Elsewhere crude prices have come off their best levels after US drillers added more oil rigs for the sixth week in a row:
US Baker Hughes Rig Count (Dec 9) 624, previous 597
— Sigma Squawk (@SigmaSquawk) December 9, 2016
Oil Rigs 498, previous 477
Gas Rigs 125, previous 119
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back on Monday.
Italy’s cabinet has no plans to meet on Saturday to discuss the current banking situation, Reuters is reporting, quoting government sources.
But it stands ready to implement an emergency decree on banks if necessary, Reuters adds.
European markets end higher despite Italian bank worries
Even though Italy’s Monte dei Paschi fell more than 10% on concerns about its refinancing, investors elsewhere remained fairly calm. Ahead of the next big economic event - the Federal Reserve’s expected increase in US interest rates next week - markets were supported by the European Central Bank’s suggestion it would continue acting to help the eurozone economy.
Meanwhile the proposed offer by 21st Century Fox for satellite broadcaster Sky helped lift shares in London. Italy unsurprisingly missed out on the gains, given the fall in Monet dei Paschi. The final scores showed:
- The FTSE 100 finished up 22.66 points or 0.33% at 6954.21
- Germany’s Dax edged up 0.22% to 11,203.63
- France’s Cac closed 0.6% higher at 4764.07
- Italy’s FTSE MIB fell 0.73% to 18,292.65
- Spain’s Ibex ended up 0.26% at 9169.6
- In Greece, the Athens market dipped 1.26% to 640.09
On Wall Street, the Dow Jones Industrial Average is currently up 75 points or 0.38%, heading for a new closing high.
Ratings agency Moody’s has just downgraded the outlook for seven Italian banks to negative:
Moody’s Investors Service has today changed the outlook to negative from stable and affirmed the ratings of seven financial institutions, prompted by the outlook change to negative from stable on the Italian government’s Baa2 debt rating...
The following banks are affected by today’s rating actions: Intesa Sanpaolo Spa, Banca IMI Spa, FCA Bank S.p.A., Banca Nazionale Del Lavoro S.P.A., Credito Emiliano SpA, Credit Agricole Cariparma S.p.A., and Cassa Depositi e Prestiti S.p.A.
Updated
Back to Italy, and Monte dei Paschi has closed down more than 10% after the European Central Bank reportedly refused an extension for a potential private sector fundraising. But other Italian bank shares were not hit as badly:
#MONTEPASCHI suspended for big chunk of day, closes dn 10%. #Italy bank share losses contained though. Index dn 2.3%=most pain was in BMPS
— Ken Odeluga (@Ken_CityIndex) December 9, 2016
Here’s our story on the Sky bid:
Sky receives new offer from 21st Century Fox
Some breaking news: satellite broadcaster Sky has agreed to be taken over by Rupert Murdoch’s 21st Century Fox for £10.75 a share or more than £18bn.
But Sky said the two sides were still in discussions about “certain material offer terms” and there was no guarantee an offer would be made.
Sky shares have jumped 31% to £10.42.
Updated
Over in Greece prime minister Alexis Tsipras has taken creditors aback by announcing a Christmas bonus for pensioners surviving on €800 or less. Helena Smith reports from Athens:
It was meant to be a goodwill gesture, announced in the wake of anti-austerity protests at the end of a crippling 24-hour nationwide strike.
Instead, prime minister Alexis Tsipras’ declaration of a one off bonus payment to supplement the pensions of some 1.6 million low-income retirees has triggered renewed tensions with the country’s creditors. Under scheme – unveiled in a televised address to the nation late on Thursday – around €600m will be handed to pensioners living on living on €800 or less a month. Greece is under tight stewardship by lenders keeping it afloat. The prospect of another round of pension and wage cuts set as the price of emergency bailout funding has seen Tsipras’ own popularity and that of his leftist-led coalition tumble.
Responding to the news a commission spokeswoman said Brussels had not been informed of Tsipras’ surprise spending spree, the details of which it would have to study. “The program includes clear commitments to discuss all measures related to program objectives with the institutions in advance,” she told reporters this afternoon. “The Commission was not made aware of all the details of the announcements before they were made.”
Very high #US consumer confidence supports our view that private consumption will continue to be the main growth engine pic.twitter.com/pu1tW7eJfl
— Danske Bank Research (@Danske_Research) December 9, 2016
Trump victory boosts US consumer confidence
Donald Trump’s surprise election victory has not only boosted the stock market, it has also given US consumers more confidence.
The initial reading of December’s University of Michigan’s consumer sentiment survey came in at 98, up from a revised 93.8 in November and well above expectations of a figure of 94.5. And it was mainly down to Trump.
The survey’s chief economist Richard Curtin said:
Consumer confidence surged in early December to just one-tenth of an Index point below the 2015 peak—which was the highest level since the start of 2004.
The surge was largely due to consumers’ initial reactions to Trump’s surprise victory. When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys.
To be sure, an equal number volunteered negative judgments about prospective economic policies, but the frequency of those negative references was less than half its prior peak levels whereas positive references were about twice its prior peak.
There were a few exceptions to the early December surge in optimism, mainly among those with a college degree and among residents of the Northeast [our bold italics], although no group has adopted a pessimistic outlook for the economy.
The most important implication of the increase in optimism is that it has raised expectations for the performance of the economy. President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance. Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence. Until specific policies are proposed, there is no reason to alter the 2017 forecast of 2.5% for real consumption.
Updated
Nasdaq hits a new peak
The worries about Monte dei Paschi may be sending the Italian stock market lower - the FTSE MIB is currently down 1.1% - but elsewhere the mood is brighter.
On Wall Street the Dow Jones Industrial Average is up 30 points at 19,644, while Nasdaq composite is up 0.34% to a new peak of 5435.
In Europe, the FTSE 100 is up 0.2% while Germany’s Dax has added 0.18% and France’s Cac has climbed 0.57%.
Commenting on International Personal Finance, Numis analysts said:
The [Polish] Ministry of Justice, as opposed to the ministry of finance has, as part of a criminal law change and anti-usury measures, suggested that the interest rate cap in Poland is reduced. There is a 14 day consultation period and the ministry of finance may intervene.
Assuming the cap is enacted as proposed it would materially reduce the revenue profile of the Polish business, calling into question the viability of the home credit model.
Where under the existing cap IPF would collect £168 from a £100 loan, under the new proposal it would only be able to collect £126. We now value IPF assuming that there is no value in Poland and that includes the capital that is allocated to this division.
Elsewhere International Personal Finance, the emerging markets lender, has slumped 30% after it said Polish authorities had published a draft bill cutting the costs lenders can charge on consumer loan agreements. It said was “reviewing the proposal to assess the extent to which the profitability of its Polish business would be affected by the proposed changes.” The proposal reduces the flat level cap of 25% of loan value to 10% and an annual cap from 30% to 10% per annum.
This is not the first time the company has been hit by changes in regulation.
Reuters: MONTE DEI PASCHI SUBORDINATED BONDS INCLUDED IN DEBT-TO-EQUITY SWAP TRADE DOWN 1000-1500 BPS ON OVER-THE COUNTER PLATFORMS - TRADER
— James Mackintosh (@jmackin2) December 9, 2016
The debt to equity swap was predicated on a cash call going ahead, and that now looks in doubt, hence the fall in the bonds which were included in the swap.
Updated
As part of its latest story on Monte dei Paschi, Italy’s Repubblica is suggesting the country may pass a decree this weekend allowing state aid. The story (in Italian) is here.
Shares in Monte dei Paschi have restarted but fallen to 11.4%, so suspended again.
And back to Italy: trading in Monte dei Paschi’s shares has been halted after they fell 7.3%.
Away from Italy’s banking problems, and the UK’s Office for National Statistics has released details of the gender pay gap in various professions.
Its interactive tool to see the gap in your job sector is here. And my colleague Katie Allen has written an analysis:
If you are a female traffic warden or probation officer read on for good news. If you are a female chief executive you may want to look away now.
The UK’s stubbornly wide gender pay gap is well-known. Almost half a century on from the gender pay act, there is still an 18.1% difference in average pay between men and women. Of course, such average figures for all employees tell a narrow story. They don’t, for example, account for the fact more women work in lower paid jobs or sectors.
But now people can quickly look up how things stand between the sexes in their particular job with a new interactive tool from the Office for National Statistics (ONS). It also shows how many women and men work in each role.
For example, women classed as “chief executives and senior officials” are paid 28.7% less than men in that group, at £34.91 per hour versus £48.94 per hour for men. Women hold 30% of those jobs.
Her full piece is here:
News of the ECB’s rejection of an extension for the Monte dei Paschi fundraising has seen the bank’s shares drop 6.6%.
Michael Hewson, chief market analyst at CMC Markets UK, said:
The decision by the European Central Bank to reject Italy’s demand for more time to secure private funding for a bailout of Monte dei Paschi is likely to keep markets apprehensive at the prospect of how any new Italian government might look in the context of dealing with the country’s banking sector, bringing closer the prospect of a possible politically toxic bail-in of retail bondholders.
Here’s the full Reuters report on Monte dei Paschi:
The European Central Bank has rejected a request by ailing Italian lender Monte dei Paschi di Siena for more time to raise capital, a source said on Friday, in a move that piles pressure on the Italian government to bail out the bank.
The country’s third-largest lender, and the world’s oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euros ($5.3 billion) rescue plan in the face of fresh political uncertainty.
The ECB’s supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.
The Italian government is expected to intervene to recapitalise the bank to avert the risk of it being wound down. The failure of Monte dei Paschi could threaten the savings of thousands of retail investors, ripple across the wider banking sector and provoke a financial crisis in the euro zone’s third-biggest economy.
Italy faces the risk of early elections, and the prospect of an anti-euro party coming to power, after Prime Minister Matteo Renzi quit this week following the heavy defeat of his plan to reform the constitution in a weekend referendum.
Pressure mounts on Banca Monte dei Paschi
Breaking: Shares in Banca Monte dei Paschi di Siena (MPS), are down 2% on reports that the ECB will reject the Italian bank’s request for more time to raise capital.
The clock is now ticking on the world’s oldest bank and it throws open the possibility that the Italian government will to step in to help it find the billions of euros it needs to bolster its capital.
Harsh but fair < ECB SUPERVISORY BOARD HAS DECIDED TO REJECT MONTE DEI PASCHI'S REQUEST FOR MORE TIME TO RAISE CAPITAL-SOURCE
— George Hay (@gfhay) December 9, 2016
— Katie Martin (@katie_martin_fx) December 9, 2016
Meanwhile more on Britain’s productivity puzzle:
Hardly encouraging for #UK #productivity ! BBC News - British business 'loath to invest in research' https://t.co/QbyJJbEsSa
— Howard Archer (@HowardArcherUK) December 9, 2016
Sticking with Ireland, GDP increased by 4% in the third quarter, driven higher by consumer spending and exports.
It put the annual growth rate at 6.9%, and left the Irish economy on track to be the fastest growing among its European peers for a third successive year in 2016.
Alan McQuaid, chief economist at Merrion Stockbrokers:
The government looks on target for its forecasts, the figures are stronger than expected. Consumer spending is holding up well, at this stage there is no sign of a major Brexit hit.
Given anecdotes of weakness in the economy since summer/Brexit etc, those are decent growth figures in Q3.
— Ian Guider (@ianguider) December 9, 2016
Irish fruit company Fyffes snapped up by Japan's Sumitomo
Fyffes, the Dublin based grower and distributor of fruit, has agreed to a €751m (£631m) bid from Sumitomo, which supplies about one in three bananas sold in Japan.
Fyffes employs more than 6,000 people and is focused mainly on bananas, pineapples and melons. It has an annual turnover of more than €1.2bn.
Fyffes shareholders will receive €2.23 a share, representing a 49% premium on the company’s closing price on Thursday.
The McCann family have run the company for many years, and hold a stake of over 12% according to the Irish Times.
Commenting on the deal, chairman David McCann, said the deal would help Fyffes to grow:
Our employees, customers, suppliers and joint venture partners will benefit from Fyffes being part of an enlarged group with greater scale, reach and resources to broaden and accelerate delivery of Fyffes’ strategic objectives.
Gold is on course for its fifth weekly drop as investors price in a Federal Reserve rate hike next week.
Spot gold fell 0.1% to $1,170.06 an ounce, leaving it down 0.6% over the week.
The precious metal fell more than 8% in November, and hit a 10-month low on Monday. US Treasury yields have risen since Donald Trump won the US presidential election, which is a negative for gold because it pays no interest.
The Bank of England has published its latest quarterly inflation expectation survey. It gives an indication of what the public thinks is happening to prices.
When asked what the current rate of inflation is, the median answer given was 2.3%, up from 1.8% in the August survey. (At the last count the official rate of inflation was actually 0.9%.)
More than 2,000 people aged 16 and over were surveyed.
Marmite-gate in action. BoE survey shows people's median expectations for inflation over the coming year 2.8%, compared with 2.2% in August pic.twitter.com/hjo4ChHfec
— Katie Allen (@KatieAllenGdn) December 9, 2016
October’s trade data was partly flattered by a particular poor performance in September.
The ONS admitted on Tuesday an error in trade figures going back to 2015. It meant the trade performance was healthier than previously estimated before the referendum, but worse than previously estimated after the Brexit vote.
Full story here:
City economists say the stronger-than-expected export performance suggests trade could make a decent contribution to GDP in the fourth quarter:
Howard Archer at IHS Markit:
Very much on the positive side, the trade performance improved substantially in October as exports jumped 4.6% month-on-month and imports fell 3.6% .
This suggests that net trade can make a decent positive contribution to GDP growth – although it needs to be remembered that the data can be highly volatile and subject to significant revisions
The hope for the UK economy going forward is that the substantial overall weakening of the pound since the UK voted to leave the European Union in June’s referendum will increasingly feed through to boost foreign demand for UK goods and services.
(Archer believes the economy will grow by 0.4% in the fourth quarter, following 0.5% growth in the third quarter.)
Scott Bowman at Capital Economics:
While the monthly data are extremely volatile, the narrowing in the trade deficit in October sets a solid base for trade in Q4.
What’s more, trade should be further supported in the coming months by the fall in sterling seen since the EU referendum, which should improve exporters’ competitiveness and encourage domestic production at the expense of imports.
UK trade deficit narrows
Britain’s trade in goods deficit narrowed more than expected in October, to £9.7bn from £13.8bn in September, as exports rose but imports fell.
Exports rose by £2.1bn to £26.8bn, while imports fell by £2bn to £36.5bn.
Policymakers are hopeful that the sharp value in the fall of the pound since the June Brexit vote will boost exports, because it makes British goods cheaper abroad, but the ONS isn’t convinced this is what happened in October.
Hannah Finselbach, ONS statistician, says:
Following the EU referendum the UK trade deficit widened in the third quarter of 2016 and then in October it narrowed again.
There remains only limited evidence so far that the depreciation of sterling has led to a marked increase in UK exports.
Updated
Breaking: UK construction output falls unexpectedly
UK construction fell 0.6% in October, disappointing expectations of a 0.2% rise.
It wasn’t all bad news however, as September’s growth figure was revised higher to 0.9% from 0.3%.
It means construction output was 0.7% higher over the year, according to the Office for National Statistics figures.
Updated
FCA cracks down on crowdfunding
The City regulator is turning its attention to crowdfunding, a rapidly growing sector that lets businesses and individuals raise money from online investors.
The Financial Conduct Authority cites several concerns, among them the difficulty for investors to assess the risks and returns of such an investment.
Crowdfunding is a massive growth sector, rising from £1.7bn of loans, investments and donations in 2014 to £3.4bn last year.
BrewDog, the self-styled punk brewer, has raised £26m from UK beer drinkers using crowdfunding.
Read our full story here:
Also coming up today are UK trade data and construction output for October.
Both will give further clues about how the economy is performing in the final quarter of 2016.
Economists are predicting the trade in goods deficit will narrow to £11.8bn, while construction output is expected to rise by 0.2% over the month.
German exports disappoint
German exports were weaker than expected in October, rising by 0.5% and not 1% as forecast by economists.
It was better than September, when exports fell 1%, but dampened hopes that trade will significantly boost growth in Europe’s largest economy in the fourth quarter.
Imports rose 1.3% in October according to the Federal Statistics Office, more than the 0.9% predicted by economists. The jump in imports narrowed Germany’s trade surplus to €20.5bn from €21.5bn in September
FTSE 100 opens higher
The FTSE 100 is slightly higher this morning, up 0.1% or five points at 6,397.
Elsewhere in Europe, markets are mixed:
- Germany’s DAX: flat at 11,184
- France’s CAC: +0.3% at 4,751
- Italy’s FTSE MIB: -0.7% at 18,306
- Spain’s IBEX: -0.2% at 9,130
- Europe’s STOXX 600: +0.2% at 353
ECB's Coeure seeks to reassure
Benoit Coeure, executive board member at the ECB, has been speaking to French radio this morning.
He says the central bank’s surprise decision to prolong the programme to next December or beyond, but scale back the pace of purchases, was a vote of “confidence” in the eurozone economy.
But he made it clear the bank would do more if necessary, as the eurozone faces a 2017 littered with challenges:
There are political risks everywhere, inside and outside of the euro zone. It’s not up to the ECB to manage political risks, that’s for the politicians to do.
But it’s up to us to draw the economic consequences and the eurozone will still need financial protection to get through 2017, which will be very risky.
The agenda: ECB is ready to do more
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Japan’s Nikkei has closed up 1.2% following gains in the US.
In Europe markets are on track to make weekly gains following the European Central Bank’s decision on Thursday to prolong its quantitative easing programme.
Investors left scratching their heads as the ECB prolonged the programme but scaled back the pace of monthly purchases to €60bn from €80bn might be boosted this morning by EBC official Benoit Coeure, who told French radio this morning policymakers are ready to do more if necessary.
In Japan, the Nikkei followed US markets higher, up 1.2% at 18,996.
Michael Hewson, Chief Market Analyst at CMC Markets UK, gives this take on markets:
Just when you think US stocks may have peaked and can’t move any higher they go and register new all-time highs once again, in what is becoming a fairly regular theme, with the Dow, S&P 500 and the Russell 2000 repeating the trick for the second day in a row.
With European markets also posting new multi-month highs as well it would appear that the season of good cheer has come upon us early in the lead up to Christmas, and next week’s offerings from the US Federal Reserve.
Given the result of the Italian referendum it seems completely counterintuitive to be saying that the DAX and the FTSE Mib are on course to post their biggest weekly gains this year, begging the question as to what would have happened if there had been a yes vote and Renzi had stayed? Sometimes markets don’t make any sense at all!
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