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| Pound slips as dollar recovers ahead of US inflation figures - business live | Pound slips as dollar recovers ahead of US inflation figures - business live |
| (35 minutes later) | |
| Here’s the Reuters report on the earlier Chinese central bank comments: | |
| China will consider including shadow banking, property financing and internet financing in its macro-prudential assessment (MPA), central bank vice governor Yi Gang wrote on Monday, according to China Finance, a publication under the People’s Bank of China. | |
| The world’s second-biggest economy still has problems and hidden dangers as the country’s debt levels are still high while asset bubble risks have not yet been fully contained, Yi wrote. | |
| The central bank will maintain prudent and neutral monetary policy while seeking to increase flexibility and effectiveness of liquidity management, Yi said. | |
| China has conditions to keep the yuan basically stable, Yi said, adding that the regulator will look to increase the yuan’s exchange rate flexibility. | |
| Back in the volatile world of cryptocurrencies, bitcoin is down 3.5% at $11,284 on fears of a further crackdown by regulators, this time in Japan. | Back in the volatile world of cryptocurrencies, bitcoin is down 3.5% at $11,284 on fears of a further crackdown by regulators, this time in Japan. |
| This follows news that one exchange, Coincheck, would refund around $400m to customers after hackers stole holdings in NEM, the world’s tenth biggest cryptocurrency. NEM is currently down around 8%. Fiona Cincotta at City Index said: | This follows news that one exchange, Coincheck, would refund around $400m to customers after hackers stole holdings in NEM, the world’s tenth biggest cryptocurrency. NEM is currently down around 8%. Fiona Cincotta at City Index said: |
| This incident highlights one of the biggest concerns towards crypto currencies, namely security. The Japanese government have ordered Coincheck to beef up its security to prevent a repeat incident, as more authorities are clamping down on the virtual currency. Given the headline grabbing numbers, this hack is unlikely to disappear into headline history fast. Japan is one of the largest markets for cryptocurrency trading, accounting for around 30% -40% of global traded volume last month. Should this hack seriously dent confidence in virtual currencies, Bitcoin could see the selloff extended. | This incident highlights one of the biggest concerns towards crypto currencies, namely security. The Japanese government have ordered Coincheck to beef up its security to prevent a repeat incident, as more authorities are clamping down on the virtual currency. Given the headline grabbing numbers, this hack is unlikely to disappear into headline history fast. Japan is one of the largest markets for cryptocurrency trading, accounting for around 30% -40% of global traded volume last month. Should this hack seriously dent confidence in virtual currencies, Bitcoin could see the selloff extended. |
| Bond prices are coming under pressure on the growing signs that central banks are moving away from their low interest rate and QE programmes. | Bond prices are coming under pressure on the growing signs that central banks are moving away from their low interest rate and QE programmes. |
| With the US economy growing at 2.6% in the final quarter and the Bank of Japan governor saying inflation was close to reaching its target, US Treasury bonds fell and the yield [or interest rate] rose. | With the US economy growing at 2.6% in the final quarter and the Bank of Japan governor saying inflation was close to reaching its target, US Treasury bonds fell and the yield [or interest rate] rose. |
| In Europe comments over the weekend from Klass Knot, head of the Dutch central bank, that the ECB should clarify how it will end its asset purchases have also hit the bond market. Germany’s yield on its five year bonds has risen to 0.004%, the first time it has been in positive territory for more than three years. French and Dutch bond yields have climbed to their highest levels since July. Neil Wilson, senior market analyst at ETX Capital, said: | In Europe comments over the weekend from Klass Knot, head of the Dutch central bank, that the ECB should clarify how it will end its asset purchases have also hit the bond market. Germany’s yield on its five year bonds has risen to 0.004%, the first time it has been in positive territory for more than three years. French and Dutch bond yields have climbed to their highest levels since July. Neil Wilson, senior market analyst at ETX Capital, said: |
| US 10s [ten year bond yields] just hit 2.71%, while German bund yields are also on the march higher with the 5-year turning positive for the first time since 2015. It does look like this is capitulation time for bond bulls as yields are entering breakout mode, which will have important consequences for equity valuations. At this stage in the cycle it makes sense for yields to be climbing but breakout beyond the 30-year trend line does signal the bond bears are here at last. A spike to 3% in the 10-year now looks very possible and a bond market rout could spook the market. | US 10s [ten year bond yields] just hit 2.71%, while German bund yields are also on the march higher with the 5-year turning positive for the first time since 2015. It does look like this is capitulation time for bond bulls as yields are entering breakout mode, which will have important consequences for equity valuations. At this stage in the cycle it makes sense for yields to be climbing but breakout beyond the 30-year trend line does signal the bond bears are here at last. A spike to 3% in the 10-year now looks very possible and a bond market rout could spook the market. |
| China’s central bank says it will keep a prudent and neutral monetary policy, but admits the country’s economy still has problems, including high debt levels and the risks of an asset bubble. | China’s central bank says it will keep a prudent and neutral monetary policy, but admits the country’s economy still has problems, including high debt levels and the risks of an asset bubble. |
| It added in its latest bulletin that it had the right conditions to keep the renminbi basically stable, and said a two way fluctuation in yuan rates would become the norm. | It added in its latest bulletin that it had the right conditions to keep the renminbi basically stable, and said a two way fluctuation in yuan rates would become the norm. |
| Julian Dunkerton, the co-founder of Superdry, is nearly £18m richer after selling part of his stake in the fashion retailer. | Julian Dunkerton, the co-founder of Superdry, is nearly £18m richer after selling part of his stake in the fashion retailer. |
| Dunkerton, which is now the company’s product and brand director, sold one million shares at the end of last week at £17.80 each. That amounts to 1.23% of the company and still leaves him with more than 25%, making him its largest shareholder. | Dunkerton, which is now the company’s product and brand director, sold one million shares at the end of last week at £17.80 each. That amounts to 1.23% of the company and still leaves him with more than 25%, making him its largest shareholder. |
| Superdry shares have surged 20% over the past year but an update earlier this month saw them slip back after it revealed a 28% fall in half year profits. | Superdry shares have surged 20% over the past year but an update earlier this month saw them slip back after it revealed a 28% fall in half year profits. |
| More on the collapse of construction group Carillion. Julia Kollewe reports: | More on the collapse of construction group Carillion. Julia Kollewe reports: |
| Accountancy firm KPMG is to be investigated by the UK’s Financial Reporting Council over its role in the collapse of Carillion. | Accountancy firm KPMG is to be investigated by the UK’s Financial Reporting Council over its role in the collapse of Carillion. |
| The business secretary, Greg Clark, welcomed the investigation, which the accounting watchdog said followed inquiries made since Carillion’s shock profit warning in July. The FRC said it would conduct the investigation, which will cover 2014 to 2016, and additional audit work carried out during 2017, “ as quickly and thoroughly as possible”. | The business secretary, Greg Clark, welcomed the investigation, which the accounting watchdog said followed inquiries made since Carillion’s shock profit warning in July. The FRC said it would conduct the investigation, which will cover 2014 to 2016, and additional audit work carried out during 2017, “ as quickly and thoroughly as possible”. |
| Carillion went into compulsory liquidation two weeks ago with debts of £1.3bn, a pension deficit of nearly £1bn and a host of unfinished public contracts. | Carillion went into compulsory liquidation two weeks ago with debts of £1.3bn, a pension deficit of nearly £1bn and a host of unfinished public contracts. |
| The full story is here: | The full story is here: |
| The move comes ahead of a select committee hearing tomorrow with the FRC, the Insolvency Service and Carillion pension trustees. | The move comes ahead of a select committee hearing tomorrow with the FRC, the Insolvency Service and Carillion pension trustees. |
| MPs have already accused the Pensions Regulator of failing to act while Carillion racked up debts to pay dividends and executive bonuses, as the business built up a pension deficit that reached nearly £1bn by the time it collapsed this month. | MPs have already accused the Pensions Regulator of failing to act while Carillion racked up debts to pay dividends and executive bonuses, as the business built up a pension deficit that reached nearly £1bn by the time it collapsed this month. |
| As expected, most European markets have opened in positive territory - just about - helped by the weakness of the pound and euro against the dollar. A weaker currency gives a boost to exporters, with the FTSE 100 in particular packed with overseas earners. | As expected, most European markets have opened in positive territory - just about - helped by the weakness of the pound and euro against the dollar. A weaker currency gives a boost to exporters, with the FTSE 100 in particular packed with overseas earners. |
| The UK’s leading index is up 0.14%, also benefiting from positive performances by mining groups after a 1% rise in the copper price. But drinks group Diageo, one of those which might be expected to benefit from a weaker pound, is down nearly 1% after a downgrade by analysts at RBC. | The UK’s leading index is up 0.14%, also benefiting from positive performances by mining groups after a 1% rise in the copper price. But drinks group Diageo, one of those which might be expected to benefit from a weaker pound, is down nearly 1% after a downgrade by analysts at RBC. |
| Germany’s Dax and France’s Cac have climbed 0.1%, Italy’s FTSE MIB is up 0.17% but Spain’s Ibex has dipped 0.2%. | Germany’s Dax and France’s Cac have climbed 0.1%, Italy’s FTSE MIB is up 0.17% but Spain’s Ibex has dipped 0.2%. |
| Despite the prospect of further US interest rate rises this year, ING Bank believes the dollar weakness is likely to continue (notwithstanding today’s move higher.) | Despite the prospect of further US interest rate rises this year, ING Bank believes the dollar weakness is likely to continue (notwithstanding today’s move higher.) |
| Apart from the US inflation data later and the two day Federal Reserve meeting which starts tomorrow, there is another big event which could have a major impact on the curreny. ING foreign exchange strategist Viraj Patel says: | Apart from the US inflation data later and the two day Federal Reserve meeting which starts tomorrow, there is another big event which could have a major impact on the curreny. ING foreign exchange strategist Viraj Patel says: |
| In an action-packed week for global markets, the main event will be President Trump’s State of the Union address (Tueday 2100 ET) – which is set to outline the administration’s 2018 policy agenda ahead of the pivotal November midterms. With US trade policy in particular focus, the burning question for investors is which type of Donald Trump will turn up: Dr Jekyll or Mr Hyde? | In an action-packed week for global markets, the main event will be President Trump’s State of the Union address (Tueday 2100 ET) – which is set to outline the administration’s 2018 policy agenda ahead of the pivotal November midterms. With US trade policy in particular focus, the burning question for investors is which type of Donald Trump will turn up: Dr Jekyll or Mr Hyde? |
| While the former manifestation may have appealed to the international elite at Davos, we would not be entirely surprised to see the more fiery characteristics of the President surface back on home soil in Washington. Indeed, with President Trump fighting low approval ratings, fresh allegations that he wanted to fire Special Counsel Robert Mueller last year and with little policy progress to show (beyond the Tax Bill) – there’s every chance that the ‘America First’ policy talk has a protectionist sting in the tail this week. As such, we expect global risk sentiment to remain on red alert ahead of the speech – with outside risks that USD/JPY could fall to the 107.00 level on a more contentious Trump State of the Union address. | While the former manifestation may have appealed to the international elite at Davos, we would not be entirely surprised to see the more fiery characteristics of the President surface back on home soil in Washington. Indeed, with President Trump fighting low approval ratings, fresh allegations that he wanted to fire Special Counsel Robert Mueller last year and with little policy progress to show (beyond the Tax Bill) – there’s every chance that the ‘America First’ policy talk has a protectionist sting in the tail this week. As such, we expect global risk sentiment to remain on red alert ahead of the speech – with outside risks that USD/JPY could fall to the 107.00 level on a more contentious Trump State of the Union address. |
| As for the dollar’s broader trajectory, it will now be very difficult for Washington to put the ‘weak dollar’ genie back in the bottle. The damage is already done – and with structural factors – such as a late US economic cycle, relative US asset valuations and the twin current account and fiscal deficits – all supporting a weaker dollar trend, the naturally tendency will be for the greenback to fall over the course of 2018. Add a US political and policy uncertainty premium into the mix – and the dollar’s decline could transpire quicker than what we had initially expected. | As for the dollar’s broader trajectory, it will now be very difficult for Washington to put the ‘weak dollar’ genie back in the bottle. The damage is already done – and with structural factors – such as a late US economic cycle, relative US asset valuations and the twin current account and fiscal deficits – all supporting a weaker dollar trend, the naturally tendency will be for the greenback to fall over the course of 2018. Add a US political and policy uncertainty premium into the mix – and the dollar’s decline could transpire quicker than what we had initially expected. |
| The weaker pound and euro are expected to give some support to stock markets when they open.: | The weaker pound and euro are expected to give some support to stock markets when they open.: |
| European Opening Calls:#FTSE 7678 +0.16%#DAX 13378 +0.28%#CAC 5546 +0.31%#MIB 23899 +0.17%#IBEX 10631 +0.34% | European Opening Calls:#FTSE 7678 +0.16%#DAX 13378 +0.28%#CAC 5546 +0.31%#MIB 23899 +0.17%#IBEX 10631 +0.34% |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| The dollar has been under pressure for some time now, and is set for its worst start to a year for around 30 years. Conversely US stock markets are making their best start for the same period, partly due to that very dollar weakness. | The dollar has been under pressure for some time now, and is set for its worst start to a year for around 30 years. Conversely US stock markets are making their best start for the same period, partly due to that very dollar weakness. |
| Concerns that President Trump’s tax reforms will add to the already hefty US deficit have undermined sentiment for the US currency, as has the prospect of a trade war which picked up pace last week as the US slapped tariffs on washing machines and solar panels from China and South Korea. | Concerns that President Trump’s tax reforms will add to the already hefty US deficit have undermined sentiment for the US currency, as has the prospect of a trade war which picked up pace last week as the US slapped tariffs on washing machines and solar panels from China and South Korea. |
| Contrasting comments at Davos did not help. Treasury secretary Steve Mnuchin said he didn’t mind a weak dollar, then Trump said virtually the opposite a day or so later. | Contrasting comments at Davos did not help. Treasury secretary Steve Mnuchin said he didn’t mind a weak dollar, then Trump said virtually the opposite a day or so later. |
| But the weakness in the dollar looks like it might be starting to attract some bargain hunters, with the currency regaining a little ground in Asia and edging higher in Europe. | But the weakness in the dollar looks like it might be starting to attract some bargain hunters, with the currency regaining a little ground in Asia and edging higher in Europe. |
| And although the Federal Reserve is expected to make no move on interest rates at this week’s meeting - the swansong for Janet Yellen as Fed chair - further rises are expected this year. | And although the Federal Reserve is expected to make no move on interest rates at this week’s meeting - the swansong for Janet Yellen as Fed chair - further rises are expected this year. |
| Later today come some US inflation figures which are likely to influence whether the dollar can hold onto its gains. Jasper Lawler at London Capital Group said: | Later today come some US inflation figures which are likely to influence whether the dollar can hold onto its gains. Jasper Lawler at London Capital Group said: |
| Investors will now look ahead to the release of US PCE [personal consumption expenditure] figures, the Fed’s preferred measure of inflation. Month on month inflation is expected to have increased 0.2% in December, from 0.1%. Meanwhile, on a annualised basis a constant reading of 1.5% is forecast. Given the ongoing concerns at the Fed over the sluggish inflation in the US, a higher reading this afternoon, could help cement the dollar’s bounce. | Investors will now look ahead to the release of US PCE [personal consumption expenditure] figures, the Fed’s preferred measure of inflation. Month on month inflation is expected to have increased 0.2% in December, from 0.1%. Meanwhile, on a annualised basis a constant reading of 1.5% is forecast. Given the ongoing concerns at the Fed over the sluggish inflation in the US, a higher reading this afternoon, could help cement the dollar’s bounce. |
| At the moment the dollar’s recovery has left the pound 0.28% lower at $1.4128 while against the euro has dipped 0.1% against the dollar at $1.1376. | At the moment the dollar’s recovery has left the pound 0.28% lower at $1.4128 while against the euro has dipped 0.1% against the dollar at $1.1376. |
| As well as being affected by the dollar’s recovery, the pound is being undermined by renewed Brexit concerns, with peers saying the EU withdrawal bill needs to be withdrawn and the prime minister under growing pressure amid calls for the chancellor to be sacked. | As well as being affected by the dollar’s recovery, the pound is being undermined by renewed Brexit concerns, with peers saying the EU withdrawal bill needs to be withdrawn and the prime minister under growing pressure amid calls for the chancellor to be sacked. |
| The US PCE figures are due at 1.30pm GMT, which is the main item on the economic agenda. | The US PCE figures are due at 1.30pm GMT, which is the main item on the economic agenda. |