Here are some comments from Iranian oil minister Bijan Namdar Zangeneh:
Zangeneh in reaction to ِ#Doha meeting stated just few words and just mentioned the report of Doha's meeting is now given to Iran
— Reza Zandi (@R_Zandi) February 17, 2016
Zangeneh Says in in a small press conference : "we support efforts by OPEC members to keep the prices stable."
— Reza Zandi (@R_Zandi) February 17, 2016
Zangeneh among journalists: "the report of yesterday's meeting is given to us. We support cooperation between OPEC and non #OPEC members../1
— Reza Zandi (@R_Zandi) February 17, 2016
...to keep the prices stable. That's a positive step and we support it.»/2
— Reza Zandi (@R_Zandi) February 17, 2016
The news has pushed oil prices off their best levels. Brent crude is now up 2.7% at $33.05 a barrel, having moved as high at $33.70.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
Updated
Iran fails to agree on oil production - report
Iran has reportedly stood firm and failed to agree with the other oil producers about a freeze in output.
#Iran refuses #Dohe's meeting proposal.
— Reza Zandi (@R_Zandi) February 17, 2016
Updated
On the rise in US industrial production, Rob Carnell of ING Bank said:
Helping to offset recent concern about the pace of US activity, US January industrial production managed a respectable 0.9%mom increase, though remains 0.7% lower than a year ago.
Manufacturing rose by 0.5% mom, helped by another robust rise in auto production, and stripping this out, the rise would have been a more modest 0.3% mom. Vehicle production remains by far the strongest element of production right now, and is helped by cheap financing and low gasoline prices.
The snow storms at the end of January in the North East will also have helped lift utility production by 5.4% mom, following a warmer than usual winter up until then, that saw utilities production fall in the previous three months.
And finally, the bad run of mining data ended with a flat monthly reading, after four consecutive declines. We wouldn’t attach much weight to this being the start of a new trend though, whilst commodity prices remain bombed out.
With Treasury yields rising anyway, this result will probably help give them a further upwards nudge.
Wall Street higher in early trading
US markets have followed the trend elsewhere and made a positive start to trading.
The Dow Jones Industrial Average is up 105 points or 0.6%, while the S&P opened 0.5% higher and Nasdaq added 0.8%.
Meanwhile European markets have held onto their gains. The FTSE 100 is ahead more than 2%, Germany’s Dax is up 2.2% and France’s Cac has climbed 2.5%.
WTI takes sharp leg down after conclusion of Tehran oil producers meeting; DJ says Iran Oil Min. to speak soon pic.twitter.com/WoM2u9klwz
— CNBC Now (@CNBCnow) February 17, 2016
If Oil is going to move around based on talk of meetings and press conferences we are in for a rough ride until Iran completes prod ramp-up
— Mike van Dulken (@Accendo_Mike) February 17, 2016
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US industrial production better than expected
US industrial production has rebounded, helped by growth in utilities and manufacturing.
The Federal Reserve reported that industrial output for January rose by 0.9% after three months of decline. The December figure showing a drop of 0.4% has been revised down to a fall of 0.7%.
Analysts had expected an increase last month, but only of 0.4%.
Commenting on the mixed data from the US so far, Rob Carnell of ING Bank said:
US housing starts were soft in January – though this is a month of very low housing construction activity typically, and the seasonals can distort very small underlying changes. Bad snowfalls in January may account for much of the decline, and we wouldn’t get too carried away with what appears to be a slight softening in the trend for this sector until we get another month’s data. Still, it is another warning light for US activity, so not to be ignored.
But PPI data came in unexpectedly strong, rising 0.1%mom against expectations for a 0.2% decrease, and core PPI measures were also stronger than expected. Strong results in the services sector seem to account for all of the good news, with trade, transport and warehousing all coming in strongly above zero, helped too by the “other” category.
This price data is probably helping bond yields to rise on a day when sentiment seems slightly more upbeat than recently. Normally, it would be a mistake to read too much into what PPI means for the CPI release on the 19th Feb, as the overlap between these two series is limited. That said, with the services sector accounting for a large chunk of CPI, the risks for CPI coming in higher than the expected -0.1% mom decrease look to have improved, and could push yields a little higher by the end of the week.
Here’s a flavour of Larry Elliott’s analysis of the UK jobs data:
Employment is at levels not seen since modern records began in the early 1970s. Hundreds of thousands of jobs are being created every year and most of them are full time. The jobless rate is half the European average. According to the Bank of England, wage settlements should be getting more generous as employers compete for a shrinking pool of workers.
In fact, the opposite is happening. Despite a higher percentage of the population working than ever before, the annual rate of growth in earnings is falling not rising. Clearly, workers are not in such short supply as the Bank of England imagines.
The full story is here:
The meeting with Iran is apparently over:
Meeting between Iranian, Iraqi, Venezuelan and Qatari oil ministers in Tehran has just ended. #Opec https://t.co/lzhDo1xyJK
— Nader Itayim (@ncitayim) February 17, 2016
US housing starts have come in lower than expected:
USA Housing Starts announcement - Actual: 1.099mln, Expected: 1.170mln pic.twitter.com/uftQrfvtDx
— Spreadex (@spreadexfins) February 17, 2016
But US producer prices are better than forecast:
US PPI (Jan) rose 0.1%, better than the -0.2% rate expected ^MW
— FOREX.com (@FOREXcom) February 17, 2016
Updated
Iran could be offered a special deal if it agrees to freeze output along with other oil producers, Reuters is reporting;
Two non-Iranian sources close to the OPEC discussions told Reuters on Tuesday that Iran might be offered special terms as part of an output freeze deal. “Iran is returning to the market and needs to be given a special chance, but it also needs to make some calculations,” said one source.
The sources did not elaborate on the special terms, which could be anything from setting limited production increases to linking future output rises to a recovery in oil prices.
But things did not appear that hopeful ahead of the meeting between Iran and other producers, according to Reuters:
Iran said on Wednesday it would resist any plan to restrain its oil output as fellow OPEC ministers tried to persuade the country to join the first global oil pact in 15 years.
Talks in Tehran between Iranian oil minister Bijan Zanganeh and his counterparts from Iraq, Qatar and Venezuela began on Wednesday. Iran is the major obstacle to the first joint OPEC and non-OPEC deal since 2001, having pledged to increase output sharply to regain market share lost during years of sanctions.
The meeting in the Iranian capital followed a deal reached on Tuesday by OPEC power Saudi Arabia and non-OPEC Russia, the world’s top two producers and exporters, to freeze production at January levels if other big oil nations agree to join....
“Asking Iran to freeze its oil production level is illogical ... when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices.” Iran’s OPEC envoy, Mehdi Asali, was quoted as saying by the Shargh daily newspaper on Wednesday.
“How can they expect Iran to cooperate now and pay the price?” he said. “We have repeatedly said that Iran will increase its crude output until reaching the pre-sanctions production level.”
European shares move higher
European markets have rallied strongly during the morning, helped by gains in banking and mining shares.
Banks have been lifted by better than expected results from France’s Credit Agricole, which has also announced plans to simplify its much-criticised ownership structure.
In the mining sector Glencore has benefitted from news it had refinanced some of its debt early, while Anglo American has also gained ground after a rethink about Tuesday’s results, which included plans to sell off some of its operations.
The rising oil price as producers including Iran meet has also helped sentiment.
By lunchtime the FTSE 100 had added 1.5% or 92 points, while Germany’s Dax is up 1.6% and France’s Cac has climbed 1.9%. US futures are indicating a 98 point rise when the Dow Jones Industrial Average opens.
Here’s our take on the UK employment numbers. Phillip Inman writes:
Britain’s record of low unemployment acted as magnet for European Union migrants last year, sending the total number of workers from the other 27 EU nations above 2 million for the first time.
Employment figures covering the three months to December show that the number of non-UK EU nationals working in Britain rose to 2.04 million.
Over the previous year, 278,000 UK workers found a job, taking the total number in work to 28.28 million, while the total number of non-UK nationals working in Britain increased by 254,000 to 3.22 million.
The figures are likely to put pressure on David Cameron as he battles to restrict the access to some in-work benefits to UK nationals during his negotiations with EU leaders.
The full report is here:
Correction: this is not the first time the figure went above 2 million.
Updated
Worries about whether central banks would run out of ammunition to stimulate flagging global economies have been growing recently. And ahead of the European Central Bank’s March meeting - where president Mario Draghi has said the bank would not hesistate to act - Vincent Juvyns, global market strategist at JP Morgan Asset Management has questioned the effectiveness of central bank action:
Ahead of the ECB’s March meeting, Mario Draghi has once again backed himself into a corner in terms of setting market expectations. Markets have already priced in a further deposit rate cut of 10 basis points and are expecting some kind of update on additional quantitative easing measures – perhaps an increase to the size of the €60 billion/month bond buying programme. Draghi has done nothing in recent public comments to downplay his intentions or dampen market expectations. That said, he certainly has strong grounds for justifying additional intervention, as market indicators are pointing to inflation expectations declining yet again and economic growth remains subdued.
Unfortunately, central bank deposit rate cuts intended to weaken currencies have recently proven less effective in that respect, as we saw with the Bank of Japan. An implicit goal for Mario Draghi is to weaken the Euro to aid exporters and economic growth, but there may be a limit to the efficacy of monetary policy in today’s environment.
In the package in March, we may see Draghi do something to acknowledge or address the rising concerns about non-performing loans that have plagued Italian banks.
The meeting between the Iranian, Qatari, Venezuelan and Iraqi oil ministers in Tehran began minutes ago. https://t.co/33CLx6yxvK … #Opec
— Nader Itayim (@ncitayim) February 17, 2016
Oil price jumps
As Iran, Iraq and Venezuela meet to discuss possible ways to stem the oil supply glut, crude prices have moved sharply higher on hopes that an agreement can be reached.
It may be a long shot to expect Iran to agree to curb output but optimism a deal can be done has sent Brent crude 3.3% higher to $33.25 a barrel while West Texas Intermediate - the US benchmark - is up 2.4% at $29.75.
Updated
According to the jobs data, non-UK European Union nationals working in Britain have increased by 215,000 to 2.04m in the three months to December compared to the same period in 2014.
Updated
For December alone, average earnings including bonuses rose 1.5%, even lower than the 1.9% for the three months to December.
Another reason to think there will be no early rise in UK rates. Howard Archer at IHS Global Insight said:
The latest labour market data are likely to solidify expectations that the Bank of England will not be raising interest rates in 2016. In particular, further slippage in earnings growth argues against any interest rate hike for some considerable time to come. Meanwhile, although the jobs data look solid, there are hints that employment growth could be starting to moderate as the UK economy finds growth harder to come by...
The monetary policy will likely particularly focus on the fact that total earnings growth fell back to a 10-month low of 1.5% [in December] from 2.2% in November and 3.6% in July. While December’s drop was influenced by lower bonus payments, it is notable that regular annual average earnings growth was limited to 2.1% in December itself, which was down from 2.2% in November and a peak of 2.9% last July.
It appears that prolonged negligible inflation is a significant factor in limiting pay awards - despite the fact that a tighter labour market had been expected to exert upward pressure on pay. Other factors may well include a reduction in the number of hours being worked per week over the past year and a change in the mix of employment growth towards more lower-paid jobs
With the labour market relatively tight, recruitment difficulties in some sectors and the National Living Wage shortly to kick in, we think it is entirely possible that earnings growth will gradually pick up over the coming months – however the pick-up does now look likely to be gradual in the near term at least.
Here’s a breakdown of the labour market:
The labour market figues paint a mixed picture, says James Smith at ING Bank:
On the one hand, the unemployment rate remained at 5.1%, which although we had expected it to move slightly lower, continues to signal that the labour market remains tight. More importantly though, wages pressures continue to remain subdued. Although the headline (excluding bonus) rate of wage growth came in above consensus at 2% year on year, this is still well below pre-crisis averages (of about 4%). Indeed, since July last year, the trend has been virtually flat, with average weekly earnings (ex. bonus) only having grown by £2 (to £465). The Bank of England has attributed this to temporary factors such as slower productivity growth and the fact that lower-paid roles are making up a “larger-than-usual share of net employment growth”. However, in our opinion, the underlying strength of the labour market means that it is only a matter of time before wages start to pick up more meaningfully again.
With wage pressures remaining fairly subdued (at least for now) and headline inflation likely to remain low in the near-term, the Bank of England has room to leave rates unchanged until the Brexit uncertainty subsides. However, if the UK votes to remain in the EU, we think there is a strong chance of a November rate hike given that consumer spending remains strong and a weaker sterling is likely to help push up inflation in the medium-term.
Some of the bullet points from the labour statistics:
- There were 1.69 million unemployed people (people not in work but seeking and available to work), 60,000 fewer than for July to September 2015 and 172,000 fewer than for a year earlier.
- There were 924,000 unemployed men, 116,000 fewer than for a year earlier. There were 766,000 unemployed women, 57,000 fewer than for a year earlier.
- The unemployment rate was 5.1%, lower than for a year earlier (5.7%). The unemployment rate is the proportion of the labour force (those in work plus those unemployed) that were unemployed.
- There were 8.88 million people aged from 16 to 64 who were economically inactive (not working and not seeking or available to work), 88,000 fewer than for July to September 2015 and 172,000 fewer than for a year earlier.
- The inactivity rate (the proportion of people aged from 16 to 64 who were economically inactive) was 21.8%, lower than for a year earlier (22.3%) and only slightly higher than the record low of 21.7% last recorded for July to September 1990.
- Average weekly earnings for employees in Great Britain increased by 1.9% including bonuses and by 2.0% excluding bonuses compared with a year earlier.
Nick Palmer, ONS statistician, said:
While the employment rate continues to hit new highs and there are more job vacancies that ever previously recorded, earnings growth remains subdued and markedly below the recent peak of mid-2015.
Updated
Here’s a graph of average earnings:
Sterling has slipped from $1.4289 before the figures to $1.4265, with the wage growth figures reinforcing the view that the Bank of England is unlikely to raise interest rates in the near future.
Updated
UK unemployment rate higher than forecast, weekly earnings up 1.9%
The UK claimant count in January has fallen by a higher than expected 14,800 to its lowest level since 1975, but the unemployment rate was steady at 5.1% in the final quarter, compared to forecasts of a dip to 5%.
Average weekly earnings rose 1.9% year on year in the three months to December as expected, the lowest for a year, down from 2.1%, according to the Office for National Statistics.
Updated
The oil producers’ statements on output seem to be driven by politics rather than anything else, suggests Sebastien Marlier, commodities analyst at the Economist Intelligence Unit. He said:
The deal yesterday and the meeting today may mark the beginning of a fraught, protracted negotiation process within OPEC. Yet joint output cuts by both OPEC members and Russia remain a distant prospect.
The process is a smart strategy for Saudi Arabia. It shows that they are willing to collaborate and are not stubbornly sticking to their painful strategy of flooding the market to evict higher-cost producers. It shifts the burden of responsibility for refusing to cut production to arch-rival Iran. Finally, it maintains the status quo while talks are ongoing, thereby continuing to press US shale and other struggling oil producers outside of OPEC.
By stating that cutting output would be “illogical”, Iran, for its part, has made its position clear ahead of the meeting, setting the bar high for negotiations.
Even if a surprise agreement emerges, for instance by giving Iran a special status, it will do little to reduce the current imbalance in global oil markets. For Iraq, Russia and Saudi Arabia to “freeze” output at January levels means keeping pumping at record levels, at a time when demand is slowing in line with decelerating global economic growth.
Speculation of further rate cuts or more QE at the European Central Bank’s meeting in March was fuelled this week by ECB president Mario Draghi saying it would not hesitate to act.
But ECB council member Ewald Nowotny seems to be concerned about the growing expectation of action, according to an interview with Swiss financial website Cash.ch.
ECB Nowotny: Heading into March, markets "should not get caught up
— MNI Eurozone (@MNIEurozone) February 17, 2016
in speculations that are not feasible institutionally and technically."
Updated
And is Iran really likely to go along with plans to curb oil production? Not according to this Reuters report:
Iran signaled on Wednesday that it would take a tough line in talks among oil producers on restraining production, saying it would continue increasing its output until it reached levels seen before international sanctions were imposed.
“Asking Iran to freeze its oil production level is illogical ... when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices.” Iran’s OPEC envoy, Mehdi Asali, was quoted as saying by the Shargh daily newspaper.
“How can they expect Iran to cooperate now and pay the price?”
Venezuelan Oil Minister Eulogio Del Pino and Iraqi Oil Minister Adel Abdel Mahdi were to travel to Tehran for talks with their Iranian counterpart Bijan Zanganeh on Wednesday in a bid to reach a deal to restrain output and prop up sagging prices.
Under the proposal, which could lead to the first global oil production deal in 15 years, producers including Saudi Arabia and Russia would freeze their output at January levels. But Saudi Arabia made clear on Tuesday that the deal depended on the cooperation of other big producers.
The volatility of Brent crude can be seen in this chart showing the movements of the past couple of days. On Tuesday the price rose on talk of the producers’ meeting, only to fall back sharply once it became clear output cuts had not been agreed, only a proposal to curtail production to January’s levels:
Updated
Oil producers including Iran set to discuss output levels
One thing likely to influence the direction of the oil price is another meeting of producers due to take place later.
In the wake of Tuesday’s news that a group of producers including Saudi Arabia and Russia had agreed to peg output at January’s levels - if others agree - comes another key gathering.
Ministers from Iraq and Iran - which is widely believed to be unwilling to agree any limits given it has just returned to the oil market after sanctions were lifted - as well as Venezuela are due to meet in Tehran later.
Qatar’s energy minister and Opec president Mohammed al-Sada is also reportedly attending, according to the Wall Street Journal, with a view to bringing Iran on board.
Analyst Tony Cross at Trustnet direct said:
There’s little optimism that a deal can be reached, but if consensus is proved wrong here then a jump higher for oil should again lend support to stocks across the board.
Updated
All eyes will be on the UK jobs data and the movements in the oil price, says analyst Connor Campbell at Spreadex:
Following the oil-inspired disappointments of Tuesday the European markets will be looking for a slightly more sustainable set of gains this Wednesday.
Despite Brent crude (which, remember, had reached the $35.50s yesterday morning) hovering dangerously near the $32 per barrel mark the FTSE has managed a decent start this Wednesday, rising by around 30-40 points to encroach on the 5900 mark.
The UK is in focus this morning, the latest jobs report set to test investors’ willingness to buy based on data rather than the macro-trends that have defined 2016... A lack of region-specific data means the Eurozone indices will be following developments elsewhere, namely the FTSE’s post-jobs report movements and the continued health of Brent crude.
European markets open in positive territory
It’s not a convincing start to the trading day in Europe, but markets are edging higher at the open.
The FTSE 100 is up 29 points or 0.5%, while France’s Cac and the FTSEEurofirst 300 are both ahead 0.1% and Germany’s Dax has added 0.4%.
Oil however continues to slip, with Brent crude now down 0.7% and West Texas Intermediate is 0.7% lower.
One reason for the dip in Asian markets is that the the People’s Bank of China set the daily rate for the renminbi lower, which in turn has sent the Japanese yen higher and shares lower. Mic Mills at Capital Index said:
A mixed session in Asia as nervousness seemed to be the major mover of markets, a softer fixing in the yuan saw equity markets sell off before quickly recovering, although that recovery couldn’t hold on and the session ended in the red.
Updated
Agenda: UK unemployment and wages in focus
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The week’s market rally has come under a little pressure after oil producers disappointed investors on Tuesday by announcing a deal to keep output at January’s levels but not unveiling a cut which would have helped stem the supply glut.
It was good news that Saudia Arabia and Russia were discussing the slide in oil prices, but with the deal dependent on other producers following suit and Iran for one unlikely to agree, the news gave little support for crude prices. Brent is currently 0.6% lower at $31.98 a barrel.
So despite Wall Street ending 1.3% higher - playing catch up after the Presidents Day holiday on Monday - Asian markets have slipped back.
The Nikkei 225 is down 1.3% while the Hang Seng has fallen 0.8%. But in China the CSI300 has bucked the trend, adding 0.87.
So European markets could well start the day slightly higher after a mixed performance on Tuesday:
Our European opening calls:$FTSE 5877 up 14
— IGSquawk (@IGSquawk) February 17, 2016
$DAX 9146 up 11
$CAC 4116 up 5$IBEX 8156 up 18$MIB 17016 up 58
On the day’s agenda come UK unemployment and earnings figures.
The number of unemployed is expected to dip by around 104,000 in the three months to December to 1.645m, which would be the lowest level since the second quarter of 2008, according to Howard Archer as IHS Global Insight.
The unemployment rate is expected to drop to 5% in the three months to December from 5.1%.
The claimant count is forecast to dip by 3,000 in January to a new record low of 782,900.
As for wages, average weekly earnings are predicted to have slipped to 1.9% in December from 2.0% in November, which would add to the idea that UK interest rates are unlikely to rise in the near future.
Later comes US industrial production and the minutes of the January meeting of the US Federal Reserve. In truth, the Fed announcement will probably look a bit outdated after recent comments from the central bank’s officials, notably Fed chair Janet Yellen who in her testimony to Congress last week raised the prospect of negative rates. As a reminder the Fed (mistakenly?) raised rates in December, just before the market turmoil which has characterised 2016 so far.
Michael Hewson of CMC Markets said:
[The Fed minutes] are likely to be stale now given recent comments from senior Fed officials in the last couple of weeks. Since that Fed meeting markets have been on a roller-coaster ride having had to cope with a Bank of Japan rate cut into negative territory and we’ve also heard from senior Fed officials William Dudley, Stanley Fischer as well as Janet Yellen herself. All three of them in their own way have indicated that “financial conditions have become less supportive of growth”, and whatever comes out of this evening’s Fed minutes markets should be mindful of that.
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