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Wall Street hits record high, as Iran tensions send oil price up - business live Wall Street hits record high, as Iran tensions send oil price up - business live
(32 minutes later)
It’s important to remember that while Washington and Tehran agree that an American spy drone has been shot down by Iranian forces, they don’t agree on where it was flying at the time.
Iranian media said the aircraft was hit inside Iranian airspace, near Kuh Mobarak, on Iran’s southern coast.
The US say the Global Hawk drone was flying in international airspace when it was shot down by an Iranian missile over the Strait of Hormuz.
Navy Captain Bill Urban, a spokesman for U.S. Central Command, insists:
“Iranian reports that the aircraft was over Iran are false. This was an unprovoked attack on a U.S. surveillance asset in international airspace.”
But Ali Shamkhani, secretary for the Supreme National Security Council, is just as adamant that the aircraft had breached Iranian borders, saying:
“We will defend Iran’s airspace and maritime boundaries with all our might. It doesn’t matter which country’s aircraft cross our airspace.”
Such talk is raising concerns of military conflict in the Middle East, which would cause oil supply disruption. That’s why oil prices are pushing sharply higher this afternoon:
US crude: up 5.8% at $59.91 per barrel, a three-week high
Brent crude: up 4.3% at $64.52 per barrel, also a three week high
And here’s our latest news story on the incident:
Iran shoots down US 'spy' drone
US crude oil is now up nearly 6%, on fears of disruption in the Gulf.US crude oil is now up nearly 6%, on fears of disruption in the Gulf.
US crude continuing to rally - JUN WTI $57.07 +5.8% pic.twitter.com/UhuhucsTjXUS crude continuing to rally - JUN WTI $57.07 +5.8% pic.twitter.com/UhuhucsTjX
Neil Wilson of Markets.com says Donald Trump’s “belligerent” tweet accusing Iran of a ‘big mistake’ is driving oil up.Neil Wilson of Markets.com says Donald Trump’s “belligerent” tweet accusing Iran of a ‘big mistake’ is driving oil up.
Oil has extended gains on this response from the White House, which sounds quite belligerent. West Texas Intermediate is up 5% to 56.76, while Brent has broken up above $64.Oil has extended gains on this response from the White House, which sounds quite belligerent. West Texas Intermediate is up 5% to 56.76, while Brent has broken up above $64.
Oil has risen to its best in three weeks and now looks to have moved out of its bottoming formation.Oil has risen to its best in three weeks and now looks to have moved out of its bottoming formation.
Oil prices rally to the day's high after Trump says Iran made a ‘very big mistake #JustIn #Oil #CrudeOil #Crude pic.twitter.com/DyDs8Bik2pOil prices rally to the day's high after Trump says Iran made a ‘very big mistake #JustIn #Oil #CrudeOil #Crude pic.twitter.com/DyDs8Bik2p
Oil is on track for its biggest daily rally in five months, driven by concerns that the US and Iran could be heading for military conflict.Oil is on track for its biggest daily rally in five months, driven by concerns that the US and Iran could be heading for military conflict.
Oil prices jump to high of the day, up more than 4%, after Trump says Iran made a ‘very big mistake’ https://t.co/WB7OIYeTIH pic.twitter.com/A2ikEjUUq8Oil prices jump to high of the day, up more than 4%, after Trump says Iran made a ‘very big mistake’ https://t.co/WB7OIYeTIH pic.twitter.com/A2ikEjUUq8
Newsflash: President Trump has tweeted that Iran made “a very big mistake” by shooting down a US military drone overnight.Newsflash: President Trump has tweeted that Iran made “a very big mistake” by shooting down a US military drone overnight.
Iran made a very big mistake!Iran made a very big mistake!
That has send the oil price soaring even higher. US crude is now up 4.5% today at over $56 per barrel, its highest level since 30 May.That has send the oil price soaring even higher. US crude is now up 4.5% today at over $56 per barrel, its highest level since 30 May.
Nearly every one of the 30 companies on the Dow Jones industrial average are up too.Nearly every one of the 30 companies on the Dow Jones industrial average are up too.
The top riser is Nike (+2.45%), followed by several tech firms including Cisco (+2%) and IBM (+1.7%).The top riser is Nike (+2.45%), followed by several tech firms including Cisco (+2%) and IBM (+1.7%).
JP Morgan, though, is a rare faller - down 0.4%. Lower interest rates aren’t good news for banks, as they erode the profit margin between borrowers and savers.JP Morgan, though, is a rare faller - down 0.4%. Lower interest rates aren’t good news for banks, as they erode the profit margin between borrowers and savers.
#Traders see 100% chance the Fed will cut rates in July#Forex #Fx- Read Full Article: https://t.co/qdSj8e0jjk pic.twitter.com/ooeZ9s272Q#Traders see 100% chance the Fed will cut rates in July#Forex #Fx- Read Full Article: https://t.co/qdSj8e0jjk pic.twitter.com/ooeZ9s272Q
President Donald Trump is excited by today’s Wall Street action:President Donald Trump is excited by today’s Wall Street action:
S&P opens at Record High!S&P opens at Record High!
With the re-election campaign kicking off, the president will use the stock market as proof that he’s doing a good job.With the re-election campaign kicking off, the president will use the stock market as proof that he’s doing a good job.
He’ll also take the credit, pointing to his campaign to force the Federal Reserve to stop raising interest rates and start cutting (as they may do next month).He’ll also take the credit, pointing to his campaign to force the Federal Reserve to stop raising interest rates and start cutting (as they may do next month).
Every sector of the US stock markets has risen today, helping to drive the S&P to today’s new all-time peak.Every sector of the US stock markets has risen today, helping to drive the S&P to today’s new all-time peak.
Energy stocks are leading the rally, up 1.8%, followed by technology (+1.34%), miners (+1.2%), healthcare (+1%) and industrial companies (+1%).Energy stocks are leading the rally, up 1.8%, followed by technology (+1.34%), miners (+1.2%), healthcare (+1%) and industrial companies (+1%).
As explained in the introduction to today’s blog, investors are bullish today because America’s top central banker has turned more dovish.As explained in the introduction to today’s blog, investors are bullish today because America’s top central banker has turned more dovish.
Fed chair Jerome Powell told reporters last night that “The case for somewhat more accommodative policy has strengthened,” and that his committee wanted to see more economic data before making their next move.Fed chair Jerome Powell told reporters last night that “The case for somewhat more accommodative policy has strengthened,” and that his committee wanted to see more economic data before making their next move.
The Fed also dropped its pledge to be “patient”, replacing it with a promise to take appropriate action to protect the economy (which is being interpreted as protecting the stock market too).The Fed also dropped its pledge to be “patient”, replacing it with a promise to take appropriate action to protect the economy (which is being interpreted as protecting the stock market too).
So traders now reckon a July rate cut is hammered down, the only question is whether it’s a small cut or a big one.So traders now reckon a July rate cut is hammered down, the only question is whether it’s a small cut or a big one.
The number circled shows the odds of a 50bps cut by the Fed on July 31st. 32% means it's "debatable." Subject to change, of course, based on factors emerging over the next weeks. Odds are 100% for a 25bps cut. pic.twitter.com/nuAdBnJOAUThe number circled shows the odds of a 50bps cut by the Fed on July 31st. 32% means it's "debatable." Subject to change, of course, based on factors emerging over the next weeks. Odds are 100% for a 25bps cut. pic.twitter.com/nuAdBnJOAU
Boom! Wall Street has hit a new all-time high at the start of trading in New York.Boom! Wall Street has hit a new all-time high at the start of trading in New York.
The S&P 500 index has jumped to 2,599 points, it’s highest ever intra-day level.The S&P 500 index has jumped to 2,599 points, it’s highest ever intra-day level.
Investors are piling into shares following yesterday’s Federal Reserve meeting, when America’s central bank dropped loud hints that it will cut interest rates this year -- probably starting next month.Investors are piling into shares following yesterday’s Federal Reserve meeting, when America’s central bank dropped loud hints that it will cut interest rates this year -- probably starting next month.
Wall Street has concluded that the Fed will do whatever it takes to maintain the current rally -- focusing on markets, rather than on inflation and unemployment.Wall Street has concluded that the Fed will do whatever it takes to maintain the current rally -- focusing on markets, rather than on inflation and unemployment.
That will fuel concerns that we could be in a stock market bubble -- but anyone whose been been holding onto cash this year rather than stocks and bonds has missed out!That will fuel concerns that we could be in a stock market bubble -- but anyone whose been been holding onto cash this year rather than stocks and bonds has missed out!
Here’s the opening prices:Here’s the opening prices:
Dow Jones industrial average: up 253 points or 0.96% at 26,757Dow Jones industrial average: up 253 points or 0.96% at 26,757
S&P 500: up 28 points or 0.99% at 2,955 points.S&P 500: up 28 points or 0.99% at 2,955 points.
Nasdaq: up 92 points or 1.16% at 8,079 points.Nasdaq: up 92 points or 1.16% at 8,079 points.
Having read the Bank of England minutes, Thomas Pugh of Capital Economics reckons the Monetary Policy Committee is more worried that Britain could crash out of the EU without a deal.Having read the Bank of England minutes, Thomas Pugh of Capital Economics reckons the Monetary Policy Committee is more worried that Britain could crash out of the EU without a deal.
He writes:He writes:
Clearly the weaker economic news has played its part in causing the MPC’s dovish shift, but there are also signs that the Committee is becoming more concerned about the possibility of a no deal Brexit.Clearly the weaker economic news has played its part in causing the MPC’s dovish shift, but there are also signs that the Committee is becoming more concerned about the possibility of a no deal Brexit.
Indeed, instead of chastising the market for underestimating how much interest rates might rise as it did in May, the MPC pointed out “the ongoing tension between the MPC’s forecast… of a smooth Brexit and the assumptions about alternative Brexit scenarios that were priced into financial market variables”.Indeed, instead of chastising the market for underestimating how much interest rates might rise as it did in May, the MPC pointed out “the ongoing tension between the MPC’s forecast… of a smooth Brexit and the assumptions about alternative Brexit scenarios that were priced into financial market variables”.
The minutes are online here.The minutes are online here.
Here’s Associated Press’s take on the Bank of England’s interest rate decision:Here’s Associated Press’s take on the Bank of England’s interest rate decision:
The Bank of England kept its main interest rate on hold at 0.75% on Thursday and warned that a combination of Brexit worries and global trade tensions was weighing on growth.The Bank of England kept its main interest rate on hold at 0.75% on Thursday and warned that a combination of Brexit worries and global trade tensions was weighing on growth.
All nine members of the Monetary Policy Committee backed the decision to not change rates. There had been some expectations in the markets that a couple of them could vote for an increase because of concerns that rising wages will push up inflation.All nine members of the Monetary Policy Committee backed the decision to not change rates. There had been some expectations in the markets that a couple of them could vote for an increase because of concerns that rising wages will push up inflation.
However, figures this week showed the annual inflation rate fell to the bank’s target of 2%, easing pressure to raise rates. Also, uncertainty surrounding Britain’s departure from the European Union remains despite a Brexit deadline extension and are keeping a lid on growth. Only around 20% of respondents to a Bank of England survey think Brexit uncertainty will be resolved by the end of this year.However, figures this week showed the annual inflation rate fell to the bank’s target of 2%, easing pressure to raise rates. Also, uncertainty surrounding Britain’s departure from the European Union remains despite a Brexit deadline extension and are keeping a lid on growth. Only around 20% of respondents to a Bank of England survey think Brexit uncertainty will be resolved by the end of this year.
Though Britain’s departure date from the EU has been pushed back to Oct. 31, there is still huge uncertainty as to whether the country will leave then. The Conservative Party contest to replace Prime Minister Theresa May has meant there’s been little progress on Brexit in recent months and concerns are rising that Britain could crash out without a deal on future relations with the EU. The favorite, Boris Johnson, has indicated that he’s prepared to go ahead with a ‘no-deal’ Brexit.Though Britain’s departure date from the EU has been pushed back to Oct. 31, there is still huge uncertainty as to whether the country will leave then. The Conservative Party contest to replace Prime Minister Theresa May has meant there’s been little progress on Brexit in recent months and concerns are rising that Britain could crash out without a deal on future relations with the EU. The favorite, Boris Johnson, has indicated that he’s prepared to go ahead with a ‘no-deal’ Brexit.
Most economists, including those at the Bank of England, think that leaving without a deal will cause huge damage to the British economy as trade with the EU is hit by tariffs and other disruptions.Most economists, including those at the Bank of England, think that leaving without a deal will cause huge damage to the British economy as trade with the EU is hit by tariffs and other disruptions.
“Domestically, the perceived likelihood of a no-deal Brexit has risen,” rate-setters said in the minutes to Thursday’s policy meeting.“Domestically, the perceived likelihood of a no-deal Brexit has risen,” rate-setters said in the minutes to Thursday’s policy meeting.
They also said that trade tensions have intensified and that economic growth is set to stall in the second quarter following a 0.5% pickup in the first three months. In its forecasts last month, the bank had projected growth of 0.2% in the second quarter.They also said that trade tensions have intensified and that economic growth is set to stall in the second quarter following a 0.5% pickup in the first three months. In its forecasts last month, the bank had projected growth of 0.2% in the second quarter.
Monetary policy summary and minutes of the MPC meeting ending on 19 June 2019: https://t.co/LhTDR3G75V pic.twitter.com/BB46VSCRx3Monetary policy summary and minutes of the MPC meeting ending on 19 June 2019: https://t.co/LhTDR3G75V pic.twitter.com/BB46VSCRx3
There is something slightly odd about today’s minutes from the Bank of England, as it leaves interest rates on hold.There is something slightly odd about today’s minutes from the Bank of England, as it leaves interest rates on hold.
On one hand, the Monetary Policy Committee sounds more concerned about Brexit (“the perceived likelihood of a no-deal Brexit has risen”), the economy (no growth is expected in the current quarter) and the balance of risks (“downside risks to growth have increased”).On one hand, the Monetary Policy Committee sounds more concerned about Brexit (“the perceived likelihood of a no-deal Brexit has risen”), the economy (no growth is expected in the current quarter) and the balance of risks (“downside risks to growth have increased”).
And yet... they still expect to raise interest rates at a gradual pace over the next couple of years.And yet... they still expect to raise interest rates at a gradual pace over the next couple of years.
Why hasn’t the Bank’s guidance changed, if the economic picture has darkened? Are they afraid to sound too gloomy, or are they simply hoping that conditions pick up?Why hasn’t the Bank’s guidance changed, if the economic picture has darkened? Are they afraid to sound too gloomy, or are they simply hoping that conditions pick up?
Chris Giles of the Financial Times suggests that any dissenters on the MPC aren’t prepared to break cover yet.Chris Giles of the Financial Times suggests that any dissenters on the MPC aren’t prepared to break cover yet.
The big question for @bankofengland after the June minutes:Why has all guidance remained the same when the outlook for the global and UK economy has deteriorated?Spoiler: there is no answer in the MPC minuteshttps://t.co/pVC13Y2t73The big question for @bankofengland after the June minutes:Why has all guidance remained the same when the outlook for the global and UK economy has deteriorated?Spoiler: there is no answer in the MPC minuteshttps://t.co/pVC13Y2t73
There won't be much defence against being asleep at the wheel, if, so to speak, the wheels come off the economy soon...There won't be much defence against being asleep at the wheel, if, so to speak, the wheels come off the economy soon...
But there was this intriguing passage in the minutes.Unanimity in wanting to leave rates at 0.75%Just a committee view on BoE's forward outlookAre there dissenters too shy to come forward? pic.twitter.com/1ElRtNAuRbBut there was this intriguing passage in the minutes.Unanimity in wanting to leave rates at 0.75%Just a committee view on BoE's forward outlookAre there dissenters too shy to come forward? pic.twitter.com/1ElRtNAuRb
Professor Costas Milas of Liverpool University suspects that the Bank of England could cut interest rates in the coming months, rather than raise them.Professor Costas Milas of Liverpool University suspects that the Bank of England could cut interest rates in the coming months, rather than raise them.
He tells me:He tells me:
MPC members decide on interest rates based on our economic performance as well as financial/economic policy risks.MPC members decide on interest rates based on our economic performance as well as financial/economic policy risks.
On the economic front, monthly GDP data suggests an economy which is at best weak (GDP fell by 0.4% in April) and CPI inflation is equal to the 2% target. Hence, economic front news suggests no need for an interest rate hike any time soon. If anything, economic front news points to an interest rate cut.On the economic front, monthly GDP data suggests an economy which is at best weak (GDP fell by 0.4% in April) and CPI inflation is equal to the 2% target. Hence, economic front news suggests no need for an interest rate hike any time soon. If anything, economic front news points to an interest rate cut.
Developments in financial and economic policy risk are currently cancelling each other. Indeed, UK financial risk (which combines information from the bond, equity, banking and foreign exchange market) remains low but economic policy risk, which largely relates to no-deal Brexit, is slightly on the rise.Developments in financial and economic policy risk are currently cancelling each other. Indeed, UK financial risk (which combines information from the bond, equity, banking and foreign exchange market) remains low but economic policy risk, which largely relates to no-deal Brexit, is slightly on the rise.
As we move towards the October deadline, there is a chance that both risk variables will escalate. Such a scenario will put MPC members under pressure to cut the policy rate....As we move towards the October deadline, there is a chance that both risk variables will escalate. Such a scenario will put MPC members under pressure to cut the policy rate....
Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management, believes there’s no chance of a UK interest rate rise until the next Brexit deadline.Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management, believes there’s no chance of a UK interest rate rise until the next Brexit deadline.
“With Brexit unresolved, it is now practically inconceivable that there will be a rate hike between now and October, despite GDP growth being close to potential. MPC members have been doing the rounds of late, making hawkish comments and it’s easy to see why. The labour market is tight and prices are rising in sectors sensitive to the output gap, but – for now – this is being outweighed by weak goods inflation. With headline CPI on target, that’s a decision for another day.“With Brexit unresolved, it is now practically inconceivable that there will be a rate hike between now and October, despite GDP growth being close to potential. MPC members have been doing the rounds of late, making hawkish comments and it’s easy to see why. The labour market is tight and prices are rising in sectors sensitive to the output gap, but – for now – this is being outweighed by weak goods inflation. With headline CPI on target, that’s a decision for another day.
“UK businesses continue to be haunted by the looming Brexit deadline of October 31st and the spectre of uncertainty is weighing on activity. Even if a No Deal exit is averted for now, the cost of delay will mount if negotiations are extended once again. Consumers may receive some respite; above inflation earnings growth and continued low interest rates mean UK households have a bit more spending power, which is supporting the economy. With the end of Carney’s tenure on the horizon, a rate rise might be an issue for his successor to grapple with.”“UK businesses continue to be haunted by the looming Brexit deadline of October 31st and the spectre of uncertainty is weighing on activity. Even if a No Deal exit is averted for now, the cost of delay will mount if negotiations are extended once again. Consumers may receive some respite; above inflation earnings growth and continued low interest rates mean UK households have a bit more spending power, which is supporting the economy. With the end of Carney’s tenure on the horizon, a rate rise might be an issue for his successor to grapple with.”
With summer holidays looming, the Bank’s gloomy forecasts haven’t helped families planning a trip across the Channel.With summer holidays looming, the Bank’s gloomy forecasts haven’t helped families planning a trip across the Channel.
Sterling has dropped by almost half a euro cent to €1.121, wiping out all yesterday’s rally.Sterling has dropped by almost half a euro cent to €1.121, wiping out all yesterday’s rally.
The pound is also surrendering some of its early gains against the US dollar, and is now back below $1.27.The pound is also surrendering some of its early gains against the US dollar, and is now back below $1.27.
Bad news for workers: the Bank of England’s economists reckon that UK earnings growth “might have levelled off”.Bad news for workers: the Bank of England’s economists reckon that UK earnings growth “might have levelled off”.
Better news: They also predict that inflation (which fell to 2% last month) will fall further in the coming months.Better news: They also predict that inflation (which fell to 2% last month) will fall further in the coming months.