Pound rallies against dollar on tight-lipped Yellen speech; oil prices climb ahead of Hurricane Harvey

Drillers battening down the hatches in the US ahead of Hurricane Harvey pushed up crude prices and the UK’s blue-chip oil producers in London yesterday to stop the FTSE 100 sinking into the red as the pound rallied against the dollar late on.

Rigs in key US oil producing hubs were abandoned as the category two hurricane, which could become the most powerful storm to hit the US coast since 2005, approached the mainland. Brent crude, the UK benchmark oil price, climbed as high as $52.68 per barrel as oil majors in Texas and the US Gulf of Mexico curbed production.

The FTSE 100’s oil giants moved in lockstep with the price increase with BP gaining 2.35p to 445.5p and Royal Dutch Shell ‘B’, the more commonly held type of the company’s shares in the UK, pushing up 10.5p to £21.73.

Robust metal prices on expectations of tightening supply in China helped blue-chip miners dominate the FTSE 100 leaderboard. BHP Billiton advanced 20p to £14.37 while rival Rio Tinto climbed 15.5p to £36.61.

The commodity stocks’ huge weighting stopped the wider FTSE 100 from reversing all of its gains as US Federal Reserve chair Janet Yellen’s speech at the Jackson Hole central banking conference disappointed news-hungry traders to send the dollar sliding against the pound.

Sterling’s afternoon bounce towards the $1.29 mark lampooned blue-chip companies’ solid early gains with the UK’s benchmark index closing 5.6 points lower at 7401.46.

Hopes that the merger of Standard Life and Aberdeen Asset Management will breathe new life into newly-formed Standard Life Aberdeen helped it climb 5.3p higher to 441.6p. Upgrading it to “buy”, Citi analyst Haley Tam said that the company could benefit from synergy savings and a recovery in its Asia Pacific and emerging market franchises.

Amazon announcing that it will begin slashing food prices at newly-acquired Whole Foods stoked expectations of a new player in the supermarket price war to pull down London-listed grocers. Tesco slumped towards the bottom of the FTSE 100 leaderboard, shedding 3.3p to 184.2p, while J Sainsbury dipped 1.1p to 236.1p.

On the FTSE 250, engineer Weir Group inched up 24p to £18.13 after broker Peel Hunt bumped up the Scottish firm to its “buy” list, citing improved “book-to-bill” figures in its minerals and oil and gas departments.

Analyst Harry Philips said that the two business were driving Weir’s momentum and that the revival of the shale industry in the US as the price of crude rises had proven that Weir can generate “substantial” profit growth in the $50 per barrel oil price environment.

Finally elsewhere on the mid-cap index, IT services provider Computacenter soared 137p to £10.18, a 16pc surge, after upping its full-year earnings guidance as it posted a 66pc rise in pre-tax profit. Bucking the industry’s gloomy outlook, the company’s chief executive Mike Norris said that he had “never been more optimistic about the market’s potential”.

5:56PM

Markets wrap: US Fed chair Janet Yellen speech at Jackson Hole disappoints; ECB’s Mario Draghi up next 

Mario Draghi is due to speak this evening at the Jackson Hole conference

The dollar weakening following Janet Yellen’s disappointing speech at the Jackson Hole central banking conference has pulled down equity markets in Europe this afternoon. Weakened by the euro and pound’s renewed strength against the greenback, the big exporters pared early gains with stock markets across Europe slipping into the red.

The FTSE 100’s fall was softened by the oil and mining giants gaining on robust commodity prices with Brent crude rising to as much as $52.68 per barrel as production is curbed in Texas and the US Gulf of Mexico ahead of Hurricane Harvey.

ECB president Mario Draghi is up next at Jackson Hole but again few hints over the central bank’s next moves on monetary policy are expected to be teased out of the Italian. Traders will hang onto to every word nonetheless and, as has been seen from Ms Yellen’s speech this afternoon, markets will move on what’s not said as well as what is.

IG’s chief market analyst Chris Beauchamp said this on today’s action at Jackson Hole

“As the week winds down in London, it’s one down and one to go in terms of today’s big central bank speeches. Janet Yellen has given the dollar a shove lower in her speech, but a lack of hawkish commentary and no excursions into the realms of monetary policy will leave dollar bulls disappointed.

“Little is exactly what we expect from Mr Draghi too, especially given that he, arguably, faces an even more divided committee of policymakers than Ms Yellen.”

4:25PM

Yellen speech sinks European equities

The FTSE 100 sunk as the pound rallied against the dollar

While equities in Europe held up for a little while against the effects of the pound and euro rallying on the dollar, they have since plunged as Janet Yellen’s speech ripples through the markets.

The FTSE 100 has now nearly pared all of today’s gains. After rising as much as 0.4pc in today’s session, the blue-chip index has now sunk into flat territory.

Has that speech ruined Janet Yellen’s chances of a second term?

Ms Yellen’s defence today of the post-financial crisis regulation, which Donald Trump has vowed to rip up, could have scuppered her chances of a second term but the US president may have nowhere else to turn.

His chief economic advisor Gary Cohn has been favourite to take the role but tensions between him and Mr Trump have risen since the events in Charlottesville. It has been reported this afternoon that Mr Cohn had drafted but never delivered a resignation letter due to Mr Trump’s limp criticism of the white supremacists behind the violence.

Here’s Capital Economics’ chief US economist Paul Ashworth’s take on what this means for Ms Yellen’s future.

“It is still possible that Trump could choose a third candidate. But he has already made plain his preference for someone who will keep interest rates low, so that would seem to rule out many of the more conservative Republican candidates.

“Most of the debate surrounding Yellen versus Cohn focuses on how they would differ on monetary policy. But, to be honest, we suspect that the differences between the two would be minor, not least because the Chair only has one vote on the FOMC. Arguably the much bigger difference is between their attitudes to regulation.”

3:47PM

Dollar sinks following Yellen speech; Hurricane Harvey shuts down US oil production

Stocks in the US has largely dismissed Janet Yellen’s quite dull speech at Jackson Hole with the Dow Jones climbing 0.4pc and S&P 500 jumping 0.6pc early on. As in Europe, oil and gas stocks are leading the way as the price is pulled up by the production shutdown in Texas with Hurricane Harvey on it way to the US coast.

The dollar has been the main loser from the Fed chair’s speech with the pound now heading towards the $1.29 mark against the greenback, a 0.7pc rise today.

Was that the final hurrah from Ms Yellen with Donald Trump soon deciding her future?

Here’s a little snippet from her speech:

“We can never be sure that new crises will not occur, but if we keep this lesson fresh in our memories–along with the painful cost that was exacted by the recent crisis–and act accordingly, we have reason to hope that the financial system and economy will experience fewer crises and recover from any future crisis more quickly, sparing households and businesses some of the pain they endured during the crisis that struck a decade ago.”

3:25PM

British supermarkets knocked after Amazon slashes prices at Whole Foods

Amazon’s takeover of Whole Foods was approved last night

Fresh fears about Amazon’s assault on the grocery landscape has knocked shares in Britain’s food retailers after the online giant announced that it would start slashing prices at Whole Foods as soon as next week.

Just two months ago Amazon announced its biggest ever takeoverwith an audacious £10.7bn swoop on upmarket grocery chain Whole Foods and the online giant is wasting no time in using the deal to propel its near-decade long push into groceries.

Whole Foods, which is known for its organic produce and fresh, natural produce, has more than 460 shops with the bulk of stores in the US and Canada and seven in the UK. 

Amazon has announced that upon closing its takeover on Monday it will start lowering prices of Whole Foods’ staple groceries. Industry experts say the move will broaden Whole Foods’ appeal to more customers and threaten supermarket rivals. 

Read Ashley Armstrong’s full report here

3:16PM

Yellen speech at Jackson Hole disappoints; dollar sinks

Janet Yellen gave little away in her speech at Jackson Hole

Janet Yellen’s speech has just been released to the press and it has largely disappointed traders on the currency markets. Nothing much in there on monetary policy. Her speech entitled ‘Financial Stability a Decade after the Onset of the Crisis’ was about, well, financial stability.

The main message coming out of the speech is that any changes to financial regulations should be “modest”.

Tight-lipped Yellen has sunk the dollar on the forex markets with the pound rising 0.5pc to $1.2857 against the greenback, its highest level in three days, in response to the disappointment.

I’ll try and pick out some highlights from the speech for you all. That’s if I can find any.

2:33PM

US durable goods orders distorted by Boeing figures

Boeing’s huge haul in June distorted the overall figures

There’s a tiny bit of economic news eking out of the United States ahead of Janet Yellen’s speech but it comes with a large caveat.

Durable goods orders in the US dived by 6.8pc in July, a sharp drop from the 6.4pc increase the previous month. Analysts have been quick to point out, however, that Boeing’s bumper 184 aircraft order haul in June thanks to the annual airshow in Paris has completely distorted the figures.

Excluding the transportation sector, orders actually rose above expectations to 0.5pc from 0.1pc in June.

2:03PM

Samsung heir jailed for five years on corruption charges in bribery scandal

Lee Jae-yong, pictured on Friday, has been detained since February

A South Korean court has sentenced the billionaire Samsung heir Lee Jae-yong to five years in prison after finding him guilty of offering bribes to the country’s former president and other crimes.

It said Lee was also guilty of embezzlement, hiding assets overseas, concealing profit from criminal acts and perjury.

The court said Lee hoped bribes for Park Geun-hye at the time she was president and her close friend Choi Soon-sil would secure government support for a merger that strengthened Lee’s control over the Samsung empire and its flagship Samsung Electronics at a crucial time. Park and Choi also have trials under way.

Read the full report here

1:20PM

US Fed chair Janet Yellen to speak soon; Trump to decide her fate soon

Janet Yellen is not expected to give much away regarding monetary policy

With US Federal Reserve chair Janet Yellen due to speak at 3pm, let’s have a quick look at what we can expect.

One’s suspects given the title of the speech, ‘Financial Stability’, that the hype building around today’s two appearances from central bank heads might end up being much ado about nothing.

But the surprise split at the Federal Reserve in its latest policy minutes over whether inflation is strong enough to withstand another rate hike before the end of the year gives a slight edge to proceedings. 

Reports that US president Donald Trump will soon decide whether Ms Yellen will have a second term as chair (they don’t get on famously) has added a little more intrigue to the speech.

UBS’ US chief economist Seth Carpenter commented, however, that there was “really no need to skip lunch” over Ms Yellen’s speech.

He commented:

“We suspect that Chair Yellen will take this opportunity to discuss the distinction between financial stability considerations and financial conditions more broadly. She will take stock of the signal from historically low interest rates and the forces that determine those rates.

“She will likely reiterate that post-recession regulation has made banks safer. She will allow for some adjustment of that regulation, but she will push back against the idea of wholesale financial deregulation. She will likely avoid discussion of monetary policy, as she will see no need to further communicate the FOMC’s intentions at this point.” 

Derek Halpenny, European head of global markets research at MUFG, is a little more optimistic that something a little more substantial on monetary policy can be teased out of Ms Yellen:

“Yellen’s speech is on financial market stability and given the reference to asset valuations in the minutes from the July meeting, which Fed Staff concluded had increased from “notable to elevated”, Chair Yellen may expand on this.

“Yellen may believe the markets need reminding that the Fed remains on course to raise the federal funds rate one further time this year. This would merely be a repeat of current Fed communication and hence is unlikely to prompt any major lift for the US dollar.”

12:41PM

Germany achieves near record budget surplus of €18.3bn

The figures are a boost for Angela Merkel, who is seeking a fourth term as chancellor

Germany achieved a near record budget surplus of €18.3bn (£16.8bn) in the first half of 2017, according to government figures released on Friday.

The timing of the figures could not be better for Angela Merkel, who is seeking a fourth term as chancellor in elections next month.

The surplus is the second largest Germany has recorded since reunification in 1990. The country recorded an even bigger surplus of  €28.8bn in the second half of 2000, but that was boosted by a government windall from the sale of mobile phone licenses.

By contrast, the surplus for the first half of 2017 was fuelled by higher tax revenues than expected, as the German economy continues perform strongly.

Read Justin Huggler’s full report here

12:05PM

Lunchtime update: Rising oil and metal prices lift FTSE 100

Hurricane Harvey approaching the coast of Texas has prompted US drillers to shut off production, raising oil prices

Investors have thrown caution to the wind ahead of the Jackson Hole central banking conference with European stocks rising into positive territory after a hesitant start to trading.

Ahead of the key speeches by US Federal Reserve chair Janet Yellen and ECB president Mario Draghi, the FTSE 100 has pushed up 0.4pc with troubled doorstep lender Provident Financial clawing back another 19pc after announcing a shake-up in its struggling home credit division.

Tightening supply lifting oil and base metal prices has helped the FTSE’s oil majors, BP and Shell, and mining giants, BHP Billiton and Rio Tinto, rise towards the top of the index. 

Brent crude has risen 0.6pc today to $52.37 per barrel as drillers in Texas shut off production ahead of Hurricane Harvey.

With little economics data to move currency markets, the pound is taking advantage of a nervy dollar and euro ahead of Jackson Hole, rising to $1.2837 and €1.0862 against the two currencies.

Here’s Spreadex analyst Connor Campbell’s take on today’s currency markets:

“As for the forex markets, the pound continued to be the main beneficiary from the euro and dollar’s pre-Jackson Hole reticence, rising 0.2% against both. To be fair to those currencies, they can afford such a meagre decline – against the euro sterling is still loitering near 8 year lows, while cable has seen its early summer growth rapidly unravel across August.”

Here’s the current state of play in Europe: 

FTSE 100: +0.39pc

DAX: +0.38pc

CAC 40: +0.28pc

IBEX: +0.38pc

11:29AM

Fiat Chrylser tries to again kill speculation of Chinese takeover

Fiat Chrysler shares have surged despite denials of a deal

Fiat Chrysler has again attempted to end speculation that it could sell part of its portfolio with a statement made at the behest of the Italian financial regulator in the wake of a surge in the Italian-American car manufacturer’s share price. 

Milan-listed FCA’s shares have risen almost 20pc in the past week as rumours swirled that Chinese car company Great Wall Motors wanted to buy the Italian-American group’s Jeep brand.

On Monday Great Wall said it had “an intention to make the purchase”, but soon reversed away from the statement, adding it had “not generated concrete progress as of now”.

FCA, headed by Sergio Marchionne, released a statement later that day saying it “had not been approached by Great Wall relating to Jeep or any matter relating to its business”, adding it was “fully committed” to its long-term business plan.

However, FCA’s shares have continued to rise despite the denials of a prospective deal, prompting the release of this latest statement.

Read Alan Tovey’s full report here

11:02AM

The effects of the ECB tapering its quantitative easing programme

Mario Draghi defended the central bank’s QE programme at his speech in Lindau, Germany, earlier this week

ECB president Mario Draghi has been heavily criticised for the central bank’s huge monthly asset purchases to boost growth but the central bank head vehemently defended quantitative easing at a speech in Lindau, Germany, on Wednesday. 

But how would Mr Draghi and the ECB signalling the winding down of its €60 billion-a-month quantitative easing programme affect stocks and companies?

Central banks snapping up government bonds from investors through QE has the effect of forcing them to put their money into riskier assets such as corporate bonds and stocks.

Buying large amounts of government bonds also has the effect of lowering interest rates, making borrowing cheaper and stimulating the economy, which should boost companies’ growth and thus push up their share prices.

The central bank is now beginning to believe that the currency bloc’s economic performance is strong enough to withstand removing this stimulus although Mr Draghi will likely steadily unwind the programme to avoid shocking the market, trimming purchases of bonds rather than selling off any of the existing stock of assets bought under the QE scheme.

There is also the unknown effect of removing such stimulus on market confidence, hence Mr Draghi’s very cautious approach which is expected to continue today.

10:45AM

Draghi boxed into a corner for Jackson Hole speech

Mario Draghi is expected to be tight-lipped over monetary policy

Expectations that today’s speeches at Jackson Hole will be game-changing are low but central banking figures have thrown a few surprises to the market this summer.

ECB president Mario Draghi is, however, boxed into a corner over signalling any changes. To do so would lift the euro and thus would then weigh on inflation to hold back the ECB’s plans to tighten monetary policy.

Despite buoyant growth in the eurozone of late, inflation has remained persistently weaker than the central bank’s target rate and the figures picking up is considered a key prerequisite to tapering the ECB’s quantitative easing programme.

10:10AM

Miners rise as base metals head for strongest week of gains in 11 years

Miners have been lifted as base metals head for their best week of gains in over a decade

London’s global miners are taking up many of the top spots on the FTSE 100 leaderboard with dual-listed BHP Billiton jumping 2.2pc and Anglo-Australian rival Rio Tinto following just behind, rising 1.7pc early on.

The miners have been lifted by base metals being on course for their strongest run of weekly gains in 11 years underpinned by strong demand and incoming supply curbs in China.

Troubled doorstep lender Provident Financial has continued to rally with this morning’s shakeup in its home credit division being cheered by investors. Shares have jumped 21pc, propelling it to the top of the FTSE 100 for a third consecutive day. 

That still leaves it 48pc lower than its closing price on Monday, however, just before its profit warning.

9:40AM

Spotify moves closer to listing as it strikes deal with Warner Music

Daniel Ek, chief executive officer and co-founder of Spotify

Spotify has taken a major step towards a public listing after agreeing a long-term licensing deal with Warner Music Group.

The music streaming service’s agreement with Warner, one of the world’s biggest record labels, follows more than two years of negotiations.

“It has taken a while to get here,” said Warner’s chief digital officer Ole Obermann. “But it has been worth it, as we have arrived at a balanced set of future-focused deal terms”.

Spotify has now struck deals with leading record labels Sony, Universal and Warner, and could float on the New York Stock Exchange by the end of the year. It has been reported that the company will not have an initial public offering when it does go public.

Spotify continues to grow ahead of rivals Amazon and Apple, and last month reached 60m paying customers.

Read Sam Dean’s full report here

9:23AM

German GDP confirmed at 0.6pc; consumer spending grows at joint-fastest since 2011

Strong economic growth is key for chancellor Angela Merkel ahead of next month’s federal elections 

The highlight of a very light economics schedule this morning was final German GDP figures, which confirmed that Europe’s engine room grew at 0.6pc in the second quarter.

One of the more interesting takeaways from this morning’s data is that Germany’s quarter-on-quarter consumer spending grew at 0.8pc, its joint-fastest since 2011 and a stark contrast to the UK’s measly 0.1pc spending growth shown in yesterday’s ONS release.

Pantheon Macro’s eurozone economist Claus Vistesen provided this analysis of this morning’s figures:

“Leading indicators suggest that domestic demand will continue perform strongly in the second half of the year, but we think the quarter-on-quarter run-rate in headline GDP growth will slow to 0.4%-to-0.5% quarter-on-quarter. Full year growth of above 2.0%, however, is a very good bet. “

9:10AM

Provident Financial shares bounce back after management shake-up

Provident Financial chief executive Peter Crook quit following the profit warning

Shares in Provident Financial jumped by more than 17pc in early trading as the troubled FTSE 100 company announced a shake-up in management and the return of a former managing director.

Chris Gillespie, who stepped down from the company in 2013, has been appointed as the managing director of the Provident home credit business, replacing Andy Parkinson.

Provident said it has begun a business review as it looks to “stabilise” after shares plunged more than 66pc earlier this week.

The fall, which followed a fresh profit warning, the scrapping of its dividend and the departure of chief executive Peter Crook, wiped around £1.7bn off Provident’s value.

Read Sam Dean’s full report here

8:55AM

Yellen vs Draghi better than Mayweather vs McGregor?

Will Yellen vs Draghi be as explosive as Mayweather vs McGregor 

Traders have locked onto speeches by US Federal Reserve chair Janet Yellen and ECB president Mario Draghi as the big market movers of the day. Unfortunately for European markets, Mr Draghi’s speech at Jackson Hole comes long after the closing bell on stock markets over here.

Reports last week indicated that Mr Draghi will not signal a major shift in policy at the central banking conference even though it was initially thought that he would use the event to announce the winding down of the ECB’s €60bn-a-month asset purchasing programme. 

Mr Draghi gave little away at a speech in Lindau, Germany, earlier this week but his tight-lipped dovish press conference following the latest ECB policy decision still managed to stir currency markets. Traders on the forex markets will latch onto to any hints from the ECB president.

For Henry Croft, research analyst at Accendo Markets, today’s dual for market attention between the two heads of central banks is even more tantalising than Mayweather vs McGregor.

He said:

“Key speeches from Federal Reserve Chair Yellen and ECB President Draghi will likely drive sentiment heading into the elongated weekend for UK traders, with markets looking for clarity on both central banks’ efforts to reduce accommodative policy. The US dollar and Euro be subject to increased price movement as a result.”

I agree Henry but I’m not sure today’s Jackson Hole conference will be quite as big a box office hit.

8:24AM

Agenda: Markets turn their attention to Draghi and Yellen speeches at Jackson Hole

US Federal Reserve chair Janet Yellen is due to speak at 3pm (BST) at Jackson Hole

A mixture of August inertia and investors turning their attention to the Jackson Hole central banking conference held stock markets roughly in flat territory yesterday. The FTSE 100 was an exception, climbing 0.3pc, and this morning it has inched up a little further with Provident Financial rising 6.4pc after reorganising its troubled home credit unit.

The markets’ tunnel vision has narrowed even further today with US Federal Reserve chair Janet Yellen due to speak at 3pm (BST) and the much awaited appearance by ECB president Mario Draghi a little later at 8pm. 

Neither are expected to hint at major policy shifts, despite early indications that the latter speaker would lay out the ECB’s plans to wind down its quantitative easing programme. Nonetheless, traders will be hanging onto their every word for any subtle deviations in the rhetoric. It is August after all.

Traders’ obsession with the central banks isn’t being helped this morning by a dearth of economics data. Nonetheless, sterling has moved higher against the euro, nudging up to €1.0868, while against the dollar, the pound has held its position at just over $1.28 overnight.

Interim results: Henry Boot

AGM: Sysgroup

Economics: Durable goods orders m/m (US), Revised UoM consumer sentiment (US), Revised UoM inflation expectations (US), Final GDP q/q (GER), Ifo business climate (GER)