK trade gap shrinks but EU deficit at record high
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.
The Office for National Statistics’ website has all the details.
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Sports Direct's Mike Ashley accuses MPs of being 'deliberately antagonistic'
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.
Ashley wrote: “I was disgusted to learn that you have adopted a stance that is deliberately antagonistic.” He accused Wright of trying to create a “media circus” by summoning him. The letter’s contents were reported in the Times on Friday and confirmed by Ashley’s spokesman.
BCC cuts UK growth forecasts
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 business lobby group’s acting director general Adam Marshall said:
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.”
The BCC urged UK chancellor George Osborne to use his budget next Wednesday to boost investment in transport and digital infrastructure. It made no mention of the referendum on Britain’s membership of the EU on 23 June.
The organisation’s director general John Longworth quit this week after saying he wanted Britain to leave the EU, which the BCC’s president said breached its neutral position on the EU.
IEA says oil prices 'might have bottomed out'
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.”
The Paris-based organisation added in its monthly market report that market forces are “working their magic and higher-cost producers are cutting output.” Last month, it was still predicting that crude had further to fall, arguing that the market remained “awash in oil”.
The agency is now forecasting that oil production outside the Opec cartel will fall by 750,000 barrels a day this year – 150,000 barrels a day more than it estimated last month. Output losses in Iraq and Nigeria will also underpin markets, it said, and also noted that Iran is restoring production more slowly than planned after sanctions were lifted.
Oil prices are up 50% from the 12-year lows hit in January. Brent crude, the global benchmark, has gained 1.4% today to $40.62 a barrel.
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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.”
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.
Much like the FTSE the eurozone indices had a disastrous end to Thursday; investors fled the region after Draghi stabbed his own stimulus package in the back by suggesting that there is no more room to cut the benchmark interest rate, leaving many to question what the ECB has left in its arsenal if this round of measure doesn’t work. Friday morning, however, has seen something of a rebound; the DAX and CAC both rose around 1.8% after the bell, with investors seemingly reassessing their previously schizophrenic reaction to the ECB announcement.
Eurozone bond markets stabilise
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.
Today, two-year German government bond yields are on course for their biggest weekly rise since early December, although ten-year German Bund yields fell.
Corporate round-up
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.
Watkin Jones, which builds student accommodation in the UK, is eyeing a London float. It is expected to be valued at £255m when it lists on the Alternative Investment Market later this month.
The firm wants to expand into the booming private rented sector. It said it had the capacity to deliver at least 10 student halls each year. It has 31 developments with 11,300 beds in the pipeline at the moment.
As we reported recently, investors have been piling into student housing and student rents are rising steadily. A record £6bn was invested in purpose-built housing in the UK last year – more than in north America. Investors are attracted by the high income returns due to strong demand: students numbers are rising every year and there is a shortage of adequate accommodation.
FTSE rises 100 points in early trading
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.
European shares are also up strongly. Germany’s Dax has risen 1.9%, France’s CAC is up 1.7% and Spain’s Ibex has leapt 2.1%.
Updated
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.
He is expecting the goods and services shortfall to widen to £3.2bn, with the goods deficit rising to £10.3bn from £9.9bn.
European markets to open higher but could finish week lower
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).
After a rollercoaster ride, European stock markets ended the day lower, with London’s FTSE 100 index losing 1.8% to 6036.70, its lowest close since late February. The euro dropped by a cent and a half to $1.0825 against the dollar, but then jumped more than 3% from its lows.
Wall Street was flat yesterday after a volatile session. In Asia, traders were unsure how to react and stocks initially followed European shares lower but then rose across the board. Japan’s Nikkei rose 0.5% and Hong Kong’s Hang Seng gained 0.8%.
European markets are expected to take their cue from Asia and open higher as traders digest the ECB’s measures. Stock futures suggest that the FTSE 100 could rise as much as 1.5% at the open, while Germany’s Dax and France’s CAC are also seen rising by 1% or more.
But following yesterday’s falls, European stock markets could well finish the week lower for the first time since mid-February.
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