All the day’s economic and financial news, as president Trump’s ban on citizens from seven countries entering the US worries investors
Dow back below 20,000
Shares fall after Trump travel ban
Financial markets suffering ‘uncertainty and jitters’
FTSE 100 has hit lowest level of 2017
UBS: Middle East investors may shun US
The agenda: Inflation data kicks off a busy week
Starbucks vows to hire 10,000 refugees after Trump travel ban
5.51pm GMT
The uncertainty and chaos caused by Donald Trump’s travel ban has sent stock markets tumbling.
With a number of Asian markets falling overnight - the Nikkei lost 0.5% - Europe and the US soon followed suit. In the UK, the FTSE 100 lost all the gains made so far this year, closing at its lowest level since 28 December. Things would have been worse without a boost from Vodafone after the mobile phone group said it was in talks about merging its Indian business with Idea Cellular. Chris Beauchamp, chief market analyst at IG, said:
The market narrative has shifted once again. For the past three months a Trump presidency has been heralded as great for stocks. Now, with Dow 20,000 behind us, it seems his government can be blamed for the bout of selling that has engulfed markets. The truth, as ever, probably lies somewhere in between these two extremes but there is probably some truth in the idea that geopolitical jitters are playing a part in price action today. The FTSE 100 has now surrendered all its gains for the year...Markets overall have been ripe for a correction for some time now, and were merely in need of a reason to begin; Trump’s rambunctious opening to his presidency, and the lighter volumes caused by holidays in Asian markets, may well have provided the bears with the opening they needed.
5.33pm GMT
Italy’s biggest bank has said its capital ratios at the end of 2016 would not meet requirements set down by the European Central Bank.
The bank is launching a €13bn rights issue to help bolster its finances, which should put it back on track to meet the ECB levels. It said:
[We envisage] a temporary deficit versus the corresponding applicable capital requirement as at 31 December 2016 .... by approximately 2% which is expected to be fully restored upon completion of the rights issue, which, subject to regulatory approvals, is expected to be settled before March 10th, 2017 on the basis of the current timetable.
Group financial results are impacted by a number of negative non-recurring items of which approximately €12.2bn were disclosed at UniCredit’s Capital Markets Day, on December 13th, 2016, in the context of the presentation of the 2016-2019 Strategic Plan..
The Group has taken into account a number of additional negative one-off items amounting to approximately €1.0bn, which are expected to be recorded in 2016. Such one-off items primarily result from a higher write-down of the investment in the Atlante Funds, on some participations and Deferred Tax Assets for temporary differences and extraordinary contributions to the National Resolution Fund.
4.11pm GMT
Despite the slump in markets following Trump’s travel ban, most are still within reach of record highs.
But Larry Summers, former US Treasury Secretary, has told Bloomberg TV he is concerned about the recent rises in markets:
What I think is a clear error, is to confuse several months of strong markets, with strong fundamentals. The period post-election when markets did best in the twentieth century was the period between Herbert Hoover’s election and his inauguration. And of course, as a presidency, that was the biggest economic disaster that we had. So I don’t know what’s going to happen next in markets, but nobody should be serene just because markets are behaving well.
As global businesses, they have a huge stake in the United States being a nation of the Statue of Liberty rather than being a nation of refugee camps and barbed wire. They have a huge stake in the United States supporting an open and tolerant global system, they have that stake for their employees, they have it for their customers, they have it for the reputation of the United States and they have spoken out.
I’m sure most of them share the values of inclusion, the values of American tradition that were reflected in the statements that John McCain and Lindsey Graham made, the statements that Jeff Immelt made.
And I don’t know whether it’s a sadder thing if others don’t have those values or whether it’s a sadder thing if they are being intimidated by the prospect of a tweet. But it’s an extraordinary thing if business leaders in the United States are being intimidated by a president’s threats of calling them out when the president’s been in office for one week. That is an extraordinary change in what the United States is about.
3.33pm GMT
Back with the markets, and the Dow’s fall back below 20,000, Spreadex financial analyst Connor Campbell said:
In what is a fairly significant development the Dow Jones opened under 20000 this Monday, causing the Trump travel ban losses to increase across the board.
The Dow plunged by 150 points after the bell, US investors equally unhappy with the instability brought on by Trump’s actions as their European cousins.
3.15pm GMT
Still with housing, but moving to Ireland, and credit ratings agency Moody’s predicts that Irish house prices could rise by 5% this year. Henry McDonald adds:
The number of homeowners in the Republic who are trapped in negative equity or have fallen behind in their mortgage repayments has also dropped dramatically, Moody’s say.
In their new year analysis of the Irish housing market, which was one of the main factors contributing to Ireland’s economic collapse towards national bankruptcy in the recession, the Moody’s report found that negative equity in the Republic is “still high.”
3.09pm GMT
Signs of strength in the US housing market.
Pending home sales rebounded in December after a decline the previous month, with the National Association of Realtors’ index rising by 1.6% to 109. Analysts had been expecting a 1% increase. Lawrence Yun, the association’s chief economist, said:
Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels1 to sign a contract. The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs. Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.
2.45pm GMT
Unsurprisingly given the chaos and uncertainty caused by Donald Trump’s travel ban and the falls it has caused in Asian and European markets, Wall Street has opened sharply lower.
The Dow Jones Industrial Average has dropped 0.66% or 130 points to 19,963 - below the 20,000 barrier it struggled for so long to achieve.
2.19pm GMT
In the UK market, one of the day’s big risers is engineering and consultancy group WS Atkins.
Its shares have jumped more than 7% following a report in the Times (£) that US peer CH2M had approached the group about a possible merger. Atkins - which has partnered the US group on projects - is not commenting, but analysts at Liberum said the idea was credible:
A response from Atkins in relation to the rumoured merger with CH2M is possible in the next day. A merger would almost double the size of the current business and would have more than 50% sales to the US. The business would be particularly strong in Energy, Water and Transportation. We believe that speculation is credible given the industry trend towards consolidation and would potentially create a top 5 global design company. Although the history of M&A is chequered in the sector, we see the potential combination as an early cycle play on growth in US infrastructure. CH2M’s third quarter trading update indicated lower earnings year on year. CH2M has had a challenging time but the suggested valuation of $2bn appears to be a reasonable market cap. The enterprise value is significantly higher, given debt, preference shares, pensions, and perhaps joint venture liabilities. The pension will be a key factor although liabilities have reduced post a controversial deal with the PPF. Premature to assess value creation, but expect limited cost-savings and an interesting debate on revenue synergies.
2.10pm GMT
Back with the German inflation figures, and despite consumer prices increasing by 1.9% year on year in January, that does not mean the ECB should rein in its stimulus programme, says economist Dr Andreas Rees at UniCredit:
Four weeks ago when the December figure was released, there was an outcry by some media and politicians about rising inflation risks in Germany. The ECB should act by unwinding QE as quickly as possible before it is too late, so the story went. It is likely that you will read such statements once again even the latest headline inflation figure came in a tad below expectations. In our view, this kind of thinking is not based on economic facts for two reasons. First, there are no signs of a persistent upward trend in consumer prices. Instead, it is largely about oil. Second, German private households’ inflation expectations remained well anchored.
Let us state the obvious: Rising inflation at the turn of the year has primarily been caused by energy prices, or more precisely by the higher oil price. The latest driver was the agreement between OPEC and non-OPEC countries such as Russia at the end of November to curb output. It was the first agreement of a global oil cartel since 2001. According to our calculations based on federal states data, inflation excluding food and energy was up a more moderate 1.4% year on year after 1.5% in the previous month....
2.00pm GMT
There’s no sign of a recovery in the European stock markets:
Whether it is building a wall, banning certain nationalities, starting a trade war or pretty much anything else President Trump may do to upset people, it does risk both creating and deepening a negative perception of the US.
What if someone now reacts by banning US products, or even worse US nationals from entering their nations? What if investors now decide to take money out of US funds? Over one million Britons have already reacted by signing a petition to stop an upcoming visit from Trump to the United Kingdom, something that will put even more pressure on Theresa May as she has not only just concluded a meeting with the new President but is already under pressure to meet her own deadline to invoke Article 50 within the next two months.
1.46pm GMT
Fresh US consumer spending figures show that the American public kept spending last month.
Consumer spending rose by 0.5% in December, up from +0.2% in November, suggesting the economy ended 2016 in solid shape.
*U.S. PCE CORE PRICE INDEX INCREASED 1.7% IN DECEMBER Y/Y
1.23pm GMT
The jump in German inflation to 1.9% this month will intensify the pressure on the European Central Bank to rein in its stimulus programme.
The common German reflex to criticize the ECB and call for an end of QE is, in our view, overblown.
First of all, there is very little the ECB can do about an increase in inflation, almost exclusively driven by energy and food prices. Secondly, even in an economy operating at full employment and which is most advanced in the current cycle, underlying inflationary pressure remains low...
1.03pm GMT
Newsflash: Inflation in Germany has hit its highest level since July 2013, in the latest sign that the cost of living is picking up in Europe.
Germany’s Consumer Prices Index jumped to 1.9% in January, according to flash estimates, up from 1.7% in December.
German inflation downside surprise! YOY came in at 1.9%, which was faster than last month's 1.7%, but below the 2.0% economists had expected
Jan #German #consumer #price #inflation up to 1.9% as y/y rise in energy prices up to 5.8% & food up to 3.2% but services inflation dipped
12.51pm GMT
There are also signs today that the eurozone debt crisis is bubbling up.
The yield, or interest rate, on Greek two-year bonds has jumped from 6.8% to 8.6% today. That means investors are keen to offload the debt, following the IMF’s warning that Greece needs substantial debt relief.
12.32pm GMT
Shares in several travel companies have fallen today.
Air France-KLM are down 2.2%, IAG (parent company of British Airways) have lost 1.2% and InterContinental Hotels are 1.6% lower. They would all suffer if the global economy slows, or enters an era of greater protectionism.
Travel stocks decline in Europe in wake of Trump’s immigration order https://t.co/nXCA0j0Cww
12.23pm GMT
Insurance group AXA UK has pledged to will honour claims from customers affected by Trump’s travel clampdown - even though they’re not technically covered for such disruption.
Here’s the official statement:
“In light of the sudden and unexpected decision by the Trump administration to block entry to the US for nationals from Syria, Somalia, Sudan, Iraq, Iran, Libya and Yemen, AXA Insurance UK confirms that individuals who have been denied entry as a result of the executive order, will be able to claim on their policy.
Although not technically covered, we view the current situation as unprecedented and unforeseen and as such we are extending the cover under our policies.
11.40am GMT
European stock markets remain in the red as lunchtime approaches, with the German, French and UK indices all down around 0.8%.
CMC Markets’ Michael Hewson says the US president’s ban visitors from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen is causing alarm.
Global Indices have started on the back foot this morning, after US President Trump announced one of his most radical policies yet, in the form of a travel ban.
The resulting press criticism and mass protests appear to have pushed some investors to the sidelines as rising uncertainty in the ability of the President not to cause damage to the US economy starts to increase, and uncertainty rarely bodes well for financial markets.
11.38am GMT
Bloomberg has flagged up that the tech industry has particular reasons to worry about Trump:
Trump is working on another immigration executive order directly impacting tech companies. https://t.co/fMiLTDycwp pic.twitter.com/ajKqYn76Si
10.46am GMT
A glimmer of good news; economic confidence across the euro area has hit its highest level in almost six years.
The EC’s Economic Sentiment Indicator, which tracks business and consumer confidence, has jumped to 108.2 from 107.8 in December, the best reading since March 2011.
Eurozone economic confidence surges to fresh pre-debt crisis high: A stellar start to a crucial year. https://t.co/lcE3VHThFN pic.twitter.com/QpdB8eRLVj
10.32am GMT
Only a handful of the 100 companies on the blue-chip Footsie index have risen this morning; the rest have been dragged down by concerns over Trump’s policies.
Joshua Mahony, market analyst at IG, says the FTSE 100 is ‘floundering’ this morning, as it sheds 60 points to its lowest level of 2017.
Friday’s dour finish across US markets seems to have paved the way for this morning’s weak trade, with markets turning their focus away from Donald Trump’s business friendly measures and towards his more controversial decision to ban citizens and refugees from seven states in the Middle East and Africa.
As we enter February, we are due the typical raft of economic data, with the Bank of England’s ‘Super Thursday’ and Friday’s US jobs report meaning that volatility is expected to grow as the week progresses.
10.06am GMT
UK public anger about Trump’s actions continues to build; one million people have now signed the petition opposing him receiving a state visit.
Trump petition breaks through ONE MILLION..... https://t.co/tZJ8v1DrjO
If Trump comes to Britain, there won't just be protests, there will be riots. This public hostility is unprecedented. He must be uninvited.
9.43am GMT
The US stock market is expected to dip when trading begins in five hours time.
The futures market indicates the Dow Jones industrial average will shed 40-ish points to around 20053, having hit record highs last week.
Wall Street is looking at a softer start to the week as questions begin to mount over just how damaging the new US immigration policy will be to a number of multinational businesses.
Sweeping bans on admission to the country from a number of nations risks undermining the globalisation agenda that has helped pump valuations in a range of US-listed stocks over the last few years, whilst the prospect of similar restrictions being applied to US citizens could also hamper overseas trade initiatives.
9.34am GMT
Back in the eurozone, Spain’s economy has posted another quarter of solid growth.
9.18am GMT
FTSE has just hit its lowest level all year at 7117, a monthly low.
9.05am GMT
Paul Donovan, economist at UBS, has warned clients that investors in the Middle East could pull money out of America, if they feel Trump is persecuting Muslims.
Paul Donovan (UBS) on Trump, the dollar, and Middle East investors pic.twitter.com/YNS72TWxrl
8.51am GMT
European stock markets are all in retreat this morning, as the US travel ban hits sentiment across the continent.
Pretty much everything slipped into the red this morning, the markets reacting to the fresh bout of instability brought on by Donald Trump over the weekend.
Though the Trump rally may have lifted the markets to their current peaks, the global outrage that has greeted the President’s first week in office, the most recent instance being the well-placed disgust at his Muslim travel ban, is now beginning suppress investors’ appetites especially since, as mentioned, the indices are trading so high.
8.44am GMT
Naeem Aslam, analyst at Think Markets, says Trump is creating “more uncertainty and jitters among investors.”
The major US tech giants have also strongly condemned the president’s executive order which is not helping business confidence.
Starbucks, the US coffee giant, announced today that they will hire 10,000 refuges over the next 5 years, sending a clear message to Trump’s anti-immigrant and biased policies. You could certainly say that the tourism sector over in the US might also feel the pinch as holidaying stateside is not an ideal scenario for visitors in light of his new anti-immigration policies.
8.33am GMT
After a blizzard of executive orders on immigration, border control, oil pipelines and trade, it’s becoming clear that Trump actually means what he said during last year’s campaign.
This may be an unwelcome shock to investors who hoped the billionaire would take a different path once in office.
“Trump always stated these were policies he would implement.
“Quite a lot of it was brushed off as ‘campaign rhetoric’ but he is following through.
8.20am GMT
Stock markets and the US dollar are both starting the week on the back foot, as Donald Trump’s controversial travel ban worries investors.
State of play. pic.twitter.com/MdqrDcsJ8H
Dollar drops as Trump ban confuses allies, businesses—and Trump aides too. https://t.co/m5tK883dhN pic.twitter.com/l1WoFMCNlT
Related: Theresa May feels heat over travel ban as Donald Trump stands firm
“World leaders were quick to condemn President Trump’s executive order to ban U.S. travel from seven Muslim countries. The global reaction has been one of universal condemnation.
The fear here is that the market may start to think that personal vendetta is clouding the Oval Office judgment and they could express a huge vote of non-confidence through the markets.
7.44am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
This is going to be a big week for news, with European growth data being released, two key central bank meetings, and a new healthcheck on America’s jobs market.
This is going to be an insane week. On top of political fallout from Friday, a huge week for data. Via @5thrule pic.twitter.com/wQE3sE0AaE
The consensus call is that the German inflation rate rose to 2% y/y in January, in line with the ECB’s own target with the likelihood that the rate will rise further in coming months which will likely see further public calls from Germany policy makers and commentators for the ECB to begin to consider normalising policy.
Related: Greece has three weeks to deal with 'potentially disastrous' debt, says IMF
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