Angela Monaghan 

Donald Trump slams Mario Draghi’s rate cut plans – as it happened

The US President says Draghi’s plans will weaken the euro putting the US at a competitive disadvantage
  
  

President Trump said Draghi’s plan to cut eurozone rates would push down the euro making it “unfairly easier for them to compete against the USA”
President Trump said Draghi’s plan to cut eurozone rates would push down the euro making it “unfairly easier for them to compete against the USA”
 Photograph: Evan Vucci/AP

Closing summary

Mario Draghi made a market-moving speech this morning, signalling the European Central Bank is ready to cut eurozone rates and start buying bonds again. Markets are now pricing in further stimulus.

Here are the key quotes from his speech at the ECB’s forum on central banking in Sintra, Portugal:

Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools. And the APP (asset purchase program) still has considerable headroom.

If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfil our mandate — and we will do so again to answer any challenges to price stability in the future.

Draghi’s comments triggered a jump in European markets - in a reversal of earlier losses - with Europe’s STOXX 600 up 1.3% at 383. The FTSE 100 is up 1.4% or 105 points at 7,461.

His comments also triggered a drop in the euro, which angered President Trump:

Trump has since turned his attentions to China, in more positive comments that are likely to further boost markets:

In other news, Facebook announced that it intends to launch its own digital currency, Libra, in 2020. Read our full story on that here.

That’s all for today. Thank you for all the comments and please join us again tomorrow.

Wall Street opens higher

The opening bell has rung on Wall Street and US markets are up:

  • Dow Jones: +0.6+% at 26,269.91
  • S&P 500: +0.6% at 2,907.63
  • Nasdaq: +0.9% at 7,916.64

Here in the UK, the once star stock-picker Neil Woodford is under renewed pressure after Fidelity banned its customers from putting new money into a second Woodford fund.

Read the full story here:

Over in the US, house building slowed in May.

Figures from the Commerce Department showed housing starts fell 0.9% to a seasonally adjusted annual rate of 1.269 million homes, amid a drop in the construction of single family housing units.

However, data for April was revised up to show 1.281 million homes were started, and not 1.235 million as initially estimated.

Major boost for European markets after Draghi speech

Markets have received Mario Draghi’s message loud and clear and are now pricing in more stimulus. This is putting a spring in the step of investors across Europe:

  • FTSE 100: +1.2% at 7,442
  • Germany’s DAX: +1.7% at 12,295
  • France’s CAC: +1.8% at 5,490
  • Italy’s FTSE MIB: +2% at 21,036
  • Spain’s IBEX: +0.9% at 9,211
  • Europe’s STOXX 600: +1.3% at 383

Andrew Kenningham, chief Europe economist at Capital Economics, says Mario Draghi was keen to hammer home his message to investors that rate cuts and/or more bond purchases are coming when he spoke earlier in Sintra:

Mr Draghi’s speech at the ECB’s conference this morning is the clearest indication yet that the Bank will cut interest rates and relaunch its asset purchase programme in the coming months if, as we expect, measures of inflation and inflation expectations remain very low.

The media reported that ECB policymakers were “frustrated” that investors did not respond to Mr Draghi’s dovish press conference earlier in the month. So he evidently decided to set out the Bank’s plans in words of one syllable today, and this time investors have taken the hint: the euro and Bund yields fell sharply in response.

Eurozone inflation fell to 1.2% in May from 1.7% in April, final figures from the Eurostat statistics agency showed.

It was the lowest rate in more than a year, and served to strengthen expectations that the European Central Bank will soon inject fresh stimulus into the single currency bloc’s economy.

The US President’s comments come a day ahead of the Federal Reserve’s latest policy decision.

Trump has repeatedly made it clear that he would like to see the Fed cut rates, saying the US economy had the potential to “go up like a rocket” if borrowing costs were lowered.

Thus far Fed chair Jerome Powell and his colleagues on the Federal Open Market Committee (FOMC) have resisted his calls and are expected to leave rates unchanged again on Wednesday.

But for how long?

Ipek Ozkardeskaya at London Capital Group comments:

The Fed will give its policy verdict on Wednesday and is expected to maintain its policy unchanged. However, markets are obsessed with the Fed’s next move, since the Fed Governor Jerome Powell said that they are ready to cut the interest rates, if needed. The Fed expectations sharply moved from ‘patient’ to two-to-three rate cuts within the next twelve months.

Now it is time to see whether Powell meant such a drastic policy shift. One thing is clear, the market is positioned for a dovish Fed. The question is, will the Fed sound as dovish as expected by the market?

Trump adds:

President Trump slams Draghi's rate cut plans

Donald Trump is not happy about Mario Draghi’s suggestion that the ECB will cut eurozone rates. Specifically, he says the resulting drop in the euro puts the US at a disadvantage:

Bart Hordijk, a currency analyst at Monex Europe, says that markets are now firmly expecting a rate cut after Mario Draghi’s comments this morning in Sintra:

The rate cutting genie is out of the bottle for the European Central Bank after Mario Draghi this morning mentioned that further cuts in the policy rate remain part of ECB’s toolkit.

A full ECB rate cut is now priced in by futures markets for 2019 after Draghi showed his concerns about the persistently low inflation in the eurozone and the lingering risks to growth.

Also, the ECB President mentioned there is “considerable headroom” regarding the asset purchase programme, indicating the ECB armoury is far from exhausted.

Euro falls on Draghi's hint at more stimulus

The euro has fallen after Mario Draghi signalled that the European Central Bank is ready to pump fresh stimulus into the eurozone economy, with more rate cuts and/or bond purchases.

The euro is down 0.3% against the dollar at $1.185, and down 0.2% against the pound at 89.28p.

The whitepaper on Libra says it will be built on the foundation of blockchain technology, and outlines just how ambitious the plans are:

People will be able to send, receive, spend, and secure their money, enabling a more inclusive global financial system.

The aim is to make Libra as widely accepted and as easy to use as possible to create a currency that people can use with confidence and convenience in their everyday lives.

Backers include PayPal, Spotify, Uber, Lyft, Ebay, Visa and Vodafone.

Facebook's Libra: how will it work?

When Libra is launched, users will be able to download Calibra, a digital wallet that will be available in Messenger, WhatsApp, and as a standalone app.

Here is our Q&A on what we can expect from Facebook’s ambitious move into cryptocurrencies:

Updated

Here is our full story on Facebook’s Libra launch:

Facebook announces a new digital currency called Libra

Breaking: Facebook has announced plans to launch its own cryptocurrency in 2020.

The currency will be named Libra and will allow the social media site’s billions of users to make financial transactions around the world.

It marks a major strategic shift for Facebook, as it seeks to expand beyond social networking and into e-commerce and global payments.

More soon...

Markets jump on Draghi's comments

European markets are making notable gains - reversing earlier falls - after Mario Draghi hinted that more interest rate cuts and bond purchases could be on the horizon.

Neil Wilson, analyst at markets.com, says the central bank governor is now in “full dove mode”.

He adds:

The towel has been thrown in. Building on the last ECB meeting, at which some members discussed reopening quantitative easing, this looks like a clear signal that the central bank is preparing markets to expect monetary policy to become more accommodative this year.

Markets across Europe:

  • FTSE 100: +0.5% at 7,394
  • Germany’s DAX: +0.6% at 12,160
  • France’s CAC: +0.9% at 5,441
  • Italy’s FTSE MIB: +0.9% at 20,815
  • Spain’s IBEX: +0.2% at 9,153

ECB's Draghi raises prospect of rate cuts

Mario Draghi has raised expectations that the European Central Bank will pump more stimulus into the eurozone economy.

Speaking in Sintra at the ECB’s forum on central banking, Draghi said the door was still open to rate cuts and/or further bond purchases:

Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools. And the APP (asset purchase program) still has considerable headroom.

If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfil our mandate — and we will do so again to answer any challenges to price stability in the future.

Read his full speech here.

European markets are mixed this morning.

Mining stocks are providing a modest to the FTSE 100, which is up 16 points or 0.2% at 7,374.

Elsewhere:

  • Germany’s DAX: -0.7% at 12,006
  • France’s CAC: +0.1% at 5,395
  • Italy’s FTSE MIB: +0.6% at 20,740
  • Spain’s IBEX: -0.6% at 9,079

Heathrow's third runway plans: details revealed

Heathrow has published details of its controversial plans for a third runway, which include lowering part of the M25 so that the runway can cross it, rerouting rivers and relocating huge car parks.

The publication marks the beginning of a 12-week public consultation on the plans, which are opposed by climate campaigners who warn of the damaging impact that 700 extra planes will have when the runway is due to open in 2026.

Read our full story here:

One major opponent to the Heathrow expansion plans is Boris Johnson, the former London mayor and favourite to be the UK’s next prime minister.

On his return to parliament in 2015, he vowed that if it came to it, he would lie “in front of those bulldozers and stop the building, stop the construction of that third runway”.

On day two of the Paris air show, Bloomberg gives a handy summary of some of the key themes:

Here is how the European car industry has fared in recent months:

The VW Group continues to have the largest share of the new car sales market in Europe, at just under 25% in May.

It is followed by the PSA Group with 17% and Renault with 11%.

European car sales rise in May boosted by rising demand in Germany

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

New car sales in Europe rose 0.1% in May to 1.4m, ending a run of eight successive months of decline, according to the European Automobile Manufacturers Association.

It was hardly a major leap in demand but will be encouraging nonetheless for an industry under serious pressure from a tough consumer backdrop, tighter emissions rules, and the challenges posed by the shift to electric cars and driverless technology.

A breakdown of the figures shows a mixed picture for western Europe’s five biggest markets, with sales up in Germany (+9.1%) and France (+1.2%) but down in Spain (-7.3%), the UK (-4.6%) and Italy (-1.2%).

The modest rise in May was not enough to halt the trend of falling sales in the year to date, with new car sales in the EU down 2.1% between January and May, compared with the same period in 2018. Germany is the only one of the five big EU markets to post a rise over the period.

Also coming up...

Facebook is expected to say it is launching its own cryptocurrency, called Libra. It will mark a major shift in strategy for the social network site, and markets and investors will be closely watching as Mark Zuckerberg reveals the details of his latest move. We will bring you the news as it breaks.

Heathrow has published the details of its planned (and hugely controversial) third runway as it begins the latest consultation stage. More on that soon.

In the diary:

  • 10am BST: Eurozone inflation data for May
  • 10am BST: The Zew survey for June will give the latest snapshot of economic sentiment in Germany
  • 1.30pm BST: US housing starts data for May

Updated

 

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