Pound drops as doubts grow over Brexit deal – live updates
Thinks are pretty downbeat across Europe, with the latest lines on the wires suggesting Brexit talks are at an impasse.
The Competition & Markets Authority has set a December 11 deadline to decide whether to launch a full-blown probe into Amazon’s plans to invest $575m into delivery firm Deliveroo.
Until then, it will determine whether the investment might lead to a “substantial lessening of competition“ in the food delivery sector.
The Brexit wobbles are continuing, with two chunky downwards twitches since trading opened this morning. The pound fell as much as 1pc against the euro and dollar a few minutes ago, though it pulled back quite quickly from those drops.
The FTSE 250, however, is having a worse day. After standing out yesterday amid high investor spirits, it is now off about 1pc as sentiment worsens.
Here’s some reaction to this morning’s headline CPI inflation figures. Capital Economics’ Andrew Wishart called them “surprisingly subdued”, writing:
House price rise beats expectations, appears steady
The other big bit of data from the ONS today: house prices rose more than expected in August despite the gloom and uncertainty, increasing by 1.3pc.
The ONS says:
Average house prices in the UK increased by 1.3pc in the year to August 2019, up from 0.8pc in July 2019 but remain below the increases seen this time last year. Over the past three years, there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England.
The lowest annual growth was in London, where prices fell by 1.4pc over the year to August 2019, followed by the South East where prices fell by 0.6pc over the year.
Breaking the UK down by countries, ENglish house prices remain the highest:
On a regional level, the North East was the English region with the highest annual house price growth, with prices increasing by 3.3pc in the year to August 2019:
Transport ceases to be large contributor to inflation rate
Here’s more from the ONS:
The contribution from transport has fallen since April 2019 meaning it no longer provides one of the larger contributions to the CPIH 12-month inflation rate. Having fallen to 0.07 percentage points, the contribution in September 2019 is practically one-tenth of the 0.68 percentage point contribution transport had in September 2018. Within transport, the contribution from motor fuels in September is negative for the second month in a row, reflecting a fall in price of 2.1pc on the year.
No change in CPI inflation – 1.7%y/y in September. Core inflation (excl.’s food & fuel) did tick up from 1.5%y/y to 1.7%y/y. Main downward push came from motor fuels, main upward push from household goods, hotels & rec. & culture goods. RPI fell from 2.8%y/y to 2.4%y/y. pic.twitter.com/cSSjrdkTsC
— Rupert Seggins (@Rupert_Seggins) October 16, 2019
Furniture prices offset falling fuel prices
Here’s what the Office for National Statistics has to say about those numbers:
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.7pc in September 2019, unchanged from August 2019.
The largest downward contributions to change in the CPIH 12-month inflation rate, between August and September 2019, came from motor fuels, second-hand cars, and electricity, gas and other fuels.
These downward movements were offset by upward movements from furniture, household appliances, hotel overnight stays, and from recreation and culture items.
The Consumer Prices Index (CPI) 12-month inflation rate was 1.7pc in September 2019, unchanged from August 2019.
Correction: Apologies, I misread the core and headline figures initially – headline CPI was flat at 1.7pc, while core rose to 1.7pc from 1.5pc. I have corrected my previous post.
Break: UK inflation stays at 1.7pc
Just in: UK headline consumer price index inflation stayed at 1.7pc in September.
The Bank of England’s target is 2pc.
Rio Tinto’s iron ore business bounces back
Shares in Rio Tinto are down slightly this morning, despite the company saying its iron ore shipments rose by 5pc in the third quarter, buoyed by rising demand from Chinese steelmakers.
The London-listed miner, which is part of the FTSE 100 index, said it had recovered from problems at one of its key Australian mining locations, after an “operational” error earlier this year led to the overproduction of low-grade material.
Its chief executive, Jean-Sébastien Jacques, said:
We have delivered improved production across the majority of our products in the third quarter, with a solid result at our Pilbara mines driving increased sales of iron ore into robust markets.
Is a Brexit deal coming?
It’s still a shaky time to be trading the pound, with sterling volatility (implied by the cost of hedging against price movements) hitting a three-year high yesterday.
Traders (like the rest of us) will be watching for white smoke from Brussels today, but the latest word via Bloomberg is that UK officials are feeling downbeat, with the DUP resisting proposals that would see Northern Ireland left in a separate custom arrangement to the rest of the UK.
As a reminder, the Prime Minister faces a pretty major hurdle getting any agreed terms through Parliament, where his majority is shot:
As ever, the Telegraph’s hugely well-informed Europe Editor Peter Foster has been breaking down the latest details. Here’s an extract from a Twitter thread he wrote this morning:
It might also be worth considering that the history of UK-EU negotiations so far is a tale of big, headline promises….that bit by bit slump back to earth. Gravity takes over, in politics as well as trade. /6
— Peter Foster (@pmdfoster) October 16, 2019
Turkey bans short-selling in seven banks
From slightly earlier this morning: Turkey has banned short-selling in seven of its banks, include one that is the focus of a US fraud and money-laundering case.
The decision comes into effect on Wednesday, according to a statement. No information was given on when the ban would end. The ban also applies to short positions closed within the same day, Capital Markets Board said in a separate statement.
Turkey temporarily bans short-selling in 7 banks
▶️Including Halkbank (Down 7.2% at the open) against which the U.S. brought a criminal case for fraud and money laundering for allegedly violating Iran sanctions
▶️Bank index down 4%https://t.co/0wPWRwXabepic.twitter.com/S3G05wjeOL
— Fercan Yalinkilic (@FercanY) October 16, 2019
Asos shares jump most in seven months after beating earnings expectations
Shares in Asos are up just under 15pc currently, having gained as much as 21pc earlier – its biggest intraday jump since March.
The online retailer beat City estimates for its profit, with figures RBC analysts deemed “reassuring”.
The online retailer’s profits slumped by more than two-thirds last year after restructuring costs and operational problems took their toll. But Nick Beighton, chief executive, insisted it had been a “pivotal” year for the retailer, saying it had invested heavily in its business.
Markets in the red
London trading has been open for just under half an hour now, and the mood is fairly anxious. The FTSE 100 is flat, while the FTSE 250 – seen as more exposed to Brexit risk – is down a solid 0.63pc.
When I wrapped up yesterday’s blog after after markets closed, I said it was best to do so while things were still neat.
I was certainly right in the case of Neil Woodford, whose investment empire effectively imploded in the hours after the bell last night.
You can read our key coverage on the saga using the links below:
Pound takes a breather
Sterling is at €1.1567, down fractionally, and at $1.2785, up 0.16pc, as crunch Brexit talks continue today.
Michael Hewson of CMC Markets has a cautionary note:
All it took was the mere whisper that EU and UK negotiators might be on the cusp of a possible Brexit breakthrough to propel, not only the pound up to its highest levels against the US dollar since May, but also sent the German DAX to its best levels in over a year…
Of course, all of this optimism over a Brexit deal could well come to nought, after all how many times have we been down this road in the last three years, as talks have faltered over the Gordian knot of Northern Ireland.
Agenda: Brexit, Brexit, Brexit
Good morning. Yesterday the FTSE 250 surged to its highest level in more than a year as investors piled into domestically-focused stocks on hopes of a Brexit breakthrough.
The mid-cap stock index closed up 1.34pc points as traders bought shares in retailers, landlords, high-street lenders and restaurants amid a relief rally that spilled onto international markets.
Meanwhile sterling hit a five-month high against the euro and a four-month high against the dollar yesterday, following reports that EU and UK negotiators were on the verge of a Brexit breakthrough. The pound touched as high as $1.28.
5 things to start your day
1) Neil Woodford has announced the “highly painful” decision to close his investment firm, following a disastrous day for the once-star fund manager. Fund supervisor Link ousted the disgraced fund manager from his flagship equity income fund early on Tuesday morning, announcing it would be wound down after Mr Woodford failed to raise sufficient funds for it to safely reopen in December.
2) How not to spin the worst jobs numbers in four years: This month saw the biggest quarterly fall in employment for four years. Unemployment up. Pay growth slipping. So spare a thought for Mims Davies – the employment minister in the Department for Work and Pensions, for anyone unfamiliar with the name – who was sent to man the barricades.
3) Thomas Cook’s former bosses have attacked ministers for standing on the sidelines as it raced to secure lifeline funding – while other European countries scrambled to offer support. Appearing in front of MPs yesterday, chief executive Peter Fankhauser revealed ministers from Germany, Spain, Turkey, Bulgaria and Greece had personally contacted him to offer support in the days before the world-renowned travel company collapsed.
4) Deeper interest rate cuts could be needed if Boris Johnson is forced to delay Brexit, Bank of England policymaker Gertjan Vlieghe warned yesterday. Interest rates are currently stuck at 0.75pc after just two rises in 12 years, forcing savers to accept tiny below-inflation returns on their bank deposits.
5) A rare disease drugs firm co-founded by the discoverer of Viagra has raised $56m (£44m) to use artificial intelligence for finding new medicines. Healx uses AI to examine potential beneficial side effects of existing treatments which could also treat rare ailments.
What happened overnight
Asian shares inched higher while sterling came off five-month highs in volatile trade on Wednesday as investors looked to whether Britain can secure a deal to avoid a disorderly exit from the European Union.
Officials and diplomats involved in negotiations said that differences over the terms of the split had narrowed significantly.
The news lit a fire under European and US equities, which jumped about 1% on Tuesday. The pound rocketed to $1.28, a level not seen since May 21.
The pound has strengthened nearly 5pc over the past week as investors rushed to reprice the prospect of a last-minute Brexit deal before the end-October deadline.
Still, the pound lost steam in Asia, falling 0.3pc to $1.2752, as uncertainties remained on whether a deal will be sealed at a make-or-break EU summit on Thursday and Friday and if Boris Johnson can get it through parliament.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4pc while Japan’s Nikkei jumped 1.5pc, hitting 10-month highs.
Australian shares added 0.9% while South Korea’s KOSPI index climbed 0.6pc, maintaining gains after South Korea’s central bank cut its policy interest rate for the second time in three months, matching a record low to address mounting deflationary pressures.
In Hong Kong, the Hang Seng index ended the morning 2.02 points up at 26,505.95.
Coming up today
Asos has had a poor year, with shares nearly 60pc below where they stood this week in 2018. The severe markdown was brought about by a pair of profit warnings, which the company pinned on issues including investments, competition, stock problems, economic worries and operational issues. That’s a fairly comprehensive list, so analysts will likely just focus on the broad strokes in its full-year results today; how sales are faring, and how the margins look.
Interim results: Rio Tinto
Preliminary results: Nanoco
Full-year results: Asos
Trading statement: Arbuthnot Banking Group, Mediclinic, Secure Trust Bank, Segro
Economics Inflation: (UK and EU)