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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (now) and Nick Fletcher (2pm-7pm)

Federal Reserve is 'closely monitoring' global economy as it leaves rates on hold - as it happened

Federal Reserve expected to leave rates on hold.
Federal Reserve had been expected to leave rates on hold. And it did. Photograph: Jonathan Ernst/Reuters

US stocks fall after the Fed

And finally.... Wall Street has ended the night on the back foot, after being underwhelmed by the Federal Reserve.

The Dow Jones shed 222 points, or almost 1.4%, to close at 15,944.46.

The S&P 500 index, which covers a wider range of companies, lost over 1% while the tech-heavy Nasdaq slid by over 2%.

Investors have noted the Fed’s dovish stance, and recognised that the central bank is anxious about the global economy and the market turmoil.

But policymakers still see the US economy recovering, which could mean it still raises borrowing costs later this year....

Anyway, we’ll back in the morning, London time, for more reaction. Good night, GW

Facebook also posted some highly impressive mobile advertising revenue:

Some late breaking news... Facebook appears to have smashed forecasts.

The social network has posted earnings of 79 cents per share, compared to expectations of 68 cents.

And Wall Street loves it, sending shares leaping in afterhours trading.

US markets finish in the red

David Zervos, Chief Market Strategist at Jefferies, is telling Bloomberg TV that the Fed’s statement was quite comforting.

But the markets are still being driven by fluctuations in the oil price, and fears over emerging markets, he adds.

Zervos says:

Markets are still bouncing around on oil, still bouncing around on China.

So what could turn the markets around? Signs that the US economy is still doing well, and not entering recession.

Our news story on the Fed decision is now live:

Here’s a flavour:

The Federal Reserve is keeping a key interest rate unchanged while pledging to closely monitor developments in the global economy and financial markets.

In December the central bank made the decision to raise rates for the first time since the recession. Stock markets have been turbulent across the world since the move, and all the US markets entered negative territory again after the announcement.

The policymakers left their benchmark rate unchanged in a range of 0.25% to 0.5%. Until December, they had kept that rate at record lows.

The Fed noted in its latest policy statement that economic growth has slowed since it raised rates from record lows: “The [Fed] is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

The changes in its statement signaled that the Fed could be prepared to slow future rate hikes if recent market turbulence and global weakness do not abate..... (click here for more).

The selloff is picking up pace, with the Dow Jones industrial average now down over 1%.

That’s not all down to the Fed, though. Apple has shed 6% after last night’s disappointing results showed that iPhone sales have slowed.

Paul Ashworth, chief US economist at Capital Economics, also points out that the Fed is no longer willing to describe the risks to the outlook as “balanced” (as covered here).

He writes:

As expected, the new statement acknowledged the apparent slowdown in activity growth in the fourth quarter. The growth of consumption and business investment is now described as “moderate” whereas back in December it was described as “solid”. The slowdown in inventory investment also receives an explicit reference. At the same time, the Fed stressed that labourmarket conditions “improved further” with “strong” job gains.

Ashworth reckons that economic data, and financial markets, may not improve in time to allow a rates to rise in March. But he still expects a string of hikes later in the year.

Nevertheless, we still think that once the worst fears about China blow over and US economic growth rebounds, the Fed will end up raising interest rates more rapidly that expected in the second half of this year. We expect the fed funds rate to reach 1.50% to 1.75% by end-2016.

The Fed is primarily worried about China, argues Worth Wray, chief economist at wealth management firm Evergreen GaveKal.

One expert reckons the Fed’s statement guarantees more market turbulence in the next six weeks:

This month’s Fed meeting was always going to be all about the statement, given the FOMC bit the bullet and raised borrowing costs for the first time since the crisis in December.

The tone of the Fed’s comments set the tone for the next few weeks -- and the statement is being taken as quite dovish.

Chris Beauchamp, Senior Market Analyst at City trading firm IG, explains:

Markets got the more dovish tone they were hoping for, with the Fed noting slowing economic growth and tipping its hat towards the idea that inflation won’t rise towards 2% as fast as it thought in December. This doesn’t mean a March move is out of the question, but the reference to global economic developments means that there will have to be plenty more improvement in the US economy before one is a definite possibility.

With the risks to the economy no longer seen as ‘balanced’ this is a Fed committee drawing in its horns. It was never going to admit that December’s move was a mistake, but today’s statement acknowledges that it is not time to get carried away with rate hikes.

Fed decision: instant reaction

Matthew Boesler of Bloomberg says the Fed is taking the recent stock market losses seriously, without panicking.

Brett House, chief economist of US investment management firm Alignvest, reckons the Fed won’t raise rates four times this year (as it had been expecting).

Financial commentator Bobi Petrov reckons rates will remain on hold at the Fed’s next meeting, in early March.

Updated

The Fed also doesn’t see inflation roaring away this year - hardly surprising, given the oil price tumble.

Tonight’s statement says:

Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further

This is a useful tool, showing some of the changes to this month’s statement:

Note how jobs growth is now “strong” after this month’s blowout non-farm payroll report showed 292,000 new hirings in December.

Stock market falls after Fed decision

Stocks are falling on Wall Street as traders digest tonight’s statement.

Not immediately clear why - but investors may be concerned that the Fed has dropped that line about economic risks being balanced.

There’s a significant change between this statement and December’s one. The Fed has dropped the line saying that the risks to economic activity and the labour market are “balanced”.

That suggests the Fed thinks the situation has become unbalanced....

The Fed is also sticking to its view that interest rates will only rise gradually, meaning borrowing costs will remain below the long-term average for some time.

But it all depends on the data.....

However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The decision was unanimous -- all 10 members of the Federal Reserve Open Market Committee agreed to leave borrowing costs unchanged. Again, that’s not a surprise.

The US central bank also reckons that the American economy is continuing to heal.

The statement says:

Household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further; however, net exports have been soft and inventory investment slowed.

A range of recent labor market indicators, including strong job gains, points to some additional decline in underutilization of labor resources

Fed is watching global economy and markets closely

The Federal Reserve says it is keeping a close eye on the global economy, and financial markets.

In tonight’s statement, is says:

The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.

That means the Fed is considering the impact on recent market turmoil, and the fall in the oil price, on the US economy and the path of inflation.

Updated

Federal Reserve leaves interest rates unchanged

In the least surprising news of 2016, the US central bank has left borrowing costs unchanged.

The policy rate remains at 0.25% to 0.5%.

OK, it’s nearly time for the Federal Reserve to announce this month’s monetary policy decision.

Remember, it’s all about the Fed’s statement - Wall Street is certain that Janet Yellen isn’t going to raise interest rates again.....

European markets close higher

Ahead of the Federal Reserve’s interest rate setting meeting, and following a rise in the oil price, European shares have ended the day on a positive note.

With hopes of co-operation between oil producers - notable Opec and Russia - to tackle the issue of oversupply, Brent crude has jumped 3.6% to $32.96. The rise comes despite a jump in US crude inventories. The closing scores showed:

  • The FTSE 100 finished 78.91 points or 1.33% higher at 5990.37
  • Germany’s Dax added 0.59% to 9880.82
  • France’s Cac climbed 0.54% to 4380.36
  • Spain’s Ibex ended up 0.56% at 8741.0
  • Italy’s FTSE MIB was an exception, dipping 0.4% to 18,848.03

On Wall Street, the Dow Jones Industrial Average is currently 34 points or 0.22% higher.

Another reason for the day’s strength in the oil price: Russia has said it discussed co-operation with Opec over crude prices. Reuters reports:

Russia’s energy ministry said possible coordination between Russia and the Organization of Petroleum Exporting Countries (OPEC) was discussed at a meeting with Russian oil companies on Wednesday.

The ministry said the discussion was related to unfavourable oil prices.

There is also talk of an emergency Opec meeting in February.

Updated

Despite its share price fall, Apple is still top of the pile in value terms:

Markets are moving higher on the back of the improvement in the oil price. Tony Cross, market analyst at Trustnet Direct said:

The threat of the early sell-off for oil prices this morning failed to materialise with crude bouncing above the $30 mark and this has in turn lent a raft of support to equity markets on both sides of the Atlantic. Even what could at best be described as a mixed bag in terms of US oil inventory data has failed to knock sentiment so London’s FTSE-100 is rounding off the day – where we tested highs not seen for two weeks – with a bullish tone. Next up however it’s the latest Federal Reserve Open Market Committee meeting and anything that is interpreted as being overly hawkish here could readily unseat equity markets globally that are still clearly rattled by recent events.

US crude stocks rise to new high

Elsewhere, US crude stocks rose to their highest level on record - ie back to 1930 - last week while gasoline stocks increased but inventories of distillates fell.

The figure for distillates, which include heating oil, follows the cold front hitting the country in the past few days. Distillate inventories fell by 4.1m barrels compared to expectations of a near 2m fall.

But crude stocks climbed by 8.4m barrels last week, well above expectations of a 3.3m increase, to 494.9m, the highest level since the Energy Information Administration began compiling records.

Refinery crude runs fell by 551,000 barrels a day.

Gasoline stocks climbed by 3.5m barrels compared to forecsats of a 1.5m increase.

But despite the rises, Brent crude is up 0.79% at $32.05 a barrel. Joshua Mahony, market analyst at IG, said:

US crude oil inventories rose by the highest level since April 2015 last week, pushing overall oil in storage to near levels not seen in 80 years for this time of year.

Crucially, we did see domestic production fall ever so slightly. This distinction highlights the reaction in global trade, which has seen oil prices rise off the back of seemingly bearish headline data. With sentiment driven by record output from Iraq and Russia, alongside the entry of Iran on the mainstream oil market, any news that US output is starting to turn lower is certainly welcome for oil bulls.

Here’s our take on the libor verdicts:

Five of the six brokers were acquitted of conspiring to rig Libor, reports Reuters.

The jury also reached a not guilty verdict on one count of conspiracy to defraud for former Icap broker Darrell Read, said Reuters, but it has yet to reach a verdict on a second count. The judge has asked the jury to reach a majority verdict.

The six brokers on trial were Darrell Read, Danny Wilkinson and Colin Goodman from Icap, Noel Cryan from Tullett Prebon, and Jim Gilmour and Terry Farr from RP Martin.

Libor brokers acquitted on fraud charges

Five out of six brokers accused of manipulating libor bank rates have been acquitted of fraud at Southwark crown court.

A jury is still discussing one count against one of them, but the others have been freed.

The six were accused of conspiring with Tom Hayes and others in a trial brought by the Serious Fraud Office which has lasted 15 weeks. But a jury took just a day to acquit them.

Updated

The Federal Reserve is holding its first meeting since December’s now-contentious decision to raise interest rates for the first time in nearly a decade.

The subsequent market turmoil, focused on a slowdown in China and the tumbling oil price, has made many wonder whether the Fed was a bit premature in pulling the rate trigger.

The Fed is highly unlikely to change rates at this meeting, and there is no press conference for Fed chair Janet Yellen to be quizzed about her thoughts on the aftermath of last month’s move. So the statement accompanying the rate decision is likely to be scrutinised for clues as to the Fed’s latest thinking.

It must surely acknowledge the market slump and fears of a global downturn which have increased since December, and may even hint that it no longer expects three or four more rate rises this year. The wording of its comments on the current state of the global economy will be key, but analysts are divided on what the Fed’s tone will be.

Simon Smith, chief economist at FXPro said:

All eyes will be back on the Federal Reserve today as they make their first interest rate decision and monetary policy statement of the year but there are no economic projections or press conference this time round, which come at the next meeting in March. We’ve seen a rise in risk appetite in this final week of January which so far has been a bit of a blood bath, although the recovery from lows in many indices has softened the blow for many investors. This has come as a result of a bounce in oil prices but also a growing expectation that central banks will have to do more to support the global economy.

Today’s Fed meeting as a result is likely to see a more dovish tone to it, especially since the market consensus is that we will see fewer rate hikes this year than the Fed is currently pencilling in.

Even though we saw a higher than expected rise in US consumer confidence yesterday a big warning shot has come from one of the world’s largest companies Apple which saw its first fall in revenue since 2003.

Fed chair Janet Yellen.
Fed chair Janet Yellen. Photograph: Susan Walsh/AP

But lya Spivak, currency strategist at DailyFX, said:

The rate-setting FOMC committee is broadly expected to keep the benchmark lending rate unchanged this time around. Indeed, priced-in probability of an increase is a mere 14.3%. This puts the spotlight on the text of the statement accompanying the rate decision and the forward guidance contained therein.

Investors appear positioned for a dovish outcome having scaled back 2016 tightening bets amid risk aversion since the beginning of the year...

For its part, the Fed will have to attempt a difficult balancing act. On one hand, it will have to acknowledge recent market turmoil as well as softening US growth dynamics in the final months of 2015. On the other, it will have to re-focus investors’ attention on mandate-relevant fundamentals and establish the possibility of tightening in March. This is necessary so that such a move, if deemed appropriate, does not trigger an overly violent response.

On balance, the case for policy normalization remains compelling. Realized and expected inflation is firming: the latest readings on core year-on-year CPI and hourly earnings growth registered at multi-year highs while 2-3 year breakeven rates have trended upward since August. On the jobs front, the unemployment rate is at the lowest level since 2008 and nonfarm payrolls growth is running at a reasonably brisk pace, with the 12-month trend average at 220k.

This means that the Fed statement will have to reassure investors that it will adjust policy if market stress infects the real economy. In the same breath, it will have to explain that as of now, the projected rate hike path has not materially changed since the first post-QE rate hike in December.

The markets’ subsequent reaction will depend on the degree of wishful thinking that traders are prepared to entertain. If they emphasize the first point – a possible result considering the dovish shift in expectations in spite of the aforementioned fundamental evidence – risk appetite is likely to strengthen. This will see the stocks rising alongside sentiment-geared currencies like the Australian and New Zealand Dollars while the greenback as well as the anti-risk Euro and Yen decline. A focus on the second point will probably deliver the opposite result.

Wall Street opens lower

As investors await the latest US oil inventory figures and the outcome of this month’s Federal Reserve meeting, Wall Street is on the slide again.

In early trading the Dow Jones Industrial Average has fallen 113 points or 0.7%, partly due to Apple which is down 3.8% at $96.24 following its disappointing figures.

Ahead of the start of US trading, here are some opening calls:

Note Apple is quoted as falling more than 3%.

Oil has come back from its worst levels of the day, on renewed hopes that Opec and other producers such as Russia would act to stem the supply glut which has hit prices.

Brent crude is now down 0.8% at $31.52 a barrel having fallen to $30.83 earlier. But US inventory figures due later will undoubtedly have an impact on the price, not to mention the Federal Reserve rate setting meeting and any effect the US central bank’s comments have on the dollar.

Meanwhile the recovery in crude has helped support stock markets. Both the FTSE 100 and Germany’s Dax are marginally in positive territory after earlier falls, while France’s Cac is only narrowly down.

US futures are showing a 57 point decline on the Dow Jones Industrial Average after Tuesday’s 282 point surge.

Apple’s shares will of course be in focus after its disappointing update.

Today’s Shell shareholder meeting
Today’s Shell shareholder meeting Photograph: Bart Maat/EPA

Ben van Beurden is upbeat about today’s vote, despite the small revolt.

Shell’s CEO says:

“I am delighted with the positive shareholder vote and the confidence that shareholders have shown in the strategic logic of the combination of Shell and BG.

Our immediate focus is on the successful completion of the transaction and we now await the results of tomorrow’s BG shareholder vote.

Assuming BG’s shareholders approve the deal (they will), Shell will become the world’s biggest liquefied natural gas (LNG) trader.

It’s worth reiterating that 17% of Shell shareholders opposed the BG merger at today’s vote.

That suggests that some big City investors have reservations about the deal, despite Shell chief Ben van Beurden’s best efforts to persuade them of its merits.

The results of today’s vote
The results of today’s vote Photograph: Royal Dutch Shell

Standard Life was the only large investor to go public - their head of equities, David Cumming, reckoned the deal only made sense when oil was over $60 per barrel, not $30ish.

But Standard Life owned less than 2% of the company, so others have clearly found the deal too risky.

Our financial editor, Nils Pratley, reminds me that even Royal Bank of Scotland’s disastrous merger with ABN Amro in October 2007 got the support of 99% of shareholders (who then suffered huge losses). So a 17% revolt may sting, a little.

Updated

Thousands of workers at Shell and BG now face the axe, once the merger goes through.

Shell announced last month that it will cut around 2,800 positions, or some 3% of the combined company.

Shell shareholders approve BG deal

Newsflash from The Hague - Royal Dutch Shell shareholders have just voted in favour of its £35bn merger with rival oil firm BG.

That’s despite pressure from some shareholders to renegotiate the tie-up, which was negotiated before the oil price slumped to just $30 per barrel.

During the meeting, Shell chief executive Ben van Beurden told the meeting that the deal would be a “springboard to simplify Shell”, the Evening Standard reports.

Van Beurden also argued that a merger still made sense despite the cheaper oil price.

The deal was approved by 83% of shareholders, with 17% opposing the plan.

BG investors give their verdict tomorrow, but there’s little chance that they will block the deal.

Updated

The City of London Skyline with St. Paul’s Cathedral in the foreground, in London, Britain.
The City of London Skyline. Photograph: Andy Rain/EPA

RBS is helping to drag the London stock market down into the red today.

As traders scoff a quick sandwich (or three courses at Gaucho), the FTSE 100 is down 22 points at 5888.

RBS are the second biggest faller, down 3.8% at 251p. The only biggest faller is Anglo American, the mining company, which has shed 5.2%. Other miners are also in the red, reflecting ongoing concerns over global growth.

Other European markets are also in the red, as investors wait to hear from the US Federal Reserve at 7pm GMT (when it will surely leave interest rates unchanged).

European stock markets at noon today
European stock markets at noon today Photograph: Thomson Reuters

Here’s more reaction to RBS’s latest financial woes, via Press Association:

Russ Mould, investment director at AJ Bell, said:

“It’s another bitter pill, but putting legacy issues behind it is essential if Chancellor George Osborne is going to off-load the Government’s stake during this parliament.”

But banking analyst Gary Greenwood, at Shore Capital, said that, while “disappointing”, the latest financial charges are not unexpected.

Over in America, traders are expecting Apple’s share price to slide after it warned that revenue will fall this quarter, for the first time in 13 years.

RBS isn’t the only bank counting the cost of the PPI scandal today.

Santander, the Spanish financial giant, has announced it is setting aside another £450m to cover compensation to customers who were missold Payment Protection Insuranace.

The move will dent profits at Santander UK.

It could be the bank’s final bill for the scandal, but we won’t know for sure until the deadline for PPI claims in 2018.

Updated

A wave of ‘challenger banks’ have sprung up since the financial crisis, hoping to win business from scandal-splattered big players such as Royal Bank of Scotland.

And one of them, Metro Bank, has announced plans to float on the stock market. Metro, which is losing around £10m per quarter, wants to raise £500m from shareholders.

Random fact: Metro encourages dogs into its branches, and even lays on water bowls and doggie toys. If only bankers had spent more time doing that before the crisis, instead of churning out toxic debt and lumbering customers with PPI contracts....

The British public had better face the truth - we’ll all be shareholders in the banks for a while longer yet.

So argues Chris Beauchamp, senior market analyst at City firm IG.

He told clients:

RBS’s ability to surprise investors with fresh bad news has been one of the hardy perennials of the past six years, and yet still the news keeps coming. George Osborne’s decision to sell a chunk of the government’s stake last August, which was derided at the time, now looks like a sound financial decision, but it does mean any further sales are essentially off the table.

Coincidentally, with Lloyds down 2% this morning in sympathy, it seems the government will remain a key asset manager when it comes to UK banks.

RBS CEO promises 'clean-up' after £2.5bn profits hit

If you’re just tuning in, here’s Jill Treanor’s news story about the latest problems at RBS:

RBS takes £2.5bn hit to profits as chief executive announces bank ‘clean-up’

Royal Bank of Scotland is set to report its eighth consecutive year of full-year losses after announcing a string of charges for legal bills, compensation and a pension payment.

The bank, which is more than 70%-owned by the taxpayer, said it would take a £2.5bn hit to profits in 2015 as a result of a clean-up exercise, driving its share price to a three-year low in Wednesday’s early trading.

RBS shares fell 5% to 246p – below the 330p at which George Osborne sold off the the government’s first tranche of shares in August, and less than half the 502p average price at which taxpayers pumped £45bn into the bank.

Issuing an unscheduled trading update on Wednesday, Ross McEwan, the chief executive of RBS, said the move was part of a continued clean-up but conceded that that the bank would make another full-year loss for 2015. It has not reported a profit since 2007.

Ross McEwan, CEO of the Royal Bank of Scotland (RBS) pauses during his speech at a news conference in London, Thursday, Feb. 27, 2014. Taxpayer-owned Royal Bank of Scotland took a whopping 8.2 billion-pound ($13.7 billion) pre-tax loss for 2013 as it announced a new plan Thursday to transform itself, streamlining the bank to make it smaller and safer. (AP Photo/Lefteris Pitarakis)
Ross McEwan. back in 2014 Photograph: Lefteris Pitarakis/AP

“I am determined to put the issues of the past behind us, and make sure RBS is a stronger, safer bank. We will now continue to move further and faster in 2016 to clean up the bank and improve our core businesses,” said McEwan.

“We’ve always been open about the scale of past issues facing RBS and although there is clearly much more to do, this announcement is a further step towards addressing legacy issues and building a great bank for our customers and delivering long-term value for our shareholders,” he added.....

Here’s Jill’s full story:

The City of London business district is seen through windows of the Royal Bank of Scotland headquarters in London<br>The City of London business district is seen through windows of the Royal Bank of Scotland (RBS) headquarters in London, Britain September 10, 2015. Britain should overhaul the way it runs a growing sprawl of state-owned financial bodies ranging from nationalised banks to institutions that manage student loans and business lending, the country’s spending watchdog said on Thursday. REUTERS/Toby Melville

The latest problems at RBS show that bankers need keeping on a tight leash, argues campaigners for a financial transaction tax.

David Hillman, spokesperson for the Robin Hood Tax campaign, says:

“It’s groundhog day in the City as RBS announces yet another huge provision for dodgy dealing and fleecing its customers.

“Try as it might, the banking sector is incapable of shaking off its past sins. The government must take note — now is not the time for it to ease up on financial sector reform.”

There are signs that Britain is taking a softer line with the City. An inquiry into banking culture was curiously abandoned at the end of last year, alarming campaigners. And yesterday, Bank of England deputy governor Andrew Bailey was appointed as head of the Financial Conduct Authority - and hand-picked by George Osborne for this crucial job.

Updated

Citigroup analysts have warned that RBS could suffer even more legal charges this year, points out the BBC’s Kamal Ahmed:

“We still see significant additional litigation charges in 2016, on top of the charges that have been announced today.

A quick explanation. When RBS says it is setting aside £1.5bn to cover “various US residential mortgage-backed securities (“RMBS”) litigation claims”, it is referring to one of the more noxious elements of the 2007-08 financial crisis.

In the build-up to the crisis, milions of mortgages were sold to US citizens with shaky credit histories, who could not really afford them. Those loans were repackaged by investment banks into new financial products (the RMBSs) and sold onto investors who weren’t told how dangerous they might be.

Cue the credit crunch, and the collapse of the subprime market. Mortgage-backed securities plunged in value, as the borrowers behind them failed to meet their payments and handed back the key to their homes.

And the smaller banks, credit unions, insurers and suchlike who had been left holding them when the music stopped (and the Big Short paid out) launched waves of legal action against Wall Street.

RBS had a finger in this unsavoury pie though its US subsidiary, Greenwich Capital Markets. In 2013, the SEC accused it of “misleading investors” and cutting corners, by selling loans that didn’t meet underwriting guidelines.

Updated

Important point: The £1.5bn in new US legal charges announced by RBS this morning does not cover any potential settlements with the US Department of Justice, or various US State Attorney General investigations.

Ian Gordon of Investec warns that:

The timing and the cost of resolving those cases remains highly uncertain.

City analysts are punting out their opinions now.

And Sandy Chen of Cenkos Securities isn’t too alarmed by RBS’s announcement. He argues that the bank is simply cleaning up the mess of previous eras (or possibly ‘previous errors’).

The new £1.5bn provision against US mortgage-backed security costs brings the total bill to £3.8bn - “closer to the £4-6bn totals that most analysts have had in mind”, Chen says.

And the £500m payment protection insurance top-up should be one of the last big ones, given the FCA’s consultation on a 2018/19 time-bar on PPI claims, Chen adds.

Pumba

His conclusion:

Bad news – really? More like putting their past in their behind, as Pumba said (in the Lion King).

[I think Pumba actually says “you got to put your behind in your past.” -- but we get the gist]

Updated

The UK government currently owns almost 73% of RBS, and at today’s share price I fear we’re stuck with it for some time.

The taxpayer paid around 502p per share when it bailed the stricken bank out in 2008.

Today, RBS shares are trading at just 250p, so we would take a stonking loss if George Osborne sells another slice of the bank.

Last summer, he sold £2.1bn of stock at around 320p - crystallising a £1bn loss for the taxpayer. That deal was criticised, but with hindsight the hedge funds who bought the stock are now sitting on a loss themselves.

RBS shares hit lowest point since 2012

RSB shares have just hit their lowest level since September 2012, I reckon.

That’s not good news for George Osborne, as he tried to sell the bank back to the private sector.

RBS’s share price over the last five years
RBS’s share price over the last five years Photograph: Thomson Reuters

RBS shares fall 5% after new wave of costs

Shares in Royal Bank of Scotland have slumped by 5% at the start of trading, shedding 12.1p to 248p.

That makes RBS is the biggest faller on the FTSE 100.

Bad news for shareholders - which in RBS’s case is every member of the UK public, as we bailed the bank out in 2008.

Q: When did RBS last make a profit, asks Jill Treanor.

CEO Ross McEwan sucks through his teeth and takes a stab at 2007 -- the year before Lehman Brothers failed.

We told you that 2015 and 2016 was about tidying up these legacy issues, and that’s exactly what we’re doing, McEwan adds.

Q: How much has RBS paid out on PPI?

The total bill is around £4.3bn, says McEwan.

RBS will post a loss in 2015

Q: Do today’s provisions mean RBS will declare a loss for 2015?

Yes, McEwan replies. Some of these charges will hit the bottom line (not the pension changes, though)

Updated

McEwan: Hopefully this is the end of PPI costs

My colleague Jill Treanor asks whether today’s £500m PPI provision is finally the end of the saga.

We’ve done the best we can, based on what we know today, to estimate what the final provision will be, McEwan replies.

We think it is hopefully the end.

People have until spring 2018 to file PPI claims.

McEwan says PPI has been a long and torturous journey for many banks, and a reminder of how to treat consumers (or how not to mistreat them).

RBS is briefing the media now, on a conference call.

Chief Financial Officer Ewen Stevenson is telling reporters that “underneath it all we’ve got a strong core bank”.

Will it ever end, wonder City journalists....

Is Ross McEwan is cleaning up RBS ahead of a sale, wonders the BBC’s Kamal Ahmed.

RBS pumps more cash into pension pot

RBS has also told the City that it is putting £4.2bn into its pension scheme, to cover an accounting deficit of £3.3 billion.

That’s mainly an accelerated payment of existing committed future contributions. It follows changes in accounting practice, which have made RBS rethink whether or not it has an unconditional right to a refund of any surpluses in its employee pension funds.

RBS announces £2.5bn in new provisions

Royal Bank of Scotland has stunned the City with a fresh wave of provisions to cover bad behaviour and legal bills.

In an unscheduled announcement, RBS announced a series of new charges. In a nutshell:

  1. The bank is setting aside $2.2 billion, or £1.5bn, to cover litigation claims in the US relating to various residential mortgage-backed securities. That’s a legacy of the subprime crisis.
  2. It is also setting aside an extra £500m to cover Payment Protection Insurance (“PPI”) claims. That’s the long-running mis-selling scandal in which millions of consumers were sold insurance they didn’t need (or even ask for, in some cases).
  3. RBS taking a goodwill impairment charge of £498m against its Private Banking business.

More than seven years after being rescued by the taxpayer, RBS is still a work in progress.....

CEO Ross McEwan insists that he is cleaning up the mess of the past:

“I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank. We will now continue to move further and faster in 2016 to clean-up the bank and improve our core businesses.

We’ve always been open about the scale of past issues facing RBS and although there is clearly much more to do, this announcement is a further step towards addressing legacy issues and building a great bank for our customers and delivering long term value for our shareholders.”

Updated

The agenda: Oil, markets, and then the Fed

Good morning, and welcome to our rolling coverage of the world economy, the financial markets the eurozone, and business.

Two things dominate today -- the turmoil in the stock markets, and the first US Federal Reserve interest rate decision of 2016.

Traders can’t take their eye off the oil price, which is lurching around the $30 per dollar mark this week. Brent crude is currently trading around $31.42 per barrel, helped by rumours that Russia and Saudi Arabia might carve up some kind of deal to cut production. It’s all a bit flaky, though.

Michael Hewson of CMC Markets explains:

The symbiotic relationship between equity markets and oil prices continued yesterday as after a rocky start to trading saw a slide in oil prices below $30 drag equity markets lower, the lack of follow through saw a semblance of stability return and a sharp recovery back above the $30 level on vague chatter that senior OPEC officials were looking to open a dialogue and put together some form of deal with Russia in an effort to put a floor under prices.

European markets are likely to be calm this morning, as investors await new from America’s central bank.

At 7pm GMT tonight, the Federal Reserve announces its decision on monetary policy. It will surely (surely!) leave interest rates unchanged, having made the first symbolic post-crisis hike last month.

The Fed’s statement will be scrutinised for its view on the global economy, and any signs of ‘hikers’ remorse’, given the turmoil in the markets in recent weeks.

Lots of companies reporting results today, although the biggie - Facebook - comes at 9pm GMT.

The City will also be digesting Apple’s results last night, which showed that the iPhone boom may finally be over:

We’ll be tracking all the main events through the day....

Updated

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