In theory, there isn’t that much reason for today’s shift. The Prime Minister’s hands are theoretically tied by the Benn Act, so unless the Government goes down an unprecedented (and illegal path), traders’ minds will be focused on the longer-term question: if a General Election comes, what is a better options out of Johnson, who is expected to run on a no-deal ticket, and Jeremy Corbyn?
With the go-caveat that there could be a deal looking like an increasingly long shot, analysts may well focus more strongly on this dichotomy in the coming weeks. It will be a test of nerves for the markets, however — especially for currency traders.
As for stock markets, they’re already in a sad place, with even the stoic-looking FTSE shedding three-quarters of a percentage point amid chunky losses. Wall Street is looking very sour, so where it goes from here could depend a lot on what sounds come out of the China and the White House this evening.
That’s all from me today — thanks for following along. I’ll be back tomorrow morning with the latest news on business, markets and economics. Join me then!
Here’s an extract from Economics Editor Russell Lynch’s full report on IMF head Kristalina Georgieva’s comment earlier this afternoon:
Kristalina Georgieva’s first speech in Washington as managing director of the international lender of last resort blamed the tariff battle between the US and China for bringing global trade growth to “a near standstill”.
The IMF chief urged central banks to keep interest rates low “where appropriate” to tackle the weakest growth in almost a decade, but she also voiced alarm over the potential side-effects of the stimulus.
With less than ten minutes left of trading, it looks like some fairly ugly losses will stick across Europe. Here are three more of the day’s top stories:
Here’s a report on Ireland’s latest budget (unveiled earlier today), from my colleague Michael O’Dwyer:
Ireland has unveiled a €1.2bn (£1.1bn) package to keep businesses afloat in the event of a no-deal Brexit.
Finance minister Paschal Donohoe presented the plan, which would return the state's finances to deficit, as part of the country's annual budget announcement today.
“This is a Budget without precedent... A budget that has been developed in the shadow of Brexit,” Donohoe said.
“This does not mean that no-deal is inevitable. But equally we stand ready if it does happen. It is a challenge Ireland has the measure of.”
If implemented, the measures would see a swift return to fiscal deficit for Ireland, which only returned to surplus in 2018 after a decade-long battle to get the public finances under control following a state bailout of commercial banks during the financial crisis.
US stock exchanges have dropped further in recent minutes, put them ahead of Europe overall at 1pc to 1.2pc down. In contract, Europe’s biggest losers — Italy and Spain — are both off about 1pc. The euro has slipped slightly, but the pound remains the standout currency — though possibly for the wrong reasons.
Kristalina Georgieva, who has just taken over as the new Managing Director at the International Monetary Fund, used her first major address as the organisation’s leader to sound the alarm over the global economy, and say governments may have to synchronise fiscal stimulus to avoid a global slowdown.
Speaking in Washington, Ms Georgieva said the global economy was in a “synchronised slowdown”, and said nations had to find a way to coordinate a response. She said:
This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade. Next week we will release our world economic outlook which will show downward revisions for 2019 and 2020.
IMF warns trade disputes could shave 0.8% off global GDP in 2020 or $700bn loss https://t.co/i0aZ0xAfBN
Here are three of the day’s biggest business stories, including our latest on HKEX’s aborted bid for LSE:
Across global stock markets, the losses are only growing larger, as an apparent Brexit breakdown mixes with trade war nerves.
All of the US’s major indices have shed more than a point, with the picture even worse across Europe. The FTSE 100 is outperforming at about 0.5pc down, but that has to be seen against the backdrop of a weakened pound.
Across Europe and the Americas, no major indices is in the green for the month so far: does this mean Red October has arrived?
The biggest riser on the FTSE 250 today is Electrocomponents, which is up about 3.2pc currently after saying it was growing and making market share gains in Europe, the Middle East and Africa despite wider uncertainty.
The electronics distributor said it anticipates its gross margin will fall year-on-year by around 0.8 percentage points. It said a “more modest” year-on-year decline was expected in the second half.
Our relentless focus on customer service, digital leadership and sales force effectiveness has been key in driving market share gains even in these more uncertain markets. We continue to invest in strategic initiatives to position the Group to deliver sustained growth over the longer term.
It is bright red across the board for sterling, despite some less-than-stellar performances for the euro and dollar.
The pound just squeaked to a one-month low against the dollar, hitting $1.2205 as hope that a Brexit deal can be reached evaporate following reports of this morning’s call between Prime Minister Boris Johnson and Angela Merkel. Sterling is now at a month low against the dollar and euro.
Completing a little run of full reports on this morning’s market-moving events, here’s my colleague Hannah Uttley on recruiters PageGroup and Robert Walters, both of which have seen their share price take a hit today. Hannah writes:
Pagegroup and Robert Walters said that firms are putting off hiring new workers due to Brexit turmoil and increasingly violent pro-democracy protests in Hong Kong.
The pair also warned over trade tensions between China and the US, which have made some overseas firms think twice before investing further in existing operations within the countries.
US producer price inflation has fallen to its lowest level-year on year since 2016. The measure, which track the price of outgoing goods at factory gates, indicates manufacturers are having to cut prices somewhat, indicating lowered demand. The dollar has weakened slightly in the wake of today’s PPI numbers.
Observers might be forgiven a sense of deja vu, as the DIT published its original schedule days before the March 29 Brexit date was postponed. Under current trading arrangements, around 80pc of goods by value come into the UK tariff-free. Today’s tweaks follow six months of industry representations, although furious farmers are still in the firing line.
New from Japan: Nissan has selected Makoto Uchida, the head of its China business, as its new chief executive — filling the hole left by Hiroto Saikawa’s exit last month.
Mr Uchida was selected because of his close understanding of the car giant’s oversees markets, sources told the Wall Street Journal.
The move comes after an international scandal that began when former Chairman Carlos Ghosn was arrested last year.
The new boss has a full in-tray: the Japanese car firm faces falling sales, a restructuring plan, and continued tensions in its alliance with France’s Renault.
Productivity contracted 0.5pc year-on-year in the second quarter as the economy stumbled, capping off 12 months of no growth in output per hour, the Office for National Statistics revealed.
The latest slump reflects the continuation of the UK’s jobs miracle in the second quarter even as GDP slipped back. The “productivity puzzle” has plagued the economy since the financial crisis but has worsened in the last year as Brexit uncertainty holds back business investment.
The pound is hovering just above its lowest intraday level against the dollar in a month. Sterling has had a wild ride over the past two months, and appears to be today entrenching a drop that began in mid-September.
Futures trading on Wall Street (which indicates how the markets will open) has taken a sharp turn of the worse in recent minutes, as storm cloud gather over the upcoming US-China trade talks.
As of a few minutes ago, futures were indicating a chunky drop of over 200 points from the Dow Jones Industrial Average.
Ahead of the Chinese delegation’s arrival in Washington on Thursday, Bloomberg reports that the US government is considering levying restrictions on investment into China, including a focus on stopping US government pension funds from pushing money into the country’s businesses.
The picture is only getting worse across Europe, with several of the continent’s blue-chip bourses now surpassing losses of 1pc.
Looks like I may have posted slightly too soon then: this tweet from European Council president Donald Tusk certainly looks like a gauntlet being thrown down.
.@BorisJohnson, what’s at stake is not winning some stupid blame game. At stake is the future of Europe and the UK as well as the security and interests of our people. You don’t want a deal, you don’t want an extension, you don’t want to revoke, quo vadis?
The pound has extended its its losses against the euro, and is just inches from a month low against the dollar.
Slew of negative remarks weighing on the pound with the rhetoric from both sides increasingly hostile. GBPUSD now back near its lowest level in a month around 1.2205 pic.twitter.com/wyeilHiaT6
The FTSE 100 is still holding flat (remember, many London-listed companies don’t have a large exposure to the UK itself, and actually benefit from the pound being weaker), while the mid-cap (and more Brexit-exposed) FTSE 250 is down about 0.75pc.
Berlin, according to reports, has declined to offer further detail on the phone call between Angela Merkel and Boris Johnson this morning, so it looks like we only have Number 10’s side of the story to go on currently.
Berlin, government spokesperson: "I can confirm that Chancellor Merkel and British PM Johnson spoke on the phone this morning. As usual, we do not report such confidential conversations." https://t.co/3WvpCcwHNZ pic.twitter.com/zZQuRnoZyg
Meanwhile, the Democratic Unionist Party had labelled the idea of keeping Northern Ireland in the Customs Union (as was allegedly discussed) is “beyond crazy”:
For the EU’s part, Mine Andreeva, a spokesperson for outgoing European Commission President Jean-Claude Juncker, has said the bloc wants a Brexit deal and has not changed its position.
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:
Sterling is under the cosh again as hopes of a deal between the UK and EU fade. The last flicker of hope was snuffed out this morning after a call between the PM and chancellor Merkel of Germany left the process at an impasse.
The news across the wires is that Merkel said a deal will only work if NI stays in the customs union. No 10 said this demand is impossible and that the EU is not engaging seriously.
It’s become clear a deal cannot be done, with the wording from Number 10 that a deal is ‘essentially impossible not just now, but ever’. Stalemate. We are now heading towards the Revoke versus No Deal showdown.
Deutsche Bank will make about half its 18,000 planned jobs cuts in Germany, while its London offices will be hit “especially hard”, reports Bloomberg, citing anonymous sources.
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.
Merkel call was indeed a disaster, as others have reported. But worse even than briefings I’m told. She essentially instructed Johnson to tell NI to accept full alignment on customs and regulation. Ordering either side in NI to do stuff is usually a good idea I’m told... 1/4
The "no problem" attribution to Merkel is so implausible that it suggests taking the rest of this "readout" with a giant fistful of salt. https://t.co/huGFkhAqQQ
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).
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.
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?
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
Chancellor Sajid Javid has told MPs the process to appoint Mark Carney’s replacement as Bank of England Governor is “on track”.
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.
The Federation of Small Businesses has responded to adjusted post-Brexit tariff plans unveiled by the government this morning.
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
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.
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.Thoughts @justinhuggler? https://t.co/U2kQhy10CG
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'
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:
UK Q2 productivity performance revised up slightly vs the flash reading......but still the biggest drop in annual terms in 5 years.