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Lagarde urges speedy Brexit deal as City sees pound hitting new lows – business live Lagarde urges speedy Brexit deal as City sees pound hitting new lows – business live
(35 minutes later)
3.20pm BST
15:20
NIESR: UK economy contracted in June
Newsflash: The British economy appears to have contracted last month.
New figures from the National Institute Of Economic and Social Research indicate that the economy was weakening, even before Britons headed to the polls.
NIESR estimates that the economy grew by 0.6% in the April-June quarter, up from 0.4% in January-March. So far so good....
But before anyone gets the bunting out, NIERS also estimate that strong growth in April fizzled out in May, leading to the economy shrinking in June.
Jack Meaning, Research Fellow at NIESR, explains:
“At first glance this represents a robust rate of quarterly growth for the UK economy. However, the quarterly figure masks an important within-quarter pattern. Our monthly estimates suggest that April saw a large expansion in GDP, which then stagnated in May.
The estimate for June is one of an intensifying contraction across the board, but this is not enough to offset the very strong April numbers.
What it does suggest is that when April drops out of the 3 month calculation we should see a quick deterioration of growth, especially if the estimated contraction in June persists or accelerates into July and beyond.”
NIESR: UK economy expanded by 0.6% in Q2. But warns that figs largely distorted by strong numbers in April. Got much weaker in June
Updated
at 3.20pm BST
3.07pm BST
15:07
Fancy buying a supermarket or an office block? It could be your lucky day.
Somewhere between £3bn to £5bn of direct real estate is now up for sale, as commercial real estate funds try to generate cash to pay redemptions to investors.
And as it is a buyers market, some assets could be sold pretty cheaply.
Investment bank Jefferies is scathing about the ‘open-ended’ funds which have invested in property on the way up. Six funds have now locked the exit doors this week; Standard Life, Aviva, M&S, Columbia, Canada Life and Henderson.
Jefferies accuses them of selling “snake oil” to retail investors, by guaranteeing liquidity while investing in a notoriously illiquid asset class. You can’t just sell a tower block in a few days, which is why redemptions are now frozen.
Jefferies analysts predict more pain ahead:
Now the virtuous cycle is turning into a vicious circle of redemptions, REIT sales, gating, discounted asset sales, lower fund valuations, and Major (Ret’d) & Mrs Smith complaining in the Sunday Times Money Section that they never read the small print and then more redemptions etc. etc.
[REIT = real estate investment trusts; companies who generate an income from owning commercial property ]
Updated
at 3.09pm BST
2.36pm BST2.36pm BST
14:3614:36
Newsflash: Another investment fund has cut the value of its property funds, following L&G and Foreign & Colonial.Newsflash: Another investment fund has cut the value of its property funds, following L&G and Foreign & Colonial.
This time it’s CCLA, which invests money for a range of charities, religious groups and the public sector. It has lopped 4.5% off the value of its funds, which were worth £1.3bn.This time it’s CCLA, which invests money for a range of charities, religious groups and the public sector. It has lopped 4.5% off the value of its funds, which were worth £1.3bn.
2.26pm BST2.26pm BST
14:2614:26
In another sign of Brexit tensions, rating agency Standard & Poor’s has revised down its opinion of several UK banks.In another sign of Brexit tensions, rating agency Standard & Poor’s has revised down its opinion of several UK banks.
It has cut Barclays’ outlook to negative, from stable, and also lowered Royal Bank of Scotland to stable, from positive.It has cut Barclays’ outlook to negative, from stable, and also lowered Royal Bank of Scotland to stable, from positive.
It blames “potential economic deterioration” following the EU vote, and says the UK is “entering a correction phase”, in which consumer confidence will suffer.It blames “potential economic deterioration” following the EU vote, and says the UK is “entering a correction phase”, in which consumer confidence will suffer.
UpdatedUpdated
at 2.35pm BSTat 2.35pm BST
2.06pm BST2.06pm BST
14:0614:06
There are fresh rumblings in the UK commercial property market, where the Brexit vote continues to alarm investors.There are fresh rumblings in the UK commercial property market, where the Brexit vote continues to alarm investors.
Two more funds have announced that the value of their shopping centres, office blocks and suchlike has fallen sharply in the last two weeks.Two more funds have announced that the value of their shopping centres, office blocks and suchlike has fallen sharply in the last two weeks.
Legal & General cut the value of its £2.3bn property fund by 10% – following a 5% cut last week – while Foreign & Colonial cut the value of its £290m fund by 5%.Legal & General cut the value of its £2.3bn property fund by 10% – following a 5% cut last week – while Foreign & Colonial cut the value of its £290m fund by 5%.
L&G also warned that it’s too early to know the full impact of the EU referendum vote.L&G also warned that it’s too early to know the full impact of the EU referendum vote.
Property fund turmoil continues as two more firms reveal cut in value https://t.co/GPp9h3D0V2Property fund turmoil continues as two more firms reveal cut in value https://t.co/GPp9h3D0V2
1.55pm BST1.55pm BST
13:5513:55
Just in: The latest US employment survey has beaten expectations.Just in: The latest US employment survey has beaten expectations.
Some 172,000 new private sector jobs were created in June, some 13,000 more than expected.Some 172,000 new private sector jobs were created in June, some 13,000 more than expected.
We get the main US jobs report tomorrow, the Non-Farm Payroll, and that will show if Brexit worries had any impact on hiring last month.We get the main US jobs report tomorrow, the Non-Farm Payroll, and that will show if Brexit worries had any impact on hiring last month.
BREAKING: June private sector jobs rose by 172,000 vs 159,000 expected: ADP https://t.co/W9Dw3T1bpWBREAKING: June private sector jobs rose by 172,000 vs 159,000 expected: ADP https://t.co/W9Dw3T1bpW
1.45pm BST1.45pm BST
13:4513:45
Christine Lagarde also warned that the global economy could suffer if Britain enters a limbo state where it delays the process of leaving the EU.Christine Lagarde also warned that the global economy could suffer if Britain enters a limbo state where it delays the process of leaving the EU.
Do we have a forecast and scenario with prolonged uncertainty, total lack of clarity, no triggering of Article 50 [the official notification required to leave the EU], things staying in limbo for a long period of time? No. We don’t have that. We doubt that it would be sustainable politically, geopolitically.Do we have a forecast and scenario with prolonged uncertainty, total lack of clarity, no triggering of Article 50 [the official notification required to leave the EU], things staying in limbo for a long period of time? No. We don’t have that. We doubt that it would be sustainable politically, geopolitically.
More here:More here:
Lagarde warns Trump-style protectionism would hit world economyLagarde warns Trump-style protectionism would hit world economy
1.01pm BST1.01pm BST
13:0113:01
Lagarde: We need clarity about UK's Brexit plansLagarde: We need clarity about UK's Brexit plans
Christine Lagarde, head of the International Monetary Fund, has called on Britain to resolve its relationship with the European Union quickly, to limit the economic damage of Brexit.Christine Lagarde, head of the International Monetary Fund, has called on Britain to resolve its relationship with the European Union quickly, to limit the economic damage of Brexit.
She’s echoing Mohamed El-Erian’s warning that uncertainty will hurt the UK economy.She’s echoing Mohamed El-Erian’s warning that uncertainty will hurt the UK economy.
In an interview with the Financial Times, Lagarde says:In an interview with the Financial Times, Lagarde says:
“We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making.“We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making.
The IMF believes could UK cushion the impact of leaving the EU by agreeing a Norway-style agreement (basically getting access to the single market, but also agreeing to EU laws and freedom of movement). That would only cut 1.5% off GDP growth by 2019The IMF believes could UK cushion the impact of leaving the EU by agreeing a Norway-style agreement (basically getting access to the single market, but also agreeing to EU laws and freedom of movement). That would only cut 1.5% off GDP growth by 2019
However, if the UK clatters out of the EU without a new trade deal, it will revert to standard WTO tariffs - meaning the economy would be 4.5% smaller than otherwise by the end of the decade. The boss of the WTO has already warned that this would cost consumers £9bn per year.However, if the UK clatters out of the EU without a new trade deal, it will revert to standard WTO tariffs - meaning the economy would be 4.5% smaller than otherwise by the end of the decade. The boss of the WTO has already warned that this would cost consumers £9bn per year.
It’s not clear when the UK can deliver the clarity which Lagarde is seeking. This morning, foreign secretary Philip Hammond told MPs that the government simply isn’t in a position to start ‘substantive negotiations’ with Brussels.It’s not clear when the UK can deliver the clarity which Lagarde is seeking. This morning, foreign secretary Philip Hammond told MPs that the government simply isn’t in a position to start ‘substantive negotiations’ with Brussels.
Foreign Secretary Philip Hammond says the U.K. is "not in a position to begin substantive negotiations immediately" on its divorce with EUForeign Secretary Philip Hammond says the U.K. is "not in a position to begin substantive negotiations immediately" on its divorce with EU
12.23pm BST12.23pm BST
12:2312:23
The pound has broken back over the $1.30 mark, away from yesterday’s 31-year low of $1.28 (and further away from dollar parity, of course).The pound has broken back over the $1.30 mark, away from yesterday’s 31-year low of $1.28 (and further away from dollar parity, of course).
It appears that some calm has returned to the markets, after some wild days.It appears that some calm has returned to the markets, after some wild days.
But analysts are expecting sterling to keep dropping.But analysts are expecting sterling to keep dropping.
fastFT have the details:fastFT have the details:
Deutsche Bank believes that sterling is in line to fall as far as $1.15, while HSBC has set $1.20 as its target for the end of the year. Goldman Sachs has a three-month target of $1.20.Deutsche Bank believes that sterling is in line to fall as far as $1.15, while HSBC has set $1.20 as its target for the end of the year. Goldman Sachs has a three-month target of $1.20.
Sterling gets its mojo back; Over $1.30 (just) https://t.co/AIOqCixmQT pic.twitter.com/z6tmmUE7iXSterling gets its mojo back; Over $1.30 (just) https://t.co/AIOqCixmQT pic.twitter.com/z6tmmUE7iX
12.12pm BST12.12pm BST
12:1212:12
Bank chiefs pledge to protect the CityBank chiefs pledge to protect the City
Five top executives from the biggest international banks based in London have pledged to work together to protect the City following the Brexit voteFive top executives from the biggest international banks based in London have pledged to work together to protect the City following the Brexit vote
Bosses from Goldman Sachs, Standard Chartered, Bank of America Merrill Lynch, Morgan Stanley and JP Morgan issued the promise, after a meeting with chancellor George Osborne.Bosses from Goldman Sachs, Standard Chartered, Bank of America Merrill Lynch, Morgan Stanley and JP Morgan issued the promise, after a meeting with chancellor George Osborne.
They cite Britain’s “brilliant workforce” and “stable legal systems” as key assets.They cite Britain’s “brilliant workforce” and “stable legal systems” as key assets.
Here’e the statement:Here’e the statement:
Britain’s decision to leave the EU clearly presents economic challenges which we are determined to work together to meet.Britain’s decision to leave the EU clearly presents economic challenges which we are determined to work together to meet.
We will also work together to identify the new opportunities that may now become available so that Britain remains one of the most attractive places in the world to do business.We will also work together to identify the new opportunities that may now become available so that Britain remains one of the most attractive places in the world to do business.
One of Britain’s key economic strengths is that it is a world leading financial centre.One of Britain’s key economic strengths is that it is a world leading financial centre.
It has one of the most stable legal systems in the world, a brilliant workforce and deep, liquid capital markets unmatched anywhere else in Europe, all of which are underpinned by world class regulators.It has one of the most stable legal systems in the world, a brilliant workforce and deep, liquid capital markets unmatched anywhere else in Europe, all of which are underpinned by world class regulators.
In recent years it has established itself as a global hub for renminbi, rupee, Islamic finance and green finance, as well as leading in new markets such as FinTech.In recent years it has established itself as a global hub for renminbi, rupee, Islamic finance and green finance, as well as leading in new markets such as FinTech.
Today we met and agreed that we would work together to build on all this with a common aim to help London retain its position as the leading international financial centre.Today we met and agreed that we would work together to build on all this with a common aim to help London retain its position as the leading international financial centre.
It’s signed by:It’s signed by:
UpdatedUpdated
at 12.12pm BSTat 12.12pm BST
11.30am BST11.30am BST
11:3011:30
According to the financial markets, there’s a high chance that the Bank of England will cut interest rates to new record lows next week.According to the financial markets, there’s a high chance that the Bank of England will cut interest rates to new record lows next week.
Ben Brettell of investment firm Hargreaves Lansdown has drilled down into the interest-rate swaps traded in the City, and reports that they imply:Ben Brettell of investment firm Hargreaves Lansdown has drilled down into the interest-rate swaps traded in the City, and reports that they imply:
He explains:He explains:
Initially August had looked more likely, but with economic data deteriorating and markets still nervous, it now looks probable the Monetary Policy Committee will adjudge that immediate action is warranted.Initially August had looked more likely, but with economic data deteriorating and markets still nervous, it now looks probable the Monetary Policy Committee will adjudge that immediate action is warranted.
UpdatedUpdated
at 11.34am BSTat 11.34am BST
11.11am BST
11:11
Expert: Pound could rally if Bank of England holds rates
Mohamed El-Erian’s warning that the pound could fall to parity with the dollar unless UK politicians urgently devise a Brexit plan has sent ripples through the City today.
Andrew Edwards, CEO of ETX Capital, report:
“The chatter on forex desks is that the pound could hit parity with the dollar.
Although not impossible, this seems a little far-fetched as sterling would have to drop considerably from where it is now. Parity would represent an all-time low for the pound.
Deutsche Bank is pessimistic with its forecast of $1.15 for cable – the consensus is $1.20.
It all depends what the Bank of England does next week -- a rate cut (to a new alltime low) could easily send the pound tumbling.
But Mark Carney and colleagues could vote to leave borrowing costs unchanged, which Edwards reckons would be “the sensible move”.
Increasing credit supply doesn’t achieve much if there is no demand and it’s the demand side that matters most.
A firm vote to hold rates where they are would send a clear signal to investors that the Bank is confident the UK can weather this storm and that it doesn’t want the pound to drop further. Keeping its powder dry would mean it has ammunition for another day, should financial conditions get a lot worse.
11.06am BST
11:06
Interesting juxtaposition on front page of Guardian's website now - https://t.co/vfa2fqqnqW pic.twitter.com/edQHj4KM92
11.01am BST
11:01
JP Morgan: We could move thousands of jobs abroad
The boss of investment bank JP Morgan has warned that he may move thousands of jobs out of the City, if Britain loses full access to the single market.
Jamie Dimon told Bloomberg that it’s crucial that firms in London retain the ability to ‘passport’ into other EU countries and sell financial services there.
If that passporting rule is broken, then JP Morgan staff will be packing their bags.
Dimon explained:
“If we have that passport after Brexit, we likely would not have to make any change at all.
“But I think the European Union will not accept that. It will put more conditions on the U.K. and might force banks to become smaller in London.”
Those with memories of the financial crisis might welcome an exodus of bankers. One problem, though, they do provide a lot of tax receipts:
There's something incredibly depressing about this graph on the amount of tax generated from different UK cities pic.twitter.com/CjzUcIxuf2
10.54am BST
10:54
Katie Allen
The OECD, which urged Britain to stay in the EU ahead of the referendum, has warned that Brexit would “represents a cloud over the UK’s recent ability to create jobs.”
There was a potential impact on wages, too, it said.
The UK had suffered from “disappointing” growth in real wages, partly reflecting weak labour productivity growth of only 2% from 2010 to 2015, the smallest increase in the OECD after Hungary, Italy and Greece.
In a briefing on the UK, the OECD says:
“Any decline in foreign direct investment in the UK that may result from Brexit could further worsen this poor productivity performance.”
The OECD has also warned today that unemployment is still too high in many EU countries:
Even in countries where labour market slack has been absorbed, low quality jobs and a high level of labour market inequality are of concern. Many of the workers who lost their jobs during the Great Recession are now back in work, but wage growth remains subdued and job stress is common.
More on that later....
Updated
at 11.06am BST
10.44am BST
10:44
Brexit pushes up cocoa prices
The chocolate bar in your pocket may soon cost more, following the sharp falls in the pound.
The price of cocoa in sterling terms has hit its highest level since 1977, at £2,487 per tonne.
Cocoa’s a key ingredient in chocolate, of course, and the Financial Times reckons we’ll soon see the impact on the shelves.
They warn:
If the collapse of sterling was not depressing enough, the price of chocolate for UK buyers could get higher as cocoa, the key ingredient hit a 39-year high.
#Brexit is making chocolate more expensive as pound's collapse drives cocoa to 39-yr high https://t.co/RT9I2qIFYi pic.twitter.com/hIfxIjliQY
Updated
at 10.47am BST
10.35am BST
10:35
Here’s more reaction to Andrea Leadsom’s claims that Britain has a bright economic future after Brexit, and that a weak pound isn’t a problem....
“I want to speak to the markets,” says Andrea Leadsom, with the air of someone who imagines you can negotiate with gravity.
Leadsom banging on about FTSE 100 as evidence of good news is yet more proof that she doesn't understand finance https://t.co/5mNNfzqz30
Remind yourselves of this folks when you fill up your car with (more expensive) petrol this weekend pic.twitter.com/aw7PMJ12i2
10.06am BST
10:06
Leadsom: We need a good trade deal
Andrea Leadsom, one of the contenders to be Britain’s next prime minister, has heeded Mohamed El-Erian’s warning that the UK needs to arrange a workable trade deal with Europe.
A free trade deal with the EU is vital, Leadsom says, as she outlines her economic platform.
She told supporters that “no-one needs to fear” Britain’s decision to leave the European Union, as the government will move carefully.
Trade must be the top priority, she says, adding:
Britain must get continued tariff-free trade with the EU and continued free trade with other countries as at present, plus agreements with other fast-growing economies.
However, she doesn’t give any details about how she’ll negotiate this happy outcome.
Our Politics liveblog has all the details:
Related: Tony Blair says he was right to 'stand by America' in run-up to Iraq war – live
Leadsom was also remarkably upbeat about the financial consequences of the Brexit vote.
She claims that the slump in the pound is partly because the markets called the result wrong – ignoring the fact that economists - correctly - predicted sterling would tumble to current levels.
Leadsom: "Fcasts for a disaster for sterling have not been proven correct" < Market prices suggested £ would fall below $1.30. And it did.
She also argues that lower sterling is good for exports, makes inward investment more attractive, and means Britons will import less and buy more at home.
Yes, but it also means goods are going to cost more....
Yes as Leadsom says weaker pound boosts exports. It also pushes up inflation & squeezes real incomes. Good for business, worse for consumers
Leadsom also loses marks for declaring that the FTSE 100 is now higher than two weeks ago, without explaining it’s mainly due to the weak pound.
Leadsom say FTSE up (but this is only cos £ at 30 year low against the $) FTSE 250 (more domestically-focused companies) DOWN
Updated
at 1.50pm BST
9.51am BST
09:51
Analysts at Deutsche Bank have predicted that the pound will keep falling, and hit $1.15 by the end of 2016. Or worse....
Deutsche Bank on their end-2016 $1.15 forecast for £ - "our aggressive forecasts may still be under-stating the level of weakness required."
9.49am BST
09:49
It feels like ancient history now... but new figures show that British industry was growing at its fastest pace in six-years before the EU referendum.
UK industrial output jumped by 1.9% in the three months to May compared with the previous three months, which is the strongest increase since May 2010.
Output did drop by 0.5% in May, but that’s less than the 1% economists expected.
So, broadly encouraging -- but we don’t know what impact the referendum result, or the weaker pound, has had yet....
UK industrial and manufacturing production was fairly solid in May but of course that was May....... #GDP #BoE
In April UK pharmaceutical production surged and in May some of it was lost. Thats why indy and manufacturing fell in May #BoE
9.33am BST
09:33
Chinese computer maker Lenovo has warned that it will probably hike its prices following the Brexit vote.
The recent slump in the pound’s value means that Lenovo’s UK earnings are now worth around 10% less than before the referendum.
Chief financial officer Wai Ming Wong told reporters earlier today price increases are one option being considered, saying:
“To the extent that we need to pass things on to the customer, we will”
More here.
Personal-computer giant Lenovo considers raising prices to maintain #Brexit profitability https://t.co/GEmE6nBt03 pic.twitter.com/xSUIyM6T6L