US Banks clears first round of Federal Reserve’s annual stress tests [Video]

Today's Highlights

• US Banks clears first round of Federal Reserve's annual stress tests

• Theresa May seeks to reassure EU citizens

Current Market Overview

34 of the largest banks in the US have money on hand to withstand a severe recession, according to the Federal Reserve (FED) last night. The findings comes from an annual "stress test". The tests were put in place after the financial crisis to strengthen financial capacity in the event of a downturn. Banks have been pushing to relax those rules and some said Thursday's results could make it easier to convince policymakers to do so.

"We see today's ... stress test results as a positive for Trump administration efforts to deregulate the banks," Jaret Seiberg, a policy analyst with Cowen & Co, told Reuters.

The Federal Reserve tested to see how banks with $50bn (£39.4bn) or more would respond in the event of a global recession, if unemployment increased to 10% and property values declined. That would trigger combined losses of nearly $500bn over more than two years, including $383bn from loans, but the firms have enough of a cushion to handle such a blow, the Federal Reserve said.

About three million EU citizens living in the UK would be allowed to stay after Brexit, Theresa May has proposed. A new "UK settled status" would grant EU migrants who had lived in the UK for five years rights to stay and access health, education and other benefits. Proposals were unveiled at a Brussels summit but are dependent on EU states guaranteeing Britons the same rights. German Chancellor Angela Merkel called the plan a "good start", but Labour said it was "too little, too late". Addressing other EU leaders at her first summit since the general election, the Prime Minister said she did not want anyone to have to leave or families to split up.

Sterling rallied as Bank of England policy maker Kristin Forbes said yesterday that she was concerned that the lower Pound was having a lasting upward effect on inflation and that central banks were more reluctant to raise rates than in the past. Forbes comments come after a turbulent week which has seen a split emerge on the Monetary Policy Committee (MPC) at a time when inflation is picking up but growth is weak and Brexit is still bringing further uncertainty. Forbes, who voted for a hike in rates earlier this month, is leaving the MPC next week as her tenure comes to an end and markets await the next vote as new member Silvana Tenreyro begins her term.

Exceptionally quiet on the data front. The EU leaders' summit will probably be the closest watched event of the day followed by manufacturing data from the US this afternoon.