European shares edge lower
The FTSE 100 may have been toasting a new closing peak, but elsewhere in Europe shares were drifting lower, with banking stocks proving a drag on markets. The final scores in Europe showed:
- Germany’s Dax dipped 0.21% to 11,451.05
- France’s Cac closed 0.2% lower at 4838.47
- Italy’s FTSE MIB fell 0.18% to 19,203.94
- Spain’s Ibex ended down 0.19% at 9327.1
- But in Greece, the Athens market added 0.15% to 636.67
On Wall Street the Dow Jones Industrial Average is drifting away from the 20,000 level and is currently down 18 points at 19,815.
Meanwhile, after initially shrugging off an unexpected rise in US crude inventories, oil prices have edged marginally lower, with Brent now down 0.37% at $56.01 a barrel.
As for the FTSE 100, it has hit a record high for the second day running, so here is our story giving the background to Wednesday’s new peak:
On that note, it’s time to close for the evening. Thanks for all your comments and we’ll be back tomorrow for the last trading day of the year.
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FTSE 100 reaches new closing record
It looked a bit unlikely as the FTSE 100 drifted lower for much of the day, but the leading index managed a last minute dash to a new closing high.
The index ended 14.18 points higher at 7120.26, within sight of the all time record reached on 11 October this year. With gold and silver prices moving higher, precious metal miners such as Randgold Resources and Fresnillo helped push the index into record territory.
Meanwhile the more UK-focused FTSE 250 added just 2.61 points to 18,015.42 and is some distance away from its own peak of 18,607 achieved in early October.
In the US, the Dow Jones Industrial Average has dipped lower - down around 7 points - while the FTSE 100 has shied away from a new closing high and is now 4 points lower. On the Dow, Chris Beauchamp, chief market analyst at IG, said:
After yesterday’s decisive turn lower for US markets there has been little sign of fresh bullish momentum. Barring a miracle, Dow 20,000 looks off the cards, although the rebound in the index over the past year, as in other US markets, has been astounding. Only time will tell if the Trump euphoria can be sustained, or whether we are due another correction early on in the New Year.
Oil prices are little changed following the release of the latest US data, with Brent crude up 0.5% at $56.50 a barrel and West Texas Intermediate more or less flat at $54.03.
US crude stocks showed a surprise rise last week, according to official figures.
Inventories rose by 614,000 barrels to 486m compared to forecasts of a 2.1m barrel decrease, according to the Energy Information Administration. But gasoline stocks fell by 1.6m barrels rather than the expected 1.3m barrel increase.
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Despite the Dow’s reluctance to surge towards 20,000, the FTSE 100 has just edged into positive territory. Could we yet have a new closing high?
Wall Street opens higher
US markets are mainly edging ahead in early trading, with the Dow Jones Industrial Average regaining a little ground after Wednesday’s triple digit decline and moved another step closer to the so far elusive 20,000 barrier.
The Dow is currently up 36 points at 19869 while the S&P 500 opened marginally higher and the Nasdaq composite marginally lower.
Oil is holding steady ahead of the latest US inventory figures from the Department of Energy.
On Wednesday the American Petroleum Institute reported a surprise 4.2m barrel increase in weekly US crude stocks compared to an expected fall of 2.1m barrels.
But ahead of the official DoE figures, Brent crude is up 0.44% at $56.47 a barrel while West Texas Intermediate is 0.18% lower at $53.96.
Here’s Reuters on the US data:
A drop in U.S. exports last month pushed the country’s trade deficit in goods higher while the number of Americans filing for unemployment benefits fell last week in a positive sign for the labor market.
The two reports released on Thursday suggested that when Donald Trump becomes president next month, the labor market will likely be at roughly full strength and international trade could be weighing on the economy.
In an initial estimate that does not include trade in services, the Commerce Department said America exported $1.2 billion less in November than in October. Imports rose by $2.2 billion during the month. The full trade report for November is due on Jan. 6...
Separately, initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 265,000 for the week ended Dec. 24, the Labor Department said.
It was the 95th straight week that claims were below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller.
The department said in a statement there were no special factors affecting claims last week although estimating the data can be more difficult around holiday periods. The department said the actual number of claims was estimated by government staff for 10 states.
More on the US trade gap, from Deutsche Bank’s chief US economist:
Nov advance goods #trade balance (-$65.3B vs -$61.9B) widened considerably: net exports are likely to weigh on Q4 GDP
— Joseph A. LaVorgna (@Lavorgnanomics) December 29, 2016
However, wholesale (0.9% vs -0.1%) and retail (1.0% vs -0.4%) #inventories rose considerably in Nov
— Joseph A. LaVorgna (@Lavorgnanomics) December 29, 2016
US trade gap widens, but jobless claims fall
Gracious me, we have TWO little pieces of economic news.
Firstly, America’s trade deficit has swelled by 5.5%.
New figures from the Commerce Department show that the US trade gap widened to $65.3bn in November, up from $61.9bn in October.
Exports shrank by $1.2bn to $121.7bn, while America imported $187bn of stuff, $2.2bn more than in October.
Secondly, the number of Americans filing new unemployment claims has fallen by 10,000, to 265,000. That’s broadly in line with forecasts, and shows that the US labour market remains resilient.
That will reassure the US Federal Reserve, which raised interest rates earlier this month.
Jobless claims hit 265,000 vs. 264,000 estimate https://t.co/YbhYoM0C6V
— CNBC (@CNBC) December 29, 2016
Trump and Brexit dominated 2016's top business stories
As it’s quiet, what better time to catch up with the biggest business stories of 2016?
We’ve crunched the numbers, and found that the Brexit vote, and the US election’s impact on the markets, were the most popular issues this year.
Our daily liveblog did well again too - so thanks to all readers for keeping our numbers up :)
Fiona Walsh, business editor of Theguardian.com, explains:
Six of our 10 most-read articles covered the aftermath of the shock EU referendum result, from the trillions wiped off global markets to the plummeting pound and the prospect of negative interest rates.
There was Donald Trump too, of course, and an apocalyptic warning from economists in January to “sell everything” before a new crash.
Here’s the full 10 Ten:
I fear America’s stock market won’t bring much excitement today either.
The futures market is suggesting Wall Street will open little changed, in 90 minutes time, after the S&P 500 fell by almost 0.9% yesterday (its biggest drop since the US election).
Italian PM criticises ECB over Monte Dei Paschi bailout
Italy’s prime minister, Paolo Gentiloni, has now criticised the European Central Bank for demanding that Monte Dei Paschi raise more new capital than previously planned.
Gentiloni told reporters that he got the news on Christmas Day - which may have rather spoiled the turkey and sprouts.
And Gentiloni wants to see the ECB’s workings out, echoing finance minister Padoan’s concerns.
Reuters has the story:
The European Central Bank should discuss with Italy the reasons behind its assessment that Banca Monte dei Paschi had a greater need for capital than previously thought, Prime Minister Paolo Gentiloni said on Thursday.
“It is important that the motives for this assessment are shared in discussions in the coming months,” Gentiloni told a news conference.
He added he had been surprised on December 25 to receive news that the regulator wanted Monte Paschi to plug a capital shortfall of €8.8bn, higher than a previous estimate of €5bn.
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Pier Carlo Padoan’s criticism of the ECB comes as Italian banking shares post fresh losses today.
UBI Banca, Unicredit and Banca Popolare di Milano are all among the biggest fallers on the Stoxx Europe 600 banks index (which tracks Europe’s financial stocks).
Investors are edgy that the cost of recapitalising the Italian banking sector may be going up, after the ECB demand that Monte Dei Paschi raises more capital than expected.
Over in Italy, finance minister Pier Carlo Padoan has lashed out at the European Central Bank over its handling of the world’s oldest bank, Monte Dei Paschi (MPS).
Earlier this week, the ECB told MPS that it needs to raise almost €9bn in new capital, sharply higher than the €5bn which it had tried, and failed, to attract from private investors.
Rome’s government is now stepping in to rescue MPC, and Padoan sounds rather unimpressed that the bill had gone up.
Speaking to financial newspaper Il Sole 24 Ore, Padoan said the ECB’s new demands would leave MPS “hyper-capitalised”. He also criticised the Frankfurt-based central bank for not explaining its thinking more clearly:
“It would have been useful to receive additional information from the ECB Supervisory Board on the criteria used for such a valuation, since it has consequences for the other banks.
“In addition to a letter of five lines and three numbers, some explanation would have been useful; opaque moves without an explanation lead people to think that there’s something wrong behind it.”
MPS’s liquidity position has been worsening in recent months, with some savers taking money out of the lender.
More here:
Italy’s finance minister criticizes the ECB for its Monte Paschi demands https://t.co/Nko0m5DXtg pic.twitter.com/FQtMGv6Bia
— Bloomberg (@business) December 29, 2016
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It’s disappointingly quiet out there....
So that FTSE 100 intraday record of 7129.83 is not in sight at the moment. Market down 5 points at 7,100.34. Santa Rally on pause.
— Ben Woods (@Ben_Woods01) December 29, 2016
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There may still be time for another Santa Rally!
After a festively slow start, the FTSE 100 has roused itself after its 8am selloff, and crept back to 7106 points - last night’s record closing level.
Trading is still pretty quiet, with many City workers still enjoying a Christmas break.
Many mining stocks are still in the red today, following commodity prices down. And banks across Europe are under pressure, partly due to worries over Italy’s banking bailout.
Ipek Ozkardeskaya, analyst at London Capital Group, says the markets are being cautious after commodity prices retreated in Asia overnight, meaning:
A combination of profit-taking and risk-off is weighing on the UK’s 100 largest caps in London.
She also suggests the US stock market could fall, if the latest trade and unemployment figures, due at 1.30pm, miss expectations.
The US’s November trade balance and the weekly jobless claims are due out today.
Any disappointment could cause a further disillusion regarding the US recovery and encourage a deeper correction in the US markets, given that there is room for significant pullback following the relentless, two-month rally in the US stock markets following Donald Trump’s appointment as the US’ next president.
#FTSE off all-time highs, #USD softer #FRES #RRS #USDJPY #Dow #SPXhttps://t.co/N6Biz1q1Io
— LCG (@LCGTrading) December 29, 2016
London house price growth lags behind UK average
Is London’s house price boom fizzling out?
Prices in the capital only rose by an annual rate of 3.7% in in the last quarter, compared to a UK average of 4.5%, according to new figures from the Nationwide building society.
This is the first time since 2008 that London prices have lagged the national average (although obviously houses are still much pricier than elsewhere).
Robert Gardner, Nationwide’s chief economist, expects prices to rise by 2% in 2017, although there is “a greater degree of uncertainty than usual”.
“The story of UK house price growth in 2016 was one of relative stability. Annual house price growth ended 2016 at 4.5%, the same as the rate recorded in 2015.
There were signs that London’s significant period of outperformance may be drawing to a close.”
Nationwide also reports that a typical first-time buyer in London would have to be in the top 90th percentile of earners (ie, one of the best paid 10% of the population), while in the North typical buyers are in the top 30th.
Jeremy Leaf, a north London estate agent, says this is a serious concern:
‘London clearly has suffered more in the price stakes than elsewhere in the country, a reverse of what we were seeing earlier in the year and for most of 2015.
But for us it is the steep fall in number of transactions and market accessibility, which remains a challenge particularly for first-time buyers, rather than the ups and downs of prices which is more important.
More here:
Toshiba shares bashed again
It’s been another torrid day for Toshiba.
Shares in the Japanese manufacturer tumbled by 19% in Asian trading, following losses of 20% on Wednesday and 12% on Thursday.
Today’s slump was driven by continued fears that the company faces a massive charge relating to the purchase of a nuclear construction business called Stone & Webster a year ago.
Toshiba shocked investors earlier this week by admitting that it may have to write off several billion US dollar’s worth of ‘goodwill’, having bought Stone & Webster for $229m.
Analysts are concerned that the full cost is still unknown; last night, Moody’s slashed Toshiba’s credit rating and warned that the company’s operating and financial performance could deteriorate.
More here:
Money is flowing out of shares and into bonds this morning.
That’s a sign that investors might be taking a safety-first approach ahead of the New Year break.
So bond prices are up, pushing yields (interest rates) down to their lowest levels in several weeks:
Bond market reprieve or reversal? Rally continues w/ German 10y yields drop to 0.18%, lowest in 7 weeks. pic.twitter.com/DVtqw7XElx
— Holger Zschaepitz (@Schuldensuehner) December 29, 2016
Precious metals producers Randgold and Fresnillo are leading the risers in London, both up over 2%.
But other mining firms are dropping back, with Rio Tinto and Glencore both down over 1%.
Mining stocks had driven yesterday’s rally, but are now suffering from falling commodity prices today (steel and copper prices have both dipped).
The pound has bounced back from yesterday’s two-months low, rising 0.25% to $1.225.
That’s helping to pull the FTSE 100 down (as a weak pound is good for internationally focused firms)
FTSE 100 falls back from record high
Having closed at a record high last night, Britain’s FTSE 100 is subsiding at the start of trading.
The blue-chip index dropped by 35 points, or 0.5%, in early deals to 7074 points.
Other European markets have also dipped, as the selloff on Wall Street last night casts a shadow.
Mike van Dulken of Accendo Markets explains:
US markets stumbled yesterday as investor optimism cooled and hopes faded of the Dow Jones hitting 20,000 before year-end. However volumes remain light and this doesn’t mean the 2016 election fuelled rally is done with. It may just be taking a well needed breather.
The biggest fallers in London are BT and Dixons Carphone, which has gone ‘ex-dividend’ this morning (you had to own the shares last night to receive the next payment to investors)
FTSE100 ex-divs account for -2.1pts today: BT 4.8p, Dixons Carphone 3.5p, Experian 10.6p
— Mike van Dulken (@Accendo_Mike) December 29, 2016
Europe opens lower by 0.5%
— Louisa Bojesen (@louisabojesen) December 29, 2016
The agenda: Could we get record highs today?
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It could be another red letter day in the City. The FTSE 100 closed at a record high last night, and traders are now wondering if the index could smash through its all-time intraday high today.
The omens aren’t great, though, with spreadbetters predicting small falls this morning as investors book profits before the year end.
The FTSE 100 is expected to drop by 27 points at the open, having closed at 7106 last night. The alltime high is 7129 points.
European opening calls suggest a little healthy profit taking - FTSE -27, DAX -30, CAC -12 (futures) courtesy of IG at 6.45am
— David Buik (@truemagic68) December 29, 2016
Later today, America’s Dow Jones industrial average could have another tilt at the fabled 20,000 point mark.
Yesterday it fell by 111 points - only its second triple-digit decline since last month’s presidential election, suggesting the rally may be fading.
Santa rally fizzles: "Kiss Dow 20,000 goodbye for 2016" https://t.co/ooFt0KGgON pic.twitter.com/Ur0Tgz2Sm4
— CNBC International (@CNBCi) December 28, 2016
On the economic front, the City will be digesting new house price figures from Nationwide, which show prices jumped by 0.8% in December (more on that shortly).
Annual house price growth ended 2016 at 4.5% - the same as in 2015. A small gain - around 2% - is more likely than a decline in 2017. (1/3)
— NBS External Affairs (@NationwidePress) December 29, 2016
#Nationwide report #UK #house prices up 0.8% m/m in Dec, were flat in Nov & Oct. Y/Y gain edged up to 4.5% from Nov 10-month low of 4.4%
— Howard Archer (@HowardArcherUK) December 29, 2016
At 1.30pm, we get the latest US trade figures, and the weekly unemployment numbers.
And we’ll keep an eye on Italy, for any developments in its banking bailout.
We’ll be tracking all the main events through the day.....
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