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UK runs up £12.6bn deficit in November – business live UK runs up £12.6bn deficit in November; Monte dei Paschi fundraising struggles – live
(35 minutes later)
4.24pm GMT
16:24
Worries about European banks are undermining stock markets, particularly in Italy and Spain. Chris Beauchamp, chief market analyst at IG, said:
Banking concerns have played across European markets once again today, as Monte dei Paschi looks set for a government takeover. The rescue plan has fallen apart, with Rome unable to find an anchor investor; for understandable reasons, no one wants to be first ‘over the top’ should the crisis worsen.
Italy’s debt will get bigger, but a major government stake should, paradoxically, boost risk appetite among investors, who will be glad to see the Italian government taking the tough decisions.
Meanwhile, Spanish banks are under pressure after the ECJ ruled they would have to pay back funds to mortgage borrowers. 2016 saw plenty of concerns about European banks, but while it made sense for everyone to buy Deutsche shares at €10, it will be harder to find investors willing to take stakes in southern European firms. Still, the overall tone on markets is only slightly negative, although the patient watch for Dow 20,000 goes on.
4.15pm GMT
16:15
Here’s Reuters on the Monte dei Paschi situation:
Ailing Italian bank Monte dei Paschi di Siena has been unable to find an anchor investor willing to put money in its privately funded rescue plan, less than 24 hours before the offer ends, two sources close to the matter said on Wednesday.
The bank needs to raise 5 billion euros ($5.2 billion) by the end of this month to avert being wound down. The Italian government is expected to step in this week to bail it out.
The Tuscan lender, Italy’s third biggest bank and the world’s oldest, had pinned its hopes on Qatar’s sovereign wealth fund investing 1 billion euros in its cash call, but that option is no longer on the table, the sources said.
As a result, the bank entire share sale, which closes at 2 p.m. (1300 GMT) on Thursday, has drawn very little interest from the wider investment community, they added.
The bank declined to comment.
4.04pm GMT
16:04
Ratings agency DBRS is keeping an eye on Italy:
DBRS SAYS NEXT 24 HOURS AND MONTE DEI PASCHI RESCUE DECISION WILL BE CRUCIAL FOR ITALY RATING
4.02pm GMT
16:02
Monte de Paschi woes continue
Over in Italy, the rescue package for struggling bank Monte dei Paschi is looking in trouble, bringing the prospect of a state bailout closer:
MONTE DEI PASCHI SHARE PLACEMENT HAS DRAWN LITTLE INVESTOR INTEREST BECAUSE NO ANCHOR INVESTOR HAS BEEN FOUND - SOURCES - Reuters News
Which suggests that Qatar is unwilling to invest in the bank. But Italy could find out whether any bailout breaches EU rules, if taxpayers have to foot the bill but investors are left untouched.
Share placement for Banca Monte Paschi (BMPS IM) has received little interest with Qatar not willing to invest according to sources
A potential white knight fades away... https://t.co/iL33KQPWDf
Updated
at 4.09pm GMT
3.52pm GMT3.52pm GMT
15:5215:52
In the wake of its recent blog on Greece, the International Monetary Fund has responded to questions about its comments, mainly to do with tax and pensions. A tweet from the IMF’s spokesperson explains:In the wake of its recent blog on Greece, the International Monetary Fund has responded to questions about its comments, mainly to do with tax and pensions. A tweet from the IMF’s spokesperson explains:
We published additional technical clarifications about our analysis of Greece, following comments to this blog post https://t.co/3SebTtY8AYWe published additional technical clarifications about our analysis of Greece, following comments to this blog post https://t.co/3SebTtY8AY
3.44pm GMT3.44pm GMT
15:4415:44
Oil prices have slipped slightly as the latest US figures show an unexpected rise in crude stocks.Oil prices have slipped slightly as the latest US figures show an unexpected rise in crude stocks.
West Texas Intermediate - the US benchmark - is 0.15% lower at $53.22 a barrel while Brent crude is down 0.38% to $55.14.West Texas Intermediate - the US benchmark - is 0.15% lower at $53.22 a barrel while Brent crude is down 0.38% to $55.14.
3.35pm GMT3.35pm GMT
15:3515:35
US oil stocks unexpectedly riseUS oil stocks unexpectedly rise
US crude stocks have defied expectations with a hefty jump last week.US crude stocks have defied expectations with a hefty jump last week.
They rose by nearly 2.3m barrels, according to the Energy Information Administration, compared to forecasts of a fall of around 2.5m barrels.They rose by nearly 2.3m barrels, according to the Energy Information Administration, compared to forecasts of a fall of around 2.5m barrels.
#UnitedStates EIA Crude Oil Stocks Change at 2.256M https://t.co/iEqHb9iXvN pic.twitter.com/C9Y7bXUDlG#UnitedStates EIA Crude Oil Stocks Change at 2.256M https://t.co/iEqHb9iXvN pic.twitter.com/C9Y7bXUDlG
The figures go against Tuesday’s news from the American Petroleum Institute of a much larger than expected 4.1m decline in crude.The figures go against Tuesday’s news from the American Petroleum Institute of a much larger than expected 4.1m decline in crude.
DOE Crude Build 2.256MM. API wrong againDOE Crude Build 2.256MM. API wrong again
3.24pm GMT3.24pm GMT
15:2415:24
Analyst welcomed the improvement in European consumer confidence, but there was some caution over the future outlook. Dennis de Jong, managing director at UFX.com, said:Analyst welcomed the improvement in European consumer confidence, but there was some caution over the future outlook. Dennis de Jong, managing director at UFX.com, said:
European consumers appear to have shrugged off concerns including Brexit, the Italian banking crisis and the upcoming inauguration of President Trump to post the year’s strongest confidence figures for December, albeit still firmly in negative territory.European consumers appear to have shrugged off concerns including Brexit, the Italian banking crisis and the upcoming inauguration of President Trump to post the year’s strongest confidence figures for December, albeit still firmly in negative territory.
While today’s data will encourage ECB chief Mario Draghi, the Christmas cheer may not last long, especially if markets start to waver as Brexit negotiations begin in earnest next year.While today’s data will encourage ECB chief Mario Draghi, the Christmas cheer may not last long, especially if markets start to waver as Brexit negotiations begin in earnest next year.
Draghi must be congratulated for steering Europe’s economy through choppy waters during what has been a particularly testing 12 months. But now the real challenge begins: delivering substantive growth in 2017.Draghi must be congratulated for steering Europe’s economy through choppy waters during what has been a particularly testing 12 months. But now the real challenge begins: delivering substantive growth in 2017.
Economist Howard Archer at IHS Markit said:Economist Howard Archer at IHS Markit said:
An encouraging boost to Eurozone growth prospects as consumer confidence rose for a fourth month running in December to reach a 20-month high. Furthermore, consumer confidence is now at a very decent level compared to long-term norms. Consumers across the Eurozone are currently benefiting from pretty decent fundamentals overall, notably including higher employment and still limited inflation.An encouraging boost to Eurozone growth prospects as consumer confidence rose for a fourth month running in December to reach a 20-month high. Furthermore, consumer confidence is now at a very decent level compared to long-term norms. Consumers across the Eurozone are currently benefiting from pretty decent fundamentals overall, notably including higher employment and still limited inflation.
This reinforces hopes that the Eurozone will have seen some pick-up in GDP growth in the fourth quarter and is set to see a decent start to 2017...This reinforces hopes that the Eurozone will have seen some pick-up in GDP growth in the fourth quarter and is set to see a decent start to 2017...
While there are no details available, it seems reasonable suspect that the marked rise in Eurozone consumer confidence in December was due to improved perceptions on the economic situation and outlook. It is also likely that job concerns eased further across the Eurozone after a marked dip in November (following increased worries during August-October). Significantly, latest data showed that Eurozone unemployment dropped at an increased rate in October and September after labour markets had shown signs of losing momentum over the summer.While there are no details available, it seems reasonable suspect that the marked rise in Eurozone consumer confidence in December was due to improved perceptions on the economic situation and outlook. It is also likely that job concerns eased further across the Eurozone after a marked dip in November (following increased worries during August-October). Significantly, latest data showed that Eurozone unemployment dropped at an increased rate in October and September after labour markets had shown signs of losing momentum over the summer.
Any improvement in Eurozone consumer confidence – particularly a decent increase – is to be welcomed as the consumer clearly is vital to Eurozone growth prospects...Any improvement in Eurozone consumer confidence – particularly a decent increase – is to be welcomed as the consumer clearly is vital to Eurozone growth prospects...
However, there is the danger that an increasingly uncertain political and economic environment could cause companies to become more cautious over employment during 2017.However, there is the danger that an increasingly uncertain political and economic environment could cause companies to become more cautious over employment during 2017.
Furthermore, consumer confidence in the Eurozone could very well be pressurised by increasing political uncertainty over the coming months, especially given that the UK’s Brexit vote in June and November’s election of Donald Trump as US President fuels concern over potential political shocks in the Eurozone. General elections are due 2017 in the Netherlands (in March), France (in April/May) and Germany (around September), and may also well occur in Italy after the December referendum defeat on constitutional reform.Furthermore, consumer confidence in the Eurozone could very well be pressurised by increasing political uncertainty over the coming months, especially given that the UK’s Brexit vote in June and November’s election of Donald Trump as US President fuels concern over potential political shocks in the Eurozone. General elections are due 2017 in the Netherlands (in March), France (in April/May) and Germany (around September), and may also well occur in Italy after the December referendum defeat on constitutional reform.
3.13pm GMT3.13pm GMT
15:1315:13
Eurozone consumer confidence rises to 20 month highEurozone consumer confidence rises to 20 month high
Eurozone consumer confidence has improved so far in December.Eurozone consumer confidence has improved so far in December.
The provisional reading for the month from the European Commission shows a rise of 1.1 points to -5.1, compared to expectations of a figure of -6. The Commission said:The provisional reading for the month from the European Commission shows a rise of 1.1 points to -5.1, compared to expectations of a figure of -6. The Commission said:
In December 2016, the...flash estimate of the consumer confidence indicator increased markedly in both the euro area (by 1.1 points to -5.1) and the EU (by 1.2 points to -4.6) compared to November.In December 2016, the...flash estimate of the consumer confidence indicator increased markedly in both the euro area (by 1.1 points to -5.1) and the EU (by 1.2 points to -4.6) compared to November.
UpdatedUpdated
at 3.39pm GMTat 3.39pm GMT
3.10pm GMT3.10pm GMT
15:1015:10
On the home sales, Lawrence Yun, the association’s chief economist, said the last three months had been outstanding for the housing market. He said:On the home sales, Lawrence Yun, the association’s chief economist, said the last three months had been outstanding for the housing market. He said:
The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months. Furthermore, it’s no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month.The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months. Furthermore, it’s no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month.
Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017. Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017. Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.
3.05pm GMT3.05pm GMT
15:0515:05
US home sales at near 10 year highUS home sales at near 10 year high
US existing home sales unexpectedly jumped in November, hitting their highest level in nearly ten years.US existing home sales unexpectedly jumped in November, hitting their highest level in nearly ten years.
Sales rose 0.7% to an annualised 5.61m units, the best since February 2007, according to the National Association of Realtors. Analysts had been expecting a fall from October’s figure of 5.57m units - itself revised down from 5.6m - to 5.5m.Sales rose 0.7% to an annualised 5.61m units, the best since February 2007, according to the National Association of Realtors. Analysts had been expecting a fall from October’s figure of 5.57m units - itself revised down from 5.6m - to 5.5m.
UpdatedUpdated
at 3.08pm GMTat 3.08pm GMT
2.51pm GMT2.51pm GMT
14:5114:51
Well that didn’t last. The Dow is now down 14 points as investors shy away from pushing it above 20,000. For the moment at least.Well that didn’t last. The Dow is now down 14 points as investors shy away from pushing it above 20,000. For the moment at least.
2.36pm GMT2.36pm GMT
14:3614:36
Dow edges closer to 20,000 as Wall Street opensDow edges closer to 20,000 as Wall Street opens
After an initial dip, the Dow Jones Industrial Average is slightly higher, edging ever nearer to the 20,000 barrier. But the trend is not exactly certain in early trading.After an initial dip, the Dow Jones Industrial Average is slightly higher, edging ever nearer to the 20,000 barrier. But the trend is not exactly certain in early trading.
The Dow is currently at 19,982, up 8 points. Elsewhere the S&P 500 opened down just 1.55 points while the Nasdaq Composite dipped 0.05%.The Dow is currently at 19,982, up 8 points. Elsewhere the S&P 500 opened down just 1.55 points while the Nasdaq Composite dipped 0.05%.
UpdatedUpdated
at 2.36pm GMTat 2.36pm GMT
2.08pm GMT
14:08
Analysts have been waiting for a few days now for the Dow Jones Industrial Average to break the 20,000 barrier for the first time, and on Tuesday it came tantalisingly close at 19,987 before closing at 19.974.
Could today be the day? The futures are indicating a slight rise, so it looks like edging ever closer. Kit Juckes at Societe Generale said:
I have no insight into what happens once the Dow breaks 20,000 but some people see this as a major milestone. And until it is broken it acts as Pied Piper, or perhaps Rudolph’s nose, lighting the way for the risk-hungry and those scared of being left behind.
1.36pm GMT
13:36
The Guardian’s monthly Brexit Watch has just been published. It shows how the impact June’s vote is now hitting the economy, with inflation up and retail sales growth slowing.
Economists Danny Blanchflower and Andrew Sentance both agree that growth is slowing:
1.12pm GMT
13:12
OBR: UK borrowing to rise over next four months
Britain’s fiscal watchdog, the Office for Budget Responsibility, has just warned that public borrowing in the final four months of this financial year will be slightly higher than a year ago.
In its official response to today’s public finance data, the OBR warns that tax receipts may weaken in the December-March period, while government spending will pick up.
The OBR says:
“Considerable uncertainty remains over prospects for borrowing in the remaining third of the year, but we expect public sector net borrowing to rise slightly relative to the same period in 2015-16. This is due to:
However (as flagged earlier), Britain’s borrowing since April is down by £7.7bn, so the annual deficit should still fall.
Data revisions improve public finances - read the latest commentary at https://t.co/k0nGloBMMW pic.twitter.com/gM3KrXEaaT
12.42pm GMT
12:42
Helena Smith
Over in Greece, relations with creditors remain awkward and tense following Monday’s inconclusive euro working group (representing Greek creditors)
Our correspondent Helena Smith reports from Athens:
The tensions stirred by the announcement of relief measures for those hardest hit by the country’s seemingly relentless economic crisis show no sign of abating.
Monday’s euro group meeting was a test case in humiliation for the embattled Greek government with Athens being forced to accept in writing that the bonus proclaimed by prime minister Alexis Tsipras for pensioners is a “one off” that will never be repeated.
Germany, the main contributor to the emergency bailouts keeping the debt-stricken economy afloat, apparently remains unconvinced that the pre-Christmas gifts (including exempting Aegean islands from a planned sales tax) will not throw the economy off-course. The leftist-led government insists that fiscal targets can be met because the supplementary help will be extracted from the primary surplus Athens, by dint of hard effort, has managed to achieve.
The deputy prime minister Yiannis Dragasakis highlighted the tensions on Tuesday evening saying it was the country’s “sovereign right” to distribute the excess surplus as it felt fit.
Finance ministry sources say with the handwringing still ongoing, Athens has yet to send the letter. Without it, euro zone partners have said the retaliatory decision to freeze short-term debt relief measures – a huge setback for Athens – cannot be lifted.
12.13pm GMT
12:13
One of Monte dei Paschi’s riskier bonds has tumbled in value today, in another sign that investors believe its €5bn cash call will fail.
Monte dei Paschi's E2bn retail bond looks to be pricing in something unpleasant in the near future. pic.twitter.com/h7FR73JOtO
That capital raising exercise ends tomorrow afternoon; if it hasn’t attracted enough support, Italy’s government might then step in and ‘bail in’ some bond holders, making them share the cost of a rescue.
11.39am GMT
11:39
Back in Italy, shares in Monte dei Paschi bank have taken an almighty dive - only to bounce right back up again .
They initially slumped by 18% in a panicky selloff, as news broke that the bank might run out of liquidity within four months.
Monte dei Paschi shares today - Start trading, limit down, trading halted, start trading, limit down, trading halted pic.twitter.com/YF2hEv1o7g
BUT then they rallies sharply, after Italian MPs approved plans to borrow an extra €20bn to fund bank bailouts (potentially starting with Monte dei Paschi)
Now practically flat, thank you for playing. pic.twitter.com/owIw4uVzgc
Italy agrees to raise debt ceiling by 21 billion dollars - making room for potentially imminent Monte dei Paschi bailout.
It’s not clear, though, that shareholders would be left with much if the Rome government is forced to intervene -- which is why shares are down 99.8% from their record high....
11.06am GMT
11:06
Britain’t tax receipts have risen by 4.4% this financial year, or £17.8bn, to £421.8bn.
That helped to pull borrowing down since April -- but not by enough to prevent the national debt hitting record highs.
Suren Thiru, head of economics at the British Chambers of Commerce (BCC), is concerned that the UK tax take isn’t growing faster:
“Government borrowing in November, while higher than expected, was still marginally lower in annual terms. Despite the slight improvement, debt levels remain unsustainably high.
“2017 is likely to be a challenging period for the UK’s public finances, with economic growth likely to soften, which will hamper the UK’s ability to generate tax receipts.
The more flexible approach to deficit reduction announced in the Autumn Statement is a sensible step given the broader uncertainty. However, the acid test for the Chancellor’s new fiscal rules will be whether they are able to reverse the ongoing shortfall in tax revenue, which has persistently hampered previous attempts to reduce the deficit.”
10.28am GMT
10:28
Public finances provide reassurance to chancellor Hammond
Chancellor Philip Hammond may find some Christmas cheer in today’s public finances.
Even though the deficit was higher than expected, Britain seems to be on track to hit the (new) budget targets which were announced in November’s autumn statement.
Howard Archer of IHS Global Insight says its “welcome news” for Hammond.
Reassuring news for the Chancellor as the public finances saw modest improvement in November compared to a year earlier – thereby keeping the government on track to meet – or even slightly undershoot - its upwardly revised target for 2016/17 contained in November’s Autumn Statement.
It would have been somewhat embarrassing if the first set of public finance figures after the November Statement had immediately put question markets over his new fiscal targets.
Howard has also crunched through today’s data, and reports that:
There was a slowdown in growth in tax receipts in November, primarily due to income tax related receipts dipping 1.1% year-on-year. ONS data show that employment growth has slowed recently, although it needs to be borne in mind that the tax data can be erratic from month to month, partly depending on when exactly the receipts come in. It is also notable that national insurance contributions were up 6.3% year-on-year.
VAT receipts were up 4.4% year-on-year in November and corporation tax receipts were up 22.9% year-on-year, which points to still resilient economic activity.
10.04am GMT
10:04
UK public finances: What the experts say
City experts aren’t impressed that Britain’s net borrowing spiked to £12.6bn last month, up from just £4.2bn in October.
Paul Sirani, chief market analyst at Xtrade, says:
“The outlook for the UK heading into the new year is a rather bearish one and investors are unlikely to be flying in with both feet as uncertainty continues to swirl.
And here’s Dennis de Jong, managing director at UFX.com,
“The gap between UK government spending and income has risen sharply in November, raising a number of red flags with investors who will interpret this as a sign that a significant economic slowdown is coming in the new year.
“Chancellor Philip Hammond has announced the final spring budget for early March where he will attempt to plan for an uncertain future, with the triggering of Article 50 set for later that month.
“If borrowing levels continues to rise at this rate, Hammond may not have too much room for manoeuvre when setting out his fiscal policy.”
9.49am GMT
09:49
UK borrowing: the key charts
This chart, from today’s public finances, shows how Britain’s national debt hit a new record high in November - up to £1.655bn from £1.641bn in October.
And this chart shows how net borrowing this financial year has fallen by £7.7bn, compared to 2015-2016.
Updated
at 10.11am GMT