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| European stock markets rise as trade fears fade – business live | |
| (about 1 hour later) | |
| Amin Nasser, the chief executive of Saudi Arabia’s state energy giant Saudi Aramco, has warned of an oil supply crunch as investment in shale projects won’t be enough to meet rising demand. | |
| He told the Financial Times in an interview (paid content): | |
| Something like shale oil… it is not going to really create a major dent in total global supply requirements up until 2040. | |
| Energy companies are reluctant to invest in longer-term projects that are more costly, and are instead cutting costs and returning money to investors through dividends and share buybacks. | |
| Meanwhile, the Church of England has threatened to sell its shares in oil and gas firms that fail to do enough to combat climate change. | |
| Church of England threatens to sell its share in oil and gas firms if they're not doing enough on climate change https://t.co/WHZKlLxv8S | |
| Elsewhere, oil prices are climbing on increased global demand and US use of sanctions against Iran to shut out Iranian output. Brent crude, the world benchmark, is 0.8% higher at $77.74 a barrel. | |
| The US wants to reduce oil exports from the world’s fifth-bigger producer of oil to zero by November, which would put pressure on other big producers such as Saudi Arabia to pump more crude. However, Saudi Arabia and other members of the Opec oil cartel have little spare capacity and oil demand has outpaced supply in recent months. US oil output is increasing but is not enough to plug the gap if Iranian exports are blocked. | |
| Connor Campbell, financial analyst at Spreadex, has also explained the buoyancy of sterling following David Davis’ departure. | |
| Sterling continued to benefit from the resignation of Brexit Secretary David Davis, with his claim that he won’t challenge Theresa May’s Tory leadership, alongside the swift appointment of Dominic Raab as his replacement, extending the pound’s Monday gains. | |
| Hopes that Davis’ grumpy abandonment of his passion project will lead Britain away from the harder EU exit Double D was after, and towards the ‘softer’ Brexit proposed by Theresa May at Chequers over the weekend has allowed the pound to ride-out Monday’s bumpy ministerial transition. Against the dollar it shot up half a percent, hitting a 3 and a half week high of $1.333, while against the euro it climbed 0.3% to sit a smidge off €1.133. | |
| Despite all this the FTSE still managed to find its own groove on Monday, the UK index rising 0.5% to tickle 7650. That’s very much in line with the situation elsewhere, with the DAX up 0.2% and the CAC jumping 0.6%. The gains come as investors express their relief at the lack of trade war escalation between the US and China (or indeed the US and EU) over the weekend, something that had become the norm in the last few weeks. | |
| Turning to this afternoon and the Dow Jones it looking at its own half a percent rise when the bell rings on Wall Street, a move that would leave the US index just short of 24600, its best price in a fortnight. There’s not too much US-specific stuff to deal with this Monday, so, Trump-intervention aside, should be able to keep hold of that growth. | |
| The pound is remarkably resilient this morning following David Davis’ resignation as Brexit secretary. | The pound is remarkably resilient this morning following David Davis’ resignation as Brexit secretary. |
| Viraj Patel, foreign exchange strategist at ING, says: | Viraj Patel, foreign exchange strategist at ING, says: |
| We’ve been saying that what matters for sterling markets is the type of Brexit delivered - not who delivers. The pound is able to live with ministerial resignations as long as that is the extent of the fallout. Looking at the tail risks of a Tory leadership contest - or even a General Election - we note the legislative hurdle is pretty high to see either outcome. So at this stage, one is inclined to interpret Davis’ resignation as a sign that the UK government is steering towards a softer Brexit - which is the more powerful, positive sterling driver. | We’ve been saying that what matters for sterling markets is the type of Brexit delivered - not who delivers. The pound is able to live with ministerial resignations as long as that is the extent of the fallout. Looking at the tail risks of a Tory leadership contest - or even a General Election - we note the legislative hurdle is pretty high to see either outcome. So at this stage, one is inclined to interpret Davis’ resignation as a sign that the UK government is steering towards a softer Brexit - which is the more powerful, positive sterling driver. |
| UK bond yields are also rising as investors are betting on a greater chance of Britain reaching a Brexit deal with the EU, following the resignation of Brexit minister David Davis. Dominic Raab, the housing minister, has been announced as his replacement in the last few minutes. | UK bond yields are also rising as investors are betting on a greater chance of Britain reaching a Brexit deal with the EU, following the resignation of Brexit minister David Davis. Dominic Raab, the housing minister, has been announced as his replacement in the last few minutes. |
| Davis said this morning that he was not calling on other ministers to quit and expressed belief that Theresa May could survive the upheaval. | Davis said this morning that he was not calling on other ministers to quit and expressed belief that Theresa May could survive the upheaval. |
| The yield on two-year gilts hit its highest level since 24 May. | The yield on two-year gilts hit its highest level since 24 May. |
| Some more thoughts on sterling, which is up around 0.4% at $1.3340. | Some more thoughts on sterling, which is up around 0.4% at $1.3340. |
| Chris Scicluna at Daiwa Capital Markets said: | Chris Scicluna at Daiwa Capital Markets said: |
| Sterling remains broadly stable this morning, and firmer than it was ahead of the Cabinet agreement last Friday. | Sterling remains broadly stable this morning, and firmer than it was ahead of the Cabinet agreement last Friday. |
| Joshua Mahony, market analyst at online trading firm IG, said: | Joshua Mahony, market analyst at online trading firm IG, said: |
| Brexit concerns are back at the top of the agenda, following last week’s meeting at Chequers, culminating in yesterday’s resignation from David Davis. While markets should be worried by the added uncertainty of losing the Brexit secretary just eight months before the UK leaves the EU, there is a feeling that the UK is moving towards a business-friendly softer Brexit. The BCC has voiced its concerns over the impact of a potential rate rise, with companies clearly in limbo ahead of an uncertain Brexit. However, while companies and individuals may not too keen on a BoE rate rise, markets are clearly warming to the idea, with GBPUSD rising to a three-week high, amid a wider dollar selloff. | Brexit concerns are back at the top of the agenda, following last week’s meeting at Chequers, culminating in yesterday’s resignation from David Davis. While markets should be worried by the added uncertainty of losing the Brexit secretary just eight months before the UK leaves the EU, there is a feeling that the UK is moving towards a business-friendly softer Brexit. The BCC has voiced its concerns over the impact of a potential rate rise, with companies clearly in limbo ahead of an uncertain Brexit. However, while companies and individuals may not too keen on a BoE rate rise, markets are clearly warming to the idea, with GBPUSD rising to a three-week high, amid a wider dollar selloff. |
| Markets are currently pricing in an 80% chance of a BoE rate rise in less than a months’ time, yet with the UK GDP figure due out tomorrow morning, we could see some sterling volatility to come this week. Interestingly, tomorrow’s UK GDP reading represents the start of a new period where we will see monthly releases from the ONS, allowing the BoE to enjoy a more accurate economic environment for setting rates. | Markets are currently pricing in an 80% chance of a BoE rate rise in less than a months’ time, yet with the UK GDP figure due out tomorrow morning, we could see some sterling volatility to come this week. Interestingly, tomorrow’s UK GDP reading represents the start of a new period where we will see monthly releases from the ONS, allowing the BoE to enjoy a more accurate economic environment for setting rates. |
| Contrary to earlier reports, junior Brexit minister Suella Braverman has not resigned, Reuters is reporting, citing a UK government official. | Contrary to earlier reports, junior Brexit minister Suella Braverman has not resigned, Reuters is reporting, citing a UK government official. |
| There isn’t much corporate news here in the UK this morning. As we reported earlier, Mothercare is slashing more jobs than expected and unveiled details of its planned fundraising later this month. | There isn’t much corporate news here in the UK this morning. As we reported earlier, Mothercare is slashing more jobs than expected and unveiled details of its planned fundraising later this month. |
| The German publisher Axel Springer has raised its stake in the UK online estate agent Purplebricks to 12.5% from 11.5% and did not rule out a further increase. Purplebricks ventured into the US last year, its third market after Britain and Australia, but remains deep in the red with its operating loss quadrupling last year. | The German publisher Axel Springer has raised its stake in the UK online estate agent Purplebricks to 12.5% from 11.5% and did not rule out a further increase. Purplebricks ventured into the US last year, its third market after Britain and Australia, but remains deep in the red with its operating loss quadrupling last year. |
| Despite warnings that the tariffs imposed by Washington and Beijing on Friday in a tit-for-tat trade dispute could hit economic growth around the world, markets are sanguine – for now. | Despite warnings that the tariffs imposed by Washington and Beijing on Friday in a tit-for-tat trade dispute could hit economic growth around the world, markets are sanguine – for now. |
| Analysts at London Capital Group said: | Analysts at London Capital Group said: |
| The actual trade tariffs are nothing new, the market has been aware of them for over a month, and for now conditions are still supportive for financial growth, allowing markets to move higher. | The actual trade tariffs are nothing new, the market has been aware of them for over a month, and for now conditions are still supportive for financial growth, allowing markets to move higher. |
| Sentiment could remain resilient until we see solid evidence of these trade tensions feed through to softer economic data, particularly in China. | Sentiment could remain resilient until we see solid evidence of these trade tensions feed through to softer economic data, particularly in China. |
| Global stocks have hit a two-week high following the stronger-than-expected US jobs report on Friday, and as traders shrugged off rising trade tensions between America and China. | Global stocks have hit a two-week high following the stronger-than-expected US jobs report on Friday, and as traders shrugged off rising trade tensions between America and China. |
| Sterling recovered quickly after a dip following Brexit secretary David Davis’ resignation as traders focused on the likelihood of a “soft Brexit”. Davis made clear this morning that he would not stand against Theresa May and would not encourage others to challenge her. The pound is now up 0.5% against the dollar. | Sterling recovered quickly after a dip following Brexit secretary David Davis’ resignation as traders focused on the likelihood of a “soft Brexit”. Davis made clear this morning that he would not stand against Theresa May and would not encourage others to challenge her. The pound is now up 0.5% against the dollar. |
| The MSCI world equity index, which tracks shares in 47 countries, has risen 0.8% while the pan-European Stoxx 600 is 0.6% ahead. | The MSCI world equity index, which tracks shares in 47 countries, has risen 0.8% while the pan-European Stoxx 600 is 0.6% ahead. |
| UK’s FTSE 100 up 0.15% at 7629.13 | UK’s FTSE 100 up 0.15% at 7629.13 |
| Germany’s Dax up 0.2% at 12,524.87 | Germany’s Dax up 0.2% at 12,524.87 |
| France’s CAC up 0.6% at 5480.75 | France’s CAC up 0.6% at 5480.75 |
| Spain’s Ibex up 0.4% at 9947.70 | Spain’s Ibex up 0.4% at 9947.70 |
| Italy’s FTSE MiB up 0.66% at 22,0780.09 | Italy’s FTSE MiB up 0.66% at 22,0780.09 |
| Sterling is now up more than 0.5% to $1.3358, after former Brexit secretary David Davis said he was not planning to challenge Theresa May’s leadership, and that he wanted her to stay as prime minister. | Sterling is now up more than 0.5% to $1.3358, after former Brexit secretary David Davis said he was not planning to challenge Theresa May’s leadership, and that he wanted her to stay as prime minister. |
| “I like [May]. She is a good prime minister,” he told the Radio 4 Today programme. | “I like [May]. She is a good prime minister,” he told the Radio 4 Today programme. |
| I’m told that the Bank of England’s deputy governor Ben Broadbent is speaking at an internal event this morning. The Bank’s chief economist Andy Haldane is speaking at townhall meetings in the North East. Again there is no text. | I’m told that the Bank of England’s deputy governor Ben Broadbent is speaking at an internal event this morning. The Bank’s chief economist Andy Haldane is speaking at townhall meetings in the North East. Again there is no text. |