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Santander rescues Spain's failing Banco Popular from collapse - business live
Santander rescues Spain's failing Banco Popular, oil prices slide - business live
(35 minutes later)
3.55pm BST
15:55
More on the US inventory figures:
pic.twitter.com/DL63SwmTad
3.52pm BST
15:52
The drop in the oil price following the unexpected increase in US crude stocks has also had an impact on stock markets.
The FTSE 100, which had been just marginally lower, is now down 41 points or 0.56% while Germany’s Dax has dipped into the red. In the US the Dow Jones Industrial Average is now virtually unchanged after its earlier gains, up just 1.2 points.
Updated
at 4.15pm BST
3.47pm BST
15:47
A sharp and surprising rise in US stockpiles - and you get a chart like this one. https://t.co/hjjHhFmk2N
3.46pm BST
15:46
Brent crude is now down more than 3% at $48.46 a barrel while West Texas Intermediate - the US benchmark - has dropped 4.6% to $45.95.
3.43pm BST
15:43
U.S. commercial crude #oil inventories for week ending 6/02/17 UP 3.3 MMbbl, refinery utilization= 94.1% https://t.co/O5s2MRItwQ #energy
The surprise rise in US crude stocks contradicts Tuesday’s report from the API showing a decline in inventories.
API ≠ EIA #crude #oil
3.35pm BST
3.35pm BST
15:35
15:35
Oil prices lose more ground on surprise rise in US crude stocks
Oil prices lose more ground on surprise rise in US crude stocks
Oil prices were already on the slide after the blockade imposed on Qatar by its neighbours, with analysts concerned the rift could impede Opec’s agreement to curb production.
Oil prices were already on the slide after the blockade imposed on Qatar by its neighbours, with analysts concerned the rift could impede Opec’s agreement to curb production.
Now they have come under more pressure following a surprise rise in US crude stocks. According to the Energy Information Administration, US crude inventories rose by 3.3m barrels last week to 513.21m, compared to forecasts of a 3.46m decline.
Now they have come under more pressure following a surprise rise in US crude stocks. According to the Energy Information Administration, US crude inventories rose by 3.3m barrels last week to 513.21m, compared to forecasts of a 3.46m decline.
Gasoline stocks rose 3.32m, well ahead of the expected 0.58m increase.
Gasoline stocks rose 3.32m, well ahead of the expected 0.58m increase.
Brent crude has fallen to its lowest level since early May following the EIA report.
Brent crude has fallen to its lowest level since early May following the EIA report.
2.42pm BST
2.42pm BST
14:42
14:42
Meanwhile the pound is now up 0.2% against the dollar at $1.2933, while the dip in the euro on reports that the European Central Bank might cut its inflation outlook on Thursday has helped the pound gain 0.59% to €1.1512 against the single currency.
Meanwhile the pound is now up 0.2% against the dollar at $1.2933, while the dip in the euro on reports that the European Central Bank might cut its inflation outlook on Thursday has helped the pound gain 0.59% to €1.1512 against the single currency.
Updated
Updated
at 2.54pm BST
at 2.54pm BST
2.38pm BST
2.38pm BST
14:38
14:38
Wall Street edges higher
Wall Street edges higher
US markets have opened in positive territory, but investors remain cautious ahead of Thursday’s triple whammy of the UK election, the European Central Bank meeting and - of more concern to Wall Street - the testimony of ex-FBI boss James Comey.
US markets have opened in positive territory, but investors remain cautious ahead of Thursday’s triple whammy of the UK election, the European Central Bank meeting and - of more concern to Wall Street - the testimony of ex-FBI boss James Comey.
The Dow Jones Industrial Average is currently up 24 points or 0.12%, while the S&P 500 opened up 0.13% and the Nasdaq Composite 0.27%.
The Dow Jones Industrial Average is currently up 24 points or 0.12%, while the S&P 500 opened up 0.13% and the Nasdaq Composite 0.27%.
US stocks open slightly higher as Wall Street awaits Comey testimony, Trump infrastructure remarks https://t.co/9oCvtHK6kk pic.twitter.com/C30MC6fNiv
US stocks open slightly higher as Wall Street awaits Comey testimony, Trump infrastructure remarks https://t.co/9oCvtHK6kk pic.twitter.com/C30MC6fNiv
2.32pm BST
2.32pm BST
14:32
14:32
WPP, whose boss Sir Martin Sorrell earlier received a rough ride from shareholders over his pay packet and his own future at the company, is the biggest faller in the FTSE 100.
WPP, whose boss Sir Martin Sorrell earlier received a rough ride from shareholders over his pay packet and his own future at the company, is the biggest faller in the FTSE 100.
That’s less to do with the annual meeting outcome and more to do with the trading statement issued alongside it. This showed a slightly slowdown in like for like sales growth of 0.7% in the first four months of the year (January to April), down from 0.8% in the first quarter (January to March). Analysts at Jefferies said:
That’s less to do with the annual meeting outcome and more to do with the trading statement issued alongside it. This showed a slightly slowdown in like for like sales growth of 0.7% in the first four months of the year (January to April), down from 0.8% in the first quarter (January to March). Analysts at Jefferies said:
One month is not a trend, but these numbers are in focus given the concern around FMCG [fast moving consumer group] spending, US growth in light of the account losses (VW and AT&T) and the weaker start to the year that WPP had in Asia.
One month is not a trend, but these numbers are in focus given the concern around FMCG [fast moving consumer group] spending, US growth in light of the account losses (VW and AT&T) and the weaker start to the year that WPP had in Asia.
2.16pm BST
2.16pm BST
14:16
14:16
Later come the latest weekly US oil stocks figures from the Energy Information Administration, a day after an industry survey showed a bigger than expected fall. But the worries over the Middle East after the rift between Qatar and other Gulf states has continued to see oil prices slide, and a positive EIA report may have little impact. Craig Erlam, market analyst at Oanda, said:
Later come the latest weekly US oil stocks figures from the Energy Information Administration, a day after an industry survey showed a bigger than expected fall. But the worries over the Middle East after the rift between Qatar and other Gulf states has continued to see oil prices slide, and a positive EIA report may have little impact. Craig Erlam, market analyst at Oanda, said:
The only notable data to come today is EIA crude oil inventories which follow an API release on Tuesday that reported a drawdown of 4.62 million barrels. With oil already under pressure as traders appear to question the suitability of the output deal and the latest geopolitical issues in the region weigh, it will be interesting to see whether another large drawdown will offer any support. Having broken below $50 though, Brent continues to look vulnerable to further downside.
The only notable data to come today is EIA crude oil inventories which follow an API release on Tuesday that reported a drawdown of 4.62 million barrels. With oil already under pressure as traders appear to question the suitability of the output deal and the latest geopolitical issues in the region weigh, it will be interesting to see whether another large drawdown will offer any support. Having broken below $50 though, Brent continues to look vulnerable to further downside.
1.54pm BST
13:54
Manuel Lopez, regulation partner at law firm Ashurst in Madrid, has declared that Santander’s rescue of Banco Popular is a “landmark moment”.
It shows that the Single Resolution Board is determined to resolve failing banks, without involving state money, he says.
This signals that SRB and other EU regulators will take major steps to ensure that taxpayers don’t bear the cost of bank failures – and that they won’t wait until the situation deteriorates too far before doing so.
The shareholders of Popular have seen, overnight, the results of the lessons learned in 2008. This will not be the last such case, and investors will certainly study the result and the financial consequences of this important decision.”
Updated
at 1.55pm BST
1.34pm BST
13:34
Britain’s top advertising magnate, Sir Martin Sorrell, received a rough ride from shareholders today over his pay package, and his own future.
One fifth of WPP shareholders refused to back Sorrell’s latest bumper pay deal, worth £48m, even though the company has tightened its remuneration policy after earlier protests.
Investors also demanded more action on a succession plan for life after Sorrell, who is 76, especially as either side can end his contract with no notice.
1.16pm BST
13:16
Businesses who are fretting about the election could consider protecting themselves against the pound suffering wild swings when the results come in.
Roy Williams, managing director at supply chain firm, Vendigital, explains why sterling volatility could be a problem.
“It’s never too late for businesses to hedge against unpleasant currency-related post-Election surprises.
“The currency markets appear to be banking on a Tory win but the polls are more ambivalent. Businesses operating on low margins with significant imports or exports should consider a late hedge to protect their trading position from exchange rate volatility in the immediate aftermath of the General Election.
“Prior to deciding what to do, businesses need to understand if they are a net importer or exporter to each of their various markets. For manufacturers that are net exporters for example, it would be worth considering locking in their exchange rate for a fixed period of time as part of a bank agreement. This will at least allow them a period of financial certainty to plan against.
Another option is to line up suppliers in different regions, to give flexibility depending how the foreign exchange markets move, Williams adds.
12.44pm BST
12:44
UBS Wealth Management have fired over some analysis of how the financial markets will respond to the result of tomorrow’s general election:
None of their scenarios sound particularly appealing, frankly, but here goes....
Conservative enhanced majority
Back to business as usual for government.
Established trends of rising inflation and weak growth in household incomes unlikely to change, weighing on growth in coming quarters.
Conservative majority, in the case of less than stellar performance
Prime Minister beholden to backbenchers in her party who favour a swift exit and hard Brexit.
Less likely to see a transition deal.
This results in sharp slowdown in growth as trade falters.
Firms shift investment from the UK into the EU.
Labour-led minority government
Complete change of economic programme for the UK. Domestic policy takes a backseat amid Brexit negotiations, with lack of clarity over which aspects of Labour’s proposals will be implemented.
Sharp drop in business and consumer confidence amid prospect of unstable coalition, muddled Brexit stance, and higher corporate and business taxes.
Downside risks to already below-consensus estimates of 1.4% GDP growth for this year and 0.7% for next.
12.24pm BST
12:24
Sterling subdued ahead of election storm
The pound has done its best impression of a somnolent sloth this morning.
Sterling is unchanged on the day, at $1.2907, on the final trading session before Britons trudge to the polls to elect our next government.
Traders are eager to find out which (if any) of the rival opinion polls have actually predicted the result correctly. The pound could rally if Theresa May gets an increased majority, but likely slide if the PM manages to actually lose seats.
Paresh Davdra of RationalFX says:
“The pound has remained steady on the eve of the general election. As campaigning reaches its climax, the pound has retreated slightly from the two-week highs seen yesterday but remains stable, as analysts await the election results.
The markets are positive about the prospects of Prime Minster Theresa May emerging the winner of tomorrow’s vote, as current polls indicate a secure lead for the Conservatives. However, there is still caution over the remote possibility of a hung parliament or a Labour victory, which investors fear would sink the pound in the aftermath of the election.
12.06pm BST
12:06
Most European stock markets have crept a little high this morning, as traders enjoy a quiet day ahead of tomorrow’s excitement.
Spain’s IBEX is lagging behind, with Banco Santander down 2% following its plan to raise €7bn in new capital to cover Banco Popular’s non-performing assets.
Thursday will include Britain’s general election, a European Central Bank meeting, and ex-FBI chief James Comey testifying to Congress.
Craig Erlam, senior market analyst at OANDA, says:
We’re seeing mild gains in the FTSE in what is otherwise a mixed European session this morning. US futures are pointing a little higher ahead of the open, with little direction coming from across the pond.
The UK index has stabilised in the weeks leading up to the election, with the sudden uncertainty around the outcome appearing to be contributing to the moves.
11.31am BST
11:31
There’s suddenly some drama in the markets, as the euro slides to a four-day low.
The single currency shed half a cent to $1.122 after Bloomberg reported that the ECB is preparing to cut its inflation forecasts.
The ECB is getting ready to cut its inflation outlook through 2019, according to Bloomberg reports. #Euro hit across the board
Government bond prices are also jumping, pushing down the yield (interest rate) on that debt.
Lower inflation forecasts means less chance of the ECB tightening monetary policy soon, and unwinding its huge bond purchase scheme.
Bond #yields fall after @business reports #ECB will lower #inflation forecasts! pic.twitter.com/AimzuKHoAh
11.12am BST
11:12
The Financial Times also argue that the Banco Popular bailout has bolstered the credibility of Europe’s banking sector.
Their Madrid bureau chief Tobias Buck writes:
Analysts said that the ability of eurozone authorities to decisively step in to wind down Popular and safeguard its assets gives the EU regime new credibility after questions were raised during the tortuous struggle to clean up Italy’s troubled banks.
“It’s essentially a case of the regulation doing exactly what it was created for,” said Laurent Frings, head of credit research at Aberdeen Asset Management. “But it does show that there is real risk in investing in these second tier names in the banking sector.
V good summary of the Banco Popular story by @TobiasBuckFT. Overall very positive for credibility of #BankingUnion. https://t.co/Z3zmAnmU4p
Updated
at 11.14am BST
11.01am BST
11:01
The rescue of Banco Popular means that attention will now turn to Italy’s financial sector.
Some analysts are speculating on whether any Italian banks will fall into Europe’s resolution mechanism, as some regional lenders are struggling to raise fresh capital.
Analysts at ABN Amro, though, fear that some Italian banks aren’t as attractive as Popular.
The deal is facilitated by the fact that Banco Popular is actually strong enough to have buyers. Especially their loan book, and diversification to Portugal was of interest. Crucially, the deal could be performed without the need for state assistance. However, in Italy, the banks of Veneto and Vicenza are not in the equivalent balance sheet position as the Banco Popular. It would seem that the large institutions in Italy would be unwilling to take over the banks without the interaction of the Italian state, either via the Atlante fund or another mechanism.
The question now is, if Banco Popular has now been stated as ‘failing or likely to fail’ by the SRB, what does this mean for the arguably weaker banks of Veneto and Vicenza banks
10.45am BST
10:45
This chart, from M&S’s Bond Vigilantes team, shows how Banco Popular’s risky bonds have been wiped out by today’s deal (the orange line).
But senior debt (which is further down the pecking order when a company fails) is not being ‘bailed-in’ to today’s rescue, so its value has actually risen.
Banco Popular to be sold to Santander. AT1 collapses by 90%, senior debt rallies. Not all debt created equal. pic.twitter.com/TAZAjBRv9T
