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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.15) and Nick Fletcher

Anglo shares hit record low; VW lowers CO2 emissions impact - as it happened

People gather around the illuminated Christmas tree set up for the Christmas season at the Pariser Platz in front of the Brandenburg gate in Berlin, Thursday, Dec. 3, 2015. (AP Photo/Markus Schreiber)
It’s starting to look a lot like Christmas at the Brandenburg gate in Berlin, but Germany’s trade data isn’t very cheerful. Photograph: Markus Schreiber/AP

European shares slide again

There was no repeat of Tuesday’s commodity driven market rout, but it was still a volatile day. With iron ore and oil prices still weak, shares were under pressure initially. But a biggest than expected fall in US crude stocks sent crude sharply higher, at least for a while, and gave some support to stock markets. After further consideration of the figures, however, investors decided they did not like the news of a weekly increase in distillate fuels, and crude slipped back once more, taking the markets with it.

Anglo American slumped another 14% initially to a new low of 2277p before recovering to close just 1.2% lower while Fresnillo, down 8% at one point after news of a ruptured pipeline at its Saucito mine, ended down just 6p or 0.9%. Overall the scores showed:

  • The FTSE 100 finished down 8.54 points or 0.14% at 6126.68
  • Germany’s Dax dropped 0.76% at 10,592.49
  • France’s Cac closed 0.95% lower at 4637.45
  • Italy’s FTSE MIB was down 0.17% at 21,500,88
  • Spain’s Ibex ended 0.02% lower at 9835.5
  • In Greece, the Athens market fell 3.8% to 559.79

On Wall Street, the Dow Jones Industrial Average is currently 111 points or 0.6% lower. Meanwhile Brent crude is down 1.5% at $39.62.

On that note, it’s time to close for the evening. Thanks for all your comments and we’ll be back tomorrow.

Crude prices have come off their best levels on further consideration of the US inventory figures. Yes, commercial crude stocks fell by a higher than expected 3.6m barrels last week, pointing to stronger demand.

But stocks of distillate - diesel fuels and fuel oils - rose from 144.4m barrels to 149.4m.

Brent is now up 0.52% at $40.47, down from its earlier peak of $41.59.

Commenting on the US crude figures, David Morrison at Spread Co said:

Crude oil inventories as reported by the Energy Information Exchange slumped by 3.6 million barrels for the week ending 4 December. This was far below the prior reading which showed a build of 1.2 million barrels. The consensus market expectation was for an increase of 700,000.

The news led to crude flying higher to the general relief of investors. Persistent weakness in the oil market has weighed on both US and UK stocks. This is due to the major indices heavy weightings of energy stocks and companies who supply services, machinery and infrastructure to the sector.

Both WTI and Brent contracts were firmer ahead of the release. The price of crude oil has fallen around 65% since the summer of 2014. The sell-off coincided with the recovery in the US dollar which rallied on expectations of Fed tightening. At the same time there is a glut of crude coming to market which continues to outstrip demand.

But despite the drop in US crude stocks, they are still well above last year’s levels:

US oil inventories fall, pushing up crude prices

American oil stocks dropped by more than 3.5m barrels to 485.9m last week, a bigger than expected decline which has helped support the crude price.

Fears of oversupply and lack of demand have sent oil prices tumbling, with last week’s indecisive Opec meeting adding to the decline. But with US stocks down last week, demand appears to be higher than expected, so Brent crude has reacted by climbing 1.79% to $40.98.

Updated

Sports Direct effectively pays workers less than minimum wage

A Guardian investigation has revealed that Sports Direct, the retail group founded by Newcastle United owner Mike Ashley, has effectively been paying workers below the UK minimum wage.

The full story is here:

The European Central Bank says markets had unrealistic expectations about what stimulus measures the bank would unveil at last week’s meeting, said policy maker Ewald Nowotny.

Disappointment at the ECB announcement saw the euro move sharply higher, but Nowotny said the bank’s communication was not to blame for the misunderstanding, Bloomberg is reporting.

Not everyone is convinced by this argument.

Wall Street edges higher

US markets have made an uncertain start, with an initial fall at the opening bell.

But as trading got properly underway, shares began to move higher. A calmer day in the commodities market has seen Brent crude rise nearly 1% to $40.64 a barrel, while copper has risen on hopes that output cuts would put a floor under falling prices. Iron ore, however, remained under pressure, down another $0.5 to $38.30 a tonne.

On Wall Street the Dow Jones Industrial Average is currently up around 50 points or 0.3%, helped by reports of merger talks between Dow Chemical and DuPont.

The rise has given some support to European markets, with the FTSE 100 now up 15 points while Germany’s Dax and France’s Cac have come off their worst levels.

Updated

Here’s our full story on Volkswagen, and the news that just 36,000 or so cars have faulty CO2 emissions.

Why Anglo's share price is hitting record lows (again)

The City usually likes the sound of job cuts and restructuring, but Anglo American’s share price is still deep in the red today (down another 6%).

And that’s because analysts fear that axing the dividend, slashing capital expenditure, and losing 85,000 jobs may not be enough to protect Anglo from the mining slump.

Des Kilalea, analyst at RBC Capital Markets, says shares are sliding because Anglo may need to raise more cash from shareholders.

RBC has cut its price target for Anglo to £3 - which is pretty much where its trading today (down around 75% this year!)

Anglo American’s share price since 2005
Anglo American’s share price since 2005 Photograph: Thomson Reuters

And Kilalea warns that there are several risks, which could hit Anglo’s share price. They include:

  • fluctuations in commodity prices,
  • South African labour volatility,
  • currencies in operating countries,
  • greater than expected mine operating and new project construction costs, and
  • increasing energy, material and manpower costs.

And if that wasn’t enough, Kilalea adds:

In a very competitive environment, Anglo American, as with all mining companies, faces challenges finding and replacing mined reserves.

The Greek stock market has shed almost 2% today, hitting its lowest level in over three years:

Big names continue to pour into ICAP’s offices in the City, and around the world, doing their bit for its charity day (see earlier post for details).

The Duke and Duchess of Cambridge are the star turn in London; they’ve mingled with the traders raising money for a string of good causes.

Handout photo issued by Robin Bell of the Duke and Duchess of Cambridge joining city brokers on the trading floor of ICAP’s London office for the firm’s 23rd annual charity day

Kate has tested her skills on ICAP’s trading:

The Duchess of Cambridge joining city brokers on the trading floor of ICAP’s London office for the firm’s 23rd annual charity day. PRESS ASSOCIATION Photo. Picture date: Wednesday December 9, 2015.

The revenues raised form trading today will be donated to a range of charities, including SkillForce, of which William is patron, and SportsAid and Place2Be, of which Kate is patron.

Our future king and queen also squeezed in some ping pong – although not terribly well, frankly.

It looks like quite a day:

Updated

RBS fined over Coutts tax evasion case

A Royal Bank of Scotland logo is pictured outside their offices in Bishopsgate in London, on February 24, 2010. The boss of Britain’s state-controlled Royal Bank of Scotland will refuse his bonus for 2009, the Financial Times reported. RBS chief executive Stephen Hester will waive his right to a possible 1.6 million pounds (1.8 million euros, 2.5 million dollars), the bank is set to disclose on Thursday when it unveils annual results. AFP PHOTO/Carl Court (Photo credit should read Carl Court/AFP/Getty Images)

Royal Bank of Scotland has been fined by Swiss authorities over tax evasion allegations involving its wealth manager arm, Coutts.

RBS will pay €23m to Swiss authorities to settle claims that staff at Coutt’s international arm helped clients to dodge tax.

The case hit the headlines back in February 2015. As we wrote at the time:

German prosecutors are investigating current and former employees of the private bank’s Zurich and Geneva offices.

The bank looks after £20bn belonging to 32,000 international customers including sovereigns, celebrities and multimillionaire entrepreneurs. Each must show they have at least £1m in free cash to open an account – and even then they may not be allowed in.

Coutts is famously the Queen’s bank, although this case didn’t involve staff in London.

RBS sold the international arm of Coutts this spring, but retained liability for this case. It still owns the UK division.

Back in the UK... policymakers at the Bank of England have warned that it is “difficult to predict” how global markets will react to a US interest rate hike.

And that is a worry, given that UK banks are rather exposed to emerging markets; they could suffer if capital surges back into American assets such as the dollar.

Here’s the story:

You can see the moment that VW announced that its CO2 emissions problems only affected around 36,000 cars, not 800,000:

VS share price
Volkswagen share price Photograph: Thomson Reuters

VW: CO2 problem not as bad as thought

Newsflash: The Volkswagen emissions scandal may not be as bad as feared.

The Wolfsburg-based carmaker has announced that far fewer vehicles than originally thought have been pumping out more CO2 than claimed, and breaching fuel efficiency figures.

According to VW, its investigation found that around 36,000 cars are affected, not the 800,000 vehicles initially estimated last month.

Reuters has the details:

“Only a small number of the model variants of new cars will have the catalogue (CO2) figure slightly adjusted,” VW said on Tuesday, adding the number of affected cars was equivalent to about 36,000 vehicles.

It’s some relief for the carmaker, which will update the media on the emissions scandal tomorrow.

Shares in Volkswagen have jumped by 4.5% today, as investors welcome the news. It had originally set aside €2bn to cover the problem; today’s announcement suggests the financial impact will be significantly smaller.

VW is not in the clear, though. The CO2 issue is separate from the original scandal, that millions of cars used secret software to disguise nitrogen oxide emissions.

Updated

Anglo American’s share price has plunged by 90% since its peak in early 2008, before the financial crisis.

It did rally in 2010 and 2011, helped by solid demand from China for its coal and iron ore, as well as platinum and diamonds (Anglo’s other main products)

But, like other miners, the company has suffered from the emerging market slowdown, which has hurt demand for products like steel.

Anyone who received mining shares from Father Christmas last year has our sympathies.

Mining angst drags FTSE 100 to three-week low

The slump in Anglo American’s shares (-8.5% at pixel time) has dragged the FTSE 100 into the red.

The blue chip index is down 9 points now, hitting its lowest point since 16 November.

Other mining companies are under pressure too. Fresnillo, the silver miner, is down 6%, while copper producer Antofagasta has dropped by 2%.

Investors are worried that Anglo may not be the last mining company to axe its dividend in an attempt to preserve capital and ride out the slump.

Alastair McCaig of IG explains:

Once again the mining sector is dragging the FTSE lower, although not with the aggression seen yesterday.

Worries that Anglo American’s actions yesterday might become the template for others in that sector have seen investors running for the exits, as a second day of double-digit falls hit. Cost-cutting and asset stripping have already been exhausted and, as unattractive as it might be, trimming or suspending dividends might be the course of action that others have to follow.

Anglo’s decline is eye-watering. My colleague Nick Fletcher flags up that more than £1bn has been wiped off its value since first thing yesterday, when it announced sweeping cutbacks.

A quick shout-out for ICAP, the City brokerage which is holding its annual charity day today.

The great, the good ( and the not-so good?) will all be manning the phones at ICAP’s offices around the globe today. They’ll be closing deals, swapping bon mots with traders and trying to raise as much as possible for a range of good causes.

This year, the Duke and Duchess of Cambridge will both be taking part. Wills is a regular at ICAPs’ fundraiser, but it’s Kate’s first year (good luck, ma’am)

Samantha Cameron, the PM’s wife, is also lending a hand. And the president of Singapore has being doing his bit.

Heavyweight champion boxer Tyson Fury, who has been widely criticised for a range of unsavoury, outdated and unwelcome comments, has tweeted that he might be taking part too:

ICAP founder Michael Spencer was just interviewed on Bloomberg.

He argued that the Federal Reserve should “get it done now” and raise interest rates at next week’s meeting.

ICAP boss Michael Spencer

Spencer, a former Conservative Party treasurer, is managing to sit on the Brexit fence.

And asked about Britain’s upcoming EU referendum, he said that:

On balance, I think the business would be better if we stay in Europe.

Spencer hasn’t decided how he’ll vote, though. And he earlier told Radio 4’s Today programme that Britain could thrive outside the EU.

Updated

Anglo American’s slump is deepening. The mining firm’s shares have now tumbled by 11% today, meaning it has lost 76% of its value this year.

Updated

Chinese flag in Beijing.

Two interesting developments from China to flag up:

1) The People’s Bank of Chine has fixed the yuan at its lowest level against the US dollar in four years. That indicates that the economic slowdown, and capital outflows, are hurting the yuan.

The PBoC may be relaxing its efforts to defend the yuan, now that the IMF has agreed to add it to its currency basket.

2) China’s inflation rate came in higher than expected last month, rising to 1.5% from 1.3% in October.

However, the prices that Chinese firms are receiving for their goods (the producer prices index) fell again. That indicates weak demand - a key cause of the commodity crash.

Updated

Societe Generale’s Kit Juckes captures the mood this morning:

Oil prices have stopped falling, at least for now. Commodity markets are quiet even as the press is dominated by their weakness. And there’s a dearth of news to drive direction.

There’s not relief for Anglo American this morning, as the long-established mining group’s shares hit fresh lows.

Shares in Anglo have slumped by almost 6%, having tumbled by 12% on Tuesday to its lowest ever level.

Investors clearly don’t think the worst is over for Anglo, after it announced 85,000 job cuts and froze its dividend yesterday.

Other mining stocks are recovering a little, though.

Rio Tinto is up 0.8%, having hit the lowest since 2009 on Tuesday. BHP Billiton has gained 0.9%, staggering back from a 10-year low.

Oil rout takes a breather

An oil pump works at sunset Monday, Dec.7, 2015, in the desert oil fields of Sakhir, Bahrain. U.S. stocks are dropping in early trading Monday as investors dump energy companies on lower oil prices. Benchmark U.S. crude is trading near its closing low for the year following a decision by OPEC last week not to cut production. (AP Photo/Hasan Jamali)

After two days of turmoil, there is a sense of calm in the commodities sector today.

Brent crude oil has gained 1.2% to $40.78 per barrel in early trading. That follows a truly dramatic day yesterday when it plunged below $40 before rebounding:

US crude is gaining ground too - up 1.6% at $38.12 per barrel.

But there’s still plenty of nervousness in the markets.

FXTM Research Analyst Lukman Otunuga says prices could easily subside again:

The decision from OPEC late last week to leave production levels unchanged has left a damaging mark and with investor sentiment continuously weak, the gates have been left wide open for WTI Oil to trade to extremely low levels, the likes of which have not been seen since the beginning of 2009 when prices reached $35.

Updated

German trade surplus near record high

Germany’s trade surplus actually rose in October to over €20bn, because imports (-3.4%) fell faster than exports (-1.2%).

That’s close to the record surpluses posted this summer.

Some may see this as a sign of Germany’s industrial might - producing products the rest of the world is keen to buy.

But it will also concern critics who argue that the German trade surplus is causing serious problems; sucking demand from elsewhere, and making it harder for its neighbours to grow.

As America’s former top central banker, Ben Bernanke, put it recently:

In a slow-growing world that is short aggregate demand, Germany’s trade surplus is a problem.

Several other members of the euro zone are in deep recession, with high unemployment and with no “fiscal space” (meaning that their fiscal situations don’t allow them to raise spending or cut taxes as a way of stimulating domestic demand). Despite signs of recovery in the United States, growth is also generally slow outside the euro zone. The fact that Germany is selling so much more than it is buying redirects demand from its neighbors (as well as from other countries around the world), reducing output and employment outside Germany at a time at which monetary policy in many countries is reaching its limits.

ING: Germany suffering from Chinese and Russian slowdown

German Defence Minister von der Leyen in Afghanistan<br>07 Dec 2015, Mazar-e Sharif, Afghanistan --- The German and Afghan flags flap in the wind at Camp Shaheen, a field camp for the Afghan Army, near Mazar-i-Sharif, Afghanistan, 07 December 2015. The German Defence Minister is on a 2-day visit to Afghanistan. Photo: KAY NIETFELD/dpa --- Image by © Kay Nietfeld/dpa/Corbis

Today’s trade data show that Germany’s economy is “weakening, but not faltering”, argues Carsten Brzeski, ING economist.

He points out that demand from certain large emerging nations has contracted this year.

During the first nine months of the year, exports to China were down by 2.5% compared with last year’s period, showing the negative impact from the ongoing slowdown of the Chinese economy.

At the same time, exports to Russia were slashed further, dropping another 28% on the back of sanctions. On the positive side, exports to the US surged by more than 20%, reflecting the direct impact of the euro weakening.

Germany has benefitted strongly from the ultra-loose monetary policy in the eurozone this year (ironic, given it needed the stimulus rather less than, say, France or Italy)

And Carsten predicts that this trend will continue in 2016, with the weak euro making German exports competitive.

German exports have become an extremely mixed bag, always up for surprises and full of diverging trends. Due to too many economic slowdowns and geopolitical conflicts around the world, exports will continue having troubles gaining more momentum in the period ahead.

However, as long as the monetary policy divergence on both sides of the Atlantic continues and the ECB continues with QE, exports should remain supportive to growth.

Updated

German imports and exports slide

Germany has kicked the day off with disappointing trade data which suggests Europe’s largest economy is suffering from weakening demand at home, and abroad.

German exports fell by 1.2 % month-on-month to €99bn in October (on a seasonally adjusted basis), according to the Federal Statistics Office.

And imports took a sharper hit - contracting by 3.4% during the month to €78.3bn.

It’s a weaker performance than expected:

The data also shows that the slowdown in emerging markets has been hurting Germany this year.

Over the year, German exports outside the EU have shrunk by 0.9% while sales to other EU countries are up by 6.4%.

Not a great sign for German growth this quarter....

I’ll pull together some reaction now...

Updated

The Agenda: Can commodity crunch bottom out?

A supply vessel and oil rig in the North Sea.
A supply vessel and oil rig in the North Sea. Photograph: Philip Stephen/bluegreenpict/REX

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Today we’ll be watching the commodity markets closely, after yesterday’s rout.

Some investors are feeling pretty bruised after seeing iron ore prices hit their lowest in a decade, oil plunge below $40/barrel, and mining company shares hit their lowest in years (or ever, in Anglo American’s case).

And worse could be ahead, if oil prices don’t bottom out soon.

As Alexei Moiseev, Russia’s deputy finance minister, put it to Reuters:

“If oil goes to $20, we will need to do additional [spending] cuts. Clearly we have shown that we are very willing to cut fiscal spending in line with an oil price at $60, for example.

In order for us to be long-term sustainable [with the] oil price at $40, we need to do additional cuts, but if the oil price goes to $20 we need to do even more cuts.”

We get a new snapshot of America’s oil industry at 3.3pm GMT today, when the latest US crude oil inventories are released.

The commodity rout is raising new concerns over the resilience of the global economy, as America’s central bank prepares to raise interest rates.

We find out how worried the Bank of England, when the minutes of its latest Financial Policy Committee meeting are released at 9.30am.

And transport group Stagecoach is releasing its results.

We’ll be tracking all the main events through the day....

Updated

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