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Markets slump as Trump tax plan disappoints and ECB keeps rates on hold

Mario Draghi, president of the European Central Bank - Bloomberg
Mario Draghi, president of the European Central Bank - Bloomberg

4:40PM

Taylor Wimpey apologises to customers 

Taylor Wimpey has apologised to customers and set aside £130m to resolve disputes over homes that were sold on leases that stipulated their ground rents would double every 10 years, writes Isabelle Fraser.

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The FTSE 100 housebuilder sold leasehold properties with the "doubling" leases between 2007 and 2011. 

More here.

4:01PM

US stocks open higher

Wall Street stocks edged higher early ahead of earnings reports from Amazon and other technology giants as the European Central Bank kept interest rates low, AFP  reports.

The ECB, as expected, left key interest rates at historic lows and mass bond-buying unchanged. President Mario Draghi pointed to overall economic improvement in the eurozone, although inflation remains low.

Several key quarterly earnings reports will be released after the market close from Amazon, Google parent Alphabet and Microsoft, among others.

About 10 minutes into trading, the Dow Jones Industrial Average was at 20,982.61, up less than 0.1 percent.

3:31PM

European stock markets claw back some of their losses

European markets came off their early lows Thursday after Wall Street opened steady ahead of a spate of new earnings reports, traders said, AFP reports.

After starting the session in negative territory, the main European stock markets at least partially clawed back some of their losses later in the day.

They managed to find some support from the steady opening on Wall Street, where investors were awaiting a volley of corporate earnings reports and economic indicators, said analysts at brokerage Charles Schwab in a note to investors.

2:50PM

'Threat of protectionism may be diminishing'

ECB chief Mario Draghi said Thursday that the threat of protectionism may be diminishing, sounding a cautiously optimistic tone amid global fears that Donald Trump's America First policy could spark trade wars, AFP reports.

Asked what he had learnt about the Trump administration's economic policies during a recent trip to the US, Draghi replied: "One has to be very tentative in this, one thing that may have come out of the meetings is that perhaps the risk of trade protectionism may have somewhat receded."

Trump
Donald Trump

Draghi did not go into details, but his assessment came at a time when major international organisations including the World Bank, IMF and OECD have been warning about rising risks of protectionism.

With a nationalist economic agenda, the Trump administration has vowed to upend decades of prevailing trade policy by renegotiating or scrapping trade agreements, imposing hefty tariffs and moving to bilateral trade agreements.

2:27PM

More analysis

Reto Foellmi, Professor of International Economics at the University of St.Gallen in Switzertland, said: "The ECB’s estimates on the current economic and inflationary situation are understandable, but I doubt whether the continuation of negative interest rates really achieves its aims.

"Bank lending is still crucial for firm lending in Europe. Since the negative interest rate puts pressure on banks, lending for firms will also be impacted. Rising interest rates towards zero percent present a favourable risk-return ratio in the current situation.”

2:25PM

'A confusing and conflicting performance from Draghi'

That's the reaction of James Asthey, a senior investment manager at Aberdeen Asset Management.

“This was a pretty confusing and conflicting performance from Mr Draghi," he said. "He’s had to acknowledge that the growth outlook has improved and the risks to the outlook are more balanced without following that through into the inflation outlook.

"This is confusing the market and so it is whipping around as traders hang on every word. His suggestion that the ECB will not be able to improve its securities lending programme has further confused matters leading to a rally in German bonds.

“At this stage, it’s better to just look beyond today. There’s enough from today to suggest that we might see a material change in policy in June. But no one should get ahead of themselves. There’s clearly not enough consensus on the Governing Council to allow Mr Draghi to give an assured performance today.”

2:22PM

'Something for everyone'

2:12PM

'The inflation outlook has not improved sufficiently'

Here's Ranko Berich, head of market analysts at Monex Europe:

“The crux of today’s presser was the fact that even though macro growth has improved and certain Governing Council members are more 'sanguine' about economic risks, the inflation outlook has not improved sufficiently for the ECB to formally consider an end to QE. Barring a wholesale change in opinion among the Governing Council against Draghi’s position, ECB QE is here to stay for now.”

2:05PM

Euro: Up and down

The euro briefly jumped against the dollar, rallying as high as $1.0920 as Draghi speaks to journalists in Frankfurt. However, it didn't last long, and the euro is now back below $1.09.

1:59PM

Eurozone recovery 'increasingly solid'

The European Central Bank sees the eurozone enjoying a firming recovery threatened by fewer risks of upset, president Mario Draghi has said.

"Incoming data since March confirm that the cyclical recovery of the euro area economy is becoming increasingly solid, and that downside risks have further diminished," Draghi said, in remarks that sent the euro up briefly against the dollar.

1:19PM

Barclays threatened with investor revolt at AGM

Barclays is facing a shareholder rebellion against its beleaguered boss Jes Staley and Sir Ian Cheshire, the man it hired earlier this year to chair its UK business, writes Ben Martin.

Two influential investor advisory firms have raised concerns about Mr Staley and Sir Ian ahead of Barclays’ annual general meeting on May 10.

More here.

1:10PM

Quick analysis

This is from Ana Boata, a European economist at Euler Hermes:

The Eurozone economy is strengthening, but we don’t expect the ECB to start raising interest rates until 2019. The most likely scenario is that interest rates increase to two per cent by 2022, which will push interest payments for the total private sector up by €160 billion compared to their current level, a moderate increase.

Even in a ‘hard normalisation’ scenario with an interest rate hike of up to 4.25 per cent over this period, the relative interest burden will fall short of the 2008 peak and pre-crisis levels.

12:59PM

EBC leaves things unchanged

The European Central Bank left its ultra-easy policy stance firmly in place on Thursday as inflation continues to undershoot its target into the fifth straight year, even as economic growth is on its best run since the global financial crisis, Reuters reports.

The ECB even maintained its bias for further policy easing, leaving the door open to further rates cuts or an increase in asset buys. This is in line with market expectations but at odds with calls from Germany, the euro zone's economic powerhouse, for a gradual reduction of stimulus.

Mario Draghi, president of the European Central Bank (ECB) - Credit: Alex Kraus/Bloomberg
Mario Draghi, president of the European Central Bank (ECB) Credit: Alex Kraus/Bloomberg

Still, ECB President Mario Draghi may acknowledge the bloc's improved growth prospects at a 1230 GMT news conference, pointing to solid growth momentum, economic sentiment hitting a 10-year high this month, and receding political risk after a pro-euro centrist candidate won the first round of France's presidential vote.

12:49PM

ECB decision incoming...

In the meantime, here's a preview from IG Group's Josh Mahony.

“Today sees Mario Draghi take centre stage again, in what is likely to be yet another volatile day for the euro. Much has changed since the last meeting in March, including the first round French election results coming in over the weekend.

"The decision-making in March was dominated by two issues: political risk and inflation. With headline inflation falling to 1.5%, core CPI down to 0.7%, and prospects of a relatively carefree EU, to some extent we have seen both risks now eased significantly.

“The big question is when we will hear from the ECB regarding a potential tapering of the current asset purchase facility. Draghi has already said that the eventual unwinding of the quantitative easing (QE) programme will involve a tapering of the asset purchase size, the timeline of which we will have to see laid out in advance.

"With that in mind, it is always worth noting that at some point, we will face the repercussions of a more hawkish Draghi, and the market response to such an event. Will it be this week? Probably not."

11:56AM

UK retail sales expand

British retailers reported the biggest increase in sales volumes since mid-2015 during April, according to an industry survey on Thursday that may help to allay fears of a worsening consumer-led slowdown.

The Confederation of British Industry's monthly retail sales balance spiked to +38 from +9 in March, confounding expectations for a decline to +6 in a Reuters poll of economists.

The upbeat figure contrasted with official data that showed retail sales posted their biggest quarterly fall in seven years in the first quarter of 2017, reinforcing economists' view that household spending, the main driver of the economy, is now slowing sharply.

11:36AM

Spanish unemployment figures

The latest figures have shown that Spain's first-quarter jobless rate rose for the first time in two years, mainly due to a lull in the tourism sector, AFP reports.

Unemployment from January to March 2017 stood at 18.7 percent, the national statistics institute INE reported.

This represents a slight increase from the previous quarter when the jobless rate came in at 18.6 percent after having dropped continuously since the first three months of 2015.

11:18AM

European shares fall

European shares retreated from 20-month highs on Thursday with financials and commodity-related stocks the main drag on the benchmark index, Reuters reports.

The pan-European STOXX 600 index was down 0.4 percent in early trading, after having hit a fresh 20-month high in the previous session. France's CAC 40 also fell 0.5 percent, just off Wednesday's nine-year high.

11:09AM

'Draghi to stamp on hawkish speculation'

Here's Neil Wilson, senior market analyst at ETX Capital:

“EURUSD is struggling to hold above the $1.09 handle this morning as sentiment remains mixed and euro bulls look for the ECB to provide the ammunition to push higher. They might be disappointed.

"The pair has so far failed to maintain much momentum since the French election result produced a wave of relief across markets that helped to send EUR higher against its peers.

"It’s found it tougher going against the dollar than versus the yen for instance, but with the European Central Bank meeting today there is a potential gear shift in store, although this looks unlikely for a number of reasons.

 Mario Draghi  - Credit: REUTERS/Ralph Orlowski
Mario Draghi Credit: REUTERS/Ralph Orlowski

"The ECB is not expected to alter policy at this meeting but a Reuters report citing three sources close to the Governing Council suggested the central bank will seek to send a signal about tapering by June by amending its forward guidance six months earlier than previously thought.

"It may therefore adopt a more hawkish tone in preparation but it’s interesting that EURUSD has failed to hold all the gains following the report ad there is rightly scepticism about how hawkish the ECB will be.

"With the bank unlikely to change policy, all eyes are on the press conference with Mario Draghi and the language in the accompanying statement. Draghi has the opportunity to sound more bullish but will he take it by the horns or maintain his dovish credentials?"

10:49AM

Swissquote: Draghi set to show optimism

Here's Swissquote Bank, an online bank in Switzerland:

For the time being, it is very likely that the current level of asset purchases (€60 billion) will continue until year-end. We believe that for some more time, the ECB will remain committed to low rates... 

Financial markets are clearly not pricing anything else but a Macron victory in France, which seems to rule out any political risks for the ECB.

In Europe, economic fundamentals are better, inflation is picking up and unemployment has decreased, even though it remains very high in peripheral countries.

So this meeting will be useful to assess the degree of optimism that could lead to a tightening policy in the near future. Markets are likely to price in better confidence and we remain bullish on the Euro in the short-term.

10:45AM

The saddest chart in global business 

Forget tanking currencies and rising public debt, the most depressing chart in business is one you've probably never heard of before, writes Patrick Scott.

Earlier this week, Simon, a 10-month-old continental giant rabbit who was tipped to become the largest rabbit in the world, died in the cargo section of a United Airlines flight from Heathrow to Chicago.

Bloomberg Dog Kill Index

While this has gone down as a fresh PR nightmare for the airline - which attracted a firestorm of controversy after hauling a man off an overbooked flight - it turns out that hundreds of animals have lost their lives on air transport in the past decade.

Bloomberg's Dog Kill index tracks this figure, which US airlines are required to provide by law. Dogs are the most common animals to die while being transported - presumably because they are most commonly transported - hence the name of the index.

More here.

9:58AM

AstraZeneca upbeat on drugs pipeline as revenue slips 

Anglo-Swedish drugmaker AstraZeneca has reported a fall in first-quarter revenue amid declining sales of cholesterol treatment Crestor, which lost patent protection last year.

Total revenue declined 12pc to $5.4bn (£4.2bn) as Crestor sales dropped 45pc. Net income fell to $537m, from $646m.

AstraZeneca - Credit: George Frey/Bloomberg
Credit: George Frey/Bloomberg

Chief executive Pascal Soriot said Thursday that the impact of recent patent expirations should ease this year as he highlighted optimism about new cancer treatments in "what we expect to be a pivotal year for AstraZeneca".

More here.

9:38AM

Hong Kong stock index closes at highest level in 20 months

Hong Kong's benchmark stock index closed at its highest level in 20 months on Thursday as investor sentiment remained supported by prospects of better global growth and receding worries about political risks in Europe, Reuters reports.

The market also drew support from continuous flows of money from mainland Chinese investors.

The Hang Seng index rose 0.5 percent to 24,698.48 points, its strongest close since August, 2015.

9:33AM

Lloyds Bank profits double in first three months of the year

Profits at Lloyds Bank more than doubled in the first quarter of the year, as the Government prepares to sell the last of its stake in the high street lender, writes Jon Yeomans.

For the three months to March 31, pre-tax profits hit £1.3bn, from £654m a year earlier.

The improvement came despite the bank having to set aside an extra £350m for payment protection insurance (PPI) misselling. In March the Financial Conduct Authority confirmed that consumers will have a cut-off date of August 2019 to make a claim for PPI. Lloyds’s total bill for PPI is now almost £17.4bn.

More here.

9:12AM

Japanese delay on inflation

Bank of Japan boss Haruhiko Kuroda has said today that it was "likely" than an inflation target which is already running four years late will not be reached on schedule.

He said is "likely that the timing of exceeding 2pc inflation in a stable manner will be later than" March 2019.

8:56AM

What to expect from the ECB

Reuters reports:

The European Central Bank is set to keep its ultra-easy policy stance firmly in place on Thursday but may acknowledge better growth prospects, setting the stage for a small signal as early as June about an eventual reduction of stimulus.

ECB President Mario Draghi is likely to point to still-weak inflation, muted wage growth and an uncertain outlook to argue that easing off the accelerator now could unravel years of work that have consumed much of the ECB's firepower, a poll of analysts showed.

But Draghi may acknowledge the euro zone's solid growth momentum, surging consumer and business confidence, and receding political risk after the first round of France's presidential vote put a pro-euro centrist in pole position.

8:49AM

Asian markets reverse on Trump Nafta talks

Most Asian markets reversed earlier losses Thursday as the US said it would renegotiate its free-trade deal with Canada and Mexico, soothing fears of a trade war after reports said President Donald Trump was considering leaving the pact, AFP reports.

Equities across the region started the day in the red following four days of gains and as traders assess the chances of Congress passing massive tax cuts unveiled Wednesday.

The White House said all three countries would revise the 22-year-old North American Free Trade Agreement (Nafta) swiftly.

The news fuelled relief on trading floors as the tycoon has previously hit out at the agreement - calling it a "disaster" that has killed American jobs - as well as other deals the US has signed globally.

Jitters about a possible trade war were heightened this week when Washington slapped 20 percent tariffs on Canadian softwood lumber imports.

"It is my privilege to bring Nafta up to date through renegotiation," Trump said in a White House statement. "I believe that the end result will make all three countries stronger and better."

8:36AM

European slump

stocks
stocks

8:34AM

Lack of Trump progress adds to investor frustration

Here's Accendo Markets analysts Mike van Dulken and Henry Croft:

A negative opening call comes after US bourses closed lower, disappointed with an underwhelming Trump tax announcement, and Asian stocks had a lacklustre session overnight as a consequence.

Nice ideas, but far from a done deal, merely adding to investor frustration about the lack of progress on all those election pledges that helped fuel risk appetite and markets to recent highs.

8:31AM

Sagging European markets

Europe's main stock markets sagged in opening deals, with London's benchmark FTSE 100 index losing 0.4 percent to 7,262.47 points, reports AFP.

In the eurozone, the Paris CAC 40 index shed 0.2 percent to 5,276.97 and Frankfurt's DAX 30 dipped 0.3 percent to 12,440.01 points compared with Wednesday's close.

The region's markets had posted small gains on Wednesday following early indications of Donald Trump's fiscal reform plan.

Asian equities took a step back on Thursday after a four-day rally, tracking a weak lead from Wall Street, as traders assessed the chances of Congress passing Trump's massive tax cuts.

8:19AM

Good morning

Hello and welcome to our live markets coverage.

A busy day lies in store, with markets awaiting  the ECB's rates decision this afternoon, when Mario Draghi speaks in Frankfurt.

Also on the agenda:

Full-year results: Havelock Europa, Air Partner, Aseana Properties, Gaming Realms, Harvey Nash Group, Styles & Wood Group, Brown (N) Group, Allied Minds

Interim results: AstraZeneca

Trading update: Persimmon, Weir Group, Travis Perkins, Schroders, Meggitt, Taylor Wimpey, Lloyds Banking Group, Berendsen, AstraZeneca, Aggreko, Kaz Minerals, Cobham, Howden Joinery Group, Greka Drilling, WPP

AGM: Jardine Lloyd Thompson, Minoan Group, DP World, AstraZeneca, Countrywide, LSL Property Services

Economics: Nationwide HPI m/m (UK), GfK consumer confidence (UK), core durable goods orders m/m (US), unemployment claims (US), preliminary wholesale inventories m/m (US), goods trade balance (US), durable goods orders m/m (US), pending home sales m/m (US), ECB press conference (EU), minimum bid rate (EU)

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