Closing summary: After the storm, more bumps
British investors returned to their desks after a bank holiday and European parliamentary elections, but trading on FTSE 100 continued to have something of a half-term break feel, with London’s blue-chip index gaining 0.2% at the time of writing.
Other major European indices recovered early losses to be roughly flat at the time of writing, although Italy’s FTSE MIB remained down by 0.3%, amid concerns that the country’s government – led by far-right deputy prime minister Matteo Salvini – could rebel against EU budget restrictions.
In many respects it is business as usual across the EU, according to Ollie Beckett, a portfolio manager at Janus Henderson. He said:
The EU election does not represent a significant change for European stock markets, particularly at the smaller end of the market cap scale. Despite the rise of potentially antagonistic populist voices in the EU, there is no clear desire for a break-up of the bloc, although the result may represent a risk of disruption to the traditional party system at a national level.
In the US shares have continued to rise after opening up. At the time of writing the S&P 500 and the Dow Jones industrial average had gained 0.5% each, with the Nasdaq Composite up by 0.7%.
Thanks for reading today. Please join tomorrow for more rolling coverage of business, markets and economics. JJ
Wall Street has gained at the open as investors return from holiday to a shortened trading week.
The S&P 500 rose by 0.13% to 2,829 points, while the Dow Jones industrial average rose by 0.14% to 25,621 points. The tech-heavy Nasdaq composite index rose by 0.22% to 7,653 points.
It could be a long night for EU watchers. The contenders for the job jobs at the head of a new European parliament may be lined up, but there is some hardcore diplomacy to get through before we have white smoke on who will lead the EU’s institutions.
With the top job at the European Commission up for grabs, parliamentarians are wrangling over the process, and how lead candidates – “Spitzenkandidaten” – from each pan-European grouping are chosen.
Groups which count for a majority in the parliament have backed the Spitzenkandidat system, but the centrist bloc encompassing Emmanuel Macron’s party and the liberal, pro-business ALDE Group is opposed to process – with bargaining set to continue today.
Guy Verhofstadt, the leader of ALDE Group, said: “The EPP is pushing hard for the Spitzenkandidaten-system, but unfortunately they killed its legitimacy when they voted against transnational lists. They try to ride to power on a horse that they already slaughtered themselves.”
“A Spitzen-candidate that you cannot vote for in the whole of Europe is simply not serious. For us it is important that the next President of the Commission is representing a broad pro-European majority with a clear programme to renew Europe.”
Macron wants the European Council leaders – mainly heads of the national governments – to decide on the European Commission bosses, and appears to be holding firm:
STATEMENT: Mr Macron’s party and ALDE said:
— Darren McCaffrey (@DarrenEuronews) May 28, 2019
“At this hour, no candidate for the presidency of the Commission has secured a majority in the European Parliament.
As we approach the US opening bell it looks like being a muted return on Wall Street following the Memorial Day closure.
S&P 500 futures pointed to a small bump of 0.04% at the time of writing, while Dow Jones industrial average futures gained 0.14% and Nasdaq 100 futures gained 0.17%.
Boots reportedly considering the closure of 200 shops
Walgreens Boosts Alliance, the US owner of Boots, has put 200 stores under review for possible closure in the next two years, Sky News reports.
Boots has struggled in recent months amid falling sales, with increased competition and the move to online shopping among the major driving forces.
Here’s the reason that NMC Health is enjoying today: an upgrade to profit guidance for the United Arab Emirates-based (but London-listed) private hospitals provider.
NMC upgraded its profits guidance after setting up a joint venture with the Saudi Arabian state pension fund.
The FTSE 100 has bumped up in the last half hour, with the mining contingent making the running at the top of the index.
Chinese iron ore prices have risen, according to Reuters, which has boosted Rio Tinto, Fresnillo and BHP – all up by more than 2%.
Private hospitals provider NMC Health is the biggest individual gainer, with shares up by 5.1%.
Over in Greece the stock market has shown a remarkable rise on the back of renewed prospects of the centre right New Democracy party assuming government when snap polls are held in the coming weeks.
In a sign of investor optimism, the stock market rose by more than 6% on Monday* while yields on 10-year bonds have fallen to historic lows of 3.1 % – not seen since Greece joined the eurozone in January 2002.
After the unexpectedly heavy defeat of his Syriza party in Sunday’s European election, Greece’s leftwing prime minister Alexis Tsipras called early elections. The poll, likely to take place on either 30 June or 7 July, was brought forward by four months.
New Democracy, which emerged with a 9.5 % lead over Syriza, is viewed as much more business friendly. The possibility of the party taking office has raised hopes of the conditions being created for much-needed foreign direct investment.
New Democracy’s leader, Kyriakos Mitsotakis, has long slammed the leftist government’s high-tax regime, calling it counterproductive at a time when Greece is gradually recovering from years of recession following its long-running debt crisis.
*This post has been edited to correct the day of the stock market move.
Updated
Alastair Campbell, Tony Blair’s former communications director, has been expelled from the Labour party for voting Liberal Democrat in the European elections, he has said.
Campbell said on Twitter: “Sad and disappointed to receive email expelling me from uklabour - particularly on a day leadership finally seems to be moving to the right place on Brexit, not least thanks to tactical voting by party members, including MPs, councillors and peers who back peoplesvote-uk.”
He added: “I am and always will be Labour. I voted Lib Dem, without advance publicity, to try to persuade Labour to do right thing for country/party. In light of appeal, I won’t be doing media on this. But hard not to point out difference in the way antisemitism cases have been handled.”
Here is the full story:
Updated
Flybe chief executive Christine Ourmières-Widener will step down on 15 July, the airline has announced, after the sale of the business to a consortium led by Virgin Atlantic.
Flybe will appoint a new chief executive to take over before her departure.
Virgin, part-owned by the billionaire Sir Richard Branson, banded together for the deal with the infrastructure firm Stobart Group and the investment house Cyrus to form the joint venture, Connect Airways. Connect bagged the struggling regional operator for £2.8m.
Let’s have a quick look at European stock markets as we reach the middle of the London trading session.
The FTSE 100 is the best performer of the major European indices, with shares flat thanks mainly to a strong day for the mining contingent.
The Stoxx 600, which measures the performance of the biggest European companies, has lost 0.3% in the aftermath of the European parliament elections. Italy’s FTSE MIB index is the worst performer of the major European markets, down by 0.8%.
And it’s Jasper Jolly taking over from Angela for the rest of the day.
ECB president: the runners and riders
Mario Draghi, the man credited with saving the euro in 2012 by declaring he would do “whatever it takes” to preserve the single currency, will stand down as president of the European Central Bank when his term comes to an end in October.
Here are some of the favourites to replace him:
- Jens Weidmann - president of Germany’s Bundesbank, and chairman of the Board of the Bank for International Settlements
- Benoît Cœuré - French economist on the executive board of the ECB
- François Villeroy de Galhau, governor of the Bank of France
- Erkki Liikanen - former Bank of Finland governor
- Olli Rehn - Bank of Finland governor
The pound hasn’t moved much in today’s trading session, still firmly below $1.27 and slightly down against the euro:
- $1.2670, down -0.06%
- €1.1316, down -0.07%
Bert Colijn, senior eurozone economist at the Dutch bank ING, says the eurozone survey suggests weaker growth for the second quarter, despite the pick up in sentiment:
The improvements were mainly led by improved optimism about the months ahead for both industry and services. This is not because of improved new orders though, which still declined in May. Industry data was poor in general as the recent production trend dropped significantly and so did employment expectations. This seems in line with a modestly weaker GDP growth rate in Q2 than Q1.
Eurozone sentiment picks up in May
Economic sentiment in the eurozone was better than expected in May, rebounding after 10 successive monthly falls.
The European commission’s indicator rose to 105.1 from 103.9 in April, beating expectations of no change.
Overall #Eurozone #economic sentiment improved in May from 32-month low in April as #consumer confidence rose to a 6-month high while #industrial sentiment came off April's lowest level since Oct 2013. #Services sentiment up but declines in #retail (marginal) & #construction https://t.co/KqUbTA0odi
— Howard Archer (@HowardArcherUK) May 28, 2019
The five top EU jobs up for grabs
Jennifer Rankin, the Guardian’s Brussels correspondent, brings this report:
Theresa May will return to Brussels for a special European Union dinner summit this evening, but Brexit is not on the menu.
Instead the prime minister will join 27 other European heads of state and government to discuss the process for divvying up the EU’s top jobs.
At the end of this year, five big posts fall vacant: the EU will need a replacement for Jean-Claude Juncker as president of the European commission, and Donald Tusk, president of the European council.
The EU also needs a new presidents at the European Central Bank, the European parliament, and a new foreign policy high representative, a post currently held by Italy’s Federica Mogherini.
EU appointments are always a highly complicated political rubix cube; the bloc wants a spread of leaders balancing western and eastern Europe, men and women, right, left and centrists.
Adding to the complexity, the European parliament is insisting it should have the biggest say over who leads the European commission. Each political group has its own candidate: the centre-right European People’s Party has chosen long-serving MEP Manfred Weber, the Socialist candidate is commission vice-president Frans Timmermans, and the liberals are promoting the EU competition commissioner Margrethe Vestager, best known for taking on Apple, Amazon and Google.
But the parliament, more fragmented than ever after last week’s elections, has so far been unable to agree on a candidate, handing the initiative back to EU leaders.
Other party leaders turned down an invite to dinner with Weber on Monday, because they did not want it to appear as if he was leading the process.
Divisions among MEPs could open the way for a compromise candidate, such as EU Brexit negotiator Michel Barnier, who has long wanted to lead the commission. Or it could be a dark horse that no one is talking about.
Either way, the next cohort of EU leaders will not change the Brexit withdrawal agreement, which is the result of decisions taken years ago. The EU is united on not reopening talks on the agreement, while remaining open to changes on the political declaration.
Theresa May is expected to arrive around teatime and will meet Tusk, before joining other leaders.
Five-a-side football pitch operator Goals Soccer Centres has appointed forensic accountants to investigate its accounting after it revealed a likely tax underpayment, the company announced this morning. My colleague Jasper Jolly reports:
Goals, which counts retail tycoon Mike Ashley’s Sports Direct among its top shareholders, announced in March that it had misdeclared its VAT bill over several years.
The forensic accountants will investigate Goals’ accounting, including how the company, which has 50 sites in the UK, recognised revenues.
Goals “remains in active dialogue with HMRC in establishing a timetable for resolving any misdeclaration and also to establish a final value” of its tax bill, it said on Tuesday.
Goals replaced KPMG with BDO as its auditor last year. The company previously said its liability could be £12m.
Goals will be unable to complete its 2018 audit in time for the 30 June deadline, and shares will remain suspended until the audit and the tax bill are completed, Goals said in a statement to the stock market on Tuesday.
Shares in the company, which are listed on the junior Alternative Investment Market, have been suspended since 27 March at 27.2p after the accounting issue was uncovered. Shares closed 2018 at 74p.
The accounting issues could prove to be a distraction for Mike Ashley, as he tries to complete the £350m sale of Newcastle United to Sheikh Khaled bin Zayed Al Nahyan of the United Arab Emirates. Ashley’s Sport Direct, which owns 19% of Goals, has lost around £6.7m since the start of the year on the investment.
UK mortgage approvals hit two-year high
The number of mortgages approved by British banks hit the highest level in more than two years in April according to the trade body, UK Finance.
Banks approved 42,989 mortgages last month, up from 40,564 in March and the highest since February 2017.
It suggests that consumers shrugged off Brexit uncertainty in the month after the UK was originally supposed to leave the EU.
The Swedish economy grew by 0.6% in the first quarter, double the rate forecast by economists and faster than the eurozone’s 0.4% growth.
David Oxley at Capital Economics, says:
The breakdown shows that exports of goods and services rose again in quarterly terms in Q1, benefiting from the rebound in the eurozone economy at the start of the year.
However, a stronger showing from imports means that net trade was broadly neutral. There were positive signs for domestic demand too. Household consumption grew at its fastest pace since Q1 2018 and investment rebounded.
Oxley says that the Swedish franc is likely to strengthen as weak global growth sends investors in search of save haven investments.
Over in France, consumer confidence rose to a one-year high in May as households became more optimistic about their personal finances.
The index, published by the French statistics office Insee, rose three points to 99, boosted by some better than expected economic data in the eurozone’s second largest economy.
#France Consumer Confidence at 99 https://t.co/D4ZREV5E7E pic.twitter.com/a9krqdvJrm
— Trading Economics (@tEconomics) May 28, 2019
FTSE ticks higher in early trading
Traders have returned from the bank holiday weekend in a reasonable mood, with the FTSE 100 outperforming is European peers in early trading.
- FTSE 100: +0.2% at 7,294
- Germany’s DAX: -0.05% at 12,065
- France’s CAC: -0.04% at 5,334
- Italy’s FTSE MIB: -0.9% at 20,185
- Spain’s IBEX: -0.2% at 9,202
- Europe’s STOXX 600: +0.03% at 377
Weber and Vestager among contenders for top EU job
Contenders to succeed Jean-Claude Juncker as president of the European commission include the German MEP Manfred Weber and Margrethe Vestager, the EU’s competition commissioner.
Manfred Weber has the backing of the German Chancellor, Angela Merkel. He leads the the European People’s party of which her CDU party is a member, but faces tough resistance from from the French President, Emmanuel Macron. He remains the bookies favourite, but is likely to meet stiff competition from a number of candidates.
Among them are Margrethe Vestager, the Danish politician with a high profile in her role as competition commissioner, not least for taking on the US tech giants. She has declared her interest in the top post, calling for gender balance in the top ranks of the EU.
Other frontrunners include Michel Barnier, who has so adeptly maintained a united front among the EU countries in his role as the bloc’s chief Brexit negotiator.
Frans Timmermans, the Dutch politician and a centre-left candidate, is another contender to succeed Junker.
Introduction: EU leaders meet to kickstart the process of filling the top jobs
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
With the dust barely settled after the results of the European elections, EU leaders will gather in Brussels today to kickstart the process of filling the top jobs.
The first round of nominations for the heads of the EU institutions - including the president of the European commission and president of the European Central Bank - is likely to mark the start of a long battle as leaders fight for their preferred candidates.
Jasper Lawler, head of research at London Capital Group, says the chosen successor to Mario Draghi at the ECB is currently “too close to call” and will be a highly politicized appointment.
He adds:
It is most likely to be someone who knows the mechanics rather than an outsider being brought in. This makes the ECB unlikely to benefit from fresh blood. Germany, France and Italy will be trying to push for their own candidates such as Villeroy, Couere or Wiedemann.
Even if the larger EU countries fail, the smaller one’s stand ready with candidates such as Rehn or Liikanean from Finland. Each candidate has a very different profile. Euro traders will be watching the race carefully as the results will impact on the future direction of monetary policy.
Here in the UK, it is the first day of trading after the European election results on Sunday, when voters frustrated by the Brexit impasse dealt a heavy blow to both the Conservatives and Labour.
Also coming up:
- 9.30am BST: UK Finance, the trade body for banks, will publish mortgage approvals data for April
- 10am BST: The latest snapshot of business and consumer confidence in the eurozone
- 2pm BST: Case-Shiller house price index in the US
