European markets edge higher
Global markets are still on the front foot, thanks to optimism over Emmanuel Macron winning the second round of the French presidential election, some positive US corporate news and anticipation over President Trump’s forthcoming tax proposals. But with some concerns that there is a chance far right candidate Marine Le Pen could still defeat Macron, the gains in Europe were subdued. But there were no such worries in the US, with the Nasdaq Composite breaking through 6000 for the first time and the Dow Jones Industrial Average also moving sharply higher.
The final scores in Europe showed:
- The FTSE 100 finished up 0.15% or 10.96 points at 7275.64
- France’s Cac climbed 0.17% to 5277.88
- Germany’s Dax rose 0.1% to 12,467.04
- Italy’s FTSE MIB was 0.59% better at 20,805.52
- Spain’s Ibex ended up 0.15% at 10,783.1
- In Greece, the Athens market added 2.05% to 697.32
On Wall Street the Dow Jones Industrial Average is currently up 234 points or 1.1%.
On that note it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.
Commenting on the day’s market moves, Spreadex financial analyst Connor Campbell said:
The Macron-move was joined by a Trump and earnings-inspired surge from the Dow Jones this afternoon.
There were two main reasons for the Dow’s 200 point jump after the bell... First, impressive updates from McDonald’s, which saw some super-sized, all day breakfast-charged like-for-like sales, and Caterpillar, which posted Q1 EPS of $1.28 against the 62 cents expected, added a chunk of growth, the companies climbing 4.1% and 6.4% respectively. Secondly, and more importantly, investors are getting all hot under the collar for the promised reveal of Donald Trump’s tax plan tomorrow, an announcement abuzz with the President’s trademark haphazardness.
These US gains ensured that Europe remained buoyant. Though it couldn’t re-cross 12500, the DAX added another 20 points, while the CAC rose just shy of half a percent as investors continued to cheer the likelihood of a Macron presidency.
As for the FTSE, it maintained its 0.3% increase as the day went on, keeping the index a smidge below 7300. Sterling, meanwhile, kept its head above 1.28 against the dollar with a 0.2% rise, but lost even more ground against the euro, falling to a fresh fortnightly low after dropping 0.3%.
Dow hits 21,000 again
Meanwhile the Dow Jones Industrial Average has reached 21,000 for the first time since the middle of March, on a mixture of positivity over the French election, a number of good corporate results and anticipation for Donald Trump’s tax reforms.
In other US data, single family home sales jumped to an eight month high in March.
Sales rose 5.8% to a seasonally adjusted annual rate of 621,000 units, but February’s figure was revised down from 592,000 to 587,000.
US consumer confidence falls in April
US consumers were less confident than expected in April, partly due to concerns about the jobs market.
The Conference Board consumer confidence index came in at 120.3 in April, below the 122.5 that analysts had been expecting. The March figure was revised down from 125.6 to 124.9. Lynn Franco, director of economic indicators at the Conference Board, said:
Consumer confidence declined in April after increasing sharply over the past two months, but still remains at strong levels. Consumers assessed current business conditions and, to a lesser extent, the labor market less favorably than in March. Looking ahead, consumers were somewhat less optimistic about the short-term outlook for business conditions, employment and income prospects. Despite April’s decline, consumers remain confident that the economy will continue to expand in the months ahead.
On the jobs market, the Conference Board added:
Consumers’ assessment of the labor market was moderately less favorable. Those stating jobs are “plentiful” declined from 31.8 percent to 30.8 percent, while those claiming jobs are “hard to get” was virtually unchanged at 19.1 percent.
The Nasdaq Composite first hit 5000 back in 2000 at the height of the dotcom boom. But the subsequent bust meant it has taken 17 years for the index to add the next 1000 points to get to 6000.
Updated
Party like it's 1999! Nasdaq Composite tops 6k for the first time ever. pic.twitter.com/hV4LRrcOmO
— Holger Zschaepitz (@Schuldensuehner) April 25, 2017
Wall Street opens higher with Nasdaq hitting 6000
US markets have again joined the global optimism, with the technology led Nasdaq Composite hitting 6000 for the first time.
The chances of Emmanuel Macron winning the French presidential election at the expense of far right rival Marine Le Pen has pushed share prices higher, while investors are also anticipating US president Donald Trump’s tax announcement. Trump is said to be about to announce more details of his plans on Wednesday, including a possible cut to corporation tax to 15%. Meanwhile a host of positive results, notably from McDonalds and Caterpillar, have also provided support.
The Dow Jones Industrial Average is currently 190 points or 0.9% better while Nasdaq opened up 0.34% at 6004 and the S&P 500 was up a similar amount.
Ahead of the Wall Street open, new figures show that US house prices rose more quickly than expected in February.
The S&P CoreLogic Case-Schiller index of 20 metropolitan areas rose 5.9% in February, compared to 5.7% in January and expectations of 5.7% again. This was the biggest year on year increase since July 2014.
David M. Blitzer of the index compilers said: “There are still relatively few existing homes listed for sale and the small 3.8 month supply is supporting the recent price increases. Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.”
The US stock market is expected to rise when trading begins in under 40 minutes.
That’s thanks to fast food chain McDonald’s, and construction and mining equipment maker Caterpillar. Both companies have beaten analyst forecasts for sales and profits today.
Dow futures +150 after strong earnings from McDonalds and Catepillar
— RANsquawk (@RANsquawk) April 25, 2017
Bad news for the UK: 300 jobs are reportedly being cut at Nestle.
The Swiss chocolate maker is also moving production of its Blue Riband bar to Poland, unions say.
Confectionery giant Nestle is planning 300 job losses and move production of the Blue Riband to Poland - @GMB_union @unitetheunion
— Alan Jones (@AlanJonesPA) April 25, 2017
#Breaking Nestle planning to cut nearly 300 jobs, mainly in York and Newcastle, and move Blue Riband biscuit production to Poland - unions
— Press Association (@PA) April 25, 2017
Ivanka Trump attends W20 event in Berlin
Over in Berlin, Donald Trump’s daughter Ivanka is rubbing shoulders with some of the world’s most powerful women, at the W20 women’s empowerment summit.
The event, backed by the G20 group of advanced economies, is aiming to increase women’s economic empowerment. Its motto is:
“Inspiring women: scaling up women’s entrepreneurship”
The W20 wants to help more women into work, raise the value of work traditionally carried out by women, help more to become entrepreneurs, and close the digital gender divide.
Ivanka was invited by German chancellor Angela Merkel; seemingly as part of Merkel’s attempt to build bridges with the new US government.
Buzzfeed’s Jina Moore reports that president Trump’s attitudes to women have come up....
Moderator notes murmur in the room when Ivanka mentions her dad's commitment to women, says "I must ask about that." Ivanka: "I have ..."
— Jina Moore (@itsjina) April 25, 2017
Angela Merkel, though, is focusing on Ivanka Trump’s business know-how:
Merkel says "what I am especially interested in, and why Ivanka Trump is here": Womens access to financing. #w20
— Jina Moore (@itsjina) April 25, 2017
Ivanka seems to have received a somewhat bracing reception, tweets Politico’s Annie Karn:
Ivanka gets booed and hissed by audience when she says her father is a"tremendous champion of supporting families."
— Annie Karni (@anniekarni) April 25, 2017
NBC’s Hallie Jackson concurs:
First Q to Ivanka at #W20: explain your role in father's administration? It's "quite new to me," she says. "I'm listening, I'm learning."
— Hallie Jackson (@HallieJackson) April 25, 2017
Some in audience now hissing Ivanka as moderator presses her about @POTUS attitude toward women. #W20
— Hallie Jackson (@HallieJackson) April 25, 2017
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This wave of investor optimism is jolly good news for the world’s richest men and women.
Bloomberg has calculated that Europe’s billionaires added $27.5bn to their collective fortunes (on paper, anyway), thanks to the jump in share prices on Monday.
Amancio Ortega Gaona, the Spanish retail magnate behind the Zara chain, became $2.7bn richer - overtaking Amazon’s Jeff Bezos to become the world’s second richest person, Bloomberg say:
Europe’s richest gain $27.5 billion on French vote rally https://t.co/6JTxboUden via @justin_villamil @coldspot pic.twitter.com/JO33NpQl4h
— Zoe Schneeweiss (@ZSchneeweiss) April 25, 2017
Brexit economy: living standards are falling as the snap election looms
The latest Guardian Brexit Dashboard is out, showing the state of Britain’s economy since last June’s EU referendum.
And the warning light next to ‘living standards’ is flashing alarmingly, as rising inflation hits household incomes.
Katie Allen, who compiles the Dashboard, explains that the
The pound’s sharp fall since the Brexit vote and a mood of uncertainty among employers has hit household budgets creating a tough economic backdrop for Theresa May’s snap election, a Guardian analysis shows.
The prime minister will be hoping the resilience seen in the UK economy in the wake of last summer’s referendum will hold over the coming months now that she has called an election for this June. But the Guardian’s monthly tracker of economic news shows living standards are already falling as rising prices outpace meagre pay growth.
That bodes ill for an economy reliant on household spending and the latest indicators from Britain’s retail and leisure industries suggest they are feeling the effects of a tightening consumer squeeze. The export sector has failed to offset that domestic drag and GDP figures due this week are expected to show the economy slowed markedly at the start of this year.
Here’s the full report:
European stock markets are holding onto this morning’s gains, keeping the MSCI World Index at record levels.
In London, the FTSE 100 is 20 points higher, while France’s CAC has also added to Monday’s 4% surge.
Connor Campbell of trading firm SpreadEx says the market’s “love affair” with Macron helped markets to record highs. But....
The latest opinion polls have Macron crushing Le Pen with more than 60% of the vote; however, the far right has continually beaten the odds in the last year and a half, so there could still be some more volatility in store before May’s second election.
The latest opinion polls suggests that Emmanuel Macron would win comfortably on May 7th.
*MACRON SEEN BEATING LE PEN 61%-39% IN OPINIONWAY DAILY POLL
— stewart hampton (@stewhampton) April 25, 2017
BUT.... my colleague Natalie Nougayrède says it’s “delusional and dangerous” to assume the race is over.
Turnout in the second round could be low if people think it’s a foregone conclusion, for example.
Or Marine Le Pen could win more votes from the defeated candidates than Macron - particularly as left-wing candidate Jean-Luc Mélenchon hasn’t yet backed either side.
She explains:
If playing with fire in politics means anything, this was it. Mélenchon spoke dismissively of both, as if unable or unwilling to see the difference. He announced that his radical left movement, France Unbowed, would organise an online “consultation” designed to determine its position ahead of the run-off. It was as bewildering as it was disgraceful. And it was a deliberate attempt to deny or minimise what is now at play.
Yet the choice France now faces could not be more clear-cut: an open, liberal message versus a closed, illiberal one. A platform of inclusiveness versus one of bigotry and nationalist hatred. A promise to strengthen the European project through reform versus a pledge to close borders, introduce protectionism and pull out of Euro-Atlantic structures. It’s also a choice between a candidate who resolutely criticises President Putin and his worldview, and one who consistently panders to the Russian autocrat and has been financially dependent on his networks.
#France Don’t assume Le Pen beaten. For one thing, radical left playing dangerous game. Collusion of the extremes? https://t.co/kjB8Mo7pF8
— Natalie Nougayrède (@nnougayrede) April 24, 2017
In the bond markets, the gap between German and French borrowing costs has narrowed this morning, extending Monday’s moves.
That shows investors are less anxious about France quitting the eurozone - a possibility if Marine Le Pen becomes French president.
Spread between German and French 10yr bonds still tightening - just 41bps now. pic.twitter.com/KxbK1QN3L5
— Mike Bird (@Birdyword) April 25, 2017
Financial market volatility has slumped since the French election results were released on Sunday night.
That shows that investors are pleased that Emmanuel Macron will fight Marine Le Pen for the presidency.
Peter Rosenstreich of Swissquote bank has the details:
The most interesting result of the French election vote was the collapse of volatility indicators globally.
The VIX index declined -19% from 15.30 while one-month implied volatility in the euro-US dollar exchange rate fell to 8.20 from 13.45.
The JP Morgan G7 volatility index fell to 8.03, a level not seen since November 2014.
Let’s get back to the stock market rally! And Donald Trump can take some credit for the rise in share prices this week.
Yesterday, a White House official revealed that the president is seeking to slash US corporation tax to just 15%, from 35% today.
Such a dramatic cut goes further than current proposals on Capitol Hill, and would deliver on a key Trump campaign pledge (making it something of a collector’s item at this early stage of the presidency...).
Apparently, Trump’s advisors believe that cutting taxes on companies would pay for itself in the long-run by encouraging economic activity and spurring growth. That’s debatable, depending where you think we are on the Laffer Curve (and if you believe in it at all).
In the short run, though, such a move would create a big hole in the US budget - driving its deficit and national debt higher, and possibly creating a major row with Congress.
But the scent of tax cuts is having its usual effect on investors, helping to push shares higher.
Ipek Ozkrdeskaya of London Capital Markets explains:
The US stocks were resuscitated after the White House announced that the US corporate taxes will be cut by 15% as part of Donald Trump’s ‘major’ fiscal plans.
According to the latest news, the personal income taxes will also be reduced. More details are due at the Wednesday’s announcement. Donald Trump will prioritize the tax cuts over the budget deficit.
In this respect, the US debt ceiling should be adjusted to avoid an eventual government shutdown. Nevertheless, the early highlights regarding the very much expected tax reforms pleased the private sector investors. The optimism is back in the US markets.
Updated
Matt Whittaker of Resolution Foundation has tweeted a handy chart, showing how the UK deficit has fallen over the last few years:
Public sector net borrowing was £52bn in 2016-17, in line with OBR forecast & 28% down on 2015-16. But it's projected to rise next year pic.twitter.com/EWpWRHQj3M
— Matt Whittaker (@MattWhittakerRF) April 25, 2017
But.... the independent Office for Budget Responsibility forecasts borrowing will jump to £58bn in the current financial year.
There’s no room for complacency about the state of Britain’s public finances, just because the deficit fell to £52bn last year.
So argues John Hawksworth, PwC chief economist, who fears that borrowing could be driven up again.
He says:
A number of one-off factors relating to the timing of tax receipts and spending flattered the deficit figures for 2016/17 but are likely to be reversed in 2017/18.
“Higher inflation will also act as a drag on growth over the next year while boosting some benefit payments that are linked to prices. So the improvement in the deficit could well be reversed in the coming financial year as the OBR predicted.
“In the longer term an ageing population and rising healthcare costs will also put pressure on the public finances. So while the deficit is now approaching a more sustainable level, there will still be some tough choices ahead on tax and spending for the next government.”
UK deficit hits lowest since the financial crisis
Breaking: Britain’s annual public deficit has fallen to its lowest level in almost a decade.
The UK borrowed £52bn in the 2016-17 financial year, new figures show. That’s slightly above the £51.7bn predicted in last month’s budget, but around £20bn or 28% lower than the previous year.
This is the smallest annual deficit since 2007-08, and the start of the financial crisis which rocked Britain’s financial sector and triggered a deep recession.
Disappointingly, March’s deficit rose by £800m to £5.1bn, rather larger than expected.
And Britain’s total national debt is now around £1.7 trillion.
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City Index: Political risk hasn't gone away
Markets do have a strong history of getting carried away by political events, especially if their favourite candidate is doing well.
So we should treat this rally with some caution, as Emmanuel Macron hasn’t yet proved he can deliver on his promises. The first challenges will be to win seats in the French national assembly in June.
Kathleen Brooks of City Index says there is a significant risk that Macron struggles to implement a reform agenda in France.
She writes:
Equity markets are putting a lot of faith into Macron, he first has to win the second round of the French Presidential election and get the keys to the Elysee Palace, but then his newly formed party has to do well in the National Assembly elections in June.
French banks have been the immediate beneficiaries to Macron’s strong showing in the first round of the vote. Societe General, BNP Paribas and Credit Agricole rose 9.5%, 7.5% and 10.8% respectively on Monday. This is to be expected, as they are most correlated to the economy and are likely to salute a pro-business Presidential candidate. However, they are also most at risk if Macron’s En Marche! Party do not get enough seats in the National Assembly elections in two months’ time, which would make it hard for Macron to get his pro-growth agenda into action.
Thus, European political risk is not at bay completely.
The French presidential rate took another twist last night, when Marine Le Pen announced she was stepping aside as leader of the National Front.
That may help her win support from voters who aren’t impressed by Macron, but can’t stomach placing a cross next to a party with such a toxic past.
Robin Bew of the Economist Intelligence Unit says it’s a clever idea, but not enough to win the second round of voting.
Le Pen step-aside from NF leadership is clever politics. Going after Fillon’s supporters. But good 1st round turnout suggests she’ll lose
— Robin Bew (@RobinBew) April 25, 2017
Optimism over the French election is pushing the euro up this morning. It’s gained 0.2% to $1.089, close to the five-month high struck on Sunday night.
Good news for the next French president -- the country’s business leaders are at their most optimistic since 2011.
French business morale in April jumps to highest in almost 6 years. pic.twitter.com/I7B4At4STU
— Jamie McGeever (@ReutersJamie) April 25, 2017
Bullish investors are in “firm control” of the markets right now, says Chris Weston of IG.
Weston writes:
Despite concerns of elevated valuation, macroeconomic and geopolitical risks, the fact the MSCI World index is at an all-time high is remarkable, especially when we think that we haven’t seen a 2% pullback for 120 trading sessions.
The “highly likely” prospect of Emmanuel Macron becoming France’s next president is encouraging traders to buy European shares and French bonds, and driving down the cost of insuring against France defaulting on its debts, he adds.
India’s main stock index, the NSE Nifty, has swept to a new all-time high today.
Tirthankar Patnaik, India strategist at Mizuho Bank, explains:
“Global markets have been very positive on news from the French election,”
More here: Nifty hits record high; rupee strengthens
Markets are in a “party mood” this morning thanks to last Sunday’s French elections, says FXTM chief market strategist Hussein Sayed.
It now appears that investors are confident that Macron will be France’s next president and will win the battle on 7 May easily. Investors who lost confidence in pollsters after they failed to predict the outcomes of the U.S. elections and Brexit vote are all of a sudden viewing them as credible sources of information again...
The importance of this one single event was reflected in asset classes across the globe, but whether this rally will have legs depends on how big Macron wins. Macron would need to win by a margin of more than 60% in the second round to unite a divided country and ensure that the spread of populism ends in France.
Frankfurt traders have pushed the German DAZ to new record highs:
#DAX hit all-time high for the second consecutive session as #Macron leads the #Frenchelections optinion polls.
— Ipek Ozkardeskaya (@IpekOzkardeskay) April 25, 2017
European stock markets are inching higher this morning, adding to yesterday’s strong rally.
The French CAC, German DAX and UK FTSE 100 have all gained a little ground in early trading, helping to send global markets to record levels.
Peeperz. Europe opens a smidge higher after European Stoxx 50's best day in 2 yrs y'day (up 4%)..CAC up a mouse toe this morn (up 4% y'day)
— Louisa Bojesen (@louisabojesen) April 25, 2017
Updated
World stock markets hit record highs
Global stock markets have hit their highest ever levels this morning, as relief over the French presidential election continues to sweep through trading floors.
The MSCI World Index - a broad measure of markets around the globe - has hit an all-time high today, for the second session running.
The rally is driven by expectations that Emmanuel Macron will become France’s next president, calming fears that the European Union could be dragged into another political crisis.
Shares have risen in Asia overnight, with the Japanese market gaining over 1%, and Hong Kong and India also up.
Investor are reacting to poll suggesting that Macron would comfortably beat his opponent, Marine Le Pen
Yesterday, European markets surged after Macron claimed a place in the run-off, with France’s CAC leaping by 4% to a nine year high.
Guy Foster, Head of Research at Brewin Dolphin, agrees that Macron looks highly likely to succeed Francois Hollande.
He says:
“Following the first-round election we are now in a crucial fortnight for France in which the impact of terror events, further WikiLeaks’ disclosures or potential scandals are multiplied by the fact that if Macron the centrist doesn’t win, Le Pen the extremist will.
Nevertheless, the chances of an Emmanuel Macron victory in the run-off election are very high indeed.
Michael Hewson of CMC Markets suggests that investors may be being too optimistic about Macron’s ability to change France.
Markets are surmising that Emmanuel Macron is a dead certainty to be French President in two weeks’ time, and while this is probably the most benign outcome at a time of rising populism it completely overlooks the challenges facing the new French President when he or she takes office on May 8th.
For a start while Mr Macron is an outsider from the established political order, he will still be viewed by the majority of the 40% of French people who voted for anti-Euro candidates, as very much part of the same elite who he has helped to push to one side in this particular vote, which means he will be presiding over a country very much ill at ease with itself.
The agenda: Did Britain hit its borrowing targets last year?
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
We’re about to discover how much Britain was forced to borrow to meet its financial needs last year, and whether it hit its targets.
At 9.30am, the Office for National Statistics publishes the public finance figures for March. That will show the deficit last month, and across the full 2016-17 financial year.
Last month, the Office for Budget Responsibility (OBR) forecast that government borrowing would hit £51.7bn this year. That was down from the £68.2bn forecast in November, and much better than the £71bn borrowed in 2015-16.
As of last month, Britain had borrowed around £47.8bn, implying that the nation will have tapped the markets for another £3bn or so in March.
With an election looming, the UK government will surely hail the figures as proof that it is getting the deficit down.
But, Britain’s total debt pile is still going up, of course - as there’s no prospect of an actual surplus in the next few years.
Mike van Dulken of Accendo Markets says:
Macro data this morning includes March UK Public Finances with net borrowing set to continue to rise following January’s seasonal drop on corporation tax receipts and accounting revisions.
Also coming up today...
Investors will be watching France closely, ahead of the presidential run-off between Emmanuel Macron and Marine Le Pen on May 7th.
In the City, hotels and coffee chain Whitbread, flooring company Carpetright, wealth manager St James’s Place and financial services group Virgin Money are all reporting results.
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