The pound is off the worst levels it reached in the immediate aftermath of the news that Article 50 will be triggered on 29 March, but is still marginally down on the day after a bright start.
It is currently down 0.06% at $1.2385 having fallen as low as $1.2368, and initially risen as high as $1.2435 on growing suggestions a UK rate rise could come sooner than expected.
Against the euro the pound is 0.19% lower at €1.1518.
Meanwhile the FTSE 100 is virtually flat, Germany’s Dax is down 0.19% and France’s Cac has slipped 0.11%.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
Stock markets, particularly in the US, have been buoyed by hopes that Donald Trump’s proposed tax and spending plans will boost the economy.
But if long term stable economic growth does not emerge, markets may fall back sharply again and confidence become severely dented, according to Mohamed A El-Erian,chief economic adviser at Allianz. Read more here:
And here’s an interesting view of the eurogroup meeting about Greece from the Slovakian finance minister:
It looks like #Greece Groundhog Day today. We'll sit down, get updates & teams will return to #Athens trying to work things out. #eurozone
— Peter Kažimír (@KazimirPeter) March 20, 2017
Is he heralding return of institutions to #Greece? The line ahead of #Eurogroup was they'd only come back if concluding review a certainty https://t.co/so8LRpdHHe
— Nick Malkoutzis (@NickMalkoutzis) March 20, 2017
In Greece prime minister Alexis Tsipras has told a visiting delegation of tourism officials that he is confident an ongoing bailout review will be wrapped up imminently. Helena Smith reports:
The Greek prime minister Alexis Tsipras has used a meeting with the country’s tourism chief, Andreas Andreadis, to express his conviction that despite being delayed, talks with creditors will be completed soon.
“He is very optimistic the review will be concluded,” Andreadis said emerging from the meeting. Labour reforms appears to be the major sticking point, according to insiders who say technical teams are not in a position to resolve what is “an enormously complex” issue.
Although agreement on €3.6bn worth of extra fiscal measures has been reached, the Greek finance minister Euclid Tsakalotos insists that “nothing will be agreed until everything is agreed.”
Today’s euro group had originally be set as the deadline for the review to be concluded by Tsipras who told Andreadis that he expected tourism to play an important role in improving GDP this year. It was not impossible, he said, that Greece would attract 30 million tourists in 2017 - an all time record. Government sources are saying they expect the review to be concluded at the next eurogroup on April 7.
Wall Street opens lower
With the decline in the oil price and uncertainty after the protectionist stance on trade by the US at the weekend’ G20 meeting, Wall Street has made an uncertain start to the week.
The Dow Jones Industrial Average is down 15 points or 0.07% while the S&P 500 and the Nasdaq Composite both opened a couple of points lower.
The pound’s slip since the confirmation that Brexit will be triggered next week does not mean the currency will remain weak, although there are other risks to watch out for, reckons Kathleen Brooks, research director at City Index. She said:
The pound fell to session lows in the hour after the news, but the question now is, how much further can [it] fall, and is all of the “bad” Brexit news priced in?
In fairness, we think that today’s dip in the pound is just a knee-jerk reaction to the Article 50 news, and part of sterling’s decline is also due to the recovery in the dollar and US Treasury yields, 10-year yields are back above 2.5%. But it is worth watching how the pound performs in the next day or two, if [it] can find support ahead of 1.2350 – a key short-term support level- and recoup today’s losses then it would be a bullish signal for the pound for this reason: the pound is failing to react to “bad news”. Last week the pound actually rallied although the Scottish leader said she will hold a second independence referendum, this is significant as markets that don’t fall on what is perceived as bad news can often rally in the aftermath.
The other reason to be positive on the pound is the recovery in the UK-US yield spread, which had fallen to a record low at one point last week. This spread has narrowed by 13 basis points since last week’s BOE meeting. This may not sound like a lot, but in the bond market this move is a big deal, and, if it continues to recover, could trigger a further recovery in the pound...
This does not mean that the pound is not without risks, it is just that the Brexit negotiations, at least in the short-term, is not one of them. There are a couple of risks for sterling that are worth noting; firstly, retail sales data on Thursday. UK inflation is expected to rise to 2.2% on Tuesday, if rising prices is hurting the consumer, then we could see the pound take a knock.
The second risk to sterling is the EU negotiating team’s response to Article 50, which we should know by end of April at the latest. This will be crucial to set the tone for exit negotiations and trade deals with the currency bloc...
It is also worth noting that there are risks for other currencies this week too, including the first French Presidential debate tonight, if Far Right candidate Le Pen puts in a strong performance then this could knock the euro. The dollar could also suffer this week from political risk. The US FBI director is scheduled to testify to the US Congress on the extent of Russia’s involvement with the US election; if there is any link that Trump colluded with the Russians to weaken Hillary Clinton’s campaign then his political position will become tenuous and could knock the dollar. This is worth watching later on Monday.
More signs of growth in the US economy, from the Chicago Federal Reserve:
Chicago Fed Nat Activity Index Feb: 0.34 (est 0.03; prev -0.05; rev prev -0.02)
— LiveSquawk (@LiveSquawk) March 20, 2017
Chicago Fed president Charles Evans has told Fox Business TV that the economy is on a positive course, and that three interest rate rises this year are entirely possible. And to Bloomberg he has said something even stronger:
EVANS: IF ECONOMY 'REALLY' PICKS UP, FOUR RATE RISES POSSIBLE
— FxMacro (@fxmacro) March 20, 2017
Updated
Commenting on the reverse in the pound, Craig Erlam - senior market analyst at Oanda, said:
The pound has come under a little bit of pressure after a spokesman for Theresa May revealed that the UK PM will trigger article 50 on 29 March. While the timing of the triggering of article 50 comes as no surprise given that May had previously vowed to do so before the end of March, it does show that sterling remains sensitive to Brexit related headlines, even those that are already widely known.
While the drop off in the pound isn’t too severe, it was enough to take it into negative territory for the day. It also acts as a reminder that the next two years will likely continue to be volatile for the UK currency as well as the FTSE and UK Gilts, with traders still concerned about the road the country is on.
#GBPUSD Delayed reaction to triggering of Article 50 or a reaction to an early push higher in US 10-year yields back above 2.5? pic.twitter.com/CHRJDo25HT
— City Index (@CityIndex) March 20, 2017
Well, it took a little while but the pound has now fallen back following the news that Article 50 will be triggered on 29 March, and is now down 0.05% at $1.2386.
Part of the reason for the strength of the pound is the dollar’s weakness in the wake of the G20 meeting at the weekend which confirmed the US government’s protectionist stance on trade.
But there are also growing suggestions of a sooner than expected UK interest rate rise. According to analysts at MNI, the chances of a rate rise later this year have nearly doubled since the Bank of England revealed last week that one member voted for a hike this time round. MNI said:
[The] market is now pricing in a 44% chance of a 25bp rate hike in Nov 2017, up from 25% last Monday as Kristen Forbes calls for a 25bp rate hike due to rising inflation and better growth, while there was some hawkish undertones from some other members in the MPC minutes as well.
News that the UK will trigger Article 50 and start the Brexit process in earnest on Wednesday 29 March has had little impact on the pound so far.
Sterling has been drifting off its day’s peak as the morning wore on but is still at three week high against the dollar at $1.2412, up 0.15%. It remains virtually flat against the euro.
Oil prices are on the slide as signs of increased US production outweighed the recent agreed cuts from Opec.
The oil group has acted to try and deal with a continuing supply glut, but on Friday it emerged that US drillers had added more rigs last week, taking the total of active rigs to 631, the highest since September 2015.
On top of that, the US protectionist stance as evidenced from the weekend’s G20 meeting has raised concerns about the outlook for the global economy, and therefore the demand for oil.
So Brent crude is currently down 1% at $51.23 a barrel while West Texas Intermediate has fallen 1.39% to $48.10.
With an uncertain mood around the markets - Brexit, Greece, the US protectionism which led to the G20 removing a free trade pledge from its weekend communique - investors are looking for havens, and gold is benefiting.
Gold has hit a two week high and is currently up $3 an ounce at $1232, as the dollar continues to weaken. David Morrison, senior market strategist at SpreadCo, said:
Gold and silver continue to build on gains made from last week. Both metals flew higher following Wednesday’s Fed meeting. The FOMC’s Summary of Economic Projections was viewed as less hawkish than expected, being effectively unchanged from December. The consensus expectation was that the Fed would indicate it was prepared to hike rates by 100 basis points in 2017, up from the 75 indicated at the end of last year.
Irish banks largely recovered from financial crisis - S&P
Good news for Irish banks, which were hit hard during the financial crisis. Ratings agency S&P said the sector’s recent results showed “ their credit profile has largely recovered from the severe ruptures experienced during 2008-2011.” It said:
We now believe that the robustness of the banks’ capital and liquidity profiles is both satisfactory and resilient. Furthermore, excluding a large negative exceptional item in relation to deleveraging costs in one case, all six rated banks are profitable for the first time since 2007.
Earlier this year, S&P raised their rating on Allied Irish Banks and Bank of Ireland:
In both cases the outlook on the long-term rating is stable, which is consistent with the stable trend that we see for Irish banking economic and industry risk.
Updated
Looking ahead to Tuesday’s UK inflation figures, and the rising cost of living puts more pressure on real wage growth. Jack Coy, an economist at the Centre for Economics and Business Research, said:
On Tuesday, ONS data are expected to show that Consumer Price Index (CPI) inflation increased to 2.1% in February, a fourth consecutive monthly rise. With upward pressure from the weak pound and higher global oil prices than a year ago, inflation is showing no signs of plateauing. Such a rise would bring inflation just below nominal wage growth. Real wages are now growing negligibly and may begin to shrink in the coming months.
Vodafone has agreed a long awaited move to merge its Indian operations with those of Idea Cellular.
The move will create the country’s biggest telecoms operator, and comes after new entrant Reliance sparked increased competition and a price war. Neil Wilson, senior market analyst at ETX Capital, said:
Vodafone’s decision to combine its Indian unit with Idea will create the largest mobile operator in India, with around 400 million customers. That makes it four times the size of Reliance Jio, the challenger operator that has upset rivals by offering free data for the last six months.
A sensible move by Vodafone as it just doesn’t have the appetite to fight a long and bitter price war on its own...
With (de)consolidation in India sorted, what now for Vodafone? Talk of a merger with US group Liberty Global has been doing the rounds for a while in the City and Vodafone CEO Vittorio Colao recently said the merits of such a tie-up remain undimmed. Given the appetite for deals at the moment, and the depressed value of sterling post-Brexit, there is a chance Vodafone and Liberty could jump into bed together.
Shares are virtually unmoved on the announcement, rising just a shade as it expected and as investors wait for what’s expected to be a fairly downbeat set of annual results in May. In February the firm said full-year earnings are expected to come in towards the bottom of range after lacklustre performances in the UK and India.”
Updated
The eurogroup is discussing Greece once more later today but little progress is expected. Analysts at UniCredit said:
Finance ministers will discuss the implementation of euro-area member states’ draft budgetary plans for 2017, the budgetary situation in the euro area as a whole and developments regarding the second review of Greece’s macroeconomic adjustment program. Greece and its lenders are heading to the meeting with few expectations of a breakthrough and the best-case scenario for Athens being an agreement for the institutions and their mission chiefs to shortly return to the Greek capital and resume negotiations.
Meanwhile eurogroup head Jeroen Dijsselbloem was reported over the weekend as saying he wanted to stay in his post despite the prospect of him losing his job as Dutch finance minister following the recent election result.
European markets edge lower
Confounding expectations, the FTSE 100 is on the back foot in early trading, undermined by the stronger pound which dents the prospects for the dollar earners which form a major part of the index.
Having hit a new closing high on Friday, the FTSE 100 is currently down 0.25%. Unilever has slipped 3p to £40.37 following weekend talk it could put its spreads business up for sale.
Meanwhile Germany’s Dax has dipped 0.31% and France’s Cac is 0.36% lower.
Sentiment has not been helped by the continued protectionist tone of the new US administration, which led to the G20 dropping a commitment to free trade at the weekend. The uncertainty over the outlook for trade also helped weaken the dollar
Updated
German producer prices at more than five year high
Earlier German producer prices showed their biggest year on year rise since December 2011.
They climbed by 3.1% in February but this was slightly less than the expected rise of 3.2%. The month on month figure was 0.2%, again a little lower than the forecast 0.3%.
Updated
European markets are set for a mixed open:
Our European opening calls:$FTSE 7431 up 6
— IGSquawk (@IGSquawk) March 20, 2017
$DAX 12076 down 19
$CAC 5027 down 2$IBEX 10260 up 14$MIB 20103 up 29
Agenda: Sterling in focus as Brexit tour begins
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Despite the continuing uncertainty about the outcome of Brexit negotiations, the pound is holding firm in early trading, as prime minister Theresa May begins her nationwide tour to “unite the country”.
Sterling is up 0.27% against the dollar at $1.2427 and virtually unchanged against the euro at €1.1531. Recent hawkish comments from the Bank of England and the prospect of UK inflation hitting 2.1% when the latest data is unveiled on Tuesday are supporting the pound. Ipek Ozkardeskaya, senior market analyst at London Capital Group, said:
The Bank of England hawks could send the pound above the 100-day moving average (1.2408) against the US dollar. The UK’s inflation data is due on Tuesday and could restate the rising inflationary pressures in the UK. The consensus for the headline inflation is 2.1% year-on-year versus 1.8% printed a month earlier. The core inflation may have climbed to 1.7% year-on-year from 1.6% a month earlier. After the MPC delivered an unexpectedly hawkish stance at last week’s monetary policy meeting, a solid inflation read could easily boost the BoE hawks, encourage a further appreciation in the pound across the board and dent the appetite in the FTSE.
FXTM chief market strategist Hussein Sayed said:
Sterling is still holding tight, thanks to the Fed neutral hike and BoE’s Kristin Forbes who voted for a rate hike. With inflation on the rise some MPC members believe that a rate hike would be needed sooner than later, but how many MPC members will join Ms. Forbes remains uncertain. Brexit headlines will become the major force moving the pound the days ahead, and the harsher stance EU takes the more pressure might be felt.
Elsewhere, on a fairly quiet Monday morning for corporate news, investors will be watching Unilever shares after reports that it could put some of its businesses up for sale following the failed Kraft bid.
And the Uber president Jeff Jones has quit in the latest problem for the troubled firm.
We’ll also be watching for any fallout from the weekend’s G20 meeting, which dropped a global free trade pledge after opposition from the US administration.
Updated
