Oil price surges on cuts deal, as Trump tweet hits Lockheed Martin shares – as it happened

Graeme Wearden

from on 2016-12-12 17:18 (#24Y69)

Crude prices hit 17-month high as Opec and non-Opec members take steps to tackle worldwide oil glut

5.06pm GMT

European stock markets are now closed, so let's wrap up:

Financial markets are expecting higher inflation after a group of oil producers sealed their first joint production cut deal since 2001.

Dzisiejsze notowania ropy Brent na otwarciu na poziomie $54.33/bbl
Brent crude oil price at $54.33/bbl#notowaniaBrent pic.twitter.com/Y716x2mjsV

"The historic OPEC deal over the weekend has led to confidence in the market pushing up to a 5 % surge in Oil prices.

Euro Zone government bond yields have risen significantly reflecting among other things an expectation of higher inflation. As Saudi Arabia made greater than expected cuts and non-OPEC countries agreed cuts of 558,000 barrels a day, oil prices peaked at a 17 month high with WTI trading at $54.2 and U.S. Brent rising 4.4% at $56.73 per barrel, steadily clawing out from the slump - boosting oil stocks and Middle Eastern bonds among other assets.

The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.

One F-35 costs @ $100 million. Trump's tweet criticising costs hit Lockheed Martin shares by

European Closing Prices:#FTSE 6890.42 -0.92%#DAX 11190.21 -0.12%#CAC 4760.77 -0.07%#MIB 18370.32 +0.42%#IBEX 9186.4 +0.18%

5.02pm GMT

True to her word, Christine Lagarde has not stayed silent - instead, she's told judges in Paris that she will fight the allegations that she was negligent by allowing the a400m payment to Bernard Tapie in 2008.

Lagarde told the court that:

"I would like to show you that I am in no way guilty of negligence, but rather that I acted in good faith with only the public interest in mind."

"Was I negligent? No. And I will strive to convince you allegation by allegation."

4.29pm GMT

Rupert Murdoch's attempt to take over broadcaster Sky has taken an interesting twist, as my colleague Mark Sweney explains:

Advisers on the transaction between Sky and Fox, which is expected to lodge an official bid later this week, are pursuing a so-called "scheme of arrangement".

This tactic, which requires Sky to gain approval from investors representing 75% of the voting rights, will ensure that all shareholders against the deal are forced to sell once the threshold is reached.

4.22pm GMT

Here's the full statement from Lockheed Martin, defending the cost of its F-35 fighters following Donald Trump's criticism.

Full Lockheed Martin statement -- "We welcome the opportunity to address any questions the president-elect has" pic.twitter.com/pmsCuwtKXH

4.07pm GMT

My colleague Kim Willsher reports that Christine Lagarde isn't planning to keep silent during her trial:

The president of the court asked Lagarde how she intended to defend herself and if she wished to exercise her right to remain silent. "I have no intention of keeping silent, madame la presidente," Lagarde replied.

3.55pm GMT

Christine Lagarde's lawyer has urged the judges at the Plais de Justice to pause her trial for negligence during her time as French finance minister.

International Monetary Fund chief Christine Lagarde went on trial Monday in a Paris court, accused of negligence for allowing a huge handout to a well-connected businessman when she was in the French government.

Poised and serious, Lagarde took notes as the judge summed up the years-long legal saga that led to charges against her charges she contests. A well-respected pioneer for women in leadership, Lagarde faces up to a year in prison if convicted.

3.32pm GMT

Despite Lockheed Martin's problem, the S&P 500 index has hit a fresh record high in early trading on Wall Street.

The Dow Jones industrial average has also hit a new high, and at 19,776 is getting close to the 20,000 mark.

The Dow touches another record high. #WallStreet. https://t.co/50AuEFyHMJ pic.twitter.com/VZj0bMA09Z

3.13pm GMT

One F-35 costs @ $100 million. Trump's tweet criticising costs hit Lockheed Martin shares by

3.09pm GMT

A Lockheed Martin executive has responded to Donald Trump's attack, insisting that the company has taken steps to cut the costs of its F-35 programme.

Reuters has the details:

Since the beginning, we have invested hundreds of millions of dollars to reduce the price of the airplane by about 70% since its original costing, and we project it to be about 85 million dollars in the 2019 or 2020 time frame", said Jeff Babione, Lockheed Martin's F-35 programme leader.

A Trump tweet is rattling stock prices again: Lockheed Martin tumbles after Trump says costs "out of control" https://t.co/qM8RVhJsFK $LMT pic.twitter.com/t4FyExofe1

2.09pm GMT

The European Central Bank has never discussed flooding the eurozone with helicopter money.

That's according to ECB board member Benoi(R)t CAuri(C), who has just completed an online Q&A about monetary policy.

.@stanjourdan "Helicopter money" not a well defined concept but likely to blur the line with fiscal policy. Never discussed. /BC #askECB

. @rafaminos Deflation risks largely disappeared but continued stimulus needed. Hence extension by 9 months and 540bn euros /BC #askECB

.@saeedamenfx Pressure exists but banks also profit from lower funding costs and better credit quality /BC #AskECB pic.twitter.com/vxFgY1zogB

. @notayesmansecon Hear it didn't go so well. But ask @ECB_cricket /BC #askECB

1.48pm GMT

The president-elect has done it again.....

The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.

Lockheed Martin shares dropping 2% in pre-market action on the tweet, Boeing shares also dipping ahead of the open. $LMT $BA https://t.co/DTbDxvdep8

1.23pm GMT

The Russian rouble has leapt by 2%, after oil producers hammered out that deal to cut global output by 1.8m barrels per day.

One US dollar now buys just 61.2 ruble, the lowest since October 2015 - before fears over Russia's economy hammered the currency:

1.04pm GMT

Newsflash: Christine Lagarde has now arrived at the Paris courthouse where she'll be tried of allegations of negligence (as explained earlier).

Christine #Lagarde looking relaxed at her arrival in #court #Paris @Lagarde @business @BloombergTV pic.twitter.com/sRESACUQV3

12.18pm GMT

Officials representing Greece's creditors will head back to Athens tomorrow, in another attempt to complete the latest review of its bailout.

European Commission officials say they hope to complete the work soon:

#EC: Staff frm institutions 'll return 2 Athens on Tue 2 start work towards conclusion of staff-level agreem't as part of 2nd review #Greece

#EC: Given progress that has already been made, we trust that all partners will engage constructively to complete this work asap. #Greece

"The Greek expression is 'put water into wine'. It's not an expression I like, because I wouldn't like my wine watered down, but you know what I mean, to reach an honest compromise."

11.53am GMT

Bloomberg's Caroline Connan has tweeted from inside France's Cour de Justice, where the head of the IMF will face a special tribunal over the Tapie Affair today.

Inside the #Court chamber where @Lagarde is standing trial today in #Paris for alleged 'negligence' #Lagarde #Tapie @business @BloombergTV pic.twitter.com/486rCEylOi

Basically, that Lagarde didn't do enough to stop a payout to [businessman Bernard] Tapie.

She's accused of gross negligence in the use of public funds, a rarely used charge brought in cases where the evidence suggests the defendant didn't knowingly participate in activities to defraud the state.

11.36am GMT

Heads-up: The European Central Bank is holding an online Q&A in 90 minutes time (from 1pm GMT)

It's looking for questions on monetary policy, having just decided to extend its bond-buying stimulus programme until the end of 2017. You can post them on Twitter using the #AskECB hashtag.

See you at 14:00 CET today for our Twitter Q&A with Executive Board Member Benoi(R)t CAuri(C). Got a question on monetary policy? Use #AskECB pic.twitter.com/hkvzDv6jih

11.14am GMT

Italian bank shares are rallying this morning, on hopes that the country's new government can resolve the problem in its financial sector.

UBI Banca, the country's fifth largest lender, has jumped by over 4% while Unicredit and Banco Populare di Milano have both gained over 2.5%

Gentiloni's appointment is expected to mean the current Finance Minister, Padoan, stays in his post to focus on resolving the banking sector.

While Monte dei Paschi is teetering on the brink of a collapse, an interim technocratic government is more likely to take on the difficult political capital cost involved in plugging in the bank's capital gap, by bailing in retail shareholders, with the promise of some fiscal compensation after the next election.

10.34am GMT

America's borrowing costs have hit their highest level in around 18 months, as the yield on US Treasury bills rises.

That's partly due to the inflationary impact of the oil deal, and partly due to predictions that the Federal Reserve will raise interest rates on Wednesday.

10 yr UST's above 2.5%, back to mid 2015 levels! #Fed #FOMC #inflation pic.twitter.com/hPec07bOcc

10.11am GMT

Reuters' source at the Italian Treasury has given more details about how a state bailout of Monte dei Paschi might be handled:

Decree Would Be Necessary If State Must Intervene To Recapitalise Monte Dei Paschi - RTRS Source

State Intervention For Monte Dei Paschi Would Require Forced Conversion Of Bonds For Shares Italy - RTRS Source

Italian State Could Compensate Retail Bond Holders But Details Would Need To Be Negotiated With European Commission - RTRS Source

9.33am GMT

European government bonds are taking a bath this morning, amid fears that the deal to curb oil production will drive inflation higher.

Prices are falling across the board, which pushes up the yield (or interest rate) on sovereign debt.

French and German 10-year bond yields have hit their highest level since January https://t.co/NfrjHOTfPz pic.twitter.com/olxxRRu4OI

9.00am GMT

Reuters is reporting that Italy's government is prepared to recapitalise Monte dei Paschi if necessary - but still hopeful that private investors will stump up for the bank's a5bn cash call.

Here's the story:

Italy is ready to pump capital into Monte dei Paschi di Siena if the ailing bank fails to get the money it needs to remain in business from investors, a Treasury source said on Monday.

Italy's third-biggest bank is pressing ahead with a plan to raise a5bn ($5.3 billion) on the market this year,despite political uncertainty in the country after a constitutional referendum triggered a government crisis.

The share price of Monte Paschi rises 6% as its board looks for private capital and the Italy Treasury hints at state backing...

8.43am GMT

Over in Italy, shares in Monte dei Paschi (MPS) have jumped by 7.5% at the start of trading.

The move came as EU economics commissioner Pierre Moscovici declared that Italy can tackle its banking problems without creating a new crisis.

"There is not and there will not be a banking crisis in Italy, there will not be a European financial crisis coming from Italy.

"We have the capacity to deal with the situation and it will be dealt with from both in Italy and at the European level."

EU'S MOSCOVICI SAYS SEES NO THREAT OF ITALIAN BANKING CRISIS - Reuters. BMPS shares up 7.5% (on hopes it lasts another whole week?)

8.23am GMT

Shares in oil companies are jumping this morning as investors anticipate higher profits once the output cuts kick in.

Royal Dutch Shell have jumped by 3%, while BP are up 2%.

8.12am GMT

City experts agree that the deal agreed by Opec and non-Opec members are significant.

But some suspect that prices may not rise much higher, because America's shale industry has not made promised to make any cuts.

MS: Non-OPEC participation adds to bullish #Oil Sentiment. #Russia named to monitoring committee increasing the probability of compliance. pic.twitter.com/frQYYnTY1u

With 1.758 million barrels expected to be slashed out of the market, or about 2% of the global oil supply starting January 1, oil prices have more room to rally with Brent potentially crossing above $60 in the next couple of weeks.

The market's focus will then switch to compliance with the agreement, and U.S. shale producers who are not a part of the agreement. U.S. rig counts rose by 21 last week to 498, the biggest increase since mid-2015, and the questions now becomes how fast will US shale ramp up production and at what level is it possible to cap the current rally?

Saudi Arabia has shown a willingness to bring its oil production below the 10 million barrels a day mark. This is surely a sign that the country is serious about lowering the supply glut on the market.

Moreover, this also shows that they are willing to do more than the non-OPEC countries to push the price of oil higher. Traders are also cheering the news that Russia is also going to cut its oil production by 300K barrels a day by May 2017.

"There are too many moving parts for OPEC's new policy to be sustainable in the long term. The strategy is bound to overshoot, in our view, leading to lower prices in the second half of next year."

7.48am GMT

The oil price is surging this morning, after energy producers hammered out a historic deal to cut output over the weekend.

"I can tell you with absolute certainty that effective January 1, we're going to cut and cut substantially to be below the level that we have committed to on November 30."

Crude #oil jumps to the highest in 17 months as Saudis eye deeper cuts while Non-OPEC joins deal. https://t.co/gMkpeib0c3 pic.twitter.com/yVyG6pgPcH

7.35am GMT

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

Executives at Monte dei Paschi of Siena (MPS) were fighting on Sunday night to salvage a multibillion-euro rescue by private investors in a frantic attempt to prop up the bank.

In a statement released after a board meeting on Sunday, the world's oldest bank said it would forge ahead with a debt-for-equity swap offer for tens of thousands of retail investors. The offer still requires regulatory approval. If MPS manages to convince investors to go along with the plan, it would help it avoid a government bailout by Italy, which would have far-reaching economic and political consequences.

"Negligence is a non-intentional offence. I think we are all a bit negligent sometimes in our life. I have done my job as well as I could, within the limits of what I knew."

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