European shares close higher
After a rollercoaster day - exaggerated by thin trading during the summer lull - European markets showed some substantial gains. It was an opening surge on Wall Street to a new record, following better than expected results from the likes of department store group Macy’s as well as a 3% jump in the oil price, that helped pull European shares sharply higher. The FTSE 100, in negative territory for much of the day, managed to end the day at a new 14 months high. Tony Cross, market analyst at Trustnet Direct, said:
The FTSE-100 has certainly been in for a volatile session...and once we take into account the toll stocks moving ex-dividend have exacted on the index, we’re looking at a rather upbeat performance. That said, we’re in the midst of the summer lull so thinner volumes will lend themselves to exaggerated market moves, but with more positive noises being made over oil prices stabilising, Wall Street has opened in an upbeat mood too – if these tailwinds continue, then it seems that soon enough the FTSE-100 will once again be starting with a “7”.
The final scores showed:
- The FTSE 100 finished up 48.29 points or 0.7% at 6914.71, its best level since 3 June 2015
- Germany’s Dax added 0.86% to 10,742.84
- France’s Cac closed up 1.17% at 4503.95
- Italy’s FTSE MIB rose 1.06% to 16,969.69
- Spain’s Ibex ended up 0.7% at 8719.5
- In Greece, the Athens market added 0.89% to 572.33
On Wall Street, the Dow Jones Industrial Average is currently up 129 points or 0.7%.
Oil continues to rise, with Brent crude climbing 5% at one point. It is now up 4.5% at $46.05 a barrel.
As for the pound, it is now down 0.36% at $1.2961 and 0.21% lower at €1.1614.
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.
Updated
Oil price jumps 3% after Saudi comments
Oil continues to rise, in turn supporting global stock markets.
As well as the International Energy Agency saying markets would rebalance, crude has also been boosted by comments from the Saudi oil minister about possible action to stabilise prices.
Khalid al-Falih said OPEC members and non-members would discuss the market situation and any action needed at their meeting at the end of September in Algeria.
Traders had been sceptical about the prospects of the OPEC meeting taking any action to stem production, especially since Saudi Arabia reported record output in July.
But these new comments have helped send Brent crude up 3.4% to $45.57, while West Texas Intermediate is 3.5% higher at $43.21.
So on Wall Street, the Dow Jones Industrial Average has been testing new highs, and is currently up 131 points or 0.7%.
The pound continues to weaken. It is now at around €1.1600 against the euro, down 0.33% and at its lowest level since 6 July. In the wake of the Brexit vote it hit a post referendum low of €1.1575 on that date, according to Caxton FX analyst Alexandra Russell-Olive.
Against the dollar, sterling is down 0.35% at $1.2965.
Updated
Wall Street higher in early trading
US markets are in buoyant mood after the oil price steadies, US weekly jobs claims fell again and a number of companies including department store group Macy’s and US listed Chinese internet group Alibaba issued positive updates.
The Dow Jones Industrial Average is currently up 49 points or 0.26%, while the S&P 500 and Nasdaq are also moving higher.
Oil steadier after new forecasts
Oil prices have edged higher after the International Energy Agency said crude markets would rebalance in the coming months.
In its latest monthly report, it predicted oil stocks would reduce in the third quarter for the first time in more than two years. It said:
Oil’s drop...has put the ‘glut’ back into the headlines even though our balances show essentially no oversupply during the second half of the year.
Brent crude is currently up 0.6% at $44.32 a barrel, having earlier fallen as low as $43.46. The US benchmark, West Texas Intermediate, is up 0.5% at $41.93 a barrel after hitting $41.1.
Former deputy governor of the Bank of England, Sir Charles Bean, has been nominated by UK chancellor Philip Hammond to the Budget Responsibility Committee of the Office for Budget Responsibility.
The vacancy at the independent OBR, which scrutinises the government’s finances, comes because Sir Stephen Nickell is due to step down in December. Sir Charles said:
I am delighted that the Chancellor has nominated me for appointment to the OBR’s Budget Responsibility Committee. Sir Stephen Nickell and the rest of the BRC have done excellent work in establishing the credibility and reputation of the OBR, and I will be honoured to take up the post should the Treasury Committee wish me to do so.
Earlier it was announced that the Office for National Statistics had begun recruiting its first data analytics apprentices, following a critical review into the quality of economic data by Sir Charles.
Over to Russia, and a preliminary report from the Federal Statistics Service showed a 0.6% fall in GDP in the second quarter. But this is an improvement on recent quarters:
#Russia #GDP Growth Rate year-on-year Prel at -0.6% https://t.co/7l3UY6fdAO pic.twitter.com/Sw8P2lZlyx
— Trading Economics (@tEconomics) August 11, 2016
Back with Brexit, and another suggestion that the UK economy is suffering after the vote to leave the European Union.
A Reuters poll of nearly 60 economists indicated they expected the economy to contract by 0.1% in the third and fourth quarters. Ahead of the vote, they had expected similar growth to the 0.6% recorded in the second quarter.
Most of those surveyed also thought the Bank of England would reduce interest rates again in November to just 0.1% after this month’s reduction in borrowing costs.
Two thirds of those who answered a question on fiscal measures expected the government to come up with some sort of fiscal stimulus in the Autumn statement.
Back to Mongolia! The FT points out that the country’s currency, the tögrög*, has hit a new record low today, thanks to those worries over its economy.
* - bonus mark to anyone who knew that 1 tögrög = 100 möngös
Hordes out of Mongolian currency...https://t.co/8aEzYCWkUY pic.twitter.com/ivoeCSbgks
— Naomi Sarah Rovnick (@naomi_rovnick) August 11, 2016
US jobless claims fall as labor market stays healthy
If job creation was an Olympic sport, then the USA would be taking home yet another medal.
The weekly job figures, just released, show that the number of Americans filing new claims for unemployment benefit fell by 1,000 last week, to 266,000. That suggests that the US labour market is in robust health, with employers still creating new jobs.
This is the 75th week running in which the initial claims figure has been below 300,000, the traditional threshold for a strong labour market.
Bloomberg’s Joe Weisenthal has more details:
The 52-week moving average of non-seasonally adjusted jobless claims just hit a new post-crisis low pic.twitter.com/HedfKx8kyM
— Joe Weisenthal (@TheStalwart) August 11, 2016
Claims fall to 266K. Cool as the other side of the pillow.
— Joe Weisenthal (@TheStalwart) August 11, 2016
Updated
Mongolian bonds routed as economic crisis deepens
Today is so quiet that we’d happily trek to Outer Mongolia for a decent bit of news.....
...and, bang on cue, Mongolian bonds are suffering a serious rout, after the government warned it faces an economic crisis.
Reuters has the details:
Bonds maturing in 2021 and 2022 fell 4.6 cents and 5 cents respectively, to their lowest since end-June . The 2018 bond fell 1.8 cents to 2-1/2-month lows.
The selloff was sparked by the new finance Minister Battogtokh Choijilsuren, who warned earlier this week that the government may struggle to pay public sector wages.
The Mongolian People’s Party won a sweeping victory last month. But the honeymoon didn’t last long, with Choijilsuren warning that:
“The economic situation is difficult but our government is optimistic that we can develop a comprehensive plan to get out of this crisis.”
Choijilsuren also spoke about “a deep state of economic crisis”, leading investors to worry about Mongolia’s ability to avoid a default.
Mongolia is rich in minerals, and commodities such as coal and copper, but has been hit by falling demand from emerging economies such as China.
It’s shaking up to be a calm day on Wall Street, where traders expect the main share indices to open slightly higher in 80 minutes time.
US Opening Calls:#DOW 18541 +0.25%#SPX 2180 +0.19%#NASDAQ 4795 +0.25%#IGOpeningCall
— IGSquawk (@IGSquawk) August 11, 2016
Sofa maker DFS isn’t worried about Brexit, though.
The company has hiked its profit forecast this morning, and hopes to get a sales boost out of sponsoring the Olympics (a curious tie-up, until you remember where most of us watch the action).
CEO Ian Filby has told us that he expects the consumer market to remain quite resilient, despite the EU referendum uncertainty.
DFS brushes aside post-Brexit fears and ups its profit forecast https://t.co/0LttlO2uGC
— The Guardian (@guardian) August 11, 2016
Updated
Survey: UK consumer confidence falls again
A new survey has shown that consumer confidence has dipped in August to a two-year low.
The Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI) eased to 49.2 from 49.4 in July. That level was last seen in early 2014.
The survey found that Brits are more concerned about losing their jobs, but actually less pessimistic about the wider economy.
Rating agency Moody’s has joined the chorus of concern over Britain’s property sector.
In a new report, it predicts that the buy-to-let sector will be particularly badly hit by the Brexit vote. Recent changes to stamp duty rules, which hit second home owners, will also hurt BTL prices.
Kamran Sabir, a Moody’s vice president, says:
“With reduced demand for credit and downward pressure on house prices, economic uncertainty will likely reverse previously positive market conditions for the UK mortgage market.”
The weakening pound is going to hit British holidaymakers in the pocket.
Holiday group TUI has warned that sterling’s recent tumble will inevitably make package tours more expensive:
Tui warns UK holidaymakers over rising cost of post-Brexit package tours https://t.co/hIsimBInxb
— Julia Kollewe (@JuliaKollewe) August 11, 2016
It’s one of those days...
pound down a bit, FTSE up a bit. *yawns*
— Neil Wilson (@neilwilson_etx) August 11, 2016
Capital Economics predict that UK house price inflation will fall to 2% by the end of this year.
They do see some glimmers of light in today’s report by Britain’s surveyors:
This morning’s RICS survey reported that the new buyer enquiries balance improved a little, from minus 36% in June to minus 27% in July. (See Chart.)
And the new sales instructions balance rose from minus 45% to minus 33%.
But the big picture is that the market is softening.
After all, most of the readings from June were deep in negative territory and multi-year lows. So despite the modest improvements seen this month, the survey still points to fewer new buyers and sellers in July than in June.
And, with the newly agreed sales balance at minus 34% and the past prices balance at 5%, the data are consistent with falling sales and low, single-digit house price growth.
Swiss bank USB reckons that the pound will fall to $1.25 in the next three months, as the Bank of England launches more stimulus measures:
UBS strategists Constantin Bolz and Thomas Flury say:
“In our view, it is very likely that further monetary easing will be delivered in the coming months, which would weaken sterling.”
UBS wealth management cut sterling forecast to $1.25 in three months - pretty much the average of market views at the moment.
— Patrick Graham (@reutersPatrickG) August 11, 2016
Updated
Pound hits one-month low
Ouch. Sterling has fallen to its lowest level against the US dollar since July 7.
The pound has shed more than half a cent to $1.295, as traders react to the slowdown in UK housing market.
Sterling is also suffering from the Bank of England’s new QE programme.
That’s because the BoE will sending a lot of pounds overseas, to buy UK government debt from foreign investors.
Kit Juckes, currency expert at French bank Société Générale, explains:
The foreign exchange conclusion of the BOE buying bonds off foreigners is very simple and sterling-negative. Throw in a soft RICS housing survey released overnight and the pound’s woes don’t get any less.
More property gloom, via the FT....
Derwent London, the UK property landlord, has become the latest real estate group to caution that Britain’s vote to leave Europe is likely to lower demand for office space in London and it has cut its expectations for growth in rental income for this year.
The group, which has assets in London locations such as Clerkenwell and Fitzrovia, is braced for a slowdown in momentum in the second half of the year and has reduced its estimate of rental growth for the whole of 2016 to 1-5 per cent from a previous forecast of 5-8 per cent.
Derwent London lowers rental growth forecast after Brexit vote https://t.co/bJfXzf1fCO
— fastFT (@fastFT) August 11, 2016
Updated
Ana Thaker, market economist at PhillipCapital UK, predicts the UK housing market will suffer from the Brexit vote for some time:
RICS housing prices showed that prices dipped by a drop to +5 for the month of July indicating one of the most significant drops since the middle of 2013.
This trend looks set to continue as the UK struggles with the fallout and the housing market is likely to be a crucial gauge of consumer sentiment following its rapid rise over the last two years.
A weaker currency is likely to fuel demand from abroad but the domestic market looks set to suffer which will permeate other crucial areas of the economy.
The government should look to act swiftly to stem any unrest in these sectors so as not to cause panic amongst consumers.
Updated
The former head of London estate agent Greene & Co reckons buyers should be cautious:
RICS say prices are recovering post brexit. I'm not so sure,sit on your hands for now unless you have a compelling reason to buy today
— David Pollock (@DavidWPollock) August 11, 2016
Some more context:
UK house prices set to fall, RICS survey suggests pic.twitter.com/aVI71u3Cet
— Andy Bruce (@BruceReuters) August 11, 2016
Shares in housebuilders slide after RICS report
Britain’s FTSE 100 index had tumbled by 50 points, or almost 1%, in early trading.
And housebuilding companies are leading the selloff, following the news that house price growth has hit a three-year low.
Berkeley Group has fallen by 5.4%, Taylor Wimpey are down 2.1% and Barratt Development has lost 1.9%. Travis Perkins, which supplies building products, are down 2.5%.
House price report: The key charts
Today’s report from RICS contains several charts, showing how the UK housing market slowed sharply in July.
These two illustrates how house price growth slowed in July, and the number of people enquiring about properties.
The slowdown is worst in the East and West midlands:
And this chart shows how RICS’s survey is often a good leading indicator of where the housing market is headed:
RICS says surveyors expect weakest house price growth in 3yrs following #EURef. Chart from @samueltombs: pic.twitter.com/eoJUVrksMf
— Ed Conway (@EdConwaySky) August 11, 2016
Updated
UK house price growth hits three-year low
Britain’s house prices rose at the slowest rate in three years in July, in the latest sign that the EU referendum has hurt the economy.
The Royal Institution of Chartered Surveyors reports this morning that house price growth, and transaction levels, fell sharply last month following the Brexit vote.
RICS’s headline price balance fell to +5 in July from +15 in June, its lowest level since April 2013.
This means that just 5% more respondents nationally saw a rise rather than fall in prices.
RICS says:
• House price growth falters in July and near term expectations remain negative
• Sales and enquiries drop further - although expectations point to a more stable picture in the coming months
• Stock levels at record lows in most parts of the UK as new instructions decline markedly
The decline was particularly sharp in London, reflecting concerns that the capital will suffer from the June 23 vote to leave the EU.
But.... RICS also reckons that the property sector is only suffering a wobble, rather than a full-blown meltdown. Most surveyors expect prices to be higher in 12 months time, and a majority expect to be handling more sales too.
That’s partly because Britain still suffers from an “acute shortage of property for sale”.
Simon Rubinsohn, chief economist at Rics, remains optimistic, saying:
“The rebound in the key 12 month indicators in the July survey suggest that confidence remains more resilient than might have been anticipated.”
Noble Francis, economics director at the Construction Products Association, flags up that house prices in some London areas are already falling:
RICS reporting London most affected by house price slowdown in July unsurprising as prime central...#ukhousing pic.twitter.com/YamIPNqPyY
— Noble Francis (@NobleFrancis) August 11, 2016
... London residential has oversupply, price falls & dependent on now uncertain international investors.#ukhousing pic.twitter.com/XlZPGvbBs4
— Noble Francis (@NobleFrancis) August 11, 2016
Updated
The agenda: Fears over Bank of England's stimulus drive
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.
Today, City investors are fretting about the Bank of England’s new stimulus programme after its new bond-buying spree drove UK borrowing costs to record lows.
Some gilts yields turned negative yesterday after the BoE bought up £1.17bn of government bonds. That’s very bad news for pension funds who rely on government debt for their income.
As we report this morning:
Anticipation that the Bank will keep buying bonds has helped push up their price – which in turn pushes down on the yield – and for some three- and four-year bonds the price rose so much that the yield turned negative.
Negative yields have happened once before since the 23 June vote, effectively meaning that the government does not have to pay any money to encourage investors to buy its debt.
Pensioners face a double-whammy right now, with the BoE also slashing interest rates to just 0.25%.
Ros Altmann, the former pensions minister, fears that Mark Carney and colleagues are wilfully ignoring savers, saying:
The Bank wants to stimulate the economy by bringing down interest rates, but the Bank is not acknowledging the negative impact these measures are having on pension deficits, and neither is the government.
Thursday's FT:
— Nick Sutton (@suttonnick) August 10, 2016
Fears mount for pensions as gilt yields touch negative territory#tomorrowspaperstoday #bbcpapers pic.twitter.com/icQt9XUDGE
It’s possible that gilt yields could hit fresh record lows today, given that pension funds are reluctant to give up their precious long-dated government debt.
Also coming up today....
- Holiday firm TUI is updating the City on its financial performance, in the light of the Brexit vote.
- The oil price is under pressure after the OPEC cartel warned that demand could be weak in 2017.
- We get another insight into the US economy at 1.30pm BST, when the weekly jobless report is released.
Traders are expecting European stock markets to drop a little in early trading:
Our European opening calls:$FTSE 6824 down 42
— IGSquawk (@IGSquawk) August 11, 2016
$DAX 10662 up 11
$CAC 4454 up 2$IBEX 8658 down 1$MIB 16791 down 1
And so far, that’s it. Fingers crossed for more news....
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