World Markets Live - June 26
We’ll be updating you throughout the day with essential breaking news, data alerts, earnings reports and all the major market movements.
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Good morning and welcome to the live blog. Top stories so far:- Italy winds down 2 troubled banks in a move that could cost the state 17 billion euros, after the ECB warns the lenders were failing.
- Intesa Sanpaolo agrees to buy the banks' good assets, receiving over 5 billion euros from the state to help maintain its capital ratio and mitigate against the loans turning sour.
- Third Point's Daniel Loeb makes a $3.5 billion dollar bet on Nestle in a bid to shake up the world's largest packaged food maker and put pressure on management to improve margins.
- And as Google braces for a $1 billion dollar fine from Brussels, we get the view from Money 20/20, live from Copenhagen.
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It's time to normalise.That's the message from the Bank of International Settlements. In its latest report, the central bank watchdog said that with an improving economic outlook, policymakers should begin unwinding monetary easing and raising interest rates. Despite the upbeat assessment, the BIS warned that soaring debt levels and low productivity growth were persistent risks.Valentin Marinov, Managing Director and Head of G10 FX Research at Credit Agricole says he belives the Federal reserve will follow th eBIS advice to normalize quickly.He said this is to provide itself with firepower when the next downturn arrives.
Meanwhile in the U.S. the Fed's John Williams has this morning said he sees gradual rate hikes as key to further U.S. growth.In Europe, Marinov said he expects QE tapering to begin in early 2018. -
US Secretary of State Rex Tillerson says demands of Qatar from four Arab states will be "very difficult" to meet. Meanwhile, Turkey's President Tayyip Erdogan has dismissed calls to close down a Turkish military base in Qatar. Erdogan said this and other demands, which include closing Al Jazeera, are an unlawful breach of Qatar's sovereignty. The four Gulf states have blockaded Qatar for weeks, accusing it of ties to terror.Firas Modad, analyst at IHS Markit says there are two sides forming and it will be hard for the U.S. to intervene:What we are seeing is a polarization between two camps. A sort of Kurdish, Israeli and Arab camp, trying to keep the Iranians away from the eastern Mediterranean and a Iranian, Iraqi, Syrian camp that is trying to pull over Qatar to their side. -
Germany's Social Democratic Party has fallen further behind in polls ahead of the general election in September. German Chancellor Angela Merkel's Christian Democrats have opened up a 15-point lead a survey by the Emnid institute.But SPD leaders have remained defiant, urging members at a party conference over the weekend to continue the fight.We'll sit down with SPD Deputy Leader Ralf Stegner today, shortly after 10 CET. He'll talk German elections and give us his take on the possible result of Brexit negotiations.
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The Italian government has put up public cash to prevent the outright collapse of two banks in North East Italy.
It was a political decision but it was long awaited.We can talk about whether it should have be done better but the fact remains that something needed to be done.At the end of the day, we should have done this sooner and we have run the risk of running of introducing more uncertainty to the system.- Filippo Taddei, Fmr. Economy Spokesman, Democratic Party and Professor at SAIS Europe Johns Hopkins University. -
European bourses are expected to open mixed on Monday, after Italian authorities announced plans to wind up two more embattled banks at a cost of up to 17 billion euros ($19 billion).
The London FTSE 100 index is called to open 5 points higher at 7,436, the German DAX up 8 points at 12,736, and the French CAC off 2 points at 5,266, according to IG.
European stocks have been drifting lower for nearly two months.
Italian authorities said Sunday they would be prepared to spend as much as 17 billion euros as part of the closure of two regional banks, in a deal which is set to transfer the banks’ best assets to Intesa Sanpaolo for a nominal sum. The move comes two days after the European Central Bank (ECB) warned that Banca Popolare di Vicenza and Veneto Banca were likely to fail.
In the U.K., Brexit Secretary David Davis is set to outline Britain’s plans on rights for citizens of other EU countries after the U.K. leaves the bloc. Davis is also expected to seek a reciprocal arrangement that would protect the rights of British citizens living in the EU.
Meantime, trade representatives from the European Union and Mexico are set to meet Monday as part of negotiations to update the existing Free Trade Agreement.
Elsewhere, U.S. President Donald Trump is poised to welcome Indian Prime Minister Narendra Modi to the White House on Monday.
Markets in Asia edged higher on Monday amid optimism regarding global growth, while a weaker than expected U.S. inflation outlook raised questions about the Federal Reserve’s monetary policy. -
Top stories so far this morning:- Italy winds down 2 troubled banks in a move that could cost the state 17 billion euros, after the ECB warns the lenders were failing.
- Intesa Sanpaolo agrees to buy the banks' good assets, receiving over 5 billion euros from the state to help maintain its capital ratio and mitigate against the loans turning sour.
- Third Point's Daniel Loeb makes a $3.5 billion dollar bet on Nestle in a bid to shake up the world's largest packaged food maker and put pressure on management to improve margins.
- Closer to a deal? DUP Leader Arlene Foster returns to London in search of an agreement to help prop up Theresa May's government.
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Eric Lonergan, Fund Manager at M&G says Italy is in the early stages of an economic recovery and rescuing two under pressure banks is the right thing to do.He argues that the threat of the two banks is being being intentionally overplayed.The Italian banking system still needs a lot of cleaning up.But what I like about this i s finally there is some pragmatism. They are slightly caught because they have to talk up the significance of this, in order to get away with state aid. -
The leader of the DUP in Northern Ireland, Arlene Foster, is to meet British Prime Minister Theresa May in Downing Street at 10:30 a.m. London time.
Arlene Foster, leader of the Democratic Unionist Party (DUP), left. Speaking to Sky News, Arlene Foster said she was hoping to conclude two deals with the Prime Minister, one of which includes a deal on Northern Ireland power sharing. -
The Italian Government has agreed to wind down two lenders - Veneto Banca and Banca Popolare di Vicenza. The deal could cost the state up to 17 billion euros after the government said it will offer additional guarantees to cover potential losses. Speaking at a press conference, Italian Prime Minister Paolo Gentiloni says his priority is to avoid the "disorderly failure" of the two lenders.As part of the deal, Intesa Sanpaolo will absorb the good assets of the lenders. The government will provide 4.8 billion euros to help Intesa keep its capital ratio. An additional 400 million euros will be set aside to cover any risk posed by the loans turning bad.Intesa says the acquisition includes high-risk loans of around 4 billion euros, but the bank has the right to hand these back by the end of 2020 if they look to be bad loans.Intesa says the acquisition is fully neutral in terms of Intesa's core tier 1 ratio.The moves comes after a long weekend of negotiating following an ECB statement late Friday describing the two banks as 'failing'. Under this agreement, senior creditors will be protected under Italian law, rather than the European Union's new banking regulations.
Italian Prime Minister Paolo Gentiloni -
There's been chatter lately about a possible takeover of Inmarsat by Japan's Softbank.At the start of the month, shares in the satellite communications firm surged 5.5 percent. They have since fallen back.
Rupert Pearce, chief executive officer of Inmarsat Plc, poses for a photograph in the operations room at the company's headquarters in Luton. Rupert Pearce, CEO of Inmarsat says he is very happy to talk to Softbank and is a firm who has a similar view if the world.So lots of things to talk about with Softbank but we are very happy being a standalone player.Setting aside the deal talk, this week sees the launch of its European Aviation Network satellite, which the company says will bring unprecedented passenger connectivity to Europe's aviation industry.Inmarsat are Pearce says passengers are demanding Wifi on flights.People would rather have wifi than eat. People would rather have wifi than arrive on time or be reunited with nags at the end of their journey. I find that extraordinary.But the reality is people are now welded to their devices. They want connectivity. -
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Italian banks are trading strongly after news that Intesa Sanpaolo will help bail out Veneto Banca and Banca Popolare di Vicenza.The deal could cost the state up to 17 billion euros after the government said it will offer additional guarantees to cover potential losses.Intesa will absorb the good assets of the lenders. The government will provide 4.8 billion euros to help Intesa keep its capital ratio. An additional 400 million euros will be set aside to cover any risk posed by the loans turning bad.The deal is giving Italian banks a boost this morning.
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Hedge Fund Third Point has revealed it now owns more than 1 percent of Swiss food giant Nestle. Billionaire activist investor Dan Loeb has called on the world's largest packaged foods maker to shed non-core businesses. including a stake in cosmetics firm L'Oreal.In a letter to shareholders unveiling its position, Third Point also called on Nestle to buy back stock and improve margins.Nestle shares now up more than 4 percent.
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L'Oreal shares have hit a record high on the Third Point/ Nestle announcement. This after the activist investor called on the packaged foods maker to dispose of its 23-percent stake in the firm .Nestle is the second biggest shareholder in L'Oreal behind Bettencourt Meyers Family.
Glencore has sweetened its bid for miner Rio Tinto's Australian coal assets, offering to pay more than 2-point-6 billion dollars.Rio shrugged off Glencore's previous offer, saying it would recommend a lower bid from China-backed Yancoal for over 2-point-4 billion dollars. Rio argued it provided better certainty to shareholders. In an attempt to ward off Rio's concerns, Glencore said it would pay 225 million dollars in the event the deal was blocked.Lufthansa CEO Cartsen Spohr has shut down rumous that a stealth takeover of Air Berlin could be in the cards. Speculation had mounted as Lufthansa has leased 38 aircraft from its ailing rival. Spohr has previously expressed interest in loss-making Air Berlin on condition its debt pile and costs could be reduced. Other operators in the region have expressed competition concerns should a deal happen. -
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Italian bond yields have widened against German yield following the Italian deal to bail out two indebted banks.
JP Morgan has turned positive on investment banks. In its latest banks report, JP Morgan says investment banks are in better shape and under better management than ever, particularly in the U.S.Kian Abouhossein, Head of EMEA Banking Research at JP Morgan is on set and says the Italian bank deal is a positive step.He says the deal is in the interest of both taxpayers and shareholders.Abouhossein says investment banks are doing a very job on cost cutting and with a bit more volatility will help them repair margins. -
Top Republicans want a vote on the Senate healthcare bill this week. But with key Republican senators expressing doubt, it's not clear President Trump will get the victory over Obamacare he's been hoping for.More on that story here:
Trump: Not ‘that far off’ from passing health overhaul
CNBCPresident Trump said he doesn't think congressional Republicans are "that far off" on a health overhaul to replace "the dead carcass of Obamacare." -
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Nestle shares have jumped to the top of the Stoxx 600 after Hedge Fund Third Point revealed it now owns more than 1 percent of the Swiss food giant.Billionaire activist investor Dan Loeb has called on the world's largest packaged foods maker to shed non-core businesses, including a stake in cosmetics firm L'Oreal.On set, Gemma says Third Point wants Nestle to improve their profit target, divest its stake in L'Oreal and to optimize a so-called inefficient balance sheet.
Gemma says activist hedge funds don't always get exactly what they want when attempting to steer big corporations, but usually some measures are taken on board which is in turn reflected in a higher share price. -
These are the state of markets with our top headlines looking like this:- Italian bank shares rally after the government strikes a deal to wind down two troubled lenders, selling the good assets to Intesa Sanpaolo and protecting senior bondholders.
- Shares in Nestle top the European market after Third Point's Dan Loeb reveals a 3 and a half billion dollar position, along with demands to reshape the Swiss food giant.
- DUP Leader Arlene Foster returns to London in search of an agreement to help prop up Theresa May's government, as Brexit Minister David Davis vows to secure a deal of his own.
- German business morale hits a record high in June, while Angela Merkel's conservatives pull further ahead of rival Social Democrats three months ahead of the country's vote.
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U.S. stock index futures pointed to a higher open on Monday, as investors watched the solid uptick in oil prices carefully, while looking ahead to key data releases.Kicking off the week, Monday is set to bring two batches of data during trade: durable goods and the Dallas Fed Manufacturing Survey, due out at 8.30 a.m. ET and 10.30 a.m. ET respectively. Meanwhile, three bond auctions are set to take place.
In the commodities space, oil have prices posted strong gains on the back of a weaker dollar.On Monday, crude futures were posting gains of just under 1 percent, with U.S. crude hovering around $43.40 at 04.45 a.m. ET, while Brent sat around $45.91.
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The UK's biggest health food retailer is being bought by a Russian billionaire for £1.8bn.Mikhail Fridman is using his fund, L1 Retail, to buying Holland & Barrett from US private equity firm Carlyle. The deal is expected to complete in September this year.
A general view of Health food shop Holland and Barrett signage in Cheapside on March 26, 2016 in London. Source: John Keeble/Getty Images Carlyle acquired Nuneaton-based Holland & Barrett in 2010.
The chain has more than 1,300 stores around the world. -
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The European Central Bank will lend banks 12 billion euros at its weekly tender, more than the 11.52 billion euros maturing.The ECB will also allot 1.5 billion euros at its three-month long-term refinancing operation. That's more than the 1.31 billion euros maturing, a Reuters poll found on Monday.Meanwhile, the CEO of BBVA is backing calls for the ECB to get on with normalizing rates.by david.reid -
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A positive bump up at the start of the week for the Stoxx600 average of stocks across Europe. Equities have been helped by an Italian resolution to two ailing banks which are to be incorporated into Intesa Sanpaolo.
Shares in that particular bank are up more than 3 percent today.
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Two trouble Italian banks, Veneto Banca and Banca Popolare di Vicenza, are to be wound down, it was announced today. The bank Intesa Sanpaolo will absorb the good assets from the lenders, with the Italian government providing 4.8 billion euros to help Intesa keep its capital ratio.An additional 400 million euros will be set aside to cover any risk posed by the loans turning bad. The deal could cost the state up to 17 billion euros after the government said it will offer additional guarantees to cover potential losses.Commenting on the deal, a spokeswoman for German's finance minister says it is generally better to wind down unprofitable banks than to keep them alive artificially with recapitalisation.The spokeswoman added it is the European Commission's responsibility to minimise state aid to banks. -
Gold is struggling today, hitting a six-week low due to a stronger dollar.
Gold falls 1 percent to hit near 6-week low
Gold prices fell amid a stronger dollar and rise in Asian shares, ahead of a flurry of U.S. data due this week. -
The U.K.'s Conservative Party has reached a deal with Northern Ireland's Democratic Unionist Party.The DUP has agreed to support a minority Conservative government on a confidence and supply basis. The agreed deal will help prop up Prime Minister Theresa May's power. -
U.K. Prime Minister Theresa May has reached an agreement with Northern Ireland's DUP, which grants support for her minority government.The deal is based on a confidence and supply basis, which means the government will have the support of DUP politicians in votes of confidence in the government and votes on government spending.
Theresa May with DUP leader Arlene Foster. -
Arlene Foster, leader of Northern Ireland's DUP, is speaking live. She says the deal to support the minority Conservative government includes maintaining the pension triple-lock, meeting the NATO requirement of 2 percent of GDP on defence and increasing spending in Ireland. -
Arlene Foster, leader of Northern Ireland's DUP, says the U.K. government will provide an extra £1 billion to Northern Ireland over the next two years.Foster says a co-ordination committee between the Conservatives and DUP has been established. Foster says the deal was guided by the principle of acting in the national interest. -
Yields on U.K. debt have fallen following announcements that the Conservatives and the DUP have signed a deal to support a minority government.The deal provides the government with some stability. Northern Ireland will receive more money as a result. The deal has also secured the pension triple-lock for the whole of the U.K.
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The U.K. government has published details on the deal between the Conservatives and the DUP. Click here for more details.The government will provide an additional £1 billion in funding to Northern Ireland. The agreement maintains the pensions triple-lock (which ensured the national pension would increase each year in line with inflation, earnings or 2.5 percent) and the universal nature of winter fuel payments to the elderly, both of which the Conservative Party had proposed changing during the recent election.
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U.K. Prime Minister Theresa May says the deal with the DUP means the minority Conservative government will have DUP support on all votes of confidence as well as votes on the Queen's Speech, the budget, national security and all votes relating to Brexit. Other matters will be agreed on a case by case basis.May welcomes the agreement, saying it provides certainty as the U.K. "embarks on our departure from the European Union".Northern Ireland's parties must now meet and reach an agreement to re-establish a power-sharing executive government by June 29. -
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We have some U.S. economic data coming up later today.At 8:30 a.m. ET, we have May durable goods, which fell by 0.8 percent in April and is forecast to fall 0.4 percent.At 10:30 a.m. ET, we'll get the Dallas Fed's manufacturing survey for June. The previous survey reading came in at 17.2. -
The euro zone's composite PMI fell to 55.7 in June. down 1.1 points from May and below expectations. However, the reading still indicates the economy is expanding, with manufacturing activity at a multi-year high.Despite this, the average reading of PMI is at a six-year high, according to Reinhard Cluse, chief economist for Europe at UBS.Our PMI-GDP model suggests that Eurozone GDP growth, recently revised upwards to 0.6% q/q for Q1, could be 0.6-0.7% q/q in Q2 (to be released on 1 August). This implies upside risk to our projection of 0.5% q/q, (especially as the Q1 GDP upward revision has closed the previous gap between hard and soft data).But we stick to our expectation that the current impressive momentum is probably "as good as it gets" and some deceleration in activity will likely become visible over the coming months.Apolline Menut, European economist at Barclays, predicts euro zone inflation will remain around 1.3 percent, based on the PMI reading.Euro area June 'flash' composite PMIs disappointed, declining to 55.7, a five-month low, as services confidence weakened. Within composite PMIs, new orders and employment were little changed from May, close to multi-year highs.But operating capacity pressures eased together with future output, and price pressures continue to recede, following the decline in oil prices. The drop in inflationary pressures is consistent with our view that headline inflation will hover around 1.3/1.2% y/y in the coming months. -
Much focus is being placed on the economic impact of China's One Belt One Road (OBOR) initiative. The metals sector hope the plan will increase demand due to the investment in infrastructure which will result in the plan.Dane Davis, analyst for Barclays, says copper and iron ore markets need OBOR to stabilize conditions.We find that for copper, OBOR has the potential to create an additional 25kta of consumption. Assuming matching capital, that estimate rises to 125kta. For steel (and, thus, iron ore), the additional demand is less significant. We find that OBOR initiatives can raise steel demand by only 2mta; with matching capital, 10mta.
In other words, given current investment levels, China’s One Belt One Road is not likely to have a major effect on global metals demand.Copper spot prices are up almost 4 percent so far this year. In stock markets, the basic resources sector of the Stoxx 600 is down 4.03 percent year-to-date.
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The Senate Republican's health-care reform bill doesn't add up. That's according to North Dakota's Democratic Senator Heidi Heitkamp.You have to look at it from a mile high and they're trying to tell you we're going to keep coverage the same, no one's going to get hurt, and we're going to take billions of dollars out of health care.
Once it's parsed and people have a chance to look at it, it is only going to get more difficult.
The Senate GOP health bill is worse than the House version, Democratic Sen. Heitkamp says
Nothing in the Senate Republican's health-care bill "adds up," Heitkamp tells CNBC. -
Germany's transport ministry expects the auto industry to should the cost of updating polluting diesel cars. That's according to Reuters citing government and industry sources.The ministry sees the cost of updating software in diesel cars being between 1.5 and 2.5 billion euros. Cars in need of the update include those with European emission standards of Euro-4, Euro-5 and Euro-6.The autos sector of the Stoxx 600 is up more than 1 percent today and more than 3 percent year-to-date.
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U.S. May durable goods orders fell 1.1 percent. This is worse than the 0.6 percent expected and larger than April's fall of 0.9 percent.Durable orders excluding transportation was up 0.1 percent. Orders excluding defence was down 0.6 percent and general machinery orders were up 0.6 percent.Also, the Chicago Fed published its national activity index. This fell 0.26 points in May, versus a rise of 0.57 points in April. -
The dollar index turns negative following the weaker-than-expected U.S. May durable goods data. The euro has extended gains against the dollar following the release, hitting a one-week high of $1.213, although the dollar remains up against the yen and Swiss franc.
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President Trump is on Twitter this morning to complain about the Democrats, calling them obstructionists.This comes as opposition to the Republican health care reform bill mounts. Five Republican senators so far have come out against the Senate GOP plan; the Republicans can only afford to lose two votes. -
U.S. durable goods orders fell 1.1 percent in May, below consensus expectations.The total orders were pulled down by falls in the civilian and military aircraft components, which dropped 31 percent and 12 percent month on month, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.Core capital goods orders dipped 0.2%, reversing the April increase and, hence, extended the recent flat trend. In recent years core capex orders have lagged oil prices by a few months; if that relationship continues to hold, orders will remain steady through the summer and then decline modestly in the fall.A repeat of the 2015/16 meltdown is not in the cards. The strong capex intentions component in the NFIB survey suggests core activity should outperform the signal of the oil price data, but we'll believe that when we see it.Jim O'Sullivan, chief U.S. economist at High Frequency Economics also weighed in on the data.In short, a bit weaker than expected, including for capex items, although the data are volatile and through the volatility trends have generally been up -- modestly at least. -
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Nestle shares are at a record high today, following news that activist investor Dan Loeb and his company Third Point have bought a 1.3 percent stake in the Swiss chocolate maker.Shares are up more than 4 percent.
Nestlé shares hit record after Daniel Loeb’s fund targets group
Nestlé is under pressure to boost profitability as the global food industry reacts to pressures from failed Kraft-Unilever deal, FT reports. -
U.K. Prime Minister May has shed some light on her approach to Brexit in parliament today.She told policy makers that she wants to completely reassure all EU citizens currently in the U.K. that the government wants them to stay, adding that family members of EU citizens living in Britain who arrive before the cut off date will be able to apply for settled status, and those who arrive after the cut off date could still stay in the country.She added that the freedoms of Irish citizens in Britain will be preserved and said she seeks to protect U.K. state pension payments for Britons living in the EU.She added that she needs a reciprocal agreement for the more than 1 million Britons living in the EU before she can ensure rights for EU citizens in the U.K. -
Shares in Avis are up sharply today on news that it will manage Alphabet's fleet of self-driving cars.Bloomberg reports that Avis has reached an agreement with Waymo, the self-driving car unit of Alphabet. The deal with Avis is limited to Waymo's vehicles in Phoenix.Shares in Avis Budget Group are up 12 percent. They were up more than 20 percent, hitting a day's high of $29.32.
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The U.S. Supreme Court has agreed to hear President Trump's appeal against the ruling blocking the travel ban on six Muslim-majority countries, Reuters reports.The Supreme Court has lifted most of the injunction that blocked the travel ban and grants the president's emergency request which allows parts of the refugee ban to go into effect. -
The CEO of Lloyd's of London has announced it will cut around 10 percent of U.K. staff. This is because the company will submit an application to Brussels to create a subsidiary company in September.Creating a subsidiary will allow the company to retain passporting rights post-Brexit, in order to continue to do business inside the single market. -
Germany's foreign minister Sigmar Gabriel says both sides are violating the ceasefire agreement in Eastern Ukraine. He describes the situation as "very difficult", Reuters reports.He adds that he is not optimistic about resolving the crisis in Eastern Ukraine in the short-term. -
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Food and beverages was the best performing sector of the Stoxx 600, thanks to Nestle shares hitting a record high following news that activist investor Dan Loeb's Third Point firm has invested in the company.Banks were the next best sector, helped by the rescue of two troubled lenders. Here are the best and worst stocks on the index. -
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