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Markets: The Nikkei closed down 1.85 per cent this morning at 15,378.99. IG.com is calling the FTSE 100 to open 4 points lower when the market opens shortly, having closed at 6,545.37 yesterday. At 7.10am Brent Crude was trading at $48.03 a barrel. For our full markets coverage see markets snap below and don’t forget to follow me for on Twitter for regular market updates throughout the day - @fletcherr.
Good morning: How low can sterling go? In volatile overnight trading in Asia sterling shed a full US cent in a matter of minutes to touch a low of $1.2798. It has since recovered (although not a lot) and at 7.10am the pound was trading down 1 per cent on the day at $1.289. Against the euro the pound is trading at 85.6p.
Goldman Sachs forecasts that sterling will drop to $1.20 over the next three months. Philip Aldrick, our economics editor, reports in today’s paper that Bank of America Merrill Lynch expects sterling to fall to $1.25 “sooner rather than later”.
The publication of the minutes of the Federal Reserve’s June meeting later today could send the pound even lower if the market, which is betting on the US central bank sitting on its hands until 2017 at the earliest, concludes that US rates could rise sooner than that. Although it should be noted that the Fed meeting took place before the UK’s referendum vote to leave the European Union. The minutes will be published at 7.00pm UK time.
“It would not take much of a rebound in expectations for US interest rates to drive the pound towards $1.20 – which is where we expect it to end up,” wrote Julian Jessop, chief global economist at Capital Economics, in an overnight note to clients.
Amid the flight to safety the yield on Japan's benchmark 20-year government bond fell below zero for the first time ever overnight. The 30-year yield was trading at just 0.015 per cent.
Engineering conglomerate Melrose is buying Nortek, a US maker of home security and ventilation systems, valued at £2.1 billion. It will fund the deal with a £1.61 billion underwritten rights issue plus new debt of £598 million.
Ahead of its AGM later today we have got an upbeat trading update from Booker, the cash and carry and convenience store business run by Charles Wilson. The group, which owns the Budgens and Londis chains, reported a 10 per cent rise in sales despite a 7 per cent fall in like-for-like sales of tobacco products following a ban on small stores displays
Elsewhere today sentencing begins of the Barclays traders convicted earlier this week of fixing Libor. The hearing is expected to last three days.
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
richard.fletcher@thetimes.co.uk |
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1 The Bank of England says that Britain has entered a period of uncertainty since the referendum and could face a property market crash caused by buy-to-let landlords selling up in the face of falling prices and stagnant rents. 2 Andrew Bailey, chief executive of the Financial Conduct Authority, said that it might impose changes on the £24 billion open-ended property investment sector as Aviva and Prudential became the latest to block investors from taking out their money. 3 Sterling dropped below $1.31 for the first time since 1985 and oil prices fell nearly 5 per cent amid concerns about a slowdown in global demand. The Bank of England said the economy was slowing and primed markets for an interest rate cut. 4 Persimmon, one of the country’s biggest housebuilders, has struck an upbeat tone in the face of pessimism about the sector as it reported a 12 per cent rise in first-half revenue and said that mortgage approvals were ahead of last year. Its average selling price rose 6 per cent to £205,500. 5 The latest services sector purchasing managers’ index by Markit shows thatgrowth slowed to 0.2 per cent in the second quarter, with most of the slowdown coming last month. The reading over the quarter fell to 52.2 from an average in the first three months of 54.2. 6 MPs investigating the collapse of BHS intend to question the wife of Sir Philip Green after they were dissatisfied with details that she provided about the retailer’s companies. Lady Green’s explanation about why companies were incorporated offshore was met with barely concealed ridicule by MPs. 7 Fitbug, the troubled technology business, is to use crowdfunding to raise £2.6 million, an unusual move for a company listed on AIM. The company, whose share price has fallen 94 per cent in a year, said that SyndicateRoom provided a source of “previously untapped retail [investor] demand”. 8 One of the City’s largest law firms made a profit equal to £1.2 million per partner as it recorded its seventh consecutive year of record revenues. Allen & Overy billed its clients just over £1.3 billion in the 12 months to April 30, a rise of almost £30 million on the year. 9 Imagination Technologies, which makes graphics processors used in the iPhone, has slumped to its largest annual loss. The semiconductor designer’s pre-tax loss of £63 million was worse than expected. 10 The chief executive of Centrica, which owns British Gas, has described a plan by the government to encourage householders to switch to electric heating as“mad”. Ian Conn said that were better alternatives.
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“Not the counter-cyclical buffer, surely? If only the Brexiteers had known it would get this bad: that, within ten days of the vote, the Bank of England governor would be forced to shoot some old buffer. Might have made people think twice before putting their cross by Leave.” Poor old buffer, but at at least Mark Carney has some sort of Brexit plan, unlike the politicians who delivered it says Alistair Osborne. “Regulations have changed, banks must hold more loss-absorbing capital and more liquidity, but individuals still act like free-market cavaliers paying themselves vast sums out of someone else’s pocket.” Bankers burnt down the economy in 2008 but are carrying on as if nothing happened, argues Philip Aldrick.
“Late in the day, someone seems to have noticed that open-ended funds may not be the most suitable vehicles for lumpy, illiquid investments like office blocks. Yet they have stood aside and done nothing while the industry mushrooms from nothing to assets of £35 billion in 15 years.” A proactive regulator would have warned all commercial property funds that they should gate all funds in the event of a Leave vote without good reason, says Patrick Hosking.
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The FTSE 100 gained 23.11 points, or 0.35 per cent, to close at 6,545.37, outperforming other leading European indices as a rise in so-called defensive stocks and those benefiting from a weaker pound offset a markdown in shares exposed to the UK property market. The broader FTSE 250, an index more reflective of the British economy, was down another 382.02 points, or 2.37 per cent, to 15,734.68. More on yesterday’s market action here. Wall Street stocks fell amid a scramble for the safest and most liquid assets. The Dow Jones industrial average ended down 110.12 points, or 0.61 per cent, to close at 17,839.25, while the S&P 500 fell 14.55 points to 2,088.4.
Sterling fell 2 per cent against the dollar to hit a fresh 31-year lower against the US dollar at $1.3022 in dealings yesterday and dropped to a two-and-a-half-year low against the euro at 85.48p as the fallout from Brexit continued to rattle the pound.
The price of Brent crude tumbled about 5 per cent to $47.66 a barrel in intraday dealings yesterday as investors worried Britain’s exit from the EU would weaken the global economy.
Shares in Persimmon were on the slide again despite a trading update that showed all the numbers moving in the right direction and no sign of a post-referendum slowdown in the housing market. Tempus asks how much further the sector can conceivably fall. Marshalls shocked the market in May with signs that the market for paving stones and other building materials was flattening off, but trading has improved since. Staffline has been hit along with the other recruitment specialists, though the company is a little different. Read on for more about the Tempus share tips of the day. |
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| The Times |
The fund management divisions of Aviva and Prudential became the latest to block investors from pulling money from their multibillion-pound property vehicles yesterday as anxiety surged about the damage that Brexit could do to the economy. The moves by Aviva Investors and M&G followed a similar decision by Standard Life this week and came amid a sell-off in asset management shares caused by worries about the fate of their property funds and the tumbling price of the pound. |
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| The Daily Telegraph |
The Bank of England took steps on Tuesday to ensure British banks can keep lending in the Brexit aftermath. Governor Mark Carney said the bank would lower the amount of capital banks are required to hold in reserve, freeing up an extra £150bn for lending. In March, Carney warned that Brexit posed significant near-term domestic risks to financial risks. Today, Carney said: "Some of those risks have begun to crystallise". |
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| Financial Times |
The pound plumbed new depths against the dollar and investors rushed for the perceived havens of gold and government bonds as financial turmoil intensified in the wake of the UK’s Brexit vote, with sterling hitting $1.2798 in early Asian trading on Wednesday — its lowest in more than 31 years. Investors, spooked by a number of UK property funds halting redemptions, switched to risk-off mode and sent yields on government bonds tumbling to new lows. |
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| The Wall Street Journal |
Two big British asset managers blocked worried investors from pulling money out of real-estate funds, and the pound sank to a new 31-year low Tuesday, twin signs that the U.K.’s vote to leave the EU was injecting new turbulence into financial markets after days of relative calm. At the same time, the Bank of England eased regulatory restraints on British banks, a bid to allow them to lend more and keep the economy flush with credit. |
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