European markets end lower
A downbeat end to the week for equities saw declines in most major markets. Worries about the Republican’s prospects of getting their tax cut proposals left Wall Street lagging, while some downbeat results and broker downgrades undermined European shares. The final scores showed:
- The FTSE 100 finished down 6.26 points or 0.08% at 7380.68
- Germany’s Dax dropped 0.41% to 12,993.73
- France’s Cac closed 0.32% lower at 5319.17
- Italy’s FTSE MIB fell 0.51% to 22,092.95
- Spain’s Ibex ended down 0.78% at 10,010.4
- But in Greece, the Athens market added 1.58% to 712.46
On Wall Street, the Dow Jones Industrial Average is currently down 82.9 points or 0.35%.
On that note it’s time to close for the day. Thanks for all your comments, and we’ll be back next week.
Carillion is one of the day’s biggest fallers following another profit warning. Jill Treanor writes:
Carillion, one of the construction companies working on the HS2 London to Birmingham rail line, is racing to refinance its business after issuing its third profit warning in five months and suffering a collapse in share price.
Shares in the company, which is at the heart of several major building projects in the UK, were suspended eight times on Friday after the shock update to the City that it would breach the terms on its existing lending at the end of the year.
The shares crashed 60% when the stock market opened on Friday – to their lowest ever levels – and were still down nearly 40% near the end of the day’s trading. At this price, about 25p, the shares are barely a tenth of the 240p level seen at the start of 2017 and values the company at just £120m.
Carillion has debts of £1.6bn and analysts expect the company – known for its work on expanding the main stand at Liverpool’s Anfield football ground and its ongoing development of Battersea power station – to have to ask its lenders to swap their debt for shares.
The company employs 30,000, two-thirds of them in the UK, and has contracts with the Highways Agency, Network Rail and the Ministry of Defence. It is building hospitals including Merseyside’s Royal Liverpool and also has a support services operation which has maintenance contracts for buildings.
The government, one of its major customers, said it was being kept informed.
The full story is here:
Updated
Meanwhile over in Athens thousands of Greeks chanting anti-austerity and anti-capitalist slogans are marching through the city centre to mark the anniversary of the 1973 Polytechnic uprising against military rule, writes Helena Smith.
Greek riot police, bracing for possible violence, are out in force. Communist party members, holding red flags aloft, are leading the protest and using it to decry the”barbaric” policies enforced on workers.
“Brussels you won’t be able to disentangle yourself from the left” is among the chants currently wafting over the capital. Anti-US slogans are also rife with demonstrators deploring the agreements the leftist led government recently signed with Washington during official White House talks between the Greek prime minister Alexis Tsipras and US president Donald Trump.
Global markets are shrugging their way towards the end of the week, says Connor Campbell, financial analyst at Spreadex:
The Dow Jones dipped 50-ish points after the bell, keeping the right side of 23400 as investors (very lightly) fretted over the Republicans’ ability to get their tax plan through Congress. The dollar, meanwhile, could only ease, rather than eradicate, the day’s losses, with the greenback down 0.1% against the pound, 0.2% against the euro and 0.5% against the yen as investors process the news that Robert Mueller subpoenaed more than a dozen of Trump’s campaign officials back in October.
Over in the Eurozone the euro’s gains continued to cause a headache for the region’s indices. The DAX slipped 0.1%, the CAC 0.4% and the IBEX 0.8%, cementing a rather miserable week for the trio.
As for the FTSE, despite a relatively flaccid performance by the pound, and the reversal of early losses in the commodity sector, the UK index just couldn’t get anything going this Friday. Instead it sat flat around 7390, preventing from taking off thanks, in part, to United Utilities and Severn Trent.
The UK water sector was hit by a downgrade on United Utilities from HSBC analysts, who cut their recommendation from buy to hold.
Bitcoin hits record high of nearly $8000
Bitcoin reached an all-time high of $8000 after reports that a software upgrade which could split the cryptocurrency in two was going ahead.
The price had fallen last week on suggestions the upgrade would be suspended. The move would mean owners of Bitcoin would in theory also hold the new spin-off, and sell it at a profit.
Bitcoin has risen more than 700% this year and is on track for its best week since July. David Cheetham, chief market analyst, at XTB said:
Major fundamental concerns remain as to the efficacy of Bitcoin but for now price remains in a strong uptrend and many observers experiencing FOMO (fear of missing out) are looking at any drops as buying opportunities.
Wall Street opens lower
After showing good gains on Thursday, US markets are on the slide again.
With the latest results season coming to a close and no major economic data due, investors are focused on political issues, especially concerns about the Republicans’ ability to get their tax reforms through Congress.
The Dow Jones Industrial Average is down 66 points or 0.28% while the S&P 500 opened 0.14% lower. But the Nasdaq Composite has bucked the trend, opening broadly flat.
One standout performer is retailer Abercrombie & Fitch. After more than a year of declines, it reported strong quarterly sales growth of 4% and forecast postive sales for the forthcoming holiday period. Its results were boosted by a strong performance from its surfwear brand Hollister.
The company, which failed to sell its business in July, saw its shares jump 20% following the latest figures.
Shares in Carillion have fallen from about 240p at the beginning of this year to 28p today:
US housing starts hit one-year high
US homebuilding jumped to a one-year high in October as communities hit by hurricanes started to replace homes damaged by flooding.
Housing starts jumped by 13.7% to a seasonally adjusted annual rate of 1.29 million homes, the Commerce Department said. It was the highest level since October 2016.
Economists polled by Reuters had forecast a smaller number, at 1.18 million homes.
The increase in starts ended three consecutive monthly declines.
Oil price rises but set for a weekly fall
Benchmark Brent crude oil is currently up 1.2% or 72 cents at $62.05 a barrel.
But it is still on course for the first weekly loss in six, as Russia’s reluctance to cut production fuels concerns of oversupply. Prices are expected to end the week 2% to 3% lower than the end of last week.
Tamas Varga, analyst at PVM Oil Associates, said the rise today shouldn’t be overplayed.
After five days of continuous losses, an upside correction is always on the cards. Such a jump, however, will not mean a change of heart.
Over in Greece, EU auditors have given a mixed verdict on the handling of the country’s three bailouts. Helena Smith reports from Athens:
The three financial lifelines thrown Greece in 2010, 2012 and 2015 achieved their overarching goal of averting default but were far from successful in other respects, EU auditors have concluded.
Issuing their first in-depth look into the cash- for-reform programmes, the independent Luxembourg-based court of auditors said Greece’s continued inability to finance itself on international markets “remains a challenge.”
Design and implementation of economic policies was poorly judged, the watchdog claimed, with Greece’s economic depression being much deeper than ever envisaged as a result of tough fiscal measures.
It added:
The [EU] commission did not comprehensively consider Greece’s implementation capacity in the design process and thus did not adapt the scope and timing accordingly.
More than €350bn has been poured into Greece by the EU and IMF to keep the country afloat.
The Greek government, which is preparing to exit the country’s third €86bn rescue programme in August 2018 – and is desperately trying to rally spirits ahead of that – did not comment on the report. It is far from sure if Greece will require further aid when its current programme officially expires.
FTSE rises as afternoon session gets underway
The FTSE 100 has reversed its earlier losses and is now up 15 points, partly because the pound’s earlier gains have largely been erased.
The FTSE tends to do better when the pound is weaker, because so many of the companies listed have significant overseas earnings.
Here are the current scores across Europe:
- FTSE 100: +0.2% at 7,402
- Germany’s DAX: +0.1% at 13,065
- France’s CAC: +0.2% at 5,345
- Italy’s FTSE MIB: -0.2% at 22,158
- Spain’s IBEX: -0.3% at 10,058
- Europe’s STOXX 600: -0.1% at 384
The pound has lost some of its earlier sparkle and is now trading roughly flat against the dollar at $1.3197.
It has also slipped agains the euro, down 0.2% at €1.1186.
David Madden, market analyst at CMC Markets, explains the gravity of the situation facing Carillion and its shareholders:
Shares in Carillion have collapsed yet again as the troubled construction company stated it will breach its banking covenants. The company also lowered its profit outlook again and stated that their asset sale programme isn’t going as fast as they had hoped.
Things have gone from bad to worse at Carillion, and the business is in dire need to cash to keep the lights on. Even though the business has plenty of work in the pipeline, it must scramble for cash in order to keep its head above water.
The UK government is one of Carillion’s biggest clients and is monitoring the firm’s troubles.
Reuters quotes a spokeswoman at the Cabinet Office:
The company has kept us informed of the steps it is taking to restructure the business.
We remain supportive of their ongoing discussions with their stakeholders and await future updates on their progress
“Carillion horror show continues”, is how Nicholas Hyett, equity analyst at Hargreaves Lansdown, describes the latest developments at the construction firm.
He adds:
Some sort of recapitalisation was inevitable, but a possible debt for equity swap, with debt even higher than the group had anticipated, is probably as bad as anyone would have guessed.
The group has made some progress on asset sales, and it sounds like some cost savings are being made. It’s not what the group expected though, and it’s clearly not enough. It’s also probably irrelevant given the state of the balance sheet, with net debt already many multiples of the group’s market capitalisation.
Carillion shares plunge after third profit warning
Carillion shares plunged as much as 60% in early trading after the construction group involved in HS2 and Battersea Power Station issued its third profit warning of the year:
The group now expects that a combination of delays to certain PPP disposals, a slippage in the commencement date of a significant project in the Middle East and lower than expected margin improvements across a small number of UK Support Services contracts, partially offset by cost savings initiatives realised in the fourth quarter, will lead to profits for the year to 31 December 2017 being materially lower than current market expectations.
Shares are now down 37% at 26p.
The company, which is struggling to cope with a large debt pile and badly-performing contracts, said the board expects a covenant breach at the end of December and will need to implement a recapitalisation plan.
Keith Cochrane, interim chief executive, said:
Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt and rebuild the balance sheet.
Constructive dialogue is continuing with our financial stakeholders, and I am grateful for their support. I remain focused on addressing this issue before my successor, Andrew Davies, takes up the role on 2 April 2018.
Love it or hate it, Black Friday is almost upon us.
In recent years Britain has embraced the American tradition where retailers slash prices the day after Thanksgiving.
British shoppers are expected to spend £10.1bn in the week of Black Friday, which falls on 24 November this year.
Just in case you’re interested, here is a piece we’ve done on some of the best deals going this year:
News of Greggs controversial decision to replace the baby Jesus with a sausage roll in an advent calendar has rippled across the Atlantic:
Greggs, which specializes in the popular delicacy, apologized for replacing the baby Jesus with a pastry wrapped around sausage meat. https://t.co/R4lFlZWtZd
— USA TODAY (@USATODAY) November 16, 2017
Draghi concludes by returning to one of his favourite themes, saying eurozone governments should do their bit to secure future economic stability by getting their “fiscal houses in order”.
The ECB will do our bit, you do yours, is the message:
ECB’s mandate is framed in terms of price stability, as this is the best contribution that we can make to the welfare of citizens. Ensuring price stability is a precondition for the economy to be able to grow along a balanced path that can be sustained in the long run. This is the guiding principle of all our monetary policy decisions.
With the recovery ongoing, now is the right moment for the euro area to address further challenges to stability. This means actively putting our fiscal houses in order and building up buffers for the future – not just waiting for growth to gradually reduce debt.
It means implementing structural reforms that will allow our economies to converge and grow at higher speeds over the long term. And it means addressing the remaining gaps in the institutional architecture of our monetary union.
The full text of Mario Draghi’s speech is available on the ECB website:
Speech Mario Draghi: Monetary policy and the outlook for the economy https://t.co/QmtGNrFobj
— European Central Bank (@ecb) November 17, 2017
Updated
Draghi: not at point where inflation can be self-sustained
Here comes the “but” part of the ECB president’s speech.
Mario Draghi says that despite solid growth and rising employment, inflation is not at the point where it will pick up without stimulus from the central bank. (Eurozone inflation dipped to 1.4% in October from 1.5% in September.)
He says the recovery thus far has been highly dependent on the bank’s support.
The key quote:
We are not yet at a point where the recovery of inflation can be self-sustained without our accommodative policy. A key motor of the recovery remains the very favourable financing conditions facing firms and households, which are in turn heavily contingent on our policy measures.
An ample degree of monetary stimulus remains necessary for underlying inflation pressures to build up and support headline inflation over the medium term.
The ECB announced last month that it would slow its bond-buying programme to €60bn to €30bn a month starting from January.
However, it extended the support for at least another nine months to the end of September 2018, “or beyond, if necessary,” Draghi says.
The key message here is that ECB policy is likely will remain supportive for some time to come.
Updated
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Draghi: lower eurozone unemployment is 'remarkable success story'
Draghi is running through stats to illustrate how much the employment picture has improved in the eurozone.
He says it “a remarkable success story” that unemployment has come down in the single currency-bloc at the same time that participation in the labour market is rising, as more women and older people enter the workforce.
Consumption is being supported by a virtuous circle between rising labour income and rising employment. Employment in the euro area has reached its highest level ever, while unemployment has fallen to its lowest rate since January 2009.
Importantly, this has taken place against the backdrop of a rising participation rate, which is now 2 percentage points above its pre-crisis level. This has been driven in particular by the increased entry of women into the workforce, whose participation rate has risen by 4 percentage points since 2008 and reached an all-time high.
It has also been strongly driven by older people. Since the start of the crisis, the participation rate has increased by 3.6 percentage points for people aged 50-54, 13.6 percentage points for 55-59 year olds and 17.1 percentage points for 60-64 year olds.
Draghi: eurozone recovery is 'robust'
Mario Draghi, president of the European Central Bank, is speaking in Frankfurt at the European Banking Congress.
He begins on a positive note on the outlook for the eurozone economy:
The euro area is in the midst of a solid economic expansion. GDP has risen for 18 straight quarters, with the latest data and surveys pointing to unabated growth momentum in the period ahead.
From the ECB’s perspective, we have increasing confidence that the recovery is robust and that this momentum will continue going forward.
The FTSE is suffering from the stronger pound this morning, Spread Ex’s Connor Campbell says:
The pound’s up 0.4% against the greenback, with the dollar losing its House tax plan-passing buzz, as Robert Mueller subpoenaed more than a dozen Trump campaign officials. Against the euro, meanwhile, sterling nudged 0.2% higher, keeping above €1.12.
This meant the FTSE continued to founder around the 7380 mark, dipping 0.2% as it struggles to escape its 6-week lows. As has been the case all week, commodities are doing their part, with a smattering of red among the oil and mining stocks helping suppress appetite in the UK index.
FTSE 100 falls in early trading
The FTSE 100 is down 17 points this morning, and the biggest faller among its major European peers:
- FTSE 100: -0.2% at 7,370
- Germany’s DAX: +0.2% at 13,074
- France’s CAC: -0.02% at 5,335
- Italy’s FTSE MIB: -0.01 at 22,204
- Spain’s IBEX: -0.1% at 10,074
- Europe’s STOXX 600: +0.02% at 385
Stiglitz interview: 'Trump has fascist tendenices'
Joseph Stiglitz, the Nobel prize-winning economist, has been interviewed by the Guardian’s economics editor, Larry Elliott, and it’s well worth a watch if you missed it:
The agenda: Pound rises against dollar; markets await Draghi speech
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The pound has a spring in its step this morning, hitting a two-week high against the dollar of $1.3252.
Sterling is benefitting from a sharp sell-off of the dollar triggered by reports in the US that special counsel Robert Mueller served President Trump’s election campaign a subpoena in mid-October, requesting documents relating to Russia.
As CMC Markets’ Michael Hewson explains, positive sentiment earlier in the day (generated by the passing of a bill in the House of Representatives aimed at cutting US company rates from 35% to 20%), quickly evaporated:
The passing of yesterday’s bill helped the US dollar close near its intraday peaks yesterday, while also helping push up US yields with the 2 year yield hitting its highest level since October 2008.
These US dollar gains were pretty short-lived and soon gave way to selling on reports that Trump officials had been subpoenaed by special attorney Robert Mueller as part of the investigation into Russian involvement in the Trump Presidential campaign.
This sent the US dollar sharply lower against the yen, dragging on the Nikkei as well as pushing the euro above 1.1800 and the pound to a two week high above 1.3200.
The pound is currently up 0.3% at $1.3229 and is up 0.1% against the euro at €1.1223.
The dollar index – which measures the greenback against a basket of other major currencies - is down 0.2%.
Also coming up today...
- 8.30am GMT: Mario Draghi, president of the European Central Bank, is giving a keynote speech at the European Banking Congress in Frankfurt
- 1.30pm GMT: Housing starts data for October will give the latest snapshot of the US property market
Updated
