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| Mark Carney: Sterling rebound reflects expectations that Brexit could be delayed - business live | |
| (41 minutes later) | |
| Just in: UK inflation has fallen to its lowest level in almost two years -- giving households some relief as they brace for possible Brexit upheaval. | |
| The consumer prices index shows that prices rose by 2.1% year-on-year in December, down from 2.3% in November, thanks to falling fuel costs. | |
| *U.K. DECEMBER INFLATION RATE FALLS TO 2.1%, AS FORECAST | |
| Bank off England governor Mark Carney has told the Treasury select committee the markets reacted positively to last night's Government defeat because they anticipate the Article 50 process will be extended. | |
| Carney adds that he wouldn’t put ‘too much weight’ on short-term market moves. | |
| Mark Carney begins his session by talking about the financial markets’ reaction to last night’s Brexit vote. | |
| The governor says that market sentiment across a range of markets are affected by Brexit developments, particularly in parliament. | |
| Last night, Carney explains, there was a “sharp rebound in sterling following the vote”, which is a sign that Brexit could be delayed beyond the end of March. | |
| Public market commentary, consistent with our market intelligence, that rebound appears to reflect some expectation that the process of resolution would be extended and that the prospect of no-deal may have been diminished. | |
| As this tweet shows, the pound fell below $1.27 after May lost the vote, but is now back at almost $1.29. | |
| Pound sterling plummets then rallies as Commons overwhelmingly rejects PM Theresa May's Brexit deal | The Independent https://t.co/j9GyDN5RQQ | |
| Carney insists he isn’t giving his own opinion of how Brexit will develop -- he’s simply citing the market’s initial take, and how it was expressed. | |
| The issue remains in the hands of parliament, he continued, adding: | |
| The markets, like the country, are looking to parliament for direction, and one could expect continued volatility. | |
| Mark Carney’s hearing is underway now. It’s being streamed live here. | |
| Newsflash: Environmental threats, and politicians inability to tackle them, are the biggest risk to the global economy, the World Economic Forum has warned. | |
| WEF’s annual global risks report, just released, cites extreme weather events, natural disasters, and failure to address climate change as the three biggest threats. | |
| WEF, which will hold its annual meeting in Davos next week, warns: | |
| Is the world sleepwalking into a crisis? Global risks are intensifying but the collective will to tackle them appears to be lacking. Instead, divisions are hardening... | |
| The report is based on the views around around 1,000 experts and decision-makers, and most are worried. | |
| WEF adds: | |
| Nine out of 10 respondents expect worsening economic and political confrontations between major powers this year. Over a ten-year horizon, extreme weather and climate-change policy failures are seen as the gravest threats. | |
| More here: | |
| Global tensions holding back climate change fight, says WEF | |
| The pound is calm now, but may rally if Theresa May wins today’s no-confidence vote, called after last night’s historic Brexit deal defeat. | |
| Kit Juckes of French bank Société Générale says: | |
| The UK voted for Brexit, markets priced it in (to a large degree) and now are watching, slack-jawed, as the Government tries to find a path to the exit which it can rally politicians behind. | |
| Today’s confidence vote isn’t quite a done deal and so if the Government survives, sterling should get a bit of a lift. | |
| Credit rating agency Moody’s isn’t considering cutting the UK’s credit rating, yet anyway, following the Meaningful Vote on the Brexit deal last night. | |
| It says: | |
| The outcome of the vote further extends the period of uncertainty over the UK’s relationship with the EU, a credit negative for many rated debt issuers. | |
| However, the vote against the deal is not, in itself, sufficient grounds for Moody’s to shift its base case to a no-deal scenario in which the rating agency would formally review the UK’s credit profile and other affected issuers | |
| City analysts and fund managers have been scrambling to update clients on the Brexit situation, after Theresa May’s withdrawal deal was resoundingly rejected by MPs. | City analysts and fund managers have been scrambling to update clients on the Brexit situation, after Theresa May’s withdrawal deal was resoundingly rejected by MPs. |
| David Lafferty, chief market strategist at Natixis Investment Managers, says the drubbing highlights the PM’s weak position: | David Lafferty, chief market strategist at Natixis Investment Managers, says the drubbing highlights the PM’s weak position: |
| “From our view, the most likely outcome is that May acquiesces and either delays or revokes article 50, effectively pushing the ‘pause button’ just before the train flies off the tracks. UK businesses and consumers should expect to live under continued uncertainty for quite a while longer. | “From our view, the most likely outcome is that May acquiesces and either delays or revokes article 50, effectively pushing the ‘pause button’ just before the train flies off the tracks. UK businesses and consumers should expect to live under continued uncertainty for quite a while longer. |
| It is important to recognize that the Brexit referendum was about an ideal – a United Kingdom independent of the EU. So far, that ideal has not been matched by a realistic plan or process to deliver it. Until such a plan emerges, the withdrawal process will probably be put on hold.” | It is important to recognize that the Brexit referendum was about an ideal – a United Kingdom independent of the EU. So far, that ideal has not been matched by a realistic plan or process to deliver it. Until such a plan emerges, the withdrawal process will probably be put on hold.” |
| Dean Turner, UK economist at UBS Global Wealth Management, sees more storms ahead. | Dean Turner, UK economist at UBS Global Wealth Management, sees more storms ahead. |
| At this stage we do not advocate taking directional views on sterling and UK assets. The reaction of the pound following the vote would suggest that markets are not currently increasing the risk of an adverse outcome. | At this stage we do not advocate taking directional views on sterling and UK assets. The reaction of the pound following the vote would suggest that markets are not currently increasing the risk of an adverse outcome. |
| For the time being, we expect that uncertainty will remain high and UK markets will stay volatile. Within portfolios, exposure to sterling-denominated assets should be maintained at benchmark levels until more clarity emerges.” | For the time being, we expect that uncertainty will remain high and UK markets will stay volatile. Within portfolios, exposure to sterling-denominated assets should be maintained at benchmark levels until more clarity emerges.” |
| Alastair Winter, chief economist at investment bank Daniel Stewart, predicts Brexit will be delayed, or even cancelled.... | Alastair Winter, chief economist at investment bank Daniel Stewart, predicts Brexit will be delayed, or even cancelled.... |
| As Mrs May licks her wounds after last night’s humiliating defeat what matters now is how hard she tries to build a consensus on the basis that a large majority in the Commons including half her ministers (and possibly herself but she is not saying) are determined to avoid ‘no deal’. She has her work cut out as nobody really trusts her competence or veracity any more (ironically, rather like Mr Trump, whom she no doubt fastidiously disdains as her mirror image). | As Mrs May licks her wounds after last night’s humiliating defeat what matters now is how hard she tries to build a consensus on the basis that a large majority in the Commons including half her ministers (and possibly herself but she is not saying) are determined to avoid ‘no deal’. She has her work cut out as nobody really trusts her competence or veracity any more (ironically, rather like Mr Trump, whom she no doubt fastidiously disdains as her mirror image). |
| She may genuinely be taken aback by the intensity of division both in Parliament and amongst voters but as Prime Minister she has to deal with it responsibly in order to limit the economic and social damage.The scale of the defeat means there is little point in her persisting with the current deal as Europhile MPs who loyally supported her yesterday will now feel able to go their own way. This, in turn, means that Brexit will not take place on 29 March, if at all. | She may genuinely be taken aback by the intensity of division both in Parliament and amongst voters but as Prime Minister she has to deal with it responsibly in order to limit the economic and social damage.The scale of the defeat means there is little point in her persisting with the current deal as Europhile MPs who loyally supported her yesterday will now feel able to go their own way. This, in turn, means that Brexit will not take place on 29 March, if at all. |
| Mark Carney will be quizzed today about the Bank of England’s latest Financial Stability Report, released at the end of November. | Mark Carney will be quizzed today about the Bank of England’s latest Financial Stability Report, released at the end of November. |
| That report predicted that the UK banking sector could survive a disorderly Brexit, thanks to the Bank’s work since June 2016 (if only the rest of the system had worked as efficiently....) | That report predicted that the UK banking sector could survive a disorderly Brexit, thanks to the Bank’s work since June 2016 (if only the rest of the system had worked as efficiently....) |
| The Bank’s Financial Policy Committee (FPC) declared: | The Bank’s Financial Policy Committee (FPC) declared: |
| The FPC has reviewed a disorderly Brexit scenario, with no deal and no transition period, that leads to a severe economic shock. | The FPC has reviewed a disorderly Brexit scenario, with no deal and no transition period, that leads to a severe economic shock. |
| Based on a comparison of this scenario with the stress test, the FPC judges that the UK banking system is strong enough to continue to serve UK households and businesses even in the event of a disorderly Brexit. | Based on a comparison of this scenario with the stress test, the FPC judges that the UK banking system is strong enough to continue to serve UK households and businesses even in the event of a disorderly Brexit. |
| 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. |
| Mark Carney has played the ‘adult in the room’ role a few times since he joined the Bank of England in 2013. And today, MPs and investors alike will be looking to the BoE governor as he testifies to parliament on the UK’s financial stability. | Mark Carney has played the ‘adult in the room’ role a few times since he joined the Bank of England in 2013. And today, MPs and investors alike will be looking to the BoE governor as he testifies to parliament on the UK’s financial stability. |
| He’ll be quizzed about the City’s ability to handle Brexit, and the preparedness (or otherwise) of firms for a cliff-edge, or disorderly, departure. | He’ll be quizzed about the City’s ability to handle Brexit, and the preparedness (or otherwise) of firms for a cliff-edge, or disorderly, departure. |
| He’ll be accompanied by Alex Brazier, Executive Director for Financial Stability Strategy and Risk, and two external members of the financial policy committee -- Anil Kashyap and Richard Sharp. It kicks off at 9.15am. | He’ll be accompanied by Alex Brazier, Executive Director for Financial Stability Strategy and Risk, and two external members of the financial policy committee -- Anil Kashyap and Richard Sharp. It kicks off at 9.15am. |
| Carney’s hearing is well-timed -- barely 12 hours after MPs threw Brexit into fresh chaos by sensationally rejecting Theresa May’s deal by a historically thumping 230 votes. | Carney’s hearing is well-timed -- barely 12 hours after MPs threw Brexit into fresh chaos by sensationally rejecting Theresa May’s deal by a historically thumping 230 votes. |
| Theresa May suffers historic defeat in vote as Tories turn against her | Theresa May suffers historic defeat in vote as Tories turn against her |
| May now faces a confidence vote tonight, while the rest of the country faces further uncertainty. Will the UK crash out without a deal on 29th March? Will MPs now force a softer Brexit, a second referendum, or even a revoke Article 50 altogether? | May now faces a confidence vote tonight, while the rest of the country faces further uncertainty. Will the UK crash out without a deal on 29th March? Will MPs now force a softer Brexit, a second referendum, or even a revoke Article 50 altogether? |
| The markets are taking the uncertainty remarkable well. Sterling is hovering around $1.28 against the US dollar - having swiftly rebounded from yesterday’s losses last night. | The markets are taking the uncertainty remarkable well. Sterling is hovering around $1.28 against the US dollar - having swiftly rebounded from yesterday’s losses last night. |
| That doesn’t mean the business world are relaxed about the situation, of course, with barely 70 days until Brexit day (delays and cancellations notwithstanding). | That doesn’t mean the business world are relaxed about the situation, of course, with barely 70 days until Brexit day (delays and cancellations notwithstanding). |
| Allie Renison, head of Europe and trade policy at the Institute of Directors, warned Bloomberg TV that the vast majority of companies simply aren’t prepared for a no-deal, so they want parliament to move swiftly onto the next step. | Allie Renison, head of Europe and trade policy at the Institute of Directors, warned Bloomberg TV that the vast majority of companies simply aren’t prepared for a no-deal, so they want parliament to move swiftly onto the next step. |
| Robert Ward, editorial director of the Economist Intelligence Unit, reckons Theresa May options are running thin... | Robert Ward, editorial director of the Economist Intelligence Unit, reckons Theresa May options are running thin... |
| Unable to command her party or parliament, Theresa May limps on, sustained by #Brexit policy chaos on all sides, lack of an obvious replacement. But her options & time running out. Also hard to see her surviving a 2nd referendum scenario. #BrexitVote | Unable to command her party or parliament, Theresa May limps on, sustained by #Brexit policy chaos on all sides, lack of an obvious replacement. But her options & time running out. Also hard to see her surviving a 2nd referendum scenario. #BrexitVote |
| We also discover whether the Brexit uncertainty has hit house prices this morning. Plus new inflation data, which may show the consumer prices rose by 2.1% per year in December, down from 2.3% in November. | We also discover whether the Brexit uncertainty has hit house prices this morning. Plus new inflation data, which may show the consumer prices rose by 2.1% per year in December, down from 2.3% in November. |
| The agenda | The agenda |
| 9am: World Economic Forum issues 2019 Global Risks Report. | 9am: World Economic Forum issues 2019 Global Risks Report. |
| 9.15am GMT: Mark Carney testifies on financial stability at the Treasury committee | 9.15am GMT: Mark Carney testifies on financial stability at the Treasury committee |
| 9.30am GMT: UK inflation data for December | 9.30am GMT: UK inflation data for December |
| 9.30am GMT: UK house price data for November | 9.30am GMT: UK house price data for November |