Carillion collapse regrettable, but government cannot bail it out: PM May's spokesman

The British government cannot be expected to bail out construction and services firm Carillion (CLLN.L), Prime Minister Theresa May’s spokesman said on Monday, after the firm’s collapse. 

“It’s regrettable that Carillion has not been able to find suitable financing options with its lenders, but tax payers cannot be expected to bailout a private sector company. Since the profit warnings were first issued in July the government has been closely monitoring the situation ... we remained hopeful that a solution could be found while putting robust contingency plans in place, ” he told reporters.

“Our primary responsibility as always (was) being able to keep our essential public services running safely.”

UK inflation hits nearly six-year high of 3.1 percent, oil puts more pressure on factories

British inflation unexpectedly rose to its highest level in nearly six years in November, tightening the post-Brexit vote squeeze on households whose spending is the main driver of the country’s economy.

Consumer price inflation hit an annual rate of 3.1 percent in November, pushed up by airfares, computer games and the price of chocolate as food costs reflected the impact of the pound’s plunge after last year’s vote to leave the European Union.

That was up from 3.0 percent in October and above economists’ average expectation in a Reuters poll for another 3.0 percent rise.

There were also signs that factories were facing a resumption of price pressure as global oil prices rose.

An increase in prices for computer games also pushed up inflation.

The ONS also said house prices in October rose by 4.5 percent annually across the United Kingdom as a whole compared with 4.8 percent in September. Prices in London alone rose by 2.1 percent, the weakest increase since March.

UK inflation surprises with slowdown, easing pressure on Bank of England

British inflation unexpectedly slowed last month for the first time since October, dousing expectations among investors that the Bank of England might soon raise interest rates for the first time in a decade. 

Consumer prices rose by 2.6 percent compared with a year earlier, the Office for National Statistics said on Tuesday, down from a nearly four-year high of 2.9 percent in May. 

Economists had expected the rate to remain unchanged. 

Sterling fell after the data, down by half a cent against the U.S. dollar, and British government bond prices jumped as the figures suggested the BoE was under little pressure to raise rates when it next meets in early August, despite concerns among some of its policymakers about rising prices. 

The fall in inflation was the sharpest between any two months since February 2015, largely reflecting a fall in global oil prices, and there were also signs of slowing price pressure in factories. 

"This is going to kill the chances of a rate rise in the short term. We will learn more about the Bank of England's thinking in a couple of weeks, but we can expect the calls for a rate rise to reduce to a whimper," Lucy O'Carroll, chief economist at fund managers Aberdeen Asset Management, said. 

However, many economists have said they expect inflation to pick up again soon, adding to the strain on households which are seeing salaries rise more slowly than prices. 

Britain's inflation rate has risen sharply since last year's referendum decision to leave the European Union which pushed down the value of the pound, making imports more expensive.

Dollar hits seven-month low, stocks, oil retreat as caution reigns

Escalating tensions in the Middle East and the coming testimony of the former FBI director, British elections and a European Central Bank meeting all took their toll on oil, the dollar and Asian stocks on Tuesday.

European stocks were headed for a subdued start, with financial spreadbetter CMC Markets expecting Britain's FTSE 100 and France's CAC 40 to open flat. Germany's DAX is predicted to start the day down 0.1 percent.

Oil fell back following a brief recovery after Saudi Arabia and several other Arab states severed ties with Qatar, accusing it of supporting extremism and undermining regional stability.

Stocks in Qatar plunged more than 8 percent overnight to their lowest since January 2016.
U.S. crude was 0.5 percent lower at $47.18 a barrel on Tuesday, after falling 0.55 percent on Monday.

Global benchmark Brent retreated 0.4 percent to $49.26, extending Monday's 1 percent slide.

The dollar index touched a seven-month low ahead of testimony before the U.S. Congress from former FBI director James Comey on Thursday.

There will be intense interest in what Comey might say about his conversations with U.S. President Donald Trump about an investigation into former National Security Advisor Mike Flynn, who was fired for failing to disclose conversations with Russian officials.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, fell to its lowest level since the November U.S. election. At 0524 GMT, it was down 0.2 percent, to 96.611.
The dollar slid 0.5 percent to 109.90 yen on Tuesday, close to the six-week low hit earlier in the session.

News on Monday of U.S. services sector activity slowing in May as new orders tumbled also hit the dollar.

The dollar further came under pressure from a stronger euro, on expectations the European Central Bank will take a less dovish tone than in the past at its Thursday meeting.

Rising Brexit 'bill' raises negotiating stakes

EU negotiators have hiked possible payment demands for Brexit over recent weeks, officials say, widening the divide between Brussels and London, which questions whether it owes anything at all before talks start next month.

Hours before chief negotiator Michel Barnier was due to give more details on the EU's standpoint, a Financial Times headline saying the EU might seek an upfront payment in 2019 of up to 100 billion euros (84.58 billion pounds), drew an immediate rejection from Britain's Brexit Secretary David Davis that he would pay that sum.

The European Commission has previously given a ballpark estimate of the bill of about 60 billion euros. The FT said the calculations it referred to would result in a net payment from Britain of roughly that level, after subsequent reimbursements.

One senior EU official involved in preparing for the talks after a British election on June 8 said he did not recognise the 100-billion-euro figure, although a number of private calculations of the bill have gone as high or even higher.

Last month, the Bruegel think-tank in Brussels put the up-front payment for Britain as high as 109 billion euros under one of many scenarios for the calculation. Later reimbursement would bring the net figure to 65 billion, Bruegel's study showed.

Over the past month, the 27 other member states have drafted negotiating guidelines for the executive Commission that leaders agreed on Saturday. In the course of drafting, governments insisted on clarifying that Britain be made to pay up front for, among other things, contingent liabilities for guarantees on loans made by, for example, the European Investment Bank.

A document seen by Reuters outlining Barnier's plans for negotiations, showed he has a plan to calculate up-front payment for contingent liabilities, to be repaid later: "This calculation will also identify the amounts covering or guaranteeing loans which have to be reimbursed to the United Kingdom if uncalled, on the basis of the maturity of the loans."

European Commission President Jean-Claude Juncker was quoted as saying after a dinner with May last week that he saw a major risk of failure as the two sides were so far apart.

Asia stocks firm ahead of U.S. jobs, dollar hits seven-week high vs yen

Asian stocks edged up and the dollar rose to seven-week highs versus the yen on Friday, ahead of the closely-watched U.S. non-farm payrolls report due later in the day.

Spreadbetters expected the firmer tone in equities to carry over into Europe, forecasting a higher open for Britain's FTSE, Germany's DAX and France's CAC.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.3 percent, taking cues from a modest bounce in Wall Street overnight.

Shares in South Korea rose 0.3 percent and the won firmed slightly after the country's Constitutional Court upheld parliament's impeachment of President Park Geun-hye over a graft scandal involving big business.

In currencies, the euro enjoyed a lift after European Central Bank head Mario Draghi's suggestion on Thursday it was less necessary to prop up the market through ultra-loose monetary policy.

German, British and Italian bond yields extended their rise in Asia as the region's investors reacted to Draghi's comments, traders said.

The euro extended its overnight gains and was last up 0.2 percent at $1.0599.

The dollar fared better against the Japanese yen, rising to 115.435, its highest since Jan. 19, as benchmark U.S. Treasury yields rose to three-month highs on expectations that Friday's nonfarm payrolls report could seal expectations for the Fed to hike rates next week.

Cementing views of tighter U.S. policy was also a report on Thursday that showed the number of Americans applying for unemployment benefits rose to 243,000 last week, rebounding from a near 44-year low, but continuing to point to a tightening labor market. 

Wall Street was marginally higher the day before, underpinned by speculation the widely-anticipated labor market report on Friday would show U.S. payrolls growth in February was far more than economist forecast.