This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2016/oct/04/pound-dollar-low-construction-imf-brexit-business-live

The article has changed 16 times. There is an RSS feed of changes available.

Version 2 Version 3
Pound hits 31-year low against US dollar, but shares soar – business live Pound hits 31-year low against US dollar, but shares soar – business live
(35 minutes later)
11.36am BST
11:36
Time for some history: a market report from the last time the pound was worth just $1.27.
A forex report by @dsmitheconomics in the Times, June 15 1985 - about the last time GBP was this weak @TimesArchive pic.twitter.com/6oCsHe7q7f
Health worries about a senior US politician? An Argentinian debt crisis? Concern about the oil price? Plus ça change, plus c’est la même chose....
Updated
at 11.36am BST
11.27am BST
11:27
Mining companies and internationally-focused firms have been the best performing companies on the London stock market this year, as this chart shows:
It was sent over by Laith Khalaf, senior analyst at Hargreaves Lansdown. He reckons the market could still go higher.
With cash and bonds yielding next to nothing, equities are the natural alternative for anyone looking for a decent level of income. Nor will there be any shortage of income-seekers at the moment, as millions of baby boomers are reaching retirement age, while the recent pension freedoms conveniently allow them to park their retirement funds in the stock market rather than buying an annuity.
And on some measures, shares aren’t actually too expensive today, he adds:
If you compare share prices to company earnings, the valuation of the UK stock market is actually somewhere in the middle of its historic range, neither particularly cheap, nor dear, at current prices. This is in stark contrast to the former peak of the market in 1999, when the price-earnings ratio of the UK stock market stood at an eye-watering level.
10.57am BST10.57am BST
10:5710:57
City fears hard time after hard BrexitCity fears hard time after hard Brexit
The City isn’t going to get any special treatment in the Brexit negotiations, according to a new report that has alarmed some investors.The City isn’t going to get any special treatment in the Brexit negotiations, according to a new report that has alarmed some investors.
Bloomberg is reporting that PM Theresa May wants to “change the relationship between the government and the City of London”.Bloomberg is reporting that PM Theresa May wants to “change the relationship between the government and the City of London”.
According to three senior figures in May’s administration, the government will refuse to prioritize the protection of the sector after the U.K. has left the European Union.According to three senior figures in May’s administration, the government will refuse to prioritize the protection of the sector after the U.K. has left the European Union.
Her team has also dismissed the key business demand for an interim deal with the EU to help ease the transition out of the bloc, one of the people said. All asked not to be named because the information is sensitive.Her team has also dismissed the key business demand for an interim deal with the EU to help ease the transition out of the bloc, one of the people said. All asked not to be named because the information is sensitive.
Here’s the full piece: Banks to Miss Out on Special Favors in May’s Brexit PlansHere’s the full piece: Banks to Miss Out on Special Favors in May’s Brexit Plans
The City fears a hard Brexit because it could prevent firms in London from offering services across the European Union.The City fears a hard Brexit because it could prevent firms in London from offering services across the European Union.
Those ‘passporting rights’ are highly prized, but would be lost if Britain leaves the single market in 2019.Those ‘passporting rights’ are highly prized, but would be lost if Britain leaves the single market in 2019.
This uncertainty is already making it harder for City firms to plan, or hire new staff.This uncertainty is already making it harder for City firms to plan, or hire new staff.
Good @FT chart on role of non-Brits in the City (22% of 360k workforce) pic.twitter.com/v26fYOSwfVGood @FT chart on role of non-Brits in the City (22% of 360k workforce) pic.twitter.com/v26fYOSwfV
10.50am BST10.50am BST
10:5010:50
Tom Stevenson, director of personal investing for Fidelity International, suggests the London stock market could easily keep climbing, despite the clouds of Brexit uncertainty.Tom Stevenson, director of personal investing for Fidelity International, suggests the London stock market could easily keep climbing, despite the clouds of Brexit uncertainty.
“As the pound plunges to a three decade low, the FTSE 100 has broken through the 7000 barrier, reaching 7,076 this morning, close to its highest ever. The first time the FTSE surpassed this milestone was in March 2015 before rising to its all-time intra-day high of 7,122 in April 2015. Since then we have seen the markets fluctuate, hitting a low in February 2016 of 5,499, before bouncing back again – an increase of 28.6 per cent.“As the pound plunges to a three decade low, the FTSE 100 has broken through the 7000 barrier, reaching 7,076 this morning, close to its highest ever. The first time the FTSE surpassed this milestone was in March 2015 before rising to its all-time intra-day high of 7,122 in April 2015. Since then we have seen the markets fluctuate, hitting a low in February 2016 of 5,499, before bouncing back again – an increase of 28.6 per cent.
“This is obviously good news for UK investors and no-one would complain about the market finally moving decisively on from its 1999 dot.com bubble peak. But it should be remembered that the main reason shares are rising today is the remarkable slide in the pound to its lowest level since 1985. It’s good for UK exporters and overseas earners but for foreign stock market investors it takes the edge off the latest gains.“This is obviously good news for UK investors and no-one would complain about the market finally moving decisively on from its 1999 dot.com bubble peak. But it should be remembered that the main reason shares are rising today is the remarkable slide in the pound to its lowest level since 1985. It’s good for UK exporters and overseas earners but for foreign stock market investors it takes the edge off the latest gains.
“Can the market go further from here? Despite coming close to a new high, the valuation of the UK market is not excessive and investors still look to shares for income, growth and stability.“Can the market go further from here? Despite coming close to a new high, the valuation of the UK market is not excessive and investors still look to shares for income, growth and stability.
10.25am BST10.25am BST
10:2510:25
FTSE 100 posts triple-digit gainsFTSE 100 posts triple-digit gains
London’s stock market is surging higher, sending the FTSE 100 index up by 100 points to a new 16-month high.London’s stock market is surging higher, sending the FTSE 100 index up by 100 points to a new 16-month high.
Shares in consumer group Unilever, drinks company Diageo, and food group Compass have all hit record highs.Shares in consumer group Unilever, drinks company Diageo, and food group Compass have all hit record highs.
And the Footsie is now hovering around 7084 points, only 38 points shy of its record high. Nearly ever share is up.And the Footsie is now hovering around 7084 points, only 38 points shy of its record high. Nearly ever share is up.
We shouldn’t forget the proviso that this is partly due to the weakness of the pound (which boosts the share prices of companies with international earnings, as explained earlier).We shouldn’t forget the proviso that this is partly due to the weakness of the pound (which boosts the share prices of companies with international earnings, as explained earlier).
But investors may also be showing some confidence in Britain’s prospects; especially after this morning’s strong data from the building sector.But investors may also be showing some confidence in Britain’s prospects; especially after this morning’s strong data from the building sector.
Chris Beauchamp, chief market analyst at City firm IG, explains:Chris Beauchamp, chief market analyst at City firm IG, explains:
There may be no shortage of commentators pointing out that the index is still down in dollar terms, but with the index at its highest level in over a year there is a distinct feel-good factor among UK investors.There may be no shortage of commentators pointing out that the index is still down in dollar terms, but with the index at its highest level in over a year there is a distinct feel-good factor among UK investors.
European markets are joining in the party, with Deutsche Bank shares resilient despite no developments on a potential reduction in the DoJ fine. The traditionally strong quarter for equities has got off to a remarkably good start, although the move has probably been helped by the lack of heavyweight data so far this month.European markets are joining in the party, with Deutsche Bank shares resilient despite no developments on a potential reduction in the DoJ fine. The traditionally strong quarter for equities has got off to a remarkably good start, although the move has probably been helped by the lack of heavyweight data so far this month.
Today’s UK construction PMI continues the trend set by manufacturing yesterday, although with so much focus still on the UK’s path to Brexit the relief for sterling has been minimal. If tomorrow’s services number also comes in strongly the Bank of England is going to have a hard time justifying another cut in interest rates.Today’s UK construction PMI continues the trend set by manufacturing yesterday, although with so much focus still on the UK’s path to Brexit the relief for sterling has been minimal. If tomorrow’s services number also comes in strongly the Bank of England is going to have a hard time justifying another cut in interest rates.
UpdatedUpdated
at 10.31am BSTat 10.31am BST
10.05am BST10.05am BST
10:0510:05
The resurgence in Britain’s construction sector hasn’t done the pound much good.The resurgence in Britain’s construction sector hasn’t done the pound much good.
Sterling is still ploughing 31-year lows this morning, trading at $1.2771 against the US dollar and 87.4p against the euro.Sterling is still ploughing 31-year lows this morning, trading at $1.2771 against the US dollar and 87.4p against the euro.
Carlo Alberto De Casa, chief analyst at ActivTrades, says:Carlo Alberto De Casa, chief analyst at ActivTrades, says:
“This is a clear signal that the fears for a hard Brexit are becoming bigger day by day and that also the limitation of the freedom of movement is taking the investors away from the pound.”“This is a clear signal that the fears for a hard Brexit are becoming bigger day by day and that also the limitation of the freedom of movement is taking the investors away from the pound.”
9.47am BST9.47am BST
09:4709:47
Here’s some expert reaction to Britain’s construction sector surging back to growth in September:Here’s some expert reaction to Britain’s construction sector surging back to growth in September:
Tim Moore, Senior Economist at IHS Markit:Tim Moore, Senior Economist at IHS Markit:
“Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.“Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.
“A number of survey respondents noted that Brexit- related anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work.“A number of survey respondents noted that Brexit- related anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work.
Mike Chappell, Global Corporates managing director for construction at Lloyds Bank Commercial BankingMike Chappell, Global Corporates managing director for construction at Lloyds Bank Commercial Banking
“Far from being overwhelmingly downbeat, many construction firms, particularly those at the larger end of the market, have indicated that the EU referendum result has – so far at least – had little impact on business.“Far from being overwhelmingly downbeat, many construction firms, particularly those at the larger end of the market, have indicated that the EU referendum result has – so far at least – had little impact on business.
“The industry has also been buoyed by the Government’s decision to press ahead with Hinkley Point, one of the most significant infrastructure projects of recent decades. Even if not all in the sector will share in the spoils, the move suggests a commitment to infrastructure, underlined by encouraging comments from the chancellor at the Conservative Party conference. Other major projects, such as HS2 and the airport expansion in the South East, are also in the pipeline.“The industry has also been buoyed by the Government’s decision to press ahead with Hinkley Point, one of the most significant infrastructure projects of recent decades. Even if not all in the sector will share in the spoils, the move suggests a commitment to infrastructure, underlined by encouraging comments from the chancellor at the Conservative Party conference. Other major projects, such as HS2 and the airport expansion in the South East, are also in the pipeline.
“On the other side of the coin, the weakness of sterling continues to make raw materials more expensive for those without relevant hedging and the expectation of many is that inflation is set to become more of a headache during 2017.”“On the other side of the coin, the weakness of sterling continues to make raw materials more expensive for those without relevant hedging and the expectation of many is that inflation is set to become more of a headache during 2017.”
Paul Trigg, construction specialist and assistant head of risk underwriting at Euler Hermes, said:Paul Trigg, construction specialist and assistant head of risk underwriting at Euler Hermes, said:
“Construction is sitting in the eye of the storm. The sector has yet to feel the full brunt of Brexit as a healthy pipeline of work will carry companies through the next 12 to 18 months. Triggering Article 50 is likely to spark a significant change, and encouraging indicators could be false positives.“Construction is sitting in the eye of the storm. The sector has yet to feel the full brunt of Brexit as a healthy pipeline of work will carry companies through the next 12 to 18 months. Triggering Article 50 is likely to spark a significant change, and encouraging indicators could be false positives.
“The Government has an opportunity in the Autumn Statement to strengthen the commitment to infrastructure spending. Projects like Hinckley Point, together with smaller scale developments to keep the economy moving, will be on the wish list of a sector that needs more prospects on its horizon.”“The Government has an opportunity in the Autumn Statement to strengthen the commitment to infrastructure spending. Projects like Hinckley Point, together with smaller scale developments to keep the economy moving, will be on the wish list of a sector that needs more prospects on its horizon.”
UpdatedUpdated
at 10.14am BSTat 10.14am BST
9.47am BST9.47am BST
09:4709:47
Some snap analysis:Some snap analysis:
Construction sector PMIs were the worst hit pre & post referendum, so return to growth is good news. Commercial building still languishing. https://t.co/vx69MJlvVTConstruction sector PMIs were the worst hit pre & post referendum, so return to growth is good news. Commercial building still languishing. https://t.co/vx69MJlvVT
More good news from the PMI surveys - construction output rises to 52.3 points in Sep. Expanding (above 50) for first time since referendumMore good news from the PMI surveys - construction output rises to 52.3 points in Sep. Expanding (above 50) for first time since referendum
UK construction; strong residential, strengthening civil, weak commercial. Costs rising on GBP falls, employment mixed.UK construction; strong residential, strengthening civil, weak commercial. Costs rising on GBP falls, employment mixed.
UpdatedUpdated
at 10.14am BSTat 10.14am BST
9.37am BST9.37am BST
09:3709:37
UK construction sector rebounds after Brexit voteUK construction sector rebounds after Brexit vote
Boom! Britain’s building sector had surged back to growth, new data shows.Boom! Britain’s building sector had surged back to growth, new data shows.
In the latest sign that the Brexit vote has not hurt the economy, the monthly construction PMI has leapt to 52.3 in September, up from 49.2 in August.In the latest sign that the Brexit vote has not hurt the economy, the monthly construction PMI has leapt to 52.3 in September, up from 49.2 in August.
That’s much stronger than expected. It means activity in the sector increased last month, at the fastest rate since March (any reading over 50 = shows growth).That’s much stronger than expected. It means activity in the sector increased last month, at the fastest rate since March (any reading over 50 = shows growth).
Markit, which compiles the report, says that residential housebuilding drove the recovery. There was also a welcome pick-up in new orders, after four months of “sustained decline”Markit, which compiles the report, says that residential housebuilding drove the recovery. There was also a welcome pick-up in new orders, after four months of “sustained decline”
The PMI, or purchasing managers index, measures activity, new orders, and confidence in the sector.The PMI, or purchasing managers index, measures activity, new orders, and confidence in the sector.
More to follow...More to follow...
9.27am BST9.27am BST
09:2709:27
The important point about today’s selloff is that the pound has slumped below its lowest point after the EU referendum.The important point about today’s selloff is that the pound has slumped below its lowest point after the EU referendum.
That strongly suggests that traders have been unsettled by the prospect of Britain leaving the EU, and the single market, as early as March 2019.That strongly suggests that traders have been unsettled by the prospect of Britain leaving the EU, and the single market, as early as March 2019.
By falling through July’s lows, the pound is now at levels only seen during the sterling crisis of 1985.By falling through July’s lows, the pound is now at levels only seen during the sterling crisis of 1985.
Back then, the world was struggling to cope with a particularly strong US dollar, as America’s central bank held interest rates high to tackle inflation (which encouraged traders to hold dollars).Back then, the world was struggling to cope with a particularly strong US dollar, as America’s central bank held interest rates high to tackle inflation (which encouraged traders to hold dollars).
Sterling fell to $1.04 in 1985, so it might be a while before you hear about a pre-1985 low. (It did go back to $1.50 the next year).Sterling fell to $1.04 in 1985, so it might be a while before you hear about a pre-1985 low. (It did go back to $1.50 the next year).
9.07am BST9.07am BST
09:0709:07
Kit Juckes of French bank Société Générale also blames the Conservative Party for sending pound down to levels last seen in 1985.Kit Juckes of French bank Société Générale also blames the Conservative Party for sending pound down to levels last seen in 1985.
Confirmation that the UK Government plans to trigger article 50 by the end of Q1 2017 hit sterling harder than I expected yesterday, which is saying something.Confirmation that the UK Government plans to trigger article 50 by the end of Q1 2017 hit sterling harder than I expected yesterday, which is saying something.
Some sort of a bounce is possible today but the noises from the Conservative party conference aren’t helpful. There will be fiscal slippage as the Chancellor won’t try to hit previous deficit reduction targets, but a significant easing is not on the cards. Nor is the government showing any signs of shifting a position where control on immigration is the hardest of lines in negotiations to leave the EU, and won’t be sacrificed or watered down in order to keep access to the single market, particularly for financial services. There’s nothing there to soften the outlook for sterling, at all.Some sort of a bounce is possible today but the noises from the Conservative party conference aren’t helpful. There will be fiscal slippage as the Chancellor won’t try to hit previous deficit reduction targets, but a significant easing is not on the cards. Nor is the government showing any signs of shifting a position where control on immigration is the hardest of lines in negotiations to leave the EU, and won’t be sacrificed or watered down in order to keep access to the single market, particularly for financial services. There’s nothing there to soften the outlook for sterling, at all.
8.54am BST
08:54
Ana Thaker, Market Economist at PhillipCapital UK, believes the pound could slump to $1.25, or worse, as exit talks with the European Union get underway.
She says:
There is great uncertainty regarding how the Brexit negotiations will take shape and this could see a renewed bout of volatility in the currency.
The Bank of England could also seek to stabilise markets if volatility continues but it remains to be seen how far Sterling could drop with the $1.25 being the next target level; whilst it could dip lower than this, there is likely to have to be significant developments for the pair to reach the $1.20 level.
8.48am BST
08:48
FTSE 250 hits record high
The FTSE 250 index of medium-sized companies has hit a new record high!
That’s significant, as the index is seen as more representative of the UK economy than the heavyweight FTSE 100.
Updated
at 9.12am BST
8.40am BST
08:40
Hats off to Bloomberg for this chart, which shows how the London stock market rally is partly due to the drop in the pound since 23 June.
SO much love for @queenofchartz and this Pound + FTSE chart pic.twitter.com/IH8PJGADQP
Updated
at 10.37am BST
8.36am BST
08:36
The prospect of a ‘hard Brexit’ is hurting the pound, says Conner Campbell of SpreadEx:
It seems that it is going to be hard to provide a tourniquet for sterling’s recent wounds given the solidity of the newly announced Brexit timeline (with March set to go down in the history books as when Article 50 was triggered), and the firmness with which May stated her intention to chase border control even if it means relinquishing Britain’s position in the single market.
8.33am BST
08:33
Today’s selloff is reinforcing the pound’s claim to be the worst-performing major currency of 2016.
This chart shows how the pound has weakened sharply against all its major rivals:
Sterling performance YTD; we're even down against the Trump trampled Mexican peso pic.twitter.com/V00NM8DtFU
8.26am BST
08:26
8.24am BST
08:24
FTSE 100 hits 7,000 points (but......)
While the pound slides, shares are soaring in London.
The FTSE 100 index of leading blue-chip companies bounced excitedly over the 7,000 point mark at the start of trading, to a new-16-month high.
It’s up 52 points to 7040, up 0.85%, as money pours into shares.
BUT.... before anyone gets excited, it’s important to note that this is partly due to the pound’s weakness.
The Footsie is packed with internationally-focused firms, whose overseas earnings are worth more when the pound is lower.
And if you price the FTSE in dollars, not pounds, it’s certainly not at a 16-month high....
Updated
at 8.35am BST
8.16am BST
08:16
Bloomberg says “Brexit angst” is hurting the pound:
The pound dropped to a three-decade low, as investor concern about Britain’s exit from the European Union welled up after Prime Minister Theresa May’s announcement that she would begin the process of leaving the bloc in the first quarter of 2017.
Sterling fell beyond its post-Brexit-vote low, and was down against 29 of its 31 major peers. During the first day of the Conservative Party’s annual conference in Birmingham on Sunday, May promised to curb immigration and set a date for Britain to trigger Article 50, which starts a two-year withdrawal process.
7.58am BST
07:58
Pound hits 31-year low after Brexit timetable released
Newsflash: the pound has hit a new 31-year low against the US dollar.
It has shed 0.5% in early trading in London, dropping to $1.2778.
That’s its lowest level since June 1985, and almost 15% weaker than before the EU referendum on 23 June.
Sterling falls to a 31-year low of $1.2775. pic.twitter.com/2mVzAbuhEE
The pound has also ploughed to a new three-year low against the euro, at 87.51p.
Sterling has been under pressure since UK government announced on Sunday it would trigger the process of leaving the European Union by the end of March 2017.
City investors are also concerned that Britain appears to be on track to leave the EU single market, as it places a priority on restricting immigration into the UK.
Currency expert Kathleen Brooks, of FOREX.com and City Index, pins the blame on events at the Conservative party conference in Birmingham.
The Tory party conference is turning into a sell for the pound, as FX traders get spooked by May’s apparent sanguine attitude to leaving the single market, preferring to focus on immigration and UK sovereignty rather than the economic fallout of Brexit.
Phillip Hammond, the UK’s new Chancellor, didn’t help the pound either when he suggested that George Osborne’s fiscal rules will be abandoned and government spending increased. This is designed to cushion some of the blow from the UK’s departure from the European Union. However, it is likely to weigh on the UK’s already large budget deficit, which is another blow to the pound at the start of the new quarter.
More reaction to follow!
Updated
at 8.06am BST
7.44am BST
07:44
The agenda: Construction survey and IMF report
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The health of Britain’s economy will probably dominate the agenda today, as the UK faces up to the prospect of exiting the EU by spring 2019.
For starters, we get a new health check on Britain’s construction sector, at 9.30am BST.
Economists predict that activity in the building industry contracted a little in September, as the sector’s recession continued.
CMC Market’s Michael Hewson says:
The construction sector has been a significant underperformer in the last three to four months, posting sub 50 readings every month since June. Expectations are for a reading of 49.1, slightly down from 49.2 in August.
Yesterday, though, we got some extremely decent manufacturing data - showing the biggest surge in two years. So a surprise can’t be ruled out.
The big news comes at 2pm BST, though, when the International Monetary Fund publishes its latest assessment of the global economy.
This will be the first World Economic Outlook since the Brexit vote in June, so it will be fascinating to see the IMF’s view today.
Back in June, they warned that Britain would lurch into recession if it voted to leave the EU; obviously its early days, but the economy does seem to be coping OK so far.
Tuesday 9:00 a.m. EDT: Launch of the World Economic Outlook (#WEO). Follow the press conference live: https://t.co/PaKZ3KFPdp
It’s not all about the UK, though. Germany’s Deutsche Bank remains under pressure to agree a fine for mis-selling mortgage backed securities.
Its shares will reopen at 8am, after a Monday holiday in Frankfurt...
We’ll be tracking all the main events through the day....
Updated
at 7.50am BST