UK growth following Brexit vote revised up; Deutche and Credit Suisse fined billions – as it happened
Britain's economy was stronger than initially thought in the immediate aftermath of the EU referendum
Earlier:
- Deutsche and Credit Suisse to pay billions to US
- Italian government approved bank bailout
- Experts say Rome should have acted years ago
2.07pm GMT
With the markets closed, City traders are now scarpering to their homes (or the shops!) to begin the Christmas break. So in that spirit, I'm going to wrap up now.
I hope you all have an excellent Christmas break. We'll be back next week for the final push towards 2017.
ONS trims pre-ref growth, increases post-ref.
Q1: 0.3% (0.4)
Q2: 0.6%, (0.7)
Q3: 0.6% (0.5)
Treasury "project fear' f/casts now a shambles.
"Today marks an important day for Monte dei Paschi, a day that sees it turn a corner and able to reassure its depositors."
Related: Deutsche Bank and Credit Suisse agree multibillion-dollar settlements with US
1.13pm GMT
The London stock market has just closed for the Christmas break, after a very dull session.
The blue-chip FTSE 100 index gained a mere 4 points to finish at 7,068. That's a fairly muted reaction to the news that Britain's economy performed better that expected in the last quarter, and that the Italian banking crisis is being resolved.
The lack of volumes associated with the holiday season can often bring the potential for significant volatility, yet in fact we have seen quite the opposite with the post-Trump romp largely brushed aside.
With US markets having hit new all-time highs and European markets also enjoying a substantial rally over the past month, there is little complain about this year. However, with the US economy is rude health, the US stock markets reaching new territory, Donald Trump will have a tough time trying to improve on the current state of play.
12.12pm GMT
Looking away from the UK economy, the European Central Bank has reported that wealth inequality across the eurozone has risen since the eurozone crisis began.
A new ECB survey has found that average net wealth across the euro area shrank by 10% between 2010 and 2014, to a223,300. This is primarily due to a sharp fall in house prices in many countries, as austerity gripped the euro area.
The Gini coefficient, a frequently used indicator of overall wealth inequality, edged up to 68.5 percent from 68.0, which is within the margin of measurement error. A value of 0 corresponds to complete equality, while 100 percent reflects maximum inequality - one household owning all wealth.
11.04am GMT
Martin Beck, senior economic advisor to the EY ITEM Club, is concerned that UK households will feel a squeeze next year, which could hold back growth.
Here's his comment on today's growth figures:
"Q3's Quarterly National Accounts brought some unexpected pre-Christmas cheer with Q3 GDP growth revised up from 0.5% to 0.6%.
"Consumer spending remained the key driver of growth in Q3, but the first cut of the income data raised further question marks about how long this can continue. Real household income dropped sharply in Q3, taking the annual growth rate to just 0.3%, the weakest outturn for two years.
10.56am GMT
If you dig into the meat of today's GDP report, there are reasons to worry -- even though the UK's growth rate was revised up to a punchy 0.6%.
Household disposable income, for example, dropped by 0.6% during the quarter; the biggest drop in almost three years. And the widening current account deficit (see 10.10am) is another concern.
Very strong performance in the services sector, the sharpest rise in employee compensation in 3 years and outperformance in construction and industrial production are then firmly offset by very weak figures in household disposable income, continuing declines in business investment and a widening of the current account deficit.
The diverging performance of multiple sectors of the economy simply mirrors the uncertainty that Brexit prospects are imposing on the UK outlook, with pockets of robust growth continuing to be frustrated by much bigger questions relating to Britain's future.
10.48am GMT
The UK government has warned that Britain's economy faces challenges, despite growing faster than thought in the last quarter.
A Treasury spokesperson doesn't actually mention the Brexit negotiations, but I think we know what they're hinting at. Here's the official response:
"The fundamentals of the UK economy are strong, but there remain challenges ahead.
The Chancellor set out, in the Autumn Statement, his plan to support a resilient economy that works for everyone by driving productivity and supporting working people, while maintaining fiscal discipline."
10.41am GMT
Today's report into the UK economy has good news for workers; compensation paid to employees rose by 4.5% in Q3. That's the biggest rise since 2013, suggesting robust pay growth over the summer.
But..... business investment only rose by 0.4% in the quarter (revised down from 0.9%), which means it was 2.2% LOWER than a year earlier.
10.10am GMT
Worryingly, Britain's current-account deficit has widened in the last quarter, as the country continues to import much more than it exports.
The difference between money flowing into the UK, and out, jumped to 25.5bn in July-September.
UK current account deficit widens to 5.2% of GDP in Q3, despite the fall in the pound. ONS release: https://t.co/B9zloX0zOV pic.twitter.com/O1EQYgHhAR
Exports of goods decreased by 5.1% in Quarter 3 2016, due mainly to a decrease in exports of aircraft, chemicals and unspecified goods.
9.48am GMT
It's not all good news, though - the ONS has revised down its estimate of UK growth in January-March to +0.3%, from +0.4%.
Growth in the second quarter of 2016 has also been trimmed, from 0.7% to 0.6%.
Summary of UK GDP. Post EU leave vote revised upwards. Pre EU leave vote revised downwards #GBP #BoE
UK Q3 GDP growth revised up on quarterly basis to 0.6% from 0.5% ... and down on annual basis to 2.2% from 2.3%.
9.39am GMT
NEWSFLASH: The UK economy grew faster than we thought in the three months after the Brexit referendum.
The Office for National Statistics has just revised up its estimate for UK GDP in the third quarter of 2016.
"Robust consumer demand continued to help the UK economy grow steadily in the third quarter of 2016. Growth was slightly stronger than first thought, though, due to greater output in the financial sector."
0.6% rise in #GDP in Q3, slightly stronger than the 0.5% previously estimated https://t.co/eAN42TsuLh
9.26am GMT
Today's flurry of banking news has spared us from the usual pre-Christmas slump.
Mike van Dulken of Accendo Markets explains what you need to know:
Firstly, overnight news that Monte dei Paschi is set to receive state aid as part of a a20bn package to keep the bank and troubled peers afloat is something of a relief, even if it does involve taxpayer funds and represents a big di(C)ji vu, having already been rescued in recent years. It allows savers to have a quieter break following an eventful week that saw the bank struggle and ultimately fail to raise funds privately. Now it's a question of what price institutional bondholders have to pay and what sort of compensation retail investors will be offered to ensure the bailout follows new EU rules preventing the bill for state aid being unfairly pinned on taxpayers and that the deal is more politically palatable. It also remains to be seen how long the process will take. Talk yesterday of it taking several months to complete is a worryingly long time, allowing unhappy investors to brood and savers take flight, potentially making the current situation even worse. Veloce!
News from the US overnight makes for a mixed bag with continental behemoths Deutsche Bank and Credit Suisse settling with the Department of Justice (DoJ) for pre-crisis mis-selling of mortgage backed securities (MBS). The former settled for $7bn (only half payable in cash) which is just half the $14bn challenge that shook markets this summer, something considered to be US retaliation for the EU's call on Apple to repay Ireland a13bn in back taxes. Credit Suisse settling for $5bn for similar allegations makes it two out of three.
9.03am GMT
City experts are relieved that Italy has finally taken the plunge and agreed to provide a20bn in emergency liquidity guarantees and capital injections for its banks.
There's also some exasperation that Rome didn't do this years ago (Britain, for example, pumped money into its financial sector back in 2008).
"Overall it's good news; finally we are heading toward a solution,"
"Italy is doing now what other countries have done many years ago to sustain their banking system."
"A nationalization should have been done five years ago.
"The bank lost time, money and credibility seeking to keep the patient on life support when he was in an irreversible coma."
Italy prepares $21 billion bailout, with government set to rescue the world's oldest bank https://t.co/MOaECETDJy pic.twitter.com/WHwFw4RKwq
8.49am GMT
Barclays is one of the biggest fallers on the FSTE 100 this morning, shedding 0.8%, after being accused of 'irresponsible and dishonest' practices by the DoJ last night.
Unlike many of its rivals, including Deutsche and Credit Suisse, Barclays is fighting charges of mis-selling mortgage backed securities.
Barclays rejects the claims made in the Complaint. Barclays considers that the claims made in the Complaint are disconnected from the facts. Barclays will vigorously defend the Complaint and intends to seek its dismissal at the earliest opportunity.
8.41am GMT
Shares in Italy banks have jumped by 1.2%, on relief that the Rome government has pledged to strengthen the sector with state help, starting with Monte dei Paschi.
8.31am GMT
Now this is interesting... shares in Royal Bank of Scotland have jumped by 2% at the start of trading in London.
8.22am GMT
Shares in Deutsche Bank have jumped by over 4% at the start of trading in Frankfurt, to a18.50.
That confirms that the $7bn settlement agreed with the DoJ for mis-selling toxic securities is much less than investors had feared.
No two ways to look at it, DoJ got rinsed beyond belief here. Their leak rebounded on them, as did the bashing foreigners strategy...
8.17am GMT
The bailout of Monte dei Paschi is an "important day" for the bank, says Italy's new prime minister.
"Today marks an important day for Monte dei Paschi, a day that sees it turn a corner and able to reassure its depositors."
8.10am GMT
Deutsche Bank's British CEO, John Cryan, will surely be pleased to have finally settled with the US authorities - and for roughly half the $14bn bill he faced at one stage.
Chris Wheeler, analyst at Atlantic securities told the Today programme that:
I think the $14bn was always posturing position by the DoJ....
The CEO [John Cryan], a very organised individual, can say that box is now ticked.
8.05am GMT
Today's flurry of fines, settlements and bailout deals are "good news" for the European banking sector, says Naeem Aslam, analyst at Think Markets.
He points out that Deutche's Bank's lengthy negotiations with the DoJ had worried the City.
Credit Suisse resolved its issue with Department of Justice over mis-selling of mortgage securities. Similarly, Deutsche Bank has also struck a deal with the Department of Justice in relation to their mortgage-backed securities issue. Deutsche bank's agreement is less than what the bank feared and this is music to investor's ears.
The amount of $14 billion which was initially expected by Deutsche could have put the bank under a lot of strain. Its stocks plummeted as the bank waited for a result, as traders were not confident about the bank's ability to carve out a deal. Under the agreement with the DOJ, the total cost will be $7.2 billion. This figure consists of $3.1 billion in penalty fees and $4.1 billion which the bank needs to refund to its consumers.
7.52am GMT
Italian market regulators have suspended trading in Monte dei Paschi's shares and bonds, following the news that it will be bailed out by the state.
Monte Dei Paschi Bonds & Shares Suspended From Trading Today
7.43am GMT
Good morning.
Christmas has come early for bank watchers, with a packed stocking full of crucial developments on the final day before the festive break.
Related: Italian cabinet gives green light to Monte dei Paschi di Siena bailout
Some pre-Christmas cheer for banks: Credit Suisse agrees to Pay $2.48bn in civil penalties following Deutsche Bank reaches $7.2bn settlement pic.twitter.com/qehRmZFWMW
European banks pay US authorities $12.5 billion to settle mortgage claims - Deutsche $7.2B, Credit Suisse $5.3B. Barclays being sued too.
The US department of justice has accused Barclays of jeopardising the financial position of millions of American homeowners over a decade-old mortgage bond mis-selling scandal.
The DoJ is now taking the bank to court, in what was thought to be the first time an institution had failed to reached a settlement with the US authorities over the sale of residential mortgage-backed securities (RMBS) in the run-up to the banking crisis. Responding to the news on Thursday night, Barclays said it would fight the case.
Related: US justice department accuses Barclays over mortgage mis-selling
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