Shares, gold and oil rally, but market turbulence has hurt Goldman; Bank governor discusses Brexit, interest rates
Bank governor Mark Carney at Lords economic committee
Goldman’s revenues and profits down
Goldman CEO blames headwinds
European markets at three-month highs
Stock markets say ‘party on, dudes’
Oil up as Kuwait strike rumbles on
Coming up: Mark Carney at parliament
6.16pm BST
As oil prices continued to climb, as the strike in Kuwait outweighed concerns that the weekend meeting of producers failed to agree a cap on output, stock markets moved sharply higher once more. Commodity companies were among the leading risers, and positive results from the likes of L’Oreal also helped sentiment.
Silver soared as Chinese buyers moved in, dragging gold along with it. Joe Rundle, head of trading at ETX Capital, said:
Gold’s rally this year is finally feeding through to silver, which jumped to a 10-month high today.
5.58pm BST
To sum up, Bank of England governor Mark Carney has warned in a Lords committee that leaving the EU could lead to lower economic growth.
He defended the Bank commenting on the referendum, saying it was its duty to weigh up the implications of Britain’s membership, but that did not mean it was getting involved in politics.
5.51pm BST
And with that the session ends.
5.48pm BST
Q: How will you pursue climate change agenda [after Paris agreement]?
The most important aspect for the Bank is we are regulator of insurance, re-insurance sector. Climate change is one of most important things they have to manage, and they do it well.
5.38pm BST
#BOEs #Carney says feels sorry for any member of the public listening to his Lords committee testimony. Its OK Mark, I'm having a good time!
5.37pm BST
Q: How high could interest rates go without doing damage?
We do surveys on this. The good news is indebtedness is down. It would have an impact, it’s been a long time since interest rates have moved up. But the position has undoubtedly improved. And when banks are making mortgage decisions, they have affordability tests, including if interest rates go up.
5.35pm BST
Q: On the housing market, lenders are edging up to higher loan to value lending, are you still concerned about housing market.
The indebtedness of British households has gone down but it still high. It is one of the major risks we watch at MPC, and we watch higher loan to value.
5.33pm BST
On productivity Carney says a lack of confidence in future growth is an increasing drag on productivity and investment in the UK and other major countries.
5.30pm BST
Q: Are economic statistics fit for purpose?
I commend Charlie Beans review of ONS. It addresses a number of everyday issues where ONS could improve. We work closely with ONS.
5.00pm BST
Carney: post Brexit access to fin services passport "would likely require accepting EU regulation... without being able to influence them"
4.57pm BST
Q: Hasn’t QE caused some of these problems? Is there a danger you will move bubbles elsewhere?
This economy has needed monetary stimulus for some time, since the crisis, says Carney. The degree of stimulus has often been less than it appeared; relative to where interest rates needed to go, stimulus has been modest.
4.52pm BST
Q: Before the crash banks were issuing very complex instruments. Are you concerned there are trillions of dollars worth of very similar instruments backed by corporate loans in last few years?
Instruments which were most problematic were securitisations of securitisations, Carney says. Single securitisation is a reasonable financial instrument
4.48pm BST
Q: Your predecessor said regulation has become too complex. It has become enormous, what is your view.
UK is one of most advanced economies in world, a highly complex economy. This isn’t a simple world of barter and agrarian economies, and we shouldn’t go back to that.
4.42pm BST
Question: What challenges to financial stability do you see from integration of euro area? What is your assessment of negative interest rates? What do you think of helicopter money?
There is a risk is that the process of deepening integration [could] restrict our ability to do our job and deliver financial stability.
4.32pm BST
Q: are you saying London would be less dominant financial centre if we left the EU.
Depends on the negotiations, says Carney, but it is less likely London would remain as a pre-eminent financial centre [if UK left]. City of London unlikely to be enhanced [by Brexit].
4.29pm BST
Q: Do you agree with Chancellor that Brexit would lead to higher mortgages? Did he consult with Bank?
Chancellor did not consult, he is not a member of the MPC, says Carney.
4.24pm BST
Question: you said Chinese slowdown was greater risk to economy than EU referendum. Still agree?
Yes, in medium term the issues are considerable, it depends how they are handled by Chinese authorities.
4.22pm BST
Question: having a complicated financial system is inviting problems, but there is no real attempt to reduce complexity, is there?
There are a series of reforms that have sought to reduce complexity, including ringfencing banking, says Carney.
4.18pm BST
On migration, Carney says that older workers staying longer in the workforce has swamped the effect of higher migration to the the UK. Net migration was likely to become more important as the effect of the increase in older workers is exhausted.
The effects of migration on wage levels are not material for the Bank of England.
4.08pm BST
Carney pushed by Lords committee on why Treasury doc did not look at advantages of Brexit. Says it's for Treasury to defend report #EUref
4.04pm BST
More Carney on the uncertainties around the referendum:
We will comment on these risks when we have a policy meeting and they come up, but we will not comment through the purdah period of the EU referendum campaign.
3.56pm BST
A reminder: more on Carney’s EU comments in the politics live blog:
Related: EU referendum: Gove compares EU to failing historical empires – live
3.55pm BST
Carney says there is no intention for the Bank to provide a commentary on that or any other EU analysis.
3.52pm BST
Lord Hollick asks his view on Monday’s Treasury assessment. Carney says it is an analysis of a specific event rather than a Bank economic forecast. The Bank did not take part and it is up to the Treasury to discuss the analysis. But it is a sound analysis, the broad approach makes sense.
3.49pm BST
Carney:
Whatever the outcome of the Referendum, the MPC would use its tools to achieve its inflation remit, and, more broadly, the Bank’s policy committees will work in concert, as One Bank, to promote monetary and financial stability.
3.42pm BST
On the EU referendum, Carney says the Bank has not made and will not make any overall assessment of the economics of the UK’s membership of the EU. But he added:
At the same time, the Bank must assess the implications of the UK’s EU membership for our ability to achieve our core objectives of maintaining monetary and financial stability.
The Bank has a duty to report our evidence-based judgments to Parliament and to the public. That is the fundamental standard of an open and transparent central bank. Assessing and reporting major risks does not mean becoming involved in politics; rather it would be political to suppress important judgments which relate directly to the Bank’s remits and which influence our policy actions.
Some elements of these risks may be beginning to manifest.
Since November, the trade-weighted value of sterling has fallen 10%, with more than half of that occurring since the MPC’s last forecast in February.
A vote to leave the EU might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short run.
3.40pm BST
Carney is talking about the housing market, and says growth in mortgage lending is driven solely by the buy to let market. He said:
Buy-to-let mortgages increased by 11.5% last year and now account for 17% of the stock of total secured lending, twice the proportion of a decade ago. The PRA has just reviewed the plans of the 31 top lenders in the industry, representing over 90% of total buy-to-let lending. The Review revealed that some banks were applying weaker standards and highlighted the risk that more might do so to meet aggressive growth plans. In response, the PRA has clarified its expectations for buy-to-let underwriting standards and introduced new guidelines for minimum stressed interest rates to be used when lenders test affordability.
Given the combination of this prudent reinforcement of underwriting standards and major tax changes now coming into force, the FPC has decided to take no further action at this stage but will continue to monitor potential threats to financial stability from buy-to-let.
3.38pm BST
The session is underway.
3.32pm BST
My colleague Andrew Sparrow will be following Bank of England governor Mark Carney’s comments on Brexit at the Lords committee in the politics live blog:
Related: EU referendum: Gove compares EU to failing historical empires – live
3.19pm BST
Carney’s appearance before the Lords can be seen live here.
3.08pm BST
Mark Carney is up before the House of Lords economic affairs committee this afternoon in its annual meeting with the Bank of England governor.
Here’s a quick look at what is expected to be on the agenda:
2.45pm BST
US markets have made a mixed start in early trading, with the Dow Jones Industrial Average up 31 points or 0.18% following the positive lead from Europe and Asia.
But Nasdaq has dipped 21 points or 0.47%.
2.29pm BST
Gold and silver continue to gain ground, mainly driven by a weak dollar and Chinese buying.
Gold is up 2% to a one week high of $1255 an ounce while silver - the main beneficiary of Chinese demand - has jumped 5% to a ten month high of $17.07 an ounce.
2.23pm BST
US housing has been one of the stronger areas of the economy, so a downturn in March raises some questions, says Rob Carnell of ING:
With talk of recession in the US economy beginning to gain traction again ahead of what will probably be a very weak first quarter GDP release next week (just after the April Federal Reserve Open Markets Committee meeting), we are looking for evidence on either side of the argument to help us update our forecasts and confirm or deny the recession argument.
We feel the evidence for recession is quite circumstantial, with both weak and strong patches within the US economy. But one of those stronger patches has been the US home building sector, and this has taken a big dent in March.
2.07pm BST
Argentina is about to make a triumphant return to the bond markets, 15 years after defaulting on its debts.
That Argentine deal 'capped at $15bn' is in fact going to be $16.5bn
“The success of the issue is seen as an endorsement of new president Macri, as it is a huge step forwards with regards to improving Argentina’s financial credibility.”
1.43pm BST
Oh dear. The number of new US house-building projects fell by almost 9% in March, new data shows.
Residential housing starts decreased 8.8% to an annual rate of 1.09 million, the lowest since October, according to the Commerce Department.
That's a big miss on both housing starts and building permits. https://t.co/zybS3jEG38
1.20pm BST
The last three months certainly weren’t a vintage quarter for Goldman Sachs:
Goldman's own investment revenue falters: DOWN 97%! https://t.co/djRS2r9Eje
Goldman Earnings Plunge 55% In Worst Quarter Since 2011;… https://t.co/WHp8G3YGzb #fixed #PropTrading #Volatility pic.twitter.com/HKOpeHNhQM
1.10pm BST
Lloyd Blankfein, chairman and CEO of Goldman Sachs, says the last three months have been pretty tough.
“The operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses.
“Looking ahead, we will continue to focus on delivering superior service to our clients and managing our business efficiently, which remain essential to generating shareholder value over the long term.”
12.58pm BST
This is the fourth consecutive quarterly fall in Goldman’s profits, as its bond traders and investment bankers suffer from tough market conditions.
12.55pm BST
Here’s some instant reaction to Goldman Sachs’ big fall in revenues and profits in the last quarter.
Goldman Sachs reports a 60% plunge in profits. Perhaps analysts wil begin revising their 2H ests sometime soon https://t.co/qieICuja9J
Goldman trading revenue in FICC and equities way down. Not immune to Wall Street headwinds, clearly.
Goldman Sachs apparently 'beat' estimates - estimates have been lowered 52% in last 3 months !! - very poor results all round .
12.44pm BST
Here come Goldman Sachs’ financial results for the last quarter!
Breaking: Goldman Sachs earnings tumble on rocky markets activity https://t.co/5xQPDPcm8q
12.18pm BST
Global stock markets have hit their highest level since last December.
The rally in Europe and Asia today, and on Wall Street last night, has pushed MSCI’s All-Country World Stocks index to a four-month high.
12.00pm BST
The European Commission is gearing up to hit Google with fresh anti-competitive charges, over its Android mobile phone operating system, it appears.
The word in Brussels is that European Competition Commissioner Margrethe Vestager could unveil formal antitrust charges on Wednesday. She’s likely to accuse Google of abusing Android’s dominance to give its own apps an unfair advantage against rivals.
Round 2 in @vestager battle with @Google imminent. Today's Brussels Brief with @SpiegelPeter https://t.co/VUloo1AWvb pic.twitter.com/k5QGFMrj1W
11.42am BST
The German stock market is roaring ahead today, jumping by 220 point or 2.2%.
Doha what? After Monday’s rather tentative trading following the lack of oil action over the weekend the markets have leapt into life this Tuesday, hitting a bevy of fresh highs in the process.
The main thrust of the morning’s growth came from the Eurozone, the catalyst for this surge being the day’s ZEW economic sentiment figures. With the German number coming in at 11.2 (against 8.2 expected and 4.3 last month) and the region-wide data at 21.5 (vastly higher than the 13.9 forecast and the 10.6 seen last month) confidence is picking up, despite the very real threat of a Brexit AND a worsening assessment of the German economy. This was the green light the DAX needed to roar in to life, jumping by over 200 points to 10350, within a 150 leap away from a fresh 2016 peak.
10.55am BST
Greece’s government is resuming talks with its lenders this afternoon over its economic reforms, as the Greek debt crisis threatens to heat up.
It’s the first meeting since the International Monetary Fund pushed for Greece’s bailout to be rewritten, to remove unachievable fiscal targets.
Scheduled meetings of #Greece gov't w/ mission chiefs on Tue:
3pm - Education
4pm - Energy
5pm - (Privatisation) Fund#economy #ec #ecb #esm
#greek finance ministry says negotiations with country's creditor quartet will resume at 3PM 2day with gov officials meeting #IMF at 5 PM
The package would be triggered only if Greece falls short of targets over the next three years. But the proposals, which come on top of a list of austerity measures already being negotiated, would have to be passed into law now—posing a stiff test for the governing coalition of Prime Minister Alexis Tsipras, which has a majority of only three seats in parliament.
10.20am BST
Economic expectations in German has smashed forecasts, despite worries about Britain’s EU referendum.
The ZEW Institute’s German economic sentiment index has surged to 11.2 this month, up from just 4.3 in March.
Die #ZEW-#Konjunkturerwartungen für #Deutschland hellen sich auf - https://t.co/syGiX6fw3z /FK pic.twitter.com/wUDTA9haol
The assessment of the economic situation in Germany worsened. The index has fallen by 3.0 points and now stands at 47.7 points.
The bottom line, however, the continuing weak growth in China and other key emerging markets remain a burden on the German export industry. The concern about a possible withdrawal from the EU Britain is likely to affect burdensome.”
10.09am BST
Niels Christensen, foreign exchange strategist at Nordea, says the recovery in oil has sent confidence gushing through the markets:
He says (via Reuters)
“It is quite amazing how oil prices have recovered from Monday’s lows. That is shoring up risk appetite and pushing up commodity-linked currencies.
“As long as oil remains above $43 a barrel we think commodity currencies will remain supported.”
10.03am BST
That ‘party on, dudes’ feeling has driven European stock markets to three-month highs.
Consumer goods firms are leading the way after France’s L’Oreal posted solid sales and profit figures this morning.
“Equity markets are handsomely positive this morning, still benefiting from the oil price rebound as supply disruption from a Kuwaiti strike helps offsets the (misplaced) weekend disappointment from Doha.
A weak US dollar following dovish Fed commentary is also keeping commodities and their miners bid while a Dow Jones back at 9-month highs 18,000 and a decent US earnings season so far is maintaining risk appetite. Equities continue to extend their gains from 2016 lows taking headwinds in the stride and preferring to focus on the positives.
9.44am BST
The workers’ strike that has halved Kuwait’s oil output looks terribly civilised, judging by these photos from Sunday:
“Sensitive to union pressure, the government is likely to compromise on most of striking oil workers’ pay demands.
In the coming days oil production is likely to partially recover from its initial drop as non-striking staff is redistributed and inventories drawn upon.
9.28am BST
Two of Europe’s better known lager brands are changing hands, as part of the latest mega-deal in the brewing industry.
Budweiser brewer Anheuser-Busch InBev is selling Peroni and Grolsch to Japan’s Asahi (the firm behind Super Dry beer), to help smooth its takeover of SAB Miller.
Greenwich @MeantimeBrewing now owned by Japan's Asahi Group. I can't keep up. https://t.co/OPURliX6Do pic.twitter.com/yjDBuoYxcY
Related: Peroni and Grolsch sold as AB Inbev and SABMiller deal nears
8.45am BST
Sterling crisis, what sterling crisis?
The pound has gained almost half a cent this morning to $1.4319, a one-week high.
*U.K. POLL ON EU SHOWS 52% REMAIN, 43% LEAVE: ORB/TELEGRAPH POLL
Phone polls > Online polls https://t.co/B8K2lO3RXC
8.40am BST
The FTSE 100 has just hit its highest level of the year, up 42 points at 6395.
FTSE100 hits new high for the year. https://t.co/x7RyUUWUBL pic.twitter.com/zpgZltQ1q9
8.37am BST
Precious metal prices are rising this morning too.
Gold has gained 1% to $1,246 per ounce, while silver has jumped by 3% to a 10-month high.
Spot gold on the move this morning. The precious metal is spiking up by more than 1 percent https://t.co/SV94HKxU31 pic.twitter.com/8eR2dIbnKF
#Silver jumps to highest since Jun. pic.twitter.com/ANUfi6HjAm
#Silver exploding higher this morning on a key break of the October 2015 high which has been tested for the last week
8.21am BST
European stock markets are rising at the start of trading, following Asia’s lead.
In London the FTSE 100 has gained 23 points, or 0.4%, to 6377 points.
Brent crude at $40 per baarrel has done a good job of rejecting the notion that without production cuts it’s going to hell in a hand basket. Unless we can un-invent the technology gains of the last few years we won’t see dramatic upside and if the upshot is that oil prices settle into a range and better still, the correlation between non oil-producing countries currencies and the price of oil falls away, then that’s even better.
In the meantime, the oil market’s willingness to get back to business as usual has been greeted by a loud cry of ‘Party On, Dudes’ in equity markets.
Oil jumps 2%, greeted by "a loud cry of ‘Party On, Dudes’ in equity markets" says @kitjuckes https://t.co/LXvYd0JCx4 pic.twitter.com/Bd3DxoerOQ
8.07am BST
Yesterday’s oil price slide has been completely wiped out:
Oil is back above $40 https://t.co/Q8hYKS04Zi pic.twitter.com/Up7wWS9zLt
8.03am BST
The recovery in the oil price has helped to drive stock markets higher in Asia.
“The effects of the Dow reaching a nine-month high created a buying trend that helped lift the Nikkei today.”
7.47am BST
The oil price is rallying this morning as world markets put the debacle of Sunday’s Opec meeting behind them.
Despoite #DohaTalks failure...#oil back at Friday levels as #Kuwait sees labour strikes pic.twitter.com/kwsjtHkaLc
7.31am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Today, we get a new healthcheck on economic confidence in Europe’s largest economy, and hear from the UK’s top central banker.
The bank, which recently agreed to pay out over $5 billion to settle allegations related to the sale of subprime mortgage to investors between 2005 and 2007, is also forecast to report a 36.6 percent year-on-year drop in revenue, to $6.73 billion in the first three months of 2016 from $10.6 billion.
Goldman’s pretax profit is also expected to take a hit and is likely to drop to $1.87 billion from $3.93 billion in the first quarter of 2015.
Highlights: German ZEW Survey Current Situation, US Housing Starts, Building Permits, API Crude Oil Inventories, comments from BoE's Carney
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