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Pound hits new 31-year low, as Brexit fears grip markets – business live Pound hits new 31-year low, as Brexit fears grip markets – business live
(35 minutes later)
2.58pm BST
14:58
Another Brexit profit warning, this time from recruitment group InterQuest. It said:
In light of the uncertainty in the run up to the EU referendum, the company has experienced variable trading with clients delaying hiring decisions. The result of the referendum is now expected to prolong this period of uncertainty and, whilst it is too early to predict the longer term impact, the company expects trading conditions in the wider recruitment sector to remain challenging for at least the remainder of the current financial year.
The company is somewhat protected from wider recruitment trends due to its focus on hard to find niche candidates in rapidly growing sectors in the new digital economy, but as a result of the wider market conditions, the company now expects that group net fee income and EBIT for the current financial year will be materially below market expectations.
Its shares have slumped 28% to 78p.
2.54pm BST
14:54
Lunchtime summary: Manic Monday in the markets
Time for a quick recap.
Europe’s financial markets are being buffeted by fresh fears following Britain’s decision to vote to leave the EU last Thursday.
The pound has been driven down to a new 31-year low, hitting $1.3152 against the US dollar for the first time since 1985.
The selloff was relentless, despite finance minister George Osborne telling the media at 7am London time that the UK economy could ride out the current storm.
The £ against the $ since Osborne made his statement at 7am... #Brexit pic.twitter.com/5aP4RUIB0x
The London stock market has also been driven down by worries about the UK economy, and the relentless political infighting at Westminster.
The FTSE 100 is currently down 119 points at 6019, which means it has lost over £80bn since the start of trading on Friday.
The FTSE 250 index, which contains smaller companies, has shed 6% as investors raced to ditch stocks again.
Bank shares are being hit very hard, with one fund manager saying there is ‘capitulation’ in the financial sector.
Royal Bank of Scotland fell 25% at one stage, meaning taxpayers had lost £8m on their stake.
Barclays is down 15%. Some smaller banks, such as Virgin Money, have lost a quarter of their value today.
RBS shares down a third since refo. Call it a £8bn loss on our 73% stake. Don't worry, tho', Johnson says markets stable.
Housebuilders and estate agents have been hit hard, too, after Foxtons issued a profit warning. Some building firms have lost 40% of their value since the referendum.
While shares slumped, the prices of safe-haven government debt have hit record highs. That has driven down the interest rate on UK 10-year gilts to below 1% for the first time ever.
City economists are gloomy today, with some forecasting a UK recession due to the uncertainty caused by the Brexit vote.
Policymakers are scrambling to react to the unfolding drama in the markets. Bank of England governor Mark Carney has pulled out of a conference in Portugal, a move swiftly copied by US central bank chief Janet Yellen.
Carney’s predecessor, Lord Mervyn King, has heavily criticised the UK government for its tactics during the referendum.
He told the BBC that:
“If you say to someone ‘you’re an idiot if you don’t agree with me’ you’re not likely to bring them in your direction,
Chancellor George Osborne has ditched one of his pre-referendum threats, to hold an emergency punishment budget.
Related: George Osborne seeks to calm markets amid Brexit turmoil
Osborne tried to sound reassuring this morning, saying:
I said we had to fix the roof so that we were prepared for whatever the future held. Thank goodness we did. As a result, our economy is about as strong as it could be to confront the challenge our country now faces.”
However, the markets don’t seem terribly calm today....
Chancellor Osborne reassures markets. #Brexit #CatsForBrexit pic.twitter.com/JxwIuGYBZF
2.40pm BST
14:40
The Dow is still falling....
ALERT: Dow falls more than 200 points https://t.co/TkYc8XrWYG pic.twitter.com/oqutdCIwsR
2.33pm BST2.33pm BST
14:3314:33
Over in New York, the US stock market is falling at the start of trading.Over in New York, the US stock market is falling at the start of trading.
The Dow Jones index dropped by 148 points, or 0.85%, at the open, with Brexit still on everyone’s mind.The Dow Jones index dropped by 148 points, or 0.85%, at the open, with Brexit still on everyone’s mind.
That follows big losses on Friday, when the Dow shed almost 600 points:That follows big losses on Friday, when the Dow shed almost 600 points:
2.23pm BST2.23pm BST
14:2314:23
Readers may have spent the weekend glued to the political crisis in Westminster, watching Euro 2016, or braving bouts of bad weather (we had hailstones in Oxford) to go shopping or tend the garden.Readers may have spent the weekend glued to the political crisis in Westminster, watching Euro 2016, or braving bouts of bad weather (we had hailstones in Oxford) to go shopping or tend the garden.
But City economists didn’t have time for fun. They were locked away, slashing their UK growth forecasts, following the Brexit vote.But City economists didn’t have time for fun. They were locked away, slashing their UK growth forecasts, following the Brexit vote.
Emily Cadman of the FT has helpfully rounded up the details:Emily Cadman of the FT has helpfully rounded up the details:
Phillip Shaw, chief UK economist at Investec, said he believed the economy would enter “a period of near stagnation”, adding that a recession was a “realistic possibility”.Phillip Shaw, chief UK economist at Investec, said he believed the economy would enter “a period of near stagnation”, adding that a recession was a “realistic possibility”.
Citi, which has yet to formally change its forecasts, warned that downgrades were “likely”.Citi, which has yet to formally change its forecasts, warned that downgrades were “likely”.
Goldman Sachs is now expecting annual growth of just 0.2 per cent in 2017, down from 2 per cent before the referendum.Goldman Sachs is now expecting annual growth of just 0.2 per cent in 2017, down from 2 per cent before the referendum.
George Buckley, chief UK economist at Deutsche Bank, said he expected Brexit to “focus minds” on the BoE’s interest rate setting committee on the long-term impact of slower growth — and a possible recession — rather than a short-term rise in inflation.George Buckley, chief UK economist at Deutsche Bank, said he expected Brexit to “focus minds” on the BoE’s interest rate setting committee on the long-term impact of slower growth — and a possible recession — rather than a short-term rise in inflation.
More here:More here:
City economists slash UK growth forecastsCity economists slash UK growth forecasts
1.49pm BST1.49pm BST
13:4913:49
Larry Hatheway, chief economist at Swiss fund manager GAM, says investors are worrying that Britain’s economy could soon start shrinking.Larry Hatheway, chief economist at Swiss fund manager GAM, says investors are worrying that Britain’s economy could soon start shrinking.
“Against the backdrop of an already slowing UK economy, Brexit anxiety could precipitate a large enough reduction in consumer and business spending to tip the UK economy into recession.”“Against the backdrop of an already slowing UK economy, Brexit anxiety could precipitate a large enough reduction in consumer and business spending to tip the UK economy into recession.”
1.48pm BST1.48pm BST
13:4813:48
Britain’s decision to vote to Leave the European Union has forced investors to tear up some long-held beliefs.Britain’s decision to vote to Leave the European Union has forced investors to tear up some long-held beliefs.
That includes the idea that major advanced European economies are safer than developing markets.That includes the idea that major advanced European economies are safer than developing markets.
Julian Mayo, Co-CIO of Charlemagne Capital, a fund manager, says the investors can’t say “with a straight face that emerging market assets are riskier.Julian Mayo, Co-CIO of Charlemagne Capital, a fund manager, says the investors can’t say “with a straight face that emerging market assets are riskier.
“The historical position that political risk is significantly higher in emerging markets (EM) than developed markets (DM) is comprehensively and possibly irreversibly blown out of the water, with implications for the relative pricing of assets.“The historical position that political risk is significantly higher in emerging markets (EM) than developed markets (DM) is comprehensively and possibly irreversibly blown out of the water, with implications for the relative pricing of assets.
Even if we manage a reasonable renegotiation with angry Europeans, the vote gives massive encouragement for disaffected groups both in the EU and beyond, including separatist movements. Whether it’s Sturgeon, Le Pen, divisions in Spain and Italy, renewed stress within the Eurozone or the increasing possibility of a Trump win, pricing of risk across DM should surely rise.Even if we manage a reasonable renegotiation with angry Europeans, the vote gives massive encouragement for disaffected groups both in the EU and beyond, including separatist movements. Whether it’s Sturgeon, Le Pen, divisions in Spain and Italy, renewed stress within the Eurozone or the increasing possibility of a Trump win, pricing of risk across DM should surely rise.
1.33pm BST1.33pm BST
13:3313:33
America’s Treasury secretary Jack Lew has urged investors to remain calm following the Brexit vote.America’s Treasury secretary Jack Lew has urged investors to remain calm following the Brexit vote.
In a CNBC interview, Lew said “there is an orderliness in the market reaction” to last week’s referendum.In a CNBC interview, Lew said “there is an orderliness in the market reaction” to last week’s referendum.
He argued that banks are in a better position to handle the fallout than in 2008 (when many had to be bailed out), but warned that there will be a “long period of change” now, as new headwinds hit the global economy.He argued that banks are in a better position to handle the fallout than in 2008 (when many had to be bailed out), but warned that there will be a “long period of change” now, as new headwinds hit the global economy.
Sec. Lew: Best impact would have been for U.K. to remain, believe there will be headwinds https://t.co/ruTg22oDDo pic.twitter.com/oUEkORmpSbSec. Lew: Best impact would have been for U.K. to remain, believe there will be headwinds https://t.co/ruTg22oDDo pic.twitter.com/oUEkORmpSb
1.16pm BST1.16pm BST
13:1613:16
Ireland’s stock market is suffering a major selloff today.Ireland’s stock market is suffering a major selloff today.
The Dublin bourse has shed 7.7% today, making it the worst-performing eurozone market.The Dublin bourse has shed 7.7% today, making it the worst-performing eurozone market.
Irish stocks now down almost 8%, Bank of Ireland down 18%, Ryanair -10%. Bigger drop than Friday's....double-ouch.Irish stocks now down almost 8%, Bank of Ireland down 18%, Ryanair -10%. Bigger drop than Friday's....double-ouch.
1.06pm BST1.06pm BST
13:0613:06
Lord King blasts government over Project FearLord King blasts government over Project Fear
Mervyn King, who steered the Bank of England through the last financial crisis, has criticised the government for trying to scare the public during the election campaign.Mervyn King, who steered the Bank of England through the last financial crisis, has criticised the government for trying to scare the public during the election campaign.
He was speaking to the BBC’s Laura Kuenssberg:He was speaking to the BBC’s Laura Kuenssberg:
Just spoken to Lord King - most important he says, don't panic, long term economic difference btw In and Out not that bigJust spoken to Lord King - most important he says, don't panic, long term economic difference btw In and Out not that big
But King wades right into the politics-he says both sides in campaign exaggerated, blasts TreasuryBut King wades right into the politics-he says both sides in campaign exaggerated, blasts Treasury
And the former Governor says Osborne and PM treated people like 'idiots' by scaremongering and voters didn't like being treated that wayAnd the former Governor says Osborne and PM treated people like 'idiots' by scaremongering and voters didn't like being treated that way
Lord King also says the emergency budget was the 'nadir' of the campaignLord King also says the emergency budget was the 'nadir' of the campaign
UpdatedUpdated
at 1.11pm BSTat 1.11pm BST
12.57pm BST12.57pm BST
12:5712:57
The FTSE 100 index has now shed 130 points today, on top of Friday’s 199 point losses.The FTSE 100 index has now shed 130 points today, on top of Friday’s 199 point losses.
That means the index has lost £85bn since the referendum result, in a blow to small investors and pension funds.That means the index has lost £85bn since the referendum result, in a blow to small investors and pension funds.
For a party for pensioners the Tories really have engineered a bloody blow for the pension pot with these equity fallsFor a party for pensioners the Tories really have engineered a bloody blow for the pension pot with these equity falls
UpdatedUpdated
at 12.58pm BSTat 12.58pm BST
12.56pm BST12.56pm BST
12:5612:56
Investors are hammering the pound and the stock market because they have no real idea what the next plot twist in the astounding Brexit drama might be.Investors are hammering the pound and the stock market because they have no real idea what the next plot twist in the astounding Brexit drama might be.
Joshua Mahoney of spread-betting firm IG explains:Joshua Mahoney of spread-betting firm IG explains:
For all of the statements of intent on both sides pre-referendum, it seems that much of it holds little basis in reality. First Farage admitted that the £350 million weekly NHS funding claim was a mistake and now Osborne has stepped back from his pledge to impose an immediate emergency budget.For all of the statements of intent on both sides pre-referendum, it seems that much of it holds little basis in reality. First Farage admitted that the £350 million weekly NHS funding claim was a mistake and now Osborne has stepped back from his pledge to impose an immediate emergency budget.
The name of the game now is stability and for that reason Osborne is crucial despite his previous support for the remain camp. Amid all the calls for Corbyn’s head and the clamour for the new PM role, financial markets are trying to ascertain what this will truly mean for the UK, the European Union and global stability.The name of the game now is stability and for that reason Osborne is crucial despite his previous support for the remain camp. Amid all the calls for Corbyn’s head and the clamour for the new PM role, financial markets are trying to ascertain what this will truly mean for the UK, the European Union and global stability.
Many traders have concluded that Britain’s housing industry is heading into a downturn, sending shares in builders and estate agents slumping (not helped by Foxton’s profit warning today)Many traders have concluded that Britain’s housing industry is heading into a downturn, sending shares in builders and estate agents slumping (not helped by Foxton’s profit warning today)
Housebuilders really hurting now ... #Brexit pic.twitter.com/eGweANf2a1Housebuilders really hurting now ... #Brexit pic.twitter.com/eGweANf2a1
12.49pm BST12.49pm BST
12:4912:49
Ouch. The pound just hit $1.316, a new post-1985 low.Ouch. The pound just hit $1.316, a new post-1985 low.
1.316 - so the pound is stable, eh Bojo ? GLWT.1.316 - so the pound is stable, eh Bojo ? GLWT.
Sterling getting beaten like it owes money.Sterling getting beaten like it owes money.
12.46pm BST12.46pm BST
12:4612:46
Chris Saint, senior currency analyst at Hargeaves Lansdown, has warned that the pound could suffer large losses in the weeks ahead:Chris Saint, senior currency analyst at Hargeaves Lansdown, has warned that the pound could suffer large losses in the weeks ahead:
“It’s a sea of red for sterling again this morning as investor sentiment continues to sour after the UK’s vote to leave the EU. The pound has slipped below €1.20 against the euro this morning for the first time in more than two years. It has also fallen to fresh lows under $1.32 against the US dollar – the lowest level since 1985.“It’s a sea of red for sterling again this morning as investor sentiment continues to sour after the UK’s vote to leave the EU. The pound has slipped below €1.20 against the euro this morning for the first time in more than two years. It has also fallen to fresh lows under $1.32 against the US dollar – the lowest level since 1985.
Exchange rates will inevitably remain very volatile in the coming days and weeks as currency markets digest the far-reaching implications of the referendum result.Exchange rates will inevitably remain very volatile in the coming days and weeks as currency markets digest the far-reaching implications of the referendum result.
Further significant losses for sterling aren’t out of the question, especially if incoming data confirms the UK economy’s slowdown and lifts the likelihood of further Bank of England stimulus to support growth.Further significant losses for sterling aren’t out of the question, especially if incoming data confirms the UK economy’s slowdown and lifts the likelihood of further Bank of England stimulus to support growth.
Pound now down versus the dollar around 12 per cent since Thursday night: pic.twitter.com/KReBjMbNSxPound now down versus the dollar around 12 per cent since Thursday night: pic.twitter.com/KReBjMbNSx
12.43pm BST12.43pm BST
12:4312:43
This tweet from the FT shows how smaller UK companies have been hit extra-hard by Brexit.This tweet from the FT shows how smaller UK companies have been hit extra-hard by Brexit.
Sterling weakness shields FTSE 100, but UK-centric FTSE 250 feels the Brexit burn. https://t.co/KHhOEthGl4 pic.twitter.com/RNzj6PzNLUSterling weakness shields FTSE 100, but UK-centric FTSE 250 feels the Brexit burn. https://t.co/KHhOEthGl4 pic.twitter.com/RNzj6PzNLU
The purple line shows the FTSE 250 index, which has dropped more sharply than the FTSE 100 (which includes multinational companies who will benefit from the weak pound).The purple line shows the FTSE 250 index, which has dropped more sharply than the FTSE 100 (which includes multinational companies who will benefit from the weak pound).