This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/business/live/2016/feb/23/stock-market-rally-german-exports-brexit-mark-carney-live

The article has changed 14 times. There is an RSS feed of changes available.

Version 4 Version 5
Bank of England making contingency planning for Brexit - business live London Stock Exchange in merger talks with Deutsche Börse - business live
(35 minutes later)
1.56pm GMT
13:56
LSE confirms merger talks!
It’s official! The London Stock Exchange has just confirmed that it is talking to Deutsche Börse about a merger deal.
It says:
Further to the recent movement in LSE’s share price, the Board of LSE and the Management Board of Deutsche Börse confirm that they are in detailed discussions about a potential merger of equals of the two businesses.
This would create “a leading European-based global markets infrastructure group”, it claims, adding:
The combination of LSE and Deutsche Boerse’s complementary growth strategies, products, services and geographic footprint would be expected to deliver an enhanced ability to provide a full service offering to customers on a global basis.
Under the plan, Deutsche Börse shareholders would hold 54.4% of the new companym, while LSE shareholders would hold 45.6%.
The LSE’s shares are now up 17%, valuing the group at almost £9.5bn.
1.41pm GMT
13:41
Deutsche Börse shares have also jumped, by around 3%, following the reports of merger talks with Britain’s LSE.
And Euronext, another stock market operator, has seen its shares rally by 4%. Investors may be anticipating a bidding war.
Here’s the Reuters story that sparked the move:
Deutsche Boerse, LSE in merger talks - sources (via @Reuters) pic.twitter.com/sbdCv3q1eN
1.21pm GMT1.21pm GMT
13:2113:21
LSE shares soar on takeover talks reportLSE shares soar on takeover talks report
BREAKING: Takeover speculation has just driven shares in the London Stock Exchange up by 9%, to the top of the FTSE 100 leaderboard.BREAKING: Takeover speculation has just driven shares in the London Stock Exchange up by 9%, to the top of the FTSE 100 leaderboard.
It has been trigger by a Reuters report, that the LSE is in talks over a possible merger with German rival Deutsche Börse.It has been trigger by a Reuters report, that the LSE is in talks over a possible merger with German rival Deutsche Börse.
Nothing official yet, though.Nothing official yet, though.
More than a decade ago, the LSE rejected Deutsche Börse’s advances....More than a decade ago, the LSE rejected Deutsche Börse’s advances....
The timing of these talks is quite intriguing, given the uncertainty which the EU referendum is casting over the City....The timing of these talks is quite intriguing, given the uncertainty which the EU referendum is casting over the City....
1.07pm GMT1.07pm GMT
13:0713:07
Analysts at Scotia Bank have predicted that the UK pound could slump to just $1.30 if the Out campaign win June’s vote.Analysts at Scotia Bank have predicted that the UK pound could slump to just $1.30 if the Out campaign win June’s vote.
That would be its lowest level in around 30 years, worse than the selloff after the 2008 financial crisis.That would be its lowest level in around 30 years, worse than the selloff after the 2008 financial crisis.
They have also suggested that consumer confidence would be badly hit, as economic growth slowed sharply..They have also suggested that consumer confidence would be badly hit, as economic growth slowed sharply..
Brexit vote would cut UK growth to zero this yr, £ to $1.30 & hit assets. But no bloodbath says Alan Clarke, Scotia pic.twitter.com/Fi5JJa7lkIBrexit vote would cut UK growth to zero this yr, £ to $1.30 & hit assets. But no bloodbath says Alan Clarke, Scotia pic.twitter.com/Fi5JJa7lkI
12.32pm GMT12.32pm GMT
12:3212:32
The pound is down again....The pound is down again....
Sterling is dropping back towards the seven year low it struck on Monday.Sterling is dropping back towards the seven year low it struck on Monday.
The pound has lost half a cent against the US dollar, dipping below the $1.41 mark. Yesterday, it weakened to $1.4057, before a late revival.The pound has lost half a cent against the US dollar, dipping below the $1.41 mark. Yesterday, it weakened to $1.4057, before a late revival.
Mark Carney’s warning that investors are protecting themselves against future sterling weakness (details here) may have reminded traders that we face months of uncertainty.Mark Carney’s warning that investors are protecting themselves against future sterling weakness (details here) may have reminded traders that we face months of uncertainty.
Dominic Stewart, sales trader at ETX Capital, says:Dominic Stewart, sales trader at ETX Capital, says:
Sterling has remained vulnerable after falling nearly 2% yesterday - its biggest one day drop in almost six years - amidst fears that Britain may leave the European Union.Sterling has remained vulnerable after falling nearly 2% yesterday - its biggest one day drop in almost six years - amidst fears that Britain may leave the European Union.
12.14pm GMT12.14pm GMT
12:1412:14
The Treasury Committee session is now over, and Mark Carney and colleagues have been released back into the wild.The Treasury Committee session is now over, and Mark Carney and colleagues have been released back into the wild.
But if you want more EU referendum action, check out our Politics Live blog.But if you want more EU referendum action, check out our Politics Live blog.
Andy Sparrow is on deck, covering a speech from David Cameron right now:Andy Sparrow is on deck, covering a speech from David Cameron right now:
Cameron: EU referendum is a ‘once in a generation’ decision - Politics liveCameron: EU referendum is a ‘once in a generation’ decision - Politics live
UpdatedUpdated
at 12.15pm GMTat 12.15pm GMT
12.00pm GMT12.00pm GMT
12:0012:00
Guardian readers have known for a while that the Bank of England was working on contingency plans for the EU referendum.Guardian readers have known for a while that the Bank of England was working on contingency plans for the EU referendum.
Back in May 2015, the Bank of England accidentally emailed us the details of Project Bookend, including how to deny it existed. #oopsBack in May 2015, the Bank of England accidentally emailed us the details of Project Bookend, including how to deny it existed. #oops
Related: Secret Bank of England taskforce investigates financial fallout of BrexitRelated: Secret Bank of England taskforce investigates financial fallout of Brexit
We wrote at the time that:We wrote at the time that:
The email indicates that a small group of senior staff are to examine the effect of a Brexit under the authority of Sir Jon Cunliffe, who as deputy director for financial stability has responsibility for monitoring the risk of another market crash.The email indicates that a small group of senior staff are to examine the effect of a Brexit under the authority of Sir Jon Cunliffe, who as deputy director for financial stability has responsibility for monitoring the risk of another market crash.
Cunliffe also sits on the board of the City regulator, the Prudential Regulatory Authority.Cunliffe also sits on the board of the City regulator, the Prudential Regulatory Authority.
James Talbot, the head of the monetary assessment and strategy division, is involved in Project Bookend, drawing on his past work as an adviser on European economic policy.James Talbot, the head of the monetary assessment and strategy division, is involved in Project Bookend, drawing on his past work as an adviser on European economic policy.
UpdatedUpdated
at 12.19pm GMTat 12.19pm GMT
11.52am GMT11.52am GMT
11:5211:52
Carney: Brexit contingency planning is underwayCarney: Brexit contingency planning is underway
The Bank of England is engaged in contingency planning for the EU referendum, Mark Carney tells the Treasury committee.The Bank of England is engaged in contingency planning for the EU referendum, Mark Carney tells the Treasury committee.
He also reveals that the Prudential Regulation Authority is keeping abreast of the contingency plans that UK banks are making ahead of the June 23 vote.He also reveals that the Prudential Regulation Authority is keeping abreast of the contingency plans that UK banks are making ahead of the June 23 vote.
Further details will discussed on March 8, when the governor testifies to the committee specifically about the referendum.Further details will discussed on March 8, when the governor testifies to the committee specifically about the referendum.
[The PRA supervises Britain’s financial sector, to ensure they are “safe and sound”, so they will be keen to avoid any firms being caught out by the referendum].[The PRA supervises Britain’s financial sector, to ensure they are “safe and sound”, so they will be keen to avoid any firms being caught out by the referendum].
Mark Carney says BofE has a done "contingency planning" in case there is a BrexitMark Carney says BofE has a done "contingency planning" in case there is a Brexit
UpdatedUpdated
at 11.53am GMTat 11.53am GMT
11.48am GMT11.48am GMT
11:4811:48
Rachel Reeves MP asks Mark Carney whether he expects the recent falls in sterling to continue.Rachel Reeves MP asks Mark Carney whether he expects the recent falls in sterling to continue.
The governor reiterates that investors have been buying downside protection to protect themselves against falls against the pound, especially against the US dollar [rather than the euro, because it could also suffer if Britain leaves the EU].The governor reiterates that investors have been buying downside protection to protect themselves against falls against the pound, especially against the US dollar [rather than the euro, because it could also suffer if Britain leaves the EU].
Governor Carney concludes:Governor Carney concludes:
It is safe to say that an element of referendum premium has come into sterling.It is safe to say that an element of referendum premium has come into sterling.
UpdatedUpdated
at 12.10pm GMTat 12.10pm GMT
11.42am GMT11.42am GMT
11:4211:42
Rachel Reeves MP reminds Carney that the latest Inflation Report states that interest rates are likely to rise, not fall. How can he can so confident?Rachel Reeves MP reminds Carney that the latest Inflation Report states that interest rates are likely to rise, not fall. How can he can so confident?
Mark Carney gives a rather dovish answer, says the Bank expects interest rates to rise, gradually, over the forecast horizon.Mark Carney gives a rather dovish answer, says the Bank expects interest rates to rise, gradually, over the forecast horizon.
But of course, if risks increased and the global economy deteriorated, that would have implications.But of course, if risks increased and the global economy deteriorated, that would have implications.
So do you expect the next move to be up, not down?So do you expect the next move to be up, not down?
Carney replies that the UK domestic economy is positive, but that must be balanced with disappointing signs from abroad. We must weigh the two up, and we’re not taking a policy decision today.Carney replies that the UK domestic economy is positive, but that must be balanced with disappointing signs from abroad. We must weigh the two up, and we’re not taking a policy decision today.
Fascinating. At TSC Rachel Reeves asks Carney whether he still thinks next move will be up rather than down. He stonewalls. Big shift... 1/2Fascinating. At TSC Rachel Reeves asks Carney whether he still thinks next move will be up rather than down. He stonewalls. Big shift... 1/2
11.38am GMT11.38am GMT
11:3811:38
Carney: No intention of imposing negative rates.Carney: No intention of imposing negative rates.
Mark Carney moves swiftly to crush speculation that the Bank of England could hit UK banks with negative interest rates.Mark Carney moves swiftly to crush speculation that the Bank of England could hit UK banks with negative interest rates.
We have absolutely no intention, no interest, in doing that [imposing negative rates].We have absolutely no intention, no interest, in doing that [imposing negative rates].
He adds that mortgage rates in Switzerland have actually gone up, even though the Swiss central bank have imposed negative borrowing costs.He adds that mortgage rates in Switzerland have actually gone up, even though the Swiss central bank have imposed negative borrowing costs.
NEVER BELIEVE ANYTHING UNTIL IT IS OFFICIALLY DENIED! Jim Hacker https://t.co/RpNdCAUig5NEVER BELIEVE ANYTHING UNTIL IT IS OFFICIALLY DENIED! Jim Hacker https://t.co/RpNdCAUig5
11.36am GMT
11:36
Can you explain the impact of negative interest rates on banks in simple terms, Steve Baker asks?
MPC member Gertjan Vlieghe outlines how banks have assets, which are loans, and liabilities, which are deposits.
They make a profit by charging borrowers more than they pay to savers.
So far, no commercial bank has passed on negative interest rates to its depositors.
So...as you lower interest rates more and more, the return on the assets goes down and down but there is no way to balance that with lower returns to savers.
In conclusion: The lower interest rates go, the harder it is for banks to make a profit.
Q: And do you need to abolish cash to allow negative interest rates to be imposed?
Deciding whether people are allowed to hold cash is not one of our tools, Vlieghe replies.
11.27am GMT
11:27
Steve Baker MP asks what the distributional impact of negative interest rates would be.
It’s too early to say, replies deputy governor Minouche Shafik. Central banks in several areas, including Switzerland, Denmark, Japan and the eurozone, now charge banks to leave money with them.
However, this has not generally fed through to consumers - so we don’t have the data to show the impact on the public.
Gertjan Vlieghe adds that it’s very hard to say how banks will react to negative interest rates - it depends on each institution.
11.21am GMT
11:21
Mark Carney also insists that the Bank could launch fresh stimulus measures. It could cut interest rates closer to zero, from 0.5% today, or buy more assets though QE.
11.20am GMT
11:20
Martin Weale says the Bank of England has more tools in the toolbox to stimulate the UK economy if needed.
That could include fresh asset purchases though its QE programme [which the Bank has used to buy £375bn of UK government debt].
11.16am GMT
11:16
Jacob Rees-Mogg MP asks whether the recent fall in bank share prices reflects the macro-economic environment. Or something else?
Mark Carney says it is primarily due to the macro picture. He cites ‘mildly disappointing’ data and uncertainty about the policy stance in emerging and advanced economies.
That caused a “renewed appreciation” that we are in an environment of low nominal growth -- a difficult environment for banks.
On top of that, Carney adds, there are some concerns in investing circles about the impact of negative interest rates on bank profitability.
11.07am GMT
11:07
BoE policymaker: Brexit fears could hurt real economy
Dr Gertjan Vlieghe, a member of the Monetary Policy Committee, now warns MPs that the uncertainty over the In-Out EU referendum could hurt the UK economy.
Asked about the impact of the weaker pound, he says that on its own, a weaker currency should boost inflation and growth. But the current situation is more complex, given the possibility of Brexit .
Vlieghe tells the Treasury Committee that:
We think the exchange rate is falling because of increased uncertainty about what’s going to happen in the period leading up to, or the period following, the referendum.
It is possible at some point that increased uncertainty from foreign exchange investors also ends up manifesting itself in increased uncertainty by households and businesses which may, or may not, delay or reduce their spending.
So far we haven’t seen very clear evidence of that, but we are watching very carefully.
So it’s not at all obvious that a weaker pound is a net boost to the economy, concludes Vlieghe, who worked for a hedge fund before being appointed to the MPC last summer.
Jan Vlieghe gives textbook 'source of the shock' account of why fall in £ isn't necessarily net stimulative. Quite right.
Updated
at 11.18am GMT
10.56am GMT
10:56
Carney: EU referendum has weakened the pound
Back to the pound.... and Martin Weale says the recent fall in sterling should push inflation up (as it makes imports more expensive)
Mark Carney says he agrees, adding that the recent fall in the pound is partly due to the EU referendum [reminder, it hit a seven year low on Monday].
Carney addes that the Bank “will take the exchange rate as given” --[ie, it will not make predictions about the referendum result, and its impact on sterling].
And the Bank’s agents across the UK will be watching for signs that business confidence has been hit by exchange rate moves.
BoE Carney "Recent declines in GBP have been influenced by the up coming #Brexit vote"
Updated
at 10.57am GMT
10.51am GMT
10:51
The committee is keen to find out whether the Bank of England will make a profit or a loss on its bond-buying quantitative easing programme.
After all, the richest households have certainly benefitted, because QE drives up asset prices. And we know who holds them.....
10.47am GMT
10:47
Tyrie then turns to Britain’s banks - is Carney confident that they are robust enough to rise out another crisis?
He points out that Sir John Vickers, who conducted a major inquiry into the UK financial sector after the 2008 crisis, has warned that the banks haven’t gone far enough. What’s your view, governor?
Carney insists that the UK banks have met the new capital requirements.
So why have bank shares fallen so sharply? Carney blames worries about profitability, not solvency:
Since the start of the year bank stocks have been under pressure. There are a variety of causes of that but what is not a cause, what it does not indicate in my view is concerns about the resilience of the institutions.
“The fundamental concerns are about the returns of the institutions.”
10.38am GMT
10:38