Oil hits six-month high; Brexit would raise European risks, says Fitch – as it happened
Crude prices are heading back towards $50 per barrel for the first time since last November
- Buffett takes a slice of Apple
- Fitch's Brexit warning
- Goldman: oil market now in deficit
- Crude prices hit 2016 high
6.10pm BST
News that Warren Buffett had bought a stake in Apple has helped lift US markets, but Europe has turned in a more mixed performance. The FTSE 100 has edged higher as commodity companies benefited from a bounce in metal prices including copper, which followed some weakness in the dollar. Markets were also supported by a rise in the oil price, after an interruption to supplies from Nigeria and a Goldman Sachs forecast that crude would reach $50 for the rest of the year.
But with the German market closed, there was little to enthuse investors elsewhere on the continent. The final scores showed:
5.28pm BST
Brent crude continues to hover close to the $50 a barrel market, currently up 2.55% at $49.05 having earlier climbed as high as $49.47. It is at its highest levels for around six months.
4.40pm BST
More on the Greek vote this weekend, courtesy Reuters:
Greece's parliament will vote on a new package of tax hikes and reforms demanded by its international lenders on Sunday, two days before euro zone finance ministers assess whether Athens qualifies for much-needed bailout loans.
The bill would increase value added tax by 1 percentage point to 24 percent, raise tax on fuel, tobacco and alcohol, liberalise the sale of banks' non-performing loans and detail the set-up a new privatisation fund, government officials said.
3.50pm BST
Wall Street is moving higher, helped by the Apple news, with the Dow Jones Industrial Average currently 101 points or 0.58% higher.
Connor Campbell, financial analyst at Spreadex, said:
There was one very clear source of growth for the Dow Jones this afternoon, and it wasn't the latest US economic data. The Empire State manufacturing index, the only notable number on the day's agenda, vastly underperformed expectations, plunging from a 14 month high of 9.6 to a 3 month nadir of -9.0.
Yet news that Warren Buffett's Berkshire Hathaway took a $1 billion stake in Apple during its (miserable) first quarter helped lift the tech company by over 2.5%. As is the weight of Apple this upwards shift more than compensated for the weak manufacturing figure and, alongside the oil-inspired gains for the likes of ExxonMobil and Chevron, ensured the Dow opened nearly 90 points higher after the bell.
3.29pm BST
Over in Greece, reports of new votes in parliament ahead of the next Eurogroup meeting:
#Greece govt to submit omnibus bill to parliament on Wed, to be voted Sun.
Bill to include tax increases, NPL scheme & contingency mechanism
3.07pm BST
Warren Buffett is not the only one keen on Apple. A number of fund managers have been making positive noises on the iPhone maker:
Thomas Fitzgerald at EdenTree Investment Management said:
Apple's share price has fallen about 28% from 2015's February peak on uncertainty over the future growth of iPhones, which accounts for 66% of sales. Beyond these near-term concerns, the anticipated launch of iPhone 7 will create fresh opportunity to take further market share. There is also still a large upgrade opportunity within its existing installed base - with only 40% of iPhone users upgraded to the new generation 6 or 6S models.
Continued strong cash generation and its balance sheet fortress will continue to support the Apple's design and development over the long term. As a result, we believe shares are attractively valued at current levels. The company is also making significant progress towards a higher recurring, subscription-led revenue model through the launch of Internet and entertainment services, such as cloud storage, Apple Music and Apple TV. This could drive greater earnings visibility and potentially stronger profitability in future years.
The Apple share price has been undergoing some recent volatility, but we remain supporters of the stock. People tend to get hung up on things like new products and how many it is selling, and when it will disclose numbers, but we think you need to take a broader, longer-term view.
There is work to be done in product transitioning in the US and Europe, but if you look at the quality of its product lines versus the competition and the company's enormous cash pile, we believe Apple remains in a very strong market position.
We own a very small position in Apple, as like many others, we find the company and its products appealing. However, we are seeing signs the smartphone industry is starting to mature and Apple is trying to reinvent itself and come up with other ideas to generate revenue.
Its recent share price fall has certainly made Apple appear more attractive, but also important to keep in mind the size of the company. At a market cap of more than $500bn, it is quite difficult to continue to compound from here. We are currently seeing more compelling opportunities to generate returns in the tech sector in areas such as cloud computing.
2.49pm BST
Apple has now reclaimed the title of 'world's most valuable company' from Alphabet, Reuters says.
2.45pm BST
Ding ding.... Wall Street is open.
Apple has jumped to the top of the Dow Jones risers, following the news that Berkshire Hathaway has taken a $1bn stake.
2.28pm BST
Another day, another warning against Brexit from the Bank of England.
"We need a banking system to support the domestic economy but I am afraid we don't have a God-given right to have anything in terms of international. That decision will be taken by many actors over time," Bailey said.
The EU provides rules for banks, insurers and asset managers that provide a "passport" for them to operate freely across the bloc's single market. This includes banks from outside Europe,such as the United States and Asia.
BoE's Bailey: London's Future As Finance Hub At Risk Outside EU - RTRS https://t.co/NZbZTfyyoX
2.16pm BST
New economic data out of America has reinforced concerns that economic growth is stumbling.
The Empire State manufacturing index, which tracks factory output in the New York region, has lurched to -9.02 this month. Many firms reported a drop in new orders, pulling the index down.
Crikey, down to minus 9.02 from plus 9.56! Empire State index weakens sharply in May https://t.co/yz7BoxuKUD pic.twitter.com/uijI0pbdJq
1.54pm BST
Looks like Apple should reclaim market cap lead from Alphabet at the market open this morning. Thanks, Warren Buffett! $AAPL $GOOGL $BRK.B
1.51pm BST
Warren Buffett is probably nursing a chunky loss on the Apple shares, given he bought them between 1 January and 31 March.
The FT points out:
Shares in the technology giant have fallen by more than 19 per cent since mid-April after it disclosed its first quarterly revenue fall in 13 years and its first decline in iPhone sales.
1.37pm BST
Bruce Kasman, chief economist at JPMorgan Chase, predicts that the oil price will be quite subdued over the next year.
Kasman: Oil Settles in $40-$50 Range Over Next Year https://t.co/PpOzfyjoks pic.twitter.com/4qEyMiUKFI
12.59pm BST
Up they go....
*APPLE CLIMBS 1.9% TO $92.20 AFTER BERKSHIRE DISCLOSES STAKE
12.43pm BST
Billionaire investor Warren Buffett hasn't lost faith in Apple, despite the recent drop in its share price.
Buffett's Berkshire Hathaway group has just revealed it took a new stake in the tech firm in the first quarter of 2016, worth around $1bn.
BREAKING: Berkshire Hathaway reports new stake in Apple with 9,811,747 shares owned.
12.19pm BST
One for technical chartists in the audience:
#Brent #CrudeOil approaching key 51.01/24 resistance, where 23.6% of 2012-2016 drop meets MT channel pic.twitter.com/SLXiUHw0QQ
12.02pm BST
Here's more detail from the Goldman Sach's oil report that has sent crude prices soaring to a six-month high today.
This chart suggests that the oil market has dramatically rebalanced in recent weeks, due to declining production and a surge in demand:
Stronger vehicle sales, activity and a bigger harvest are leading us to raise our Indian and Russia demand forecasts for the year. And while we are reducing our US and EU forecasts on the combination of weaker activity and higher prices than previously assumed, we are raising our China demand forecasts to reflect the expected support from the recent transient stimulus.
Low-cost producers will continue to drive production growth in the New Oil Order - with growth driven by Saudi Arabia, Kuwait, Iran, the UAE and Russia.
Second, non-OPEC producers had mostly budgeted such price levels and there remains a pipeline of already sanctioned non-OPEC projects. In fact, we see risks to our production forecasts as skewed to the upside as we remain conservative on Saudi's ineluctable ramp up and Iran's recovery.
11.34am BST
Brexit could also send UK house prices tumbling, Fitch suggests today.
Whoops, try again. @ @FitchRatings UK house prices 25% above 'sustainable' level. Brexit could wipe out premium, via interest rates
Bullish for UK millennials working for US-based firms. https://t.co/ZzK0Ve6j1H
10.39am BST
Fitch has also pointed out that some British firms might benefit if the UK quits the European Union, weakening the pound.
The rating agency says:
For the corporate sector, the leave scenarios could have mixed effects, depending on sector. UK exporters would benefit from improved price competitiveness, due to sterling's depreciation.
UK companies with significant foreign currency debt would face servicing issues. UK airlines could be significantly affected by sterling depreciation due to their foreign currency cost base.
Turns out one of @George_Osborne's special guests is a Ryanair plane. pic.twitter.com/gmRZVVxJm2
.@GuardianAnushka Michael O'Leary boss said Ryanair will be campaigning hard to persuade people to vote in.
10.25am BST
Rating agency Fitch has just warned that European economies could be disrupted if Britain votes to leave the EU.
In a new report, Fitch warns that the populist parties across the region would get a boost if the UK public decide to quit.
Brexit would create a precedent for countries leaving the EU. It could boost anti-EU or other populist political parties, and make EU leaders more reluctant to implement unpopular policies with long-term economic benefits.
Negotiating the terms of the UK's exit could exhaust the EU's time and energy and open up new fronts of disagreement. Brexit could shift the centre of gravity of the EU, making it more dominated by the eurozone core, poorer, more protectionist and less economically liberal. If the UK were to thrive outside of the EU, it might encourage other countries to follow suit.
Fitch reckons Ireland, Malta, Belgium, the Netherlands, Cyprus and Luxembourg would suffer most from Brexit: https://t.co/QI7JU6UT9A
Brexit would reduce the UK's contribution to the EU budget (a net a7.1bn in 2014 after rebates), potentially to zero. This would imply that other net contributors would have to increase payments, or net recipients accept lower EU expenditure.
10.11am BST
Morgan Stanley agrees with Goldman Sachs:
Morgan Stanley suggest that the oil market is in balance for the time being due to losses of supply
10.01am BST
This chart explains very clearly why Goldman has reversed its position on the oil market.
9.41am BST
Reuters is reporting that the Nigerian authorities have apprehended members of a group behind recent attacks on its oil pipelines:
The Nigerian army has arrested several people suspected of having been involved in a recent wave of attacks on pipelines in the restive Delta region, a military source said on Monday.
Nigerian newspapers reported that the army had arrested several members of a militant group called Niger Delta Avengers which has claimed a string of attacks in the southern swamps.
9.28am BST
More UK business chiefs are cutting back on investment ahead of the EU referendum next month.
That's according to a survey conducted by Credit Suisse that found little enthusiasm for Brexit:
Corporate executives postponing/reducing spending because of the referendum. pic.twitter.com/8QhYL58SKT
The UK leaving the EU would be a Bad Thing, per the CS Executive Panel Survey pic.twitter.com/yXY7nhLJxj
9.22am BST
Although mining companies are rallying this morning, other sectors are in retreat.
"A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms' plans to invest."
Related: UK economy: gloomy outlook for workers' pay rises
Losses are broad based with some mixed economic data out of China over the weekend and ongoing fears over the risk of the UK voting to leave the EU at the end of next month both weighing.
8.58am BST
Shares in BP and Royal Dutch Shell have risen by around 0.8% this morning, following the jump in the oil price.
8.53am BST
The price of oil is on the march again as Brent Crude Oil passes US $48 this morning...
8.46am BST
Goldman is also predicting that the oil market will remain in deficit until the end of the year.
However, it would then return to oversupply in 2017:
8.38am BST
Brent crude oil is bobbing around a six-month high, as traders digest Goldman's claim that the market is now in deficit:
8.20am BST
The oil price has jumped this morning after Goldman Sachs declared that the long run of oversupply was coming to an end.
In a new report, the Wall Street firm argues that the oil market has actually flipped into deficit, due to various supply disruptions.
"The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected....
The market likely shifted into deficit in May ... driven by both sustained strong demand as well as sharply declining production."
7.56am BST
Good morning, and welcome to our rolling coverage of the financial markets, the global economy, the eurozone and business.
There's a definite Monday morning feeling in the City today.
"We're seeing that growth engines are losing momentum, and the growth outlook has turned soft as well.
It's clear the government wants to manage down or re-anchor market expectation."
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