Market turmoil as Swiss central bank drops currency cap – business live
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Version 0 of 1. 5.19pm GMT17:19 European markets end traumatic day higher In another volatile day, stock markets plunged after the Swiss bank abandoned its currency cap against the euro, before regaining lost ground and pushing into positive territory, writes Nick Fletcher. The exception was the Swiss market itself, which recorded its biggest daily percentage fall for 25 years. Elsewhere investors moved back into the markets on the basis that the Swiss move signalled its central bank expected a quantitative easing programme to be unveiled by the European Central Bank next week, an event which would be seen as positive for shares. So the closing scores showed: On Wall Street the Dow Jones Industrial Average is currently down 39 points or 0.23%, with US markets unimpressed with figures from Bank of America and Citigroup. On currency markets, the euro is currently down 13% against the Swiss franc at 1.04 compared to the cap of 1.20. With that, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back tomorrow. 5.18pm GMT17:18 Some comments from Bundesbank president Jens Weidmann following this week’s European Court of Justice ruling which seemed to pave the way for the ECB to conducti quantitative easing, something the Germans are not happy with. Courtesy of Reuters: 4.18pm GMT16:18 Lagarde warns of risks to global economy IMF managing director Christine Lagarde has warned of the problems ahead for the global economy. Next week sees the fund’s latest world economic outlook, but ahead of that report she said in a speech at the Council on Foreign Relations in Washington: I can already say this: despite the boost from cheaper oil and stronger U.S. growth, we see the global recovery continuing to face a very strong headwind. Referring to the Rosetta mission which put a spacecraft on a comet, she said: This year the global economy will face what we might call three “Rosetta moments”. These are major policy challenges that require decisions based on political courage, decisive action, and multilateral thinking—in short, true global leadership. The first Rosetta moment is all about boosting growth and employment in the next 12 months – overcoming that “strong headwind” that I mentioned. The second Rosetta moment is about achieving more inclusive, shared growth; and the third is about attaining more sustainable, balanced growth. She continued: The obvious question is this: should lower oil prices and a stronger recovery in the United States make us more upbeat about the prospects for the global economy? The answer is most likely “No,” since there are still powerful factors that weigh on the downside. Too many countries are still weighed down by the legacies of the financial crisis, including high debt and high unemployment. Too many companies and households keep cutting back on investment and consumption today because they are concerned about low growth in the future. In fact, the United States is the only major economy that is likely to buck the trend this year, while others are being held back – mainly by lackluster investment. A promising recovery continues in the UK, but growth remains very low in the Euro Area and Japan. And emerging economies, led by China, are slowing down, relatively speaking. Overall, we believe that global growth is still too low, too brittle, and too lopsided. And she pointed to several risks, including the repercussions of monetary policy getting back to normal, with US rates set to rise this year, as central banks end their unprecedented support for the global economy. The subsequent strengthening of the dollar and higher interest rates could hit emerging and developing economies, while the likes of Nigeria, Russia and Venezuela face huge currency pressures. Meanwhile the eurozone and Japan could be stuck in a world of low growth and low inflation for a prolonged period. There are also increased geopolitical risks, including Ukraine and the recent terrorist activities. So what should policymakers do? She said: Broadly speaking, accommodative monetary policies remain essential. Fiscal adjustment must be as growth and job-friendly as possible. And above all, policymakers need to finally step up structural reforms. This economic mantra – support demand, growth, and structural reforms – is not new, but now takes on increased urgency. And it places increased emphasis on political leadership. For example, the impact of lower oil prices will prove to be an immediate test for many policy makers. In the Euro Area, cheaper oil is contributing to a further decline in inflation expectations, which increases the risk of deflation. This bolsters the case for additional monetary stimulus, which the European Central Bank has indicated it stands ready to support as needed. Most importantly, however, the drop in oil prices provides a golden opportunity to cut energy subsidies and use the savings for more targeted transfers to protect the poor – for which the IMF has been pushing hard. There was also a need for structural reforms, trade reforms and efforts to “unleash the economic power of millions of women who are currently locked out of the labor market.” Reforms of the financial sector should be implemented, and an international agreement on climate change is required: We need greater political courage to reach a comprehensive deal to cut carbon emissions at the Paris summit in December. A successful agreement could usher in a new energy era that could help save the planet. Updated at 4.19pm GMT 3.53pm GMT15:53 Some further reading (and watching): Our economics editor Larry Elliott has analysed the Swiss situation, and writes: Another day, another bout of extreme market turbulence. The last cue for mayhem has been the decision by the Swiss National Bank to abandon its attempts to prevent the franc from appreciating against the euro. Given that just a month ago, the SNB said it would hold the line with the “utmost determination”, the announcement took traders by surprise. The franc soared, the euro collapsed, shares lost their gains. It was uproar. The reason the Swiss have thrown in the towel is pretty obvious. Mario Draghi finally seems to have convinced the Germans that quantitative easing is needed to prevent the eurozone from sliding into a potential damaging period of deflation, and the European Central Bank is likely to publish plans for a sovereign bond buying programme when it meets next week. The SNB has close links to the ECB, and knows QE is coming..... More here: Swiss currency shock: blame the bank in Frankfurt not Zurich Our Money editor Patrick Collinson explains the impact on our pockets.... Swiss franc Q&A – what the currency changes mean for tourists ....while Bloomberg points out that the move has hit the world’s power brokers hard: The Swiss Central Bank Just Made Davos a Lot Pricier Expensive coffee and bags? RT @BennSteil: SNB action hits Davos crowd where it hurts http://t.co/rOGjYOCmKh pic.twitter.com/pUqxEaGmxu The FT has done a handy video explaining what the Swiss bank has done, and why: And we’re collecting expert reaction here: Swiss franc - what the economists say Updated at 3.53pm GMT 3.26pm GMT15:26 Today has been a dramatic, even historic day for the foreign exchange markets, says Christopher Vecchio, currency analyst at DailyFX. Here’s his take on the Swiss central bank’s moves: “The Swiss National Bank’s decision to remove the EURCHF Sf1.2000 floor is a monumental development for FX markets. Sparing no few words, nothing more needs to be said than the fact that this is a complete surprise for most (if not all) market participants. With the SNB’s balance sheet having exploded to 100% of the country’s annual GDP, the cost of maintaining the floor was too costly for the SNB. The first signs that the SNB was struggling with the floor came on December 18, when the SNB first introduced negative interest rates as a way to deter speculators from betting on further Franc appreciation. At the time we said that the move was in all likelihood preemptive action to front run a massive balance sheet expansion by the ECB; this may be the surest sign yet that the ECB is on the verge of unveiling some massive QE program. 2.44pm GMT14:44 IG’s shares have fallen almost 5%. 2.41pm GMT14:41 IG could have lost £30m in currency turmoil City trading firm IG Index has just admitted that today’s turmoil has cost it up to £30m. In a statement to the City, IG said it had suffered a “negative financial impact” following the surge in the value of the Swiss franc. It says: The market exposure occurred where client positions were closed at a more beneficial level than the Company was able to close its entire corresponding hedge due to the market dislocation. In other words, IG clients were ‘stopped out’ of their positions when the franc soared against the euro, but IG has been forced to pay an even worse exchange rate to settle its exposure. The Swiss franc is still 15% higher against the euro at CHF1.02. 2.24pm GMT14:24 The Daily Telegraph’s Ambrose Evans-Pritchard is grinding his teeth at the Swiss central bank: Very cross with SNB since I'm going to Switzerland tomorrow. Suddenly very expensive trip. Colleague @JeremyWarnerUK switched £ yesterday 2.21pm GMT14:21 Sean Richards, independent economist, has blogged about the end of the Swiss franc cap - which he dubs the ‘nuclear option’ He says: On a worldwide scale this is a collapse of one of the pegs of the system and is a kick in the teeth for those who treat central bankers as omniscient and all-powerful. He also blames events in Moscow for driving money into Switzerland: Other moves by central banks are now threatened by this as the world monetary system receives quite a shake. What broke this dam? It seems fairly clear that the Russian crisis and the consequent flood of Roubles out of Russia into what are perceived as safe havens was the straw which broke the camels back. Switzerland takes the nuclear option in the currency wars (updated 1pm) http://t.co/vr56zjcogC #Swiss #SNB 2.10pm GMT14:10 Economist Nouriel Roubini agrees that Russia’s currency crisis and Europe’s imminent move into quantitative easing forced the Swiss central bank’s hand: CHF was under pressure given expected ECB Sov QE, safe have inflows given Russia and geopol risks, and lower oil prices helping switerland 2.00pm GMT14:00 What a day....the European stock markets are surging higher again with the FTSE 100 up 75 points or 1.2%. The trigger? US economic data. The US Empire Manufacturing survey, which tracks factory activity in the New York area, beat expectations by rising to +9.95, up from -1.23 in February. Oil is also surging, pushing the cost of a barrel of Brent crude up over $50 for the first time this week. WTI now trading 13% higher than yesterday's lows. Is this the correction or temporary blip? #oil Updated at 2.03pm GMT 1.15pm GMT13:15 Stocks in Switzerland are hitting new lows: Swiss Market Index near 15% plunge after SNB action pic.twitter.com/5AV8QTOgjZ 1.10pm GMT13:10 Here comes the last questions for Switzerland’s bank chief (dubbed “the most-hated man” in the foreign exchange markets by the FT today): Asked about the European Central Bank’s move towards quantitative easing, Thomas Jordan replies that the ECB has already said it will do QE, and “most of it” is already priced into the markets. *JORDAN SEES MOST OF ECB QE ALREADY PRICED INTO MARKETS And that’s the end. 1.02pm GMT13:02 Will negative interest rates (on large deposits) encourage people to hoard cash at home? No. Interest rates would have to be more negative for that to happen, Jordan says. Updated at 1.02pm GMT 1.01pm GMT13:01 The Q&A is nearly over, just time for a couple more questions (reminder, there’s a live feed here) 12.59pm GMT12:59 Has the introduction of deeper negative interest rates (0.75%) restricted the SNB’s room for maneuver? Quite the opposite, Jordan replies 12.55pm GMT12:55 What does the drop in oil prices mean for Switzerland? It’s positive for the Swiss economy, Jordan says. 12.55pm GMT12:55 *JORDAN SEES RISKS OF 2015 NEG. INFLATION STAYING LONGER 12.54pm GMT12:54 Asked about deflation, Jordan says that the risk is still there, but is confident that Switzerland will reach price stability over time. He doesn’t expect Switzerland to enter a deflationary spiral. 12.50pm GMT12:50 What does negative interest rates mean for small savers? Jordan says he doubts that banks will introduce negative rates for small savers. But it’s different for big investors, who the SNB wants to discourage from holding large deposits in swiss francs. 12.49pm GMT12:49 Russian crisis cited The cap (which was introduced in 2011) was the right policy at the time, but conditions have changed, Jordan says. He cites various “international developments”, mentioning the Russia crisis and the changes in the euro-dollar rate. [The tumble in the Russian rouble has driven some money out of Moscow into Switzerland, while the euro has been weakening as investors anticipate a new QE stimulus package] Updated at 12.56pm GMT 12.47pm GMT12:47 12.44pm GMT12:44 Has the SNB switched its attention to the Swiss franc’s value against the dollar, now the euro cap has been abandoned? No, we are looking at the overall exchange rate against all currencies, now we have a full floating rate again, Jordan replies. He reiterates that the SNB will intervene in the FX markets if required. 12.40pm GMT12:40 We have gone from having a very rigid system to one where we have more scope for action, Jordan explains. 12.39pm GMT12:39 Jordan denies that the SNB has gone against its mandate of delivering price stability in the Swiss economy. 12.38pm GMT12:38 Jordan declines to comment on whether the SNB spoke to other central banks about the decision to remove the currency cap on the euro. He also won’t comment on whether the SNB is intervening in the markets (in today’s statement, it says it will ‘remain active’ where necessary). Updated at 12.44pm GMT 12.36pm GMT12:36 Jordan adds that there is always volatility in such situations before a currency rate returns to a more normal level. 12.35pm GMT12:35 SNB chief expects franc to return to more normal rate soon What does the sharp appreciation in the value of the Swiss currency mean for the economy, and for jobs? Jordan replies that today’s decision came as a surprise to the markets. Markets tend to overshoot in these situations. There has been a huge overappreciation in the Swiss franc today, Jordan explains. He expects it to return to a more normal rate in due course. Jordan explains that the cap had calmed the economy and helped companies exposed to the FX rate to plan for the future. (via my colleague Julia Kollewe who is translating the Q&A for me) Updated at 12.35pm GMT 12.30pm GMT12:30 Swiss central bank chief denies panicking Under questioning from journalists, SNB chief Thomas Jordan is defending abandoning the euro ceiling on the swiss franc. He denies that it was a “panic reaction”, insisting that the Bank had taken a “well-thought out” decision. SNB's Jordan "we had to surprise markets by dropping the #EURCHF floor" - actually you shocked the markets. Jordan also says that imposing negative interest rates of 0.75% on large bank deposits is a “strong instrument” that will “increasingly show its effect”. 12.23pm GMT12:23 12.21pm GMT12:21 Alas the webfeed from the SNB press conference keeps crashing - perhaps a sign of huge interest. Governor Thomas Jordan has just read out the official statement (see previous post) in German. Now onto questions.... 12.09pm GMT12:09 The Swiss central bank will be giving a press conference shortly to explain today’s move. It is being streamed live here. Its statement, which is online here, explains why the cap was abandoned, and leaves the door open to future intervention if needed. The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets. This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation. Recently, divergences between the monetary policies of the major currency areas have increased significantly – a trend that is likely to become even more pronounced. The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified. The SNB is lowering interest rates significantly to ensure that the discontinuation of the minimum exchange rate does not lead to an inappropriate tightening of monetary conditions. The SNB will continue to take account of the exchange rate situation in formulating its monetary policy in future. If necessary, it will therefore remain active in the foreign exchange market to influence monetary conditions. 11.51am GMT11:51 Nervous investors are pouring money into gold, as the shock move by Switzerland to abandon its franc ceiling shakes the markets. The price of billion has jumped by 2% to a four month high, at $1,260 per ounce, in a new search for safety. Shares in gold produce Randgold have jumped over 4%, to the top of the FTSE 100, as Nick Fletcher reports: Randgold and Fresnillo rise as gold and silver benefit from Swiss move 11.38am GMT11:38 Today’s market moves have major implications beyond Switzerland, City analyst Marc Ostwald points out: Some mortgage holders in Eastern Europe have taken out mortgages in Swiss francs; a rise in the franc means their repayments have just gone up. #SNB fall-out; Fin Min said Austria budget has "big problems", so thinking its banks with CEE CHF mortgage exposure have even bigger ones ! 11.37am GMT11:37 Swiss bank UBS has also gone public with its concerns: 11.28am GMT11:28 Shares in Swiss chocolate bunny producer Lindt are down 6%, as traders conclude that its exports will suffer: Did the SNB just ruin Easter? Lindt prices sure to surge as franc has risen by ~30%. 11.22am GMT11:22 M&G’s retail bond experts say it’s simply impossible to maintain a currency peg indefinitely at the “wrong” level (as Britain saw on Black Wednesday when the pound was driven out of the ERM): Lessons from financial history: economic fundamentals always triumph over pegs. #Swiss Updated at 11.22am GMT 11.11am GMT11:11 Switzerland’s stock market is now down 8.7%, on track for its biggest one-day fall since October 1987 (the Friday the 13th mini-crash). Biopharmaceuticals firm Actelion’s shares have tumbled almost 15%. 11.05am GMT11:05 Swatch CEO: Switzerland faces tsunami without franc cap The boss of watchmaker Swatch has blasted the decision to remove the ceiling on the Swiss franc as a ‘tsunami’. Reuters reports: Swatch Group chief executive Nick Hayek called the Swiss National Bank’s decision to discontinue the minimum exchange rate on the Swiss franc a “tsunami” for the Alpine country and its economy. “Words fail me! Jordan is not only the name of the SNB president, but also of a river… and today’s SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country,” Hayek said in an emailed statement on Thursday. Oh those poor Swiss watchmakers.Reuters reporting that Swatch's CEO has described the SNB's shock move as a "tsunami" for export industry 10.55am GMT10:55 Swiss exporters tumble The Swiss stock market has plunged by 7% since the news broke. Exporters of luxury goods are leading the selloff. A more valuable Swiss franc is going to make their goods more expensive for foreign consumers. Shares in Richemont are down by 11%. It owns Dunhill, Cartier, Jaeger-LeCoultre and Montblanc brands -- all popular with the wealthy. The #Swiss Market Index Index drop is the biggest since October 1989: $114 BILLION of value has vanished... pic.twitter.com/Er6fI8Z4W5 10.53am GMT10:53 The Swiss have given up fighting a losing battle against the euro, says Simon Smith, chief economist at FxPro, ahead of a new quantitative easing programme from the European Central Bank. Smith adds: Clearly, the SNB felt that they were giving with one hand and taking away with the other by moving rates further into negative territory. But at this point in time, the SNB has broken a dam wall and the waters have flooded out. It will take time to see what lies beneath. 10.43am GMT10:43 By slashing interest rates deeper into negative territory (-0.75%), the Swiss central bank is hoping to deter investors using the franc as a safe haven. JP Morgan Asset Management Global Market Strategist Alex Dryden explains: This move wasn’t completely unexpected; it was becoming increasingly painful for the SNB to maintain this support for the Swiss currency cap. That said, the additional interest rate cut is a surprise and it will now mean investors will have to pay around 80 basis points to hold Swiss currency on deposit for 3 months. The SNB hopes that this will dissuade investors from viewing the Swiss Franc as a safe-haven and therefore avoid a negative shock for the Swiss economy. 10.37am GMT10:37 Kathleen Brooks, research director at Forex.com, suggests the Swiss central bank may have concluded that the ECB will launch a major stimulus programme next week, bigger than expected. She says: The SNB has close ties with the ECB. This move could be a sign that the SNB thinks (or knows) that the ECB will embark on QE at next week’s meeting, and the size of its QE programme could be bigger than the market expects – perhaps $1 trillion, not the $500bn that was “leaked” last week. If the SNB is so spooked it is disbanding with a policy that it has held dear since 2011, then the rest of the market may want to reconsider their expectations for next week’s ECB meeting. On the other hand, though, the SNB may have decided that keeping the franc artificially weak at CHF1.20 to the euro was “too costly, so they needed to act now” 10.32am GMT10:32 Steve Collins, global head of dealing at London & Capital Asset Management, also predicts shockwaves in the markets: This is a HUGE event that will create large dislocations #swiss 10.27am GMT10:27 This chart shows how the Swiss franc surged against the euro at the moment the Swiss central bank abandoned its attempts to keep it weak: CHFing heck. This is bonkers pic.twitter.com/3P3z5pX1pS 10.25am GMT10:25 Kit Juckes, currency strategist at Société Générale, is discussing the end of the Swiss franc/euro cap on Bloomberg now. He says the Swiss National Bank has switched to a new policy, “Plan B”, rather than capitulating. The SNB has decided that it is better to have volatility, and a very strong Swiss franc for a period, and then get back to a less strong franc in due course, he explains. Juckes points out that the SNB was one of the biggest buyers of the euro every day, as it tried to keep the franc artificially weak. That’s why the euro has fallen against the US dollar since the news broke (currently down 0.5% at $1.174). 10.18am GMT10:18 A stronger Swiss franc is going to hurt Switzerland’s tourism industry, points out IG analyst Brenda Kelly: So that rules out any skiing plans in Switzerland. 10.17am GMT10:17 Technical analyst Nicola Duke warns that the 28% surge in the Swiss franc against the euro will cause serious losses to some: I can see some retail FX brokers going out of business on today's move in $EURCHF Updated at 10.17am GMT 10.12am GMT10:12 Can you buck the market? Swiss National Bank has decided to stop intervening to hold down the franc, but cut interest rates to minus 0.75%. 9.59am GMT09:59 Expert: Swiss have "capitulated" as eurozone QE approaches. The Swiss National Bank has “thrown in the towel” and given up trying to weaken its currency in the face of outright deflation and a falling European single currency, explains Jeremy Cook of World First: “This is a complete capitulation. The pressure and belief that the European Central Bank will launch a bond buying program in the coming week - further devaluing its currency - has been enough to make the Swiss National Bank step out of the way. “Nobody wins when you stand in the way of a freight train, except for the train.” So, another sign that the ECB is likely to launch a new quantitative easing programme next week. 9.56am GMT09:56 European stock markets wobblde after the Swiss central bank shocked investors by allowing the Swiss franc to trade freely against the euro. The FTSE 100 dropped 60 points, having been up as much as 80 points in early trading. 9.50am GMT09:50 Euro plunges as Swiss central bank abandons cap Wow. The Swiss Central Bank has just slashed interest rates deeper into negative territory, and given up trying to stop its currency appreciating against the euro. In a shock move, the Swiss National Bank cut rates to minus 0.75%, from -0.25% before . It also dropped the cap which prevents the franc rising above CHF1.20 to the euro, a hugely unexpected move. Here’s the statement Pressure had been growing on the cap for weeks, as the euro has weakened on the currency markets as traders anticipate QE. Now SNB ready for ECB QE The euro has promptly plunged by almost 30% against the Swiss franc, to CHF0.87. That shows how much pressure had been building on the cap, which was means to help Swiss exporters remain competitive. Shares on the Swiss stock market have fallen sharply. And the euro has tumbled to a new nine-year low against the US dollar, at $1.1685. Sharp move lower in the #EURUSD this morning http://t.co/CUadnG1FLc pic.twitter.com/RmmWIUhVpi Updated at 9.51am GMT 9.35am GMT09:35 Income inequality still a threat A year ago, Davos attendees said income disparity was the top threat to world stability, as years of lobbying by the likes of Occupy Wall Street hit home. Today, though, the issue doesn’t appear in the top 10. The Ukraine conflict, and the turmoil in the Middle East, have elbowed it out. This chart shows how the risks identified by experts attending Davos have changed over the last eight years: WEF acknowledges that income disparity within countries is driving social fragility: Among the members of the Organisation for Economic Co-operation and Development (OECD), the average income of the richest 10% has now grown to about nine times that of the poorest 10%. In other countries, the ratio is even higher: for example, more than 25 times in Mexico. WEF also warns that Income inequality is widening quickly in large emerging markets: The People’s Republic of China has seen its Gini Index rise from about 30 in the 1980s to over 50 in 2010.4,5 While extreme poverty (less than $1.25 per day) was reduced from afflicting over 50% of the world’s population in 1990 to 22% in 2010, the same reduction did not take place in those earning under $3 per day.6 The story is of people escaping extreme poverty, yet remaining poor. Widening income inequality is associated with lower and more fragile economic growth, which reduces the scope to meet rising social expectations in emerging markets. Updated at 9.35am GMT 9.23am GMT09:23 This is the first time since 2008 that health-related risks have appeared high in the list of WEF’s Global Risks. That’s due to the Ebola crisis that struck parts of Africa last year. 9.10am GMT09:10 WEF’s report is online here. 9.01am GMT09:01 Interstate conflict is "biggest risk" facing the world International conflict is the biggest threat to world stability over the next decade, according to an influential survey of almost 900 experts just released. The World Economic Forum is warning this morning that geopolitical risks have rocketed back to the top of the agenda, two decades after the end of the Cold War. The Crimea crisis is a “forceful reminder” of the impact that interstate conflicts can have on a region, WEF says, while the rise of ISIS shows the dangers of state collapse and the failure of national governance back into public consciousness. This means interstate conflict is the biggest threat to the world economy, in terms of likelyhood, according to WEF’s latest Global Risks report which has just been released. The report comes ahead of the annual meeting in Davos next week. Other major threats include extreme weather events (second on the list), failure of national governance systems (3), state collapse or crisis (4) and high structural unemployment or underemployment (5). Margareta Drzeniek-Hanouz, Lead Economist, World Economic Forum, says: “Twenty-five years after the fall of the Berlin Wall, the world again faces the risk of major conflict between states,” “However, today the means to wage such conflict, whether through cyberattack, competition for resources or sanctions and other economic tools, is broader than ever. Addressing all these possible triggers and seeking to return the world to a path of partnership, rather than competition, should be a priority for leaders as we enter 2015.” WEF is presenting the report in London now, so I’ll watch out for more details.... Updated at 9.12am GMT 8.47am GMT08:47 Energy secretary: UK oil industry is still strong The UK government will be meeting with oil industry today, as workers face the threat of redundancy following the tumble in the price of crude oil. My colleague Frances Perraudin reports: Speaking on BBC Radio 4’s Today programme, energy and climate change secretary Ed Davey said he would work with the main North Sea oil and gas producers to protect jobs as oil prices fall. The Liberal Democrat MP said that BP and Shell were strong companies and that the government were implementing recommendations laid out in Sir Ian Wood’s review of the oil industry, which called for a huge shake-up of regulation in the sector. Davey said he will be meeting with the oil and gas authority later today “to think about how we manage these challenges in the decades ahead.” “We’re taking a strategic view to make sure that we’re not wasting money,” he said. “We’re much more cost competitive than we were. There have been problems in the north sea, you’re absolutely right. We’ve seen production efficiency go down, we’ve seen exploration rates go down.” Davey stressed that people should not panic about short term falls in the price of oil: “Of course there a problems for a number of oil and gas companies as a result of the low oil price, but we also have to think strategically, because energy is a long term game. I talked about importance of energy security, actually I’m talking energy security for the UK in the 2030s and 2040s, even as we green our economy and reduce our dependence on oil and gas.” Staff at BP, though, are braced for heavy job cuts to be announced later today: BP to announce North Sea job cuts I understand BP expects oil price of $50 to $60 for 2 to 3 years, as I said on @BBCr4today Updated at 8.47am GMT 8.24am GMT08:24 Spain falls deeper into negative inflation Spanish consumer prices fell at a faster pace than expected last month, reinforcing concerns that the eurozone risks slipping into deflation. Spain’s harmonised CPI fell by 0.7% month-on-month in December, and was 1.1% lower than a year earlier. Core inflation (which removes volatile energy prices) was 0.0% year-on-year, showing that oil cannot take all the blame. 8.13am GMT08:13 FTSE 100 jumps 84 points in early trading The London stock market is open, and shares are bouncing back from Wednesday’s selloff. The FTSE 100 has jumped by 84 points, or 1.3%, to 6472, recovering more than half of yesterday’s losses. Mining giants and oil companies are leading the risers, suggesting that the recent shake-out in the commodities space may be over (for the moment....) Other European markets are also higher: Strong European open; #DAX +1.3% #FTSE +1.3% #CAC +1.4% Updated at 8.15am GMT 8.10am GMT08:10 There was some surprise news from India earlier today. The central bank cut interest rates, from 8% to 7.75%, in an attempt to stimulate growth. Bloomberg has the details. 8.04am GMT08:04 Here’s the details of the recovery in the copper price, from Reuters: London copper climbed on Thursday on a mix of bargain-hunting and short covering, a day after its biggest slide in more than three years, but traders said selling would cap rallies even as large-scale buyers were lying in wait at lower levels. Copper took a bruising after a bearish World Bank report on global growth, which would have been even darker had it not been for a 60% drop in oil prices, although that in turn is also eroding the price of commodities, said analyst Mark Keenan of Societe Generale in Singapore. “Yesterday’s move was very big - it was compounded by speculative selling, by Chinese selling, by option activity,” he said. “We are still bearish copper.” Three-month copper on the London Metal Exchange climbed by 1.5 percent to $5,628.50 a tonne by 0738 GMT, after careening down 5.3 percent on Wednesday. The price tumbled more than 8 percent at one point to $5,353.25 a tonne, which was the weakest since January 2009. And here’s some market trivia. Copper is known as “Doctor Copper – the only metal with a PhD in economics”, as its price movements are an uncannily accurate prediction of economic trends. Although it’s not infallible, as my colleague Debbie Carlson explains: Are we reading too much into #copper's losses regarding global recession fears? My piece for @GuardianUS http://t.co/bli6LRUvR8 8.02am GMT08:02 7.57am GMT07:57 The Agenda: Markets recover but remain tense Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. World stock markets are bouncing back today, after yesterday’s tumbles, but concerns over low growth, deflation and political crises continue to grip investors. Japan’s Nikkei has jumped back from a one-month low overnight, gaining 1.8%, boosted by signs that the commodities rout is taking a breather. China’s market has surged by over 3.5%. European markets are expected to recover too (yesterday, the FTSE 100 shed 153 points in a hefty selloff that wiped £8bn off the index). Market meltdown-Copper fall wipes £8bn from shares. FTSE 100 down 2.4% -losing £39.1bn last night http://t.co/WdGjkGBrDw @MailOnline The mood on the trading floors remains nervous, though, as Chris Weston of IG explains from Melbourne: Markets continue to grapple with falling inflation, spiralling commodities, crazy bond yields, political uncertainties and ultimately a market that feels central banks have no juice to meet their mandates. The copper price, that bellweather of the global economy, has jumped by 2.5%, after hitting a five year low on Wednesday. Traders are concluding that the recent selloff in copper may be overdone, even though the global economy is looking more fragile: As Chae Un Soo, a metals trader at Korea Exchange Bank Futures in Seoul, put it to Bloomberg: “The fundamentals aren’t good, but this fall was too much...People are buying on cheap prices.” Asian equity markets lifted overnight as copper prices recover some of yesterday’s heavy selling and US crude futures settle back above $48 Oil had recovered overnight, but it’s dipping again in early London trading. Brent crude is changing hands at $48.75, having hit $49.75 earlier. So we could be set for another volatile day. Also coming up today.... The World Economic Forum is releasing its list of Global Risks in 2015 this morning, ahead of the annual meeting in Davos next week. In Europe, we get Spanish consumer price inflation, German GDP for 2014 (9am GMT) and the latest eurozone trade data (10am GMT). And later we get the latest US Empire Manufacturing report. Plus the usual political tensions in Europe, with Greece in pre-election mode. I’ll be tracking all the main events through the day.... |