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Sterling falls to fresh 31-year low as banks and builders slide Sterling falls to fresh 31-year low as banks and builders slide
(about 4 hours later)
The pound has slid to a fresh 31-year low and shares in housebuilders and banks have sustained more heavy losses as the economic and political ramifications of the Brexit vote continued to weigh on markets. Sterling has slid to a fresh 31-year low and shares in housebuilders and banks have sustained more heavy losses as the economic and political ramifications of the Brexit vote continued to rattle markets.
The pound remained under pressure on the foreign exchange markets on Monday, despite attempts by George Osborne to soothe the markets by insisting Britain was “ready to confront what the future holds for us from a position of strength”. The pound remained under pressure on the foreign exchange markets on Monday despite attempts by the chancellor, George Osborne, to soothe nerves, insisting Britain was “ready to confront what the future holds for us from a position of strength”.
After initially gaining some ground, sterling fell more than 3% against the dollar to $1.3192, its lowest level since 1985. Against the euro it was down to €1.1983, its lowest since March 2014. After initially gaining some ground, sterling fell more than 4% against the dollar to $1.3151, its lowest level since 1985. Against the euro it was down to €1.1983, its lowest point since March 2014.
The chancellor spoke after turmoil on global markets on Friday wiped $2tn from share prices, the largest ever one-day fall, surpassing even the darkest days of the 2008 banking crisis. Turmoil on global markets on Friday wiped $2tn from share prices, the largest ever one-day fall, surpassing even the darkest days of the 2008 banking crisis.
Osborne’s words gave investors some confidence to buy gilts, UK government bonds. The yields on gilts, which move inversely to prices, fell below 1% for the first time, amid expectations that the Bank of England will cut interest rates from their current low of 0.5% to zero. Osborne’s words on Monday gave investors some confidence to buy gilts - UK government bonds. The yields on gilts, which move inversely to prices, fell below 1% for the first time, amid expectations that the Bank of England would cut interest rates from their current low of 0.5% to zero.
The Bank of England’s Mark Carney abandoned plans to fly to Portugal later in the week for a meeting with fellow central bank governors and policymakers. He will remain in the UK to oversee the response to the crisis. The Bank of England governor, Mark Carney, has abandoned plans to fly to Portugal this week for a meeting with fellow central bank governors and policymakers. He will remain in the UK to oversee the response to the crisis.
The FTSE 100 was down more than 100 points at 6,037, or 1.7%, but the fall was not as large as had been feared. Before Osborne spoke, the index of leading shares was being called 180 points lower. The FTSE 100 extended its losses, falling 2%, or 124 points, to 6,015 as New York markets opened. The Dow Jones index was down 1.3%.
Even so, there were some hefty fallers: easyJet had one of the biggest losses as the short-haul airline warned profits would be lower than expected because of the impact on consumer confidence. Its shares slumped 18% to a three-year low of £10.72. There were some hefty fallers in London: easyJet was one of the biggest as the short-haul airline warned profits would be lower than expected because of the impact on consumer confidence. Its shares slumped 24% to a three-year low of £10.02.
Shares in banks fell sharply, adding to the losses on Friday. Barclays slumped by 11%. Bailed-out Royal Bank of Scotland and Lloyds Banking Group were also among the top 10 fallers, as the market reckoned the government’s attempt to sell off its remaining stakes has now stalled. RBS slumped 15% to 175p, its lowest level in five years. Lloyds was down 9% at 51p. Shares in banks fell sharply, adding to the losses on Friday. Barclays slumped by 11%. The bailed-out Royal Bank of Scotland and Lloyds Banking Group were also among the top 10 fallers, as the market reckoned the government’s attempt to sell off its remaining stakes had now stalled. RBS was down 25% at one point – its lowest level since February 2009. Lloyds was down 9% at 51p.
Housebuilders and companies reliant on providing supplies to the housing market were also down. Housebuilders and companies reliant on providing supplies to the housing market were also lower. Taylor Wimpey, Persimmon and Barratt Developments have lost 40% in two days.
Outside the FTSE 100, shares in estate agents Foxtons were down 22% after it spelt out the impact of Brexit on the high end of the property market. Outside the FTSE 100, shares in the estate agent Foxtons were down 22% after it spelt out the impact of Brexit on the high end of the property market.
The FTSE 250 index, which comprises companies more closely linked to the UK economy, was down 2%. Virgin Money was off 21%, while other challenger banks were also sharply lower such the newly floated Clydesdale bank. Headhunters Hays, engineering compnay Balfour Beatty, online supermarket group Ocado and building group Redrow were also lower. The FTSE 250 index, which comprises companies more closely linked to the UK economy than the multinational-heavy FTSE 100, was down 6%. Virgin Money was off 21%, while other challenger banks were also sharply lower such the newly floated Clydesdale. The headhunters Hays, engineering company Balfour Beatty, online supermarket group Ocado and building group Redrow were also lower.
Analysts said the chancellor’s intervention had helped to calm some nerves, at least initially. Analysts said the chancellor’s intervention had helped to calm some nerves, at least initially, although he faced criticism from Mervyn King, the former Bank of England governor, who said the Treasury would need to row back from exaggerated claims during the referendum campaign that had left him “baffled”.
“It seems that George Osborne’s appearance this morning, his first since before the referendum results were announced, has somewhat calmed investors’ fears, the chancellor joining many of his Tory colleagues in claiming there is no rush to trigger the dreaded article 50 despite increasing pressure from Europe,” said Connor Campbell, analyst at spread-betting firm SpreadEx. Article 50 is the formal process by which the UK withdraws from the EU. Even so, analysts have been cutting their forecasts for UK growth, including Goldman Sachs, which now forecasts 0.2% growth in 2017, down from 2% predicted previously.
The delay to invoking article 50 was welcomed by employers’ body the CBI. “Never has there been a more important time to put the interests of the country ahead of party politics,” said Carolyn Fairbairn, its director general. The delay to invoking article 50 – the formal process by which the UK withdraws from the EU – was welcomed by the employers’ body the CBI. “Never has there been a more important time to put the interests of the country ahead of party politics,” said Carolyn Fairbairn, its director general.
She called for the government “to preserve the openness of the UK’s economy” by protecting “tariff and barrier-free access to the single market”.She called for the government “to preserve the openness of the UK’s economy” by protecting “tariff and barrier-free access to the single market”.
She said: “There is one other action that needs to be taken immediately. The government should remove uncertainties over the long term right to stay in the UK for those already working here as soon as possible.” Fairbairn added: “There is one other action that needs to be taken immediately. The government should remove uncertainties over the long-term right to stay in the UK for those already working here as soon as possible.”
Much of the focus has been on the value of the pound, which had plunged to 31-year lows as the referendum result came in during Thursday night. Legendary speculator George Soros, who made $1bn when sterling fell out of the exchange rate mechanism in 1992, had warned of a “Black Friday” in the event of Brexit. His spokesman stressed that he not bet against the pound last week. Much of the focus has been on the value of the pound, which had plunged to 31-year lows as the referendum result came in during Thursday night. The speculator George Soros, who made $1bn when sterling fell out of the exchange rate mechanism in 1992, had warned of a “black Friday” in the event of Brexit. His spokesman stressed that he had not bet against the pound last week.
“George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union,” the spokesman was quoted by Reuters as saying. “George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union,” the spokesman was quoted by Reuters as saying. “However, because of his generally bearish outlook on world markets, Mr Soros did profit from other investments.”
“However, because of his generally bearish outlook on world markets, Mr Soros did profit from other investments.”