U.S. dollar strengthens along with emerging market currencies, euro and pound fall, and Wall Street extends gains following better-than-expected U.S. consumer confidence numbers, as markets reopen after the Christmas holiday break…
This article titled “Global markets climb on rising US confidence and higher oil prices – live” was written by Katie Allen and Julia Kollewe (now), for theguardian.com on Tuesday 29th December 2015 16.17 UTC
On Monday, the rouble hit its lowest level this year, pressured by sliding oil prices. The Russian economy is heavily reliant on crude and natural gas, which together account for almost half of state revenue.
But today, the Russian currency has recovered, boosted by higher oil prices and a Bloomberg report that former Russian finance minister and investor favourite Alexei Kudrin is in talks with Vladimir Putin about returning to a senior post to help deal with the country’s worsening economic troubles.
Let’s take a look at currency markets. The US dollar is up against the euro and other major currencies, but has slipped against the Russian rouble, which has been been lifted by higher oil prices. Brent crude is nearly 3% higher on the day.
Investors are snapping up riskier assets, including stocks and emerging market currencies, on the back of the rally in oil prices. This has hurt the euro, which is regarded as a safer currency, given its low yield.
Away from the markets, here’s some good news for UK consumers. Companies that plague householders with nuisance phone calls and texts face fines totalling more than £1m this year and next, a government watchdog has warned after tripling the financial punishment for rogue callers in 2015, our consumer affairs correspondent Rebecca Smithers writes.
You can read our full story here.
The most recent fine came earlier this month when the ICO fined the Telegraph Media Group £30,000 for sending hundreds of thousands of emails on the day of the general election urging readers to vote Conservative, breaking the rules around direct marketing.
Here is a list of other fines imposed this year:
- A record £200,000 fine in September to Home Energy & Lifestyle Management Ltd (Helms), a solar panels company that made 6m nuisance calls to householders.
- A £130,000 fine in October to Pharmacy 2U Ltd, a company that was selling customer details to postal marketing companies. Buyers of the details included a health supplements company cautioned for misleading advertising.
- A £90,000 fine in November to Nuisance Call Blocker Ltd for making unsolicited marketing calls to sell cold-call-blocking devices. The Poole-based company was telephoning people to sell a call-blocking service and device to stop the same type of calls the company itself was making.
- A £80,000 fine to UKMS Money Solutions Ltd, a PPI claims firm that sent 1.3m spam text messages to mobile phone numbers it had bought from list brokers.
Gold has benefited from the rally in oil prices, but gains were limited by a stronger dollar. Spot gold edged up 0.1% to $1,070.05 an ounce in thin trading.
The precious metal is still on course for its third year of losses, pressured by the prospect for more rate hikes in the US. It is likely to end the year nearly 10% lower from the previous year, mainly due to expectations that higher US interest rates will hit demand for gold.
ABN Amro analyst Georgette Boele said:
Gold’s down trend is likely to continue throughout 2016…. there are going to be more US rate hikes than the market is anticipating the next year.”
Brent crude is nearly 3% higher, rising more than a dollar to $37.70, after hitting 11-year lows.
Here is Connor Campbell again, financial analyst at Spreadex:
A slightly better than expected goods trade deficit (at $60.5bn against the $60.9bn anticipated, but still greater than last month’s $58.4bn) and a much better than forecast CB consumer confidence figure helped the Dow Jones open at, and maintain, a 170 point jump this Tuesday. That leaves the US index at a 12 day high, and with a slim chance of edging into the green in terms of year-long growth before the end of trading on Thursday.
This has given a further boost to eurozone stocks, already buoyant on the rising oil price. Germany’s Dax is nearly 180 points, or 1.66%, ahead, while France’s CAC has gained almost 70 points, or 1.45%.
The FTSE 100 index in London is some 33 points ahead, or 0.5%.
The FTSE likely would have been higher if wasn’t for the gains made by its housing sector being effectively negated by the Scrooge-like commodity stocks and a renewed slide from the supermarket sector. News that the sale of its pharmacy business to Celesio would be undergoing an in-depth investigation, as ordered by the CMA, caused a specific headache for Sainsbury’s [down 1.2%].
More generally, news that Amazon intends to substantially expand its grocery delivery service Pantry in the New Year caused the likes of Tesco and Morrisons to tumble, with the online-only Ocado Group [plunging more than 4%] especially spooked by the announcement.”
Here is our story on Amazon.
Adam Button, currency analyst at Forex Live, says about the rise in US consumer confidence:
It’s strong but still well below where it was in September. The revision to the November reading meant it was the worst since July, not the worst since Sept 2014.”
Stocks on Wall Street are extending gains on the better-than-expected US confidence numbers, with the Nasdaq and the Dow Jones up around 1% and the S&P 500 0.8% ahead.
Lynn Franco, director of economic indicators at the Conference Board, said:
Consumer confidence improved in December, following a moderate decrease in November. As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market.
Looking ahead to 2016, consumers are expecting little change in both business conditions and the labor market. Expectations regarding their financial outlook are mixed, but the optimists continue to outweigh the pessimists.”
The monthly survey is conducted for the Conference Board by Nielsen. The cutoff date for the preliminary results was 15 December.
You can read the full consumer confidence report here.
US confidence improves
The latest US consumer confidence numbers are out. The Conference Board consumer confidence index improved to 96.5 in December, from a revised 92.6 in November, beating expectations of a reading of 93.5.
Barclays Capital agrees $13.75m US settlement over mutual funds
Staying on the other side of the Atlantic for the moment, the US regulator FINRA has settled with Barclays Capital over mutual funds. The Financial Industry Regulatory Authority has ordered Barclays Capital to pay $13.75m for unsuitable mutual fund transactions and related supervisory failures.
The British bank’s investment banking arm will have to pay more than $10m in compensation, including interest, to affected customers, and has been fined a further $3.75m by the regulator. It said in a statement:
FINRA found that from January 2010 through June 2015, Barclays’ supervisory systems were not sufficient to prevent unsuitable switching or to meet certain of the firm’s obligations regarding the sale of mutual funds to retail brokerage customers….
In concluding this settlement, Barclays neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.”
You can read the statement in full here.
Wall Street opens higher
Shortly after the opening bell on Wall Street, shares are higher, mirroring a rally in oil prices.
The tech-heavy Nasdaq index is up 0.7%, the Dow Jones industrial average is up 0.9% and the S&P 500 has added 0.8%.
In the UK, the FTSE 100 is up 0.6% while Brent crude is up 2% at $37.4, creeping further asway from an 11-year low hit last week.
US house price inflation edges up
Figures just out in the US suggest home prices there rose at a slightly faster pace in October compared with September and a touch above economists’ forecasts.
The S&P/Case Shiller index of 20 metropolitan areas rose 5.5% on a year earlier in October. That was faster than 5.4% inflation for single-family home prices in September and beat the forecast for 5.4% in a Reuters poll of economists.
The survey authors said San Francisco, Denver and Portland continue to report the highest year-over-year gains among the 20 cities with another month of double-digit price increases of 10.9% for all three.
Commenting on the latest report [PDF], David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices says:
“Generally good economic conditions continue to support gains in home prices.
“Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts.”
He also highlights the impact on sentiment among potential homebuyers from the US central bank’s move to raise interest rates earlier this month – the first increase for almost a decade:
“The recent action by the Federal Reserve raising the Fed funds target rate by 25 basis points and spreading expectations of further increases during 2016 are leading some to wonder if mortgage interest rate might rise. Typically, increases in short term interest rates lead to smaller increases in long term interest rates … From May 2004 to July 2007, the Fed funds rate moved up from 1.0% to 5.25%; over the same period, the mortgage rate rose from about 6% to 6.75% during a sustained tightening effort by the Federal Reserve. The latest economic projections published by the Fed following the recent rate increase suggest that the Fed funds rate will be around 2.6% in September 2017 compared to a current rate of about 0.5%. These data suggest that potential home buyers need not fear runaway mortgage interest rates.”
Competition watchdog to probe Sainsbury’s pharmacy sale
The Competition and Markets Authority (CMA) in the UK has confirmed it is referring the sale of Sainsbury’s pharmacy business for an in-depth investigation.
In a statement, the CMA says the proposed acquistion of the business by Celesio, the owner of Lloyds Pharmacy, will be probed further after Celesio had failed to address the watchdog’s concerns about competition being affected.
The CMA says:
The CMA’s initial investigation identified 78 local areas where customers may be affected by a loss of competition between Lloyds Pharmacy (a Celesio subsidiary) and Sainsbury’s pharmacies. The CMA also indicated that in other local areas it had been unable to reach a positive conclusion on whether the merger gives rise to a realistic prospect of a substantial lessening of competition.
Celesio has not offered any undertakings in lieu and the CMA will therefore now refer the merger.
A decision on the merger will be made by a group of independent panel members supported by a case team of CMA staff. The deadline for the final report will be 13 June 2016.
Sainsbury’s announced back in July that it had sold its 281-store pharmacy business to Celesio for £125m.
Under the deal, Lloyds will rent out and run Sainsbury’s 277 in-store pharmacies and take over four located in hospitals.
More pressure on Britain’s big supermarkets
The focus will be firmly on retailers’ shares in coming days as the trading updates from the crucial Christmas season roll in.
We already know Britain’s supermarkets have been struggling as shopping habits change and as discounters like Lidl and Aldi take market share and intensify a fierce price war. Now Amazon is preparing to crank up the pressure on grocers by dramatically expanding the range of food products it sells.
My colleague Graham Ruddick has been talking to Christopher North, UK boss of the online retailer. North says Amazon plans to expand its Pantry service rapidly in the new year.
Here’s the full story:
Markets edge up, Wall St looks to open higher
On Wall Street the US futures market is pointing to a higher open, helped by a modest rise in oil prices, traders say.
In the UK, the FTSE 100 is up 0.4%, or 24 points, at 6278. Housebuilders are among the biggest risers while the miners again feature among the biggest fallers as aluminium and copper prices head lower.
Connor Campbell, analyst at spread betting company Spreadex highlights that the FTSE is underperforming its European peers:
“Whilst thin(ish) trading volumes appear to be enhancing whatever nascent positive sentiment there is in the eurozone, allowing the DAX and CAC to stretch out their legs to hit fresh 20-day highs, the FTSE hasn’t been so lucky this Tuesday morning.
“Despite a strong set of housing stocks (Persimmon and Berkeley Group leading the charge), lifted by both news of record high UK prices and the potential windfall from the cost of rebuilding and repairing the numerous homes damaged in the northern floods, and a stable oil price, the UK index is struggling to match its Eurozone peers, hampered by a still grumpy mining sector. There are no real signs that the latter issue could turn around this afternoon… As ever those same commodity stocks that have plagued the FTSE throughout 2015 are trying to ensure it ends the year not with a bang but a whimper.”
Saudi stocks hit after oil plunge swells deficit
The plunge in oil prices this year has taken its toll on Saudi Arabia’s state coffers and today the fallout is being fell in its stock market.
Late on Monday, Saudi Arabia announced plans to cut government spending and reform its finances after the drop in oil prices resulted in a record annual budget deficit of nearly $98bn (£66bn).
The the world’s top crude exporter ran a deficit of 367bn riyals ($97.9bn) in 2015, or 15% of gross domestic product, officials said.
Today, the Saudi stock index dropped 3% in early trading and is currently down around 1.5% as traders digest the prospect of spending cuts and tax rises in the biggest shake-up to economic policy there for more than a decade. The finance ministry is also changing subsidies for water, electricity and petroleum products over the next five years.
Saudi Arabia’s stock index:
Brent crude is still just about eking out some gains today after Monday’s sell-off. It is currently up around 0.3% or 0.1 cents to $36.7 per barrel. It is not far off an 11-year low of $35.98 hit last week.
There are signs that the global glut of oil will deepen in 2016 as a market already awash with oil from the two biggest suppliers – Saudi Arabia and Russia – receives additional supply from the lifting of sanctions against Iran and the ending of a 40-year US export ban.
Time for a quiz?
Trading volumes are particularly thin on European markets today and it seems many (sensible) people have taken a few days off between Christmas and the New Year. For those who are in the office today, dare we suggest the holiday lull might offer a chance to take an end of year quiz or two while you tuck into your turkey sandwiches.
We’ll keep it strictly business-related:
There is, of course, our own very broad business quiz covering (almost) everything from Cadbury’s Fruit and Nut bars to Libor-rigging and Greece’s brush with Grexit:
If central banks are your thing, this is from Bank Underground, a blog for Bank of England staff:
Deloitte’s chief economist, Ian Stewart, set the quiz for newspaper City AM. The questions are notably offbeat, including one on the world’s “most sleep-friendly airport”:
The BBC’s business team has put together these 10 questions, including some typically flowery Yanis Varoufakis quotes:
New floods threaten the UK with Storm Frank on the way and as we reported earlier, estimates of the costs so far are already in the billions.
For live coverage of the flooding and its fallout, you can follow our blog here:
While accountants have sought to put a figure on the cost of damage so far, economists note that counting up the economic impact overall is a very tricky task.
Howard Archer, economist at the consultancy IHS Global Insight, sends through these comments explaining that damage from extreme weather can dent some spending in the short term but then boost other areas of spending, notably repair work, further out:
“In purely economic/GDP costs, the net overall impact of the floods will be limited. There will be some near-term hit to the economy (but even this will be relatively limited given the overall size of the economy) but this will be offset by some gains further out). But this will not tell the whole story by a long way – especially for the poor individual people and businesses that are affected.
“Looking at the extent of the flooding, it could well shave 0.2-0.25 percentage point off GDP growth in the near term. As the flooding is occurring late on in the fourth quarter, some of this negative impact is likely to occur in the first quarter of 2016.
“This is the consequence of businesses not being able to open, loss of agricultural output, people not being able to get to the shops, travel etc. There is also the cost to insurance companies. There is also the loss of work from those people not actually able to get to work.
“However, damage to personal property does not affect GDP growth, although it is obviously a disaster for the poor people involved. And GDP measures do not capture the stress that the people/businesses affected incur.
“Further out there will be some boost to GDP growth through the construction work that will be generated by major repair work to buildings and infrastructure and replacement buildings. There will also be a positive impact to growth coming from the replacement purchases of furnishings, household goods etc lost or damaged during the flooding.
“The boost to growth from the construction work and replacement purchases will be spread out, but some will likely start occurring in the first quarter of 2016 which will at least partly offset the hit to activity at the start of the quarter.”
New record for UK house prices
- The prospect of stamp duty changes in April has prompted a rush into the UK property market from buy-to-let investors and helped lift the average UK house price above £230,000 mark for first time, according to one estate agent chain today.
- Haart, the UK’s largest independent estate agent, says the average UK house price was up 3.7% in a month and 13.4% on the year to reach £231,857 in November.
- London property prices saw the fastest monthly increase for six months, up 3.4% to £525,780.
- Overall, the number of new buyers rose 7.5% on a year earlier. There were signs, however, that the buy-to-let rush and related price rises were deterring first-time buyers from the housing market. The number of first-time buyers declined 7% on the month, haart said, using figures from some 100 branches around the UK.
Its chief executive Paul Smith comments:
“UK house prices rose 13.4% annually and 3.7% on the month to break records again in November. This is the steepest monthly and annual increase on record and follows a surge in registrations from buy-to-let investors since the Autumn Statement in anticipation of the 3% stamp duty surcharge which is effective from the 1st of April 2016. This could mean the stamp duty payable on a property worth £275,000 could rise from £3,750 to £12,000.
“Although first-time buyer house prices have remained relatively stable, up just 1.1% in the last month, I expect these to shoot up over the coming months as first-time buyers face fierce competition from buy-to-let investors. The pressure is already being felt by many with demand among first-time-buyers already down 7% in the last month alone. While first-time buyers may face a tough couple of months, once the stamp duty changes come into effect in April, demand from buy-to-let investors is likely to recede so we should see a recovery in prices at this level.”
Deutsche Bank shares are up this morning after news it is selling its 20% stake in Beijing’s Hua Xia Bank, making it the latest Western business to pare back its links to China.
As Reuters reports, Deutsche is selling the stake to Chinese insurer PICC Property and Casualty Co in a deal worth up to $4bn (£2.69bn).
It is the latest move in the German bank’s drastic restructuring by new chief executive, John Cryan.
Shares in Deutsche are up 2.4% while the wider German Dax index is up 1.6%.
As Britain’s big banks carry on with long task of patching up their reputations, they have new report cards to pore over from the body set up to improve standards in the wake of the Libor-rigging crisis.
Dame Colette Bowe, chair of the Banking Standards Board (BSB), has likened the assessments of the behaviour and culture inside the major banks to the reports delivered by auditors, which are signed off by the partner at the accountancy firm which has assessed their books and is included in their annual reports. The BSB will publish its own annual report in the spring.
The first such set of report cards have been sent to the founder members: Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander and Standard Chartered and Nationwide Building Society.
There is also talk of making bankers swear an hippocratic oath in the way that doctors do but that seems to be some way off.
My colleagues Jill Treanor and Larry Elliott have the full story:
It looks like it was a very merry Christmas for Fitbit, the US-listed maker of wearable health monitors. Reports that its app topped download charts on 25 December suggest plenty of people were unwrapping new gadgets from the firm on Christmas day and that helped lift its shares on Monday. They closed up 3.3%.
Back in November, Fitbit reported a 168% surge in revenues in its third-quarter earnings report.
In the UK, department store chain John Lewis recently highlighted Fitbits as it reported record Black Friday sales. Overall sales of wearable technology such as fitness monitors up 850%. Sales of Fitbit trackers were up 1,200%.
Puts a whole new spin on new year’s healthy living resolutions when your wristband can tell you when you are cheating…
Markets update: Oil steadies, FTSE bobs around unchanged mark
After its little Christmas break the FTSE 100 has re-opened this morning and struggling to find some direction. The bluechip index of London-listed shares is up around 8 points, that’s just 0.1%, at 6263.
That is down around 5% from where the index started 2015 at 6,566. With a sharp sell-off in global commodities, from copper to oil, providing much of the FTSE’s direction this year, it had climbed to a 2015 high of 7122.7 on 27 April but hit a low for 2015 of 5768.2 on 24 August. The index’s average level for the year is 6,592.6, according to Thomson Reuters.
Here’s how the FTSE looks for the year:
Oil prices meanwhile look set for further falls after already plunging this year. Brent crude shed another 1.3% on Monday but this morning the price per barrel has edged back up 0.5% to $36.8 with traders citing colder temperatures in Europe as boosting demand prospects.
Brent crude in 2015:
Elsewhere, Asian stock markets edged up overnight on the steadier oil price, there is a small boost to European stock markets from firmer financial stocks this morning and copper prices are falling again.
Introduction: Floods impact, FTSE re-opens
Good morning and welcome back to our live blog covering financial markets and business and economics news from around the UK and the world.
As the north of England and Scotland brace for the arrival of yet another storm later, towns, households and businesses are counting the cost of the flood damage so far.
The morning newspapers put varying figures on the devastation, citing estimates from insurers, accountants and economists.
Here is our own main story overnight that the cost of the winter floods across the UK will breach £5bn, with about a fifth of the bill falling on those with inadequate or non-existent insurance policies.
That’s according to accountants at KPMG, who warn the insurance policies of many of the worst hit would not cover the full losses. Here’s the full story:
As pressure mounts on the UK government over its spending on flood defences, the Mirror condemns a “£6bn Floods Shambles”:
The i newspaper goes with the £5bn figure and like others, highlights pressure on prime minister David Cameron:
We’ll be following updates on the expected economic impact of the storms throughout the day.
Also on the agenda, the FTSE 100 re-opens after the Christmas break and it is looking like the bluechip index will end the year pretty close to where it started it, after gains in the first half were wiped out by losses for heavyweight commodity-related stocks since the summer. The FTSE 100 has just opened up 0.1%.
After some choppy trading sessions for global oil prices, Brent Crude is fairly flat this morning, at $36.7, and its movements today will again be providing some direction to stock markets. It’s worth keeping in mind that thin holiday trading could make for some volatile moves.
We will also be keeping an eye out for updates from retailers as they tot up takings from the all-important Christmas shopping and sales season.
In the US later there are a handful economic releases: November’s trade balance (at 1.30pm GMT), October home prices from Standard & Poor’s/Case-Shiller (at 2pm GMT) and consumer confidence figures from the Conference Board (at 3pm GMT).
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