UK runs up £12.6bn deficit; Monte dei Paschi fundraising struggles – as it happened
All the day's economic and financial news, as Britain's national debt hits a new all-time high and Italian bank Monte Dei Paschi fights for its future
- Italy's Monte dei Paschi struggles with fundraising
- US oil stocks rise unexpectedly
- Dow slips away from 20,000 level
- UK borrowing drops to 12.6bnin November, from 13.2bn
- National debt now at 1.655 trillion
- City analysts unimpressed
- But UK seems on track to hit new deficit targets
6.01pm GMT
In quiet pre-Christmas trading, the banking sector came under pressure on concerns that Italian bank Monte dei Pashi's fundraising was in trouble, helping push European markets into negative territory. The moves were hardly dramatic however, ahead of the holiday period, and the German market managed to just about buck the trend. In the US, the Dow Jones Industrial Average has so far failed to test the 20,000 barrier. The final scores in Europe showed:
5.48pm GMT
Dow currently trading in narrowest daily range since December 30, 2013. #jinxtweet
4.24pm GMT
Worries about European banks are undermining stock markets, particularly in Italy and Spain. Chris Beauchamp, chief market analyst at IG, said:
Banking concerns have played across European markets once again today, as Monte dei Paschi looks set for a government takeover. The rescue plan has fallen apart, with Rome unable to find an anchor investor; for understandable reasons, no one wants to be first 'over the top' should the crisis worsen.
Italy's debt will get bigger, but a major government stake should, paradoxically, boost risk appetite among investors, who will be glad to see the Italian government taking the tough decisions.
4.15pm GMT
Here's Reuters on the Monte dei Paschi situation:
Ailing Italian bank Monte dei Paschi di Siena has been unable to find an anchor investor willing to put money in its privately funded rescue plan, less than 24 hours before the offer ends, two sources close to the matter said on Wednesday.
The bank needs to raise 5 billion euros ($5.2 billion) by the end of this month to avert being wound down. The Italian government is expected to step in this week to bail it out.
4.04pm GMT
Ratings agency DBRS is keeping an eye on Italy:
DBRS SAYS NEXT 24 HOURS AND MONTE DEI PASCHI RESCUE DECISION WILL BE CRUCIAL FOR ITALY RATING
4.02pm GMT
Over in Italy, the rescue package for struggling bank Monte dei Paschi is looking in trouble, bringing the prospect of a state bailout closer:
MONTE DEI PASCHI SHARE PLACEMENT HAS DRAWN LITTLE INVESTOR INTEREST BECAUSE NO ANCHOR INVESTOR HAS BEEN FOUND - SOURCES - Reuters News
Share placement for Banca Monte Paschi (BMPS IM) has received little interest with Qatar not willing to invest according to sources
A potential white knight fades away... https://t.co/iL33KQPWDf
3.52pm GMT
In the wake of its recent blog on Greece, the International Monetary Fund has responded to questions about its comments, mainly to do with tax and pensions. A tweet from the IMF's spokesperson explains:
We published additional technical clarifications about our analysis of Greece, following comments to this blog post https://t.co/3SebTtY8AY
3.44pm GMT
Oil prices have slipped slightly as the latest US figures show an unexpected rise in crude stocks.
West Texas Intermediate - the US benchmark - is 0.15% lower at $53.22 a barrel while Brent crude is down 0.38% to $55.14.
3.35pm GMT
US crude stocks have defied expectations with a hefty jump last week.
They rose by nearly 2.3m barrels, according to the Energy Information Administration, compared to forecasts of a fall of around 2.5m barrels.
#UnitedStates EIA Crude Oil Stocks Change at 2.256M https://t.co/iEqHb9iXvN pic.twitter.com/C9Y7bXUDlG
DOE Crude Build 2.256MM. API wrong again
3.24pm GMT
Analyst welcomed the improvement in European consumer confidence, but there was some caution over the future outlook. Dennis de Jong, managing director at UFX.com, said:
European consumers appear to have shrugged off concerns including Brexit, the Italian banking crisis and the upcoming inauguration of President Trump to post the year's strongest confidence figures for December, albeit still firmly in negative territory.
While today's data will encourage ECB chief Mario Draghi, the Christmas cheer may not last long, especially if markets start to waver as Brexit negotiations begin in earnest next year.
An encouraging boost to Eurozone growth prospects as consumer confidence rose for a fourth month running in December to reach a 20-month high. Furthermore, consumer confidence is now at a very decent level compared to long-term norms. Consumers across the Eurozone are currently benefiting from pretty decent fundamentals overall, notably including higher employment and still limited inflation.
This reinforces hopes that the Eurozone will have seen some pick-up in GDP growth in the fourth quarter and is set to see a decent start to 2017...
3.13pm GMT
Eurozone consumer confidence has improved so far in December.
The provisional reading for the month from the European Commission shows a rise of 1.1 points to -5.1, compared to expectations of a figure of -6. The Commission said:
In December 2016, the...flash estimate of the consumer confidence indicator increased markedly in both the euro area (by 1.1 points to -5.1) and the EU (by 1.2 points to -4.6) compared to November.
3.10pm GMT
On the home sales, Lawrence Yun, the association's chief economist, said the last three months had been outstanding for the housing market. He said:
The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months. Furthermore, it's no coincidence that home shoppers in the Northeast - where price growth has been tame all year - had the most success last month.
Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017. Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.
3.05pm GMT
US existing home sales unexpectedly jumped in November, hitting their highest level in nearly ten years.
Sales rose 0.7% to an annualised 5.61m units, the best since February 2007, according to the National Association of Realtors. Analysts had been expecting a fall from October's figure of 5.57m units - itself revised down from 5.6m - to 5.5m.
2.51pm GMT
Well that didn't last. The Dow is now down 14 points as investors shy away from pushing it above 20,000. For the moment at least.
2.36pm GMT
After an initial dip, the Dow Jones Industrial Average is slightly higher, edging ever nearer to the 20,000 barrier. But the trend is not exactly certain in early trading.
The Dow is currently at 19,982, up 8 points. Elsewhere the S&P 500 opened down just 1.55 points while the Nasdaq Composite dipped 0.05%.
2.08pm GMT
Analysts have been waiting for a few days now for the Dow Jones Industrial Average to break the 20,000 barrier for the first time, and on Tuesday it came tantalisingly close at 19,987 before closing at 19.974.
Could today be the day? The futures are indicating a slight rise, so it looks like edging ever closer. Kit Juckes at Societe Generale said:
I have no insight into what happens once the Dow breaks 20,000 but some people see this as a major milestone. And until it is broken it acts as Pied Piper, or perhaps Rudolph's nose, lighting the way for the risk-hungry and those scared of being left behind.
1.36pm GMT
The Guardian's monthly Brexit Watch has just been published. It shows how the impact June's vote is now hitting the economy, with inflation up and retail sales growth slowing.
Related: Brexit economy: inflation surge shows impact of vote finally beginning to bite
Related: 'The news is not going to get better' - experts debate Brexit watch data
1.12pm GMT
Britain's fiscal watchdog, the Office for Budget Responsibility, has just warned that public borrowing in the final four months of this financial year will be slightly higher than a year ago.
In its official response to today's public finance data, the OBR warns that tax receipts may weaken in the December-March period, while government spending will pick up.
Data revisions improve public finances - read the latest commentary at https://t.co/k0nGloBMMW pic.twitter.com/gM3KrXEaaT
12.42pm GMT
Over in Greece, relations with creditors remain awkward and tense following Monday's inconclusive euro working group (representing Greek creditors)
The tensions stirred by the announcement of relief measures for those hardest hit by the country's seemingly relentless economic crisis show no sign of abating.
Monday's euro group meeting was a test case in humiliation for the embattled Greek government with Athens being forced to accept in writing that the bonus proclaimed by prime minister Alexis Tsipras for pensioners is a "one off" that will never be repeated.
12.13pm GMT
One of Monte dei Paschi's riskier bonds has tumbled in value today, in another sign that investors believe its a5bn cash call will fail.
Monte dei Paschi's E2bn retail bond looks to be pricing in something unpleasant in the near future. pic.twitter.com/h7FR73JOtO
11.39am GMT
Back in Italy, shares in Monte dei Paschi bank have taken an almighty dive - only to bounce right back up again <insert joke about your least favourite footballer>.
They initially slumped by 18% in a panicky selloff, as news broke that the bank might run out of liquidity within four months.
Monte dei Paschi shares today - Start trading, limit down, trading halted, start trading, limit down, trading halted pic.twitter.com/YF2hEv1o7g
Now practically flat, thank you for playing. pic.twitter.com/owIw4uVzgc
Italy agrees to raise debt ceiling by 21 billion dollars - making room for potentially imminent Monte dei Paschi bailout.
11.06am GMT
Britain't tax receipts have risen by 4.4% this financial year, or 17.8bn, to 421.8bn.
That helped to pull borrowing down since April -- but not by enough to prevent the national debt hitting record highs.
"Government borrowing in November, while higher than expected, was still marginally lower in annual terms. Despite the slight improvement, debt levels remain unsustainably high.
"2017 is likely to be a challenging period for the UK's public finances, with economic growth likely to soften, which will hamper the UK's ability to generate tax receipts.
10.28am GMT
Chancellor Philip Hammond may find some Christmas cheer in today's public finances.
Reassuring news for the Chancellor as the public finances saw modest improvement in November compared to a year earlier - thereby keeping the government on track to meet - or even slightly undershoot - its upwardly revised target for 2016/17 contained in November's Autumn Statement.
It would have been somewhat embarrassing if the first set of public finance figures after the November Statement had immediately put question markets over his new fiscal targets.
There was a slowdown in growth in tax receipts in November, primarily due to income tax related receipts dipping 1.1% year-on-year. ONS data show that employment growth has slowed recently, although it needs to be borne in mind that the tax data can be erratic from month to month, partly depending on when exactly the receipts come in. It is also notable that national insurance contributions were up 6.3% year-on-year.
VAT receipts were up 4.4% year-on-year in November and corporation tax receipts were up 22.9% year-on-year, which points to still resilient economic activity.
10.04am GMT
City experts aren't impressed that Britain's net borrowing spiked to 12.6bn last month, up from just 4.2bn in October.
Paul Sirani, chief market analyst at Xtrade, says:
"The outlook for the UK heading into the new year is a rather bearish one and investors are unlikely to be flying in with both feet as uncertainty continues to swirl.
"The gap between UK government spending and income has risen sharply in November, raising a number of red flags with investors who will interpret this as a sign that a significant economic slowdown is coming in the new year.
"Chancellor Philip Hammond has announced the final spring budget for early March where he will attempt to plan for an uncertain future, with the triggering of Article 50 set for later that month.
9.49am GMT
This chart, from today's public finances, shows how Britain's national debt hit a new record high in November - up to 1.655bn from 1.641bn in October.
9.34am GMT
Newsflash: Britain borrowed more than 12.6bn to balance the books in November.
The public sector net borrowing requirement (excluding the impact of our state-owned banks) came in at 12.647bn.
9.29am GMT
If the public's inflation expectations are accurate, then pay packets are going to be eroded by rising prices in the next few years.
This chart from the Resolution Foundation shows how real wages could start falling in 2017, as inflation overtakes nominal pay growth:
The historically low inflation that has made pay packets stretch further in recent years is coming to an end in 2017 https://t.co/CMRl8uD0qy pic.twitter.com/2YGbjCMll1
9.22am GMT
*MONTE PASCHI HALTED, LIMIT DOWN AFTER FALLING 17% IN MILAN
9.22am GMT
Now this is interesting.... three of the six policymakers at Sweden's Riksbank voted against extending its QE programme by six months.
One deputy governor wanted a smaller QE boost, while two more opposed any extension.
9.09am GMT
Shares in Italy's Monte dei Paschi (MPS) have just been temporarily suspended in Milan after plunging over 8%.
The selloff was triggered, I think, by a Reuters report showing that MPS is burning through its a11bn cash reserves faster than expected. It is now on track to run out of funds in four months time, rather than having almost a year's worth of liquidity.
Monte dei Paschi said it now expected its net liquidity position, currently standing at a10.6bn, to turn negative after four months. On Sunday the bank had forecast that a current net liquidity position, which was of a11bn, would turn negative after 11 months under a number of assumptions.
MONTE PASCHI HALTED -8.30%
Meanwhile Monte Paschi shares suspended just above all time lows
Sorry state of affairs is now seeing the light of day #montepaschi. The bank's liquidity position is in dire straits and was known before https://t.co/5RIrmlm3mq
8.53am GMT
Newsflash from Stockholm: Sweden's central bank has voted to leave interest rates at their current record low of minus 0.5%.
The Riksbank has also extended its asset-purchase scheme by another six months, to maintain its current expansionary monetary policy.
Riksbank keeps rates on hold at -0.5% but extends QE for the first 6-months of 2017
8.51am GMT
The pound is dipping in early trading, down 0.25% against the US dollar to $1.2334, and 0.4% against the euro to a1.185.
The US dollar itself is edging away from yesterday's 14-year high, but remains strong -- possibly too strong, given the political uncertainty in America.
Once again, we have to think that the market is irrationally exuberant heading into the New Year and while the economic side of the new politics is being fully priced in - US and Chinese stimulus - the political side of the economics - policy mistakes and antagonistic trade stances - are not.
The dollar has made an impressive run but our minds keep circling back to the inauguration of Donald Trump on January 20th as a possible turning point. Markets like to 'buy the rumour and sell the fact' and the swelling of asset prices, the dollar and inflation expectations could be a monster version of this trading plan. We cannot be sure until Trump is in the White House and that is in a month's time.
World First Morning Update December 21st - It's pretty slow out there - https://t.co/gLZtH0u5RZ
8.40am GMT
Have City traders clocked off for Christmas already?
European stock markets have barely shifted in early trading, and are hovering close to their highest level in 11 months.
8.16am GMT
Some breaking news: Britons are expecting inflation to pick up speed over the next few years, according to a new survey.
Reuters has the details:
The British public's long-term expectation for inflation rose to 3% in December, a more than two year high, according to a closely watched survey by polling company YouGov.
The survey for U.S. bank Citi showed that in December, people on average expected inflation in 5-10 years to reach 3%, the highest level since September 2014 and up from a November forecast of 2.8%.
UK households are expecting long-term inflation to average 3%, according to a new poll https://t.co/zQF6KgzeZl pic.twitter.com/4ghLItuPpb
8.02am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Even though its unseasonably mild, this morning's economic data may send a shiver through the City.
November is traditionally a seasonally difficult month for the public finances, and we see a deficit of 12bn on the public sector net borrowing (ex-banking groups) measure.
#UK economy today: public finances pic.twitter.com/4NZN1u9Eiz
Our European opening calls:$FTSE 7034 -0.14%
$DAX 11453 -0.10%
$CAC 4837 -0.27%$IBEX 9391 -0.18%$MIB 19233 -0.07%
#FTSE is called 13 points lower at 7030 pence at the open.
#oil prices nudge higher ahead of today's US crude inventory data. Market expects a draw of +/- 2.5mb. Brent trading @ $55.65 / WTI @ $53.60
Continue reading...