And finally, the chair of the Treasury select committee Andrew Tyrie has commented on the session with Bank of England governor Mark Carney. He said:
The Governor has given strong advice today, both to the UK Government and to the governments of the rest of the EU. He’s told the Government that it is “highly advisable” to seek agreement to transitional arrangements, and at the start of the negotiations.
And he’s also told the UK’s negotiating counterparts in the EU that they, more than the UK, are vulnerable to financial stability risks during the period of transition. I hope they are all listening.
On that note, it’s time to close for the evening. Thanks for all your comments and we’ll be back tomorrow.
European markets end higher
In Europe the mood was also fairly buoyant while in the US, the Dow Jones Industrial Average ricocheted between positive and negative and positive again as president elect Donald Trump gave his press conference. The final scores in Europe showed:
- Germany’s Dax rose 0.54% to 11,646.17
- France’s Cac climbed 0.01% to 4888.71
- Italy’s FTSE MIB added 0.32% to 19,486.88
- But Spain’s Ibex ended down 0.46% at 9408.6
Meanwhile the Dow Jones Industrial Average is currently up 19 points at 19,874 having been as high as 19,973 and as low as 19,833 during the day so far.
FTSE 100 hits three records
While Carney was speaking, the FTSE 100 ran up three new records, as continuing weakness in the pound - it hit a near 32 year low against the dollar excluding last year’s flash crash- continued to drive overseas earners higher.
The index smashed through the 7300 level although it later slipped back as the pound came off its worst levels, ending up 15.02 at 7290.49.
That marked a new peak, the tenth day of record closes and the 12th day of rises. All three never seen before. Laith Khalaf, senior analyst at Hargreaves Lansdown, said:
The Footsie has now seen a dozen days of price increases, in what amounts to its longest winning streak ever. It won’t go on forever, but the winter rally has shown it has considerable legs.
It’s not just the miners and international companies benefiting from lower sterling which are sustaining the rally, some domestically-focussed stocks are also chipping in, which suggests some optimism towards the prospects for UK companies is driving the market upward too.
Updated
Mark Carney at the Treasury select committee
In a two and a half hour session, Bank of England chair Mark Carney and members of its financial policy committee were quizzed on Brexit, forecasting and stress tests.
Carney said Brexit was no longer the most significant domestic risk to financial stablity. But he maintained that the Bank’s actions had mitigated the risks around the referendum vote.
On the Brexit discussions, Carney said the consequences of not having a transitional deal would be higher for the EU than for the UK.
On the subject of the Bank getting its forecasts wrong ahead of the vote, FPC member Martin Taylor said that just because there had not been a problem yet, that meant there would not be problems.
Carney says forecasting has improved because they look at what could go wrong rather than thinking everything was going right. He repeats that the Bank’s actions and preparations helped mitigate some of the risks following the vote.
Martin Taylor said he was surprised at the strength of the economy since the Brexit vote, but it was because forecasters overestimated the negative effect of the referendum on consumer confidence.
Speaking of forecasts, Carney suggested the Bank was likely to lift its UK growth forecasts in February.
Anil Kashyap of the FPC reckons the risk to financial stability has not yet increased because of the election of Donald Trump, but the Bank admitted it was monitoring the president elect’s Twitter account given his potential for market moving comments.
The Bank members also spent some time defending the latest bank stress tests, notably to suggestions they were not rigorous enough.
And there were also concerns about the high levels of consumer credit.
And after some discussion about the buy to let market, the session ends. Chair Andrew Tyrie says that “ as usual when we start talking about financial stability we end with the housing market”, and thanks them for coming.
Is housing market sustainable, with prices relative to income back to levels seen in 2008?
Alex Brazier: That rise in level in house prices relative to income has not, as it did in 2008, meant a rise in household debt. It’s not house prices per se, it’s the level of household debt, and [that] shows a completely different picture.
Question on the 10.8% growth in consumer credit last year. Is the Bank too relaxed or complacent about this?
FPC executive director Alex Brazier says he’s not relaxed: Consumer credit growth is difficult to ignore. What are the risks to financial stability? We have been discussing the loosening of credit conditions, such as a doubling of interest rate free periods for credit cards. We need to be alert and vigilant.
It has been a driver of consumer spending, so it’s important how we should address it, as it has a broader economic resilience.
Carney and his committee defend the results of the tests, but says he welcomes analysis and discussion ( such as by the head of an independent review of banks Sir John Vickers, who said the stress tests were not rigorous enough.)
An ITV report said using more rigorous tests would have meant only Lloyds passed, but Carney and co said they could not see how this result was achieved and seemed satisfied with the outcome of their own tests.
Anil Kashyap says he expects it will become exceptional for UK banks to fail the stress test in future.
Question on bank stress tests, when RBS failed in November: Should we expect every year to see at least one bank fail so we can’t say they are not difficult enough.
Martin Taylor: People say that anyway. We don’t consider that. We try to set stress which is severe and plausible and put the system through the wringer.
Pound hits new 31 year low against the dollar
Meanwhile the pound has hit a new 31 year low against the dollar - excluding the flash crash - with the US currency boosted ahead of Donald Trump’s press conference on hopes of details of his plans for the country’s economy. Sterling has fallen as low as $1.2039 and is now down 1% at $1.2056. Neil Wilson, senior market analyst at ETX Capital, said:
The move looks dollar driven with the buck heavy bid at day highs across the board ahead of Donald Trump’s news conference.
It’s now looking very precarious indeed for sterling and we could see it drop further as stops are triggered. Cable is down another 1% today and is flirting with flash crash lows and could spark more selling.
The correlation between the pound and the FTSE is obvious. The sharp move south at 15:18 saw sterling dip half a cent against the dollar in just a minute and we witnessed a corresponding move in the FTSE 100 at the exact same time, with the index jumping 10 points in 60 seconds. At pixel time it was rocking new highs at 7,321, on course for yet another record close.
We monitor Trump's Twitter account
Question: Do you monitor Trump’s Twitter account in case he says something,.
Carney: Yes. We monitor your Twitter account, chairman. So yes we follow it.
We look forward to working with the new US members.
Updated
Risks have stayed the same so far after Trump - Bank
Tyrie: is Trump a risk to financial stability?
Anil Kashyap: The committee hasn’t discussed this but personally, the first thing will be Trump filling the vice chair position at Federal Reserve. That could change the way the Fed negotiates over financial stability issues.
It still takes 60 votes in Senate to do many things, anything attached to tax and spending review you need 50. Anything to do with rolling back Dodd Franks, they can’t do that will just 50 votes.
He can do personal changes immediately.
Tyrie: so has risk up or stayed the same?
The same, the number of things the US can do unilaterally that he can trigger is limited in the short term.
Updated
Carney says what is true is that growth has been remarkably weak and the general level of income growth has been weak... which is a product of meagre productivity performance in this country.
Mann: Do you regard inequality as a problem?
Carney says the level of wealth and income inequality has gone down over the last decade, the level has gone up among generations.
Since interest rates fell and QE introduced, wealth and income has risen. Is inequality an issue in this county? One of the issues is that in general within advanced economies increases in inequality have some potential to reduce the equilibrium interest rate. That means running the economy for some time with low interest rates which runs greater risk to financial stability.
FTSE 100 breaks through 7300
As Carney speaks, the FTSE 100 has crossed the 7300 line. Connor Campbell, financial analyst at Spreadex, said:
With Mark Carney stating – after a bit of coercion from the Treasury Select Committee – that Brexit is no longer the signal most significant domestic risk to the UK’s financial stability the FTSE received the final push it needed to cross 7300 this Wednesday. The comments also helped to lift the pound against the euro, but failed to have much impact on sterling’s losses against the dollar, with the greenback taking half a percent off of the UK currency.
Updated
Carney says we are starting to get an increase in inflation and a slowdown in growth has not yet transpired.
Carney says that BoE is likely to upgrade its growth forecast for the UK in February. "Directionally that is right"
— Philip Aldrick (@PhilAldrick) January 11, 2017
Updated
John Mann: are none of you surprised at the health of the economy.
Martin Taylor: I’m surprised, it is better than I expected. The conclusions drawn about forecasters are wrong: that they’re hopeless, politically biased, or there’s been some miracle in the economy. It is more prosaic. There is no precedent for major country to tear up trade deals and go off into a new world. Any forecaster has got to suppose there will be a confidence effect. The mistake was not to forecast the scale of the confidence effect on the consumer. They’ve got on with their lives, partly thanks to consumer credit.
Updated
Bank likely to upgrade growth forecast in February
Rees Mogg: But the forecasts were inaccurate.
Carney: Speaking as the MPC, the MPC had a more positive forecast than others in August, it took action to reinforce the situation, it upgraded its forecasts.
“I would say, and I’ll say this very lightly, that recent data would be consistent with some further upgrade of the forecast but that forecast has not yet started”
We have expected there will be some slowing of the economy this year, related to some effects of Brexit.
Missing the financial crisis is a big deal, a couple of different quarters is nice to have, it’s a different order of magnitude.
Updated
Rees Mogg continues: But the forecasting around Brexit was just as inaccurate as before the financial crisis of 2008.
Carney says the risk aspect around Brexit was right and the steps we took (helped mitigate it).
There was hard money in the market, a lot of major institutions would have been caught on the wrong side. The reason they weren’t is Bank identified risk of outcomes of Brexit vote and took it off the table.
Bank ensured markets especially derivatives markets were liquid [ahead of the vote}.
On the morning after... it was important the system was rock solid. So the assessment was right in terms of the risk and the steps taken to mitigate the risk were necessary.
In that sense, we were making the weather.
On forecasting Carney says the way we have to get better - and it has improved - is by looking at what could go wrong rather than just what could go right.
In subprime a lot of time was spent saying there wasn’t a problem rather than saying, if there is a problem, what could go wrong?
UK economy grew by 2% last year, down from 2.2% - NIESR
Away from Carney for a moment, and an update on the state of the UK economy.
UK ouput grew by 0.5% in the three months ending in December 2016, after the same level of growth in the three months to November, according to the National Institute of Economic and Social Research.
The thinktank said it estimated the economy grew by 2% in 2016, compared to 2.2% in 2015. But there could be clouds ahead.
James Warren, Research Fellow at NIESR, said “Our estimates suggest the economy grew by 2 per cent in 2016, in line with the long run potential growth rate of the UK economy. The composition of economic growth in 2016 has been unbalanced: robust consumer spending has compensated for the weakness in other sectors. Consumers face significant headwinds this year and next, not least the increase in consumer price inflation that is a consequence of pass through from the depreciation of sterling in 2016.”
Updated
Rees Mogg turns to Carney now and forecasting. On the Michael Fish quote, he says Fish’s boss apologised for the hurricane mistake 24 years later, so they may call Carney back in 24 years time.
Carney does not look amused.
Kashyap says Brexit will be a leap and we have no certainty how well it will go.
And now Jacob Rees Mogg, who has clashed with Carney before.
He starts though with Martin Taylor, and asks how Brexit will affect ways of looking at stability.
Taylor says, it depends on result of the arrangements we’ve been talking about.
Member Anil Kashyap says Bank will resist low regulation, light touch approach as much as it can after Brexit.
Rees Mogg There has not been any great impact so far [from the Brexit vote}, but the Bank had been quite concerned.
Taylor: The Bank was quite concerned, we were concerned to provide liquidity ahead of the vote, and after to make sure business as usual. The third phase will be after Brexit happens. The phase we’re now in will throw up its own challenges.
I don’t share view that because there has not been a problem yet there won’t be one in future. It becomes increasingly difficult to disentangle what was due to Brexit and what would have happened anyway.
Updated
Carney says it is possible and desirable for UK to remain part of the EU customs union. This is the way the global economy should work, he says.
He adds the Bank’s FPC itself has not taken a view on whether the UK should stay.
My colleague Jill Treanor writes:
Douglas Flint, chairman of HSBC, appears to started something yesterday when he likened the risks of Brexit to Jenga. Andrew Tyrie, chairman of Treasury select committee, has been asking Mark Carney about it today. The governor of the Bank of England has admitted it is a “decent analogy”. “Just like when you play Jenga and you start early there are some pieces you can take out without imperilling the tower” says Carney.The Jenga problem starts when capacity is taken out of the market. The argument being that the EU 27 relies on the City for its financing and, argues Carney, faces a greater risk to financial stability than the UK from Brexit.
Question: Are there any substantive reasons - leaving aside political reasons - the EU would not grant the UK equivalence, treating UK financial rules as equivalent to EU ones?
No, not at all, says Carney.
Updated
Carney says we don’t want to be a rule taker. We feel the regulatory construct within the EU is as we would have it. Once we’re not there, I expect we will get rules with which we don’t agree.
We want equivalance with EU rules, but not cutting and pasting EU rule changes.
Earlier Carney agreed that describing the stability of the UK financial system after Brexit as a game of jenga was a decent analogy.
If the permanance of access to EU financial markets comes into question, it would raise economic and financial stability issues. The British government would have to make political choices on EU access.
One of the Bank’s FPC members Martin Taylor says it is important to get EU transitional arrangements in place as soon as possible.
Consequences of no transitional deal higher for EU than UK - Carney
On a transitional arrangement, Carney says it is in the interests of UK and the EU27 that there is a transition phase.
Is it necessary to avoid serious risks, ask Tyrie.
“it is the best mitigant to those risks, highly advisable. If there is not such a transition, we will work to mitigate those consqeences. The consequences would be higher for EU but there would also be consequences for the UK.”
Updated
Brexit no longer the most significant domestic risk to stability - Carney
Tyrie asks if Brexit is still the most significant risk to financial stability.
Carney is trying not to be drawn, saying the biggest risks to the Uk economy are external, but the Bank also identified four domestic risks.
Tyrie presses whether Brexit is still the most signifiant internal risk.
A pause then Carney says the Bank’s committee has not termed it that way. “We have four risks, Brexit amplifies some of those risks,”
Tyrie persists: “Yes or no”
Carney: “No. In the run up to the referendum we felt it was largest risk because there were things that could have happened which had financial stability implications. Actions were taken to mitigate that, but having got through the day after, the scale of the immediate risks has gone down.”
Updated
Bank mitigated Brexit risk after vote - Carney
Mark Carney is up at the select committee, and is immediatly asked by chair Andrew Tyrie whether he agrees with Andy Haldane’s assessment that forecasters had a Michael Fish moment, in failing to predict the outcome of various events including Brexit.
Carney bats this away, saying one advantage of abolishing group think is that you don’t always agree with colleagues. He said Haldane was talking about ability to identify risk, he suggested some solutions but our responsibity to financial stability is to identify it and take mitigating action. The probe with success is the risk doesn’t happen.
“I do think we helped make the weather [around the time of the vote], we mitigated risk and put country in better place.” (Carney is talking about the interest rate cut and other actions the bank took the day after the vote)arrangements.
Over in parliament governor of the Bank of England, Mark Carney, is set to face the Treasury Select Committee shortly.
Carney is being quizzed on the Bank’s financial stability report at the end of November, which saw RBS fail the latest stress tests and the Bank warn on a number of matters, including the uncertainty created by the Brexit vote, the commercial property sector, high level of debts in UK households and the potential vulnerability of the economy to a reduction in foreign investors buying UK debt.
FTSE 100 hits new highs
After its record breaking run of nine closing highs, the FTSE 100 is continuing to move ahead.
The leading index, again boosted by mining shares benefitting from the weak pound and supermarkets following Sainsbury’s well received update, has hit a new peak of 7296. This is tantalisingly close to the 7300 level but whether the UK index follows Wall Street’s pattern - the Dow Jones Industrial Average was on the verge of breaking 20,000 last week before falling back - remains to be seen.
Currently the FTSE 100 is up 0.25% at 7293.
Speaking of the Dow, it is virtually flat ahead of Donald Trump’s press conference later, which may see some detail about his plans to boost the economy and may also get some questions about other matters.
Updated
WEF also asks its panellists to list their greatest risks, in terms of the impact they would have on the global economy.
Between 2007 and 2014, this list was always topped by financial worries -- such as asset price crashes, a fiscal crisis, or a major failure of the whole system
But this year, the threat posed by weapons of mass destruction has climbed to the top of the list, followed by a string of environmental worries.
In terms of impact, four of @wef's five biggest risks in terms of impact have an environmental element pic.twitter.com/T8q9rZZr6j
— Will Nichols (@WillNicholsRisk) January 11, 2017
One obvious problem with the World Economic Forum’s global risks report is that Davos is stuffed each year with the politicians, business leaders, economists and other ‘global elite’ who have led the global economy to its current state.
Issues such as climate change and economic inequality have been creeping up WEF’s agenda for several years -- ‘severe income disparity’ was ranked as the most likely danger to the economy in 2012, 2013 and 2014.
Indeed, three years ago Davos began with a stern lecture from the Pope to improve wealth equality and help those in ‘dire poverty.
It is intolerable that thousands of people continue to die every day from hunger, even though substantial quantities are available and wasted.
But none of this halted the push towards populism that gripped 2016, and could do the same next year too.
Speaking on Bloomberg earlier, WEF’s head of global competitiveness, Margareta Drzeniek-Hanouz, said this year’s Davos gathering will seek solutions to income inequality. She argued that Davos is open to populist voices, as elected politicians should represent the view of the people, along with representatives of civic society, charities, etc.
But Jenny Ricks of the Fight Inequality Alliance, for example, isn’t convinced that the Davos elite will find the answers.
#WEF names inequality as top global economy threat – but solutions will come from people not elites #fightinequality https://t.co/XliBLZL2GA
— Jenny Ricks (@jenny_ricks) January 11, 2017
Is this why income inequality is worse in America?
WEF’s report also highlights that the richest 1% in the US have done particularly well over the last few decades.
And with great timing, a group of economists at the Norwegian School of Economics and Stockholm University have published the results of an experiment into whether Americans are more relaxed than Norwegians about inequality.
My colleague Katie Allen explains:
The researchers wanted to assess how people reacted to inequality that stemmed from brute luck. Spectators were told that worker A and worker B did work of the same quality but that in a lottery it had been randomly decided the entire $6 earnings bonus would go to worker A. The spectators were asked if they would like to leave things as they were or redistribute the bonus between the two workers.
The researchers’ findings were striking.Among Norwegian spectators, 80% chose to redistribute the bonus and make it equal between the two workers. Among Americans only 50% chose to share it out.
They also found that Americans were much more reluctant to redistribute bonuses paid on merit..... More here:
Climate change dangers also dominate the risk landscape for 2017, WEF says.
Its global risks report singles out the danger of extreme weather events, as both the likeliest threat and one of the most damaging (beaten only by the dangers of weapons of mass destruction).
Water crises, often caused by changes to the weather, also features high up the list of dangers (continuing a recent trend), along with the risk that governments fail to mitigate against climate change.
WEF says:
This year, environmental concerns are more prominent than ever, with all five risks in this category assessed as being above average for both impact and likelihood....
Iineffective management of the “global commons” – the oceans, atmosphere, and climate system – can have local as well as global consequences. For example, changing weather patterns or water crises can trigger or exacerbate geopolitical and societal risks such as domestic or regional conflict and involuntary migration, particularly
WEF’s report argues that income inequality can’t be solely blamed for Donald Trump’s victory.
Instead, it singles out the rapid changes in society over the last few decades that left many feeling left behind, or treated unfairly.
Early analysis by political scientists Ronald Inglehart and Pippa Norris points to the populism behind the victories of Brexit and President-elect Trump as being driven more by demographics and cultural factors than income inequality: a backlash among older and less-educated voters who “feel that they are being marginalized within their own countries” by changing values in areas such as gender, sexual orientation, race, multiculturalism, environmental protection and international cooperation.
Pew research found stark divisions in the self-described values of supporters of President-elect Trump and Democrat candidate Hillary Clinton: for example, 72% of President-elect Trump’s supporters described themselves as “traditional”, versus 31% of Clinton supporters; other big differences included “honor and duty are my core values” (59% vs 35%); “typical American” (72% vs 49%), “feminist” (5% vs 38%) and “supporter of LGBT rights” (24% vs 66%).
Fourth Industrial Revolution poses risks
New technologies such as self-driving cars and smart robots could also threaten global stability in the years ahead, according to today’s report.
WEF’s experts said that artificial intelligence and robotics is “the emerging technology with the greatest potential for negative consequences over the coming decade”.
That’s because tens of millions of jobs will be lost as work is increasingly handed to automated systems, in the so-called ‘Fourth Industrial Revolution”.
The report says:
Estimates of the number of jobs at risk to technological displacement vary: a frequently cited 2013 Oxford Martin School study has suggested that 47% of US jobs were at high risk from automation; in 2016 an OECD working paper put the figure lower, at 9%.
In 2015 a McKinsey study concluded that 45% of the activities that workers do today could already be automated if companies choose to do so.....
Technology has always created jobs as well as destroying them, but there is evidence that the engine of technological job creation is sputtering. The Oxford Martin School estimates that only 0.5% of today’s US workforce is employed in sectors created since 2000, compared with approximately 8% in industries created during the 1980s.
Technological change is shifting the distribution of income from labour to capital: according to the OECD, up to 80% of the decline in labour’s share of national income between 1990 and 2007 was the result of the impact of technology.
Cecilia Reyes, chief risk officer at Zurich, says these changes are a key cause of social instability.
Zurich's Cecilia Reyes believes wrong to cite globalisation as driver for social instability, actually 4th industrial revolution #risks2017 pic.twitter.com/Dxo9cskOKk
— Arif Durrani (@DurraniMix) January 11, 2017
Reyes says during disruptive times, cooperation (gov, business) essential to avoid further deterioration & more social unrest #risks2017
— Arif Durrani (@DurraniMix) January 11, 2017
Reyes: tech progress is creating challenges, without proper governance & reskilling of workers, jobs will be eliminated faster than created pic.twitter.com/UfxupctemK
— Arif Durrani (@DurraniMix) January 11, 2017
WEF singles out Donald Trump’s victory and the Brexit vote as the “highest-profile signs” of rising political discontent.
Today’s report says:
That discontent with the current order has now become an election-winning proposition clearly increases the urgency of understanding and responding to these global risks.
But what’s the solution? WEF has a five-point plan:
- fostering greater solidarity and long-term thinking in market capitalism,
- revitalizing global economic growth,
- recognizing the importance of identity and inclusiveness in healthy political communities,
- mitigating the risks and exploiting the opportunities of the Fourth Industrial Revolution, and
- strengthening our systems of global cooperation.
WEF say that anger over economic inequality could shake the “social solidarity” that underpins the status quo -- especially as global growth has been weak since the financial crisis.
The report warns that:
In sum, it is difficult to identify routes that will lead back to robust global rates of economic growth. However, growth is now only part of the challenge policymakers need to address.
Concerns over income and wealth distribution are becoming more politically disruptive, and much greater emphasis is needed on the increasing financial insecurity that characterizes many people’s lives. As socio-economic outcomes are increasingly determined globally, popular frustration is growing at the inability of national politics to provide stability.
Economist Dani Rodrik coined the phrase “the globalization trilemma” to capture his view that, among democracy, national sovereignty and global economic integration, only two are simultaneously compatible – and recent events in Europe and the United States suggest an appetite for rebalancing towards democracy and national sovereignty.
The combination of economic inequality and political polarization threatens to amplify global risks, fraying the social solidarity on which the legitimacy of our economic and political systems rests.
Updated
WEF: Market capitalism needs reforming to address populist surge
Blimey. The World Economic Forum has admitted that “fundamental reforms” to market capitalism may be needed, to tackle the public anger that led to Brexit and the election of Donald Trump.
Setting the scene for next week’s Davos, today’s Global Risks Report points out that the public are losing faith with the status quo. (ie, many of the people who trek to the Forum’s annual meeting in Switzerland).
WEF says public anger is now a global issue:
Years of building pressure in many parts of the world, at least since the global financial crisis, crystallized into dramatic political results during 2016 as public disaffection with the status quo gained traction. In the West, consensus expectations were defied by the United Kingdom’s decision to leave the European Union, by President-elect Donald Trump’s victory in the United States and by the Italian electorate’s rejection of Matteo Renzi’s constitutional reforms. The implications of results such as these are potentially far-reaching – some people question whether the West has reached a tipping point and might now embark on a period of deglobalization.
But the uncertainty and instability that characterized 2016 are not Western phenomena alone: we saw variations of them in countries across the world, including Brazil, the Philippines and Turkey.
Crucially, WEF acknowledges that simply encouraging economic growth is not the answer. Instead, fundamental reforms are needed to tackle anger against the richest in society.
The report states:
Despite unprecedented levels of peace and global prosperity, in many countries a mood of economic malaise has contributed to anti-establishment, populist politics and a backlash against globalization. The weakness of the economic recovery following the global financial crisis is part of this story, but boosting growth alone would not remedy the deeper fractures in our political economy.
More fundamental reforms to market capitalism may be needed to tackle, in particular, an apparent lack of solidarity between those at the top of national income and wealth distributions and those further down.
WEF also produced this chart, showing how the recovery since 2008 has been the weakest in at least 40 years:
Updated
You can see the report here:
WEF are presenting the findings at a press conference now - it’s being streamed here.
Wef's annual GlobalRisks report today,Margareta Drzeniek says rising inequality & polarisation now seen as top drivers of risk among experts pic.twitter.com/OduWjwED7S
— Arif Durrani (@DurraniMix) January 11, 2017
This chart from WEF shows how the world economy faces an interconnected web of risks.
‘Rising income and wealth inequality’ is the most important, according to the 700 experts surveyed for this report, due to unemployment and its link to social instability.
Income and wealth inequality top 2017's risks
Here’s the top five trends that will determine the future of the global economy ove the next decade, according to the World Economic Forum’s Global Risks report.
- Rising Income and wealth disparity
- Changing climate
- Increasing polarization of societies
- Rising cyber dependency
- Ageing population
WEF releases top global risks report
Newsflash: The World Economic Forum’s Global Risks Report 2017 is just being released.
And it singles out “economic inequality” as the biggest issue in the global economy over the next decade, as income and wealth disparity continues to rise.
The polarization of societies, and “intensifying environmental dangers” are the other top three trends that will shape global developments over the next 10 years.
The report warns that:
Trends such as rising income inequality and societal polarization triggered political change in 2016 and could exacerbate global risks in 2017 if urgent action is not taken, according to the Global Risks Report 2017
WEF says that world leaders need to “urgently” work together to avert further hardship and volatility in the coming decade.
Here’s the key bullet points from the report:
- Patterns persist. Rising income and wealth disparity and increasing polarization of societies were ranked first and third, respectively, among the underlying trends that will determine global developments in the next ten years. Similarly, the most interconnected pairing of risks in this year’s survey is between high structural unemployment or underemployment and profound social instability.
- The environment dominates the global risks landscape. Climate change was the number two underlying trend this year. And for the first time, all five environmental risks in the survey were ranked both high-risk and high-likelihood, with extreme weather events emerging as the single most prominent global risk.
- Society is not keeping pace with technological change. Of the 12 emerging technologies examined in the report, experts found artificial intelligence and robotics to have the greatest potential benefits, but also the greatest potential negative effects and the greatest need for better governance.
More to follow...
Updated
A few eyebrows were raised in the City when Sainsbury’s launched a takeover bid for catalogue retailer Argos last year.
But no-one’s carping now, after the supermarket chain released forecast-beating results over the Christmas period, mainly thanks to a 4% jump in like-for-like sales at Argos.
That’s sent Sainsbury’s shares up 6% this morning, to the top of the FTSE 100.
More here:
Updated
Foxtons share hit record low
Over in the City, estate agent Foxtons’ shares have hit their lowest level ever after another disappointing financial statement.
It admitted that core profits almost halved for 2016 to £25m, from £46m in 2015, as it suffers from the slowdown in the London property market since the EU referendum.
Sales in the last quarter of 2016 dropped to just £12m, from £20m, as “volumes remained subdued”.
And this year won’t be much better, warned CEO Nic Budden:
Looking ahead, we expect trading conditions to remain challenging in 2017. Should current levels of sales activity continue in the short term, it is likely that 2017 volumes will be below those in 2016.
Our balanced business model provides resilience against sales market cycles and we have a strong balance sheet with no debt.
This sent Foxtons shares down by 10% in early trading to just 90p, the lowest since the company floated on the stock market in 2013.
The agenda: What are the big global risks for 2017?
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The World Economic Forum is releasing its Global Risks Report for 2017, at 9am, to set the scene for next week’s meeting in Davos.
This report will identify the five biggest threats to the world, and what needs to be done to protect us from their worst effects.
After a dramatic 2016, geopolitics will loom large on this year’s report -- given the imminent arrival of Donald Trump in the White House, and Britain’s vote to leave the EU.
Climate Change, migration, cybercrime and pandemics could also feature highly too.
WEF, which is one of the cheerleaders for globalisation, is concerned that that the recent rise of populism will undermine global efforts to work together on these problems.
It says:
2016 saw a crystallization of political risks that have led to the election of populist leaders, a loss of faith in institutions and increased strain on international cooperation.
We should not be surprised by this: for the past decade, the Global Risks Report has been drawing attention to persistent economic, social and political factors that have been shaping our risks landscape.
The report comes hot on the heels of a new report from the World Bank, released last night, which cites Brexit and president-elect Trump as key threats to growth this year.
The World Bank’s Global Economic Prospects report warns that:
“The heightened level of policy uncertainty, especially regarding trade, has been exacerbated by recent political developments – most notably in the United States and the United Kingdom.
“This and other risks – particularly financial market disruptions amid tighter global financing conditions – may be amplified over time by mounting protectionist tendencies, slower potential growth and elevated vulnerabilities in some emerging markets and developing countries.”
Also coming up today....
The City look a little subdued today, with the FTSE 100 expected to dip this morning after hitting its record-breaking ninth record closing high in a row yesterday.
There’s a splurge of UK economy data at 9.30am, with new trade and industrial production surveys for November.
Bank of England governor Mark Carney is testifying to parliament’s Treasury Committee at 2.15pm today, to discuss last month’s financial stability report. This means another battle with eurosceptic MPs who criticise its warnings ahead of June’e EU referendum, and its actions since.
Mark Carney is starting 2017 exactly where he left off: in front of his fiercest critics https://t.co/sgrpVRpu5N pic.twitter.com/KVtKWJbuu2
— Bloomberg (@business) January 11, 2017
On the corporate front, supermarket chain Sainsbury’s, estate agent Foxtons, and cinema chain Cineworld are reporting results.
Updated
