European markets end lower
After a fairly uneventful morning, European markets took another turn lower as investors turned cautious once more. With no guidance from Wall Street, closed for the President’s Day holiday, shares went into reverse as the day progressed. Connor Campbell, financial analyst at Spreadex, said:
It was hard to ascertain exactly what caused Monday’s late reversal. For the FTSE a copper-led decline in its mining stocks – which have a busy week of reporting ahead of them – certainly contributed, as did Reckitt Benckiser’s post-full year results 5.5% decline. The lack of news from the US likely didn’t help, with investors seemingly craving reassurances that the Dow Jones is willing to continue last week’s recovery before following suit.
Regardless, the fact that the markets have turned negative on a day almost completely devoid of anything interesting news-wise perhaps gives an indication where sentiment currently lies.
Chris Beauchamp, chief market analyst at IG, said:
The worry is that the US will follow this pattern when it reopens tomorrow, which would accord with the historical norm; another test of the lows, and a possible new low, before the ‘ball held underwater’ springs higher once again, catching everyone off guard.
The final scores showed:
- The FTSE 100 finished down 47.04 points or 0.64% at 7247.66
- Germany’s Dax dropped 0.53% to 12,385.6
- France’s Cac closed down 0.48% at 5256.18
- Italy’s FTSE MIB fell 1% to 22,568.92
- Spain’s Ibex ended down 0.26% at 9806.2
- But in Greece, the Athens market added 0.38% to 846.07
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
With Spain’s Luis de Guindos set to become vice president of the European Central Bank, there is a suggestion this could clear the way for Germany’s Jens Weidmann to take over as the head of the ECB. Reuters reports:
Euro zone finance ministers on Monday chose Spanish Economy Minister Luis de Guindos to succeed European Central Bank Vice President Vitor Constancio in May, a move likely to boost the chances of a German becoming head of the ECB next year.
The choice of a Southern European for vice president increases the likelihood that a northerner such as German Bundesbank governor Jens Weidmann could be elected to replace Mario Draghi as head of the ECB in 2019. This could influence the bank’s ultra-loose monetary policy.
“The Eurogroup (of euro zone finance ministers) today gave its support to the candidacy of Luis de Guindos for the position of Vice President of the European Central Bank (ECB),” an EU statement said after a brief discussion among finance ministers.
De Guindos said he would resign as Economy Minister within days after being chosen as ECB Vice-President.
Initially faced with two candidates -- de Guindos and Irish central bank governor Philip Lane -- the ministers had their choice made simple for them by Ireland’s decision to withdraw Lane’s name.
Spain’s Luis de Guindos is set to become vice president of the European Central Bank after the eurogroup backed his appointment.
The move looked a done deal when potential rival Philip Lane, the Irish central bank governor, withdrew from the race in the interests of “consensus.” Here is the eurogroup statement on de Guindos:
The Eurogroup today gave its support to the candidacy of Luis de Guindos for the position of Vice President of the European Central Bank (ECB).
The recommendation to the European Council, composed of the heads of state and government, should be formally adopted by the Council on 20 February. On this basis, the European Council will request opinions from both the European Parliament and the Governing Council of the ECB. It is then expected to adopt its final decision at its meeting of 22-23 March.
The new Vice President will replace Vítor Constâncio as of 1 June 2018. He will serve a non-renewable 8-year term.
Back in the UK, and a troubled meat supplier has gone into administration:
More than 260 workers have lost their jobs at the meat supplier Russell Hume, which has collapsed into administration just weeks after production was suspended following a food standards scare.
Administrators announced 266 redundancies on Monday from the 302 employees at the company, which has its headquarters in Derby and operates from six production sites in Liverpool, Birmingham, London, Boroughbridge in North Yorkshire, Exeter and Fife.
It is expected that all the company’s employees will eventually lose their jobs.
Meat products were prevented from leaving the group’s factories last month after Food Standards Agency (FSA) inspectors found “serious non-compliance with food hygiene regulations” during a surprise visit to the Birmingham premises. Jamie Oliver’s Italian restaurant chain and Wetherspoon were among the major restaurants and pub groups that were customers of Russell Hume. .
The company’s demise comes after the pork company Fairfax Meadow voluntarily recalled meat products earlier this month after an unannounced inspection revealed issues with use-by date labelling.
Meanwhile, in September, a Guardian and ITV undercover investigation into 2 Sisters Food Group resulted in the country’s largest supplier of supermarket chicken suspending production at its West Bromwich plant for five weeks.
The full story is here:
More from the eurogroup:
#Eurozone ministers likely to choose #Spain's de Guindos to succeed #ECB vice president Constancio, a move likely to boost the chance of a German becoming the head of the ECB next year. https://t.co/UHH4AGSmTl pic.twitter.com/iWXNMG5fO0
— Holger Zschaepitz (@Schuldensuehner) February 19, 2018
Eurozone officials appear to be dashing Greek hopes that fresh loans of up to €5.7bn will be disbursed at today’s eurogroup meeting, writes Helena Smith in Athens:
Before heading to Brussels for today’s meeting of eurozone finance ministers, Greek officials had expressed hopes that new loans amounting to €5.7bn would be greenlit for release. The country’s latest market foray and credit upgrade had strengthened hopes with the finance ministry announcing at the weekend that both provided “strong proof of restoration of investor confidence” in the country.
But officials, citing the latest compliance report of Athens’ reform progress, are leaking that at least two prominent “prior actions,” or reforms, have to be completed before more loans are drawn down from its final €86bn bailout programme. The measures singled out are electronic auctions of foreclosed property – set to begin May 1st – and privatisation of Athens’ old international airport, a mega project currently held up by a court decision. Auditors, who begin returning to Athens tomorrow, are hoping that both will be resolved by February 26th.
Updated
Oil prices have moved higher, boosted by growing signs of a strengthening global economy and amid tensions in the Middle East, in particular between Israel and Iran.
But there were some negative factors for crude, with US producers increasing output even as Opec continues its measures to try and limit supply. Brent crude has risen 0.68% to $65.28 a barrel while West Texas Intermediate is up 0.9% at $62.24.
British millennials losing out financially - Resolution Foundation
Britain’s millennials are losing out dramatically in financial terms compared to previous generations, according to a new report:
Britain’s millennial generation, born since 1981, have suffered a bigger reversal in financial fortunes than their counterparts in most other developed countries except Greece, according to a study.
The report by the Resolution Foundation paints a gloomy picture for all young adults across the developed world – apart from the Nordic countries. It highlights how incomes are depressed, jobs scarce and home ownership is slumping for the millennial generation compared with the baby boomers that preceded them.
But it also reveals that on many measures – apart from unemployment – British millennials have suffered a more significant decline than those in other countries.
The full story is here:
UK household finances deteriorated at fastest pace for seven months, according to the latest survey by IHS Markit, and around 60% expect the Bank of England to raise interest rates within the next six months:
UK households are braced for higher borrowing costs, with 60% expecting a rate hike from the Bank of England over the coming six months. There has been a clear shift in interest rate expectations since the start of 2018. More at https://t.co/BkUKtqU1n9 pic.twitter.com/MVWTTUP8gx
— Chris Williamson (@WilliamsonChris) February 19, 2018
The pound has edged lower against the dollar and there could be further declines ahead, says Fawad Razaqzada, market analyst at Forex.com:
The GBP/USD has rallied to its pre-Brexit levels of above 1.40 in recent weeks as the dollar sold off. However, with the recent improvement in US macro pointers, there is a good chance that the greenback could bottom out soon. If this is the case, then the cable could head lower. Brexit uncertainty is likely to offset the support the pound is receiving from a hawkish Bank of England amid improving UK data and rising inflation. The potentially weaker exchange rate will be a welcome relief for export names in particular. However, if the relentless dollar selling continues then the cable could extend its gains further and this may be an additional factor weighing on the FTSE. In the more near-term outlook, the latest UK wages data on Wednesday and the second estimate for UK GDP a day later on Thursday should cause the pound – and therefore the FTSE – to move sharply.
Sterling is currently down 0.24% at $1.4005.
With US markets shut for President’s Day and no major economic news, there is little impetus for European shares to show much movement, and so it has proved up until now. Connor Campbell, financial analyst at Spreadex, said:
Given all the drama February has brought with it, you can forgive investors for choosing to take a bit of a breather this President’s Day.
Without the US markets to provide any guidance this afternoon the European indices decided it was better to do nothing this Monday. The FTSE slipped by 0.1%, leaving it just below 7290; the DAX, meanwhile, gave up its 12500-crossing growth to sit flat around the 12460 mark, with the CAC trickling a couple of points lower.
The forex markets were just as barren. Cable was broadly unchanged at $1.4025, recovering from some morning losses that briefly left it the wrong side of $1.40, while against the euro the pound nudged 0.1% higher to tease €1.13.
In terms of earnings, Reckitt Benckiser kicked off a very busy week in pretty inauspicious fashion, contributing to the FTSE’s sluggish start. Despite a Mead Johnson-boosted 21% rise in total revenue to £11.5 billion and an 11% surge in pre-tax profit to £2.5 billion, the consumer goods firm – which counts Nurofen and Durex among its stable of products – fell 5.5% as the day went on, with investors disappointed that full year like-for-like growth was flat.
More jobs lost, and saved, at Carillion
Newsflash: Another 152 workers at Carillion have been made redundant, following its collapse into liquidation last month.
The Official Receiver, which took control of the outsourcing group, says this takes the total number of jobs lost to 1,141.
In happier news, 942 jobs have been saved -- because Carillion contracts have been taken on by other suppliers. That takes the total number of jobs protected to 7,641.
More than 10,000 Carillion workers still face uncertainty, though, as the company employed almost 20,000 in the UK.
The Official Receiver says:
“Discussions with potential purchasers continue and I expect that the number of jobs safeguarded through the liquidation will continue to rise. I am continuing to engage with staff, elected employee representatives and unions to keep them informed as these arrangements are confirmed.”
The news comes as MPs release evidence from several Carillion shareholders, which show that one - Edinburgh’s Kiltearn - had considered suing the company.
More here:
The torpor in the City has been (briefly) broken by the news that European building firms boosted their output at the end of last year.
Construction output across the EU rose by 0.6% month-on-month in December. Within the eurozone, it rose by a more modest 0.1%.
The figures also show that, during 2017, construction output rose by a healthy 3.5% across the EU - and by 2.4% in the euro area. Another sign that Europe’s economy strengthened last year.
Updated
Greece celebrates credit upgrade, as bailout end nears
Greece’s bailout is back on the agenda today.
Eurozone finance ministers will discuss Athens’ progress when they gather for a Eurogroup meeting in Brussels this afternoon.
Greece’s minister Euclid Tsakalotos will brief the room about the implementation of various ‘prior actions’ under its bailout review programme. Once they are all completed, the next tranche of the Greek bailout will be handed over.
Greece got a boost on Friday night, when rating agency Fitch raised its credit rating from B- to B, with a positive outlook, saying:
Fitch believes that general government debt sustainability will improve, underpinned by sustained GDP growth, reduced political risks, a record of general government primary surpluses and additional fiscal measures legislated to take effect through 2020.
Greece’s current bailout is due to end this summer. Athens hopes to then return to the financial markets. Today, it’s 10-year bonds are trading at a yield of around 4.2%. That’s much lower than the ‘danger zone’ of around 7%, but higher than other euro countries.
Rebecca O’Keeffe, Head of Investment at interactive investor, sees a “positive” sentiment in the stock markets today as the global rebound continues.
Many investors who are selling government bonds are putting the money into shares instead, she explains:
Not even the unexpected indictments from Special Counsel Robert Mueller could hold the rally back, as US markets closed higher for the sixth straight session on Friday, resulting in the best week for US equities in five years.
The strength of the equity recovery has surprised some, but the weight of money coming out of bond markets is primarily finding its way into equities, which, for the moment at least, look far more attractive than other alternatives.
Latvia's top central banker arrested in anti-corruption probe
Latvia has been rocked by the news that its top central banker has been arrested
Ilmars Rimsevics was detained by his country’s anti-graft bureau on Sunday, as part of an anti-corruption clampdown.
The news is also a blow to the European Central Bank as Rimsevics serves on its governing council.
Bloomberg has more details:
The detention followed a search by authorities of Rimsevics’s office and private property, state-owned LTV reported. His lawyer, Saulvedis Varpins, said the governor considered the move against him as “clearly illegal.
Rimsevics has served as the governor of the Bank of Latvia since 2001
Finance Minister Dana Reizniece-Ozola has urged Rimsevics to step down, telling reporters:
“Each day that Mr. Rimsevics remains in the central bank’s leadership significantly worsens.
“I think that at this moment, it would be wise if Mr. Rimsevics would at least, during the course of the investigation, step down.”
In another development, the ECB has halted all payments by one of Latvia’s largest lenders, ABLV, this morning. US authorities accuse ABLV of money laundering and breaching sanctions against North Korea.
Britain’s FTSE 100 is being dragged back by consumer goods giant Reckitt Benckiser.
Reckitt slightly missed City forecasts this morning; it reported like-for-like sales growth of 2% in the last quarter, vs estimates of 2.1%.
Only a small miss, but enough to wipe 3% off the Nurofen-to-Cillit Bang maker’s share price this morning.
The FTSE 100 itself is up just 4 points, or 0.06%.
European markets open higher
Europe’s major stock markets have opened higher, with Germany’s DAX up 0.35% and the French CAC gaining 0.27%.
Traders have taken their cue from the gains in Asia overnight. They also seem to be unruffled by the latest political tensions in America over Russian meddling in the presidential election.
Hussein Sayed, Chief Market Strategist at FXTM, explains:
Investor sentiment has gradually improved after fears of rising inflation sent most global indices into correction territory.
The Cboe’s Volatility Index (VIX) ended Friday’s session below 20, suggesting that indictments from Special Counsel Robert Mueller against 13 Russian nationals for alleged interference in the 2016 elections did little to impact investor decisions.
The agenda: Asian markets rally as confidence returns
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets are starting the new week in confident mood, as investors put the recent bout of volatility behind them.
Shares are rallying across Asia today, and we’re expecting a positive start to trading in Europe too.
The markets seem to have got over their worries over American interest rate hikes, and the threat of rising inflation. Traders have concluded that shares look attractive again, following the sharp losses earlier this month.
David Madden of CMC Markets says confidence is back in the markets:
Stock markets around the world rebounded last week as investors took at advantage of the relatively low prices of equities. Whenever there is a severe sell-off in the stock markets, traders spend a lot of time wondering is there another leg lower coming, or is it safe to get back in the water.
The move higher last week saw some indices reach their highest levels in over a week. Market confidence often attracts even more market confidence, and that is what we are seeing at the moment. The cooling of the volatility index (VIX) has been given some dealers the green light to buy back into the stock market, and while the fear factor keeps sliding, it is likely equity benchmarks will continue to push higher.
So, Japan’s Nikkei is up 2%, Australia’s S&P/ASX 200 has gained 0.6%, and the South Korean market is up 0.7%. (other markets are closed for the Lunar New Year).
European Opening Calls:#FTSE 7306 +0.15%#DAX 12535 +0.67%#CAC 5301 +0.37%#MIB 22897 +0.43%#IBEX 9870 +0.38%
— IGSquawk (@IGSquawk) February 19, 2018
We’ll also be watching the restaurant industry, as a report warns that the number of insolvencies jumped by 20% last year.
Celebrity chef Jamie Oliver hasn’t been immune to these problems, and there are fears that his Barbecoa chain of steak restaurants could be in trouble if a buyer can’t be found.
Otherwise, it’s looking like a quiet day - especially as it’s President’s Day in America.
The agenda
- 10am GMT: Eurozone construction output data for December
- 2pm GMT: Eurozone finance ministers hold a eurogroup meeting in Brussels
- 5.45pm GMT: Bank of England governor Mark Carney gives a speech on Leadership and Values.
Updated
