The pound has extended its losses against the euro in recent minutes, although it appears to have found a resting place around 0.6pc down against the dollar. Markets.com’s Neil Wilson says:
The German lender has not yet fully detailed where the axe will land as it undertakes major restructuring plans, but it looks like retail units in its home country will be bearing much of the brunt.
Here are more responses to reports about the call between PM Boris Johnson and Chancellor Angela Merkel this morning. It looks like we might be waiting a bit longer for Germany’s side of of the story.
Bad news for hopes of a Brexit deal, and some better-than expected figures from German have dragged the pound to a one-month low against the euro (it is at its lowest level against the dollar since last Tuesday).
That drop puts it near an overall fall against the currency for the year:
European share losses extend after Brexit talks stall
Europe’s stock exchanges have sunk deeper into the red following those reports of stalled Brexit talks, with all major bourses on the continent now off more than 0.5pc on the day.
In London, the FTSE 100 has returned to being flat, with a weaker sterling offering some support the index’s exporters.
Sky: Prepare for no-deal showdown
Sky News’ political editor Beth Rigby tweets:
So 30 min call btwn PM & Merkel confirms what No 10 was expecting: a deal on Johnson new terms ‘overwhelmingly unlikely’. Source says Merkel position means deal ‘essentially impossible not just now but ever’ > So we pivot to a No Deal and legal showdown over Benn Act?
— Beth Rigby (@BethRigby) October 8, 2019
While Christopher Cook (formerly of the BBC and now part of Tortoise) says:
This has been the Irish position since January 2017. It was a feature of the Joint Report, the EU draft WA and the final WA. https://t.co/pac2y1cCYg
— Chris Cook (@xtophercook) October 8, 2019
Follow updates from Westminster on our politics live blog…
Javid: Recruitment process to replace Mark Carney at Bank of England is ‘on track’
Chancellor Sajid Javid has told MPs the process to appoint Mark Carney’s replacement as Bank of England Governor is “on track”.
In a letter to the Treasurt Select Committee, Mr Javid wrote:
You asked for an update on this important recruitment process. It is on track. In terms of the appointment itself, we will make an announcement in due course, ahead of the start of the next Governor’s term on 1 February 2020.
I would like to assure you that the Committee will have the opportunity and time to scrutinise the successful candidate after the appointment has been made but before the individual has taken up the role.
Mr Carney has previously signalled he would be willing to remain in the role if the Government desired him to do so.
FSB says new Brexit tariff plans aren’t enough
The Federation of Small Businesses has responded to adjusted post-Brexit tariff plans unveiled by the government this morning.
Adjustments have been made to the charges on HGVs, bioethanol and clothing.
The Department for International Trade said the new tariffs were introduced in order to:
lower tariffs on HGVs entering the UK market, striking a better balance between the needs of British producers and the SMEs that make up the UK haulage industry, ensuring that crucial fleet replacement programmes that help to lower carbon emissions can continue
adjust tariffs on bioethanol to retain support for UK producers, as the supply of this fuel is important to critical national infrastructure
apply tariffs to additional clothing products to ensure the preferential access to the UK market currently available to developing countries (compared to other countries) is maintained
Mike Cherry, chairman of the FSB, said:
While these tariff adjustments will be good news for businesses in certain sectors – particularly smaller firms in our vital haulage industry – the cold hard fact remains that two thirds of small businesses that fear the impacts of no-deal feel they cannot prepare for this outcome.
The average cost of preparation to small exporters and importers of putting contingencies in place is £3,000.
Fundamentally, small firms are crying out for two things at this point: a pro-business Brexit deal and financial assistance to help manage the costs of uncertainty. The urgent issuing of £3,000export vouchers is a must.
It’s also important to stress that these tariffs only apply to the 12 month period after a no-deal scenario. What small businesses really want – with confidence currently suffering an unprecedented losing streak – is a return to an environment where they can plan three, five and ten years in advance.
Kuenssberg: Feels like chance of Brexit deal this month ‘just died’
Here’s more from the BBC’s Laura Kuenssberg:
4. Feels like any chance of a deal this month just died
— Laura Kuenssberg (@bbclaurak) October 8, 2019
There may be reason to be sceptical of the claims, however. The Telegraph’s James Crisp tweets:
This would be very significant. But it is very unMerkelesque to close down talks in this way w/ bald bold ultimatums. So not convinced this source telling whole truth tbh.
— James Crisp (@JamesCrisp6) October 8, 2019
BBC: Merkel tells Johnson Brexit deal ‘overwhelmingly unlikely’ if Northern Ireland is not in Customs Union
The pound has dropped sharply following this tweet by BBC Politics Editor Laura Kuenssberg:
2. No 10 says PM stressed to Merkel UK believes they had put forward a reasonable new deal, but with no desire to engage on EU side + this demand on NI staying in Customs Union a deal is ‘essentially impossible’
— Laura Kuenssberg (@bbclaurak) October 8, 2019
Sterling is about 0.6pc off against the dollar compared to yesterday’s close.
Figures highlight UK’s productivity ‘puzzle’
Reflecting on those downbeat productivity figures, the ONS’s statisticians write:
This sustained period of declining labour productivity represents a continuation of the UK’s “productivity puzzle”, with productivity since the economic downturn in 2008 growing more slowly than during the long period prior to downturn.
Despite occasional periods of growth, this sustained general pattern of stagnation contrasts with patterns following previous UK economic downturns, when productivity initially fell, but subsequently recovered in a relatively sustained fashion whilst returning to the previous trend rate of growth.
A breakdown of which sectors contributed to the decline shows non-manufacturing and construction couldn’t offset a wider slip:
Productivity drop is worst in five years
Reuters’ Andy Bruce tweets:
UK Q2 productivity performance revised up slightly vs the flash reading…
…but still the biggest drop in annual terms in 5 years. ��
Poor ���� productivity record continues �� pic.twitter.com/qpp5guJVZ1
— Andy Bruce (@BruceReuters) October 8, 2019
UK productivity slipped during quarter of contraction
Labour productivity in the UK (measured as output per hour) slipped by 0.5pc compared to the same quarter last year, after two consecutive quarters of stagnation.
The Office for National Statistics says:
Both services and manufacturing saw a fall in labour productivity growth of 0.8pc and 1.9pc respectively, compared with the same quarter in the previous year.
UK productivity (output per hour) fell -0.5%y/y in Q2. Professional services, manufacturing, transport services & financial services contributed most to the fall, though there was also a contribution from labour moving from more to less productive sectors (“allocation effect”). pic.twitter.com/V8qOsDPZZV
— Rupert Seggins (@Rupert_Seggins) October 8, 2019
LSE: We remain committed to Refinitiv tie-up
London Stock Exchange Group has responded to HKEX’s decision to pull its takeover bid — confirming its intention to push ahead towards a tie-up with data giant Refinitiv, that would position the company as a major player in the financial data sector. LSE said:
LSEG remains committed to and continues to make good progress on its proposed acquisition of Refinitiv. Regulatory approval processes are underway and shareholder approval for the transaction is expected to be sought at an Extraordinary General Meeting in November 2019. The transaction remains on track to close in H2 2020.
China: ‘Stay tuned’ for US tech blacklist response
A spokesperson for China’s foreign ministry has told reporters to “stay tuned” for the country’s response after Donald Trump’s administration placed eight Chinese tech giants on a blacklist.
AI startups and security firms were placed on the list, which was unveiled shortly ahead of trade talks between the two countries.
What will ‘Red October’ means for stock markets?
Are you ready for a tough October’s trading?
The tenth month of the year is often to deadliest for financial markets, reports Tom Rees for today’s Think Tank. He writes:
Market volatility in October is on average 25pc higher than other months, according to Goldman Sachs, meaning sharp swings are more likely than usual. Furthermore, six of the top 10 biggest historical drops in US stocks have occurred this month, including the Wall Street Crash in 1929 and Black Monday in 1987.
Goldman analyst John Marshall argues that high October volatility “is more than just a coincidence” and in fact reflects that this month marks a “critical period” for investors and companies just before the end of the year.
Read more here: Could Red October torpedo your stocks again?
EasyJet shares fall, analysts highlight lack of forward guidance
Shares in EasyJet have fallen about 5.5pc so far today, despite the company unveiling ‘solid’ profit figures in a confident-sounding update to the City this morning.
Bloomberg notes that the update was light on guidance for 2020, which appears to have left some analysts feeling let down. Goodbody writes:
Combining with the company’s decision not to hold a meeting or hosting a conference call, this could be seen a disappointing.
FT: Odey fund lost 12.7pc last month
Crispin Odey’s European hedge fund lost 12.7pc amid last month’s market turbulence as bets against the pound and financial firms came back to bite, the Financial Times reports.
The paper says:
Mr Odey, founder of London-based Odey Asset Management, lost 12.7 per cent in September in his European hedge fund, according to numbers sent to investors and reviewed by the Financial Times.
That left his fund down 18.1 per cent for the year. September proved a major challenge for hedge funds, many of which have been riding rising stock and bond markets this year.
The Brexit-backer’s losses were offset somewhat by the payoff from a bet against Metro Bank.
That make deal some damage to a popular conspiracy theory that has been doing the round on Twitter:
Sterling weakens as euro strengthens
The pound has weakened slightly this morning, as the euro strengthens following better-than-expected industrial data from Germany.
Seasonally-adjusted German industrial production increased by 0.3pc month-on-month in August, against estimates of a flat figure.
That is one of the first glimmers of positive industry news to emerge from Europe’s largest economy in a while — and investors have the added positive motivation that they know stimulus is coming from the European Central Bank.
PageGroup plummets after profit warning
Shares in PageGroup have dropped by around 15pc this morning, after it downgraded its profit expectations in the face of political and economic uncertainty.
The FTSE 250 recruitment firm said slowing growth in the US and Germany, Brexit uncertainty and ongoing disruption in Hong Kong has reduced its growth during the third quarter, as companies delayed permanant hiring decisions. It said:
Given the heightened political and macro-economic challenges seen in the quarter, together with our limited forward visibility, we currently expect 2019 operating profit to be in the range of £140m to £150m
Its chief executive, Steve Ingham, said:
Looking ahead, the deterioration in trading conditions seen during Q3 across the majority of our regions is anticipated to continue.
LSE Group drops nearly 7pc after Hong Kong exchange pulls bid
The withdrawal of HKEX’s interest in LSE has brought the latter’s shares down a peg, as hopes of a buyout fade. It fell nearly 7pc at the open, but has pared back those losses a little:
EasyJet hails ‘solid’ performance as rivals suffer from strikes
EasyJet has said it expects profit before tax to land in the upper half of its estimates, after strike disruption placed pressure on industry rivals during the summer.
My colleague Michael O’Dwyer reports:
The budget airline boosted passenger numbers by 8.6pc to 96 million after increasing its capacity by 10.3pc to 105 million seats. However load factor — the proportion of available seats sold — will fall 1.4pc to 91.5pc for the full year, easyJet said.
EasyJey’s chief executive Jonah Lundgren said:
As a result of our self-help initiatives and the increased demand due to disruption at British Airways and Ryanair, we anticipate achieving headline profit before tax for the full year 2019 of between £420m and £430m, in the upper half of our previous guidance range.
Hong Kong/LSE: The numbers behind the failed deal
Hong Kong’s stock exchange has been forced to scrap its £32bn bid for the London Stock Exchange.
The proposed deal was met with scepticism by investors and suspicion among politicians.Even if the deal’s economics had been made to work, there would have been plenty of regulatory hurdles to jump, as we have explained previously on Telegraph Business.
Here are some of the key numbers behind the two companies:
The failed bid may yet have a legacy in shaping the UKs approach to regulating foreign takeovers in the future. Our Mergers and Acquisitions reporter Vinjeru Mkandawire took a look previously at how the Hong Kong bid had sparked debate on the rules regarding foreign takeovers:
Agenda: Hong Kong abandons bid for London Stock Exchange
Good morning. The Hong Kong Stock Exchange has dropped its multibillion-dollar bid for the prized London Stock Exchange Group, which would have created a global markets titan. We’ll be bringing you all the latest news on that story which broke overnight.
Elsewhere, official German data yesterday showed a drop in industrial orders in August but the news failed to shake European stocks, which pushed higher to close in positive territory. US stocks however fluctuated throughout the day ahead of a meeting between the US and China later this week.
5 things to start your day
1) The Conservatives risk trashing their reputation for sound financial management after experts warned that day-to-day spending is set to surge to levels promised by Jeremy Corbyn’s Labour party. Boris Johnson’s new Government is “now adrift without any effective fiscal anchor” and will break its budget rules in its first full year, the Institute for Fiscal Studies said.
2) Could Red October torpedo your stocks again? While traders will be praying to escape unscathed, doomsayers (and admittedly some financial journalists) are rubbing their hands with glee. The previous years when October proved brutal stand long in the memory. 1929, 1987, 2008, 2018 – and now 2019?
3) Walmart plays nice: How retail giant is battling its image problem. The retail behemoth, which started life as Sam Walton’s Five and Dime store in Bentonville, Arkansas in 1950, has not always enjoyed the best of reputations.
4) The Turkish lira slumped to its lowest level against the dollar in more than a month following Donald Trump’s threats to “totally destroy and obliterate” Turkey’s economy. The currency fell as much as 2.1pc to 5.8178 (81p) against the dollar yesterday, its lowest level since September 3.
….the captured ISIS fighters and families. The U.S. has done far more than anyone could have ever expected, including the capture of 100% of the ISIS Caliphate. It is time now for others in the region, some of great wealth, to protect their own territory. THE USA IS GREAT!
— Donald J. Trump (@realDonaldTrump) October 7, 2019
5) A Hong Kong raider targeting the London Stock Exchange may be forced to rack up massive debts as it scrambles to sweeten its £32bn bid in the face of sceptical investors. Hong Kong Exchanges and Clearing has only won the backing of one shareholder among the top 10 since making its audacious offer for the London market (LSE) last month, sources said.
What happened overnight
Hong Kong’s bourse on Tuesday dropped its unsolicited $39 billion bid for London Stock Exchange Group (LSE), conceding it hadn’t won over LSE management for a move that could have transformed both global financial services businesses.
The surprise approach, made last month, had threatened to upend the LSE’s own $27 billion plan to buy data and analytics company Refinitiv. The Hong Kong exchange had said the LSE would have to ditch the Refinitiv purchase for its offer to go ahead.
In a statement on Tuesday, Hong Kong Exchanges and Clearing Ltd (HKEX), said it still believed the combination of the two exchanges would be “strategically compelling”.
In the markets, meanwhile, Asian shares inched up, with Chinese shares making modest gains after a week-long holiday, though investors remained cautious over US-China trade talks after President Donald Trump said a quick trade deal was unlikely.
Japan’s Nikkei climbed 1pc while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7pc, led by gains in tech shares in South Korea and Taiwan.
South Korea’s Samsung Electronics rose 1.2pc after its profit guidance. The semiconductor firm said its third-quarter operating profit likely fell 56pc on a downturn in global memory chip prices, but that was better than what analysts had anticipated.
Taiwan’s stock index gained 0.7pc to hit five-month highs while Hong Kong shares extended gains after the territory’s leader said she had no plans to use the emergency regulation ordinance to introduce other laws.
Shanghai shares rose 0.3pc after the week-long break though gains were led mainly by defensive shares ahead of the crucial trade talks.
Coming up today
Turbulence puns are well-worn when it comes to the performance of Britain’s airlines, but easyJet truly has been flying through a storm in recent months: a sharp oil price spike following the attack on Saudi oil facilities, offset by a wider fall; the collapse of rival Thomas Cook; major rivals hit by strike action; and difficulties faced by several of its sector rivals.
After a record loss in the first half of the year, it could be on course for a record profit in the second, says Hargreaves Lansdown’s Nicholas Hyett. “Take fuel out of the equation, and other operating costs are one of the important areas in which airlines can influence their own destiny,” says Hyett.
“The focus on reducing non-fuel costs looks set to deliver better results in the second half, having fallen 4pc in the third quarter. That’s despite an improved pay deal for staff, and sustainable progress here would set easyJet up well for next year.”
Preliminary results: YouGov
Trading update: EasyJet, Electrocomponents, Ferrexpo
Economics: PPI (US)