PS: It’s also worth noting that the oil price has hit a one-month high, with Brent crude trading around $48.12 per barrel. Persistent speculation that the OPEC cartel might actually agree a production freeze are the main factor. City AM has more details.
London stock market closes at 14-month high.
Hello again. Just popping back to record that Britain’s FTSE 100 closed at a new 14-month high tonight. The index of blue-chip shares ended the day 25 points higher, at 6,941 - as the weak pound benefited international firms like mining group Anglo American (up 1.8%) and Glaxo (up 1.2%).
That may be it...
OK, we seem to have run out of news for the day. And it’s sunny out there. So I’m wrapping up for the day, but we’ll be back it anything important happens.... GW
Newsflash: the Bank of England has successfully bought £1.17bn of UK government bonds, as part of its new stimulus programme.
So, no repeat of last week’s failed reserve auction, when the BoE couldn’t prise enough long-dated bonds out of their owners’ clutches.
However.... today’s auction was for bonds of 3 to 7-years maturity, not the longer dated stuff. That auction is taking place tomorrow....
America's stock market hits new highs
The US stock market has hit fresh record highs at the start of trading, despite the weak Empire manufacturing report.
The Dow Jones industrial average, the S&P 500 and the Nasdaq all ticked up to new all-time highs, expending last week’s rally.
BREAKING: Nasdaq and S&P 500 hit new all-time highs at the open » https://t.co/aDuRStZ1Rd
— CNBC Now (@CNBCnow) August 15, 2016
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US Empire survey misses forecasts
A closely watched survey of US business confidence in the New York area has come in way below forecasts, giving us another reason to worry.
The Empire Manufacturing index slumped to -4.21 this month, down from +0.55 in July. Economists had expected it to rise to 2.00; instead, firms in the area warned that work conditions have weakened.
NY #Fed #Empire six-month outlook for business conditions,new orders and shipments all declined forshadowing further #manufacturing weakness
— Joseph A. LaVorgna (@Lavorgnanomics) August 15, 2016
The Empire strikes.....out
— Mike van Dulken (@Accendo_Mike) August 15, 2016
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Lloyds passes rate cut onto mortgage holders (and savers are next....)
Remember Mark Carney’s warning on 4 August that lenders had no excuses not to pass on the cut in interest rates to 0.25% to borrowers?
Lloyds Banking Group has finally responded, saying it will pass on the full cut to all mortgage customers on its variable-rates deals.
It’s significant, as Lloyds is the largest lender in the country since the takeover of HBOS during the crisis. Here are the new rates:
Halifax Homeowner Variable Rate –3.99% currently - falls to 3.74% as does the Halifax Standard Variable Rate and the Lloyds Bank Homeowner Variable Rate. This is thought to affect around a third of its 3 million mortgage customers.
The bank, 9% owned by taxpayers, is also warning savers that they will take a hit. It is not immediately clear what the scale of the cut will be.
The bank said.
“We will not make any changes to our savings rates for existing customers until we have reduced our mortgage reversionary rates (Halifax Homeowner Variable Rate, Halifax Standard Variable Rate and Lloyds Bank Homeowner Variable Rate) with effect from 1 October 2016”
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Pound falls ahead of Brexit healthcheck
The pound is losing ground against the US dollar, as well as the euro.
Sterling just hit a one-month low of $1.2883, as traders hunker down ahead of some crucial economic data that may show the impact of the Brexit vote.
Tomorrow we get July’s inflation report, followed by unemployment surveys on Wednesday and then July’s retail sales figures on Thursday.
Ana Thaker, Market Economist at PhillipCapital UK, explains why it matters:
This week’s data is a crucial set as it is some of the first to cover the entire month of July and take into account the full effect of Brexit on the UK economy.
Sterling looks to have significant downside risk this week as hedge funds increase bearish bets on the currency in the futures market with contracts topping levels last seen in 1992.
Whilst we cannot always rely on hedge funds to get it right, market sentiment has declined for Sterling and may do so further as more economic data is released.
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Sports Direct workers get £1m backpay
Good news for Sports Direct workers!
The retail chain has coughed up £1m in backpay for employees who received less than the minimum wage, due to its policy of compulsory searches after their shifts had finished.
The payments, which could be worth £1,000 each, follow a Guardian investigation into working practices at Sports Direct’s warehouse - which also prompted a parliamentary investigation.
Simon Goodley reports:
The agreement, which is understood to have been struck between the union Unite, the retailer and HM Revenue & Customs, includes workers directly employed by Sports Direct and staff hired through temporary employment agencies. Two agencies, The Best Connection and Transline, provide most of the 3,000 workers in the company’s warehouse in Shirebrook, Derbyshire.
Payments are expected to begin to be made from the end of this month.
Those familiar with the deal, however, say that 1,700 Transline agency workers may initially receive half the back pay they are owed, because the agency is refusing to refund unpaid wages from before it took over contracts from a rival agency two years ago.
Sports Direct forced to pay £1m to workers below nat min.https://t.co/GuDOZsvRi2 Exposed by Guardian undercoverhttps://t.co/gnTx4r5QqC
— Paul johnson (@paul__johnson) August 15, 2016
Sports Direct to give staff more than £1m in back pay thanks to @guardian campaign https://t.co/WjicTTGdd7
— Juliette Garside (@JulietteGarside) August 15, 2016
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Market pushed up by stimulus talk
The prospect of fresh government action to stimulate economic growth has pushed global stocks higher.
Britain’s FTSE 100 has settled at a new 14-month high, while other European markets are at their best levels since the EU referendum.
Only Japan is missing out on the rally, following its disappointing growth figures.
The mood in the City is pretty quiet, frankly, as we’re now deep into the August slowdown.
Joshua Mahony, market analyst at IG, says that the prospect of yet more central bank action is pushing money into shares:
The month of August typically exhibits the lowest volumes of the summer and given the fact that today marks assumption day across Europe, we are looking likely to see a more unpredictable day.
With the Bank of England’s recent QE programme, coupled with heightened expectations of action from the Bank of Japan, there is a clear underlying bullish sentiment for stocks, with investors favouring stocks in this low interest rate environment.
Pound hits three-year low against the euro
The pound has slipped to a new three-year low against the euro this morning, as Brexit angst continues to weigh it down.
Sterling fell to €1.1555 against the single currency, its lowest level since 2013.
That means it has shed almost 12% since Britain voted to leave the EU - something for holidaymakers to ponder as they head over the Channel....
Apart from that, the foreign exchange markets are pretty quiet:
Breaking live shot of today's currency markets pic.twitter.com/NZvUhgtdEN
— World First (@World_First) August 15, 2016
Santander halves 123 interest rate
Customers at banking giant Santander are waking up to the news that their 123 current account just became rather less lucrative.
Santander has slashed the interest rate on the account to 1.5%, from 3%, following the Bank of England’s decision to slash benchmark borrowing costs to 0.25%.
Santander slashes its 123 interest rate https://t.co/HCMCrafBjN
— The Guardian (@guardian) August 15, 2016
Another small milestone for Germany’s stock market:
Well that took a while...Dax in the green for 2016 pic.twitter.com/aMrs9s052F
— Caroline Hyde (@CarolineHydeTV) August 15, 2016
Back to Japan...and the disappointing news that its economy only expanded by a tiny 0.05% in the last quarter.
Norio Miyagawa, senior economist at Mizuho Securities, says the Japanese economy is still troubled despite the best efforts of its government and central bank.
“Consumer spending is weak, and the reason is low wage gains. There is alot of uncertainty about overseas economies, and this is holding back capital expenditure.
“The government has already announced a big stimulus package, so the next question is how the Bank of Japan will respond after its comprehensive policy review, which is sure tolead to a delay in its price target.”
Japan’s economy looks a little better, though, if you consider nominal GDP (growth plus inflation). That shows that the economy is steadily clawing its way out of its deflationary swamp:
Japanese economy just keeps growing in nominal terms, despite constant whining over failure of Abenomics. pic.twitter.com/uVwqkqRDfX
— Mike Bird (@Birdyword) August 15, 2016
UK borrowing costs are close to record lows this morning.
The 10-year British gilt is changing hands at an interest rate of just 0.51%, a new alltime low, meaning the UK could borrow extremely cheaply for the next decade.
Rupert Harrison, chief macro strategist at investment group BlackRock, has tweeted that this gives chancellor Philip Hammond the chance to borrow and spend more:
Back from holiday. First thought (with old hat on) is lower gilt yields will flatter UK's public finances, cushioning Brexit impact (1/2)
— Rupert Harrison (@rbrharrison) August 15, 2016
(2/2) Impact unlikely to offset impact of slower growth but might increase scope for fiscal policy to support demand
— Rupert Harrison (@rbrharrison) August 15, 2016
Ps a cynic might, once again, marvel at the power of financial repression. Govt budgets around world incredibly dependent on central banks
— Rupert Harrison (@rbrharrison) August 15, 2016
Harrison, incidentally, is former chief of staff to ex-chancellor George Osborne....
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The takeover battle raging in Britain’s bookmaking industry has taken another twist this morning.
William Hill has formally rejected a £3.16bn bid filed by rivals 888 Holdings and Rank Group over the weekend, saying it “substantially undervalued” its business. More here.
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Sage shares slide after data breach
Accountancy software firm Sage are usually too dull to catch our eye. But not today!
Sage’s shares have slumped by 4% this morning, after it fell victim to a security breach.
The company admitted over the weekend than the personal details of workers at 280 British companies may have been compromised, after an internal login was used to gain unauthorised access to their data.
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European stock markets have opened calmly, as investors take the weak Japanese growth figures in their stride.
(Alternatively, they’re shattered after watching the Olympics all night).
Either way, European markets are close to their highest levels in seven years. Here’s the situation:
- The FTSE 100: up 5 points at 6920
- Germany’s DAX: up 12 points at 10,726
- French CAC: up 3 points at 4,503.
Updated
HSBC economist Jing Li has told his clients to expect new stimulus measures from China soon:
“In light of persistent headwinds from the external sector, weak business sentiment, and a cooling property market, we believe that policymakers need to accelerate policy easing and reforms.”
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Chinese stock market hits seven-month high
In China, shares have hit a seven-month high as investors anticipate fresh government stimulus efforts.
The benchmark Shanghai Composite index jumped by 2.5% today to close at 3,125.
That level was last seen in early January, as world stock markets were hit by a global selloff.
The rally is sparked by speculation that Beijing will take fresh steps to help its economy, after a raft of weak economic data. Last week, for example, we got disappointing trade, latest industrial production, retail sales and fixed asset investment data.
Japanese minister warns of Brexit risks
Japan’s economy minister, Nobuteru Ishihara, has warned that Britain’s vote to leave the EU threatens its recovery.
Ishihara said (via Reuters):
“Japan’s economy is likely to achieve a recovery driven by private demand” though the government must be mindful of risks such as slowing emerging market growth and uncertainty over the fate of Britain’s exit from the European Union.
The agenda: Japanese GDP disappoints
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After a weekend of sporting excitement, we’ve come down to earth this morning with the worrying news that Japan’s economy stagnated in the last quarter.
Japanese GDP was virtually unchanged in the three months between April and June, according to new data released overnight (just as Andy Murray was rounding off Super Sunday in style).
Economists had expected growth of 0.2% during the quarter, following the +0.5% growth recorded in January-March.
On an annualized basis (basically, multiplying the quarterly figure by 4) , GDP expanded by a meagre 0.2%, much worse than the 1.9% recorded three months ago.
It suggests that prime minister Shinzo Abe’s huge, three-pronged stimulus programme is failing to shake the country out of its long stretch of economic weakness:
Abenomics in tatters: Japan econ slowed to 0.2% (1.9%) even as BoJ & Govt ramped up stimulus https://t.co/AszIxSE95p pic.twitter.com/vgnf6jDbCb
— Holger Zschaepitz (@Schuldensuehner) August 15, 2016
We’ll be mopping up reaction to this data, along with other key events through the day.
There’s not much in the diary, though, apart from the US Empire Manufacturing survey at 1.30pm BST, plus financial results from UK housebuilder Bovis.
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