European markets have closed in the red tonight, hit by worries that G7 meeting will develop into a diplomatic punch-up.
The FTSE 100 shed 23 points, or 0.3%, while German’s DAX lost 44 points, or 0.35%.
Italy’s FTSE MIB was the big loser, dropping by almost 2% as traders fretted about the new Italian government.
David Madden, market analyst at CMC Markets UK, says:
European stocks spent much of the session in the red as trade tensions weighed on investor sentiment. The G7 meeting gets under way today in Quebec, and investors are cautious as certain trading relationships are a little strained.
Those talks in Quebec will run for hours and continue tomorrow (although without Donald Trump). Leaders are being pushed to make gender equality a top priority, alongside climate change and trade.
Keep an eye on our website for the latest developments. Goodnight! GW
Satellite firm Inmarsat rejects takeover approach
Newsflash: British satellite company Inmarsat had found itself in a takeover battle.
Shares in the company jumped by 13.5% today, sparking speculation that the company could be ‘in play’...and it is!
Inmarsat has just told the City that it has rejected an approach from US rival Echostar.
It says:
The Board of Inmarsat plc notes today’s recent press speculation and movement in its share price and confirms that it received a highly preliminary and indicative non-binding proposal from Echostar Corporation in relation to the potential acquisition of the entire issued, and to be issued, share capital of Inmarsat (the “Proposal”).
After carefully considering the Proposal with its advisers the Board rejected the Proposal on the basis that it very significantly undervalued Inmarsat and its standalone prospects. The Board remains highly confident in the independent strategy and prospects of Inmarsat.
Echostar now has until 6 July to make a firm offer, or walk away.
Inmarsat is now valued at around £2.2bn, following todays share price move.
Italy’s debt has come under pressure today, sending yields on Italian government bonds higher.
#Italy's 10-year bond yield back at >3.1% levels as PM Conte supports President Trump's call for Russia to rejoin #G7.#G7Charlevoix pic.twitter.com/RvEY6au1Vg
— Yannis Koutsomitis (@YanniKouts) June 8, 2018
The FT says the are several factors, both at home and in Frankfurt.....
Strategists are uncertain over how the newly-formed populist government will work with Brussels, and also over its fiscal plans.
At the same time, a string of hawkish speeches from ECB policymakers earlier this week have revved up expectations that the central bank will announce next week the end of its bond buying programme.
Quantitative easing has been a boon to eurozone government debt, helping push yields lower.
Tusk: Europe will be united at G7
European Council president Donald Tusk, who is attending the G7 meeting, insists that European delegates will maintain a united front.
Tusk also played down the idea that Russia could be readmitted to the gathering, despite Donald Trump’s comments earlier:
He said:
“This morning I had the first and very good, promising meeting with Italy’s Prime Minister Giuseppe Conte and I am convinced that here at the G7 we will have a fully united European position on all issues.
Including on Russia. I am not talking about details but about the more general common line.
Tusk also put his finger on the challenge facing world leaders:
Donald Tusk on the Trump threat to international order: "What worries me most is the fact that the rules-based international order is being challenged, quite surprisingly not by the usual suspects, but by its main architect and guarantor, the US."
— Julian Borger (@julianborger) June 8, 2018
More Tusk: "We will not stop trying to convince President Trump that undermining this order makes no sense at all, because it will only play into the hands of those who seek a new post-West order, where liberal democracy and fundamental freedoms would cease to exist."
— Julian Borger (@julianborger) June 8, 2018
BT’s shares are still near the top of the FTSE 100 leaderboard this afternoon, as traders digest the exit of CEO Gavin Patterson.
They’re currently up 1.1% at 205p. Back in 2013, when Patterson was appointed, they were worth 300p, so there’s been some value destruction on his watch.
BT share price currently 40% below where it was when Patterson took over five years ago. Yikes. Huge amount of work to do before it sees those levels again
— Ben Marlow (@benjaminmarlow) June 8, 2018
BT’s shares did rise early in Patterson’s tenure, hitting £5 in 2016. But they then fell back as BT struggled to hit growth and earnings targets - despite spending a lot of money on sports rights.
Last month’s profit warning, released alongside the latest strategy, was the last straw, sending shares to six-year lows.
George Salmon, equity analyst at Hargreaves Lansdown, says:
“Perhaps fittingly, Gavin Patterson’s tenure was very much a game of two halves.
The rise of BT’s Sport coverage, which has stepped up to challenge the dominance of Sky initially brought some good times for investors. However, it’s been a different story over the last two years.
Since 2016, BT’s share price graph resembles something of a black run; pretty much always on a downward trend and with a few nasty cliffs here and there. Ultimately, this is what’s behind the change. Shareholder confidence has followed the share price down, and with BT embarking on a crucial restructure, the board has decided it’s time for a change.
Here’s our news story about Trump’s comments:
US stock markets have followed Europe and Asia’s lead, and dipped in early trading.
It’s a modest fall, though; the Dow Jones industrial average has shed 40-odd point, or 0.15%., while the Nasdaq is down 0.5%.
Italy’s prime minister, Giuseppe Conte, has reportedly backed Trump’s call for Russia to be reinstated.
ITALY'S CONTE SAYS AGREES WITH TRUMP THAT RUSSIA SHOULD BE BACK IN G7
— lemasabachthani (@lemasabachthani) June 8, 2018
It raises the prospect of the G7 becoming the G8 again... unless it shrinks to become the G6 first, of course.
At the rate things are going Russia may have to be readmitted just to keep it a G-7.
— Greg Ip (@greg_ip) June 8, 2018
If Trump decides to withdraw from the #G7, perhaps there would be room for Russia again. These days, nothing seems out of the realms of possibility
— Luke Baker (@BakerLuke) June 8, 2018
Pound slides as Barnier blasts backstop
Breaking: The pound is falling as the Europe Union’s Brexit negotiator, Michel Barnier, gives a thumping thumbs down to the UK’s latest proposal.
Barnier has rejected Theresa May’s proposal that Britain should stay in the customs union until the end of 2021 unless a new customs agreement is agreed once Brexit has occured.
He is telling journalists in Brussels that the backstop cannot apply to the whole UK, but could apply to Northern Ireland.
Barnier also takes issue with the ‘time-limited’ nature of the UK’s offer. He insists that “backstop means backstop” (a wry jibe at May’s claim that “Brexit means Brexit”).
This has to be a backstop that provides a guarantee under all circumstances.
This is another blow to the UK’s position - which was only agreed yesterday after crunch talks between May and Brexit secretary David Davis.
Barnier chucks a spanner into the works - "Our backstop cannot be extended to the whole of the UK."
— Jessica Elgot (@jessicaelgot) June 8, 2018
Barnier also claimed that the UK’s position is “paradoxical” (because London wants to leave the EU but maintain many of its advantages).
The pound has dropped by 0.5% against the US dollar, or 0.66 of a cent, to $1.336.
Our Politics Live blog has all the action:
Trump has added further spice to the G7 meeting, by telling reporters in Washington that Russian president Vladimir Putin should be joining the throng in Quebec:
On South Lawn before departing for Canada, Trump calls for Russia to be reinstated in G-8 (which has been the G-7 since the annexation of Crimea)
— Zeke Miller (@ZekeJMiller) June 8, 2018
Russia’s membership of the G8 (as it then was) was suspended after the annexation of Crimea in 2014.
Given events since, such as the Salisbury Novichok attack, I don’t think Putin is welcome back....
NEW: Donald Trump says Russia should be re-instated as G8 member, as he prepares to head (briefly) to the G7 in Canada.
— Olly Barratt (@ollybarratt) June 8, 2018
which won't improve the mood at what was already shaping up to be a G6 + 1 type affair.
— Olly Barratt (@ollybarratt) June 8, 2018
Trump also declared that Canada, the EU and Mexico all treat America very badly when it come to trade, meaning we can dial down expectations for a successful G7 even lower....
Donald Trump’s social media sledging isn’t doing much for the mood on Wall Street.
The Dow Jones industrial average is expected to fall by 136 points at the open, or around 0.5%.
America’s increased isolation on the world stage is worrying traders, says Craig Erlam of City firm OANDA.
While Trump has at times appeared friendly with certain other heads of state in the past, the relationships have at least appeared to have become more hostile since tariffs were imposed on the European Union, Canada and Mexico by the US last week.
The G7 meeting has become more like a G6+1, with Trump choosing to isolate the US on a number of issues from trade to Iran and climate change.
The Nasdaq is heading for an 0.8% drop, with Apple called down 2% following reports it is taking a “cautious” approach toward upcoming iPhone shipments this year.
Trump has thrown down the gauntlet:
I am heading for Canada and the G-7 for talks that will mostly center on the long time unfair trade practiced against the United States. From there I go to Singapore and talks with North Korea on Denuclearization. Won’t be talking about the Russian Witch Hunt Hoax for a while!
— Donald J. Trump (@realDonaldTrump) June 8, 2018
We’ll try to hold the president to that last pledge....
However, I suspect the talks will mostly centre on the recent tariffs imposed by the United States on its allies:
In another sign that America is detaching from fellow advanced economies, Donald Trump will actually leave the G7 meeting early.
The president is due to leave Quebec on Saturday morning, meaning he’ll miss the summit’s second day. Trump is flying to Singapore for his historic meeting with North Korea’s Kim Jong-un.
The talks could lead to a thawing of tensions between the two countries; but with such unpredictable leaders, anything is possible.
My colleague Julian Borger explains how the Trump-Kim meeting could unfold:
Trump has sought to play down expectations, characterising the meeting as “getting-to-know-you, plus”.
But without a substantial “plus” in the form of progress in the direction of disarmament, the meeting will widely be deemed a failure. And to achieve that progress, Trump will have to make significant gestures towards what Kim wants most – security guarantees.
Both leaders will go into the Singapore meeting with cards in their hands, representing quick, deliverable concessions. The big question next week will be which cards they play and in what sequence. At a minimum, Kim will be expected to formalise the current suspension of nuclear and missile testing. He could go further by declaring a cap on his existing arsenal freeze on other nuclear activity like uranium enrichment.
His biggest element of his opening offer, however, would be a statement on his plans to dismantle his nuclear weapons programme, and here everything will be in the details – how clearly denuclearisation is defined, and whether Kim commits to a timetable.
Trump attacks Canada over dairy tariffs
Just in: Donald Trump is limbering up for the G7 meeting by firing another attack at Canada over trade tariffs:
Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!
— Donald J. Trump (@realDonaldTrump) June 8, 2018
Looking forward to straightening out unfair Trade Deals with the G-7 countries. If it doesn’t happen, we come out even better!
— Donald J. Trump (@realDonaldTrump) June 8, 2018
Trump is referring to Canada’s “Supply management” regime, a long-running point of dispute between the two countries.
This system specifies fixed prices paid to farmers, strict quotas for how much they can produce, and a tariff wall to prevent cheaper imports from abroad.
The result: stable incomes for farmers, who are protected from bankruptcy in lean times, at the cost of higher prices for Canadian consumers.
American farmers, though, want to send their own milk and butter north, and Trump is pushing their case.
Emerging market currencies are being hit badly today, as investors scramble into the safety of the US dollar instead.
The South African rand, the Turkish lira and the Indian rupee have all suffered sharp falls.
Morning Note:
— Jonathan Ferro (@FerroTV) June 8, 2018
1. Messy G7 meeting coming up
2. DB considering Commerzbank
3. EMFX rout continuing to build pic.twitter.com/PbTRcAMo35
This kind of action puts pressure on domestic policymakers to consider raising interest rates to prevent capital flight - a move that also hurts economic growth.
Yesterday, Turkey’s central bank hikes its benchmark rate to a blistering 17.75%, from 16.5%, in an attempt to prop up the lira.
Angela Merkel has received some unwelcome news as she prepares for the G7 meeting -- German industrial output and exports both fell in April.
Factory output across Germany shrank by 1% in April, dashing expectations that it would rise by 0.3%.
German Industry's bad news keeps coming as output declines. "This morning’s macro data suggests that the German economy has had more trouble re-accelerating than previously thought," ING says. https://t.co/X7HLFt5ZQn pic.twitter.com/6cK17nXE1w
— Holger Zschaepitz (@Schuldensuehner) June 8, 2018
The Federal Statistics Office also reported that German exports fell by 0.3% in April while imports rose by 2.2%.
That helps to narrow Germany’s trade surplus, so could be welcomed by its neighbours. The wider concern, though, is that trade war fears are hurting demand for German goods.
Paul Donovan of UBS Wealth Management is gloriously unimpressed by this weekend’s G7 shindig, arguing that little will be achieved in Quebec.
But markets could slide if Donald Trump falls out badly with fellow world leaders.
Donovan says:
Several heads of government disappear off for a taxpayer-financed weekend mini-break in Canada today. The G5, G7, G8, and now G6 plus 1 have never really accomplished very much after the first burst of enthusiasm with the Plaza and Louvre accords of the 1980s. This meeting will be no different.
Because the G6 plus 1 is about spin not substance, the risks for markets come from the visual from this meeting. The US is looking isolated. This is not the isolationism and protectionism of the 1930s.
In the 1930s everyone put up trade barriers against everyone else. This time the US is putting up trade barriers against everyone else, and everyone else is carrying on just as before.
Robin Bew of the Economist Intelligence Unit says the international trade system is more complex than Donald Trump suggests....
#G7 looking to be very heated over trade. Will be lots of fair/unfair accusations. There are differences in both tariff and non tariff barriers between #US and others but often the result of a deal where a quid pro quo has been cut elsewhere (IP protection etc).
— Robin Bew (@RobinBew) June 8, 2018
Donald Trump’s attacks on the EU and Canada have sent traders racing to sell risky assets, says Ken Odeluga, market analyst at City Index.
Interest rate realities are sinking back in ahead of what’s going to be a not particularly cordial G7 summit in Canada. It’s little wonder that risk-aversion has returned.
Odeluga points out that G7 summits can often disappoint -- but his week’s one could be especially worrying:
Even under ‘normal’ circumstances, markets tend to write-off the chances that G7 summits will result in concrete communiques with lasting impact. The current U.S. administration back-tracked on climate-related pledges within weeks of the last meeting. It also took its first steps on the trade war path despite the anti-“protectionism” sentiments addressed in the prior G7 statement.
With new U.S. tariffs now lodged against all but one of the remaining six members and Trump tweeting his still combative mood overnight, some leaders might be wondering if there might be more productive ways to spend their time this weekend.
No wonder markets are falling.
Overnight, Donald Trump launched a fierce attack on his fellow G7 leaders via Twitter, accusing Europe and Canada of treating America unfairly.
Trump signed off that he’s ‘looking forward’ to meeting Justin Trudeau and Emmanuel Macon in Quebec.... having further stoked the feud between the US and the rest.
Why isn’t the European Union and Canada informing the public that for years they have used massive Trade Tariffs and non-monetary Trade Barriers against the U.S. Totally unfair to our farmers, workers & companies. Take down your tariffs & barriers or we will more than match you!
— Donald J. Trump (@realDonaldTrump) June 8, 2018
Prime Minister Trudeau is being so indignant, bringing up the relationship that the U.S. and Canada had over the many years and all sorts of other things...but he doesn’t bring up the fact that they charge us up to 300% on dairy — hurting our Farmers, killing our Agriculture!
— Donald J. Trump (@realDonaldTrump) June 7, 2018
Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers. The EU trade surplus with the U.S. is $151 Billion, and Canada keeps our farmers and others out. Look forward to seeing them tomorrow.
— Donald J. Trump (@realDonaldTrump) June 7, 2018
Macron responded more tactfully, tweeting that tensions are rising everywhere, and the G7 meeting will be demanding.
Les tensions montent partout. Ce G7 sera exigeant.
— Emmanuel Macron (@EmmanuelMacron) June 7, 2018
Updated
FTSE 100 falls
A wave of selling has swept through Europe’s trading floors this morning.
In London, the FTSE 100 has shed 58 points or 0.75%, to 7645 points.
Nearly every share is down -- BT jumped 2.5% at the open, but has now subsided.
Connor Campbell of SpreadEx blames geopolitical worries:
A likely feisty G7 meeting in Quebec appears to be the main thing driving the markets lower. Investors are either worried that nothing will get resolved, or Trump will become more entrenched in his aggressive approach to trade.
Germany’s DAX has also started the day badly - down 1.1% - while France’s CAC is down 0.6%.
Updated
BT tweets...
We're kicking off the search to find our next CEO.
— BT Group (@BTGroup) June 8, 2018
Find out more ➡️ https://t.co/fwEQvfyyZL pic.twitter.com/erWLJbZxhO
...because the incumbent is being kicked out by the chairman?...
Geoff Cutmore of CNBC questions whether BT will stick with Patterson’s strategy to revitalise BT, and cut 13,000 jobs, if he’s now surplus to requirements.
Question for the morning courtesy of my colleague @steve_sedgwick on @BT . If the board still believe in CEO Gavin Patterson's strategy - why is he leaving? Very good question......
— Geoff Cutmore (@GeoffCutmore) June 8, 2018
Cutmore’s colleague, Karen Tso, points out that transforming BT into a tech-focused company is a huge challenge:
As @btgroup begins its search for a successor...we're debating @SquawkBoxEurope - Can a #telecoms company become a #tech company? ..."You almost need a brain transplant to think it will become a viable media/tech competitor" says Walter Price @AllianzGI_view
— Karen Tso (@cnbcKaren) June 8, 2018
Why BT CEO has left
It emerged earlier this week that BT shareholders were agitating for change, with top investors demanding talks with chairman Jan du Plessis.
We wrote on Monday that du Plessis has already held meetings with investors, with more planned. Clearly the mood wasn’t great.
As one top investor told the FT:
“I don’t have much faith in Gavin....Since he took over [five years ago], it has not been a happy time for shareholders. I am not sure he is the right man for the job.”
Today’s statement suggests that du Plessis and the rest of the board came to the same conclusion, deciding that ‘a change of leadership’ is needed.
As Richard Fletcher of The Times puts it, du Plessis has now ‘ousted’ Patterson:
Gavin Patterson ousted as BT chief executive. Today's @TimesBusiness morning email in your inbox shortly ... pic.twitter.com/wxvUmcixlP
— Richard Fletcher (@fletcherr) June 8, 2018
A wobbly day’s trading in Asia has seen Japan’s Nikkei drop 0.5%, China’s Shanghai Composite index lose 1.5%, and the Hong Kong Hang Seng lose 1.7%.
David Madden of CMC Markets says G7 worries are mounting.
The G7 meeting starts today in Quebec. Traders will be paying attention to see if any progress is made regarding trade talks. President Tump is in the eye of the trade storm, and he is letting the world know he means business, and he is determined to get the best deal for the US.
At the moment, investors aren’t overly concerned about the state of play, but that doesn’t mean they don’t have a pain threshold.
The agenda: BT boss quits; G7 fears hit markets
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Some breaking news to start the morning: Gavin Patterson is stepping down as chief executive of BT, in the face of criticism from investors.
The telecoms giant has announced that Patterson will leave later this year -- after concluding that a ‘change of leadership’ is needed.
My colleague Angela Monaghan explains:
The company said that it had already started the process of looking for his successor, and expected to appoint a new chief executive in the second half of the year.
Jan du Plessis, chairman of BT, thanked Patterson for his contribution but said the company needed a change in leadership.
He said: “The board is fully supportive of the strategy recently set out by Gavin and his team. The broader reaction to our recent results announcement has though demonstrated to Gavin and me that there is a need for a change of leadership to deliver this strategy.”
Patterson was clearly under pressure; BT’s share price hit its lowest level since 2012 last month.
It emerged earlier this week that some investors were losing patience with Patterson, who has been spending billions of pounds on sports rights such as Premier League football in an attempt to attract customers to its TV service.
This looks like a rather humiliating way to go, just four weeks after announcing a new strategy and thousands of job cuts.
More on that shortly....
Also coming up today
Investors will be watching La Malbaie in Quebec, as Canada hosts the G7 meeting of world leaders. It could turn into a G6 +1, though, as America faces criticism over its trade policies from the UK, Germany, France, Japan, Italy and Canada.
European markets are expected to fall, with the FTSE 100 called down 35 points, after Asian markets dropped back.
#FTSE100 called -35pts at 7669. Will that channel hold? pic.twitter.com/GXqkxAhkib
— Mike van Dulken (@Accendo_Mike) June 8, 2018
Jasper Lawler of London Capital Group says ‘risk aversion’ is rising, as investors fear the meeting will be fraught.
Given the quiet economic calendar today, the continuing trade spat between the US its closet allies will attract a good deal of attention as the G7 summit begins.
The broader US market posted its first loss in 5 days as the recent equity rally, and more specifically tech rally, faltered, whilst investors started to show unease over the potential climate at the G7 Summit. Souring investor sentiment resulted in a softer session for Asia and indicates a weaker start for Europe on the open.
Here’s the agenda
- 7am BTS: German trade and industrial production figures
- All day: G7 meeting in Quebec
Updated
