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| Markets await UK public finances, as oil edges higher - live | Markets await UK public finances, as oil edges higher - live |
| (35 minutes later) | |
| 9.16am GMT09:16 | |
| A quick summary of commodities this year: | |
| Having a look at commodities YTD, WTI and Brent both down >30%, gold & silver down almost 10%...sugar & cotton only majors in +ve territory | |
| 9.11am GMT09:11 | |
| After Japan’s Toshiba said it would cut nearly 7,000 jobs after a $1.3bn accounting scandal, Moody’s has cut the company’s credit rating. Moody’s said: | |
| Moody’s Japan K.K. has downgraded Toshiba Corporation’s long-term senior unsecured bond ratings to Ba2 from Baa3. Moody’s has also downgraded Toshiba’s subordinated debt rating to B1 from Ba2, and short-term rating to Not Prime from Prime-3... | |
| “The downgrades were prompted by Toshiba’s announcement of its structural reform plan and financial forecast for the fiscal year ending 31 March 2016 (FYE3/2016),” says Masako Kuwahara, a Moody’s Vice President and Senior Analyst. “The announcement indicated that earnings and cash flow generation will be significantly below our previous expectations.” | |
| “We expect that Toshiba’s leverage will stay high over a prolonged period, given that its restructuring costs will exceed our previous estimates, and our expectation of improvement in earnings, if any, for each business segment will be very gradual even after the restructuring,” adds Kuwahara. | |
| The downgrades also reflect Moody’s concerns of a significant deterioration in the Memories business, which would hinder solid profit contributions. Moody’s points out that Toshiba’s Memories business faces intense global competition, rapid changes in technology, and increasing price pressures. | |
| Moody’s decision to place Toshiba’s ratings on review for downgrade reflects Moody’s concerns over Toshiba’s funding plan for its announced structural reforms and the pressure on its equity from potential further asset write downs. | |
| 9.00am GMT09:00 | |
| Next year will see a calmer time in the Greek crisis, according to the Economist’s forecast: | |
| The World in 2016's forecast for Greece https://t.co/RPj7CHg5Ld pic.twitter.com/yaJHphANsv | |
| 8.54am GMT08:54 | |
| Spanish election uncertainty could damage economic confidence - Fitch | |
| Here are the Fitch comments on Spain: | |
| The inconclusive outcome of Spain’s general election increases the related risks of prolonged political uncertainty, and potentially a looser fiscal policy stance and/or a reversal of structural reforms... | |
| In the short run political uncertainty is likely to have limited impact on fiscal policy as the 2016 budget was approved before the elections. We maintain our baseline assumption that any new government will keep public debt/GDP declining in the latter half of the decade, consistent with eurozone and Spanish fiscal policy rules, although the election increases risks of slippage. But an extended period of political uncertainty and the possibility of a partial reversal of reform and consolidation measures could damage economic confidence and reverse the current benign macro-fiscal dynamics. | |
| The full report is here: | |
| Fitch: Inconclusive Spain Vote Increases Fiscal, Reform Risks | |
| Updated at 8.55am GMT | |
| 8.50am GMT08:50 | |
| The uncertain outcome of the Spanish election may remain uncertain for a while longer, it seems: | |
| Don't expect things in #Spain to move fast: #Rajoy is going on holidays tomorrow, according to @ESdiario_com. https://t.co/sB8vy5FRi1 | |
| And here’s one impact of the election: | |
| #Spain's risk premium over #Italy widens after rating agencies Fitch and Moody's have warned over reform backlash. pic.twitter.com/OJPhxsJR4J | |
| Updated at 8.52am GMT | |
| 8.36am GMT08:36 | 8.36am GMT08:36 |
| Oil could fall $5-$15 when Iran re-enters market - IMF | Oil could fall $5-$15 when Iran re-enters market - IMF |
| Oil prices may be edging higher - Brent crude is currently up 0.8% at $36.67 - but recent weakness has been due to fears of a glut, especially when Iran re-starts exports after sanctions are finally lifted. | Oil prices may be edging higher - Brent crude is currently up 0.8% at $36.67 - but recent weakness has been due to fears of a glut, especially when Iran re-starts exports after sanctions are finally lifted. |
| In a report on Iran, the International Monetary Fund has put a figure on the effect of the country re-entering the oil market: | In a report on Iran, the International Monetary Fund has put a figure on the effect of the country re-entering the oil market: |
| The expected increase in oil supply from Iran would put downward pressure on global prices, by an estimated $5–$15 per barrel, boosting global GDP by an estimated 0.3 percentage point. While part of this impact may be already discounted in futures markets, a further decline could materialise when Iran’s exports rise, depending on how other OPEC producers react. The potential for Iran to increase its non-oil trade is also large, with estimates from a gravity model suggesting that Iran’s exports, at about 20 percent of GDP, are less than half of their potential. | The expected increase in oil supply from Iran would put downward pressure on global prices, by an estimated $5–$15 per barrel, boosting global GDP by an estimated 0.3 percentage point. While part of this impact may be already discounted in futures markets, a further decline could materialise when Iran’s exports rise, depending on how other OPEC producers react. The potential for Iran to increase its non-oil trade is also large, with estimates from a gravity model suggesting that Iran’s exports, at about 20 percent of GDP, are less than half of their potential. |
| 8.27am GMT08:27 | 8.27am GMT08:27 |
| Commenting on the UK market’s opening rise, analyst Tony Cross at Trustnet Direct said: | Commenting on the UK market’s opening rise, analyst Tony Cross at Trustnet Direct said: |
| After last night’s sharp sell off for London equities, the picture is looking a little more upbeat this morning but with traders heading away from their desks and little fundamental news on the agenda, it’s difficult to try and attribute too much to the early rebound. Only a few stocks are currently in negative territory with ITV bottom of the pile, retracing some of yesterday’s bid-inspired gains, whilst retailers are again feeling the pressure with concerns building over Christmas sales... | After last night’s sharp sell off for London equities, the picture is looking a little more upbeat this morning but with traders heading away from their desks and little fundamental news on the agenda, it’s difficult to try and attribute too much to the early rebound. Only a few stocks are currently in negative territory with ITV bottom of the pile, retracing some of yesterday’s bid-inspired gains, whilst retailers are again feeling the pressure with concerns building over Christmas sales... |
| Natural resources stocks are once again dominating the upper end of the index, but the potential upside is looking relatively limited and it’s difficult to believe this is down to anything more than some opportunistic bargain hunting. | Natural resources stocks are once again dominating the upper end of the index, but the potential upside is looking relatively limited and it’s difficult to believe this is down to anything more than some opportunistic bargain hunting. |
| 8.13am GMT08:13 | 8.13am GMT08:13 |
| In Japan, the government is planning nearly $800bn of spending next year to boost its struggling economy. | In Japan, the government is planning nearly $800bn of spending next year to boost its struggling economy. |
| The move is part of a budget due to be unveiled this week which should also see the country promising to cut back its huge debts. Reuters reports: | The move is part of a budget due to be unveiled this week which should also see the country promising to cut back its huge debts. Reuters reports: |
| Finance Minister Taro Aso on Tuesday vowed to boost growth and achieve fiscal reform with government budget spending worth 96.7trn yen ($797.53bn) for the next fiscal year that starts in April. This is up a touch from the 96.3bn yen spending set for the current year’s initial budget. | Finance Minister Taro Aso on Tuesday vowed to boost growth and achieve fiscal reform with government budget spending worth 96.7trn yen ($797.53bn) for the next fiscal year that starts in April. This is up a touch from the 96.3bn yen spending set for the current year’s initial budget. |
| Confirming figures reported by Reuters last week, Aso said tax revenue is estimated at a 25-year high of 57.6trn yen in fiscal 2016. | Confirming figures reported by Reuters last week, Aso said tax revenue is estimated at a 25-year high of 57.6trn yen in fiscal 2016. |
| That revenue assumption, based on an expected economic growth of nominal 3.1% and real 1.7%, will allow the government to slash new bond issuance by 2.4trn yen from this year to 34.4trn yen, he said. | That revenue assumption, based on an expected economic growth of nominal 3.1% and real 1.7%, will allow the government to slash new bond issuance by 2.4trn yen from this year to 34.4trn yen, he said. |
| The budget plans signal a growing commitment by Prime Minister Shinzo Abe to rein in the industrial world’s heaviest debt burden even as he continues to pump-prime the economy via a cocktail of expansionary policies. | The budget plans signal a growing commitment by Prime Minister Shinzo Abe to rein in the industrial world’s heaviest debt burden even as he continues to pump-prime the economy via a cocktail of expansionary policies. |
| “This budget is appropriate for marking the first step towards our new fiscal plan while we aim for economic revival and fiscal consolidation at the same time,” Aso told reporters after he presented the budget figures at a meeting between government officials and ruling party lawmakers. | “This budget is appropriate for marking the first step towards our new fiscal plan while we aim for economic revival and fiscal consolidation at the same time,” Aso told reporters after he presented the budget figures at a meeting between government officials and ruling party lawmakers. |
| 8.11am GMT08:11 | 8.11am GMT08:11 |
| In the wake of Spain’s election result at the weekend, which saw gains by anti-austerity party Podemos, Italian prime minister Matteo Renzi has warned in an interview with the Financial Times that the policies which many see as being imposed by Germany are having a detrimental effect on governments. The FT reports (£): | In the wake of Spain’s election result at the weekend, which saw gains by anti-austerity party Podemos, Italian prime minister Matteo Renzi has warned in an interview with the Financial Times that the policies which many see as being imposed by Germany are having a detrimental effect on governments. The FT reports (£): |
| Renzi, Italy’s centre-left prime minister, has warned that German-driven eurozone austerity policies are fanning the flames of populism, leading to political paralysis and electoral setbacks across the continent for incumbent governments. | Renzi, Italy’s centre-left prime minister, has warned that German-driven eurozone austerity policies are fanning the flames of populism, leading to political paralysis and electoral setbacks across the continent for incumbent governments. |
| In an interview with the Financial Times at his Rome office the day after voters in Spain slashed the majority in parliament enjoyed by centre-right prime minister Mariano Rajoy, leaving him struggling to form a new government, Mr Renzi said there was one main lesson to be learnt. | In an interview with the Financial Times at his Rome office the day after voters in Spain slashed the majority in parliament enjoyed by centre-right prime minister Mariano Rajoy, leaving him struggling to form a new government, Mr Renzi said there was one main lesson to be learnt. |
| “I don’t know what’s going to happen to my friend Mariano but I know that those who have been in the front line of being the faithful allies of the politics of rigour without growth have lost their jobs,” Mr Renzi said. | “I don’t know what’s going to happen to my friend Mariano but I know that those who have been in the front line of being the faithful allies of the politics of rigour without growth have lost their jobs,” Mr Renzi said. |
| “It happened in Warsaw, though the circumstances were very particular there, it happened in Athens, it happened in Lisbon. Let’s see what happens in Madrid,” he added. | “It happened in Warsaw, though the circumstances were very particular there, it happened in Athens, it happened in Lisbon. Let’s see what happens in Madrid,” he added. |
| Updated at 8.12am GMT | Updated at 8.12am GMT |
| 8.09am GMT08:09 | 8.09am GMT08:09 |
| European shares open higher | European shares open higher |
| As forecast, European markets have taken their cue from Wall Street’s overnight gains and a steady performance in Asia following the comments from China about further possible stimulus. | |
| The FTSE 100 is up 43 points or 0.7% while Germany’s Dax is up 1%, France’s Cac 0.7% and Italy’s FTSE MIB 0.9%. | The FTSE 100 is up 43 points or 0.7% while Germany’s Dax is up 1%, France’s Cac 0.7% and Italy’s FTSE MIB 0.9%. |
| In Spain the Ibex, which fell 3.6% following the election result, has opened 0.9% higher. | In Spain the Ibex, which fell 3.6% following the election result, has opened 0.9% higher. |
| Updated at 8.57am GMT | |
| 7.46am GMT07:46 | 7.46am GMT07:46 |
| European markets are expected to open higher after another volatile day on Monday - not helped by thin trading in the run up to the Christmas break. | European markets are expected to open higher after another volatile day on Monday - not helped by thin trading in the run up to the Christmas break. |
| Shares ended lower in Europe, losing their early gains as the falling oil price again hit sentiment, and the Spanish market dropped 3.6% following the country’s inconclusive election result at the weekend. | Shares ended lower in Europe, losing their early gains as the falling oil price again hit sentiment, and the Spanish market dropped 3.6% following the country’s inconclusive election result at the weekend. |
| But with a rise on Wall Street, analysts expect a positive start to the day: | But with a rise on Wall Street, analysts expect a positive start to the day: |
| Our European opening calls: $FTSE 6074 up 39 $DAX 10578 up 80 $CAC 4604 up 38 $IBEX 9436 up 71 $MIB 21273 up 173 | Our European opening calls: $FTSE 6074 up 39 $DAX 10578 up 80 $CAC 4604 up 38 $IBEX 9436 up 71 $MIB 21273 up 173 |
| 7.33am GMT07:33 | 7.33am GMT07:33 |
| Agenda: UK public finances in the spotlight | Agenda: UK public finances in the spotlight |
| Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business. |
| After hitting 11 year lows on Monday, oil prices have shown some signs of recovery. A glut of supply as Iran restarts exporting following the lifting of sanctions, along with fears of slowing demand, mean the cost of crude is on course for its biggest monthly fall since the collapse of Lehman Brothers in October 2008. | After hitting 11 year lows on Monday, oil prices have shown some signs of recovery. A glut of supply as Iran restarts exporting following the lifting of sanctions, along with fears of slowing demand, mean the cost of crude is on course for its biggest monthly fall since the collapse of Lehman Brothers in October 2008. |
| But with comments from China suggesting further stimulus measures might be taken to boost the world’s second largest economy, commodity prices have stabilised. So Brent crude after falling as low as $36.05 on Monday, has recovered 0.25% to $36.44. | But with comments from China suggesting further stimulus measures might be taken to boost the world’s second largest economy, commodity prices have stabilised. So Brent crude after falling as low as $36.05 on Monday, has recovered 0.25% to $36.44. |
| Meanwhile UK public finances will be the centre of attention this morning. | Meanwhile UK public finances will be the centre of attention this morning. |
| The figures are expected to show a rise in UK borrowing for November from £7.5bn to £11.1bn, partly due to the falling oil price which is undermining VAT receipts at the pumps, said Michael Hewson, chief market analyst at CMC Markets UK. | The figures are expected to show a rise in UK borrowing for November from £7.5bn to £11.1bn, partly due to the falling oil price which is undermining VAT receipts at the pumps, said Michael Hewson, chief market analyst at CMC Markets UK. |
| So chancellor George Osborne may well miss his borrowing targets for the year. Hewson said: | So chancellor George Osborne may well miss his borrowing targets for the year. Hewson said: |
| November generally tends to be a weak month in any case with December usually a little stronger as the tax year deadline gets closer. Even allowing for that the Chancellor looks set to fall short of his borrowing target for this tax year unless tax receipts start to improve substantially. | November generally tends to be a weak month in any case with December usually a little stronger as the tax year deadline gets closer. Even allowing for that the Chancellor looks set to fall short of his borrowing target for this tax year unless tax receipts start to improve substantially. |
| Howard Archer, chief UK and European economist at IHS Global Insight, said: | Howard Archer, chief UK and European economist at IHS Global Insight, said: |
| The public finances are expected to show that the public finances saw year-on-year improvement in November but to also highlight that the Chancellor will need sharply higher tax receipts in January if he is to meet the fiscal target for 2015/16 contained in November’s Autumn Statement. Specifically, we expect Public Sector Net Borrowing excluding banks (PSNBex) to have narrowed to £11.5bn in November from £13bn in November 2014. We also estimate that the total PSNB narrowed to £10.7bn in November 2015 from £12.2bn in November 2014. | The public finances are expected to show that the public finances saw year-on-year improvement in November but to also highlight that the Chancellor will need sharply higher tax receipts in January if he is to meet the fiscal target for 2015/16 contained in November’s Autumn Statement. Specifically, we expect Public Sector Net Borrowing excluding banks (PSNBex) to have narrowed to £11.5bn in November from £13bn in November 2014. We also estimate that the total PSNB narrowed to £10.7bn in November 2015 from £12.2bn in November 2014. |
| The Office of Budget Responsibility argues that there should...be a substantial improvement in the public finances over the final months of 2015/16 due to a number of factors. This particularly includes an expected jump in self-assessment tax receipts in January resulting from past policy measures. The OBR also expects spending cuts to have an increasing impact as pressure to meet budget targets mounts on departments subject to Treasury controls. | The Office of Budget Responsibility argues that there should...be a substantial improvement in the public finances over the final months of 2015/16 due to a number of factors. This particularly includes an expected jump in self-assessment tax receipts in January resulting from past policy measures. The OBR also expects spending cuts to have an increasing impact as pressure to meet budget targets mounts on departments subject to Treasury controls. |
| Otherwise, in the wake of last week’s interest rate rise by the US Federal Reserve, come the latest third quarter GDP numbers, expected to be revised lower from 2.1% to 1.9%. | Otherwise, in the wake of last week’s interest rate rise by the US Federal Reserve, come the latest third quarter GDP numbers, expected to be revised lower from 2.1% to 1.9%. |