European shares end higher
With Wall Street hitting new record highs, global markets were in relatively buoyant mood, as global jitters faded for the moment. Rising oil prices helped, following a reduction in US crude stocks last week, as did the continuing trend of better than expected US company results, with Microsoft and Morgan Stanley both pleasing investors. In the UK the FTSE 100 finished above 6700 for the first time since last August. Tony Cross, market analyst at Trustnet Direct said:
Having come close for the last two days, London’s FTSE-100 is finally finishing above the 6,700 level, with fresh record highs on Wall Street helping shape sentiment in the latter part of the session. Financial stocks are leading the charge with better than expected unemployment readings adding further weight to the idea that a rate cut may not be all that imminent, whilst it’s the miners that are the day’s laggards. Anglo American has followed Rio Tinto in posting some lacklustre numbers and this is casting a shadow over the sector as a whole.
The final scores showed:
- The FTSE 100 finished up 31.62 points or 0.47% at 6728.99
- Germany’s Dax added 1.61% to 10,142.01
- France’s Cac climbed 1.15% higher to 4379.76
- Italy’s FTSE MIB rose 0.54% to 16,763.82
- Spain’s Ibex ended 1.06% better at 8575.5
- In Greece, the Athens market added 1.06% to 569.74
On Wall Street, the Dow Jones Industrial Average is currently 38 points or 0.21% higher.
On that note, it’s time to close for the evening. Thanks for all your comments and we’ll be back tomorrow for, among other things, the latest meeting of the European Central Bank.
#Turkish lira weakens to record low vs dollar after S&P downgrade pic.twitter.com/J56UbRfuEu
— Peter Hoskins (@PeterHoskinsTV) July 20, 2016
Meanwhile UK prime minister Theresa May has flown to Berlin to meet German chancellor Angela Merkel, with Brexit very much on everyone’s mind. For the latest developments, see our political live blog:
No surprise really, but S&P has cut Turkey’s credit rating from BB+ to BB and its outlook from stable to negative following the recent coup attempt. The agency said it expected a period of heightened unpredictability which could constrain capital flowing into Turkey’s economy.
Updated
Oil prices continue to recover after the US Energy Information Administration reported a 2.3m barrel fall in crude inventories, and have moved back into positive territory for the day. West Texas Intermediate is now up 0.67% at $44.95 a barrel having fallen as low as $43.69.
While the FTSE 100 has been regaining ground since the shock Brexit vote and is now sitting at an 11 month high, the more UK focused FTSE 250 has yet to recover the level it reached ahead of the June 23 vote.
But the mid-cap index is getting there, and a rise of 1% to its current 17,080 leaves it only 250 points shy of its pre-referendum level. Investors appear to have been comforted by the fact that the worst predictions of disaster following a leave vote have yet to be realised, with even the IMF this week rowing back from its talk of a UK recession in the wake of Brexit.
US crude stocks fell last week much in line with expectations, with a draw of 2.34m barrels compared to a forecast 2.1m.
2.3M barrel crude oil draw last week according to EIA. #CrudeOil ^JC
— FOREX.com (@FOREXcom) July 20, 2016
But gasoline stocks rose unexpectedly, compared to expectations of no change:
US GASOLINE STOCKS rose +0.9 million bbl to 241 million bbl last week pic.twitter.com/aIBhQDwDx9
— John Kemp (@JKempEnergy) July 20, 2016
So crude prices remain lower but recovering from their worst levels, with West Texas Intermediate now down 0.9%, while gasoline future have hit their lowest since early March.
Further slip in #consumer confidence in July in wake of #Brexit vote adds to signs #eurozone consumption is slowing pic.twitter.com/8RqSkKcWUx
— Capital Economics (@CapEconEurope) July 20, 2016
The consumer confidence figures, while not as bad as they could be, still show that Brexit could have an effect on EU economic activity, says economist Howard Archer at IHS Global Insight:
While there are no details available, there can be little doubt that a second successive drop in Eurozone consumer confidence to a three-month low in July is largely the consequence of heightened concerns over the economic and political outlook following the UK’s vote to leave the European Union. The June consumer confidence survey - which showed modest slippage - had been completed before the UK vote on 23 June.
There may be an element of relief that July’s drop in Eurozone consumer confidence was not greater and it may alleviate some of the deepest concerns about how much Eurozone growth will be negatively impacted by the Brexit vote.
Nevertheless the clear dip in Eurozone consumer confidence in July reinforces belief that the Brexit vote will have some dampening impact on Eurozone economic activity - particularly as the consumer has been a key growth driver for the Eurozone, notably in the first quarter of this year.
On the positive side, for now at least, the fundamentals still look pretty solid for consumers in the Eurozone with negligible inflation supporting purchasing power and labour markets significantly improved overall.
Dennis de Jong, managing director at UFX.com, said these figures could mark the low point:
Consumer confidence in the EU had already dropped in the lead up to the Brexit vote and, in the uncertain aftermath, it’s no real surprise that the mood has worsened.
In the UK, consumer confidence has actually come through robustly, which may be an indicator as to how the rest of EU consumers will respond.
Suddenly the euro doesn’t look so shaky next to the falling pound, so there’s every chance we could be looking at a consumer confidence nadir in today’s numbers.”
European Union consumer confidence drops after Brexit
In the wake of the UK’s vote to leave the EU, consumer confidence in the area fell sharply, new data shows.
According to a flash estimate by the European Commission, consumer confidence in the EU as a whole dropped by “a marked” 1.8 points to -7.6 in July. This is the worst level for two years.
In the eurozone, confidence fell by 0.7 points to -7.9, slightly better than the -8 figure expected by economists polled by Reuters. The June figure of -7.2 was revised up from the initial -7.3.
Oil is on the slide again ahead of US inventory figures, with West Texas Intermediate down 1.8% at $43.84, a two month low. The fall reflects continuing strength in the US dollar as well as concerns about a supply glut.
Wall Street opens higher
US markets continue to move ahead, as Microsoft and Morgan Stanley continue the trend of companies reporting better than expected results.
The Dow Jones Industrial Average is up around 13 points or 0.06% at 18572 having earlier hit a new peak of 18618. The S&P 500 opened up 0.26% and Nasdaq 0.48%.
Top 500 global companies see revenues and profits drop in 2015
The world’s largest companies saw their revenues fall last year for the first time since 2010, according to the latest Fortune Global 500 list.
Total revenues dropped 11.5% to $27.6trn from $31.2trn in 2014, with profits down 11.2% to $1.48trn. Fortune says:
There are plenty of reasons for the reversal. A slowdown in China’s once-booming economy has affected companies worldwide. Growth in the U.S. and Europe remains modest at best. And sustained low oil prices have erased billions in sales for giant petroleum producers like Exxon Mobil, Royal Dutch Shell, and Sinopec. But one macroeconomic trend looms largest of all: the explosive comeback of the U.S. dollar and the wide-ranging impact of its renewed strength on global trade.
The US had 134 companies on this year’s list, the highest number of any country, followed by China with 103 and 52 from Japan. The US added 6 new companies from the previous year, China added 5, and Japan lost 2, says Fortune. Chinese, Japanese and the US companies together accounted for 58% of the list. China only had 19 companies a decade ago.
Britain currently has 26 Fortune Global 500 companies with 17 of them based in London (before any impact from Brexit of course.)
Walmart is top of the list, as it has been eleven times since 1995. Apple appears in the top ten for the first time:
- 1. Walmart Stores (U.S.)
- 2. State Grid (China)
- 3. China National Petroleum (China)
- 4. Sinopec Group (China)
- 5. Royal Dutch Shell (Netherlands)
- 6. Exxon Mobil (U.S.)
- 7. Volkswagen (Germany)
- 8. Toyota Motor (Japan)
- 9. Apple (U.S.)
- 10. BP (Britain)
The full list and more details are here.
Here’s link to the Moody’s report on UK banks (see 13.49):
Brexit uncertainty drives UK banking system outlook to negative from stable https://t.co/RQ9S3nDNnq
— Moody's InvestorsSvc (@MoodysInvSvc) July 20, 2016
Updated
US markets are expected to open higher following better-than-expected results from Microsoft and Morgan Stanley:
US Opening Calls:#DOW 18606 +0.26%#SPX 2170 +0.28%#NASDAQ 4626 +0.51%#IGOpeningCall
— IGSquawk (@IGSquawk) July 20, 2016
Updated
Moody’s has downgraded its outlook for the UK banking system to negative from stable because of the Brexit vote.
Carlos Suarez Duarte, senior vice president at Moody’s:
Increased uncertainty about the UK’s future trade relationship with the EU will likely lead to reduced confidence and lower investment and consumer spending in the UK.
This will, in turn, pressure revenues, asset quality and profitability metrics for all banks in the UK, though some are more resilient to these pressures than others.
Philip Hammond has had a dream start as chancellor according to Larry Elliott, the Guardian’s economics editor:
The Bank of England says there are no signs of a general slowing in activity. Consumers are still spending in the shops. The International Monetary Fund says the economy will slow sharply but will avoid a recession.
It is still early days, of course. The full effects of the Brexit vote on the economy will only become apparent over months and years rather than in the four weeks that have so far passed since 23 June. As the Bank’s agents made clear in their monthly report, many companies were so stunned by the result they have yet to work out what to do next.
The IMF made a similar point in its updated World Economic Outlook. It noted that Brexit was still unfolding, which is obviously true.
That said, Hammond has not had the baptism of fire that many predicted. Forecasts from the remain camp – of which the new chancellor was a member – came thick and fast in the run-up to the referendum. All of them warned of severe and immediate consequences if the leave side won.
Read the full article here:
Debbie Abrahams, Labour’s shadow work and pensions secretary, has commented on the earlier labour market figures.
She says wage growth remains too weak. (It was 2.3% in the three months to May, or 2.2% excluding bonuses.)
It is welcome that there has been a fall in unemployment. However, under the Tories long term pay growth continues to be sluggish and our economy is over-reliant on low paid insecure work.
If Theresa May is serious about supporting working people we need to see serious action on tackling low pay and investing in the high-skilled high-wage jobs our economy needs.
MPs on the Business, Innovation and Skills Committee will publish their report on employment practices at Sports Direct on Friday...
Sports Direct minimum wage investigation to cover shop workers
The Guardian understands the official investigation into Sports Direct’s failure to pay its warehouse workers the national minimum wage has been widened to include the sportswear chain’s 13,000 retail workers.
Here is the full update from Simon Goodley:
Returning to the labour market data, the number of people claiming jobless benefits rose by 400 in June to almost 760,000.
It was far smaller than the 3,500 increase predicted by economists but the figure for May was heavily revised to show a 12,200 jump over the month, compared with the 400 fall the ONS previously estimated.
As we move into afternoon trading European markets are up.
Investors are cheered by evidence from the Bank of England that so far, the Brexit vote does not appear to have triggered a slowdown.
Wolfgang Schaeuble, Germany’s no nonsense finance minister, will meet the new UK chancellor Philip Hammond on Saturday on the sidelines of the G20 meeting in China.
As well as bilateral talks between the two men, G20 finance ministers will discuss the aftermath of Brexit and how policymakers can ease concerns.
TUC: self employment is behind jobs increase
The TUC has a different take on the unemployment report, arguing that it’s not all good news.
Specifically it points to the sharp rise in self-employment, which has increased by 300,000 people over the past year and now represents 15.1% of the workforce (4.8 million).
TUC General Secretary Frances O’Grady says:
While it’s good to see more people in work, the huge increase in self-employment raises questions about the nature of these jobs.
These newly self-employed workers are not all budding entrepreneurs. Many don’t choose self-employment, being forced onto contracts with fewer rights, less pay and no job security.
We need more decent jobs. Not working conditions like those exposed at the courier firm Hermes these week, where workers were pushed on to self-employed contracts with fewer rights.
Updated
Economists at Capital Economics still expect the Bank of England to inject fresh stimulus into the economy in August, despite the better-than-expected UK jobs figures.
Paul Hollingsworth at Capital Economics:
Despite the relatively upbeat assessment of the labour market overall, we still expect the Bank’s Monetary Policy Committee to follow through with its (loose) commitment to ease policy at its next meeting on 4th August.
After all, the vote to leave the EU will almost certainly now cause some firms to put hiring decisions on hold or cut back headcounts altogether. Indeed, we expect the unemployment rate to drift up over the coming quarters.
He adds however that comments from the Bank’s regional agents support his view that the short-term impact of the Brexit vote will be less severe than many think.
Today’s Bank of England agents’ report showed that a majority of firms did not expect a near-term impact from the referendum outcome on their investment or hiring plans.
Accordingly, for now we remain content with our view that the damage to the economy in the short term will be rather less severe than many others are anticipating.
Not everyone agrees that the fallout from Brexit is limited so far.
UK households think the outlook for their finances is the worst in two-and-a-half years following the decision to leave the UK.
The indicator dropped to 47 in July from 49.3 in June according to Markit’s latest survey. Anything below 50 signals a deterioration.
People are also becoming more concerned about their jobs, Markit said.
Philip Leake, economist at Markit:
The survey suggests that the Brexit vote has badly affected households’ views on their finances. With future prospects clouded by uncertainty, July data pointed to the worst financial outlook in two-and-a-half years.
Household concerns also intensified as workplace activity fell for the first time since May 2012, with employers awaiting a clearer picture following the Brexit vote.
Pound rises as Bank signals limited Brexit fallout
The comments from the Bank of England agents - as well as the better-than expected employment data - are supporting the pound.
It was down against the dollar before the two reports were published but is now up 0.6% at $1.3193.
James Smith, economist at ING, says there may be trouble ahead, despite the upbeat tone struck by the Bank’s agents:
The latest update from the Bank of England’s Agents suggests that there is little evidence of a knee-jerk reaction from businesses post-Brexit, but the medium/long-term outlook is more uncertain.
The main message was that firms, for the time being, were seeking to maintain “business as usual” and this suggests that it may be a while before we see any material Brexit impact show up in UK data.
Further down the road, the outlook appears to be less certain. On investment, approximately a third expected some negative impact over the next 12 months, echoing the sentiment of recent surveys.
Updated
Bank of England agents: no clear sign of Brexit slowdown
There is “no clear evidence” that a UK slowdown is underway since the Brexit vote, according to the Bank of England’s network of regional agents.
Bank agents talk to businesses around the country to gain clues about how the economy is really doing, and the July report is the first since the 23 June referendum.
The agents reported that while business uncertainty had “risen markedly”, there was little evidence that consumers were spending less.
A majority of firms spoken with did not expect a near-term impact from the result on their investment or staff hiring plans.
But around a third of contacts thought there would be some negative impact on those plans over the net 12 months.
As yet there was no clear evidence of a sharp general slowing in activity.
Updated
The jobs figures suggest employers were not rattled enough in the run-up to the EU referendum to freeze hiring or cut jobs on a major scale.
The big question is whether that will change following the Brexit vote.
The UK unemployment rate has fallen to 4.9% in the three months ending May, from 5%. The last time it was as low as that was 2005.
He's hardly flavour of the month - but today's unemployment figs are one hell of a sign off for George Osborne
— steve hawkes (@steve_hawkes) July 20, 2016
Updated
Chancellor: strong jobs figures prove UK strength
These better-than-expected jobs figures are a gift to the new chancellor, Philip Hammond, who wasted no time commenting on them:
Today’s employment and wage figures are proof that the fundamentals of the British economy are strong.
In the months before the referendum, employment in the UK reached a new record high, unemployment fell to its lowest in a decade and wages continued to rise.
As the economy adjusts to the effect of the referendum decision, it is doing so from a position of economic strength.
While the decision to leave the European Union marks the beginning of a new phase for our economy, the message we take to the world is this: our country remains open for business and we are the same outward-looking, globally-minded, big-thinking country we have always been.
UK jobs figures stronger than expected
The pound rose back above $1.31 after better-than-expected figures from the UK jobs market.
The headline figures:
- Unemployment rate falls unexpectedly to 4.9% in the three months ending May from 5%. It was the lowest since 2005.
- The number of people out of work falls by 54,000 to 1.65m.
- People claiming jobless benefits rises by a much smaller than expected 400 to 759,100
- Employment rises by 176,000 to 31.7m
- Record employment rate of 74.4%
- Earnings increase by 2.3%, as expected
Updated
The Bank of England will shortly publish its agents’ summary of business conditions for July.
It will provide the first snapshot of how businesses around the UK have responded to Britain’s decision to leave the EU following the 23 June referendum.
Figures published later today are expected to show consumer confidence weakened in the eurozone in July, following the Brexit vote.
The ‘flash’ indicator from the European Commission is expected to fall to -8 from -7.3 in June.
Nintendo shares fall for first time since Pokemon Go release
Nintendo has lost some of the gains made since the release of its hugely successful Pokemon Go game.
Shares were down almost 15% at one point on Wednesday following reports the release of the game might be delayed in Japan.
Nintendo’s market value had doubled since the launch of the game - which combines the virtual world with the real one - earlier this month.
Asian markets were mixed on Wednesday.
- Nikkei: -0.3% at 16,682
- Hang Seng: +0.9% at 21,857
Updated
FTSE is back above 6,700
The FTSE 100 is up 19 points or 0.3% at 6,716 in early trading.
The FTSE 250 is roughly flat at 16,902.
Most other major European markets are up.
- Germany’s DAX: +0.5% at 10,027
- France’s CAC: +0.4% at 4,348
- Italy’s FTSE MIB: -0.1% at 16,660
- Spain’s IBEX: +0.4% at 8,515
Pound falls below $1.31; euro drops
The pound has dipped below $1.31. It is currently down 0.2% at $1.3085.
The euro is down against both the pound and the dollar. It is down 0.3% against the pound at 83.93p, and hit a two-and-a-half-week low against the dollar of $1.0985.
The dollar is rising partly on the back of expectations that the Fed will raise interest rates before the end of 2016 following positive data from the US economy (including jobs and the housing market).
UK jobless claims expected to rise in June
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
At 9.30 the Office for National Statistics will publish latest figures from the UK jobs market.
The figures are expected to show the number of people claiming unemployment benefit rose by 3,500 in June, following a drop of 400 in May.
The headline unemployment rate will cover the three months to the end of May and is expected to be unchanged at 5%.
Wage growth including bonuses is expected to pick up to 2.3% from 2%. Excluding bonuses growth is expected to be unchanged at 2.3%.
The figures should provide some clues about how confident employers were feeling in the run-up to the 23 June referendum.
Any shock to the downside would undoubtedly trigger a few alarm bells about the outlook for UK jobs in the aftermath of the Brexit vote.
