London stock market hits 2016 high, despite IMF warning -as it happened

Graeme Wearden (until 1.00) and Nick Fletcher

from on 2016-04-13 16:20 (#1AAHG)

Better-than-expected trade figures from China sent stock markets soaring across Europe, the US and Asia

5.20pm BST

Better than expected Chinese trade data which prompted hopes the world's second largest economy was beginning to stabilise set the tone for a positive day for investors. A rise in US crude inventories, which contributed to a 1% fall in oil prices, did not dampen the mood, while better than expected results from US bank JP Morgan gave further support to the market. Weak US retail sales also helped, dampening fears of an immediate rise in US interest rates. The final scores showed:

5.01pm BST

It is not just oil which is giving the market a lift. Joshua Mahony at IG said:

Confidence is coursing through the veins of financial markets today, as the worries seen at the turn of the year disappear into the rear view mirror. If yesterday was all about oil, today's big mover was the US dollar which finally found a buyer after over two weeks of selling. European and US stock markets are clearly in a jubilant mood, with buyers remaining in control since the opening bell. The relative disregard from US markets at the release of the joint worst retail sales figure in over a year, spells out the buoyant mood of markets today.

The Bank of Canada maintained its headline interest rates steady today, in line with expectations. Certainly there will be significant relief at the BoC at the recent revival in crude prices, which will help ease the burden of monetary policy.

There can be little doubting the fact that London's FTSE-100 has posted a solid day of gains during Wednesday's session, realising its first triple digit gain in a month and finding intra-day highs not seen since early December 2015. Commodity prices continue to march higher and that is very much dictating the pace for the markets - the Dow Jones non-ferrous metals index is up another 6% already and the miners are scattered across the top of the board, but once again Standard Chartered is worthy of note. The bank's exposure to commodity traders has been something of a millstone, but as underlying prices rally, the stock is back in vogue and today's 10% gain is certainly impressive.

4.55pm BST

The recent strength of the oil price - today's fall notwithstanding - has been based mainly on hopes that the weekend's producer meeting will agree a freeze, along with signs of a slowdown in US output. But, says Capital Economics:

There have not been any game-changers in the fundamentals of the oil market itself. Admittedly, US oil production has started to fall. But the declines are small. US oil output was down by about 1.7% year on year in February. What's more, both the key pillars which have underpinned the recent rally could quickly unwind.

Indeed, there is no guarantee of a deal at the weekend. Saudi Arabia has said that it will not participate in a production freeze unless Iran agrees to join as well and Iran has steadfastly committed to increasing its output to pre-sanctions levels. As it happens, we think some sort of compromise agreement is still likely, even without Iran's full participation. But given that very few of the countries attending the meeting on Sunday have either the capacity or intention to increase output anyway, freezing production at the current very high level should at best put a floor under prices.

3.48pm BST

Oil prices have slipped further after a much bigger than expected rise in weekly crude inventories, but still remain well above $40 a barrel. Brent crude is currently down 1.6% at $43.96.

[BREAKING] US DoE Crude Oil Inventories (Apr 8): 6634K (est 1000K, prev -4937K)

US DoE Distillate Inventories (Apr 8): 505K (est 200K, prev 1799K)

US DoE Gasoline Inventories (Apr 8): -4237K (est -1500K, prev 1438K)

3.02pm BST

The enthusiasm for the Chinese export figures has outweighed a host of bad news for stock markets, says Connor Campbell, financial analyst at Spreadex:

The reasons to abandon the day's super-surge began to stack up this afternoon, yet the markets remained resolute in their Chinese export-inspired jubilance as the day continued.

First Opec cut its demand forecasts for 2016, slashing estimates by 50000 barrels a day with the potential for more revisions to come. Then there was yet another poll outlining the damage that would be dealt in the case of a Brexit, news that was swiftly followed by the announcement of falling retail sales in the US.

2.56pm BST

The US market has followed other global markets higher after the positive Chinese export data, better than expected results from JP Morgan and the oil price holding onto much of its recent gains.

The weak US retail sales have also helped sentiment, suggesting that the Federal Reserve may be reluctant to raise interest rates again in the near future after December's increase.

2.37pm BST

More on the weaker than expected US retail sales. Rob Carnell of ING said:

Even when you take some upward revisions into account for February, this is yet another soft retail sales release, and makes an April rate hike look far-fetched.

Consensus was hoping that despite the likelihood that the headline retail sales figure would be depressed by very weak auto sales in March, rising gasoline prices would provide some offset at the headline level, and a pick up in underlying sales would prop up the core figures. This did not happen. Indeed, the headline fell by 0.3% month on month, much worse than the 0.1% increase expected, and core figures were also weak, with the control group for sales which strips out most of the volatile components, rising only 0.1% month on month.

2.24pm BST

The IMF's warning on the state of the European banking system is directed at countries on the periphery of the eurozone, and Italy in particular, writes Phillip Inman:

Total losses attributed to European banks in the last financial crash were around a1tn, so a repeat of the devastation caused in 2008 could be withstood by just calling on shareholders to sacrifice their equity.

If the crash cost more than a1tn, banks can call on the a8tn of debts to bondholders, which could be cancelled in part or in their entirety, freeing up cash from interest payments to safeguard depositors. This is a substantial extra buffer. No wonder officials in Brussels, European Central Bank head Mario Draghi and the UK's regulator, the Bank of England, feel confident a taxpayer bailout will never again be required.

2.00pm BST

A day after cutting its global growth forecasts, the International Monetary Fund is talking about the risks of a new financial crisis. Larry Elliott writes:

The International Monetary Fund has highlighted risks of a new financial crisis, warning that global output could be cut by 4% over the next five years by a repeat of the market mayhem witnessed during the 2008-9 recession.

The IMF used its half-yearly Global Financial Stability Report to call for urgent action on the problems of banks in the eurozone, a third of which it said faced "significant challenges" to be sustainably profitable.

"The hardest hit banking systems within the euro area in February have been those of Greece, Italy, and to a lesser extent, Portugal, along with some large German banks, reflecting some or all of the following factors: structural problems of excess bank capacity, high levels of NPLs, and poorly adapted business models."

Noting that threats to global financial stability had increased since its last health check in October, the Fund said: "The main message of this report is that additional measures are needed to deliver a more balanced and potent policy mix for improving the growth and inflation outlook and securing financial stability. In the absence of such measures, market turmoil may recur."

1.51pm BST

Five of the top eight US banks do not have credible plans for winding down their operations during a crisis without being bailed out with public money, according to a report from federal regulators. Reuters reports:

The "living wills" that the Federal Reserve and Federal Deposit Insurance Corporation jointly agreed were not credible came from Bank of America, Bank of New York Mellon, J.P. Morgan Chase, State Street and Wells Fargo.

The requirement for a living will was part of the Dodd-Frank Wall Street reform legislation passed in the wake of the 2007-2009 financial crisis, when the US government spent billions of dollars on bailouts to keep big banks from failing and wrecking the US economy.

1.42pm BST

The weaker than expected US retail sales figures could give the Federal Reserve pause for thought on interest rates, said Dennis de Jong, managing director at UFX.com:

Consumer spending remains a core component of the US economy, so all eyes will be on these latest sales figures from Main Street.

Last year, economists heralded the resilience of US consumers as a rare bright spot against a backdrop of turbulent financial markets and weakening global demand, so they will be discouraged by this below expectations performance.

1.40pm BST

A drop in car purchases caused an unexpected drop in US retail sales in March, according to the Commerce Department.

Retail sales fell 0.3% after being unchanged in February, and compared to forecasts of a 0.1% rise.

1.21pm BST

A vote by Britain to leave the European Union would damage the UK economy, according to the majority of economists surveyed in a Reuters poll.

Thirty one of the 35 economists polled said the impact of leaving would be negative, but there was a roughly equal split about whether remaining in the EU would be positive or neutral.

1.14pm BST

Opec has predicted that global demand for oil will be less than previously expected in its latest monthly report.

The oil producers group cut its forecast for 2016 demand by 50,000 barrels a day as consumption slows, and said there could be further downward revisions.

12.43pm BST

Time for a quick catch-up

Stock markets in Asia and Europe have rallied today, after China beat expectations with an 11% surge in exports in March.

"Mid-way through the European session, equity markets are holding firm with the UK's FTSE 100 benefiting from a good set of Chinese trade data - that helping the miners and other EM-focused stocks. Does this mean better times ahead? We must be careful when answering such a question, but with Chinese copper imports having surged by 36% in March, the near-term outlook seems trade positive.

12.36pm BST

A Chinese hard landing is the number one fear in the City, according to a new survey from Moodys's.

The rating agency found that a third of investors believe China's slowing economy is the biggest risk, followed to deflation in the euro area.

"It is clear that a slowing Chinese economy is a major concern among market participants. However, rather than a hard landing we expect a continuation of slower GDP growth at around 6% as Chinese authorities continue to use policy measures to avoid a sharp economic slowdown."

12.25pm BST

Wall Street is expected to open strongly in two hours time:

Banks are pushing U.S. futures higher, as JPMorgan reports first-quarter results https://t.co/08CwPomlhv pic.twitter.com/rMeJLIWU3x

12.09pm BST

JP Morgan's shares are up almost 3% in pre-market trading, as Wall Street welcomes its financial results.

Bank of America and Citigroup are up around 2% in the pre-market too.

11.59am BST

JP Morgan has reported a 6.6% drop in profits in the last quarter, down from $5.91bn to $5.52bn.

JP Morgan Q1 markets trading revenue -13% to $5.718B, investment banking revenue -19% to $2.417B. Declines drive profit down 6.7% to $5.52B,

Big jump in JPMorgan's loan loss reserves: pic.twitter.com/ELy7sVG3S9

11.44am BST

It's nearly time for JP Morgan to kick off the US bank reporting season, by revealing how well (or badly) it performed in the last three months.

Analysts predict that earnings and revenues both fell during the quarter, as investment banking has suffered from lower trading volumes and fewer major deals recently.

Getting ready for Bank Earnings season pic.twitter.com/RA906dIBcx

11.25am BST

Beneath the optimism in the markets, worries over Greece's bailout are resurfacing.

10.47am BST

Italian bank shares have risen sharply this morning, up around 6% on average.

The a5bn bank rescue deal agreed over the weekend is bolstering confidence in the sector.

Major Italian banks rise at average 6.02% pic.twitter.com/4DDe9gk6qR

10.27am BST

There's no stopping the FTSE 100 index right now. The blue-chip index is up 95 points at 6337, its highest level since last December.

For the commodities rout to be over a resurgent China is required, and the impressive trade data released overnight provided exactly the assurance we were looking for.

While it may be too soon to conclude that the worst is over for China, this revival in exports helps restore confidence as investors pile into commodity stocks once more.

9.42am BST

David Cheetham of City broker XTB.com reckons Tesco is on the right path, despite this morning's stock market drubbing:

A 0.9% rise in like-for-like sales for Q4 2015 is arguably the highlight of this solid report, and marks the first quarter of comparable sales growth in over three years....

More work is clearly needed before investors can hope for a return to anywhere near the previous levels of stock price, but this morning's report shows that the current strategy is beginning to bear fruit and the continued attempts by Mr. Lewis to streamline the business and dispose of unwanted segments indicate that the firm won't be resting on it's laurels as they strive to return to former glories.

9.38am BST

Tesco is now the worst-performing share across Europe's main stock markets, after it warned that the supermarket sector remains tough.

#Tesco worst performer on Stoxx600... pic.twitter.com/hs49LRJodH

9.34am BST

European stock markets are rallying hard, on the back of today's Chinese trade data.

The Italian, German and French markets have all gained around 2%, a strong move, amid hopes that the global economy may be picking up.

Commodities remain very much in focus - we've seen base metals soaring in the last few hours helped by upbeat Chinese import data and even if oil prices are coming off the boil a little, the bulls are still winning out at least for now.

Note: China's improved exports more of a base effect; absolute level still below trend - pic.twitter.com/kF6N2RVePS

8.53am BST

If the FTSE 100 stays at this morning's levels, it will hit its highest close this year.

8.43am BST

News that Chinese exports rebounded in March has "more than revitalised the market's spirits", says Conner Campbell of SpreadEx:

Whilst it is too early to claim that talk of a Chinese economic slowdown has been overstated (imports did shrink by 7.6% over March, and there is still the Q1 GDP and industrial production data to come on Friday), the announcement of an 11% rise in the country's exports has had a miraculous effect on the European indices this Wednesday morning.

8.33am BST

Tesco is missing out on today's rally, despite reporting its first sales increase in three years.

Dave Lewis in an unsurprisingly good mood this morning. Admits he is "extremely pleased" with @Tesco FY figs but insists job not done

8.21am BST

Shares are rallying across Europe at the start of trading, as China's trade figures boost confidence.

In London, the FTSE 100 index has hit its highest level of 2016.

In March, Chinese exports went up by 11.5% (in US dollar terms), the most in a year and an impressive recovery from February's 25% slump.

That's sure to indicate that China's still making stuff, so should be a good thing for companies that produce materials - like miners - today.

Strong open for European stock markets this sunny morning:
Stoxx 600: +1%
FTSE 100: +0.9%
CAC 40: +1.6%
DAX 30: +1.4%

8.06am BST

Mixing Ambrosia custard and Bisto gravy with Schwartz's dried spices would challenge the most daring fusion chef.

7.52am BST

The rebound in China's exports shows that pessimism over the global economy is overdone, argues Marcel Thieliant and Mark Williams of Capital Economics:

China's trade data for March point to healthy growth in import volumes and add to growing evidence that the extreme gloom of a few weeks ago about the state of the domestic economy was misplaced".

7.45am BST

Asian markets are rallying hard, following news that Chinese exports surged 11% in March.

The Shanghai stock market jumped by 2%, as investors hailed the better-than-expected trade figures.

7.33am BST

There's relief in the markets this morning after China posted surprisingly good trade figures.

The surge in exports adds to the improving outlook for China indicated by moderating producer price inflation and a rebound in business confidence data.

The pickup in exports was likely supported by the devaluation of the yuan at the start of the year which made Chinese goods relatively cheaper than domestic options abroad.

"Even with this rebound, first-quarter trade is still quite weak....We cannot be very definite about a turnaround."

7.14am BST

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

It's a big day for corporate results.

. @Tesco posts FY op. profit 944m (+1.1%) = beat vs analyst consensus of 936m

#Breaking Tesco is back in profit and has posted its first quarterly UK sales growth for three years

Wednesday's Guardian front page:
IMF raises stakes with warning Brexit would hit global growth#tomorrowspaperstoday pic.twitter.com/7kAfPhZUd1

Wednesday's Times Business:
World economy in danger of stagnating, IMF warns#tomorrowspaperstoday #bbcpapers pic.twitter.com/b0C938AytO

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