Daily Mail

Voters fuel euro revival

- Alex Brummer

STuDENTS of British economic history will have few doubts about the power of financial markets to drive our politics. Britain’s ejection from the exchange rate mechanism in 1992 drove John Major’s Tories from power and paved the way for the Blair era. Similarly, the financial crisis forced Gordon Brown from office to be replaced by David Cameron.

We have recently seen the relationsh­ip reversed. The election of Donald Trump in November 2016 produced a strong rally which propelled the Dow Jones, Nasdaq and the S&P 500 to new highs and boosted the dollar by 5pc.

As the White House tumbled into a quicksand over Russia and the sacking of FBI chief James Comey, the dollar sank like a stone and the bull market in shares paused.

In contrast, on the Continent, the crisis in euroland is lifting.

The return of moderates in the Dutch election and the arrival of Emmanuel Macron at the Elysee has encouraged a reversal of financial flows out of the dollar into the euro which has climbed 7pc to its strongest level since November.

Politics have been the driver, but economics also are playing a part.

It is early days but there are signs of a recovery across the eurozone with output up 0.5pc in the first quarter.

Also on the plus side, there are indication­s Italy’s broken banking system loaded with bad loans of £310bn is starting to be repaired. unicredit raised £11bn in a rescue rights issue and efforts to mend the world’s oldest bank Monte dei Paschi di Siena are progressin­g.

There are still big fissures. A new package to keep Greece current on its loan repayments has been devised, but the Internatio­nal Monetary Fund and Germany are at loggerhead­s over debt forgivenes­s. The IMF thinks it should happen now and Germany’s hardline finance minister Wolfgang Schaeuble doesn’t want to be seen as having gone soft ahead of his country’s elections.

Amid the see-saw for the dollar-euro rate, the pound is holding steady at $1.30, close to its post-Brexit vote high, notwithsta­nding manifesto blips for the Tories and the horror in Manchester.

Thank goodness for small mercies.

Fintech fight

AS the last grown-up mutual standing, Nationwide is anxious not to make the mistakes which drove so many of its former compatriot­s to the wall in the financial crisis. It is severing links with commercial property, bearing down hard on buy-to-let mortgages and pulling out of car insurance.

Nationwide chief executive Joe Garner makes a big deal of how in the year ending in March the building society decided to tip the balance to depositors and current account customers by holding interest rates for savers while passing on rate cuts to mortgage customers. The result was a squeeze on profits, which fell by 17pc to £1.1bn.

Long-term savers are rewarded the luxury of 0.75pc returns in a period when inflation is running at 2.6pc.

Not exactly the kind of returns which will have deposits skipping down the street.

Although to be fair to Nationwide it does have some handsome teaser offers for shortterm saving and current accounts.

The biggest challenge for Nationwide as it looks to the future will be technology. Gar- ner assures me that investment in bringing mobile banking up to scratch is state-ofthe-art and the bank is using HD television technology to link branches and ease the strain of queues.

But it has much to do if it is to continue competing with the service levels and systems of Metro Bank or the new platform of TSB imported from owners Sabadell in Spain. One is reminded of the way technology is disrupting the traditiona­l banking by the launch by TransferWi­se of Borderless, a new service which offers cut-price crossborde­r payment services.

With revenues soaring by 150pc a year TransferWi­se, backed by Sir Richard Branson among others, is seen as ripe for a listing.

Traditiona­l lenders have little choice but to go all out in buying the newest technology or watch their cake being eaten by innovators.

Noble nixed

COMPARE and contrast. Over the last 12 months, shares in London-quoted natural resources trader Glencore more than doubled. Shares in its Asian commodity rival Noble have fallen 77pc this year (34pc in latest trading) and its bonds have been downgraded as ‘junk’.

Standard & Poor’s warns it may find difficulty paying its debt service bills this year.

Yikes!

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