FTSE 100 posts new all-time closing high
Boom! Britain’s FTSE 100 index has set a new closing high.
Relief over the Dutch election result, and the dovish comments from America’s Federal Reserve last night, drove shares higher in London today.
The news of a split at the Bank of England over interest rates didn’t spoil the party either.
So the Footsie ended the day up 47 points at 7415, beating the previous closing high of 7382 set on March 1st. Mining stocks led the risers, showing optimism for global growth.
The FTSE 100 Index has closed at an all-time high of 7,415.95
— Gareth Baines (@DrGABaines) March 16, 2017
The pound is also up today -- trading 0.75 of a cent higher at $1.236. That pulled the FTSE 100 back from this morning’s intraday high of 7,444 points (set before the Bank of England revealed that policymaker Kristin Forbes had voted to raise interest rates).
Connor Campbell of SpreadEx explains:
Though Forbes’ decision doesn’t mean that the BoE will be raising rates anytime soon, especially since she leaves the institution in June, with inflation creeping ever higher it does perhaps nudge the MPC closer to a hawkish position.
The pound certainly thought so, at least, rising half a percent against the dollar to a 2 week high having been in the red by the same amount earlier in the day after the Queen gave her Royal Assent for the triggering of Article 50.
Other European markets have also romped ahead, helping the Stoxx 600 index to close 0.6% higher.
The Amsterdam market closed at its highest level since December 2007. The AEX index finished 0.4% higher tonight as traders digested the news that prime minister Mark Rutte’s VVD party had beaten far-right Geert Wilders to first place in Wednesday’s election.
Steve Ruffley, chief market strategist at InterTrader, points out that the markets have defied predictions of sharp losses if Britain voted to leave the EU, or if Donald Trump won the US presidential election.
Nine months ago, we were warned that Brexit may knock the markets by 10%, if Trump became president maybe they may fall 20%, yet here we stand at record levels. The explanation for this is easy. The world has gone mad.
Last night we saw the Fed finally start the path of normalisation on rate with a hike. Predicted to be 1 of 4 but most likely 3. In traditional economic models hikes in rates send markets down. Not in the new exciting world of ‘no news is bad news for stocks’.
On the serious side investors, with a lack of alternatives (interest on cash) have forgotten stocks are a risky investment. What goes up will come down.
Ruffley added that 7,500 points is the new ‘psychological testing point’ for the FTSE 100, suggesting it will continue to rise.
Selling new highs is not the strategy in this new ‘stocks at any cost’ mentality.”
And on that note, I’m wrapping up for the night. Thanks for reading and commenting. See you tomorrow. GW
Updated
With 30 minutes to go, the FTSE 100 is on track to end the day at a new closing high.
The jump in the pound at noon today, when the Bank of England interest rate decision hit the wires, has pulled down share prices a little.
The blue-chip index is currently up 37 points at 7,406. That’s down on this morning’s intraday high of 7,444 points, but still above the previous record close.
Greek counter-terrorism officials are investigating whether the letter bomb sent to the IMF was dispatched from a post office in the Greek capital, insiders say.
One tells us:
“All post offices have been ordered to go back through their files,”
The blast occurred a day after the Greek urban guerrilla group Conspiracy of the Cells of Fire claimed responsibility for a parcel bomb sent to the German finance minister Wolfgang Schäuble on Wednesday. The suspicious parcel laced with the sort of explosive used in fireworks was intercepted by German authorities before it reached its recipient.
A message posted on the Indymedia Athens anarchist site says:
“We take responsibility for sending the booby trapped parcel to the Germany finance minister.”
Greek intelligence officials are working on the assumption that today’s blast may have been orchestrated by the same group. Greek anarchist groups have recently racheted up criticism of the demands made of Greece by the IMF.
Updated
Security is tight outside the IMF offices near the Arc de Triomphe in Paris this afternoon, as police investigate today’s exploding letter.
IMF letter bomb was homemade, says Paris police chief – video https://t.co/XbxAqTuUpo
— The Guardian (@guardian) March 16, 2017
Over in New York, animal rights campaigners are protesting outside the stock exchange.
They’re unhappy that Canada Goose, the retail chain that uses fur on some of its winter coats, has floated on the stock exchange today.
There’s rather less action inside the stock exchange, though.
After jumping last night, the Dow Jones index is becalmed this morning, down just 0.07%.
Christine Lagarde, head of the IMF, has confirmed that one of her colleagues was injured in an explosion at its Paris offices (seemingly caused by a letter bomb).
She says:
“I have been informed about the explosion in the IMF’s Paris office, which caused injuries to one of our staff. I have been in touch with the office, and my compassion goes to the colleagues there.
“I condemn this cowardly act of violence and reaffirm the IMF’s resolve to continue our work in line with our mandate. We are working closely with the French authorities to investigate this incident and ensure the safety of our staff.”
My statement on the explosion in the IMF’s Paris Office https://t.co/QAtyLajdMp
— Christine Lagarde (@Lagarde) March 16, 2017
Updated
Adam Chester, head of economics at Lloyds Bank Commercial Banking, points out traders now expect the first UK interest rate rise to come a little sooner than before:
Early reaction has seen the pound and UK government bond yields spike higher. The pound has rallied back above $1.2350 and €1.15, and 10-year government bond yields have risen around 7bp to 1.26%.
In the money markets, expectations are now fully priced to a rise in UK interest rates by the end of 2018, compared with early 2019 before today’s announcement.
Experts: UK interest rates will stay on hold
Despite today’s split, City economists don’t expect UK interest rates to rise anytime soon.
Ian Kernohan, economist at Royal London Asset Management, points out that Kristin Forbes’s term on the MPC soon expires:
“As expected, the Bank of England have left policy unchanged. GDP growth in the first quarter looks to have been close to their forecast, with some signs of a slowdown in household spending.
“A reduction in the equilibrium unemployment rate, supported by a softening in wage pressures in the latest Labour Market Report, suggests interest rates will remain on hold for now.
“The dissenting vote by Kristin Forbes will have come as a surprise to some, although she is a well-known hawk on the committee, who will be leaving this summer.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, warns savers to expect little help from the BoE:
‘The Bank of England is showing no signs of blinking in the course it has charted for monetary policy. Inflation may be starting to rise, but interest rates are staying put for the foreseeable future, which is going to cause further pain for cash savers.
Households face a currency crunch this year, as weaker sterling feeds through into consumer prices, pushing up the cost of living, while pay growth still looks anaemic.
Hannah Maundrell, Editor in Chief of money.co.uk, says a rate hike would have hurt struggling families:
“Today’s interest freeze is no surprise, the Bank of England won’t budge on interest rates for a while yet. With our world thrown into uncertainty by Brexit, wage growth stalling and inflation creeping up they need to tread carefully even with the drop in unemployment. A rate rise today would have put extra pressure on household finances and queued up trouble by stopping stretched households spending at a time when it’s important they continue.”
Kallum Pickering of Berenberg predicts that interest rates will stay on hold for at least another year:
As our base case, we look for a 25bp first rate hike in the second quarter of 2018, with a 30% chance the BoE raises the bank rate earlier.
After the first hike, the BoE will likely continue to proceed with extra caution, with small and infrequent rate hikes signalled far in advance, and with a strong bias toward remaining in neutral as and when risks to growth surface.
Sterling jumps
The pound has hit a two-week high, on the back of the split at the Bank of England.
Sterling jumped nearly a cent when the results of this month’s meeting hit the wires, to $1.235 for the first time since 28 February.
Fawad Razaqzada, market analyst at Forex.com, says Professor Forbes’ decision to push for a rate hike has driven the pound up.
Like the Bank of Japan and Swiss National Bank, the Bank of England decided to keep its monetary policy unchanged. BUT it wasn’t a unanimous decision as Kristin Forbes voted for a 25 basis point rise amid concerns over inflation. This caused the pound to jump across the board.
Why the MPC voted to leave interest rates unchanged
Today’s minutes show that eight members of the MPC voted to leave interest rates on hold because they don’t think the UK economy is strong enough to stomach a rate hike.
Pay growth had remained subdued, consistent with the Committee’s view that some slack remained in the labour market, and there had been some signs that the squeeze in households’ real income growth was feeding through into spending, as expected. In this context, the conditioning assumption that had underpinned the February projections – that there would be some modest withdrawal of monetary stimulus over the course of the forecast period – remained appropriate.
The potential for uncertainty over future trading arrangements to affect materially economic decision making remained, posing a downside risk to the activity outlook, to which the Committee could respond if necessary. On the other hand, with inflation rising sharply, and only mixed evidence on slowing activity domestically, some members noted that it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted.
But they also show that Kristin Forbes is rather concerned about inflation; with unemployment at a joint 42-year low, she argued that a rate hike was justified.
For one member, the monetary policy trade-off had evolved to justify an immediate increase in Bank Rate. Inflation was rising quickly and was likely to remain above target for at least three years. Measures of domestically generated inflation had also increased notably and, combined with global reflation and minimal labour market slack, posed upside risks to inflation.
On the other side of the trade-off, the weakness in activity expected since the referendum had not materialised. Unemployment showed no signs of increasing. Although consumer spending appeared to be softening, as expected, growth was likely to be supported by other components of demand, such as net exports. Therefore, for this member, there was less justification for tolerating inflation above the target for an extended period, although monetary policy should remain nimble.
Updated
Bank of England: Inflation will 'materially' exceed target soon
The Bank of England has warned that inflation is likely to smash over its target this summer, partly thanks to higher energy bills.
The minutes of this month’s MPC meeting show that policymakers are bracing for the consumer prices index to hit its 2% soon (possibly even next week), and keep rising.
The BoE says:
Twelve-month CPI inflation had been 1.8% in January, fractionally below Bank staff’s expectation at the time of the February Inflation Report, in part owing to weaker clothing and footwear prices, which were typically volatile.
Since the time of the previous Report, a number of domestic utility providers had announced increases in gas and electricity prices that were somewhat in excess of the baseline assumptions factored into the February forecast.
The net result of the news in the January CPI outturn, recent utility price announcements, and the decline in the sterling oil price was to leave the staff’s expectation for CPI inflation broadly similar to the February projection. CPI inflation was expected to rise to around the 2% target over the next month or so, and, given the impact of sterling’s depreciation, to exceed the target materially by the summer.
" CPI inflation expected... around the 2% target over the next month...and [given fall in £] to exceed the target materially by the summer"
— Duncan Weldon (@DuncanWeldon) March 16, 2017
Here’s some snap reaction from City experts:
BOE unch as expected...only thing of note is that Kristin Forbes voted for a hike...8-1 vote to keep policy on hold | $GBPUSD ticks higher
— Christopher Vecchio (@CVecchioFX) March 16, 2017
As 100% expected, #BOE keeps #UK #interest rates at 0.25% at March #MPC meeting. But rather unexpectedly Forbes voted for a 25bp hike
— Howard Archer (@HowardArcherUK) March 16, 2017
Forbes making a point with a few meetings to go
— World First (@World_First) March 16, 2017
Kristin Forbes voting for a rate hike pic.twitter.com/ZNmhfwuaFm
— Mike Bird (@Birdyword) March 16, 2017
Kristen Forbes is the first MPC member to vote to raise UK interest rates in over a year.
The previous lone hawk was Ian McCafferty in January 2016.
It’s worth remembering that Forbes leaves the BoE in June - so she won’t have many more opportunities to vote for a hike.
From the Bank of England, my colleague Katie Allen writes:
The Bank of England has held interest rates at their record low but its policy committee was split on the decision with one member, Kristin Forbes, voting to raise borrowing costs immediately.
Eight members of the Bank’s monetary policy committee (MPC) felt that the current 0.25% base rate and electronic money-printing programme were appropriate to support the post-referendum economy amid signs that slower pay growth and rising inflation was dampening consumer spending.
But Forbes, who leaves the committee at the end of June, felt inflation “was rising quickly” and was likely to remain above the Bank’s 2.0% target for at least three years. Minutes from this week’s policy meeting showed Forbes also felt “the weakness in activity expected since the referendum had not materialised” and that unemployment “showed no signs of increasing”.
As such, she voted against the rest of the committee and advocated an increase in the base rate back to 0.5%. It is the first split on the MPC since the aftermath of the Brexit vote in July 2016, when Jan Vlieghe had voted for a cut in interest rates from 0.5% to 0.25%. The rest of the MPC opposed him but then voted for a cut in August 2016.
Here’s the official tweet:
MPC holds #BankRate at 0.25%, maintains government bond purchases at £435bn and corporate bond purchases at £10bn. pic.twitter.com/Ag0AAlciOT
— Bank of England (@bankofengland) March 16, 2017
Bank of England leaves rates on hold, but one member wanted a hike
Breaking! The Bank of England has voted to leave UK interest rates unchanged at their current record low of just 0.25%.
But in a major surprise, one member of the Monetary Policy Committee, Kristin Forbes, has voted to raise interest rates back to 0.5%.
Forbes was outvoted by the other eight members of the committee, though.
The Bank has also left its asset purchase scheme (quantitative easing) unchanged at £435bn.
More to follow!
Murdoch's Sky bid referred to Ofcom
Newsflash: Rupert Murdoch’s takeover bid for Sky being referred to media regulator Ofcom.
The UK government has asked regulators to investigate whether the £11.7bn deal, launched last December, would give the media mogul too much influence over the UK news landscape.
Ofcom must now also judge whether Murdoch family are “fit and proper” owners of the company, following the phone-hacking scandal.
Here’s the full story:
Brexit continues to loom over the UK economy today.
Supermarket chain Sainsbury has warned that sterling’s weakness since last June’s referendum continues to create uncertainty:
And Toyota accompanied its new £240m investment in the UK with a call for “ontinued tariff- and barrier-free market access” with Europe.
Newsflash: there are reports of an explosion at the offices of the International Monetary Fund in Paris.
BREAKING: One person injured in Paris in explosion after opening an envelope at IMF offices - BFM TV pic.twitter.com/wiUJCxietj
— Reuters World (@ReutersWorld) March 16, 2017
MORE: Police operation ongoing at IMF/World Bank offices in Paris - police
— Reuters World (@ReutersWorld) March 16, 2017
In less than 40 minutes, we’ll know the Bank of England’s decision on interest rates.
The City widely expects the BoE’s monetary policy committee to leave borrowing costs at the current record low of 0.25%.
However, the minutes of the meeting may show some more hawkish policymakers making noises about reversing last August’s rate cut, following the Brexit vote.
#BoE rate decision at 12:00 pm today. Benchmark rate expected to be unchanged. pic.twitter.com/tIvorYzARn
— IG (@IGcom) March 16, 2017
With the Dutch election over, City traders are now refocusing their attention on the French polls in late April.
Alexandra Russell-Oliver, Caxton FX’s currency market analyst, says the euro isn’t ou of the woods yet:
“The incumbent candidate, Mark Rutte, was victorious in the Dutch elections. While Wilders’ party secured second place, he is unlikely to be part of the coalition government. The euro strengthened on the results. Markets had feared that a victory for Wilders’ party could lend support to populist candidates in other European elections. A turn to populism in Europe could call into question the strength of the EU and the euro.
Traders will be closely watching the French and German elections. Any causes for concern could test euro’s recent lows.
French centrist candidate Emmanuel Macron is extending his lead in the betting market -- but votes in the ballot boxes are what counts.
Macron has broken 60% in the betting odds pic.twitter.com/NY96TIbuQ7
— Joe Weisenthal (@TheStalwart) March 16, 2017
Alex Edwards, currency analyst at OFX, says last night’s US interest rate rise is still moving the markets today:
“As far as the markets were concerned, the Dutch election result was somewhat of a relief, and damp squib. The euro has reacted positively to Rutte’s win, or at least it’s been well supported since the result.
The Fed decision and statement last night got more of a reaction - Yellen was a lot less hawkish than investors were expecting.
If you missed it...the key news was that the Federal Reserve still expects to raise interest rates three times in 2017 (including last night’s hike), rather than getting aggressive and hiking four times.
Newsflash: Japanese carmaker Toyota has announced plans to invest £240m in its UK operations.
Despite the uncertainty over Britain’s exit from the EU, the Japanese carmarker is planning to upgrade the Burnaston plant near Derby.
The money will improve the plant’s competitiveness and promote UK supply chain efficiencies, it says.
BBC News - Toyota to invest £240m in UK operations https://t.co/NBNfQhahvZ
— Joe Lynam BBC (@BBC_Joe_Lynam) March 16, 2017
Here’s Capital Economics on the Dutch election:
'Dutch ado about nothing?' - good work from @CapEconEurope on #NetherlandsElections pic.twitter.com/366vy2EaFc
— Finance Haill (@olihaill_biz) March 16, 2017
The FTSE 100 has hit an all-time high trading at 7435 points beating the previous record of 7395 points set on 2 March
— Sky News Newsdesk (@SkyNewsBreak) March 16, 2017
Britain’s FTSE 100 is continuing to hit record levels. It’s now up a stonking 69 points at 7438, up nearly 1% today.
Dutch election: What the experts say
Plenty of City experts are commenting on the Dutch elections, and what it means for the eurozone.
Darren Ruane, Head of Fixed Income at Investec Wealth & Investment, says Mark Rutte’s first place is boosting share prices today:
“The results of the Dutch election helped to buoy investment markets following a better-than-expected outcome for mainstream parties. In particular, current Prime Minister Mark Rutte’s Liberal Party is projected to take 33 seats in the 150 seat lower house of parliament.
“The anti-Islam Freedom Party, led by Geert Wilders, is seen as a relative loser from the election. Prior to the election, the Freedom Party was a frontrunner in the polls in early January. Given that there is a lack of interest in both the Freedom party to form a coalition with other parties and vice-versa, the party’s policy influence should be limited.
“In investment markets, European equities have risen by around 1% in early trade, although some of the optimism is follow-through from an expected US interest rate decision last night. Government bond yields in Europe are trading only marginally lower from overnight levels. Bond markets were forecasting a benign outcome from the Dutch elections, with a very strong gain for Wilder’s Freedom party required to disrupt markets in a meaningful way.”
Anna Stupnytska, Global Economist at Fidelity International, says it could be a “turning point” in the popularity of populist parties
“The poorer than expected performance of Geert Wilders’ Freedom Party is good news for the eurozone, with the euro gaining as the results pointed to a clear victory for Mark Rutte’s centre right VVD party. This is a market positive result, although with a three party coalition looking unviable, a long negotiating period to form a government is likely. This is not helpful for a Greek bailout review.
“Markets will of course now turn their attention to France, where the candidacy of the far right Marine Le Pen arguably poses greater risks. To whatever extent this vote is a signal on France, the high turnout and rally around towards the mainstream centre look bad for her. The structure of the French presidential election also create additional obstacles to any far right victory in France. As such, the Dutch result may be remembered as the turning point in the popularity of populism for 2017.”
Michelle McGrade, chief investment officer of TD Direct Investing, says fears that the Netherlands could follow Britain out of the EU have abated.
“Mark Rutte’s win for the People’s Party for Freedom and Democracy today dramatically reduces the likelihood of a referendum to leave the EU.
”Despite today’s outcome, there are still other European elections taking place later this year, and undoubtedly continued political uncertainty in the region. But instead of focusing on politics, we should probably concern ourselves more with the fundamentals.”
“Rising employment continues to propel the eurozone region towards 2% growth. Add in inflation and operational gearing, and growth at a company level starts to look interesting. There are some selected good structural growth stories across Europe. What we’ve learnt from Brexit is that no one knows how key political events are going to transpire, and what the stock markets’ reaction to those events will be. As investors, it is better to stick to what you do know and focus on a long-term investment horizon.”
But Pepijn Bergsen of the Economist Intelligence Unit argues that mainstream parties still face a battle against populist rivals:
1/ Some first thoughts on the morning after #DutchElection . This is a big disappointment for Wilders. Nevertheless, he has had...
— Pepijn Bergsen (@pbergsen) March 16, 2017
2/ ...considerable influence through shifting the debate, both VVD and CDA (and even Labour) sounded like Wilders-light at times.
— Pepijn Bergsen (@pbergsen) March 16, 2017
3/ Despite winning a smaller vote share than in 2010, he and his influence are not going away, in part because he has nowhere to go.
— Pepijn Bergsen (@pbergsen) March 16, 2017
4/ However, he won't be in government and his influence and credibility have taken a hit after this result.
— Pepijn Bergsen (@pbergsen) March 16, 2017
5/ Foreign commentators seeing this as a big victory over populism should thus hold back. Last night was a positive step but not the end.
— Pepijn Bergsen (@pbergsen) March 16, 2017
6/ Nexit was never a real possibility. EU was a campaign theme but NL voted for a better functioning EU, not in any way to leave.
— Pepijn Bergsen (@pbergsen) March 16, 2017
7/ Consensus seems to be that government formation will take long. This could surprise many. Base of next coalition is clearly visible:
— Pepijn Bergsen (@pbergsen) March 16, 2017
8/ VVD, CDA and D66 almost certain to be part of this. Question is what the fourth party will be, likely to be GreenLeft given good result.
— Pepijn Bergsen (@pbergsen) March 16, 2017
9/ No pressure to cut spending due to budget surplus makes negotiations easier and could possibly lead to interesting reform efforts.
— Pepijn Bergsen (@pbergsen) March 16, 2017
10/ In general Dutch democracy functioned well; high turnout, clear choices on the ballot and a campaign that was less negative than feared.
— Pepijn Bergsen (@pbergsen) March 16, 2017
Here’s a handy summary of today’s roaring markets, from the Daily Telegraph’s Tara Cunningham:
Markets this am:
— Tara Cunningham (@TaraSCunningham) March 16, 2017
FTSE100 at record high;
Amsterdam's AEX: 10yr high;
Italy's FTSE MIB: 14month high;
CAC 40: 19 mth high;
DAX: 23 month high
European markets hit 15-month high
European stock markets have hit their highest level in 15 months, as the Dutch election results calm fears over the region’s stability.
Amsterdam’s stock exchange is romping ahead, hitting its highest level since the start of the financial crisis in 2007.
And in London, the FTSE 100 is keeping climbing. It’s now up over 50 points at 7423 for the first time ever.
Neil Wilson of ETX Capital say “Risk appetite returns in spades” to the markets.
The FTSE 100 index hit a record intra-day high as equity markets responded to last night’s decision by the US Federal Reserve to raise interest rates. Despite policymakers being more firmly agreed on three hikes this year rather than just two, markets took it as a dovish signal that the Fed is going to only cautiously tighten as the economy improves. The message was that the economy is firing but inflation is not going to be an issue. It’s in no hurry to raise rates and that is good news for equities.
There’s a bit of relief too as the Dutch elections showed no strong support for populists – helping send the euro to a 5-week high and lifting European equities. A softer dollar is also supporting the risk rally, particularly commodities.
Updated
Britain’s FTSE 250 index, made up of shares in medium-sized companies, has also just hit a record high.
It gained 97 points in early trading to hit 19,061 points, up over 0.4%.
Updated
Newsflash: Switzerland’s central bank has held interest rates unchanged at minus 0.75%, and warned that the global economy faces “considerable risks” - including Brexit.
The SNB says:
Chief among these are political uncertainty with respect to the future course of economic policy in the US, upcoming elections in Europe, and the complex exit negotiations between the UK and the EU.
SNB flagging Brexit, EU elections and US fiscal policy uncertainty as outlook risks. Sounds like wait-and-see mode for a while still
— Ilya Spivak (@IlyaSpivak) March 16, 2017
Mining stocks are leading the rally in London this morning.
That’s typically a sign that investors are more optimistic about the global economy (more growth = more demand for iron ore, copper, coal and nickel).
Anglo American, the resource giant, is the top riser - after Indian billionaire Anil Agarwal announced he’s taking a £2bn stake in the company.
A “rather more palatable Dutch election result than feared” has helped boost risk appetite in the markets, says Mike van Dulken of Accendo Markets.
Markets are being allowed to ponder the potential for less populist French and German political outcomes in the months to come while further US stimulus supports both US growth and Fed policy normalisation, in turn helping global growth.
Updated
FTSE 100 hits record high
Boom! Britain’s FTSE 100 has hit a new record high at the start of trading.
The blue-chip index of leading shares gained 40 points to hit 7411 points for the first time ever, up over 0.5% this morning.
Other European stock markets are also jumping, as relief over the Dutch elections sweeps trading floors in Paris, Frankfurt, Milan and Madrid.
And the Amsterdam stock market has gained 0.8% to its highest level since December 2007.
RBC Capital Markets says that the Dutch election result is bolstering hopes that a mainstream candidate will win the French presidential elections this spring
The electoral spotlight now moves to France where the first round of voting in the presidential election takes place on Sunday April 23rd with the focus on the prospects of Marine Le Pen. Already markets have begun to take some signals (see above) from last night’s Dutch result that the electoral prospects of anti-EU populist parties may be checked.
Konstantinos Anthis of ADS Securities says investors are also buying shares on relief that the US Federal Reserve sounded cautious on interest rate policy last night:
Investors were looking for Yellen to hint on either 4 rate hikes in total this year or a rate hike sooner than expected, possibly in June in order to further fuel the Dollar rally. On the contrary, the Fed Chief mentioned neither of these possibilities and instead said that the central bank didn’t “discuss in detail potential policy changes”
The euro hit a five-week high this morning, touching $1.0746 against the US dollar.
That’s partly because the dollar is weaker across the board, after the US Federal Reserve was more cautious than expected about future interest rate hikes yesterday.
But the Dutch election is also a factor.
Naeem Aslam of Think Markets explains:
It is all over and public has put an end to the nonsense populist concept which started with Brexit. Dutch prime minister Mark Rutte has comfortably beaten the anti-Islam Freedom party.
We have a moment of calm and this has helped the euro to rally as everyone breathes a sigh of relief. Mr Wilders’ victory could have provided a tailwind for Marine Le Pen’s presidential campaign in France, which could have put the future of the euro in jeopardy.
European government bonds are strengthening this morning, following Geert Wilder’s failure to claim first place in the Dutch election.
French debt is in demand, as investors take it as a sign that Marine Le Pen might be thwarted in her bid to win the presidency.
Reuters has the details:
France’s government bond yields hit a one-week low in early trade on Thursday after results of Wednesday’s Dutch parliamentary elections suggested that populist party PVV would come a distant second to the current ruling party.
Dutch centre-right Prime Minister Mark Rutte scored a resounding victory over anti-Islam and anti-EU Geert Wilders in an election on Wednesday.
French government bonds were seen as vulnerable to a potential victory for PVV, as France faces its own presidential elections in April and May, with far-right leader Marine Le Pen in with a chance to win the keys to Elysee Palace.
France’s 10-year government bond yield fell 5 basis points to one-week low of 0.99%. Most other euro zone bond yields were also lower on the day.
#Eurozone spreads shrink as pol establishment held on to power in Dutch elections. Weak Wilders seen as leading indicator for rest of Europe pic.twitter.com/inQgbobxSv
— Holger Zschaepitz (@Schuldensuehner) March 16, 2017
The agenda: Bank of England interest rate decision
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s Bank of England Day! Over in Threadneedle Street, in the heart of the City, Britain’s central bank is putting the finishing touches to this month’s decision on monetary policy.
We don’t expect a change on interest rates, which are currently at a record low of just 0.25%. But the minutes of the meeting will be poured over for signs that the Bank may be considering whether to tighten policy in response to rising inflation.
The decision comes at noon.
Analysts at PNC believe that yesterday’s unemployment figures, which showed falling pay growth and a rise in self-employment, will encourage the Bank to sit tight for several months.
Lower wage growth and a shift to self-employment (possibly a disguised form of underemployment) reinforces our view that slack has increased in the British labor market since the June 2016 Brexit referendum, making a bank rate hike unlikely in 2017.
Another reason not to expect a rate hike is that the BoE’s MPC believes Brexit will be a headwind to British output over the medium term, for example by reducing market access for British services exports to EU end-markets which account for 5 percent of the UK’s GDP.
We’ll also be mopping up reaction to last night’s US interest rate rise. As we blogged, the Federal Reserve raised borrowing costs to 1%, but maintained a cautious approach to normalising monetary policy.
That sparked a rally on Wall Street last night, and Europe is likely to follow suit his morning.
FXTM Chief Market Strategist Hussein Sayed says:
“Thank you, Janet Yellen,” this is today’s market message to the U.S. Fed Chair.
The greenback [US dollar] is falling while everything else is in green today after the Federal Reserve delivered on its promise to hike rates by 25 basis points. While this move was widely expected, many market participants were positioned for a more hawkish language and an upgrade in economic projections which didn’t happen
City traders believe the FTSE 100 could hit a new record high!
Opening calls:
— Louisa Bojesen (@louisabojesen) March 16, 2017
FTSE +30 points at 7401
DAX +90 points at 12100
CAC +35 points at 5020
(via LCG)
#Ftse set for record high on the open pic.twitter.com/IG2qMWiPqC
— Neil Wilson (@neilwilson_etx) March 16, 2017
European investors are also digesting the results of the Dutch election.
Far-right populist Geert Wilders has failed to claim first place, claiming just 20 seats - behind Mark Rutte’s centre-right VVD party which is set to win 33.
That appears to leave VVD clear to form a new coalition; it may take a few weeks, but fears of another populist shock victory can now recede.
Here’s what you need to know:
What you need to know about the Dutch elections this morning, thanks to @Claire_Phipps : https://t.co/ggjMLJdkvk pic.twitter.com/mdSFNbeSDZ
— Mary Hamilton (@newsmary) March 16, 2017
Updated
