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Stock markets fall as ECB adds to warnings on trade war – business live Stock markets fall as ECB adds to warnings on trade war – business live
(32 minutes later)
With a few minutes to go to the Wall Street opening bell, it appears that US markets will follow Europe down.
Futures prices for the S&P 500 suggest shares will fall by 0.6% as trading begins. Dow Jones industrial average futures suggest a 0.7% fall for those blue-chip stocks.
An update on Boeing, which is still in the middle of a crisis following the grounding of its 737 Max aircraft. The 737 Max was grounded because its safety features were implicated in two fatal crashes.
Reuters reports from Seoul, where the airline industry is currently meeting:
The International Air Transport Association (IATA) expects it could take until August before the Boeing Co 737 MAX returns to service, the airline group’s head said on Wednesday, adding that the final say on the timing rested with regulators.
“We do not expect something before 10 to 12 weeks in re-entry into service,” IATA director general Alexandre de Juniac told reporters in Seoul. “But it is not our hands. That is in the hands of regulators.”
Pickering now puts the likelihood of a hard Brexit at 35%, up from 25%, because a Brexit-backing politician is odds-on to replace Theresa May as prime minister.
According to the bookmakers’ implied odds, the next PM is likely to be a Brexiteer: Boris Johnson (38% chance), Michael Gove (18%), or Dominic Raab (18%). On its own, this would raise the hard Brexit risk.
Raab is the “one to watch”, says Pickering, given his hardline stance, while the others are more pragmatic.
However, Costas Milas, professor of finance at the University of Liverpool, has found an interesting correlation: searches for Boris Johnson on Google move in tandem with sterling-dollar volatility.
In an article on the Conversation, Milas writes that the reaction to Johnson’s comments on Brexit means he has a role to play in future volatility of the pound.
Given the considerable likelihood of him becoming the next UK prime minister, it would definitely be wise for Boris Johnson to think carefully before making statements that have the potential to move financial assets. The last thing the UK needs is a prime minister who has the potential to trigger considerable instability in its currency and therefore undermine the willingness of international investors to cast a vote of confidence in its already Brexit-battered economy.
Sterling is essentially flat against the US dollar and the euro for today, but it remains near levels not seen since the start of the year because of traders’ perceptions of Brexit risks.Sterling is essentially flat against the US dollar and the euro for today, but it remains near levels not seen since the start of the year because of traders’ perceptions of Brexit risks.
With the dust settled (in the UK at least) on European parliament elections which were painful for both major parties, the chances of a compromise which would avoid a no-deal Brexit have lessened, according to Kallum Pickering, senior economist at Berenberg.With the dust settled (in the UK at least) on European parliament elections which were painful for both major parties, the chances of a compromise which would avoid a no-deal Brexit have lessened, according to Kallum Pickering, senior economist at Berenberg.
After haemorrhaging support to the Brexit Party, the Conservatives look set to harden their stance on Brexit as the party searches for a new leader and prime minister. The Labour Party, which suffered big losses to the pro-EU Liberal Democrats, looks set to fully back a second EU referendum shortly. Strong support for the Scottish National Party has renewed its drive for a second Scottish referendum.After haemorrhaging support to the Brexit Party, the Conservatives look set to harden their stance on Brexit as the party searches for a new leader and prime minister. The Labour Party, which suffered big losses to the pro-EU Liberal Democrats, looks set to fully back a second EU referendum shortly. Strong support for the Scottish National Party has renewed its drive for a second Scottish referendum.
Altogether, this lowers the odds of a compromise semi-soft or soft Brexit while increasing the likelihood of the more extreme outcomes. The latest sterling selloff reflects the heightened political uncertainty and rising tail risks.Altogether, this lowers the odds of a compromise semi-soft or soft Brexit while increasing the likelihood of the more extreme outcomes. The latest sterling selloff reflects the heightened political uncertainty and rising tail risks.
More professions should be included on a list of jobs in which the UK has a shortage, according to an independent body tasked with examining the British immigration system.More professions should be included on a list of jobs in which the UK has a shortage, according to an independent body tasked with examining the British immigration system.
Vets, web designers and architects should be included on the shortage occupations list, which would make it easier for people in those professions to gain a visa, the Migration Advisory Committee (MAC) said today.Vets, web designers and architects should be included on the shortage occupations list, which would make it easier for people in those professions to gain a visa, the Migration Advisory Committee (MAC) said today.
The MAC’s suggestions would mean that 9% of the labour market is on the list, up from 1% at the moment. Other changes would include widening the doctors, artists and civil engineers on the list.The MAC’s suggestions would mean that 9% of the labour market is on the list, up from 1% at the moment. Other changes would include widening the doctors, artists and civil engineers on the list.
The government is still technically committed to reducing net migration to the UK to the “tens of thousands” (even if some Tory leadership contenders want to ditch the target). In the meantime the government has asked the MAC to try to work out the ideal immigration policy.The government is still technically committed to reducing net migration to the UK to the “tens of thousands” (even if some Tory leadership contenders want to ditch the target). In the meantime the government has asked the MAC to try to work out the ideal immigration policy.
Polls carried out on behalf of Lord Ashcroft on referendum day found restricting immigration was the second most common reason for voting leave in the EU referendum (behind the desire to assert the UK’s sovereignty).Polls carried out on behalf of Lord Ashcroft on referendum day found restricting immigration was the second most common reason for voting leave in the EU referendum (behind the desire to assert the UK’s sovereignty).
Yet business groups are, for the most part, in favour of keeping a more open immigration policy. Tej Parikh, senior economist at the Institute of Directors, said:Yet business groups are, for the most part, in favour of keeping a more open immigration policy. Tej Parikh, senior economist at the Institute of Directors, said:
In the current context of an extremely tight labour market vacancies are often going unfilled, particularly in STEM [science, technology, engineering and mathematics] areas. This is holding firms back from growing even faster, to the benefit of the UK economy.In the current context of an extremely tight labour market vacancies are often going unfilled, particularly in STEM [science, technology, engineering and mathematics] areas. This is holding firms back from growing even faster, to the benefit of the UK economy.
It is crucial that migration policy takes into account economic realities. Widening the list will help relieve some of the strains businesses face in searching for talent.It is crucial that migration policy takes into account economic realities. Widening the list will help relieve some of the strains businesses face in searching for talent.
The mayors of Greater Manchester and Liverpool city region have called on the transport secretary to terminate the Northern rail franchise after a year of sustained misery for passengers.The mayors of Greater Manchester and Liverpool city region have called on the transport secretary to terminate the Northern rail franchise after a year of sustained misery for passengers.
Speaking on behalf of the 4.3 million people they represent, Andy Burnham and Steve Rotheram made the demand 12 months on from last May’s timetable chaos, writes the Guardian’s Helen Pidd.Speaking on behalf of the 4.3 million people they represent, Andy Burnham and Steve Rotheram made the demand 12 months on from last May’s timetable chaos, writes the Guardian’s Helen Pidd.
They complain of a litany of failures, with nearly a fifth of all services arriving late following years of underinvestment.They complain of a litany of failures, with nearly a fifth of all services arriving late following years of underinvestment.
In a separate (but perhaps emblematic) move, the Department for Transport yesterday announced a plan to use the infamous Pacer trains currently in service as, er, village halls.In a separate (but perhaps emblematic) move, the Department for Transport yesterday announced a plan to use the infamous Pacer trains currently in service as, er, village halls.
Read more here:Read more here:
Manchester and Liverpool mayors call for termination of Northern railManchester and Liverpool mayors call for termination of Northern rail
European stock markets are all still very much in the red just after the middle of the trading day in London.European stock markets are all still very much in the red just after the middle of the trading day in London.
The FTSE 100 is down by 1.4%, while the mid-cap FTSE 250 has lost 1%.The FTSE 100 is down by 1.4%, while the mid-cap FTSE 250 has lost 1%.
The City regulator has banned a former trader who was cleared of rigging the Libor interest rate, saying he acted dishonestly and lacked integrity.The City regulator has banned a former trader who was cleared of rigging the Libor interest rate, saying he acted dishonestly and lacked integrity.
Terry Farr arranged nine “wash trades” with no commercial purpose in a bid to gain brokerage payments between 19 September 2008 and 25 August 2009, the Financial Conduct Authority found.Terry Farr arranged nine “wash trades” with no commercial purpose in a bid to gain brokerage payments between 19 September 2008 and 25 August 2009, the Financial Conduct Authority found.
Farr was a broker on the Japanese yen desk at Martins, a relatively small brokerage which arranged transactions of currencies and derivatives between financial institutions. He was acquitted of participating in fixing Libor (the London Interbank Offered Rate) in January 2016.Farr was a broker on the Japanese yen desk at Martins, a relatively small brokerage which arranged transactions of currencies and derivatives between financial institutions. He was acquitted of participating in fixing Libor (the London Interbank Offered Rate) in January 2016.
The wash trades meant that Martins received unwarranted brokerage of £258,151, the FCA said, increasing his bonus pool.The wash trades meant that Martins received unwarranted brokerage of £258,151, the FCA said, increasing his bonus pool.
Mark Steward, executive director of enforcement and market oversight at the FCA, said:Mark Steward, executive director of enforcement and market oversight at the FCA, said:
There was no legitimate reason for Mr Farr to make these trades and his actions were motivated by greed. His actions mean he has no place in financial services.There was no legitimate reason for Mr Farr to make these trades and his actions were motivated by greed. His actions mean he has no place in financial services.
Today’s ban reflects our commitment to making sure that people working in financial services act with integrity.Today’s ban reflects our commitment to making sure that people working in financial services act with integrity.
Stock markets across Europe have fallen on Wednesday morning amid concerns over global growth. Economists are eyeing the trade dispute between the US and China as the most prominent threat to the long-running expansion.Stock markets across Europe have fallen on Wednesday morning amid concerns over global growth. Economists are eyeing the trade dispute between the US and China as the most prominent threat to the long-running expansion.
The European Central Bank warned that the trade war could harm the global economy, and that a slowdown could be the trigger to a bout of financial instability.The European Central Bank warned that the trade war could harm the global economy, and that a slowdown could be the trigger to a bout of financial instability.
ECB vice-president Luis De Guindos this morning told reporters that “a trade war is the main risk to the economy globally.”ECB vice-president Luis De Guindos this morning told reporters that “a trade war is the main risk to the economy globally.”
The ECB report said:The ECB report said:
Weaker than expected growth and a possible escalation of trade tensions could trigger further falls in asset prices.Weaker than expected growth and a possible escalation of trade tensions could trigger further falls in asset prices.
The dispute over tariffs and trade between the US and China, sparked by US President Donald Trump, has unsettled investors through fears of higher import taxes that could slow trade and growth.The dispute over tariffs and trade between the US and China, sparked by US President Donald Trump, has unsettled investors through fears of higher import taxes that could slow trade and growth.
In other news:In other news:
The ECB also sent a warning to Italy that its debt may be unsustainable.The ECB also sent a warning to Italy that its debt may be unsustainable.
German unemployment rose for the first time since 2013.German unemployment rose for the first time since 2013.
Tesco and Sainsbury’s have both lost market share, according to Kantar.Tesco and Sainsbury’s have both lost market share, according to Kantar.
Oil prices have fallen amid concerns over demand.Oil prices have fallen amid concerns over demand.
Here is some interesting news in the battle for the Conservative party leadership – and hence to be the UK’s next prime minister: Boris Johnson will have to appear in court to face allegations of misconduct.Here is some interesting news in the battle for the Conservative party leadership – and hence to be the UK’s next prime minister: Boris Johnson will have to appear in court to face allegations of misconduct.
The summons to court follows a crowdfunded move to launch a private prosecution of the MP, who is currently the frontrunner in the Tory leadership contest, writes the Guardian’s Ben Quinn.The summons to court follows a crowdfunded move to launch a private prosecution of the MP, who is currently the frontrunner in the Tory leadership contest, writes the Guardian’s Ben Quinn.
Johnson lied and engaged in criminal conduct when he repeatedly claimed during the 2016 EU referendum that the UK sent £350m a week to Brussels, lawyers for Marcus Ball, a 29-year-old businessman who has launched the prosecution bid, told a court last week.Johnson lied and engaged in criminal conduct when he repeatedly claimed during the 2016 EU referendum that the UK sent £350m a week to Brussels, lawyers for Marcus Ball, a 29-year-old businessman who has launched the prosecution bid, told a court last week.
Read more here:Read more here:
Boris Johnson to appear in court over misconduct claimsBoris Johnson to appear in court over misconduct claims
The risk-off attitude among investors is making its mark on oil markets as well.The risk-off attitude among investors is making its mark on oil markets as well.
Futures for Brent crude, the North Sea benchmark, are down by 2% today to below $69 per barrel. It earlier hit lows of $68.44.Futures for Brent crude, the North Sea benchmark, are down by 2% today to below $69 per barrel. It earlier hit lows of $68.44.
Futures for the US benchmark, West Texas Intermediate, fell by 2.2% to $57.83 per barrel.Futures for the US benchmark, West Texas Intermediate, fell by 2.2% to $57.83 per barrel.
Prices have rallied steadily from around $50 per barrel at Christmas to almost $75 in April, but have retreated in the face of concerns over demand as investors await the inevitable slowdown in global growth.Prices have rallied steadily from around $50 per barrel at Christmas to almost $75 in April, but have retreated in the face of concerns over demand as investors await the inevitable slowdown in global growth.
Back in the markets, the FTSE 100 has now lost more than 100 points for the day, or 1.5%. It’s a fairly broad-based sell-off across sectors, with Ocado now the biggest faller, down 5.4% so far.Back in the markets, the FTSE 100 has now lost more than 100 points for the day, or 1.5%. It’s a fairly broad-based sell-off across sectors, with Ocado now the biggest faller, down 5.4% so far.
Every major European index has lost well over 1% so far. France’s Cac 40 is down by 1.8%, Germany’s Dax is down by 1.4%, and Italy’s FTSE MIB has lost 1.5%.Every major European index has lost well over 1% so far. France’s Cac 40 is down by 1.8%, Germany’s Dax is down by 1.4%, and Italy’s FTSE MIB has lost 1.5%.
On currency markets, sterling has dipped by 0.14% against the US dollar and 0.1% against the euro. The US dollar index, based on a trade-weighted basket of currencies, is up by 0.1% overall.On currency markets, sterling has dipped by 0.14% against the US dollar and 0.1% against the euro. The US dollar index, based on a trade-weighted basket of currencies, is up by 0.1% overall.
There is also an interesting chapter on the climate crisis in the European Central Bank’s financial stability review.There is also an interesting chapter on the climate crisis in the European Central Bank’s financial stability review.
Central banks have become increasingly vocal on the dangers posed by global heating – albeit couched in language about exposures to financial risks.Central banks have become increasingly vocal on the dangers posed by global heating – albeit couched in language about exposures to financial risks.
The report said:The report said:
While significant macroeconomic impacts from climate change may occur in the more distant future, some impacts are already beginning to be felt.While significant macroeconomic impacts from climate change may occur in the more distant future, some impacts are already beginning to be felt.
There are “key gaps” in data on the financial sector’s exposure to climate risks, the ECB warned. However, what data there is appears to show an increasing toll from the climate crisis in recent years.There are “key gaps” in data on the financial sector’s exposure to climate risks, the ECB warned. However, what data there is appears to show an increasing toll from the climate crisis in recent years.
Risks to the eurozone from a no-deal Brexit – still a possibility after 31 October – are “manageable”, but there is the small possibility that disruption could coincide with another global shock with damaging consequences, the ECB says.Risks to the eurozone from a no-deal Brexit – still a possibility after 31 October – are “manageable”, but there is the small possibility that disruption could coincide with another global shock with damaging consequences, the ECB says.
The financial stability review says:The financial stability review says:
There remain tail macro-financial risks whereby a no-deal Brexit interacts with other global shocks, in an environment where risks to the euro area growth outlook are tilted to the downside.There remain tail macro-financial risks whereby a no-deal Brexit interacts with other global shocks, in an environment where risks to the euro area growth outlook are tilted to the downside.
If such a scenario occurs, the impact would likely be concentrated on particular countries, such as those with significant ties to the UK.If such a scenario occurs, the impact would likely be concentrated on particular countries, such as those with significant ties to the UK.
Such a shock could dent eurozone GDP growth, along with an “even more significant macroeconomic shock in the UK”.Such a shock could dent eurozone GDP growth, along with an “even more significant macroeconomic shock in the UK”.
Downside risks to the growth outlook “appear prominent”, the ECB warns, and Italy is particularly in the crosshairs.Downside risks to the growth outlook “appear prominent”, the ECB warns, and Italy is particularly in the crosshairs.
“Country-specific debt sustainability concerns” are a problem, the central bank warns. In case you don’t know which country, they provide a handy chart with a large “IT” in the corner:“Country-specific debt sustainability concerns” are a problem, the central bank warns. In case you don’t know which country, they provide a handy chart with a large “IT” in the corner: