Closing summary: markets fall but pound holds on to gains
Before we close up for the day, let’s take a look at the markets.
Over on Wall Street, markets are down in early trading:
- Dow Jones: -0.04% at 21,446
- S&P 500: -0.1% at 2,439
- Nasdaq: -0.7% at 5,715
In Europe, markets are red across the board:
- FTSE 100: -0.4% at 7,359
- Germany’s DAX: -0.9% at 12,528
- France’s CAC: -1.3% at 5,186
- Italy’s FTSE MIB: -1.3% at 20,775
- Spain’s IBEX: -0.8% at 10,614
- Europe’s STOXX 600: -0.8% at 383
The pound has held on to its gains against the dollar and is currently up 0.5% at $1.2987.
Thank you for all your comments today and please join us again tomorrow. AM
Over in Dublin, Irish tourism leaders have been expressing concerns about the impact of Brexit on the industry. Reilly Dugery reports:
At a British Irish Chamber of Commerce seminar on Thursday, Brexit was described as a “train with lights coming screaming down the track at us” by Eoin O’Mara Walsh of the Irish Tourist Industry Confederation.
Shane Clarke of Tourism Ireland warned that Brexit had already had a negative impact on tourism, with 900,000 fewer visitors from the UK and a 20% decrease in British spending on the island since the beginning of 2017. Over 12 months, this decrease is expected to cost the island more than €100 million.
John Concannon of Creative Ireland insisted that in order to maintain its appeal to tourists, Ireland must find an identity, comparing the country to a younger sibling having the chance to step outside of his older brother’s shadow.
Concannon stated that economic investment in cultural events and initiatives would increase the satisfaction of the local population and subsequently entice potential visitors to the island. All members of the panel agreed that the loss of a soft border and a common travel area would be detrimental for the industry and that significant investment would be necessary to ensure a sustainable future for tourism in Ireland.
Six-jobs George: Osborne lands another role
George Osborne, editor of the Evening Standard and former chancellor of the exchequer, has got another job, taking the total to six.
He will take on the unpaid role of honorary professor of economics at the University of Manchester, starting in July. In a series of lectures and masterclasses he will build on his work on the “northern powerhouse”, which he began in number 11.
Osborne said he was “bowled over by this honour”.
He now has six jobs:
- Editor, Evening Standard
- Chairman, Northern Powerhouse Partnership
- Advisor, Blackrock
- Speechmaker, Washington Speakers Bureau
- Fellow, McCain Institute
- Professor of economics, University of Manchester
Read our full story here:
If you extend the trend line of recent Osborne Job Increase, by mid 2018 he will have approximately 36 jobs pic.twitter.com/fPSWsibIbu
— Tom Phillips (@flashboy) June 29, 2017
There were no new revelations on interest rates when Mark Carney was interviewed earlier by Bloomberg TV.
In fact there was no mention of rates at all, with the focus of the interview on a new report on climate change.
Read our story on the report here:
IG traders are forecasting a mixed opening for Wall Street:
US Opening Calls:#DOW 21490 +0.18%#SPX 2445 +0.22%#NASDAQ 5744 -0.15%#IGOpeningCall
— IGSquawk (@IGSquawk) June 29, 2017
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Sticking with the US, there were 244,000 new claims for jobless benefits last week, more than the 240,000 forecast by economists in Reuters poll.
The figure for the previous week was revised up to by 1,000 to 242,000.
US first-quarter growth revised up
US growth has been revised up to 1.4% (on an annual basis) in the first quarter, from an earlier estimate of 1.2%, the Commerce Department said.
The boost came from unexpectedly higher consumer spending and a bigger rise in exports.
It was still a slowdown compared with the fourth quarter of 2016, when GDP increased 2.1%.
Greek army could be called in to deal with strike
Thousands of striking public sector workers have held a mass protest rally in Athens as unionists consider whether they should continue a 12-day walk-out that has left tonnes of rotting rubbish on the streets.
The government has not ruled out bringing in the army, or forcibly mobilising the strikers through recourse to the courts, if they decide to continue with the industrial action. Marching on parliament earlier, municipal employees held banners proclaiming : “No firings, make all contract workers permanent now.”
Temperatures hit 44C in some parts of Athens on Thursday with the heatwave now fuelling fears of a public health crisis on account of the massive mounds of rubbish that have accumulated.
“Depending on developments, all available state mechanisms will be used not to endanger public health,” said the government spokesman Dimitirs Tzanakopoulos. With temperatures expected to rise on Friday the army could be brought in as early as this evening.
The Greek prime minister, Alexis Tsipras, who held talks with unionists on Tuesday, said obligations to creditors behind the country’s three international bailouts made it impossible to satisfy all demands.
Updated
German inflation rises unexpectedly
German consumer inflation rose unexpectedly in June, to 1.6% from 1.5% in May, the Federal Statistics Office said. It had been expected to fall to 1.4%.
When harmonised to make the figures comparable with other EU countries, the rate rose to 1.5% from 1.4%.
Carsten Brzeski, ING’s chief economist for Germany, said this could be the “last inflation hooray” and considers the dilemma facing the ECB.
Looking ahead, lower oil prices and the stronger euro exchange rate should lower headline inflation in the coming months.
Today’s German inflation data provides further evidence for the ECB’s (and other central banks’) current dilemma: a cyclical upswing without significant inflationary pressure. If even an economy which has just entered its ninth year of economic expansion and which has record high employment hardly shows any inflationary pressures, how could the eurozone as a whole do so any time soon?
Over the last 48 hours, financial markets have been overly excited about the ECB and possible tapering. Looking back at the now famous Sintra speech of ECB president Draghi confirms our earlier view that the ECB has not drastically changed its stance, neither its own take on the economy or the future path of monetary policy.
The ECB will strike a very cautious balance between moving towards tapering, without jumping the gun and distorting markets. This week’s market reaction has been a clear reminder for the ECB that steering market expectations is an extremely tough job to do.
Greece will return to the markets within a year, finance minister says
Over in Greece, finance minister Euclid Tsakalotos is in confident mood.
Speaking at a conference in Athens, Euclid Tsakalotos signalled that the debt-stricken country plans to return to markets within a year.
He took many aback saying the country would attempt to access markets whether it had been included in the European Central Bank’s bond-buying programme or not. Backtracking from the Greek government’s previous stance that entry into the European Central Bank’s quantitative easing programme was essential to market return, Tsakalotos said the belief now was that it would have a largely “symbolic” effect and, as such, should not be given with too much significance.
“I wouldn’t elevate it too high … it would be very useful. It is important but mostly in symbolic terms,” he told the conference also attended this year by officials representing Greece’s quartet of creditors.
The leftist-led government, he said, was now placing more emphasis on persuading investors that when the thrice-bailed out nation does tap markets it isn’t a one-off. He insisted it was important that Greece - essentially exiled from capital markets since 2010 - didn’t go in “too early.”
“What we need to do is ensure that the investment community knows there will be a programme of access to the markets. When we do go, we want to ensure that the markets know that it’s apart of a strategy of going two, three, four times, so they understand not the details but the process.”
Updated
Here is our story on the government’s decision to refer the Sky bid to the competition watchdog:
Bradley says parties will have until 14 July to make representations before a final decision is made.
Sky’s shares are up:
#Sky shares on a wild ride as government makes announcement on Fox bid pic.twitter.com/5GG90BexQx
— Peter Hoskins (@PeterHoskinsTV) June 29, 2017
Breaking: government refers Fox/Sky deal to the competition watchdog
Karen Bradley, the culture secretary, says she is referring Fox’s £11.7bn offer for Sky to the Competition and Markets Authority for a “phase two” inquiry on the grounds of media plurality.
Culture secretary Karen Bradley proposes referring Rupert Murdoch's £11.7bn bid to takeover Sky to the competition authorities
— Mark Sweney (@marksweney) June 29, 2017
Updated
The culture secretary is making a statement on her decision on Fox’s proposed takeover of Sky...
Eurozone economic sentiment nears 10-year high
Eurozone economic sentiment rose more than expected in June to its highest level in almost 10 years, according to monthly data from the European commission.
Optimism rose across all sectors of the economy, pushing the headline index to 111.1 in June from 109.2 in May.
It was the highest since August 2007, and beat expectations of a smaller increase to 109.5. The commission’s business confidence also rose, to its highest level since April 2011.
So all in all, eurozone firms do not seem ruffled at the prospect of Brexit.
Peter Vanden Houte, ING’s chief economist for the eurozone, says the survey suggests the European Central Bank is safe to take “baby steps” towards tightening policy.
The eurozone economy continues its winning streak, making a growth figure above 2% no longer a fantasy.
The current figures fit the picture painted by [ECB president] Mario Draghi earlier this week pretty well: the eurozone economy is definitely gaining momentum.
One should note that the recent trend in oil prices is likely to push headline inflation down again in the coming months. At the same time, expectations for unemployment in the consumer survey fell to the lowest level since 2007. This could increase wage bargaining power and ultimately lead to higher wages, which is according to Mario Draghi the lynchpin for monetary policy.
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Howard Archer, chief economic adviser to the EY Item forecasting group, says that even small rises in interest rates could cause problems for households:
It may be that the heightened squeeze on consumer purchasing power is increasing the need for some consumers to borrow.
The Bank of England will be far from happy with the May consumer credit data, and it could bolster the case for a near-term interest rate hike to try to curb consumers’ readiness to borrow.
While any interest rate hike would be small with further increases some way off, even small increases could cause problems for some consumers given high borrowing levels.
Updated
Andy Haldane, the Bank of England’s chief economist and dove-turned-hawk, has been out and about on a mini tour of Wales (Barry, Porth and Ely in Cardiff).
He reiterated his point that interest rates might have to “edge up” if the cost of living continues to rise in Britain.
He told BBC Wales:
We need to look seriously at the possibility of raising interest rates to keep the lid on those cost of living increases.
For now we are happy with where the rates are, we need to be vigilant for what happens next.
Updated
Hannah Maundrell, editor in chief of comparison site money.co.uk, says the rise in consumer credit is worrying.
This jump is concerning - it’s worrying providers have been lending more money while the gap between how much credit they are willing to give v how much people are actually earning has got wider.
Rock bottom interest rates have made borrowing cheap and we’ve definitely been making the most of it. The harsh reality is many households would struggle to pay back what they owe if interest rates went up.
If you’re thinking of borrowing money you must be realistic with yourself. Work out if you can actually afford it and how stretched it will leave you each month. If you were to lose your job do you have the means to pay it back?
Updated
Pound rises above $1.30
News flash! The pound broke through the $1.30 barrier for the first time in five weeks.
It is up more than half a cent or 0.5% against the dollar.
Traders are standing by their bet that the Bank of England is readying for a rate rise after those comments from Governor Mark Carney on Wednesday.
Updated
The stronger than expected consumer credit and mortgage approvals figures come just two days after the Bank of England told banks they must hold more capital in the face of a rapid growth in borrowing on credit cards, car finance and personal loans.
Household finances are coming under increasing strain as inflation outpaces wage growth. That means consumers are forced to dip into their savings or take on more debt in order to maintain spending.
Ruth Gregory, UK economist at Capital Economics, says the latest figures suggest consumers aren’t losing too much sleep over the pay squeeze:
May’s UK money and credit figures provide another reason to think that the consumer slowdown shouldn’t be too severe. Not only was the monthly rise in consumer credit of £1.7bn up on April’s £1.5bn increase, but it was well above the consensus expectation (£1.4bn) too.
Meanwhile, the number of mortgages approved for new house purchase rose from an upwardly-revised 65,051 in April to 65,202 in May, also higher than the consensus expectation (of 64,000).
This suggests that households remain confident enough to increase borrowing to help smooth consumption, in the face of the squeeze on their real incomes. Of course, this will do nothing to allay policymakers concerns about the recent rapid increases in unsecured lending and strengthens the case for the Financial Policy Committee to act to address this issue at its next meeting in September.
Breaking: surprise jump in UK consumer credit
The Bank of England has just published its latest consumer credit and mortgage approvals figures.
Consumer lending rose by £1.7bn in May, following a £1.5bn rise in April. UK economists were predicting a slowdown in lending to £1.4bn.
There was a 10.2% rise in unsecured consumer borrowing, year-on-year in the three months to May, up from 9.7% in April. It was the joint highest since November.
Meanwhile the number of mortgages approved for house purchase rose to 65,202 in May, little changed from April’s 65,051. It beat economists’ forecasts of 64,000 approvals.
UK banks boosted as US peers pass stress test
UK banking shares are benefiting this morning from developments in the US, where banks passed the second round of the Federal Reserve’s stress test.
It opened the door to higher payouts to shareholders, and boosted confidence about the general health of the sector.
Neil Wilson, senior market analyst at ETX Capital, said UK banking shares are enjoying the “US halo effect”.
Banking stocks jumped on the open after regulators in the US gave the greenlight to higher dividends and buybacks, whilst the hints of a shift in tone from central bankers towards tightening is spurring hopes of higher interest rates again.
HSBC led the FTSE 100, rising nearly 4% at the start of play. Standard Chartered rose 2%, while Barclays, Lloyds and RBS were all up more than 1%.
With a big index weighting that HSBC boost powered the FTSE 100 higher, while gains for mining stocks as metal prices firmed also supported.
The boost seems to have been the halo effect from the US, as all the major banks passed stress tests, which means they can now significantly raise shareholder returns. The Fed has effectively green-lighted up to $100bn in dividends and buybacks. US banks rose in after-hours trading as a result.
FTSE 100’s biggest risers this morning:
FTSE 100 rises in early trading
It’s been a mixed start for European markets this morning. The FTSE is leading the risers, boosted by the banking and mining sectors.
The scores so far:
- FTSE 100: +0.4% at 7,42
- Germany’s DAX: +0.2% at 12,674
- France’s CAC: -0.1% at 5,248
- Italy’s FTSE MIB: -0.3% at 20,994
- Spain’s IBEX: -0.1% at 10,697
- Europe’s STOXX 600: flat at 386
Fox's Sky takeover: decision due today
The government is due to announce today whether or not it will give the go ahead to 21st Century Fox’s proposed £11.7bn takeover of Sky.
Karen Bradley, the culture secretary, is expected to make the announcement later this morning.
She could decide to wave the deal through, discuss options with Fox to address any issues raised by Ofcom, or refer the takeover to the Competition and Markets Authority.
Here is a reminder of the background:
Financial watchdog probes PwC over BT accounting scandal
Some UK corporate news now.
The Financial Reporting Council is to take a deeper look at the role played by ‘Big Four’ accountant PricewaterhouseCoopers in BT’s £530m Italian accounting scandal.
After “initial enquiries”, the UK’s corporate governance watchdog announced a full investigation into the audits performed by PwC on BT over the three years from 2015 to 2017.
BT wrote off £530m in January over “improper practices”, sending its shares tumbling 21% in a day.
Chief executive Gavin Patterson has since seen his pay packet slashed by £4m, while the firm’s European head Corrado Sciolla lost his job over the affair.
Euro hits 14-month high against dollar
The euro is also climbing higher against the dollar this morning as investors bet on tighter monetary policy across Europe.
It is currently up 0.4% at €1.1425, boosted by comments on Tuesday from Mario Draghi, president of the European Central Bank.
Draghi’s statement that “reflation” was returning to the eurozone prompted speculation of policy tightening, even after ECB sources felt compelled to clarify on Wednesday that he was not signalling immediate action.
Bloomberg TV will be showing an interview with Mark Carney at 11.30.
Markets are now pricing in a 50% chance of a UK rate rise by the end of 2017. Let’s see if the Bank of England governor provides any more clarity.
The pound dropped sharply immediately after the 8 June general election, when it became clear Theresa May had lost her majority.
Sterling has now returned to pre-election levels after Carney’s rate rise hint. It is edging closer towards $1.30 this morning, at $1.2974.
Traders at spread-betting firm IG predict European markets will open higher this morning:
Our European opening calls:$FTSE 7424 +0.49%
— IGSquawk (@IGSquawk) June 29, 2017
$DAX 12705 +0.46%
$CAC 5274 +0.40%$IBEX 10728 +0.24%$MIB 21157 +0.52%
The agenda: pound holds on to gains after Carney's rate rise comments
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Markets had much to digest on Wednesday after surprise comments from Mark Carney were interpreted as a hint that he is moving closer to a vote for a rate hike.
The pound jumped to a post-election high after his remarks at a European Central Bank conference in Portugal, and the currency has built on those gains this morning.
The pound is currently up 0.3% against the dollar at $1.2963.
However, the devil is in the detail and some analysts say that while his comments were certainly less dovish than his Mansion House speech, Carney wasn’t suggesting he’s ready to press the button on a rate rise just yet.
We’ll keep you updated on all the latest developments.
Also coming up today...
- At 9.30am the Bank of England will publish the latest data on consumer credit and mortgage approvals data. This should be interesting following the Bank’s warning earlier this week of a rapid growth in borrowing on credit cards, car finance and personal loans.
- A snapshot of eurozone business confidence in June is scheduled for 10am.
- German inflation data at 13.00 is expected to show a slight dip in the rate to 1.4% in June from 1.5% in May.
- In the US we have the second revision of first-quarter growth, and weekly jobless claims data, both at 13.30.
And here is a reminder of what Mark Carney had to say on Wednesday:
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