Factories stuck in ‘twilight zone’ as Brexit stockpiling softens downturn – latest updates
Coming up later today, we’ll get the latest figures on US jobs growth, with sharp slowdown expected in October because of the General Motors strike.
Analysts polled by Bloomberg expect 85,000 jobs to have been added over the month, compared to 136,000 in September.
The 40-day strike will have hit non-farm payroll (NFP) figures because striking workers do not receive paychecks, and are counter as unemployed for the sake of the survey.
Job growth has been slowing this year, with the trade war between the US and China weighing on business investment.
FTSE pushes higher
The FTSE 100 has slightly extended its gains, as part of widespread bounce-back on European stocks.
The pound is holding small gains, but has fallen back to $1.295.
SpreadEx’s Connor Campbell said:
Sterling is in a pretty good place – despite Goldman Sachs’ suggestion to ignore the currency completely over the new few months.
Manufacturing sector in ‘twilight zone’
Duncan Brooks, director of the Chartered Institute of Procurement & Supply, said of the figures:
A minor uplift in overall purchasing activity did little to ease the agony for manufacturing companies in October as the sector remained submerged in contraction terrain and heading for recession. Business was still restrained by the Brexit leash, as firms were subjected to the struggle against client indecision and also the downpull of a slowing global economy.
This affected new order intakes which fell for a sixth sequential month as the second Brexit deadline loomed into view. Domestic clients packed up and went home without placing orders, leaving the sector to survive on a handful of stockpiling purchases from clients in the EU.
Naturally this had a heavy impact on job creation as manufacturing firms cut jobs for the seventh month in a row and at one of the fastest rates for a decade. Companies have lost faith in their ability to weather the ongoing storms, reining back spending where they can. As the manufacturing sector remains in the twilight zone, wondering whether to stock or de-stock, hire new staff, look for new business or batten the hatches once again, it looks like a scary end to the year.
Best reading in six months at firms stockpilie, but slowdown continues
Researchers at IHS Markit said:
Ongoing uncertainties surrounding Brexit, the economic outlook and the political situation continued to weigh on the UK manufacturing sector during October. Output and new order inflows contracted, leading to further job losses. Firms also ramped up stock-building and purchasing activity in the lead-up to the (postponed) October Brexit departure date.
They note that the data was gathered for the October 11 to October 28 period, meaning it is all from before the Brexit extension was confirmed.
Their analysis continues:
The downturn in manufacturing production continued, although the rate of contraction slowed. Firms reported that weaker inflows of new business, especially from the domestic market, had led to a further scaling back of output. This was partly offset by manufacturers who raised production to build-up stocks in advance of the October Brexit deadline.
New orders decreased, while factories continued to shed workers.
Rob Dobson, director at IHS Markit, said:
The manufacturing downturn continued at the start of the final quarter as uncertainties surrounding Brexit, the economic outlook and domestic politics all took their toll.
However, the underlying picture looks even darker than even these disappointing headline numbers suggest, as output and new orders fell despite short-term boosts from stock-building activity in advance of the October 31 Brexit deadline, which included a rise in exports as clients in the EU sought to mitigate supply risk.
Break: UK manufacturing slows down in October, but beats expectations
Just in: Activity in the UK’s factories continued to slow down in October, but was better than expected.
Purchasing managers’ index activity data for October gave a score of 49.6, where a reading above 50 indicates growth. Analysts had expected 48.2
Questor: How we’d invest through a Corbyn government
Does a possible Corbyn government represent an existential threat to Questor’s portfolio?
That’s the question the Telegraph’s investment column has set out to answer today. Questor editor Richard Evans writes:
We’ll have to await the party’s manifesto for details of its latest plans for these businesses but previous indications about its intentions can only mean pain for shareholders.
Shafik for Governor?
A new frontrunner in the heated field of possible replacements for Bank of England Governor Mark Carney?
The BBC reports Egyptian-born Dame Minouche Shafik, director of the London School of Economics, is the Government’s current favourite to take the hot seat at Threadneedle Street.
Mr Carney’s replacement is likely to be announced after the outcome of December’s election, with the Canadian set to leave on January 31.
NEW: told that Minouche Shafik is THIS govt’s preferred candidate for next Bank of England Governor. No announcement this side of election – cos it would be “politically messy” but if (a big if) this government secures majority – Egyptian born Minouche is current favourite.
— Simon Jack (@BBCSimonJack) October 31, 2019
Dame Shafik, a former deputy governor at the bank, once said she would a “wise” owl if she were in charge of rate-setting (as opposed to a hawk or dove).
Evraz steel output falls
Crude steel output at Russian miner Evraz fell during the third quarter, with the group blaming the decline on lower volumes, disruption caused by scheduled repairs, and weaker demand at its North American sites.
The FTSE 100 company’s shares are off about 1pc this morning after releasing the figures in an update to the City. Total steel sales were flat quarter-on-quarter overall.
Lookers shares plummet after profit warning
This morning’s profit warning has put a big dent in Lookers shares, which are down about 16pc currently, having fallen as much as 30pc.
On the FTSE 100, Auto Trader is leading fallers – possibly due to investor nerves about the car-sales sector.
Nervous market movements boost TP ICAP
TP ICAP, the biggest inter-dealer broker in the world, said its revenue jumped over the third quarter as market nerves led to an increase in trading.
It warned, however, that global uncertainties could impact its transaction volumes during the rest of the year, holding its current guidance.
Revenue for the three months to the end of September was 17pc higher than during the same period last year.
Peel Hunt analysts said:
Overall, the business delivered strong growth in Q3, benefitting from more volatile market conditions.
The company’s share price has fallen slightly at open:
Markets claw back some of yesterday’s slide
European markets have opened slightly upbeat, with the FTSE 100 recovering some of yesterday’s losses.
The pound has continued to push slightly higher, and is just over $1.296.
Profit warning and leadership changes at Lookers
Car dealership Lookers has warned on profits and announced a board clear-out just months after the launch of a probe by the City watchdog sent its shares crashing, my colleague Michael O’Dwyer reports. He writes:
Chief executive Andy Bruce and chief operating officer Nigel McMinn will step down from the board immediately, the company said.
Lookers said that trading since mid-September had been much more challenging than expected. As a result, it warned that underlying pre-tax profits for 2019 could be £20m lower than previously forecast.
Trading in both the new car market and the higher-margin after-sales business had been disappointing, Lookers said.
Agenda: FTSE 100 looks to recover losses after worst day in a month
Good morning. The FTSE 100 is set to open narrowly in the green after better-than-expected Chinese manufacturing data pushed Asian stocks higher overnight.
The UK’s blue-chip index suffered its biggest drop in almost a month yesterday as a series of heavyweight falls and fears that progress in US-China trade talks may be stalling dragged on stocks.
The pound gained overnight to rise above $1.295, closing in on the highest level it reached last month. October ended as the best month for sterling since the financial crisis.
5 things to start your day
1) Plug it in? The drive to ensure Britain can charge millions of electric cars. The final part of our week-long electric vehicle (EV) series examines whether Britain is ready to meet demand for charging points.
2) The economics election scorecard: five charts showing whether Britons have had their pockets picked or lined since 2017. how has the economy performed for the man on the street since voters were last sent to the polls?
3) Italy’s billionaire Agnelli family are in line for a €1.4bn (£1.2bn) payday if the merger of car makers PSA Group and Fiat Chrysler goes through. The Agnellis – already worth almost €10bn – control about a third of Fiat Chrysler through their Exor investment vehicle, of which they own half.
4) Some of Britain’s most prominent business leaders branded Jeremy Corbyn “clueless” and said he has led “a narrow life” after the Labour leader attacked them in an election campaign speech. Financier Crispin Odey and Sports Direct boss Mike Ashley hit back at the Labour leader when he accused them of taking advantage of the UK’s “corrupt system” in a blistering attack on capitalism.
5) Apple faces a potential fine from French authorities for allegedly breaking competition law, the tech company has revealed. France’s Autorité de la Concurrence has hit Apple with claims that its sales and distribution operations in the country are anticompetitive, the company disclosed in its annual report.
What happened overnight
Most Asian stocks rose and European and US futures pushed higher Friday as investors weighed better-than-expected Chinese manufacturing data against uncertainty about an interim US-China trade deal.
Equities in Japan pared losses, while shares in Hong Kong and China rose after a closely-watched manufacturing gauge unexpectedly climbed. Stocks in Seoul shrugged off the latest plunge in South Korean exports.
Sentiment had weakened earlier and the S&P 500 slipped overnight after Bloomberg reported that Chinese officials have warned they won’t budge on the thorniest trade issues. Negotiators are expected to hold a call Friday.
Coming up today
Trading statement: Evraz, TP ICAP
Economics: Manufacturing PMI (UK and US)