European markets edge higher
While the FTSE 100 was breaking new records, European markets were more subdued but still managed to end the day in positive territory, for the most part. The final scores showed:
- Germany’s Dax added 0.17% to 11,583.30
- France’s Cac closed up just 0.01% at 4888.23
- Italy’s FTSE MIB rose 0.33% to 19,424.19
- But Spain’s Ibex ended down 0.43% at 9452.0
In the US the Dow Jones Industrial Average is currently up 42 points or 0.2% at 19,929, heading back towards the 20,000 barrier.
Meanwhile after its recent falls, the pound is currently flat against the dollar at $1.2160 and up 0.1% against the euro at €1.1511.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
FTSE 100 hits unprecedented 9th record closing high
The FTSE 100 has closed at a record high for the ninth day running, breaking a record which has stood for nearly 20 years.
The index finished up 0.53% at a new peak of 7275.47, bettering the eight day winning streak recorded in May 1997 as Tony Blair’s Labour won the general election.
The FTSE 250 has closed at 18,413, also a record high.
As markets continue to climb - the Dow Jones Industrial Average is now in positive territory and just under 60 points away from the 20,000 level - Joshua Mahony, market analyst at IG, said:
The FTSE 100 has again had an outstanding day, with the index gaining from the first minute to the last as it reached new all-time highs once more. The fact that we are seeing the index hit these new highs in such a fearless manner says a lot about the potential for further gains. Interestingly we have seen both [President elect] Trump and [UK prime minister} May providing positive news for the respective US and UK indices, yet for very different reasons. While Trump has boosted US stocks by setting out a positive outlook for the future, the strength of the FTSE has been largely down to the pound devaluation associated with fears over a hard Brexit outcome.
Back with the markets, and the FTSE 100 is well on course to break two records - a new closing peak and the longest run of closing highs. With a winning streak of nine consecutive end-of-day peaks, this would beat the previous record set in May 1997.
Connor Campbell, financial analyst at Spreadex, said:
With the pound still at 2 month to 10 week lows (even if it did manage to shrink much of today’s losses), the miners boosted by data from China [factory gate inflation] and the supermarkets led higher by Morrisons impressive Christmas performance the FTSE has plenty of support this Tuesday..[This] sees the index set to break the record for most consecutive days of new all-time closing highs, a record that has lasted for just shy of 20 years.
Labour leader Jeremy Corbyn is giving a speech on Brexit and my colleague Andrew Sparrow is covering it in the politics live blog:
Wall Street opens lower
As investors await the US reporting season to see if company results justify the heady heights the stock market has reached, leading shares have edged lower in early trading.
The Dow Jones Industrial Average, which came perilously close to the elusive 20,000 barrier on Friday, has shied further away from that level. It is currently down 27 points or 0.13% at 19,860.
The S&P 500 and Nasdaq Composite have both slipped marginally at the open.
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Back in the markets, the pound has pulled out of today’s slide and is now flat against the US dollar at $1.217.
It’s still down slightly against the euro though, at €1.149.
Kathleen Brooks of City Index says the recovery could be temporary...
Monday was a bit like Deja-Vu for currency traders, and a keen reminder of how politics can play havoc with a currency. Sterling declined to its lowest level since October as political fears and the Brexit premium started to bite.
The pound has managed to claw back some losses on Tuesday, but it remains at risk from a further decline in sentiment.
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This year’s Davos will certainly be different, thanks to the Brexit vote and Donald Trump’s election victory.
Attendees will be pondering whether populist forces will triumph in elections in Germany, France and the Netherlands this year, and president Trump’s views on climate change, financial regulation and global inequality.
So it’s no surprise that Klaus Schwab, who created WEF decades ago, is no fan of populism.
But, of course, those ‘populist’ forces are no fans of Davos either!
CNBC’s Matt Clinch has a good take:
In a nod to this current mood, this year’s World Economic Forum (WEF) is titled “Responsive and Responsible Leadership” and its official agenda describes a “weakening of multiple systems” that has eroded confidence and speaks of a possible “downward spiral” fuelled by protectionism, populism and nativism.
Donald Trump’s inauguration as U.S. president on January 20 will overshadow the event but it’s hard to see how every conference, bilateral meeting or roundtable in Davos won’t include some reference to this political upheaval, which the conservative news aggregation site The Drudge Report calls the “new, new world order”.
Indeed, some critics have attacked the event itself as being a reason why U.S. citizens started to question globalization and contemplate the negative impacts it’s had on some parts of Western nations.
CNBC: The ‘party of Davos’ wakes up to the new, new world order
Bloomberg’s Matthew Campbell and Albertina Torsoli agree that China will be one of the big issues at WEF next week.
They explain:
The most high-profile guest by far will be Chinese president Xi Jinping, the first sitting Chinese leader to attend the event. He’s heading a larger-than-ever delegation of business executives from the world’s second-biggest economy, underscoring China’s determination to assume a global leadership role as other major powers are hobbled by domestic infighting.
China’s two richest citizens, Alibaba Group Holding Ltd. founder Jack Ma and Dalian Wanda Group Co. Ltd CEO Wang Jianlin, will join him and appear in solo on-stage interviews. China’s deepening engagement with the world will, meanwhile, be the subject of a discussion on “China’s Role for Global Prosperity,” in which stock-market regulator Fang Xinghai and state-assets chief Xiao Yaqing will appear alongside Lloyds of London Chief Executive Officer Inga Beale.
More here:
The Davos elite will gather as an aggressive new populist-in-chief is sworn in https://t.co/vKSW6JCQio pic.twitter.com/D2munQNUrw
— Bloomberg (@business) January 10, 2017
Chinese president Xi’s first visit to Davos, next week, is an important opportunity to strengthen relations between China and the rest of the world, says argues WEF founder Klaus Schwab.
Schwab tells the WEF press conference that Xi Jinping will attend with a set of top officials and businesspeople, at a time when its economic power is as important as ever.
Since I first visited China in 1979, we have developed a very close relationship, close presence in China.
We are all aware that we are now in transition to a multi-polar geo-political and geo-economic structure.
China will equal the United States soon for economic power. And I foresee that President Xi will show how China will assume a responsive and responsible leadership role in global affairs.
Schwab also reiterates that populism won’t make the world a better place.
We are living in a very complex world. All the issues are interrelated....
There are no simple answers to the challenges that we have. So what we have to do in Davos is show how complicated the situation is.
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Davos founder: Populism isn't the answer
Over in Davos, the World Economic Forum are getting ready for their 47th annual meeting, which begins next Monday.
A lot has happened around the world since the 46th get-together, and much will have shocked the CEOs, government leaders and other heavy-hitters who trek to the ski resort each year.
WEF founder Klaus Schwab and colleagues are holding a pre-meeting press conference now (it’s online here).
Schwab says this year’s meeting must make progress towards tackling the world’s problems - and argued that the rising tide of populism isn’t the answer.
Every simplified approach to deal with the global complex agenda is condemned to fail.
We cannot just have populist solutions.
The problems we face technologically, economically, socially and politically are so tremendous, such that sustainable solutions requite a systemic, holistic approach....and particularly the collaboration of all global stakeholders, united in one mission - improving the state of the world.
Klaus Schwab: answer to world's challenges must be global. Should not be populist or protectionist. #wef17 @wef @davos pic.twitter.com/VAEllPCJIa
— Peter Vanham (@petervanham) January 10, 2017
Schwab also singled out the challenge created by the Fourth Industrial Revolution (the new wave of automation and robotics), and pointed out that Chinese premier President Xi Jinping will address Davos for the first time.
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Over in Italy, two people have been arrested for allegedly hacking into the email accounts of European Central Bank President Mario Draghi, former prime ministers Matteo Renzi and Mario Monti, and thousands of others.
We don’t know what information was obtained, or what it was used for, but it will only intensify the focus on cybersecurity.
Reuters has the details:
“There were tens of thousands of email accounts hacked, and among them were accounts belonging to bankers, businessmen and even several cardinals in the Vatican,” Roberto Di Legami, director of the specialised cyber police unit that conducted the investigation, told Reuters.
Police have sequestered a server in Rome containing thousands of files, but 99 percent of the data was stored in the United States, Di Legami said. The information will be shipped back in coming days but it will take some time before it can be analysed.
Draghi, Renzi among targets of cyber spying (Ansa).
— Frederik Ducrozet (@fwred) January 10, 2017
Pound's woes continue
While the FTSE 100 hits fresh highs, the pound is on track for its worst three-day run sin October.
Sterling is now down 0.2% at $1.214, adding to Monday’s 1% slide, and keeping it at a 10-week low against the US dollar.
It’s also at two-month lows against the euro, down 0.25% at €1.147.
These aren’t big moves, of course, but it does bring the pound rather close to its weakest level against the dollar since the alarming ‘flash crash’ of early October, which is $1.2080.
This chart from City expert David Jones shows how the pound’s rally in November has now unravelled:
Another weak day for the pound today GBPUSD. Interesting to see if the post "flash-crash" lows at 1.2080 manage to hold: pic.twitter.com/OY2UEtVe6z
— David Jones (@JonesTheMarkets) January 10, 2017
Pound heads for worst 3-day drop since October https://t.co/dMUk3CBQsF pic.twitter.com/GE3fgVOqbT
— Bloomberg Brexit (@Brexit) January 10, 2017
Paresh Davdra, CEO and Co-Founder of RationalFX, says the uncertainty around Brexit is overshadowing the fact that UK economic data has been better than expected.
He writes:
“The pound’s lowly performance this week took a sharper hit, reaching fresh 10-week-lows, owing largely to dimming hopes for a ‘soft’ Brexit. The key issue being the taut stance of EU over free-movement and its effect on the prospects of a single market access deal for the U.K. Selling pressure on the pound is expected to stay until further details are revealed in the coming weeks.
On the bright side, the economy is still defying expectations as it continues to persist on the momentum from 2016 and a lower pound has positively affected exports. Modest economic growth figures ideally mean that the BoE cannot afford to increase interest rates anytime in the near future – such indicators normally strengthen the pound, however, the Brexit clamour seems to be the sole driver of the current narrative.”
Incidentally, the FTSE 100 could also set its longest run of daily gains since 2009 today -- as well as the lengthiest stretch of record highs ever.
FTSE 100 set for best winning streak since 2009 https://t.co/h7RbYpuOtj
— Fabrizio Goria (@FGoria) January 10, 2017
Updated
FTSE 100 on track for record-breaking run
Britain’s FTSE 100 is on track to post its longest run of record highs since it was created in 1984.
After another morning of gains, the blue-chip index is up 30 points at 7268, an new intraday high.
Partly thanks to the weak pound, the FTSE has closed at a record high for the last eight days running. It’s gained 8% since the start of December:
So if the rally holds, the FTSE 100 will close at a record high for the ninth day running.
This would smash the previous record set in 1997 after Tony Blair won a landslide general election victory.
Mining companies are now leading the rally, helped by optimism about economic growth next year. The strong Christmas trading figures from Morrison’s are pushing supermarkets shares higher too.
Here’s some more snippets from the parliamentary hearing on Brexit and the City, via Financial News’s Lucy McNulty:
LSE's Rolet: transition arrangement for finance best way to have successful Brexit. Should be 5yrs from Article 50 triggering #tsc #brexit
— Lucy McNulty (@LucyMcNulty) January 10, 2017
HSBC's Flint: London ecosystem is like a Jenga tower. You don't know if you pull a bit out, if it's going to have a big impact #tsc #brexit
— Lucy McNulty (@LucyMcNulty) January 10, 2017
LSE boss: Thousands of jobs threatened by Brexit uncertainty
Over in parliament, the chief executive of the London Stock Exchange has warned that thousands of City jobs could be lost if the uncertainty around Brexit doesn’t ease.
Xavier Rolet told the Treasury committee that LSE clients wouldn’t wait for clarity about Britain’s exit from the EU.
He said:
“I’m not just talking about the clearing jobs themselves which number into the few thousands.
But the very large array of ancillary functions, whether it’s syndication, trading, treasury management, middle office, back office, risk management, software, which range into far more than just a few thousand or tens of thousands of jobs. They would then start migrating.”
(thanks to Ben Woods of the Press Association for the quotes).
LSE CEO: Jobs Would Migrate After Article 50 Is Triggered #Brexit
— Livesquawk (@Livesquawk) January 10, 2017
LSE CEO: Clients Would Ask About Alternatives As Brexit Starts
— Livesquawk (@Livesquawk) January 10, 2017
HSBC chairman Douglas Flint is also talking about clients’ concerns about Brexit. We’ll have more on this shortly...
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Food inflation picks up as Premier Foods plans price hikes
Food inflation is returning to the UK, and the weak pound is partly to blame.
Research group Kantar Worldpanel has reported that grocery prices rose by 0.2% in the 12 weeks to 1 January, the first time in just over two years that food prices have gone up.
The cost of importing foodstuffs like sugar and chocolate into the UK has risen since sterling slumped against other currencies. And one of the country’s largest food producers, Premier Foods, is now in talks to hike prices.
It’s bad news for fans of Mr Kipling cakes, Ambrosia custard and Loyd Grossman’s sauces.
City AM reported overnight that Premier was talking to Tesco, Sainsbury’s and Asda due to “growing cost pressures from the weaker pound in the wake of the EU referendum”.
A spokeswoman has now confirmed that negotations are underway, saying:
“The situation on pricing differs between our different categories and brands and is currently under discussion with our individual retail customer.
On average we are considering rises around the midsingle digit mark.”
Tuesday's @CityAM front page pic.twitter.com/9QmwmKiZgF
— Christian May (@ChristianJMay) January 9, 2017
The swingometer has been a staple of British current affair since the 1950s.
And analysts at HSBC have created their own version, the ‘Brexometer’ to show whether the City is expecting a hard or soft Brexit.
Today’s weakening pound suggests we’re heading towards a rather solid exit (losing full access to the single market, and no longer subject to the free movement of people, capital, goods and services).
HSBC's "Brexometer" to track how hard FX market thinks Brexit will be; If no Brexit at all, GBP would be around $1.55. Hard Brexit = $1.10. pic.twitter.com/i0h0cAAG7R
— Jamie McGeever (@ReutersJamie) January 10, 2017
Connor Campbell of SpreadEx predicts more sterling volatility today:
The prospect of Jeremy Corbyn set to deliver a speech claiming the UK can be better off out of the EU meaning it might be another rough day for the pound.
Labour leader Jeremy Corbyn is due to give a major speech on Europe today that will outline his vision for Britain after Brexit.
Our political editor Anushka Asthana explains:
Jeremy Corbyn will use his first speech of 2017 to claim that Britain can be better off outside the EU and insist that the Labour party has no principled objection to ending the free movement of European workers in the UK.
Setting out his party’s pitch on Brexit in the year that Theresa May will trigger article 50, the Labour leader will also reach for the language of leave campaigners by promising to deliver on a pledge to spend millions of pounds extra on the NHS every week.
He will say Labour’s priority in EU negotiations will remain full access to the European single market, but that his party wants “managed migration” and to repatriate powers from Brussels that would allow governments to intervene in struggling industries such as steel. Sources suggested that the economic demands were about tariff-free access to the single market, rather than membership that they argued did not exist.
Karl Whelan, Professor of Economics at University College Dublin, tweets that this call for immigration control but full access to the single market seems familiar....
Corbyn basically adopting the "have cake and eat it" Tory strategy on free movement and the SM. https://t.co/WPZaYRpOvX
— Karl Whelan (@WhelanKarl) January 10, 2017
The Financial Times argues today that “exasperation” over Theresa May’s lack of clarity about Brexit are doing the real damage to sterling.
Traders aren’t surprised that Britain is likely to leave the single market, to allow new controls on immigration, but they are uncomfortable in the dark waiting for more details.
Here’s a flavour:
With less than three months to go before the government plans to invoke Article 50 and begin the Brexit process, there is nervousness that the government has yet to reveal a plan.
“There is no clear path and a lack of substance,” said Andrew Soper, head of FX options at Nomura.
More here: Traders fret over Theresa May’s Brexit vagueness
The pound is continuing to drop.
It just hit a new 10-week low of $1.2118 against the US dollar, down another half a cent this morning.
FTSE 100 climbs to new hgihs
Boom! Britain’s FTSE 100 has hit a new all-time high at the start of trading.
The index of the largest companies listed in London gained 23 points, or 0.3%, to hit 7261 points.
That’s partly due to the pound’s weakness, which boosts the value of international companies and should help exporters.
A strong performance by the supermarket sector is also helping, after Morrisons posted its best sales results in seven years. Morrison’s share are up 4%, with rivals Sainsbury and Tesco close behind.
On Monday night the FTSE 100 hit a record closing high for the 8th day in a row. That last happened in 1997 -- a ninth consecutive closing high today would break that record.
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Pound hits two-month low against the euro
Despite Theresa May’s best efforts, the pound is under renewed pressure this morning as investors fret about Brexit.
Sterling has fallen by 0.3% against the euro to €1.1466 in early trading, its lowest level since the 10th November.
The pound is also a little weaker against the US dollar at $1.2137, adding to Monday’s losses (when it hit a three-month low against the greenback).
The pound remains around its lowest since the end of October https://t.co/lrdZ51tGJF pic.twitter.com/anc1K357SP
— Bloomberg Brexit (@Brexit) January 10, 2017
The PM claimed on Monday that Britain will get the best possible deal from the EU.
However, her insistence that the UK can’t keep ‘bits of membership’ have fuelled worries about a ‘hard’ Brexit (not a term Mrs May approves of), and exit from the single market.
Kathleen Brooks of City Index says the pound was ‘battered’ on Monday. She predicts that investors will keep betting against sterling until they know the details of Brexit.
We expect the pound to remain the most volatile of the G10 currencies in the coming months while we wait for the triggering of Article 50. Essentially the market is likely to re-establish shorts in GBP, after a brief respite at the end of last year, until it is quite confident that Brexit won’t be ‘hard’ or disastrous for the UK economy.
While Theresa May says that we can’t keep ‘bits of the EU’, sterling isn’t safe from the bears until we know what will replace the single market.
Any potential recovery in the pound be scuppered by “heightened levels of political risk”, she adds.
Updated
The agenda: Christmas cheer from Morrisons and Majestic
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
We’re getting a new healthcheck on Britain’s economy this morning, with results from supermarket chain Wm Morrison and retailer Majestic Wine.
The early signs are encouraging, with Morrison’s posting its best sales growth since 2009 - up 2.9% over the crucial Christmas period. That suggests UK consumer confidence is holding up, although Morrison’s new management team should take the credit too.
WM MORRISON - like for like transaction growth for the last year +5.2% - strongest sales performance for 7 years! - shares called up 4%!
— David Buik (@truemagic68) January 10, 2017
Majestic says its retail outlets had their biggest ever Christmas too, with like-for-like sales up 7.5%.
Xmas retail trading statements looking good...
— Louise Cooper (@Louiseaileen70) January 10, 2017
Majestic Wine sales +15%
Blimey
30% of annual sales at Xmas.
So, Britain hasn’t lost its appetite for wine - and after 2016, who can blame us?
More on all that shortly....
Also coming up today
Three City chiefs will be grilled by MPs about Brexit this morning. Douglas Flint of HSBC, Elizabeth Corley of Allianz Global Investors and Xavier Rolet of the London Stock Exchange are due before the Treasury committee at 10am.
And City traders will be watching to see Britain’s FTSE 100 can maintain its run of record highs.
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