Draghi urges UK to reveal Brexit plans, as oil rises ahead of Opec meeting – as it happened - Digital Innovation for a Sustainable Future

European Central Bank president says Europe simply doesn’t know what Brexit will mean, and how much damage it may cause to the City of London

Earlier:

5.20pm GMT

Time for a recap.

1) ECB chief Mario Draghi has urged the UK government to provide clarity on its plans to exit the European Union. Draghi believes it’s currently impossible to say what impact Brexit will have on the City, or the rest of Europe, due to the lack of information from London.

We are also looking for a concept by the UK government where it would share its views and plans with its own citizens, and see what they say about that, before we can actually express our views on this.

If, in the long run, the risk of a less-open U.K. economy in terms of trade, migration and foreign direct investment were to materialize, there would be a negative impact on innovation and competition and, thus, productivity and potential output

“Such developments would first and foremost weigh on the U.K. economy.”

“We are optimistic. We hope we (will) have agreement. We will cooperate with OPEC members to reach agreement acceptable to all.”

OPEC reporters literally covering a freeze pic.twitter.com/p8uAYwFnl7

#Vienna this evening #OOTT #OPEC pic.twitter.com/spn4njv1fV

Retailers seem to have a bad case of the ‘Cyber Monday blues’, following from a Black Friday that didn’t even try to live up to the hype. Could it be that, having shopped for Britain in the wake of Brexit, UK consumers are now reining in their spending?

4.46pm GMT

Paresh Davdra, CEO of City firm RationalFX, says Mario Draghi may be losing patience with politicians….after years of propping up economic growth:

He writes:

“ECB President Draghi’s speech this afternoon before MEPs saw him stress the importance of reform in the governance of the Eurozone. Whilst maintaining that ECB stimulus has helped recovery in the Eurozone, his call for greater input from policymakers to help growth will likely reignite the debate over the role of central banks in both the EU and the UK. With a decision on further QE on the agenda for early next week, there is a good chance his warning is in reference to the uncertainty that the Italian Referendum and the French and German elections will bring in the new year.

Draghi’s comments likely reflect a frustration that BoE governor Mark Carney will be able to relate to, in which central banks have to fulfill certain roles that policymakers traditionally undertook in order to keep the economy stable. Draghi‘s comments on Brexit further acknowledge this, in his call for Prime Minister Theresa May to share more about the Brexit strategy days after it was revealed Carney was involved in contingency planning in the case of ‘hard Brexit’. Whilst it is likely that further uncertainty awaits the Eurozone’s economy before the end of the year, markets will be watching to see if Draghi’s wish for more than just stimulus measures to help boost the Eurozone will be answered.”

4.20pm GMT

Newsflash: One of the Bank of England’s policymakers is defending the central bank against criticism of its loose monetary policy.

“It has been raining, so we have all opened our umbrellas”.

“Umbrellas together with rainfall are observed in many countries. Nobody actually believes that umbrellas cause rainfall”.

“We have had several low interest rate, low inflation countries that have raised interest rates over the past decade. This was not followed by an escape from the alleged confidence trap”.

“Higher interest rates, far from boosting demand and inflation, have caused growth to slow and inflation to fall”.

Jan Vlieghe latest BoE policymaker out defending low rates, saying “umbrellas don’t cause rain” https://t.co/7qCX7E9MlS

Vlieghe: current level of UK int/rates remains appropriate despite significant, but ultimately temporary, rise in inflation from weak pound

Although my personal experience would suggest that forgetting an umbrella often causes rainfall

Vlieghe concludes:”Monetary policy cannot solve distributional issues, and shd not be asked to try.” not that it’s hurting pensioners anyway pic.twitter.com/eW2GPeSuf6

4.11pm GMT

Sky New’s Faisal Islam thinks Draghi’s comments are significant:

European Central Bank chief Mario Draghi tells EU Parliament Brexit economic impact “would first and foremost weigh on the UK economy” …

…no surprise he says this, but Draghi most influential economic diplomat in Europe; “whatever it takes” speech changed € crisis in 2012

4.01pm GMT

Bloomberg have a good take on Mario Draghi’s comments about Brexit. Here’s a flavour:

European Central Bank President Mario Draghi warned that Britain’s economy would be the first to suffer if its decision to leave the European Union leads to protectionist measures.

“If, in the long run, the risk of a less-open U.K. economy in terms of trade, migration and foreign direct investment were to materialize, there would be a negative impact on innovation and competition and, thus, productivity and potential output,” Draghi said in testimony to European Parliament lawmakers in Brussels on Monday. “Such developments would first and foremost weigh on the U.K. economy.”

European Central Bank chief Draghi intervenes on #Brexit, warning of economic impact in UK. https://t.co/1hvwgv8CU4 pic.twitter.com/dXTeYceRW3

3.57pm GMT

Now a question for Mario Draghi about this Sunday’s constitutional referendum in Italy.

Q: Could a country leave the euro against its own wishes, as a result of a referendum? And are eight Italian banks at risk, as reported in the UK and Italy, if the No campaign wins?

3.47pm GMT

Another question about Donald Trump, this time about his infrastructure spending plan….

Q: If the German government came up with a similar infrastructure plan in 2017, after the next federal elections, would it get the ringing endorsement of the ECB?

3.32pm GMT

Q: Are you worried that Donald Trump might replace Janet Yellen as head of the US Federal Reserve?

Draghi says he’s not privy to Trump’s thinking with respect to the Fed. But he suggests the president-elect should tread carefully:

Undermining independence of central banks is not in anyone’s interests, especially those in the jurisdiction of the central bank.

3.30pm GMT

Another MEP asks Draghi for his views on the fiscal plans announced by chancellor Philip Hammond last week (which included £122bn of fresh borrowing, and new spending on infrastructure).

Draghi says he doesn’t have enough knowledge to assess the impact of Hammond’s plan on the eurozone.

#Draghi: No matter how important financially the UK it is still smaller than the eurozone https://t.co/chgfE1fvrK

3.03pm GMT

Mario Draghi has urged Theresa May to give British citizens more information about her plans for Britain’s exit from the EU.

The European Central Bank president told MEPs in Brussels that he’s still in the dark about Britain’s strategy.

We don’t know.

And the reason we don’t know is we have to see exactly how the final shape of the negotiations will be, and how long they will last.

Now, how will this change, We don’t know.

Will this be recreated somewhere else? We don’t know.

2.41pm GMT

Mario Draghi says the ECB will decide next month whether to extend its QE stimulus programme:

#Draghi – Dec #ECB meeting will assess options to preserve very substantial degree of accommodation needed to bring #inflation to target

Draghi “I have not discussed with Janet Yellen the new Trump-administration scenario, but we will soon”

#Draghi seems more worried w/ what the approach of #Trump‘s administration to regulation (Basel in particular) will be than interest rates

2.36pm GMT

On Brexit, Draghi says that the eurozone has weathered the fallout from the UK referendum outcome with “encouraging resilience”.

While the UK referendum did create uncertainty as far as the country’s participation in the Single Market is concerned, the Single Market cannot go backwards.

It is imperative that its integrity and the homogeneity of rules and their enforcement will be preserved. This also means we cannot take backward steps concerning the regulatory,supervisory and oversight framework for banks and financial market infrastructures, which has been enhanced considerably since 2008.

2.32pm GMT

Mario Draghi has urged European leaders not to abandon economic and monetary union as they wrestle with Europe’s new security challenges.

The head of the European Central Bank began his session in Brussels by telling MPs that the euro area economy is growing at “a moderate but steady pace” despite economic and political uncertainties.

I am aware that the attention of our policymakers has shifted. In the direct aftermath of the financial crisis the need to complete Economic and Monetary Union came to the forefront of the European debate. Since then circumstances have changed. Today Europe’s focus is more on security.

Both projects require Europe to be united – to act together. However, let us not forget that Europe will be better able to protect itself if it has a strong and resilient economy. And for that purpose, Economic and Monetary Union must overcome the vulnerabilities stemming from its incompleteness.

2.07pm GMT

Over in Brussels, ECB chief Mario Draghi is taking his seat to take questions from the European Parliament’s committe on economic and monetary affairs.

1.54pm GMT

This week’s meeting is the first opportunity for Opec oil ministers to discuss the implications of Donald Trump’s victory.

The president-elect could dramatically change the rules of the energy industry, and not to Opec’s advantage either.

News reports suggest Saudi Arabia may have the support from key members like Iraq and Iran, and even support of non-Opec member Russia to cap production. Trump’s support for US oil production will hang over talks.

“I think they [Opec] are terribly concerned about it,” says Rob Thummel, portfolio manager at Tortoise Capital. “The biggest concern the Saudis have is: what if the US encourages these companies to drill too soon and that puts another 500,000 barrels on the [already oversupplied] market, say 12 months from now? That could really weigh on prices.”

1.34pm GMT

1.14pm GMT

ABN Amro’s Hans van Cleef shows how the oil price has already been buffeted by rumours from Vienna, even before the main meeting even begins (on Wednesday):

Deal or no deal? Nice intraday speculation as OPEC meeting will continue to dominate the headlines for the coming 48h… #OPEC #OOTT #Oil pic.twitter.com/sOQ5zO0znf

1.09pm GMT

#Iraq oil minister says optimistic #OPEC will reach an agreement that’s acceptable by all #OOTT #oil

1.02pm GMT

The oil price has jumped, as traders welcome the Iraqi oil minister’s ‘optimism’ about a deal this week.

Brent crude just spiked by 1% to $47.75 per barrel, its highest point of the day, after Jabar Ali al-Luaibi said Iraq would co-operate with other Opec members this week.

#Iraqi Oil Minister says he is optimistic for OPEC deal this week. Brent crud hits day-high

Iraq is now earning about $1.8m per day more than it was 5 minutes ago because the oil minister said ‘we’re optimistic’. Oh #OPEC… #OOTT

12.49pm GMT

Breaking news! A vase has been sent tumbling in Vienna as oil reporters rushed to speak with Iraq’s oil minister as he arrived at the Opec meeting.

Jabar Ali al-Luaibi told the expectant, and clumsy, throng that he’s “optimistic” that a deal will be reached on Wednesday. No details though.

Iraq oil min “optimistic” #OPEC can reach deal on Wednesday. Vase was casualty of press scrum for that insight #OOTT pic.twitter.com/dfOBG23lLu

Disaster happens when Iraqi oilmin arrives at hotel in Vienna. However he says he is optimistic for OPEC deal this week.” #OOTT pic.twitter.com/7AVpxabW7q

12.39pm GMT

When not demolishing expensive club sandwiches, oil reporters are mainly hanging around Opec’s plush foyer waiting for cartel bigwigs to arrive:

Everyone is watching that door. Waiting for the Iraq oil minister to arrive at the Kempinski hotel in Vienna. #oott #opec pic.twitter.com/gPs6Oqaq6q

12.31pm GMT

Sports Direct’s auditors, Grant Thornton, could be in hot water over the company’s relationship with Mike Ashley’s brother’s company, Barlin Delivery (as flagged earlier).

My colleague Rob Davies explains:

A small FRC team of two or three investigators will look into Grant Thornton’s role in failing to report the nature of the firm’s relationship with Barlin.

If investigators determine that Grant Thornton did not do its job properly, it could be hit with anything from a public reprimand to a sizeable fine.

12.15pm GMT

Opec attendees should take their best winter woolies — conditions are getting frostier in Vienna…..

Snowing in Vienna… #OOTT #OPEC #Oil

12.02pm GMT

Here’s another reason why Iran is reluctant to cut supply:

IRAN/#OPEC dilemma (Market share)
2005: Iran 4.1mln bpd / Saudi Arabia 9.1mln bpd
Today: Iran 3.7-3.9mln bpd / Saudi Arabia 10.6mln bpd

11.52am GMT

Opec’s attempts to agree an output cut this week faces many hurdles.

One is that it’s not clear how much oil Iraq and Iran are actually pumping — so what is billed as a ‘cut’ might actually only be a freeze.

Iraqi officials claim all of Iraq, including Kurdish territory, is producing 4.776 million b/d, when secondary sources estimate that it’s producing 4.561 million b/d. The difference is material for an OPEC cut as it amounted to 215 thousand b/d in October and in recent months the gap has swelled to 300 thousand b/d. (As Platts has reported, Baghdad appears to be “double-counting” some oil that’s produced inside Kurdish-controlled territory.)

OPEC is reportedly aiming for a production cut target of 4.5 percent. 4.5 percent of Iraq’s claimed output is equal to the gap between the higher official number and the lower secondary sources estimate. So if Iraq’s official—and possibly inflated—production number is the baseline for a cut, then Iraqi production might only be frozen at around 4.5 million b/d. No barrels would come off the market.

Iran represents a real challenge because its messaging has been so confused in the weeks leading up to the Vienna meeting. At home, when speaking to a domestic audience, Iranian officials have claimed higher production levels than they’ve reported to OPEC. They’ve even claimed that volumes today are higher than at any time since the Shah ruled Iran.

Statements like these should raise eyebrows when all year Iran has said it would not consider freezing or cutting output until production reached “pre-sanctions” levels, presumably those that prevailed in the mid-2000s. Simply put: Iran can’t claim victory and ignore OPEC. This disconnect isn’t necessarily disingenuous either. If you count crude oil and lighter condensates, the case can be made that Iranian production is at its highest level in decades.

Any deal is better than no deal for #OPEC. @matthewmreed breaks down what to know going into this week: https://t.co/3NX1AjP60D

11.46am GMT

Fleet Street expense departments must really love the Opec meetings, judging by this tweet from the FT’s David Sheppard:

It’s not Opec until there’s an over-priced club sandwich in a gaudy hotel lobby. #OOTT #OPEC pic.twitter.com/HS1huGUsE6

11.22am GMT

Italian banks aren’t the only ones facing problems, as Associated Press reports:

The troubles at Portugal’s biggest bank by assets, state-owned Caixa Geral de Depositos, are deepening as its new president and six board members have quit less than three months after starting work.

The resignations come amid a dispute over a law demanding that the bank’s senior officials make public their income and personal assets.

11.21am GMT

Opec’s technical meeting is now in full swing:

Long technical meeting ahead #OPEC #OOTT #oil pic.twitter.com/5X99xqVr5x

11.14am GMT

Back in the UK, Tata Steel UK has moved close to selling its Speciality Steels business to fellow steelmaker Liberty House, for £100m.

Tata says it has sighed a letter of intent to sell the operations, which employ around 1,700 people making steel for aerospace, automotive and oil and gas companies.

Tata Steel has agreed deal to sell speciality steels business in northern England (2,000 employees) to Liberty for £100m

10.44am GMT

The oil price has just bounced back from its earlier losses.

Brent crude is now up 0.3% at $47.38, having shed more than 1% earlier.

10.30am GMT

The OECD is also optimistic that America will drive global growth, thanks to Donald Trump’s promise of a “more supportive fiscal stance”.

It says:

In the aftermath of the US elections, there is widespread expectation of a significant change in direction for macroeconomic policy.

Trade enhances competitive pressures, enables greater specialisation and improved resource allocation, facilitates knowledge transfer and is essential for the functioning of global value chains.

10.04am GMT

And here are the OECD’s new forecasts

New OECD f’casts see UK slowing to 1.2% economic growth next yr, slowest since 2009, worse than BoE and OBR f;’cast. Sees 1% growth in 2018 pic.twitter.com/0j8AuqgxZV

10.03am GMT

Newsflash: The OECD has warned that the world economy will struggle to escape its long period of low growth unless governments take advantage of low interest rates to invest more.

In its new global outlook, just released, the OECD also predicts the UK economy will be hit by Brexit uncertainty next year and grow just 1.2%, the slowest rate since 2009’s recession.

“Monetary policy is overburdened, leading to growing financial risks and distortions. Alongside structural reforms, a stronger fiscal policy response is needed to boost near-term growth and strengthen long-term prospects for inclusive growth.”

OECD raises 2016 UK growth forecast to 2.0% from 1.8%, raises 2017 to 1.2% from 1.0%

9.48am GMT

Newsflash: Britain’s accounting watchdog has launched an investigation into Sports Direct’s financial statements.

The Financial Reporting Council (FRC) has commenced investigations under the Accountancy Scheme and the Audit Enforcement Procedure in relation to the preparation, approval and audit of the financial statements of Sports Direct International plc (“Sports Direct”) for the 52 week period ended 24 April 2016.

These decisions follow reports of an arrangement between Sports Direct and Barlin Delivery Limited which was not disclosed as a related party in the company’s financial statements.

9.40am GMT

JP Morgan’s oil team have predicted that oil could fall back below $40 per barrel if Opec doesn’t agree to curb oil output:

JPM says failure of OPEC deal could push oil to $35-$40; sees 60% chance of oil-supply deal. #OPEC #OOTT

9.27am GMT

Italian bank shares have hit an eight-week low this morning, in a bout of pre-referendum jitters.

ETX Capital analyst Neil Wilson explains why:

UniCredit and Banca Popolare di Milano are down 4%, while Banca Monte dei Paschi di Siena is down 7% as it kicks off a debt-to-equity conversion ahead of its €5bn recapitalisation.

It’s a key moment for Italy’s banks. Sunday’s referendum on constitutional reform is Italy’s Brexit moment and a No vote would send tremendous shockwaves through the markets and the banking system. It could also heap pressure on the euro. Already crushed post-Trump, the euro could hit parity with the dollar if prime minister Matteo Renzi loses as Italy’s place in the Eurozone could be doubt.

9.12am GMT

Back in Vienna, officials from Opec countries have gathered for technical talks ahead of Wednesday’s meeting:

All member state #OPEC delegates make their way into the meeting which starts in 10 mins #OOTT

#Kuwait #OPEC Delaware entering technical meeting says “we are still talking so that’s good news” #OOTT

#Libya #OPEC delegate entering technical meeting says “we are still hopeful for a deal” #OOTT

#saudi delegates roll into the meeting now #OPEC #OOTT

9.03am GMT

European stock markets have all fallen in early trading, amid worries over Opec’s ability to agree output cuts this week.

The FTSE 100 index has fallen by 61 points, or 0.9%, to 6779, dragged down by oil producers.

OPEC officials said Saudi Arabia won’t attend a prep meeting today with Russia and others ahead of the cartel’s official meeting even going as far as to suggest the group doesn’t need necessarily to curb output.

Here we go. Buckle up.

8.40am GMT

It’s just two decrees Celsius in Vienna right now, where the temperature matches the chilly relations between Saudi Arabia and Iran.

Bloomberg’s Javier Blas has defied the cold to tweet:

It’s a lovely morning in Vienna as #OPEC talks start here — it’s freezing however. Maybe that’s it: a freeze and not cut? #OOTT #oil pic.twitter.com/BU8Iy8AF8F

8.35am GMT

The Wall Street Journal’s Georgi Kantchev reports that there’s optimism in Vienna that output cuts will be finalised

Good morning from the OPEC HQ in Vienna. Oil prices may be down but here hopes are high that a deal will be clinched this week pic.twitter.com/H1ENbLY5CG

So far all non #OPEC participation in Vienna has been shelved, perhaps another sign to lower our expectations #OOTT

#OPEC technical meeting expected to last all day #oil #OOTT

8.26am GMT

Forbes energy expert Ellen Wald reckons Saudi Arabia is playing hardball with Iran ahead of Wednesday’s Opec meeting.

Saudi’s refusal to meet with non-Opec members today, and its hint that output cuts may not be needed, are all part of a strategy to make Iran take part in output cuts.

Though these statements may appear to indicate an about-face in Saudi policy, they are in fact a negotiating tactic. Saudi Arabia is prepared to walk away from a deal if OPEC cannot reach an agreement and Saudi Arabia will not make any additional concessions.

8.13am GMT

The oil price is weakening in early trading, as traders fret that Wednesday’s OPEC meeting won’t yield an agreement to cut output.

Brent crude has lost 0.75% to $46.91 per barrel, adding to Friday’s 3% slide.

#Oil continues its drop amid skepticism Opec to reach output deal this week. https://t.co/c4lrYLJlz8 pic.twitter.com/FiZGiloKyh

“An agreement is needed to avoid (price) downside. So, the question is what kind of agreement will they do? The market is clearly very nervous… We shall see. I think they will reach some form of agreement.”

7.59am GMT

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

Tension is building in the markets today ahead of a crunch meeting of oil producers in two day’s time.

“We expect demand to recover in 2017, then prices will stabilize, and this will happen without an intervention from OPEC.

“We don’t have a single path which is to cut production at the OPEC meeting, we can also depend on recovery in consumption, especially from the U.S.”

Deal or no deal.. Optimism that OPEC will surprise the market Wednesday with an aligned strong message about the intended prod.cut is fading

Preparing the market for a disappointment? probably…

Saudi energy minister “oil market would balance even without #OPEC output cuts”.

Draghi urges UK to reveal Brexit plans, as oil rises ahead of Opec meeting – as it happened