US new home sales rise less than expected
New US home sales rose less than expected, up 3.7% to a seasonally adjusted 555,000 units.
Economists polled by Reuters had predicted a 6.3% increase.
December’s number was also revised down slightly to 535,000 units from 536,000.
The median price for a new home increased 7.5% annually to $312,900 in January.
Jan New Home Sales: 3.7% increase puts annualized pace at 555K which is spot on the 3-mo avg. Prices up 7.5% Y/Y. pic.twitter.com/LmzTMNzwds
— Joseph Brusuelas (@joebrusuelas) February 24, 2017
On that note we are closing the blog for the day. Thank you for your comments, and have a good weekend.
US markets open lower
Trading is underway on Wall Street with the major US indices all down:
- Dow Jones: -0.1% at 20,788
- S&P 500: -0.3% at 2,356
- Nasdaq: -0.3% at 5,315
Greece is on the road to recovery, central bank governor says
Back with Greece now, where Yannis Stournaras, the Bank of Greece governor, has been giving his annual address to shareholders.
The central bank boss echoed the message from prime minister Alexis Tsipras: Greece is on the road to recovery. Helena Smith reports from Athens.
Casting recent prognostications of catastrophe to the winds, the Bank of Greece Governor Yannis Stournaras said Greece had not only shown “remarkable resilience” over the past two years but was well on the road to economic recovery.
Addressing the bank’s 84th annual meeting of shareholders, Stournaras said GDP contracted by just 0.2 % in 2015 despite “the particularly adverse conditions” that prevailed during the first half of the year when debt-stricken Greece came closest yet to exiting the euro area and capital controls were ultimately imposed.
In 2016, a whole, he said, GDP rose by 0.3 %, deflationary pressures were contained, employment picked up and joblessness (though at 23 % still the highest in the EU) dropped.
These developments are a strong indication that the Greek economy has growth potential, which after remaining idle for so long, stands ready to be tapped into, as soon as the right conditions are in place.
Besides, despite the mistakes and the backsliding, despite the heavy economic and social costs of the crisis, the economic adjustment programmes implemented over the past years have succeeded in addressing chronic weaknesses and structural shortcomings of the Greek economy, thereby facilitating the improvement in the medium-to-long term growth potential.
Listing the country’s achievements he said the primary fiscal deficit and current account deficit had both been eliminated, the substantial cumulative loss in labour cost competitiveness had been recouped, exports as a percentage of GDP had almost doubled, banks had been recapitalised and the labour and product markets subjected to major structural reforms.
There were risks, starting with a volatile global environment, the rise in euroscepticism across the EU and potential changes in US foreign and economic policies under the new Trump administration. Delays in implementing reforms and concluding the latest bailout review also posed dangers. But he insisted Greece had “reached the final stretch.”
Very little remains to be done compared to the massive changes made since 2010. The process of economic adjustment has largely been completed.
Carney meets US treasury secretary Steven Mnuchin
Bank of England governor Mark Carney held a meeting with US treasury secretary Steven Mnuchin in Washington on Thursday.
In his capacity as chairman of the Financial Stability Board, Carney discussed international financial regulation with the newly appointed and fellow Goldman Sachs alumnus Mnuchin.
According to a statement from the US treasury, Mnuchin stressed that Donald Trump’s administration would promote US interests in global talks on financial regulation:
Secretary Mnuchin underscored that he looked forward to working with governor Carney on international financial regulatory issues and noted that one of the administration’s core principles for financial regulation is to promote American interests in international financial regulatory negotiations and meetings.
The secretary stressed the importance of cooperation between the United States and other G-20 and Financial Stability Board members to achieve our common goals of addressing financial stability risks, fostering efficient global financial markets, and promoting a global level playing field.
Trump has appointed several Goldman Sachs almuni to senior positions in the White House, a fact that was not lost on RBS chairman Sir Howard Davies during his Q&A with analysts earlier today:
RBS Chairman Howard Davies bringing the jokes to the analyst call: "I have a question online from the White House, I'm sorry, Goldman Sachs"
— Richard Partington (@RJPartington) February 24, 2017
Wall Street is expected to open lower on the back of lower oil prices and a fading “Trump rally”.
Brent crude oil prices are down 1% at $55.97 a barrel, after US crude inventories rose for a seventh week in a sign of over supply.
Business secretary holds talks with Peugeot on Vauxhall takeover
The business secretary Greg Clark is the latest person to receive assurances from the Peugeot boss about the future of Vauxhall car manufacturing.
Earlier on Friday, Carlos Tavares told Unite boss Len McCluskey the French company was not here to close plants.
Clarke said:
I had a constructive meeting with the chief executive in which I made the case for how important Vauxhall is to the UK, the excellence of its plants and operations across the UK and how successful they have been.
The meeting was reassuring, we discussed how PSA’s approach is to increase market share and expand production, rather than close plants. I was assured that the commitments to the plants would be honoured. There was also recognition that members of the Vauxhall pension fund will be no worse off.
Mr Tavares said no deal has been done, discussions continue and he and I agreed to stay in close touch. This is a very important company and workforce which has been successful and we all want it to be just as successful in the future.
Bundesbank: UK based banks will probably move operations
Banks based in Britain will probably have to move some of their operations to the EU post Brexit to retain market access.
That is the view of Germany’s Bundesbank board member Andreas Dombret. Speaking in London, he said:
In the end, there might well be two separate jurisdictions in which (banks) operate, and these jurisdictions might diverge over time – or instantly, once the divorce has gone through.
So it seems that the prospects for EU market access through the UK look rather dim.
I expect London to remain an eminent global financial centre. Nevertheless, I also expect a number of UK-based market participants to move at least some business units in order to hedge against all possible outcomes of the negotiations.
Updated
CMC’s Michael Hewson says equities are beginning to look tired.
European markets look set to finish the week on the back foot as the air starts to slowly come out of the recent rally.
The German DAX has continued to pull back after hitting its highest levels since April 2015 earlier this week. The FTSE 100 has also come under pressure, hitting a two week low as a number of earnings reports disappointed.
After spending the last few days climbing a wall of expectation, are investors starting to lose their footing, on heightened political concerns and a reassessment of the reflation trade?
With gold also at four month highs it would appear that caution is back at the forefront today.
He points out the implications of new record lows for yields on two-year German government bonds:
German 2 year prices hit new record highs and yields go to an incomprehensible -0.95%. With German inflation currently at 2%, that equates to a real yield of -3%. German savers will love that!
European markets extend losses
After a low-key start, market falls have accelerated as the afternoon trading session gets underway.
In the UK, RBS, Standard Chartered and the miners are dragging the FTSE 100 down. Across the Channel, uncertainty surrounding the French election appears to be weighing on sentiment.
The latest scores:
- FTSE 100: -0.7% at 7,222
- Germany’s DAX: -1.5% at 11,769
- France’s CAC: -1.4% at 4,822
- Italy’s FTSE MIB: -1.1% at 18,616
- Spain’s IBEX: -0.7% at 9,426
- Europe’s STOXX 600: -1.1% at 369
The Robin Hood Tax Campaign is commenting on the RBS results, which revealed a £7bn loss for 2016, making a total loss of £58bn since 2008.
David Hillman spokesperson for the campaign, described Ross McEwan’s£3.5m pay as an “insult”.
RBS has racked up astronomical losses of over £58bn since UK taxpayers bailed it out. Ordinary people struggling to get by will feel angry that the bank has come up with the cash to pay chief executive Ross McEwan a whopping £3.5m.
For a bank 72% owned by the public this is an insult. There is no other part of the economy where such abject failings are so richly rewarded. The government needs to get a grip on a sector that operates in a parallel universe to everyone else.
Updated
Standard Life published full-year results this morning. Julia Kollewe reports:
Standard Life boss Keith Skeoch took a pay cut last year – he made £2.7m, down from £3.5m in 2015. His annual bonus was cut to £988,000 from £1.5m while another bonus, paid out under the long-term incentive plan, dropped to £883,000 from £1.2m. The insurer explained that despite a forecast-beating performance last year, the maximum targets were not hit.
Another factor was the £175m provision related to the Financial Conduct Authority’s review into non-advised annuity sales.
Even so, Standard Life had a good year, posting a 9% rise in operating profit before tax to £723m for 2016. The Brexit vote in June “triggered very substantial [fund] outflows for the industry,” Skeoch said, but the firm only saw a modest £1.7bn outflow over the year.
Its fund management arm has a branch in Germany and subsidiaries in Ireland and may hire a few more people in Frankfurt or Luxembourg in the wake of the referendum, but “we are talking about tens, not hundreds,” Skeoch said. It is too early to say whether jobs would move from the UK.
Updated
Back in the UK, Unite has issued a statement following its meeting with French car group PSA. Here is the statement in full:
The leader of Britain’s largest union, Unite, Len McCluskey met with the chief executive officer of PSA group Carlos Tavares to discuss the proposed takeover of Vauxhall today (Friday 24 February).
Commenting after his meeting with the chief executive officer of PSA group Carlos Tavares Unite general secretary Len McCluskey said:
I’ll be meeting over 100 Unite shop stewards from Ellesmere Port, Luton and Toddington on Monday to report back fully on my meeting with Carlos Tavares.
It was a relatively positive first meeting in which Mr Tavares gave assurances that current production commitments would be met should the takeover with PSA go-ahead.
It was also heartening to hear that PSA group wants to work with Unite and recognises the skill and efficiency of our members who make the world class Astra and Vivaro vans.
Going forward both Unite and PSA have agreed to work together and engage constructively as developments unfold.
Over in Greece, prime minister Alexis Tsipras has been defending the controversial deal the government has struck with its creditors to unblock stalled bailout talks.
From Athens our correspondent Helena Smith reports:
A confident Alexis Tsipras told the Greek parliament this morning that the preliminary agreement reached at Monday’s Eurogroup meeting was an “honourable compromise” worthy of praise, not criticism, from the leftist-led government’s opponents.
Addressing the 300-seat house, Tsipras said the accord, which now paves the way for auditors to return to the capital to resume stalled bailout talks, was a decisive step towards completing a bailout review that only last week was cause for renewed speculation that Greece was teetering towards euro exit.
When you negotiate you win [some things] but you are also obliged to give ground. We always lost and never won. What we achieved was an honourable compromise. It was the end of the beginning of continual austerity.
For “every euro” that creditors demanded in extra pension and income tax measures, counter policies would be enacted that would offset the cost, he said. “Measures and counter measures will be legislated at the same time. That means they will be fiscally neutral.”
Tsipras not only has to face austerity-weary Greeks but members of his own Syriza party who are reluctant to be associated with passage of yet more gruelling austerity.
Breaking: Peugeot tells unions it is not here to close UK car plants
PSA has told Len McCluskey, the boss of Britain’s biggest union, Unite, that its plan to buy General Motors’ European business is not about closing car plants in the UK.
If the deal goes ahead, the French car maker which owns Peugeot, Citroën and DS, will become the new owner of Vauxhall, GM’s UK subsidiary. It has sparked fears about the future of Vauxhall’s factories in Luton and Ellesmere Port.
PSA boss Carlos Tavares told McCluskey on Friday that the French company was “not...here to shut plants”.
The union boss said the talks were “relatively positive” and that he was “pleased with some of the assurances given’.
McCluskey added there were still a lot of issues to be hammered, with pensions high on the agenda.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says the rise in mortgage approvals for house purchase might not last...
The pickup in mortgage approvals in January to their highest level since February 2016 confirms that the closure in December of the Help to Buy mortgage guarantee scheme, which helped lenders to offer 5% deposit mortgages for purchases of existing homes, has not weighed on housing market activity.
The recovery in mortgage lending, however, likely will run out of steam soon. Admittedly, the renewed decline in swap rates over recent weeks has eased the pressure on lenders to raise mortgage rates. Nonetheless, timelier indicators show that households’ appetite for making big financial commitments is fading.
UK mortgage approvals hit 12-month high
Mortgage approvals for house purchase (rather than remortgage) hit a 12-month high of 44,657 in January according to the British Bankers Association.
It was 2.5% higher than December, but 2.5% lower than January 2016.
The snapshot of lending by Britain’s high street banks showed the number of remortgages approved was almost 16% higher than a year ago at 28,862 in January. It was lower than December, but above the average of 25,987 in 2016.
Eric Leenders, managing director for retail banking at the BBA, said homeowners were taking advantage of ultra low borrowing costs:
The new year saw homeowners make the most of historically low interest rates by taking advantage of competitive re-mortgage offers. Nearly 29,000 of these deals were approved last month – 16% higher than January last year.
Updated
China hits back at Trump over currency comments
Beijing has hit back at Donald Trump, after the US President accused China of being the “grand champion” of currency manipulation.
Trump told Reuters:
I think they’re grand champions at manipulation of currency. So I haven’t held back. We’ll see what happens.
Geng Shuang, spokesman for the Chinese foreign ministry, said he hoped the US could “fully and correctly” view the exchange rate issue.
China has no intention of seeking foreign trade advantages via an international devaluation of the renminbi. There is no basis for the continued devaluation of the renminbi.
If you must attach the label ‘grand champion’ to China, then I think China is a grand champion. But we are the grand champions of economic development.
RBS losses reach £58bn since the bailout. Signals job cuts and branch closures coming https://t.co/Vser991tI1
— Jill Treanor (@jilltreanor) February 24, 2017
Connor Campbell, financial analyst at Spreadex, brings this market update:
It was another somnolent start to trading this Friday, with things livened up only slightly by the latest annual report from the UK’s banking sector.
The FTSE, seemingly stuck in its own Groundhog Day, opened just below 7,300 once again this morning, the index now sitting around 40 points from that level after a late slide yesterday afternoon.
The pound, meanwhile, largely held onto the growth it posted on Thursday, with sterling flat at 1.25-ish against the dollar and down 0.2%, but still above 1.18, against the euro.
Over in the eurozone there wasn’t much joy, the DAX and CAC both falling 0.2% as the day got underway. The political situation in France appears to be to blame, even if consumer confidence in the country was revealed to be at a 9 year high this morning.
European markets fall
Major markets across Europe are down this morning, with the exception of Spain.
The scores so far:
- FTSE 100: -0.2% at 7,259
- Germany’s DAX: -0.3% at 11,911
- France’s CAC: -0.3% at 4,876
- Italy’s FTSE MIB: -0.4% at 18,753
- Spain’s IBEX: +0.1% at 9,498
- Europe’s STOXX 600: -0.2% at 372
RBS 'trapped in a dystopian nightmare'
Since RBS was bailed out in 2008, a whopping 90,000 jobs have gone, with the workforce more than halving over the period from 170,000 to 80,000 today.
Some of those losses were attributable to businesses being sold off and branch closures.
CMC Market’s Michael Hewson says that RBS boss Ross McEwan must feel that he is stuck in a “dystopian nightmare”:
Nine years and counting as Royal Bank of Scotland announced its ninth successive annual loss in a row.
Chief executive Ross McEwan must feel that he is trapped in a dystopian nightmare with RBS as no sooner does he overcome one obstacle than he encounters another.
In comments that accompanied today’s results Ross McEwan stated that “these costs are a reminder of what happens when things go wrong”, which is somewhat of an understatement.
So far we’ve had nine reminders of the costs of what happens when things going wrong and Mr McEwan like the rest of us must be hoping that we don’t get a tenth.
Here is a handy graphic detailing RBS’s losses over the past nine years:
RBS shares fall 2%
RBS is one of the FTSE’s biggest fallers in early trading, down 2% at 244p after the bailed out bank revealed a £7bn loss for 2016.
#RBS shares fall at open after posting 9th consecutive annual loss
— Peter Hoskins (@PeterHoskinsTV) February 24, 2017
The FTSE 100 is faring better overall, down just one point at 7,270.
The agenda: French consumer confidence, UK mortgage approvals
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Over in France, consumer confidence was at the highest level for more than nine years in February for the second month in a row.
As the jobs market finally turns a corner in France, consumers shrugged off uncertainty surrounding the presidential election and felt it was good time to make a major purchase. The headline index was unchanged from January at 100, the highest since October 2007.
We’ll get the latest snapshot of the UK housing market at 9.30, when the British Bankers’ Association publishes mortgage approvals figures for January.
Rounding off a week of bank results, RBS has just revealed a £7bn loss for 2016. The bailed out bank (still 72% owned by the taxpayer) hasn’t made an annual profit since 2017. It was hit with £6bn in conduct and legal costs.
Here’s our story:
Later on in the US we get new home sales data for January.
