Market rally continues but oil falls as Opec warns on excess supply - as it happened

Graeme Wearden (until 2.20) and Nick Fletcher

from on 2016-03-14 18:04 (#170QW)

All the day's economic and financial news, as traders brace for news from the Fed, the Bank of England and the BoJ this week

6.04pm GMT

Despite weak Chinese data over the weekend and a drop in the oil price, investors pushed stock markets higher ahead of this week's raft of central bank meetings.

The poor Chinese retail sales and industrial production figures only served to suggest there could be further stimulus measures from the country's central bank to boost its economy. So for the moment we are in bad news is good territory once more.

Today has marked a positively tranquil start for European markets, which have been grinding higher following on from the post-ECB rally seen last week. Tentative signs of weakness in the crude markets have sent jitters across the commodity space, with energy, precious metals and base metals all suffering on the day.

This decoupling of commodity prices and equity markets highlights a possible end to the direct linkage between crude and stocks which has dominated the trading landscape over recent months.

5.12pm GMT

The negative news for the oil price continues. After Opec said excess supply would be higher than previously thought this year and Iran dashed hopes of a co-ordinated cut in output, came reports that US crude stockpiles continued to rise.

Information firm Genscape said inventories at Cushing in Oklahoma, the delivery hub for US crude, rose by 585,854 barrels, according to Reuters.

4.21pm GMT

Oil continues to slide:

Rinse, repeat: #Oil prices fall sharply on oversupply concerns https://t.co/pm94QwGopk pic.twitter.com/n8e8iWKcDp

3.53pm GMT

Anyone waiting for the 'major announcement' from Bangladesh after cyber thieves stole $81m from the central bank's accounts.....will have to wait a little longer it appears.

To recap, the country's finance minister Abul Maal Abdul Muhith has heavily criticised Bangladesh Bank for not alerting the government to the theft earlier, and said a statement concerning the central bank would be made shortly.

3.11pm GMT

Opec's monthly oil report has kept its overall forecast for growth in crude demand unchanged at 1.25m barrels a day for 2016.

But it has cut its estimate for demand for the organisation's own crude, and says its forecast that supply from non-Opec producers will decline by 700,000 is becoming more uncertain. It said rival producers were still trying to maintain output despite low prices.

OPEC: Global Oil Demand Growth For 2016 Unchanged At Around 1.25mln BPD, To Average 94.23mln BPD

OPEC: 2016 Demand For OPEC Crude Is Expected At 31.5mln BPD, 0.1mln BPD Lower Than Last Month, And 1.8mln BPD Higher Than Last Year

OPEC: Crude Oil Futures Recovered In Feb Amid Numerous Positive Factors That Ignited Speculations That Oil Markets Would Soon Be Balanced

2.59pm GMT

Last week's European Central Bank announcement included - as well as a further rate cuts - the proposal to buy bonds through its QE programme issued by companies and not just financial institutions. Here is a note of what has been bought so far through the QE programme:

CHART: Assets purchased by #ECB under QE program, as of last week. Acceleration: next month. https://t.co/pr1PPZM5Xa pic.twitter.com/2nwbg289Ll

2.38pm GMT

Another big share mover today is GW Pharmaceuticals, a pharmaceutical business which develops cannabis-based treatments.

Its shares have more than doubled after news that its Epidiolex drug had significantly reduced seizures in patients with Dravet syndrome, a type of epilesy for which there are currently no treatments approved in the US, compared to a placebo.

2.20pm GMT

The Starwood news has also prompted thoughts of further consolidation in the sector, helping push up shares in UK-listed InterContinental Hotels by more than 4% to 28.45.

2.17pm GMT

Shares in hotel chain Starwood have soared in early New York trading, after a Chinese consortium launched an audacious $13bn takeover bid.

1.48pm GMT

The US stock market has just opened for the week, surprising any European who didn't realise America put its clocks forward yesterday (ahem).

The fact that markets only discount a 20% chance of a rate hike in April, and a 43% probability of a June move, highlights that this delicate balancing act will be no easy task.

1.35pm GMT

Germany's Berenberg has become the latest bank to predict turmoil if Britain votes to leave the European Union.

1.20pm GMT

Egypt's stock market has soared by 6% following the surprise devaluation of the Egyptian pound this morning.

"Inevitably there will be short-term pain as inflation rises, and the central bank will hike rates at its meeting on Thursday, probably in the order of 100 basis points.

But in time the devaluation will bring benefits to Egypt...and encourage foreign investors back to the country."

12.57pm GMT

A former top Irish banker appeared in a Dublin court today, to face charges relating to the collapse of one of the country's fallen lenders.

David Drumm, former CEO of Anglo Irish Bank, was arrested in the early hours of Monday after arriving at Dublin Airport. He had fought attempts to extradite him from the US for several months, before dropping his legal challenge in February.

The 49-year old was formally charged at a north Dublin police station after arriving at Dublin airport from Boston on Monday morning .

Drumm is accused of forgery, conspiracy and false accounting for loans in 2008 designed to rescue Anglo Irish Bank's share price. The Dublin-born banker denies any wrongdoing. The charges carry prison sentences ranging from a maximum of five years, up to an unlimited term of imprisonment.

After the rescue of Anglo Irish Bank, it was nationalised and renamed the Irish Banking Resolution Corporation.

The sharp practices at the bank during the Celtic boom, when it became the major financier for overstretched Irish developers and investors playing the global property market, caused national outrage in Ireland.

12.48pm GMT

European stock markets are all comfortably higher as City traders' minds turn to lunch.

Monday is likely to be the calm before the storm as a dearth of corporate and economic data will see traders scratching around for a sense of direction ahead of this week's UK budget and the FOMC's interest rate decision.

Confirmation that China is set to return to its policy of infrastructure spending and equity market support has been as good an excuse as any to see the bulls hold the early morning upper hand. Unsurprisingly, as the Asian beast looks to be awakening from its slumber, the mining sector has been the major beneficiary in the FTSE.

12.18pm GMT

Morgan Stanley have also scrapped its prediction that the US central bank would raise interest rates three times in 2016.

It now only expects a single hike from the Federal Reserve, in December, reflecting the US economy's weaker growth prospects.

In the US, our economists look for the Fed to delay its next rate hike until the December 2016 FOMC meeting - a big change from their previous expectation of three hikes this year. Our economists expect quarterly real GDP growth to stay below 2.0% through 2017.

11.38am GMT

Morgan Stanley has slashed their forecasts for global growth, and warned that the risks of a global downturn have increased.

In a new report, analyst at the Wall Street bank cautioned that:

Growth remains weak and the probability of a global recession has risen.....

Our economists are below consensus on global, emerging markets and developed markets growth and have raised their probability of a global recession within the next 12 months to 30%.

Central banks hold a declining number of less effective policy tools. Their latest foray, negative rates, may do more harm than good. How bad is it if central banks are powerless to boost the economy? Well, it clearly isn't good. But it also isn't as "unprecedented" (and therefore bad) as often portrayed.

Prior to 2010, central bank easing was usually unable to stop market declines (2002, 2008). And this makes sense; policy can't change the course of the underlying economy, it can only nudge it one way or the other.

10.31am GMT

Bloomberg agrees that this is a big week for monetary policy, but doesn't expect any interest rate hikes or cuts:

A big week for central banks @Bank_of_Japan_e, @federalreserve, @bankofengland all expected to keep rates unchanged pic.twitter.com/ZiuoPAV2zV

10.30am GMT

Here's more details of the surprisingly decent eurozone factory data, from Howard Archer.

There were widespread gains in output across sectors in January. In particular, capital goods output jumped 3.2% month-on-month while there were also healthy month-on-month gains for consumer non-durables (2.4%), durables goods (1.3%) and intermediate goods (0.9%).

Additionally,energy output rebounded 2.4% month-on-month in January after a dip of 3.4% month-on-month in December when the weather was unseasonably mild.

10.09am GMT

Boom! Eurozone factories have reported a surprisingly strong increase in factory output.

Industrial production across the single currency region surged by 2.1% month-on-month in January, and was 2.8% higher than a year ago.

Euro area industrial production +2.1% in Jan 16 over Dec 15, +2.8% over Jan 15 #Eurostat https://t.co/JOUNw9vRbr pic.twitter.com/I2BVCrfFn8

Boost to Q1 2016 #Eurozone #GDP growth prospects as #industrial #production spikes 2.1% m/m in January with strong gains in all sectors

Big beat of expectations. https://t.co/kJOMNJSMbu

Very strong European output (2.1% vs 1.7% fcst) with upward revision. Markets ignore it.

10.02am GMT

Over in Bangladesh, the government has lashed out at the central bank after cyber thieves pinched $81m from its accounts.

Finance Minister Abul Maal Abdul Muhith has promised a 'major announcement' shortly, and heavily criticised Bangladesh Bank for not alerting the government to the theft earlier.

"Bangladesh Bank has the audacity not to inform me.....

I am very unhappy about it. The handling of the matter by Bangladesh Bank is very incompetent."

Bangladesh's central bank is branded "incompetent" after hackers steal $101 million https://t.co/6oLoQnCiAq pic.twitter.com/7uBwkAXoud

9.46am GMT

Brent crude oil has fallen back below $40 per barrel this morning, after Iran sank hopes of a co-ordinated production cut.

Tamas Varga, oil analyst at London brokerage PVM Oil Associates, explains (via Reuters):

"Oil is down because Iran said they would only join the output freeze group once they reached production of 4 million barrels a day (bpd)."

Brent crude oil is $40 as a drop in U.S. rigs offsets Iran's supply plans https://t.co/hl3FqkmWV3 pic.twitter.com/BTKj5lMDmO

9.25am GMT

Egypt's central bank has just fired another shot in the currency wars, by devaluing its currency.

In an unexpected move, the Egyptian Central Bank cut the value of the Egyptian pound by around 13%. That means one US dollar is now worth 8.85 Egyptian pounds, up from 7.73 before.

Falling foreign currency inflows have been strangling businesses and threatening imports of basic necessities including medicines. A terrorist bomb that downed a Russian airliner caused a sharp drop in tourist numbers exacerbating already dollar shortages.

Egypt Central Bank to Adopt More Flexible Exchange Rate

@notayesmansecon Yep pic.twitter.com/U1t8803XDh

9.06am GMT

In Frankfurt, traders have responded to Angela Merkel's drubbing at the polls...by sending shares soaring.

The DAX index has jumped over the 10,000 point mark for the first time since mid-January, making it the best-performing stock market today.

During the campaign, CDU candidates in all three states had distanced themselves to varying degrees from their leader's strategy for the refugee crisis.

The politician who won in Baden-Wi1/4rttemberg's, Green state premier Winfried Kretschmann, had passionately defended the German chancellor's open-borders stance, stating in one day that he was "praying every day" for her wellbeing.

CHART: Yes, #Merkel lost a few feathers yesterday but remains very popular. Just look at her approval rate. #wahlen pic.twitter.com/dbpPt3vV3x

8.41am GMT

A breeze of optimism has pushed shares higher in London this morning.

The FTSE 100 has jumped by 44 points, or 0.75%, to 6184 points. That adds to the 103-points jump recorded on Friday, as traders (belatedly) welcomed the European Central Bank's latest stimulus package.

At odds with the old adage "no news is good news", it would appear it's more a case of "all news is good news" when it comes to China.

8.27am GMT

China's stock market has also enjoyed a solid day, with the Shanghai Composite index closing 1.7% higher.

The rally was sparked by hopes of fresh intervention from Beijing, after a Chinese regulator said it's too early to consider withdrawing government bailout funds from the market.

Chinese data dreary-industrial/retail miss over weekend,but hey,who cares when regulator says gonna support stocks!? pic.twitter.com/u07nEzUluQ

8.25am GMT

Shares have pushed higher across Asia as the rally that began in Europe last Friday continues.

"Investors seemed more confident that there is little chance of a March Fed hike this week, but they are anticipating some sort of guidance at the press conference."

8.02am GMT

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

After last week's fireworks from the European Central Bank, the world's other top central banks get their time in the spotlight this week.

Recent developments have suggested Prime Minister Abe is applying pressure for even more 'growth-friendly' interventions, especially as Consumer Confidence last week added to the list of dismal data.

BoJ Governor Kuroda has become quite skittish of late and his recent remarks that all was going well could presage a further bout of easing, albeit perhaps not this week.

More economists in a @WSJ survey see the Fed waiting until June to raise rates https://t.co/pnAibJWzpE pic.twitter.com/YgvAoAzZd9

Meanwhile, Governor Carney has in the past also been criticised for sending out false signals but he has been more consistent recently and, having resisted negative rates and more QE hitherto, is most unlikely to announce any changes on Thursday.

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