US markets weaken after FBI director's firing; ECB's Draghi defends stimulus –as it happened

Graeme Wearden (until 2.15) and Nick Fletcher

from on 2017-05-10 17:07 (#2NYMF)

All the day's economic and financial news, as Donald Trump's sacking of James Comey undermines the US dollar

6.07pm BST

The talking point in the dealing rooms was Donald Trump's sudden sacking of FBI director James Comey, but the actual effect on the market was rather more limited. In Europe shares moved higher, and there was a similar story in the UK, while the decline in the US was fairly muted. An initial drop in the dollar did not last, and the pound's move higher towards $1.30 was soon nipped in the bud as dealers looked forward to the Bank of England meeting on Thursday, expected to be fairly dovish. So the final scores showed:

5.47pm BST

Brent crude is now above $50 a barrel and on course for its best day since 1 December.

It has jumped more than 3% to $50.27 in the wake of the bigger than expected drop in US crude stocks. West Texas Intermediate is currently up 3.44% at $47.46 a barrel.

4.33pm BST

Still with oil, Joshua Mahony, market analyst at IG, said:

On a day largely devoid of major economic announcements, US crude inventories have grabbed the headlines late into the session. The EIA posted the largest drawdown of 2017 to date. Yesterday's API figure once more provided us with a useful guide to where we could see today's EIA number. Despite recent fears that OPEC's output cuts may not be having an effect on inventories, it is clear that despite the odd outlier, the trend since the early February high has been towards reductions in stocks.

4.09pm BST

US GASOLINE STOCKS fell -0.2 million bbl to 241 million bbl in the week to May 5 (basically unchanged and in line with normal seasonal move) pic.twitter.com/eN0rB9up4J

3.43pm BST

Oil prices are moving higher following news of a bigger than expected decline in US crude stocks last week.

They fell by 5.25m barrels to 522.53m, according to the Energy Information Administration, much higher than the forecast 1.8m decline. However gasoline stocks slipped by less than expected.

3.28pm BST

Wall Street's reaction to the Comey sacking can hardly be described as dramatic (unlike the circumstances of the event itself).

The US market falls are limited, and the dollar has recovered ground. The pound, for example, having looked as if it was going to breach the $1.3 level for the first time since September, is now down 0.02% at $1.2931. Investors are of course keeping Thursday's Bank of England meeting in mind, with the expectation that rates will remain unchanged and fading talk of a hawkish outlook.

The Comey controversy continued to be the main topic of discussion this Wednesday, though its impact on the market faded as the afternoon went on.

The Dow Jones kicked off the US session 50 points lower, an improvement on the 80 point drop promised by the futures at points during the morning. The dollar also recovered the majority of its losses... That means Trump's dismissal of the FBI director has transitioned from pressing concern to mild annoyance in the eyes of investors, if not for the health of American democracy.

2.49pm BST

As expected following the news that FBI director James Comey had been "terminated" by President Trump, US stock markets have slipped back a little.

But the falls are not dramatic, with the Dow Jones Industrial Average down around 50 points or 0.24%, the Nasdaq Composite just 0.03% lower and the S&P 500 off 0.06%.

2.28pm BST

US markets are about to open, following Donald Trump's sacking of FBI director James Comey:

Stocks are looking a bit queasy ahead of the bell https://t.co/hvcb82Z12k pic.twitter.com/QK3JfKN0q5

2.21pm BST

Meanwhile the Greek stock market continues to be lifted by the recent agreements between the country and its creditors. It is currently up just over 1%, meaning it is on track for a twelfth consecutive rise and is at a fresh 21 month high. Indeed, it is close to erasing all the losses since the Athens exchange was closed in June and July 2015 at the height of the crisis when banks were shut and capital controls imposed.

Greek stocks rise for 12th consecutive day - longest streak since 1999. +22% YTD. And...wait for it...foreign investors bought t-bills today pic.twitter.com/NF30f3vaUD

2.16pm BST

Over in Greece, it appears that the International Monetary fund will finally sign up to the economic adjustment programme keeping debt-striken Greece afloat. Helena Smith reports from Athens:

As financial rows go, it was one of the longest, most ill-kept secrets of all times. But now it seems the spat between the EU and IMF over how to deal with debt-stricken Greece finally has been put to rest with the latter agreeing to participate in the country's latest bailout programme. Attending the EBRD's annual meeting in Nicosia, Slovakia's ever-loquacious finance minister Peter Kazimir said that, thanks to the Washington-based organisation's managing director Christine Lagarde, the IMF board had decided to join the programme.

"It seems to me that yes, finally (the IMF will provide funding to Greece)," he said. "We have to congratulate Christine Lagarde that she managed to convince the IMF. This amount is not important, (but) it is really symbolic. Technically the IMF must be on board."

Germany had argued that without the IMF actively monitoring the programme, it would have trouble convincing the Bundestag to approve of further disbursement of loans. The IMF had countered that it would not sign up to the a86bn programme - the third since Greece's near-economic implosion in late 2009 - until Athens' staggering debt load was made sustainable. At 180% of GDP, the debt pile is by far the highest in the EU with the IMF saying that longer grace periods and maturity extensions are only likely to throw the problem into the long grass.

But analysts now believe there are signs euro area finance ministers will revise Greece's post-programme primary surplus in its debt sustainability analysis which would pay the way to minimal debt relief in 2018 - allowing the IMF to come on board either at the next May 22 eurogroup meeting or by mid June at the latest.

2.11pm BST

In a genius touch, Dutch MPs ended Mario Draghi's session by handing him a solar-powered tulip!

It's meant to remind the ECB president of the danger of asset bubbles, such as the Tulip bulb mania of the 17th century in which bulbs changed hands for huge sums of money.

#Dutch parliament just gave Draghi a solar powered plastic tulip flower...

Draghi receives tulips from a Dutch MP as a reminder that world's first financial crisis took place in the Netherlands: the tulip mania pic.twitter.com/Nw0pJUkOmW

Draghi gets a solar-powered tulip to remind him of past financial crises to close his appearance at the Dutch parliament

1.50pm BST

Back in the Netherlands, Mario Draghi is taking a terse line with MPs who are criticising his stimulus programme, insisting that it got millions of people back to work.

Draghi: "Our monetary policy created 4.5m jobs that were not there before. The rest is speculation."
(wearing his whatever-it-takes tie) pic.twitter.com/Fw4AAkxrKM

1.32pm BST

Wall Street is expected to open cautiously in an hour's time, as the Comey sacking continues to dominate the US news.

US Opening Calls:#DOW 20915 -0.20%#SPX 2394 -0.05%#NASDAQ 5678 +0.01%#IGOpeningCall

12.34pm BST

Mario Draghi's breezy defence of the EBC's stimulus programme didn't convince all Dutch MPs; one has just told the ECB president that he's no hero in Holland.

Dutch parliamentarian not mincing words to Draghi, 'In Holland, you are not a hero.'

Draghi in #Dutch parliament:
It's not my job to be a hero. My job is to pursue my mandate.

12.23pm BST

European Central Bank president Mario Draghi is addressing the Dutch parliament now, and dismissing criticism of his actions as Europe's top central banker.

He starts by explaining how the ECB took "decisive policy action" when the eurozone debt crisis struck, by slashing interest rates to zero, imposing negative rates on banks, and buying tens of billions of euros of bonds each month.

Since the start of 2013, inflation had drifted consistently away from the ECB's target rate of below but close to 2% over the medium term, reaching levels below 1%.

Without counteracting measures, this low inflation could have turned into a deflationary spiral which would have deepened our economies' woes considerably.

Draghi: Similar to what we have observed at the euro area level, the economic expansion in the Netherlands has strengthened pic.twitter.com/9n5kv72uUA

An accommodative monetary policy means households accrue fewer nominal returns on their savings. However, an accommodative policy supports the economic recovery, which in turn bolsters employment, income, returns on investment and tax revenues.

It therefore benefits households in their capacity as workers, entrepreneurs, investors, borrowers and taxpayers.

Draghi on the need for structural reforms https://t.co/Uw6uI3Buk4 pic.twitter.com/8o7c8ZfJ7I

11.58am BST

Most European stock markets are in the red now, as James Comey's sacking helped to dampen the mood.

It's not every day that the US president fires the head of the FBI, so some of what we are seeing could be concerns about the political situation in the US, but overall a lack of macro catalysts and general exhaustion in equities is the main cause of the current drift in European stocks.

11.57am BST

Barclays' chairman, John McFarlane, is now backing Jes Staley, arguing that trying to uncover a whistleblower wasn't all that bad.....

McFarlane, Barclays chair, defending Staley in the face of call to quit at agm following whistleblowing scandal

McFarlane on Staley: "The action for going through a red light wrongly is you don't lose your licence"

11.46am BST

Here's the full quote from Barclays CEO Jes Staley about the impact of Brexit on its operations, from today's AGM meeting:

While on the subject of the Investment Bank, I want to briefly touch on the question of 'passporting' and how the Brexit vote might affect our European operations, because I know that is of interest to shareholders.

The first thing to say is that we see this as a wholly manageable challenge.

11.36am BST

Looking away from the markets briefly, Barclay's under-fire CEO has apologised to shareholders for trying to unmask a whistleblower.

Jes Staley Barclays CEO starts agm with apology to shareholders over whistleblowing investigation

Barclays boss Staley on Brexit: do not currently see a need in our options to shift British jobs or significant operations elsewhere

Barclays on Brexit: "If we require a build-up of capability in another EU jurisdiction as part of our plans then we can do so, and we will"

11.05am BST

The FT's Edward Luce has written a snappy outline of James Comey's sacking:

Like any US federal scandal, the details mount but the basics remain simple. Having fired the head of the only Russia investigation taking place within the executive branch, Mr Trump will now conduct a search for Mr Comey's replacement.

What are the chances he selects an independent figure who will pick up the Russia investigation where Mr Comey left off? What are the odds Mr Trump's FBI nominee gets the necessary fifty votes for Senate confirmation? Mr Trump will be aided in his search by Jeff Sessions, the attorney-general, who was forced to recuse himself from overseeing Mr Comey's investigation because of his undisclosed contacts with the Russian ambassador. This was the same ambassador with whom Michael Flynn, Mr Trump's first national security adviser, held conversations secretly recorded by the FBI.

10.33am BST

James Comey's sacking isn't entirely without precedent; Bill Clinton fired FBI director William Sessions in 1993 following a critical report into Sessions' performance and conduct.

But Comey's abrupt exit may remind older readers of another incident - the notorious Saturday Night Massacre of October 1973. That was the moment Richard Nixon had special prosecutor Archibald Cox fired, rather than hand over Oval Office recordings to the inquiry into the Watergate burglary.

Markets don't want Donald Trump to have his own Watergate scandal. This very much reminds us of Nixon firing Cox....

Anything that can upset the reflation trade, the infrastructure spending, the tax cut that Trump is trying to get through is not good for markets

.@jasperlawler says markets are 'unhappy' over the firing of James Comey in the US. #ticky MORE https://t.co/bU0gS7j9bi pic.twitter.com/cq6nahYFOB

9.24am BST

The British pound is close to hitting $1.30 for the first time since last September.

Bloomberg shows how sterling is leading the charge against the US dollar today:

Trump seems to have found a way to weaken the dollar. He's winning!

8.58am BST

Naeem Aslam of Think Markets is also concerned that Comey's sacking will seriously undermine Trump's ability to get things done:

For investors, this news matters, because President Trump needs to make alliance with both parties in order to have a swifter path for his tax reform bill to pass.

Any unnecessary escalation of tension doesn't provide much aid to bolster investor sentiment. The last thing they want to see is the tax bill to drag on its heel forever and the nightmare of repealing the Obamacare returns.

8.44am BST

This chart shows how the dollar reacted to Comey's dismissal:

Another blow to Trump credibility: Dollar softens trade after Comey dismissed. Dollar Index down almost 0.3%. pic.twitter.com/U9N7dSP1Ye

8.38am BST

Comey's shock sacking is the main topic of conversation in the City's trading rooms, says Connor Campbell of SpreadEx:

There wasn't much for investors to work with this morning, the main news being Donald Trump going all Apprentice on FBI director James Comey.

While Comey's shock dismissal doesn't technically have any immediate consequences for the market, it is another reminder of the unpredictable and irresponsible nature of Trump's governance.

#Trump's letter to #JamesComey splashed across 4 columns @NYTimes: "many hear echoes of Watergate". #FBI pic.twitter.com/HlbtxN8pHI

8.33am BST

James Comey's sudden dismissal last night has stunned US politicians from across both parties, with some calling for a special prosecutor to investigate links between Donald Trump's allies and Russia.

This means it is a serious issue for investors too, as UBS analyst Paul Donovan explains:

Ordinarily the dismissal would not matter to markets, but the move might be regarded as further evidence of presidential unpredictability (which markets dislike).

It may impact relations with Congress, and relations with Russia; both have market relevance.

This could impact approval of the stimulus policy markets are hankering after.

"The Comey news is being treated as a risk-off event, and the headlines were sparking the dollar's move down."

8.18am BST

The US dollar is coming under pressure this morning after Donald Trump shocked America, and beyond, by firing the director of the FBI.

The move came as CNN reported that a grand jury had begun issuing subpoenas to associates of Michael Flynn, the former national security adviser at the centre of the ongoing probe of Russian meddling in last year's presidential election. If confirmed, the report suggests that the FBI's investigation into the Trump camp's links with Moscow has entered a significant new phase.

Comey's sacking, which was condemned by one Senate Democrat as "Nixonian", raised concerns over the independence of the investigation and prompted vociferous demands for a special prosecutor to be appointed.

Donald Trump "terminated" FBI Director James Comey, calling for a "new beginning". US stock futures slipped as a result.

7.56am BST

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

World stock markets are hovering around record highs today, as traders continue to take comfort from the French election result

In the past Mario Draghi has been overly optimistic about the growth prospects of the Euro area but today improvements in the data may support his view.

From Sunday the European currency has dropped from its 1.1000 heights to trade as low as 1.0870, so his speech may be a trigger for some of these losses to be recovered.

Our European opening calls:$FTSE 7344 +0.02%
$DAX 12732 -0.13%
$CAC 5388 -0.19%$IBEX 11023 -0.24%$MIB 21448 -0.18%

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/