The FTSE 100 has risen at the start of the week, up by about 0.3% in the first minutes of trading.
Early gainers on London’s blue-chip index include Rio Tinto, Rolls-Royce and BHP Group.
Deutsche Bank and Commerzbank exploring merger
Germany’s two largest listed banks revealed they have started formal merger talks at the weekend, after a long period of struggles at Deutsche Bank.
Commerzbank told investors that it has started “discussions with an open outcome on a potential merger”. Deutsche Bank’s chief executive, Christian Sewing, said it will “pursue options that make economic sense”.
A combination of Commerzbank and Deutsche Bank would create something of a national champion for Germany – a lender with the scale to match its strong industrial sector.
However, it would likely face stiff opposition domestically, with the likelihood that any merger would involve massive job losses to make it worth the cost. The Verdi union calculated that as many as 30,000 jobs could go – mainly in retail roles – if the merger goes through with government blessing.
That would be a heavy political price to pay to help Deutsche Bank, whose struggles have been more focused on its investment bank.
Introduction: Central banks and Brexit looming
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors on global stock markets appear to have taken heart ahead of a big week for central banks. The Bank of England’s monetary policy committee announces its latest decision on interest rates on Thursday, but it is the US Federal Reserve which is driving the conversation on markets.
After a string of rate rises in 2018, Fed chair Jerome Powell appears to have put the brakes on. Markets are now predicting a 99% chance that interest rates will not move at Wednesday’s announcement, but revised economic forecasts and the potential for tinkering with the central bank’s enormous balance sheet will be key for investors.
In particular, Powell is expected to give details on whether to continue selling off bonds at the same pace as before. A moderation in the pace of the sell-off might be welcomed by jittery markets who fear that the US economy may have peaked.
In the UK, meanwhile, there are 11 days until Brexit. That will undoubtedly be the driving force for sentiment for British businesses who still have little idea what rules will govern trade with the EU after 29 March.
Prime Minister Theresa May is courting the Democratic Unionist party to try to win support for the withdrawal deal she agreed with the EU. That deal has been defeated twice in emphatic fashion already, but we could see a third or even fourth attempt to get it through parliament this week as the clock ticks.
The range of possibilities for where we will be in a week’s time is striking – amid doubts over whether a second referendum could be backed.
- 10am GMT: Eurozone balance of trade (January)
- 3:10pm GMT: Speech by European Central Bank chief economist Peter Praet