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Markets: Asian shares ticked higher, building on the rally at the start of the week as investors bet that the Bank of England will cut rates later today (see below). The Nikkei closed up 0.95 per cent this morning at 16,385.89. IG is calling the FTSE 100, which closed at 6,670.40, yesterday to open 1 point lower when the market opens shortly. At 7.01am Brent crude was trading at $46.67 a barrel and against the dollar the pound was trading at $1.32. For our full markets coverage see markets snap below. Good morning: How low can we go? Eight years after cutting the base rate to a historic 0.5 per cent markets are betting on the Bank of England’s Monetary Policy Committee going even lower today in a pre-emptive strike to head off a Brexit-related slowdown and encourage investment.
Thirty-nine of the 60 economists polled by Reuters yesterday predicted that the MPC would cut at least 25 basis points from the present 0.5 per cent base rate today. Markets seem even more certain - appearing to price a cut as a “dead cert”. Economists who make up the shadow MPC of the Institute of Economic Affairs are the latest to raise concerns about a rise. In a letter to The Times today they argue: “Now is the time for calm heads. It is not the moment for the MPC to signal an imminent economic downturn by voting for an aggressive, pre-emptive easing of monetary policy.” The Bank announces the MPC decision at midday. We’ll have a full story on our website and analysis from Philip Aldrick, our Economics Editor. Follow me on Twitter for the latest on market reaction to the decision - @fletcherr. Philip Hammond, the new chancellor, is wooing the nation with TV and radio appearances this morning . He has told Sky News that there will be no emergency budget, just the usual autumn statement. He’s also meeting Mark Carney this morning.
There is an upbeat trading update from price comparison website Moneysupermarket this morning, which has reported a 10 per cent rise in revenues. We have also got an update from Experian, the FTSE 100 checking company.
Full-year results from SuperGroup this morning show a 21.3 per cent rise in revenue. Meanwhile Halfords has warned that it could be hit by the weak pound as prices rise. BHP Billiton has announced that the Samarco iron ore operation in Brazil was unlikely to restart this year, with discussions taking place to reduce the workforce by 40 per cent through voluntary redundancies. A burst dam at the Samarco mine last year unleashed a mudflow that killed 19 people, left hundreds homeless and polluted a major river. Finally, Burberry shareholders gather this morning (9.30am) for what could be a stormy annual general meeting. We have asked Marcus Leroux to put on his most fashionable suit and sent him along. You can follow him on Twitter for the very latest - @marcusleroux . Please do keep sending me any thoughts or observations about The Times business coverage - richard.fletcher@thetimes.co.uk. Have a great day. Richard Fletcher
Business Editor
The Times |
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1 Theresa May handed the keys to No 11 Downing Street to Philip Hammond last night, replacing George Osborne as chancellor in the new prime minister’s first cabinet. Mr Osborne had held the job since 2010. 2 The cost to consumers of building the Hinkley Point nuclear power station could spiral to nearly £30 billion because of plummeting wholesale electricity prices, the spending watchdog has warned. 3 Most economists expect the Bank of England to cut interest rates by a quarter- point in an attempt to take pre-emptive action against a Brexit-related slowdown by buoying the economy and encouraging investment. 4 Up to eight North Sea oil platforms owned by Royal Dutch Shell were facing the threat of strike action after rig workers rejected plans for further steep pay cuts. More than 200 employees of Wood Group voted in favour of the strike, with 99.1 per cent of members of the Unite union and more than 98.5 per cent of RMT members coming out in support. 5 Poundland’s unhappy two-year spell as a listed company looked set to come to an end after the 900-store discount chain recommended a £597 million cash offer from Steinhoff International, a South African retailer. 6 Investors looking to withdraw millions from Aberdeen Asset Management’s commercial property fund will have to take a cut of almost a fifth in the value of their investment. 7 The Bank of England and Treasury have come under fire again for their strong advocacy of remaining in the European Union and have been warned not to “talk down” the economy. Economists for Brexit, which campaigned for Britain to leave the EU, criticised official warnings before the referendum about the danger posed to the economy and said that the two institutions needed to change their behaviour now. 8 Towergate Underwriting, an insurance broker that came close to collapse last year, has been hit with a multimillion-pound fine by the City watchdog over systems failures that led to a shortfall of more than £12 million in its clients’ funds going undetected for years. 9 Dozens of companies are set to submit bids this week for one of the world’s biggest energy storage projects, supplying back-up power for the National Grid. More than 60 companies have expressed interest in the colossal energy storage scheme to provide 200 megawatts of back-up electricity, mainly using industrial-scale battery arrays. 10 Deutsche Börse appeared close to securing the necessary majority of its shareholders to approve its merger with the London Stock Exchange, after the terms of the vote were changed.
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“That’s it then: Theresa May is now in charge of Britain’s nuclear button. So why waste the chance to make an immediate impact? She should press it pronto and blow up Hinkley Point C. What better start could she make than that?” No project better sums up the doomed Cameron/Osborne alliance than the overpriced Somerset nuke, built as it is on little more than a giant Franco-Sino bribe, says Alistair Osborne. “The referendum ... catapulted hostility to the City to center stage in political debate. First articulated by leading Brexiters such as Boris Johnson and Michael Gove, it formed a centerpiece of Theresa May’s leadership campaign speech on Monday, in which she took aim at excessive boardroom pay, weak corporate governance and foreign company takeovers.” The biggest post-Brexit political risks to the City may come from Britain itself, says Simon Nixon. “Even before the referendum, the economy was showing weakness. This isn’t just about Brexit. GDP growth slackened to only 0.4 per cent in the first quarter, compared with 0.6 per cent in the fourth quarter of 2015. If you look at the constituents of growth, it’s particularly worrying that manufacturing and construction output are weak; the economy is being supported by the services sector,” Balancing the economy has suddenly become a harder task, argues Oliver Kamm. |
The FTSE 100 ended its four-day winning streak, easing off its 11-month high to close off 10.29 points, or 0.15 per cent, at 6,670.40. The broader FTSE 250 declined 56.06 points, or 0.33 per cent, to 16,751.02. More on yesterday’s market action here. On Wall Street, US shares inched up by just enough to set another pair of records. The Dow Jones Industrial Average put on 24.45 points, or 0.1 per cent, to close at 18,372.12 while the S&P 500 was flat in percentage terms and up by just a quarter of one point to 2,152.43 - both closing levels were all-time highs. Around 6.5 billion shares changed hands compared with the recent daily average of 7.9 billion. Sterling fell in the mid-week session after two-days of gains as the focus shifted away from the political outlook in the UK and towards the anticipated interest rate cut by the Bank of England today. Against the US dollar, the pound was 0.5 per cent lower at $1.318 and against the euro it fell by 1 per cent to €1.185. Oil prices fell again yesterday as US stockpiles again declined by less than expected and the number of drilling rigs in action continued to rise steadily. In New York, Brent crude for September settlement was 4.1 per cent lower at $46.55. Those companies set to do well from the post-referendum depreciation of sterling continue to emerge, Tempus notes. The latest is Icap, the interdealer broker, which also saw a spike in business on its electronic foreign exchange trading platform on the day after the vote. Also benefiting is Fenner, which makes conveyor belts and other equipment, though its end markets remain difficult. GW Pharmaceuticals now has most of its shareholder base in the US and remains a speculative biotech stock. Read on here for more about the Tempus share tips of the day. |
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| The Times |
The Bank of England is tipped today to slash interest rates to a record low in a pre-emptive strike to head off a Brexit-related slowdown and encourage investment. In a Reuters poll of 60 leading economists, 39 predicted that the nine-strong monetary policy committee would shave at least 0.25 of a percentage point from the present 0.5 per cent base rate that was set in March 2009. In the same survey a week ago a big majority expected no change from policymakers. While financial markets expect significant stimulus, some experts believe the move would be rash and could increase anxiety among traders and consumers similar to that generated in September 1992. Then Britain was forced to suspend its membership of the exchange rate mechanism and the Bank briefly raised rates to 15 per cent, before slashing them to just above 5 per cent by February 1994. |
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| The Wall Street Journal |
Theresa May left Buckingham Palace on Wednesday as Britain’s new prime minister—and with a long list of political challenges in the divided nation that voted last month to leave the European Union. Ms. May swiftly named key members of her new cabinet. She appointed Boris Johnson as U.K. foreign secretary, a promotion that will put the former London mayor—one of the most high-profile politicians who campaigned foraBritish exit—into a major role in the new government. Until recently, Mr. Johnson had been expected to vie for the premiership himself but dramatically pulled out at the last minute. |
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| The Daily Telegraph |
Households and businesses are expected to rein in spending and cut back on credit in the wake of the Brexit vote, according to a series of surveys that point to a slowdown in the housing market and wider economy. The UK's biggest banks said demand for credit was likely to cool "in the near term" following the decision to leave the European Union, a Bank of England survey showed. Signs of a slowdown in the property market were also evident. A survey by the Royal Institution of Chartered Surveyors (Rics) revealed the biggest drop in the number of properties coming to market in June since records began in 1999. The number of people wanting to buy a house also fell to the lowest level since 2008. House prices across the UK are expected to decline over the next three months, according to Rics. It warned that property prices in London and the East of England would continue to fall for a year. The Bank of England's poll of major UK lenders, including Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS and Santander suggested investment projects were being put on hold months before the vote. Its latest credit conditions survey showed demand from big businesses for corporate lending "decreased significantly" in the three months to the middle of June. |
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| Financial Times |
Theresa May has entered Number 10 with a promise to address the country's deep divisions, ruling not "for the privileged few" but for people who felt that they were losing control of their lives. Within hours of becoming the UK's second female prime minister, Mrs May made her first cabinet appointments by installing Philip Hammond as chancellor and Boris Johnson as foreign secretary. George Osborne left the government, making way for the former foreign secretary who has long harboured an ambition to move to the Treasury. Mrs May spoke only fleetingly about last month's Brexit vote as she addressed the nation outside Number 10, but her mission statement was aimed squarely at those voters who saw the referendum as a chance to attack the economic establishment. A low-key fiscal hawk, Mr Hammond is not a natural fit with Mrs May's plan to relax austerity and tackle corporate excess but he will bring business and ministerial experience to the top of government in uncertain times. |
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