ECB rejects Monte dei Paschi delay request - report
UK trade deficit narrows as exports rise
City regulator cracks down on crowdfunding
German exports weaker than expected
FTSE rises but European markets are mixed
UK construction output falls unexpectedly
Elsewhere crude prices have come off their best levels after US drillers added more oil rigs for the sixth week in a row:
US Baker Hughes Rig Count (Dec 9) 624, previous 597
Oil Rigs 498, previous 477
Gas Rigs 125, previous 119
Italy’s cabinet has no plans to meet on Saturday to discuss the current banking situation, Reuters is reporting, quoting government sources.
But it stands ready to implement an emergency decree on banks if necessary, Reuters adds.
Even though Italy’s Monte dei Paschi fell more than 10% on concerns about its refinancing, investors elsewhere remained fairly calm. Ahead of the next big economic event - the Federal Reserve’s expected increase in US interest rates next week - markets were supported by the European Central Bank’s suggestion it would continue acting to help the eurozone economy.
Meanwhile the proposed offer by 21st Century Fox for satellite broadcaster Sky helped lift shares in London. Italy unsurprisingly missed out on the gains, given the fall in Monet dei Paschi. The final scores showed:
Ratings agency Moody’s has just downgraded the outlook for seven Italian banks to negative:
Moody’s Investors Service has today changed the outlook to negative from stable and affirmed the ratings of seven financial institutions, prompted by the outlook change to negative from stable on the Italian government’s Baa2 debt rating...
The following banks are affected by today’s rating actions: Intesa Sanpaolo Spa, Banca IMI Spa, FCA Bank S.p.A., Banca Nazionale Del Lavoro S.P.A., Credito Emiliano SpA, Credit Agricole Cariparma S.p.A., and Cassa Depositi e Prestiti S.p.A.
Back to Italy, and Monte dei Paschi has closed down more than 10% after the European Central Bank reportedly refused an extension for a potential private sector fundraising. But other Italian bank shares were not hit as badly:
#MONTEPASCHI suspended for big chunk of day, closes dn 10%. #Italy bank share losses contained though. Index dn 2.3%=most pain was in BMPS
Here’s our story on the Sky bid:
Related: Rupert Murdoch's Fox agrees deal to buy Sky
Some breaking news: satellite broadcaster Sky has agreed to be taken over by Rupert Murdoch’s 21st Century Fox for £10.75 a share or more than £18bn.
But Sky said the two sides were still in discussions about “certain material offer terms” and there was no guarantee an offer would be made.
Over in Greece prime minister Alexis Tsipras has taken creditors aback by announcing a Christmas bonus for pensioners surviving on €800 or less. Helena Smith reports from Athens:
It was meant to be a goodwill gesture, announced in the wake of anti-austerity protests at the end of a crippling 24-hour nationwide strike.
Instead, prime minister Alexis Tsipras’ declaration of a one off bonus payment to supplement the pensions of some 1.6 million low-income retirees has triggered renewed tensions with the country’s creditors. Under scheme – unveiled in a televised address to the nation late on Thursday – around €600m will be handed to pensioners living on living on €800 or less a month. Greece is under tight stewardship by lenders keeping it afloat. The prospect of another round of pension and wage cuts set as the price of emergency bailout funding has seen Tsipras’ own popularity and that of his leftist-led coalition tumble.
Very high #US consumer confidence supports our view that private consumption will continue to be the main growth engine pic.twitter.com/pu1tW7eJfl
Donald Trump’s surprise election victory has not only boosted the stock market, it has also given US consumers more confidence.
The initial reading of December’s University of Michigan’s consumer sentiment survey came in at 98, up from a revised 93.8 in November and well above expectations of a figure of 94.5. And it was mainly down to Trump.
Consumer confidence surged in early December to just one-tenth of an Index point below the 2015 peak—which was the highest level since the start of 2004.
The surge was largely due to consumers’ initial reactions to Trump’s surprise victory. When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys.
There were a few exceptions to the early December surge in optimism, mainly among those with a college degree and among residents of the Northeast [our bold italics], although no group has adopted a pessimistic outlook for the economy.
The most important implication of the increase in optimism is that it has raised expectations for the performance of the economy. President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance. Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence. Until specific policies are proposed, there is no reason to alter the 2017 forecast of 2.5% for real consumption.
The worries about Monte dei Paschi may be sending the Italian stock market lower - the FTSE MIB is currently down 1.1% - but elsewhere the mood is brighter.
On Wall Street the Dow Jones Industrial Average is up 30 points at 19,644, while Nasdaq composite is up 0.34% to a new peak of 5435.
Commenting on International Personal Finance, Numis analysts said:
The [Polish] Ministry of Justice, as opposed to the ministry of finance has, as part of a criminal law change and anti-usury measures, suggested that the interest rate cap in Poland is reduced. There is a 14 day consultation period and the ministry of finance may intervene.
Assuming the cap is enacted as proposed it would materially reduce the revenue profile of the Polish business, calling into question the viability of the home credit model.
Elsewhere International Personal Finance, the emerging markets lender, has slumped 30% after it said Polish authorities had published a draft bill cutting the costs lenders can charge on consumer loan agreements. It said was “reviewing the proposal to assess the extent to which the profitability of its Polish business would be affected by the proposed changes.” The proposal reduces the flat level cap of 25% of loan value to 10% and an annual cap from 30% to 10% per annum.
This is not the first time the company has been hit by changes in regulation.
Reuters: MONTE DEI PASCHI SUBORDINATED BONDS INCLUDED IN DEBT-TO-EQUITY SWAP TRADE DOWN 1000-1500 BPS ON OVER-THE COUNTER PLATFORMS - TRADER
The debt to equity swap was predicated on a cash call going ahead, and that now looks in doubt, hence the fall in the bonds which were included in the swap.
As part of its latest story on Monte dei Paschi, Italy’s Repubblica is suggesting the country may pass a decree this weekend allowing state aid. The story (in Italian) is here.
Shares in Monte dei Paschi have restarted but fallen to 11.4%, so suspended again.
And back to Italy: trading in Monte dei Paschi’s shares has been halted after they fell 7.3%.
Away from Italy’s banking problems, and the UK’s Office for National Statistics has released details of the gender pay gap in various professions.
Its interactive tool to see the gap in your job sector is here. And my colleague Katie Allen has written an analysis:
If you are a female traffic warden or probation officer read on for good news. If you are a female chief executive you may want to look away now.
The UK’s stubbornly wide gender pay gap is well-known. Almost half a century on from the gender pay act, there is still an 18.1% difference in average pay between men and women. Of course, such average figures for all employees tell a narrow story. They don’t, for example, account for the fact more women work in lower paid jobs or sectors.
Related: Gender pay gap tool reveals the good, the bad and the scandalous
News of the ECB’s rejection of an extension for the Monte dei Paschi fundraising has seen the bank’s shares drop 6.6%.
Michael Hewson, chief market analyst at CMC Markets UK, said:
The decision by the European Central Bank to reject Italy’s demand for more time to secure private funding for a bailout of Monte dei Paschi is likely to keep markets apprehensive at the prospect of how any new Italian government might look in the context of dealing with the country’s banking sector, bringing closer the prospect of a possible politically toxic bail-in of retail bondholders.
Here’s the full Reuters report on Monte dei Paschi:
The European Central Bank has rejected a request by ailing Italian lender Monte dei Paschi di Siena for more time to raise capital, a source said on Friday, in a move that piles pressure on the Italian government to bail out the bank.
The country’s third-largest lender, and the world’s oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euros ($5.3 billion) rescue plan in the face of fresh political uncertainty.
Breaking: Shares in Banca Monte dei Paschi di Siena (MPS), are down 2% on reports that the ECB will reject the Italian bank’s request for more time to raise capital.
The clock is now ticking on the world’s oldest bank and it throws open the possibility that the Italian government will to step in to help it find the billions of euros it needs to bolster its capital.
Harsh but fair < ECB SUPERVISORY BOARD HAS DECIDED TO REJECT MONTE DEI PASCHI'S REQUEST FOR MORE TIME TO RAISE CAPITAL-SOURCE
Meanwhile more on Britain’s productivity puzzle:
Hardly encouraging for #UK #productivity ! BBC News - British business 'loath to invest in research' https://t.co/QbyJJbEsSa
Sticking with Ireland, GDP increased by 4% in the third quarter, driven higher by consumer spending and exports.
The government looks on target for its forecasts, the figures are stronger than expected. Consumer spending is holding up well, at this stage there is no sign of a major Brexit hit.
Given anecdotes of weakness in the economy since summer/Brexit etc, those are decent growth figures in Q3.
Fyffes, the Dublin based grower and distributor of fruit, has agreed to a €751m (£631m) bid from Sumitomo, which supplies about one in three bananas sold in Japan.
Fyffes employs more than 6,000 people and is focused mainly on bananas, pineapples and melons. It has an annual turnover of more than €1.2bn.
Our employees, customers, suppliers and joint venture partners will benefit from Fyffes being part of an enlarged group with greater scale, reach and resources to broaden and accelerate delivery of Fyffes’ strategic objectives.
Gold is on course for its fifth weekly drop as investors price in a Federal Reserve rate hike next week.
The Bank of England has published its latest quarterly inflation expectation survey. It gives an indication of what the public thinks is happening to prices.
When asked what the current rate of inflation is, the median answer given was 2.3%, up from 1.8% in the August survey. (At the last count the official rate of inflation was actually 0.9%.)
Marmite-gate in action. BoE survey shows people's median expectations for inflation over the coming year 2.8%, compared with 2.2% in August pic.twitter.com/hjo4ChHfec
October’s trade data was partly flattered by a particular poor performance in September.
The ONS admitted on Tuesday an error in trade figures going back to 2015. It meant the trade performance was healthier than previously estimated before the referendum, but worse than previously estimated after the Brexit vote.
Related: UK's trade deficit before Brexit vote narrower than first calculated
City economists say the stronger-than-expected export performance suggests trade could make a decent contribution to GDP in the fourth quarter:
Howard Archer at IHS Markit:
Very much on the positive side, the trade performance improved substantially in October as exports jumped 4.6% month-on-month and imports fell 3.6% .
This suggests that net trade can make a decent positive contribution to GDP growth – although it needs to be remembered that the data can be highly volatile and subject to significant revisions
While the monthly data are extremely volatile, the narrowing in the trade deficit in October sets a solid base for trade in Q4.
What’s more, trade should be further supported in the coming months by the fall in sterling seen since the EU referendum, which should improve exporters’ competitiveness and encourage domestic production at the expense of imports.
Britain’s trade in goods deficit narrowed more than expected in October, to £9.7bn from £13.8bn in September, as exports rose but imports fell.
Following the EU referendum the UK trade deficit widened in the third quarter of 2016 and then in October it narrowed again.
There remains only limited evidence so far that the depreciation of sterling has led to a marked increase in UK exports.
UK construction fell 0.6% in October, disappointing expectations of a 0.2% rise.
It wasn’t all bad news however, as September’s growth figure was revised higher to 0.9% from 0.3%.
The City regulator is turning its attention to crowdfunding, a rapidly growing sector that lets businesses and individuals raise money from online investors.
The Financial Conduct Authority cites several concerns, among them the difficulty for investors to assess the risks and returns of such an investment.
Related: FCA to crack down on crowdfunding
Also coming up today are UK trade data and construction output for October.
Both will give further clues about how the economy is performing in the final quarter of 2016.
German exports were weaker than expected in October, rising by 0.5% and not 1% as forecast by economists.
It was better than September, when exports fell 1%, but dampened hopes that trade will significantly boost growth in Europe’s largest economy in the fourth quarter.
The FTSE 100 is slightly higher this morning, up 0.1% or five points at 6,397.
Elsewhere in Europe, markets are mixed:
Benoit Coeure, executive board member at the ECB, has been speaking to French radio this morning.
There are political risks everywhere, inside and outside of the euro zone. It’s not up to the ECB to manage political risks, that’s for the politicians to do.
But it’s up to us to draw the economic consequences and the eurozone will still need financial protection to get through 2017, which will be very risky.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Japan’s Nikkei has closed up 1.2% following gains in the US.
Just when you think US stocks may have peaked and can’t move any higher they go and register new all-time highs once again, in what is becoming a fairly regular theme, with the Dow, S&P 500 and the Russell 2000 repeating the trick for the second day in a row.
With European markets also posting new multi-month highs as well it would appear that the season of good cheer has come upon us early in the lead up to Christmas, and next week’s offerings from the US Federal Reserve.
Related: ECB surprises markets by scaling back QE programme