London Stock Exchange in merger talks with Deutsche Börse - as it happened

Graeme Wearden (until 2.30pm) and Nick Fletcher (n

from on 2016-02-23 17:43 (#14VE0)

Bank of England governor Mark Carney has told MPs that investors fear the pound will suffer fresh losses as the EU referendum approaches

5.43pm GMT

A slide in the oil price as Saudi Arabia seemed to rule out hopes of production cuts sent stock markets sharply lower again after Monday's rally.

Brent crude is currently nearly 4% lower at $33.32, while West Texas Intermediate is down almost 5%.

4.58pm GMT

Sterling has hit a new seven year low against the dollar of $1.4044, following Bank of England governor Mark Carney's comments suggesting UK interest rates could be cut.

The UK currency has also come under renewed pressure on the uncertainty over the forthcoming referendum on whether Britain should leave the European Union, which Carney also referred to.

4.06pm GMT

I think it's fair to say the #oil market didn't warm to that #Naimi speech...#Saudi #WTI #Brent #shale #Iran #OPEC pic.twitter.com/leTEbC39yQ

3.55pm GMT

Crude continues to weaken as Saudi oil minister Ali Al-Naimi suggested production cuts were not on the cards.

He told a conference in Houston that cutting production would not happen, but major producers would freeze output to help the market rebalance.

Oil prices turned lower after the Iranian oil minister's colourful description of the output freeze between Russia and Saudi Arabia as "ridiculous." Iran and its plans to ramp up output after the lifting of sanctions is proving a thorn in the side of other producing counties which appear to be reaching consensus that production should stay at current levels. Tensions are clearly rising in the cartel as the Saudi oil minister reposted that "not all the countries will freeze. The ones that count will."

3.39pm GMT

The day's confidence figures show how fragile sentiment is at the moment, says analyst Connor Campbell at Spreadex:

Whilst the [US] existing home sales figure actually saw a mild increase month-on-month, from 5.45 million to 5.47 million, more notable was the sharp decline in the CB consumer confidence number.

Coming in at 92.2 against the 97.4 last month the figure, like this morning's year-low German Ifo business climate data, highlights just how entrenched the market's current fears are, despite the sporadic surges that have taken the global indices to a variety of recent highs. There was to be no such surge this afternoon, however, the Dow Jones dropping over 100 in light of that literal knock to the index's confidence.

3.24pm GMT

Back with the London Stock Exchange, and analysts at Numis point to a number of problems facing its proposed merger with Deutsche Birse:

This represents the third time the LSE and DB have attempted to merge, first in 2000 then in 2004. Although no details were given, a merger is expected to provide enhanced growth, significant customer benefits as well as substantial revenue and cost synergies.

However, we see a number of challenges in completing this deal, namely:

3.16pm GMT

The Richmond manufacturing index has also disappointed, coming in at -4 compared to the 2 which analysts had been looking for.

However US existing home sales have beaten expectations, up 0.4% in January compared to a forecast fall of 2.5%.

3.14pm GMT

USA Consumer Confidence announcement - Actual: 92.2, Expected: 97.0 pic.twitter.com/AggAe2BV5H

3.08pm GMT

US consumer confidence figures for February have come in much lower than expected, as the recent market volatility outweighs the benefits of cheaper oil.

The index fell from 97.8 in January - itself revised down from 98.1 - to 92.2. Analysts had been expecting a figure of 97.

Despite relatively healthy numbers over recent months, onlookers will be concerned with the worrying dip in this month's consumer confidence data.

It's surprising that US shoppers have kept their wallets in their pockets for another month, especially considering that low gas prices continue to help them save.

RT @Riccanomix Big miss on consumer confidence in February, probably due to market turmoil. (92.2 vs. 97.8 prior) pic.twitter.com/UFdVAT3neO

2.58pm GMT

@LSEGplc + @DeutscheBoerse is Chicago's nightmare scenario: @LCH_Clearnet + @EurexGroup =creation of European intrestrate+OTC clearing giant

2.50pm GMT

Meanwhile US stock markets have opened lower, in line with the dips on European exchanges.

The Dow Jones Industrial Average is down 40 points or 0.2% after another fall in oil prices - West Texas Intermediate is around 2% lower after a report Iran's oil minister called the proposed output freeze ridiculous. At the open the S&P 500 is 0.3% lower and Nasdaq down 0.4%, ahead of the latest US consumer confidence figures.

2.38pm GMT

It was not always so friendly between the LSE and Deutsche Birse:

Ah deja vu. And here's the note accidentally sent by LSE in 2000. Blame "german intransigence" if merger aborted. pic.twitter.com/lLq15hsWA7

2.31pm GMT

Here's our first take on the LSE-Deutsche Birse merger plan:

The London Stock Exchange is in talks to merge with Germany's Deutsche Birse in a deal that would seal an alliance first discussed at the turn of the millennium.

The LSE confirmed on Tuesday it was in detailed discussions with its German rival about an all-share merger. Under the proposed structure, Deutsche Birse shareholders would own 54.4% of the combined company and LSE shareholders would hold 45.6%.

2.22pm GMT

David Cheetham of City trading firm XTB.com says a merger between the LSE and Deutsche Borse would create one of the world's biggest financial trading platforms.

"Shares in London Stock Exchange Group have soared by over 17% in the past hour as news that they're in talks with Deutsche Boerse have been confirmed. If the deal were to go ahead it would create a clear market leader for European and one of the largest exchanges in the world for trading and risk managing derivatives.

The timing of this development appears coincidental as the possibility of a Brexit has become increased in recent days now that a referendum date has been set and Boris has joined the Out campaign."

2.18pm GMT

The news that Britain's stock exchange could soon merge with its German rival has startled the City, especially given the upcoming EU vote.

Mike van Dulken, head of research at Accendo Markets, tweets:

Interesting timing for #LSE #Deutsche Boerse merger talks given how close #Brexit referendum is

1.56pm GMT

It's official! The London Stock Exchange has just confirmed that it is talking to Deutsche Birse about a merger deal.

It says:

Further to the recent movement in LSE's share price, the Board of LSE and the Management Board of Deutsche Birse confirm that they are in detailed discussions about a potential merger of equals of the two businesses.

The combination of LSE and Deutsche Boerse's complementary growth strategies, products, services and geographic footprint would be expected to deliver an enhanced ability to provide a full service offering to customers on a global basis.

1.41pm GMT

Deutsche Birse shares have also jumped, by around 3%, following the reports of merger talks with Britain's LSE.

And Euronext, another stock market operator, has seen its shares rally by 4%. Investors may be anticipating a bidding war.

Deutsche Boerse, LSE in merger talks - sources (via @Reuters) pic.twitter.com/sbdCv3q1eN

1.21pm GMT

BREAKING: Takeover speculation has just driven shares in the London Stock Exchange up by 9%, to the top of the FTSE 100 leaderboard.

1.07pm GMT

Analysts at Scotia Bank have predicted that the UK pound could slump to just $1.30 if the Out campaign win June's vote.

That would be its lowest level in around 30 years, worse than the selloff after the 2008 financial crisis.

Brexit vote would cut UK growth to zero this yr, to $1.30 & hit assets. But no bloodbath says Alan Clarke, Scotia pic.twitter.com/Fi5JJa7lkI

12.32pm GMT

Sterling is dropping back towards the seven year low it struck on Monday.

The pound has lost half a cent against the US dollar, dipping below the $1.41 mark. Yesterday, it weakened to $1.4057, before a late revival.

Sterling has remained vulnerable after falling nearly 2% yesterday - its biggest one day drop in almost six years - amidst fears that Britain may leave the European Union.

12.14pm GMT

The Treasury Committee session is now over, and Mark Carney and colleagues have been released back into the wild.

But if you want more EU referendum action, check out our Politics Live blog.

12.00pm GMT

Guardian readers have known for a while that the Bank of England was working on contingency plans for the EU referendum.

Back in May 2015, the Bank of England accidentally emailed us the details of Project Bookend, including how to deny it existed. #oops

The email indicates that a small group of senior staff are to examine the effect of a Brexit under the authority of Sir Jon Cunliffe, who as deputy director for financial stability has responsibility for monitoring the risk of another market crash.

Cunliffe also sits on the board of the City regulator, the Prudential Regulatory Authority.

11.52am GMT

The Bank of England is engaged in contingency planning for the EU referendum, Mark Carney tells the Treasury committee.

He also reveals that the Prudential Regulation Authority is keeping abreast of the contingency plans that UK banks are making ahead of the June 23 vote.

Mark Carney says BofE has a done "contingency planning" in case there is a Brexit

11.48am GMT

Rachel Reeves MP asks Mark Carney whether he expects the recent falls in sterling to continue.

The governor reiterates that investors have been buying downside protection to protect themselves against falls against the pound, especially against the US dollar [rather than the euro, because it could also suffer if Britain leaves the EU].

It is safe to say that an element of referendum premium has come into sterling.

11.42am GMT

Rachel Reeves MP reminds Carney that the latest Inflation Report states that interest rates are likely to rise, not fall. How can he can so confident?

Mark Carney gives a rather dovish answer, says the Bank expects interest rates to rise, gradually, over the forecast horizon.

Fascinating. At TSC Rachel Reeves asks Carney whether he still thinks next move will be up rather than down. He stonewalls. Big shift... 1/2

11.38am GMT

Mark Carney moves swiftly to crush speculation that the Bank of England could hit UK banks with negative interest rates.

We have absolutely no intention, no interest, in doing that [imposing negative rates].

NEVER BELIEVE ANYTHING UNTIL IT IS OFFICIALLY DENIED! Jim Hacker https://t.co/RpNdCAUig5

11.36am GMT

Can you explain the impact of negative interest rates on banks in simple terms, Steve Baker asks?

MPC member Gertjan Vlieghe outlines how banks have assets, which are loans, and liabilities, which are deposits.

11.27am GMT

Steve Baker MP asks what the distributional impact of negative interest rates would be.

It's too early to say, replies deputy governor Minouche Shafik. Central banks in several areas, including Switzerland, Denmark, Japan and the eurozone, now charge banks to leave money with them.

11.21am GMT

Mark Carney also insists that the Bank could launch fresh stimulus measures. It could cut interest rates closer to zero, from 0.5% today, or buy more assets though QE.

11.20am GMT

Martin Weale says the Bank of England has more tools in the toolbox to stimulate the UK economy if needed.

That could include fresh asset purchases though its QE programme [which the Bank has used to buy 375bn of UK government debt].

11.16am GMT

Jacob Rees-Mogg MP asks whether the recent fall in bank share prices reflects the macro-economic environment. Or something else?

Mark Carney says it is primarily due to the macro picture. He cites 'mildly disappointing' data and uncertainty about the policy stance in emerging and advanced economies.

11.07am GMT

Dr Gertjan Vlieghe, a member of the Monetary Policy Committee, now warns MPs that the uncertainty over the In-Out EU referendum could hurt the UK economy.

We think the exchange rate is falling because of increased uncertainty about what's going to happen in the period leading up to, or the period following, the referendum.

It is possible at some point that increased uncertainty from foreign exchange investors also ends up manifesting itself in increased uncertainty by households and businesses which may, or may not, delay or reduce their spending.

Jan Vlieghe gives textbook 'source of the shock' account of why fall in isn't necessarily net stimulative. Quite right.

10.56am GMT

Back to the pound.... and Martin Weale says the recent fall in sterling should push inflation up (as it makes imports more expensive)

Mark Carney says he agrees, adding that the recent fall in the pound is partly due to the EU referendum [reminder, it hit a seven year low on Monday].

BoE Carney "Recent declines in GBP have been influenced by the up coming #Brexit vote"

10.51am GMT

The committee is keen to find out whether the Bank of England will make a profit or a loss on its bond-buying quantitative easing programme.

After all, the richest households have certainly benefitted, because QE drives up asset prices. And we know who holds them.....

10.47am GMT

Tyrie then turns to Britain's banks - is Carney confident that they are robust enough to rise out another crisis?

He points out that Sir John Vickers, who conducted a major inquiry into the UK financial sector after the 2008 crisis, has warned that the banks haven't gone far enough. What's your view, governor?

Since the start of the year bank stocks have been under pressure. There are a variety of causes of that but what is not a cause, what it does not indicate in my view is concerns about the resilience of the institutions.

"The fundamental concerns are about the returns of the institutions."

10.38am GMT

10.37am GMT

Andrew Tyrie does have one question on the EU referendum:

Q: Has the Bank modelled the impact on sterling if the Out campaign win, given what's been going on in the markets in recent days?

Carney in brick wall approach to #Brexit treating it as any other political event

Particularly, there has been a sharp increase in risk reversals - buying more downside protection against future falls in sterling around the referendum date as opposed to upside protection.

They have spiked to levels consistent with around the height of the Scottish referendum. And they've been particularly concentrated against cable...the sterling/dollar options market.

10.31am GMT

10.23am GMT

Andrew Tyrie, committee chairman, says he doesn't want to linger on the Brexit issue for long - as Carney is going to testify about it on 8 March.

10.22am GMT

10.21am GMT

Panic averted - the session is starting now...

10.13am GMT

The FT's Emily Cadman reports that Mark Carney is behind schedule....

Carney et al are running late at the TSC for anyone on the edge of their seats

10.11am GMT

Looks like there's a small delay with the web feed of Mark Carney's session at parliament (hurry up chaps!).

Come on Carney, there's only so many times you can hear "Treasury Committee, Thatcher Room, Tuesday 23rd February 2016. BEEEEEEEEEP"

10.01am GMT

The governor of the Bank of England, Mark Carney, is about to take his seat in the Thatcher Room at the Houses of Parliament.

He'll be quizzed by the Treasury committee about the Bank's latest inflation report, in which it slashed its UK growth forecasts and suggested interest rates may not rise this year.

9.46am GMT

Bloomberg economist Maxime Sbaihi is alarmed by the fall in German business confidence this month:

CHART: Ifo expectations dooown. Another worrying soft data in euro area. Red flag for recovery momentum. And #ECB. pic.twitter.com/FvDedVOZh4

9.37am GMT

The euro just hit a three-week low, losing 0.3% to $1.0993 against the US dollar.

The single currency is being dragged down by this morning's weak German business confidence report and the knock-on effect of Britain's EU referendum (as discussed earlier)

EURO FALLS TO 3-WEEK LOW VS DOLLAR, JUST BELOW $1.10 ... Brexit risk

9.22am GMT

Morale among Germany's business leaders has hit a one-year low, after falling at its fastest rate in over four years this month.

IFO, the Munich-based think tank, has reported that German corporate chiefs are much gloomier about future prospects, due to the slowdown in China and recent stock market volatility.

Usually boring Ifo is interesting for once. In February German business sentiment saw its sharpest drop since 2011 pic.twitter.com/qQkKh3lHZs

Global events have finally reached German companies' boardrooms.....

Expectations have taken another sharp hit from recent market turmoil, the adverse impact of low oil prices and renewed concerns about a slowing of the Chinese economy, dropping to 98.8 in February, from 102.3 in January.

#Germany's Ifo dive in Feb to 105.7, lowest since end-2014 as expectations fall off a cliff. https://t.co/PIaDCTSqtQ pic.twitter.com/iibi1g5Xy1

9.08am GMT

There's a lot of chatter that the Britain's EU referendum could spark a sterling crisis.

And that's because the pound (like the English cricket team) has a worrying history of occasionally collapsing under pressure.

The growing speculation that a Brexit may spillover to the Eurozone and threaten the future of the European Union has already encouraged bearish investors to attack the Euro across the global currency markets.

8.40am GMT

Shares in Standard Chartered are sliding sharply after it posted its first annual loss since 1989.

The bank has lost $1.5bn, and warned that it faces a "broad range of challenges and uncertainties....notably China and commodities".

Standard Chartered falls as much as 12% in London after unexpected loss https://t.co/LUVZrbLFW6 pic.twitter.com/TPXKpvRXlG

8.32am GMT

Over in Frankfurt, the German DAX has slid by 103 points, or over 1%.

Investors aren't impressed by the first fall in German exports since 2012.

8.23am GMT

European stock markets are sliding in early trading.

In London, the FTSE 100 has shed 48 points, or 0.8%. The blue-chip index is being dragged down by mining shares, after BHP Billiton reported that 4bn loss and warned that commodity prices will remain weak.

It doesn't help that the mining sector got its own unwelcome surprise; whilst it was expected that BHP Billiton would post its first half year loss in 16 years (coming in 4 billion in the red) analysts were still looking for a 31p dividend.

Instead BHP slashed its interim payout by 75% to 16p, whilst also sacrificing its progressive dividend policy in order to protect its credit rating. The company's subsequent 3.5% slide helped ensure its mining peers started the day at a loss, dragging the FTSE down by nearly 50 points after the bell.

8.13am GMT

Ralph Solveen, an economist at Commerzbank AG in Frankfurt, is concerned that German exports fell by 0.6% in the last quarter of 2015.

He told Bloomberg that:

"Investment was rather solid.

On the other hand, given the rather weak development of exports, you can see that there's a problem for the German economy."

8.04am GMT

Germany has suffered a fall in exports as the powerhouse European economy is hit by the global downturn.

Ouch! #Germany's exports drop in Q4 for first time since 2012. https://t.co/ynGDl0jnDN pic.twitter.com/gqb8mAS2Gn

GDP details show German Q4 15 growth was mainly driven by (public and private) consumption and construction. Good but is it sustainable?

7.56am GMT

7.48am GMT

Asian stock markets have fallen today, as the recent rally in shares subsided. And it could be a downbeat day in Europe too, with the main indices expected to fall.

Shares are being pulled down by the oil price, which has dipped by almost 2% this morning - erasing its own recent gains.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2%, after earlier rising 0.4% to its highest level since January 8. Japan's Nikkei erased morning gains to close down 0.4%.

Korea's Kospi, which started the day higher, and Australia's ASX 200, which opened little changed from Monday's three-week high close, both ended the day with losses.

Global rally struggled to extend into Asian hours, although gains in energy and material stocks capped the extent of losses. #DJ

Our European opening calls:$FTSE 5998 down 40
$DAX 9510 down 64
$CAC 4271 down 28$IBEX 8339 down 48$MIB 17407 down 97

7.33am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

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