European markets end lower
US markets may be hitting new highs but it is a more downbeat picture in Europe.
Dollar weakness lifting the euro and the pound has hit the main European markets, while Wall Street is benefiting from the currency movements and investor hopes that the Republicans are making progress with their tax returns. The final scores in Europe showed:
- The FTSE 100 finished down 25.74 points or 0.35% lower at 7383.90
- Germany’s Dax dipped 0.46% to 13,000.20
- France’s Cac closed down 0.56% at 5360.09
- Italy’s FTSE MIB fell 1.07% to 22,176.70
- But Spain’s Ibex edged up 0.1% to 10,063.1
- In Greece, the Athens market added 0.17% to 724.39
On Wall Street, the Dow Jones Industrial Average is currently up 26 points or 0.11%.
And bitcoin is 2.5% better at $9509.
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.
Oil lower ahead of Opec meeting
Oil is on the slide ahead of this Thursday’s meeting of Opec, despite talk that the producers will extend their output cut to try and curb oversupply and protect the price. David Madden at CMC Markets says:
WTI and Brent Crude oil are in the red today after having a positive run recently ahead of the OPEC meeting on Thursday. There is speculation that major oil producers will extend the oil production cut until the end of 2018. Some dealers feel a lot of that is already priced in and are exiting their long positions ahead of the meeting in Vienna.
The US shale producers will be paying close attention to OPEC’s decision, as a surge in the energy market could prompt higher production in the shale sector – which could counteract OPEC’s decision.
Brent crude is currently down 0.8% at $63.33 a barrel while West Texas Intermediate is 2% lower at $57.7.
Bitcoin, by the way, is currently up 4% at $9647, although down from its earlier peak of $9721.
More on the markets. Chris Beauchamp, chief market analyst at IG, said:
Another day, another record high in the Dow Jones, which is playing catch-up with the S&P 500 and Nasdaq after those indices hit fresh records last week. Risk appetite remains healthy in the US but subdued in the UK and Europe, and once again it is strength in the home currencies arising from dollar weakness that is helping to stifle what looked like a strong session earlier in the day. The other big worry, particularly for the FTSE 100’s mining contingent, is a notable tightening of financial conditions in China; while rising bond yields might not seem like a reason to worry, a hit to corporate profits could feed through to the broader economy and thus raise questions about demand for raw materials in 2018. The great mining rally has recovered from its wobble in the first half of the year, but assuming demand remains healthy this weakness could be a chance to pick up some big miners on the cheap.
US stocks are back to normal today, with the recovery from Thanksgiving overindulgence complete. Tax reform looks a bit less of a done deal today, and it is strange to see the market so blissfully unconcerned. Perhaps it is the thought of a festive rally into year-end that is keeping them stable, or perhaps they’re hoping Mr Trump will pull a rabbit out of the hat. Either way, as we head into the final month of the year a sudden pullback due to tax reform worries offers the dip-buyers their best hope.
Earlier the Bank of England’s chief economist Andy Haldane gave a speech at a Birmingham school about the importance of economics to the general public:
In his latest speech our Chief Economist, Andy Haldane, discusses why economics can be a turn-off for most people and how our new approach to "communication, conversation and education" aims to tackle that. https://t.co/e9Iq1vSbfG pic.twitter.com/m2fWrZSe85
— Bank of England (@bankofengland) November 27, 2017
European markets have not been able to keep pace with their US counterparts, and are marginally in the red as we head towards the last hour or so of trading. Connor Campbell, financial analyst at Spreadex, said:
Monday’s been a pretty scatty, aimless day of trading, with the European indices reversing their lunchtime reversal.
Once again the FTSE finds itself back below 7400, falling 20 points having been up by that same amount at midday (and having been down by that same amount just after the bell). The pound’s 0.1% rise against both the dollar and the euro likely didn’t help, with cable briefly striking a fresh 8 week peak.
However the brunt of the FTSE’s decline appears to be coming from the commodity and banking sectors. BP and Shell haven fallen 0.9% apiece as Brent Crude slipped around 1% as it eyes Wednesday’s OPEC meeting, with the miners stranded in a sea of red. The smattering of losses coating the likes of Barclays, Lloyds and RBS, meanwhile, comes ahead of tomorrow’s stress test results.
In the Eurozone the DAX and CAX followed the same pattern as the FTSE, flitting in and out of the red before settling at a loss this afternoon. The German index is down 0.1% despite signs of political progress in Germany, while its French peer fell 0.2%.
As for the Dow Jones, it surged 0.3% this Cyber Monday, crossing 23600 to hit a brand spanking new all-time peak. For those keeping track, the index has rocketed nearly 20% higher since the start of the year (it’s even more if you trace its rise back to Trump’s election).
Following the strong US housing figures, the Dow Jones Industrial Average has moved sharply higher and has now also hit a new peak. It is now up 0.3% at 23,628.
US home sales unexpectedly jump 6.2%
Some strong housing data from the US.
New home sales jumped 6.2% to a seasonally adjusted annual rate of 685,000 in October, the highest level in ten years. New home sales have increased for three straight months, although September’s figures was revised down from 667,000 to 645,000.
Economists had been expected sales to fall 6% to 625,000 in October.
No comment:
A short history of Bitcoin 😂$BTC.X -> https://t.co/Z9d3xU1r62 pic.twitter.com/CmniRiv1xt
— StockTwits (@StockTwits) November 27, 2017
Wall Street opens higher
Another day and more records for US markets.
Helped by gains for retail shares on Cyber Monday, the S&P 500 has edged up to a new peak of 2604, while the Nasdaq Composite is at a record 6890.
The Dow Jones Industrial Average is below the heights reached last week but is still up 0.13% on the day at 23,587.
Pound hits eight week high against the dollar
Back with non-cryptocurrencies, and the dollar is slipping back on suggestions that a US rate hike in December may be the last for a while, given last week’s Federal Reserve minutes showed some reluctance to push borrowing costs too high.
So the pound has added 0.3% against the US currency to $1.3382, an eight week high. Michael Hewson at CMC Markets said of the dollar:
While a December rate move remains a done deal in the eyes of the markets, it’s what comes after that which is becoming less clear. There were positive views about the jobs market as well as general economic activity across the board, but there were diverging views about the lack of inflation, and it is this uncertainty about US rate policy in 2018 which continues to undermine the currency against the backdrop of a flattening yield curve.
Back in the world of shopping, and US retail companies are seeing share price gains in premarket trading, following Black Friday and during Cyber Monday.
JC Penney is up 1.8%, Target is 1% better, Macy’s is 1.1% better and the unstoppable Amazon has added 0.5%.
What do central banks think of bitcoin and other cryptocurrencies. Bloomberg has done a roundup of views:
Eight years since the birth of bitcoin, central banks around the world are increasingly recognizing the potential upsides and downsides of digital currencies.
The guardians of the global economy have two sets of issues to address. First is what to do, if anything, about emergence and growth of the private cryptocurrencies that are grabbing more and more attention -- with bitcoin now surging toward $10,000. The second question is whether to issue official versions.
The reaction is mixed, with some warning of the dangers while others - including the Bank of England’s Mark Carney - seeing it as a potential revolution. The full report is here.
Updated
European stock markets are subdued today, following the selloff in China overnight.
Britain’s FTSE 100, the German DAX and the French CAC are all down by between 0.1 and 0.3%, as the pound and the euro gain against the US dollar.
Rebecca O’Keeffe, Head of Investment at interactive investor, says:
European markets are tracking Asia lower, as fears grow that Chinese equities could be starting one of their downward legs, which may cause fright for global investors. Chinese equity markets are notorious for delivering a volatile ride for investors, who have become used to boom and bust periods.
The China effect is especially significant for commodity markets and by extension the metal and oil heavy FTSE 100.
Investors are also looking for signs of progress in Germany, now that the centre-left SPD party is prepared to consider another coalition with Angela Merkel.
After its early morning jump, bitcoin is currently bobbing around the $9,600 mark.
That leaves the $10,000 milestone firmly in its sights. And some in the industry reckon this could lure more people into buying digital currencies.
Thomas Glucksmann, Hong Kong-based head of marketing at cryptocurrency exchange Gatecoin Ltd, told Bloomberg:
“The weekend’s bitcoin price hike is just the continuation of a long-term bull run on the cryptocurrency, fueled by the tsunami of speculative trading on Japanese exchanges and the entrance of institutional investors across the world.
It is more likely that the $10,000 psychological stratosphere will push more institutional investors into the mix.”
Alternatively, Bitcoin’s rapid ascent might force financial authorities and central banks to rethink their current policy of waiting to see how digital currencies evolve.
In recent months we’ve seen a boom in Initial Coin Offerings (ICOs), in which new cryptocurrencies are launched into the market - often backed by a celebrity (yes you, Paris Hilton and Floyd Mayweather).
ICOs are already under serious scrutiny, due to fears that investor aren’t properly protected. David Futter, fintech partner at law firm Ashurst, predicts that scrutiny will intensify.
In the shorter-term regulatory scrutiny will continue to fall on ICOs and the benefits of adapting the existing financial regulation around investments, payments and e-money to drive even more competition while protecting consumers.
“Regulators know the rewards of cryptocurrency and blockchain could be huge, but have more than one eye on the catastrophic ramifications if good governance, stability and control are not preserved. If the carrot of self-regulation proves insufficient, the regulators will not hesitate to use their stick.”
Bitcoin mining uses more energy than Ireland
Now here’s a thing. Bitcoin’s “mining” network uses more electricity in a year than 19 European countries, including Ireland, according to statistics released this morning.
That power consumption is the cost of verifying transactions made using bitcoins, as our technology writer Alex Hern explains:
At a continual power drain of 3.4GW, it means the network consumes five times more electricity than is produced by the largest wind farm in Europe, the London Array in the outer Thames Estuary, at 630MW....
The astronomical power draw is a facet of how the bitcoin network protects itself against fraud. With no centralised authority confirming transactions, bitcoin is instead backed by “miners”, who put specialised computers to work churning through extremely power-intensive computing problems. Solving those problems both rewards the miner, handing them almost a quarter of a million dollars in bitcoin, and verifies all transactions made in the last 10 minutes.
More here:
Here’s our news story on Bitcoin’s rally:
Speaking of those stress tests, here’s a video explaining how Britain’s banks have been put under the microscope.
We will release the results of our stress test of the largest UK banks tomorrow. Here’s a short explainer of what stress testing involves. pic.twitter.com/DZc3KDwiFt
— Bank of England (@bankofengland) November 27, 2017
Bitcoin is the first, and the biggest, "cryptocurrency" – a decentralised tradable digital asset. Whether it's a bad investment is the $97bn question (literally, since that's the current value of all bitcoins in existence). Bitcoin can only be used as a medium of exchange and in practice has been far more important for the dark economy than it has for most legitimate uses. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption – or regulation. That means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it's hard (but not impossible) to trace a bitcoin transaction back to a physical person.
Tomorrow is a big day for Britain’s banking sector.
At 7am, the Bank of England will publish the results of this year’s bank stress tests. They will assess whether UK lenders have enough capital to cope with a sterling crisis, a recession, and a housing market crash.
City editor Jill Treanor explains:
The Bank of England is to reveal the damage inflicted on the UK’s biggest lenders from £30bn of hypothetical consumer loan losses, an economic downturn and a collapse in the pound.
Threadneedle Street’s latest health check on the sector – the first was conducted in 2014 – could have an impact on a bank’s ability to pay dividends and on its business models.
The lenders could be forced to sell off assets or ask existing shareholders and bondholders for more cash if they fail the tests based on hypothetical scenarios intended to put the sector under severe stress.
You can get up to speed with Jill’s preview, here:
Bitcoin’s rapid ascent towards $10,000 could spur some investors to cash in their gains, suggests the analyst team at FXPro.
They write:
Currently, the market is anticipating that Bitcoin will reach $10K, with the lack of warning signals down to the lack of any doubts regarding further growth. It begins to seem that big businesses intended to profit from it. If this happens, there is a huge risk that big players start taking profit, with news provoking panic and sell-off. The cryptocurrency market currently seems like a playground for Wall Street tycoons, with JP Morgan Chase’s Jamie Dimon ‘looking at business opportunities in the planned Bitcoin-futures market’, albeit having labelled Bitcoin ‘a fraud’ just two months ago.
Once speculation is over, it is very likely that only the real business model projects will remain, such as logistics companies, accountancy or statistics firms reliant on blockchain.
There are roughly 16.7 million bitcoins in circulation - that’s the number mined using special software and hardware.
Those coins are now worth $160bn in total (if you accept that a currency can have its own market capitalisation), more than some of the world’s major companies.
At $160 billion, Bitcoin's market cap just passed GE's.
— Charlie Bilello (@charliebilello) November 27, 2017
Yes, that GE:
Founded in 1892
Once the largest company in the world
295,000 employees
$123 billion in revenue$BTC.X $GE pic.twitter.com/XDqjW2l5Ns
Mike’s got a point...
It is not a 'currency' in the true sense of the word (store of value/medium of exchange) if you have no idea what it will be worth when you wake up. #bitcoin
— Mike van Dulken (@Accendo_Mike) November 27, 2017
Tarzan* has swung into the debate on Britain’s industrial strategy!
Lord Heseltine, former UK deputy prime minister, has argued that the best thing for British business would be to cancel Brexit, rather than
Heseltine says it’s simply implausible to expect firms to commit fresh investment while Britain’s future is unclear:
Our country is facing years of stagnation, and what is a principal cause of that? It’s that anyone who has got to take an investment decision today is saying, ‘Well how do I know what to invest in? What’s going to happen about Britain and its biggest market of Europe?’ and so they’re hesitating.
Whether they’re British companies or overseas companies investing here, they’re hesitating. And as long as we have this Brexit shadow going over us, that will remain. And what do we get in the Budget? A £3bn bill in order to prepare for this Brexit disaster.
Our Politics Live blog has all the details:
* - a reference to Lord Heseltine’s impressive mane and exuberant approach to politics (some readers may remember his antics with the House of Commons mace in 1976)
This chart, from Bloomberg, shows how bitcoin has soared this year:
Some analysts say it looks like an unsustainable bubble.
But Hussein Sayed, chief market strategist at FXTM, reckons bitcoin will keep rising as more individuals and investors jump on board.
From a fundamental perspective it is still almost impossible to give the cryptocurrency a fair value, however, there has been a strong correlation between the price of Bitcoin and number of users opening new wallets. It is not just retail investors showing interest in the cryptocurrency, but many hedge funds have decided to join the party recently by including Bitcoins in their portfolios.
Given that number of users haven’t exceeded 0.1% of the global population, there’s still more potential for this momentum trade to continue. Whether the price will be justified in the foreseeable future, depends on the adoption and the application of the new currency, but so far it still looks unstoppable.
Updated
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Bitcoin’s rally is partly due to the established financial world taking cryptocurrencies more seriously.
Last month, derivatives marketplace CME Group announced it will start offering Bitcoin futures in December - letting investors trade Bitcoin without actually buying it.
Neil Wilson of ETX Capital says this was a key moment:
CME’s decision to launch bitcoin futures in December has undoubtedly fuelled buying. BTC is up more than 50% since the decision was announced on October 31st. The legitimacy this gives Bitcoin as a tradeable asset is very important. The market cap of Bitcoin now exceeds that of IBM, Disney and McDonald’s.
But traditional investors still find Bitcoin’s rally baffling, with many predicting that it will end in tears.
As Wilson puts it:
Rather than a commodity or currency, Bitcoin is like owning stock in a company that will only ever issue 21 million shares and never pay a penny in dividends. The only way it has value is if the next guy is willing to pay you more for it – the greater fool. With no intrinsic value to Bitcoin, it’s hard to see this as anything other than a giant speculative bubble.”
Updated
Bitcoin heads towards $10,000
Chinese stocks may be sinking, but Bitcoin is on a tear (again) this morning.
The crypto currency has hit a fresh record high of $9,600 this morning, putting the $10,000 mark within its sights.
It’s quite a rally - Bitcoin started 2017 at just $1,000, before smashing a series of milestones with remarkable speed.
Bitcoin price increase in number of days.
— Ahmed Nafo (@Ahmed_Nafo) November 27, 2017
$0 - $1000: 1789 days
$1000- $2000: 1271 days
$2000- $3000: 23 days
$3000- $4000: 62 days
$4000- $5000: 61 days
$5000- $6000: 8 days
$6000- $7000: 13 days
$7000- $8000: 14 days
$8000- $9000: 9 days pic.twitter.com/kvjAC1dk83
Bullish Chinese investors capitulated this morning, says Mike van Dulken of Accendo Markets.
He writes:
China equities are turning lower again, led by financials.
This is driven by concerns about rising yields (multi-year highs) amid a bond market sell-off that is likely to raise re-financing costs in an already over leveraged economy, putting pressure on both corporates and consumers, reviving the China credit bubble story.
Chinese stock market hits three-month low
Chinese stocks have hit this lowest level since the summer, as a government crackdown on risky lending spooks investors.
The Shanghai composite index fell almost 1% to 3,322 points, the lowest level since 25th August.
Traders said jitters in the bond market are hitting Chinese shares, on fears that corporations will pay more to borrow - eating into profits.
New curbs on the asset management sector are also driving people to sell, as Reuters explains:
Selling in China’s stock markets last week had been prompted by a rout in the bond market that pushed yields on government treasury bonds to three-year highs, and by fresh moves to reduce risks in the asset management industry that may bring a sea change for banks and millions of small investors.
But while bond market jitters appeared to ease on Monday, stock market investors continued to unload shares in major firms that have enjoyed strong gains in recent weeks.
This could weigh on Europe’s stock markets this morning too....
The agenda: UK to unveil industrial strategy
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Weak productivity growth is a key reason why Britain faces years of anaemic growth and weak pay.
But the UK government hopes to crack the puzzle today, by announcing a new UK’s Industrial Strategy.
It will focus on five ‘key foundations’ -- ideas, people, infrastructure, business environment and places, in an attempt to make the British economy fit for the 21st century.
Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, will launch the strategy this morning. He hopes to make Britain a world leader in areas such as AI and driverless cars.
Our economics editor Larry Elliott explains:
The paper will identify four grand challenges, global trends that the government sees as shaping the future: artificial intelligence; clean growth; an ageing society; and future mobility from driverless cars to drones.
Industrial strategy went out of fashion in the Conservative party after the defeat of the 1974-9 Labour government by Margaret Thatcher. But Clark believes a new approach based on competition rather than on picking winners will help address Britain’s long-term problems.
But will it really be enough to spur Britain forwards?
Also coming up today...
City investors will be watching Germany closely. Over the weekend, senior officials in Angela Merkel’s CDU party agreed to pursue a “grand coalition” with the Social Democrats. This could spare Germany from a fresh snap election.
Plus, we get a new health check on America’s housing market
Here’s the agenda
- 9.30am GMT: Industrial strategy released
- 3pm GMT: US new home sales figures for October
Updated
