It’s not been the most exciting day in the financial markets, with traders distracted by reports of banks and insurers preparing for life after Brexit.
And it’s ended with the main European markets posting small gains, with Germany’s DAX hitting a new two-year high.
The FTSE 100 missed out, though, and closed down 0.06%. It was hit by a pick-up in the value of the pound, which gained half a cent to $1.249 against the US dollar.
European stock markets tonight Photograph: Thomson Reuters
Jasper Lawler of London Capital Group sums up the session:
Stocks are still in a bit of a holding pattern with traders lacking a bit of conviction to follow through on the last two days of dip-buying. A positive open in the US, helped by further recovery in crude oil prices improved sentiment in European markets by the afternoon.
A bigger than expected fall in German inflation during March assured investors who have been buying the country’s shares in hopes of an extended period of easy money policies. The German benchmark DAX index touched a two-year high for a second day.
The resilience of the British pound in the face of Article 50 uncertainty was probably the biggest factor behind the underperformance of the FTSE 100. Fund manager Schroders was the biggest loser while Ashtead Group was top gainer.
And on that note, we’re closing down for the night. Thanks for reading and commenting. GW
Theresa May’s decision to activate Article 50 yesterday has also encouraged City firms to trigger their own contingency plans, says Joshua Mahony, market analyst at IG.
He predicts short-term pain for London, as the Brexit process rumbles on.
Lloyds of London’s decision to relocate jobs to Brussels, coupled with rumours of potential relocations for the likes of Citi and JP Morgan do little to inspire confidence in the City of London.
There is no doubt that London will be the main loser from the coming two years of negotiations, much in the same way it was the UK’s main beneficiary from our EU membership. While the UK’s loss may be the EU’s gain in the short-term, the long-term picture of a more open, globalised UK should mean that perhaps the EU and the UK will be better off further down the line.
Another investment bank, Citigroup, has told its staff that some London-based jobs will move overseas due to Britain leaving the EU.
Jim Cowles, the head of Citi’s Europe, Middle East and Africa division, told staff in an internal memo that planning has been underway for months.
Cowles explained that Citi expects a “hard Brexit” (ie, losing membership of the single market and the Customs Union), adding;
“A hard Brexit would require certain changes, including relocating certain client-facing roles to the EU from the UK, and the possible creation of a new broker-dealer entity within the EU.”
The city of Luxembourg Photograph: Eric Vidal/Reuters
In another Brexity development, Luxembourg has thrown its hat into the ring to become the new home of the European Banking Authority.
The EBA’s responsibilities include holding the regular European-wide banking stress tests. It is currently based in London, which won’t be sustainable once Britain has left the EU.
Amsterdam, Dublin, Frankfurt, Paris and Vienna have all reportedly been batting their eyelashes at the EBA. The EC has suggested it could be merged with a pensions regulator, based in Germany.
Luxembourg, though, claims it has a legal right to host the EBA, citing a letter from 1965 which said it would be considered as a host for financial institutions.
Luxembourg claims right to host London-based European Banking Authority after Brexit. @AFP story https://t.co/0LRBvTIxK5
The Liberal Democrats are worried that JP Morgan and Lloyd’s could be signalling an exodus from the City.
Susan Kramer, the Lib Dem Treasury spokeswoman, says:
“David Davis has already gone back on his assurances that British firms would continue to enjoy all the benefits of single market membership in his post-Brexit utopia. Now reality is starting to intervene, with JP Morgan reportedly looking to move 1,000 jobs out of London. This follows Lloyd’s of London saying it will open an office in Brussels due to Brexit and become, at least in part, Lloyd’s of Brussels.
“It is the prime minister’s choice to drive Britain out of the single market, and that is driving jobs and wealth creation out of the UK. Estimates suggest leaving the single market could cost Britain up to £200bn over 15 years.
“When the P45s start to land and the NHS operations are cancelled, this will be the government’s fault.”
That’s partly because Easter fell in late March in 2016, but this year isn’t until mid-April. Prices usually rise around the Easter holidays, partly due to higher transport costs.
But even so, this should take some pressure off the European Central Bank to start tightening monetary policy. The overall eurozone inflation rate, announced on Friday morning, is on track to fall from last month’s 2%.
German (core) inflation slowed a bit more than expected, but that's mostly due to Easter effects, likely to be reversed next month. https://t.co/sRWnyDyWDE
We mentioned earlier that Lloyd’s of London is planning to shift “tens of jobs” to Brussels, rather than whole floors of staff from London.
Reuters’s George Hay has dubbed this an example of the “phantom exodus”, and suspects that fewer staff will leave the City than feared.
He writes:
There is no way to spin this outflow as a good thing. Even if every financial firm moves only 10 percent of staff, that could still risk a tangible proportion of the 71 billion pounds of tax from financial services companies generated in 2016. UBS has said a fifth of its 5,000 London staff could be affected by Brexit, while a quarter of JPMorgan’s 16,000 UK staff could be.
Still, anecdotally bankers at the big firms think the exodus will be less, and London will retain its financial hub status. While a free trade agreement between the EU and the UK on favourable terms for finance seems far-fetched, it’s not impossible – and Prime Minister Theresa May on Wednesday said that a future free trade agreement ought to cover financial services. More simply, not many financial types want to leave London. As such, Lloyd’s is merely doing what every other firm is doing – acquiring an option that it hopes will expire, out of the money.
Just in: A former investment banker has been fined over £37,000 for sharing confidential client information over the WhatsApp messaging service.
The Financial Conduct Authority imposed the penalty on Christopher Niehaus, ruling that he failed to act with “due skill, care and diligence”.
It explains:
The FCA found that Mr Niehaus, who was a managing director in the Investment Banking division at Jefferies International Limited, received client confidential information during the course of his employment and, on a number of occasions between 24 January and 16 May 2016, shared that information with both a personal acquaintance and a friend, who was also a client of the firm. In one of the instances where Mr Niehaus shared client confidential information with his friend, who was also a client of the firm, that information was about a competitor. Mr Niehaus used the instant messaging application WhatsApp to share this information. The information was shared by Mr Niehaus because he wanted to impress the people that he shared the information with.
The details of the information he shared included the identity of the client, the details relating to the client mandate and the fee Jefferies would charge for their involvement in the transaction. Mr Niehaus also boasted about how he may be able to pay off his mortgage if one of the deals was successful.
None of the parties traded on the information shared, the FCA adds. Even so, Niehaus resigned from Jefferies after being suspended, after the WhatsApping came to light. More here.
Bloomberg is also reporting that JPMorgan is in talks to buy office space in Dublin in response to Brexit.
It believes the bank wants enough room for over 1,000 workers.
It says
The lender is negotiating the potential purchase of a building in Dublin’s Capital Dock that’s being developed by a venture between Kennedy Wilson Holdings Inc. and Ireland’s National Asset Management Agency, the people said, asking not to be identified because the plans are private.
The building, at 200 Capital Dock, has about 130,000 square feet (12,000 square meters) of space, the people said. That’s enough for more than 1,000 workers.
JP Morgan 'eyes Dublin's Capital Dock for Brexit relocation'
In another potential blow to the City, JP Morgan is reportedly considering moving hundreds of jobs to Dublin.
That’s according to the Irish Independent this morning, which reports:
US investment banking giant JP Morgan is understood to be considering the relocation of hundreds of its employees from London to Capital Dock, the 31,600 sq m (340,000 sq ft) office scheme currently being developed by Kennedy Wilson in Dublin’s docklands.
News of JP Morgan’s potential post-Brexit move will be welcomed, coming as it does in the wake of the decision by two major insurance companies, Lloyd’s of London and AIG, to choose Brussels and Luxembourg instead of Dublin for their respective European Union bases.
While a source familiar with the matter insisted that a decision on Capital Dock was “still up in the air”, JP Morgan’s intentions in relation to the scheme’s offices are currently the subject of intense speculation within Dublin’s commercial real estate sector.
The Irish Independent understands that JP Morgan has been engaged in a search for space capable of accomodating employees from both its existing offices at George’s Dock in Dublin’s International Financial Services Centre and up to 500 personnel currently working within its London operations.
Today’s Wall Street Journal reports that the investment bank has been weighing up the respective charms of several cities, including Paris, Frankfurt, Luxembourg and Dublin.
As with Lloyd’s of London, such a move would allow JP Morgan to retain those passporting rights to offer financial services within the EU (which the City will lose if Britain quits the single market).
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