Euro sinks on German far-right shock

Euro pessimism was quick to seep into the markets as investors worked through the impact of a German election bombshell – a fourth term for Merkel but a far-right presence in the German parliament. The Alternative for Germany (AfD) party will be the third biggest parliamentary presence in the Bundestag.

Responding, the euro slipped -0.44% against the dollar to $1.1872 and almost the same amount against the pound to 0.8792. Matters were further depressed by a less-than-stunning reading from Germany’s IFO survey. It pointed to continuing manufacturing investment, but not by the margin hoped for (115.2 vs 116).

Mid afternoon Mario Draghi, ECB boss, testified in Brussels before the European Parliament but little that was new or insightful emerged from his lips. “Risks surrounding the euro area growth outlook are broadly balanced,” he said. “At the same time, downside risks continue to exist.” Chew on that. 

The FTSE 100 closed at 7,307, down three points. Share rises were muted with Convatec, ITV and BT Group seeing +1.5% rises. In contrast Mediclinic Int and Antofagasta endured -5.1% and -3.3% falls.

• UK FTSE 100 7,307 -0.13%
• Dow 22,327.25 -0.10%
• S&P 500 2,498.22 -0.17%
• Nasdaq 6,377.74 -0.79%
• Nikkei 225 20,347.48 +0.18%
• DAX 12,618.04 +0.20%
• CAC 40 5,275.11 -0.12%
• Gold 1,296.90 -0.05%
• Oil WTI 51.40 +1.46% 

Bank of England gets the debt jitters

Earlier The Bank of England fired a personal credit warning. The Bank’s Financial Policy Committee warned that UK banks could shoulder up to £30bn of losses should UK consumers hit the buffers if the economy tanked.  

The committee is particularly anxious about consumer credit in its many forms – plain vanilla borrowing, car PCP loan debt plus the mounting pressure on families struggling to cope with higher inflation and barely-shifting UK wages. 

Not everyone is so up-tight. Paul Hollingsworth from Capital Economics thinks that if inflation falls back after peaking in October and, with a bit of wage growth, “the foundations for spending growth next year should be stronger, so concerns about consumer credit are likely to diminish, rather than build further.”

Still, the UK’s consumer debt pile is enormous at £200bn or thereabouts. This is unsecured debt. Earlier this year the Financial Conduct Authority estimated that one in six people who had taken on loan debt were now in serious financial straits.

Bank of England is worried about debt - again: Shutterstock

US stocks take a tumble

This afternoon US stocks slipped on more investor worry over central bank anticipation – when will the US Federal Reserve raise interest rates? Social media stocks were the most exposed with Facebook taking the biggest hit, down more than -3.5% at $164 at just after 4.30pm. Microsoft shares were down -1.5% and Amazon shares sank by a similar amount. 

Much depends on the inflation picture. Fed Reserve chief Janet Yellen is scheduled to speak later in the week. The chances of a December rate hike looks close to 75/25 odds – currently. 

Breaking news: US stocks fall again following the news from North Korea that it has the right to shoot down approaching American bombers. Cunard is to launch a new cruising ship by 2022, owner Carnival Corporation says. Deliveroo claims it's worth more than $2bn following a new funding injection.