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| 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) | |
| 12.14pm BST | |
| 12:14 | |
| Umunna blames Brexiteers for sterling slide | |
| Chuka Umunna MP, Chair of Vote Leave Watch, has seized on the slump in the pound to berate the leaders of the Brexit campaign. | |
| In a resounding blast, Umunna says: | |
| “Leave campaigners promised that the economy would be unaffected by a vote to leave the EU. They dismissed every economic warning as ‘scaremongering’ or ‘Project Fear’. | |
| “Today we see how hollow their assertions were. This collapse in the value of the pound means ordinary British workers will be worse off, as prices in the shops soar and the pound in everyone’s pocket is worth less. | |
| “The Tory conference in Birmingham reveals three cabinet members responsible for Brexit – Davis, Fox and Johnson – blind to the damage Brexit is already doing to Britain. Instead of rushing to pull out of the Single Market, they should focus on limiting the damage to our economy and maintaining as many of the current benefits we enjoy as possible.” | |
| Umunna is absolutely right that the weak pound is pushing up the cost of imports; both finished goods and raw materials. | |
| Some technology companies began hiking prices immediately after the referendum. Consumer goods group Unilever warned in August that prices will be pushed higher; it makes Dove Soap, icecream, biscuits and Flora. | |
| Even bacon from China could become more expensive too. | |
| But other companies say they hope to ‘absorb’ these costs, rather than pushing up prices. For example, baking firm Greggs said today it will do its “absolute utmost” to avoid price rises. | |
| 11.53am BST | |
| 11:53 | |
| Ireland trims growth forecasts on Brexit fears | |
| The uncertainty swirling around the Brexit issue has forced the Irish government to cut its growth forecasts. | |
| Reuters has the story: | |
| Ireland on Tuesday cut its gross domestic product forecast for 2017 on concerns about the fall-out from Britain’s vote to leave the European Union and said risks were centered “firmly to the downside.” | |
| The finance ministry cut its 2016 GDP forecast to 4.2 percent from 4.9 percent and for 2017 to 3.5% from 3.9% and said there was considerable uncertainty to the outlook for next year with the impact of Brexit still unfolding. | |
| “We have reduced next year’s forecast by around half a percentage point to take into account the uncertainty associated with Brexit,” John McCarthy, the finance ministry’s chief economist, told a parliamentary committee. | |
| Around 40% of Ireland’s food and drink exports are sold to the UK, in an example of the close trade links between the two countries. | |
| Dublin is particularly anxious about the prospect of the UK leaving the EU customs union without any new trade agreement. The future of the border between Northern Ireland and the Republic is another obvious issue -- leading to calls today for a new agreement to prevent a ‘hard border’ being established. | |
| 11.36am BST | 11.36am BST |
| 11:36 | 11:36 |
| Time for some history: a market report from the last time the pound was worth just $1.27. | 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 | 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.... | 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 | Updated |
| at 11.36am BST | at 11.36am BST |
| 11.27am BST | 11.27am BST |
| 11:27 | 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: | 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. | 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. | 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: | 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. | 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 BST | 10.57am BST |
| 10:57 | 10:57 |
| City fears hard time after hard Brexit | City 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 Plans | Here’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/v26fYOSwfV | Good @FT chart on role of non-Brits in the City (22% of 360k workforce) pic.twitter.com/v26fYOSwfV |
| 10.50am BST | 10.50am BST |
| 10:50 | 10:50 |
| 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 BST | 10.25am BST |
| 10:25 | 10:25 |
| FTSE 100 posts triple-digit gains | FTSE 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. |
| Updated | Updated |
| at 10.31am BST | at 10.31am BST |
| 10.05am BST | 10.05am BST |
| 10:05 | 10:05 |
| 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 BST | 9.47am BST |
| 09:47 | 09:47 |
| 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 Banking | Mike 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.” |
| Updated | Updated |
| at 10.14am BST | at 10.14am BST |
| 9.47am BST | 9.47am BST |
| 09:47 | 09:47 |
| 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/vx69MJlvVT | Construction 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 referendum | More 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. |
| Updated | Updated |
| at 10.14am BST | at 10.14am BST |
| 9.37am BST | 9.37am BST |
| 09:37 | 09:37 |
| UK construction sector rebounds after Brexit vote | UK 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 BST | 9.27am BST |
| 09:27 | 09:27 |
| 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 BST | 9.07am BST |
| 09:07 | 09:07 |
| 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. |