China pledges economic stimulus, as German growth hits five-year low - as it happened

And finally, there’s been wild swings in the currency markets as Theresa May suffers a historic defeat over her Brexit deal.

Sterling slid to $1.266, lowest since January 4th, as investors reacted to the sheer scale of the defeat -- a majority of 230 MPs opposed the plan.

But it then staged a Lazarus-like recovery, back over $1.283, as May challenge the opposition to table a no-confidence vote, and Jeremy Corbyn promptly obliged.

It’s still not clear what will happen next - the deal looks dead, but May may attempt to revive it.

Ranko Berich, Head of Market Analysis at Monex Europe, comments:

“Tonight’s confused sterling price action reflects the fact that the pound was already trading with significant downside risk priced in. It seems that for now, market participants have faith in the supposed majority that exists for avoiding a no deal, and are at least a little encouraged by the prospect that the chaos results in a delay or a softening of Brexit.

A nightmare scenario for sterling would be a standoff where May sees off the vote of no confidence but still can’t pass a bill, and so is forced to continue to run down the clock while refusing to offer any real alternatives or call a referendum. Such a game of chicken would substantially increase the risk of miscalculation or deadlock leading to no deal and send sterling towards parity against the euro.

“The outcome of the vote of no confidence is obviously the first major question for sterling at this point. Our view is that tonight’s small sterling rally reflects the marginal increase in the chance of a Labour-led soft Brexit, so if May falls we could see further sterling strength. The pandemonium of a general election, however, could well end up as a net negative as the polls change from day to day.”

You can track all the action here:

When the pound goes down, the FTSE 100 often goes up, as it has today....

Something for currency traders (and the rest of us) to digest:

The fortunes of the pound tonight will be determined by the size of Theresa May’s defeat.

Tyler Griffin, currency specialist at OFX, said:

Looking ahead, anything close to 100 votes would cause upside for the pound, however if May loses by more than 150 votes, there would be further turmoil for sterling which could tumble to below 1.25 versus the US Dollar.”

In the currency markets, sterling is under pressure as parliament prepares to vote on Theresa May’s Brexit deal - and surely inflict a historic defeat on the PM.

With the US dollar generally stronger, the pound has dropped by one and a half cents to $1.2723. That’s a chunky move, but it only takes sterling back to last week’s levels.

The City isn’t really sure what to expect with Brexit, but there’s a theory that sterling assets should rally if the threat of no deal was taken away.

Joel Kruger of LMAX Exchange argues that anything short of a hard Brexit will be very good for the value of the pound.

“We believe the most critical takeaway with respect to the outlook for the UK economy is that there are no parties involved that would benefit from a no deal Brexit outcome. This puts a beaten down Pound and UK assets in position to outperform in 2019, as the tail risk event of no deal Brexit is truncated.”

Sterling is also down around 0.35% against the euro (which is also down against the dollar) at €1.118.

Our Politics Live blog has all the action:

With some of the early optimism over China’s stimulus pledge fading, the FTSE 100 has closed 40 points higher at 6,895 tonight.

Beijing’s pledge to cut taxes and maintain plenty of liquidity is still welcome, but analysts are questioning quite how quickly it will happen, and how much impact it will have.

The German and French markets also handed back some gains, but still finished higher (0.33% and 0.5%).

David Madden of CMC Markets says:

European equity markets are a mixed bag this afternoon. The major equity benchmarks started off strong today after Beijing announced plans overnight to trim the tax rate for small businesses. It was the latest move by the Chinese government to try and encourage economic activity. The fact that a large portion of the gains have been handed back suggests that investors are not overly confident the Chinese economy will suddenly stop cooling. The firmer oil price has helped BP and Royal Dutch Shell, which in turn has helped the FTSE 100.

Here’s Jamie Rowlands, partner at City law firm Gowling WLG, on China’s pledge overnight to cut business taxes:

This seems to be an attempt to stimulate domestic SME-type businesses in an environment where China’s economic strength is in question – albeit still more robust than much of the rest of the world.

Definitely an internal financial boost incentive rather than international.

Wall Street has opened a little higher this morning, as traders absorb China’s pledge to stimulate its economy.

The tech-focused Nasdaq index is leading the way, thanks to Netflix which has announced price hikes (sending its shares up 6%).

Auto news: Ford and Volkswagen have announced details of a new alliance.

The deal is designed to cut the cost of the technological revolution now shaking the industry and deal with slowing sales.

My colleague Dominic Rushe explains:

The companies will start with the development of commercial vans and mid-size pickups but the alliance will also involve sharing resources on autonomous vehicles, mobility services and electric vehicles.

“Over time, this alliance will help both companies create value and meet the needs of our customers and society,” Ford’s chief executive, Jim Hackett, said at the Detroit auto show He said the deal would give the companies “the opportunity to collaborate on shaping the next era of mobility”.

No word on the impact on jobs. Last week, Ford Europe announced thousands of job cuts, as the industry reels from the slowdown in China and the diesel emissions scandal.

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Donald Trump may have blown Davos out this year (blame the shutdown over his border wall), but plenty of other world leaders will be making the trek to the snowy ski resort.

The World Economic Forum have just announced the list of attendee’s for next week’s event. Topping the list are two G7 leaders - Germany’s Angela Merkel and Japan’s Shinzo Abe.

Brazil’s new right-wing president, Jair Bolsonaro, is another big name, while China will be represented by Wang Qishan, Vice-President of the People’s Republic of China.

Also in attendance are:

Giuseppe Conte, Prime Minister of Italy; Pedro Sanchez, Prime Minister of Spain; Barham Salih, President of Iraq; Mohammad Ashraf Ghani, President of the Islamic Republic of Afghanistan; Sebastian Kurz, Federal Chancellor of Austria; Ivan Duque, President of Colombia; Abiy Ahmed, Prime Minster of Ethiopia; Leo Varadkar, Taoiseach of the Republic of Ireland; Benjamin Netanyahu, Prime Minister of Israel; Faiez Al Serrag, Prime Minister of Libya; Mark Rutte, Prime Minister of the Netherlands; Jacinda Ardem, Prime Minister of New Zealand; Erna Solberg, Prime Minister of Norway; Rami Hamdallah, Prime Minister of the Palestinian National Authority; Martin Alberto Vizcarra Cornejo, President of Peru; Paul Kagame, President of Rwanda; Cyril M. Ramaphosa, Prime Minister of South Africa; Yoweri Kaguta Museveni, President of Uganda; Nguyen Xuan Phuc, Prime Minister of Viet Nam; and Emmerson Mnangagwa, President of Zimbabwe.

Heads of the major international bodies are also attending, including the WTO’s Roberto Azevedo, the OECD’s Angel Gurría, and Christine Lagarde of the IMF.

No mention of Theresa May, but perhaps she’s waiting to see how this week’s Brexit votes pan out....

...instead, Prince William and David Attenborough will be flying the flag for the UK, talking about environmental issues, and mental health.

Assuming we can make it through the mountains of snow next week....

15 Jan 201908.59 EST

Greek bonds rally ahead of confidence vote

Helena Smith

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In what may well be rare good news today, Greek bond yields have hit a one-month low.

Greece’s debt is strengthening on expectation that prime minister Alexis Tsipras will survive a parliamentary vote of confidence prompted by the departure of the right-wing Independent Greeks party, ANEL, from his ruling coalition.

The leftist leader kicked off a two-day debate over the censure motion appealing to MPs to renew their confidence in the government in the name of “patriotic interest towards history and democracy.”

“We have before us many big political initiatives that must not be delayed,” he told the House before singling out increasing the minimum wage as one of the reforms.

Yields on ten-year bonds fell 2bps to 4.267%, while five-year bonds were down 3bps to 3.21% reflecting investor confidence that the government will survive the vote. Tsipras’ Syriza party controls 145 seats in the 300-member parliament but at least six opposition MPs (including four from ANEL) have said they will back the government.

Addressing parliament, Tsipras spoke more out of sorrow than anger about ANEL leader Panos Kammenos’ decision to withdraw from the coalition over the landmark accord to change neighbouring Macedonia’s name - a deal that must now be ratified by Greek MPs after being endorsed by the Skopje parliament.

Parliament’s speaker has called the ballot be held at midnight tomorrow - in a revisit of similar votes at the height of the euro crisis even if tomorrow’s is unlikely to be a cliffhanger of the kind that we all once witnessed.

Newsflash: US banking giant JP Morgan is urging politicians in Washington to work together, after missing Wall Street forecasts.

JP Morgan has just reported adjusted earnings per share of $1.98 in the last quarter, below estimates of $2.21 per share.

Recent market ructions seems to have hurt the bank; net income at its investment bank fell 15%, partly due to a weakness at its fixed-income division (bond trading).

CEO Jamie Dimon says it was a challenging quarter, as “volatility and lower market levels” hit its bottom line.

And as the US government shutdown enters its 25th day, Dimon is pushing Capitol Hill to help the economy:

As we head into 2019, we urge our country’s leaders to strike a collaborative, constructive tone, which would reinforce already-strong consumer and business sentiment.

Businesses, government and communities need to work together to solve problems and help strengthen the economy for the benefit of everyone.”

Shoppers at 17 towns and cities around the UK are losing their local Marks & Spencer, as the retailer implements its restructuring plan.

The proposed closures will cost 1,000 jobs, and hurt the high streets from Huddersfield and Hull to Ashford and Felixstowe.

Elsewhere in the eurozone, shares in Italian banks are sliding after they were told to set aside more capital to cover bad loans.

Reuters has the details:

The European Central Bank has asked lenders it oversees to put aside more money to fully cover their impaired loans by around 2026, Italian newspaper Il Sole 24 Ore reported on Tuesday citing a source.

The report focused in particular on Italian banks, saying the country’s lenders were burdened by the highest amount of impaired loans in Europe.

UBI Banca, Italy’s fifth-largest bank, has slumped by almost 10% today, as investors fret about the ECB’s move. Banco BPM SpA, the third-largest lender, has shed 8.6%, while market leader Unicredit has lost 3%.

Germany’s growth pains are part of a wider slowdown across Europe.

Oxford Economics reckons eurozone growth will drop to just 1.5% this year, from 1.8% in 2018 - and a sizzling 2.7% in 2017.