Markets rally as China 'rewrites economic plan'; pound jumps over $1.26 - as it happened
Investors welcome signs that tensions between Beijing and Washington are thawing
- Latest: China 'rewriting economic plan'
- Sterling up ahead of Theresa May's confidence vote
- Why are markets rallying?
- Introduction: China to cut US car tariffs soon
5.00pm GMT
After another BUSY day, European stock markets closed sharply higher tonight.
The Stoxx 600 index surged by 1.8% tonight, its second day of solid gains.
FTSE 100 finishes the day up 1.2% at 6886 points.
FTSE 250 up 1.8% at 17,978. Not a bad day, as it happens
Related: May could offer to stand down before election to win support in confidence vote - politics live
4.39pm GMT
Theresa May will address Conservative MPs shortly, ahead of tonight's confidence vote.
The City has already given its verdict, though, sending the pound up by 1.75 cents against the US dollar today to $1.266, recovering some of its tumble earlier this week:
The news that enough Conservative MPs have submitted a letter to trigger a No Confidence vote in is seismic. But markets have long been willing to look past heightened hard Brexit risk if events take a turn that could avoid Brexit entirely. Such thinking looks to be in play again.
For one thing, whilst Theresa May has pledged to fight the confidence vote with everything she's got, she has also toughened warnings to Brexiteers about the chance of a No Brexit. Her statement earlier noted that a new leader "wouldn't have time to renegotiate a withdrawal agreement"so one of their first acts would have to be extending or rescinding Article 50, delaying - or even stopping it".
4.26pm GMT
Despite the latest drama in Westminster, there's not as much panic as you might expect when a prime minister's job is hanging in the balance.
Professor Costas Milas of the University of Liverpool explain:
It definitely looks chaotic at the moment but we have not reached levels of national crisis yet.
Economic policy uncertainty (as measured by related articles in 650 UK newspapers) currently remains 12 times lower than what we observed the day after the Referendum vote and also 2 times lower than April 18 2017 (when Mrs May announced a snap election). With this in mind, we are still far from a large-scale crisis.
To the extent that Mrs May survives the no confidence vote tonight, it looks more likely than not that she will take a much tougher stance against Conservative Brexiteers which should also reassure our EU partners that the British prime minister remains a strong and indeed the only negotiator (our side).
Any other outcome tonight will trigger a surge in policy uncertainty which will bring to mind the events of June 24th 2016 when Mark Carney and his BoE staff had to step in to provide emergency liquidity support to boost the economy.
4.05pm GMT
The Dow is continuing to rise, now up 350 points at 24,721, as New York traders continue to hail signs of progress in the trade war.
3.57pm GMT
The war of words, and tit-for-tat tariffs, didn't deter a Chinese music streaming service from floating in New York today.
Tencent Music, which dominates music streaming in China, said Wednesday that its listing priced at the bottom of its targeted range. By selling shares at $13 each, the company is raising nearly $1.1 billion, roughly half the amount it was reportedly seeking to raise earlier this year.The shares start trading Wednesday on the New York Stock Exchange with the ticker TME.
Tencent Music is going public at a volatile time for tech stocks, which have been rattled by the unpredictable trade war between the United States and China.
3.39pm GMT
Commerzbank and Deutsche Bank have both declined to comment on those reports that the German government is working towards a merger.
German Finance Ministry spokesperson also said that they do not comment on media rumour or speculation....
3.18pm GMT
Back in Europe, shares in Deutsche Bank have surged by 5% following reports that the German government is "intensifying efforts" to help the company.
This apparently includes smoothing the way to a merger with rival Commerzbank.
The high-level discussions -- which have included Finance Minister Olaf Scholz and Deutsche Bank Chief Executive Officer Christian Sewing-- are looking at concrete ways the government can assist in a potential combination of the country's two largest lenders, said the people, asking not to be identified discussing the private deliberations.
The talks include potentially changing existing laws to make the steps necessary for a merger less costly, they said.
SCOOP: Germany is said to intensify plans for a Deutsche Bank merger with Commerzbank AG https://t.co/OqXpOksW6a via @eyk_henning @StevenArons @DNair5 @bjennen1
3.14pm GMT
Industrial firms and miners are leading the rally in Wall Street today.
Construction equipment maker Caterpillar is up 2.3%, industrial conglomerate 3M is up 1.8%, and Boeing has gained 1.34%.
2.56pm GMT
The pound is continuing to climb, and is now up 1.5 cents today at $1.264.
That makes it the best-performing major currency, as traders continue to predict that Theresa May will win tonight's confidence vote.
Which is the strongest performing major currency vs the dollar over the past 24 hours?
Step forward the Great British pound.
Then again it was comfortably the weakest on Monday, and lots of other days. So this means basically nothing. Except sterling's all over the place pic.twitter.com/RoeCXmf4Dk
2.46pm GMT
If you're just tuning in, there are three reasons why trade war optimism is trumping pessimism today.
1) The WSJ is reporting that China is revising its economic plan to give foreign companies more access. That could address some of the White House's concerns.
2.40pm GMT
Boom! Wall Street is surging in early trading, as traders grasp onto signs that the US-China trade war is cooling.
The Dow Jones industrial average has jumped by 306 points, or 1.25%, to 24,677 points.
Dow climbs 325 points at Wednesday's opening bell as investors cheer signs of progress on the US-China trade talks. S&P 500 jumps 1.3%, while the Nasdaq advances 1.4%. Watch live https://t.co/DikKI5r1SL
2.28pm GMT
Professor Christopher Balding, a China expert, says it would be very significant if Beijing is indeed rethinking its economic plans (see last post).
I'm skeptical for many reasons but this would be an enormous change and the reporters here are the best in the business. A kindler gentler 2025 is unlikely to win Trump hawks but I would laugh at the critics if material and executed https://t.co/VByTEy59mu
China promises to change #MadeInChina2025 via @bobdavis187 https://t.co/UolXQBXlfk via @bobdavis187 Key sentence: "Odds that the new plan will go far enough in addressing U.S. complaints are long." Left unaddressed: currency management, eliminating NTBs to US exports, etc...
On the @WSJ Made in China 2025 story, Faber says, "this is a positive today."
Cramer: "it is but i don't want to be faked out by them"@CNBC @SquawkStreet
2.03pm GMT
NEWSFLASH: Chinese officials are rewriting their economic plans in response to Donald Trump's trade war threats, according to the Wall Street Journal.
In what would be a major switch, Beijing is drafting a replacement for the "Made In China 2025" policy driven by president Xi.
China plans to replace an industrial policy savaged by the Trump administration as protectionist with a new program promising greater access for foreign companies, according to people briefed on the matter, in a move to resolve trade tensions with the U.S.
China plans to replace an industrial policy savaged by the Trump administration as protectionist with one promising greater access for foreign firms https://t.co/gnrJUN35vc
1.50pm GMT
Boom! The pound has risen back over $1.26, as the City becomes increasingly certain that Theresa May will win tonight's confidence vote.
May needs 159 votes to ensure victory; Sky News has been totting up the various displays of loyalty, and reckon she's pretty much there.
NEW: At least 158 Tory MPs say they will support PM tonight (and now I'm dipping out of my spreadsheet temporarily for a sandwich) pic.twitter.com/OnObTMYb1p
If May wins the vote by a narrow margin, fears of failure or a vote of no confidence in the Commons will intensify, although ironically the impact of a general election on sterling is difficult to call as it would introduce a real prospect of reversing Brexit altogether.
If May loses tonight's vote, all hell will break loose for sterling as several scenarios that were previously tail risks become more plausible, with the net effect being to substantially increase the likelihood of a catastrophic no deal outcome.
1.42pm GMT
Just in: US inflation has slowed, giving policymakers another reason not to tighten monetary policy much further.
Consumer prices were unchanged month-on-month in November, as the recent drop in the oil price fed through to people's pockets.
Fed can breathe easy? CPI in line with forecasts. Inflation still doesn't seem to be a significant threat just yet.
Paul La Monica sums it up well: No inflation threat yet.
CPI = 2.2%
CPI less food & energy = 2.2%
Gas actually DECLINED -4.2% in November, which help offset rising costs of shelter and used cars & trucks. #economy https://t.co/yWD3jBEdPU
12.58pm GMT
Soybeans are healthy stuff - packed with protein, iron and B-vitamins.
"I just heard today that they're buying tremendous amounts of soybeans. They are starting, just starting now."
The most-active soybean contract on the Chicago Board Of Trade gained 0.7 percent to $9.21-3/4 a bushel, after touching its highest since Dec. 3 at $9.23 a bushel.
Wheat was up 0.8 percent at $5.25-1/4 a bushel, having closed down 0.8 percent on Tuesday, and corn added 0.4 percent at $3.86-1/4 a bushel, having gained 0.2 percent in the previous session.
11.56am GMT
Here's Richard Partington on the City's reaction to tonight's confidence vote:
Related: Pound rallies despite new Brexit turmoil
Stephen Martin, the director general of the Institute of Directors, also criticised MPs. Martin said: "The last thing businesses needed today was even more uncertainty - and yet politics has managed to deliver on that once again.
"Many business leaders, along with the rest of the country, will be tearing their hair out at the state of Westminster politics at the moment. We are edging closer and closer to no deal as a result of constant can-kicking and internal domestic political strife."
11.46am GMT
Wall Street is expected to pick up the baton, and rally when trading begins in under three hours:
Dow futures up over 200 points as trade-talk optimism reboots https://t.co/44UcWHhvgQ
11.26am GMT
Good news. European factories have shaken off the trade war jitters.
Eurozone industrial production rose by 0.2% in October rebounding from a 0.6% decline in September. That may show that growth is still holding up, despite various headwinds.
Good news from #Eurozone 's economy: industrial production rises +0.2% MoM in November from previous month -0.6%, as expected, and +1.2% YoY from previous month +0.8%, better than expected 0.7%. It will have positive effects on 4Q GDP @graemewearden @bpprimeuk
Eurozone industry still struggled to leave the car sector shock behind in October, but it is very encouraging that capital goods output (excl. the auto sector) has picked up materially in recent months suggesting that the investment cycle remains healthy despite high uncertainty. pic.twitter.com/0YtihHcYUK
11.05am GMT
European carmakers are romping ahead today, on hopes that China will swiftly slash it tariff on American car imports.
In Frankfurt, Volkswagen has gained 2.2%, BMW is up 2%, while Daimler is 1.4% higher.
"The equity markets are taking encouragement from recent reports of a potential truce in the US-China trade dispute. China is said to be considering the removal of the increased tariff on US auto imports, with President Donald Trump saying he would intervene in the case of the arrested Huawei CFO if it would help secure a trade deal with China. Asian equity markets are all positive this morning as a result.
Of course, the newsflow regarding developments in the US-China trade dispute has been notoriously erratic and positive news can quickly give way to negative news."
10.41am GMT
Deutsche Bank reckons a Theresa May win tonight would be good for stocks....while a defeat could send investors scurrying for cover:
Deutsche Bank on what the result of tonight's no confidence vote in Theresa May's leadership might mean for markets pic.twitter.com/SNKHq68umP
10.24am GMT
The UK stock market is pushing higher.
JP Morgan: expects May to get "around 200" votes out of 315 Conservative MPs
The markets seem somewhat shell-shocked by Westminster shenanigans and the FTSE's first reaction was to move a notch higher on a mixture of hopes that Brexit might end up being delayed or potentially not even happen.
10.16am GMT
May says new PM would have to delay Brexit if she loses confidence vote - politics live https://t.co/MK6zWKd8wq
9.55am GMT
The pound may be calm now, but that would swiftly change Theresa May was forced from power by her own party tonight.
Hamish Muress, currency analyst at OFX, explains:
"Theresa May's decision to fight for her job has left the pound in a state of limbo. With rumours now driving the currency as much as facts, the rest of the day for both market watchers and political analysts will be spent adding up Tory MPs and trying to work out whether the PM will be ousted.
Uncertainty is the word of the day, and all eyes will be on tonight's vote. The prospect of a general election would not be good news, and it's no secret that sterling strives for stability."
Sterling could fall 3% if UK PM loses confidence vote says @Nomura $GBPUSD $POUND $GBP
9.50am GMT
The British Chambers of Commerce are usually a restrained bunch.
But they've absolutely let rip this morning, at the news that Theresa May faces a confidence vote tonight, potentially plunging the UK into even more political upheaval.
"At one of the most pivotal moments for the UK economy in decades, it is unacceptable that Westminster politicians have chosen to focus on themselves, rather than on the needs of the country.
"The utter dismay amongst businesses watching events in Westminster cannot be exaggerated. Our firms are worried, investors around the world are baffled and disappointed, and markets are showing serious strain as this political saga goes on and on.
9.32am GMT
Sterling is managing a small rally today, as Theresa May prepares to fight for her premiership tonight.
The pound has gained half a cent against the US dollar to $1.254, which is three-quarters of a cent above Tuesday's 20-month low.
Sterling up slightly this morning, either because traders think Theresa May will win the confidence vote, or that a defeat for her will mean a delayed Brexit, as David Gauke has suggested.
"Sterling has remained stable this morning despite a Conservative party leadership contest being triggered as Theresa May has vowed to contest the vote.
The situation remains unclear at present, with the pound set to remain under pressure in the near-term until the result of the vote is known and the impact on Brexit negotiations becomes clear."
9.12am GMT
More gloom from the UK economy: electronics retailer Dixons Carphone has posted a 440m loss -- but it insists it won't cut jobs.
My colleague Jasper Jolly explains:
The big loss came in part because the company, formed through the merger of Dixons with Carphone Warehouse in 2014, was forced to write down the value of the mobile retailing brand which is now unprofitable, by 344m.
The loss, recorded in the 26 weeks to 26 October, compares starkly with a profit before tax of 54m in the equivalent period last year. Revenues rose by 2% on a like-for-like basis during the first half, to 4.9bn.
Related: Dixons Carphone loses 440m in six months
Dixons Carphone boss Alex Baldock says @bbc5live there are no plans to close more stores or cut more jobs than those previously announced.
This despite the 440m loss after the poor performance of its Carphone Warehouse business.
8.44am GMT
Ouch! Shares in UK clothing group Superdry have plunged by over 30%, after it hit investors with a profits warning.
Superdry, known for jackets, coats and hoodies, said it had suffered from "unseasonably warm weather" in November and early December. This has wiped out 11m in profits for last month, with a similar impact expected in December unless "trading conditions improve" (ie, it gets a lot colder.
8.30am GMT
European stock markets have opened higher, fuelled by hopes of trade war di(C)tente.
The FTSE 100 is up 27 points, or 0.4%,at 6835.
8.15am GMT
Craig Erlam of trading firm OANDA says:
China has reportedly agreed to cut tariffs on US cars - from 40% to 15% - in a gesture aimed at de-escalating the trade war between the world's two largest economies.
While the details of the cut are not yet known, the move reverses the tariff hike in July in response to those imposed by the US, which is hopefully a sign of more unwinding to come. It's too early to be optimistic though as tensions remain high, with the arrest of Huawei CFO Meng Wanzhou further complicating the relationship, although Trump has suggested he could intervene, which makes the timing of the arrest all the more suspicious.
7.53am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
If I think it's good for the country, if I think it's good for what will be certainly the largest trade deal ever made - which is a very important thing - what's good for national security - I would certainly intervene if I thought it was necessary."
Asia stock mkts are rallying and Europe seen higher on trade optimism. US President Trump expressed optimism over US-China trade talks in an interview w/ Reuters. Says could intervene on Huawei that added to pos sentiment. Pound hits 20mth low as British PM risks party challenge. pic.twitter.com/Ho04rJA7Kl
Vote on Theresa May's leadership will take place on Wednesday evening with result announced shortly after.
Read full press release from 1922 Committee chairman Sir Graham Brady pic.twitter.com/vmbkRSYqKH