What to Watch: Markets shrug off impeachment, Bank of England audio hijacking, and RBS reshuffle
Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:
European markets shrug at impeachment
European markets were largely unmoved by the House of Representatives vote to impeach US President Donald Trump on Wednesday evening.
The House voted to impeach the President on two charges, abuse of power and obstruction of Congress, setting up a trial in the Senate.
“While the news cycle is full of last night’s impeachment of President Trump by House Democrats, financial markets have given the news a collective ‘meh’,” said Michael Hewson, chief market analyst at CMC Markets.
“The reality is no-one cares given that its highly improbable that the Senate will ratify proceedings, which means the story will inevitably die a death.”
The FTSE 100 (^FTSE) was flat, Germany’s DAX (^GDAXI) was down 0.1%, France’s CAC 40 (^FCHI) was flat, and the Euronext 100 (^N100) was also unchanged.
Overnight in Asia, Japan’s Nikkei (^N225) closed down 0.2%, while the Hong Kong Hang Seng Index (^HSI) ended down 0.3%, and China’s Shanghai Composite (000001.SS) ended flat.
Bank of England audio hijacked
Britain’s financial watchdog is investigating reports hedge funds had unfair access to audio of Bank of England events, potentially giving them an edge in financial markets.
The Times reported on Thursday that a backup audio feed used to broadcast Bank of England press conferences was unknowingly sold to hedge funds and traders by a third party supplier.
The Bank of England regularly holds press conferences where governor Mark Carney and other executives discuss interest rate policy, growth forecasts, and other economic issues. These events can regularly move financial markets.
The central bank broadcasts videos of these press conferences to ensure everyone can have access to the information at the same time. The Bank of England employs a back-up audio feed that is only intended to be used if the video goes down.
The audio feed is slightly ahead of the regular video feed provided by financial news service Bloomberg. The Times said traders would have had a five to eight-second head start.
While it may not sound like much time, it could make a huge difference. High-frequency trading — essentially placing trades before everyone else based on public information — is a lucrative trading strategy.
RBS exec reshuffle
Two senior bosses at Royal Bank of Scotland’s (RBS.L) investment bank have stepped down, the bank said on Thursday.
Chief executive Chris Marks and chief financial officer Richard Place are both leaving NatWest Markets. They will stay on to ensure an “orderly transition” until June and March next year respectively.
Robert Begbie, currently RBS treasurer, will take the role of interim chief executive and Robert Horrocks, RBS treasury finance director, will stand in as interim chief financial officer. The bank has launched an internal and external search for permanent replacements.
RBS CEO Alison Rose thanks Marks and Place, and said: “They have set the foundations for the continuing transformation and simplification across NatWest Markets as RBS has been re-shaped to focus on serving its customers in the UK and Ireland, whilst also managing complex organisational changes around ring-fencing and Brexit.”
Interest rate decision due
The Bank of England will deliver its final interest rate decision of the year at 12pm today, outgoing governor Mark Carney’s penultimate decision.
Analysts are expecting rates to remain unchanged at 0.75%. However, investors will be watching the balance of voting on the Bank of England’s Monetary Policy Committee for signs of whether a further rate cut could be in store in the new year.
“Commentary in tomorrow’s BoE decision and the voting pattern (could more than two members vote for a cut?) may well be important in indicating the Bank’s willingness to loosen policy and have material effects on our GBP view,” Nomura economist George Buckley said in a note to clients earlier this week.
Deutsche Bank this week revised its forecasts and pencilled in a 25 basis point rate cut at the Bank of England in January.
The pound was steady ahead of the announcement, flat against the euro at €1.1769 (GBPEUR=X) and up 0.1% against the dollar to $1.3098 (GBPUSD=X).
Queen’s Speech to open parliament
The Queen will visit parliament this morning to officially open a new session in Westminster.
The monarch will deliver a Queen’s Speech at 11am, setting out the new government’s legislative agenda.
While Brexit is likely to dominate, the speech could contain some business and financial policy. The Financial Times reports that the Queen will announce a tougher accounting watchdog, following a string of scandals such as the collapse of Thomas Cook and Carillion.
EY’s Thomas Cook role probed
The auditing watchdog has expanded the scope of its investigation into EY over its work on collapsed travel operator Thomas Cook.
The Financial Reporting Council (FRC) said on Thursday that it would now investigate the firm’s audit of the Thomas Cook’s 2017 accounts.
This comes on top of its previously announced investigation of the audit of Thomas Cook’s most recent set of results, which cover the 12 months to the end of September 2018.
If the FRC finds against EY, the company could face millions in fines. The watchdog can fine firms up to £10m and ban individuals involved in flawed audits from the industry. The FRC hit auditors with £43m in fines in 2018.
What to expect in the US
US stocks futures point to a quiet open. S&P500 futures (ES=F), Dow Jones futures (YM=F), and Nasdaq futures (NQ=F) were all flat.
27 companies are reporting in the US later today, including:
Accenture (ACN)
