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You can find the current article at its original source at https://www.theguardian.com/business/live/2019/jun/26/oil-and-bitcoin-rally-as-middle-east-tensions-drive-markets-business-live
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| Bank of England predicts no-deal Brexit rate cut, attacks funds built on 'lies' - business live | |
| (32 minutes later) | |
| Take a deep breath before watching this clip of Donald Trump rubbishing America’s top central banker on Fox News today: | |
| Trump absolutely trashes Fed Chair Jerome Powell."Here's a guy -- nobody ever heard of him before. And now, I made him, and he wants to show how tough he is, okay. Let him show how tough he is. He's a-- he's a-- he's not doing a good job." pic.twitter.com/SGmFI8WxNb | |
| Back in the UK, Bathstore, the country’s biggest bathroom specialist, has collapsed into administration after failing to find a buyer, putting more than 500 jobs at risk. | |
| Just the latest in a string of retail failures that have cost tens of thousands of jobs this year. | |
| Here’s the full story: | |
| Bathstore goes into administration, putting 500 jobs at risk | |
| Wowzers. Donald Trump has suggested he could widen his trade war to include Vietnam. | |
| Here’s a clip from his Fox News appearance: | |
| After spending roughly 30 minutes attacking China, Trump now says Vietnam is "almost the single worst abuser of everybody" and indicates he's considering tariffs on Vietnamese goods as well. pic.twitter.com/X5NsaVxd3E | |
| The Financial Times have a good take on Mark Carney’s criticism of investment funds built on the “lie” of instant redemptions. | The Financial Times have a good take on Mark Carney’s criticism of investment funds built on the “lie” of instant redemptions. |
| Here’s a flavour: | Here’s a flavour: |
| The Bank of England governor said that all fund investors should expect to have redemption terms that were in line with the liquidity of the assets that underpinned them and should not be able to assume they could get their hands on their money daily. | The Bank of England governor said that all fund investors should expect to have redemption terms that were in line with the liquidity of the assets that underpinned them and should not be able to assume they could get their hands on their money daily. |
| “These funds are built on a lie, which is you can have daily liquidity,” Mr Carney told MPs on the Treasury select committee. For assets that “fundamentally aren’t liquid” or might become illiquid in a market downturn, he said the damage of that “lie” for financial stability is that it “leads to an expectation for individuals that it’s not that different from having money in a bank”. | “These funds are built on a lie, which is you can have daily liquidity,” Mr Carney told MPs on the Treasury select committee. For assets that “fundamentally aren’t liquid” or might become illiquid in a market downturn, he said the damage of that “lie” for financial stability is that it “leads to an expectation for individuals that it’s not that different from having money in a bank”. |
| “We do have to be very deliberate about the types of measures that need to be taken — something that better aligns the redemption terms with the actual liquidity of the underlying investment is infinitely preferable to the situation we have today,” the governor said. | “We do have to be very deliberate about the types of measures that need to be taken — something that better aligns the redemption terms with the actual liquidity of the underlying investment is infinitely preferable to the situation we have today,” the governor said. |
| BoE governor Mark Carney calls for change to fund regulation https://t.co/98XGdgNhpn | BoE governor Mark Carney calls for change to fund regulation https://t.co/98XGdgNhpn |
| Donald Trump has used an interview on Fox News to blast a range of targets - from America’s top central banker to its largest tech companies. | Donald Trump has used an interview on Fox News to blast a range of targets - from America’s top central banker to its largest tech companies. |
| Trump Says Fed'S Powell Doesn'T Do Anything For U.S. As Other Countries Devalue Their Currencies || Says Fed'S Powell Is Not Doing A Good Job || Says He Has The Right To Demote Or Fire Fed'S Powell || Fed Policy Is 'Insane,' Ecb Is Pouring Money In While Fed Is Taking Money Out | Trump Says Fed'S Powell Doesn'T Do Anything For U.S. As Other Countries Devalue Their Currencies || Says Fed'S Powell Is Not Doing A Good Job || Says He Has The Right To Demote Or Fire Fed'S Powell || Fed Policy Is 'Insane,' Ecb Is Pouring Money In While Fed Is Taking Money Out |
| Ouch. This has gotta hurt. TRUMP SAYS U.S. SHOULD HAVE DRAGHI INSTEAD OF `OUR FED PERSON' | Ouch. This has gotta hurt. TRUMP SAYS U.S. SHOULD HAVE DRAGHI INSTEAD OF `OUR FED PERSON' |
| “We should be suing Google and Facebook and all that, which perhaps we will,” Trump says on Fox. | “We should be suing Google and Facebook and all that, which perhaps we will,” Trump says on Fox. |
| 26 Jun - 08:33:16 AM [RTRS] - TRUMP SAYS OTHER COUNTRIES HAVE DEVALUED CURRENCIES AND U.S. CANNOT BECAUSE OF FEDERAL RESERVE POLICY -FOX BUSINESS NETWORK INTERVIEW | 26 Jun - 08:33:16 AM [RTRS] - TRUMP SAYS OTHER COUNTRIES HAVE DEVALUED CURRENCIES AND U.S. CANNOT BECAUSE OF FEDERAL RESERVE POLICY -FOX BUSINESS NETWORK INTERVIEW |
| He also took a swipe at Japan, shortly before heading to Tokyo for the G20 summit: | He also took a swipe at Japan, shortly before heading to Tokyo for the G20 summit: |
| Hours before departing for Japan, Trump complains to Fox about Japan taking advantage of US with defense treaty: “If Japan is attacked, we will fight World War III...But if we’re attacked, Japan doesn’t have to help us. They can watch it on a Sony television.” | Hours before departing for Japan, Trump complains to Fox about Japan taking advantage of US with defense treaty: “If Japan is attacked, we will fight World War III...But if we’re attacked, Japan doesn’t have to help us. They can watch it on a Sony television.” |
| Trump just complained about U.S. treaty with Japan: If they're attacked we will "fight with our lives and with our *treasure*" pic.twitter.com/5kTrQ77WeI | Trump just complained about U.S. treaty with Japan: If they're attacked we will "fight with our lives and with our *treasure*" pic.twitter.com/5kTrQ77WeI |
| Newsflash from America: Durable goods orders fell sharply last month, raising new fears about the health of the US economy. | Newsflash from America: Durable goods orders fell sharply last month, raising new fears about the health of the US economy. |
| New orders for durable goods (such as transportation and machinery) fell by 1.3% in May, led by a drop in airline sales. That follows a 2.8% tumble in April, and is weaker than expected. | New orders for durable goods (such as transportation and machinery) fell by 1.3% in May, led by a drop in airline sales. That follows a 2.8% tumble in April, and is weaker than expected. |
| Demand for capital goods (expensive equipment) fell by 3.3%, and computer-related orders slid by 2.4%. | Demand for capital goods (expensive equipment) fell by 3.3%, and computer-related orders slid by 2.4%. |
| New orders for US manufactured #durable #goods fell to -1.3% from a month earlier in May 2019, after a revised -2.8% slump in April and worse than market expectations of a 0.1% drop. Transportation equipment, down three of the last four months, drove the decrease. #FUTURES #FX pic.twitter.com/uiBr8zj4L2 | New orders for US manufactured #durable #goods fell to -1.3% from a month earlier in May 2019, after a revised -2.8% slump in April and worse than market expectations of a 0.1% drop. Transportation equipment, down three of the last four months, drove the decrease. #FUTURES #FX pic.twitter.com/uiBr8zj4L2 |
| City experts say Mark Carney is correct to predict interest rates would be cut after a no-deal Brexit. | City experts say Mark Carney is correct to predict interest rates would be cut after a no-deal Brexit. |
| Joshua Roberts, associate director at JCRA, says investors had already worked this out for themselves: | Joshua Roberts, associate director at JCRA, says investors had already worked this out for themselves: |
| “Carney’s comments are hardly a revelation for the market, which has been judging a rate cut as more likely than a hike for over a month. | “Carney’s comments are hardly a revelation for the market, which has been judging a rate cut as more likely than a hike for over a month. |
| The logic is inescapable: if the flow of goods and services between the UK and its most important trading partner is severely disrupted, the Bank of England has a duty to try and stabilise the resulting economic shock.” | The logic is inescapable: if the flow of goods and services between the UK and its most important trading partner is severely disrupted, the Bank of England has a duty to try and stabilise the resulting economic shock.” |
| Oliver Blackbourn, portfolio manager at Janus Henderson, says the Bank is in the hands of Westminster: | Oliver Blackbourn, portfolio manager at Janus Henderson, says the Bank is in the hands of Westminster: |
| Carney made it clear that he and some others on the MPC favour more support in the event of a no-deal Brexit. | Carney made it clear that he and some others on the MPC favour more support in the event of a no-deal Brexit. |
| With the Brexit forecast assumption dependent on government policy, we are back to awaiting the new Prime Minister and their ability to manage parliament for indications of future BoE decisions.” | With the Brexit forecast assumption dependent on government policy, we are back to awaiting the new Prime Minister and their ability to manage parliament for indications of future BoE decisions.” |
| Mark Carney has given his strongest hint yet that the Bank of England could cut interest rates back toward record lows, if Britain crashed out of the EU without a deal. | Mark Carney has given his strongest hint yet that the Bank of England could cut interest rates back toward record lows, if Britain crashed out of the EU without a deal. |
| The BoE governor told the Treasury committee that many policymakers, himself included, believe they would need to protect the economy through a new stimulus package. | The BoE governor told the Treasury committee that many policymakers, himself included, believe they would need to protect the economy through a new stimulus package. |
| Previously, the Bank has suggested it could hike interest rates to prop up the pound and fight inflation, if no-deal caused a sterling crisis and made imports expensive and hard o obtain. | Previously, the Bank has suggested it could hike interest rates to prop up the pound and fight inflation, if no-deal caused a sterling crisis and made imports expensive and hard o obtain. |
| But today, Carney said: | But today, Carney said: |
| In the event that there is no deal, the response would not be automatic, it would depend on demand, on supply and where the exchange rate went. | In the event that there is no deal, the response would not be automatic, it would depend on demand, on supply and where the exchange rate went. |
| Some of us, myself included, have said it is not equally weighted. | Some of us, myself included, have said it is not equally weighted. |
| However, if Britain leaves with a ‘smooth Brexit’, the Bank’s Monetary Policy Committee expect to raise rates in a gradual, limited way. | However, if Britain leaves with a ‘smooth Brexit’, the Bank’s Monetary Policy Committee expect to raise rates in a gradual, limited way. |
| Carney also warned that fears of a no-deal Brexit have risen recently, dragging business investment back and hurting the economy. | Carney also warned that fears of a no-deal Brexit have risen recently, dragging business investment back and hurting the economy. |
| Financial markets are also anticipating the risk of a disorderly Brexit. Carney said: | Financial markets are also anticipating the risk of a disorderly Brexit. Carney said: |
| The path of interest rates, in the markets judgment, is lower because they are ascribing some possibility to no-deal. And in the event of no-deal, that interest rates would be lower than they otherwise would be. | The path of interest rates, in the markets judgment, is lower because they are ascribing some possibility to no-deal. And in the event of no-deal, that interest rates would be lower than they otherwise would be. |
| The governor reiterated that Britain couldn’t rely on “Gatt 24” to insist on tariff-free trade with the EU after a no-deal Brexit. This WTO rule could only be used as part of an agreement between London and Brussels, Carney explained. | The governor reiterated that Britain couldn’t rely on “Gatt 24” to insist on tariff-free trade with the EU after a no-deal Brexit. This WTO rule could only be used as part of an agreement between London and Brussels, Carney explained. |
| He also slapped down suggestions that Britain should just get Brexit over with and leave on 31, pointing out that a transition period is crucial to help companies adjust. | He also slapped down suggestions that Britain should just get Brexit over with and leave on 31, pointing out that a transition period is crucial to help companies adjust. |
| The Bank also denied that there are too many ‘zombie companies’, propped up by low interest rates. | The Bank also denied that there are too many ‘zombie companies’, propped up by low interest rates. |
| On world affairs, Carney said that trade war tensions have risen since the Bank issued its latest quarterly inflation report in May (just before Donald Trump announced new tariffs on China). | On world affairs, Carney said that trade war tensions have risen since the Bank issued its latest quarterly inflation report in May (just before Donald Trump announced new tariffs on China). |
| But he remains confident that the Federal Reserve will maintain its independence, despite political pressure from Donald Trump. | But he remains confident that the Federal Reserve will maintain its independence, despite political pressure from Donald Trump. |
| He also chastised fund managers who invest in illiquid assets but offer their customers instant redemptions, saying they are “built on a lie”. | He also chastised fund managers who invest in illiquid assets but offer their customers instant redemptions, saying they are “built on a lie”. |
| This is a hot issue, since Neil Woodford blocked investors from quitting his equity income fund after a wave of redemptions. | This is a hot issue, since Neil Woodford blocked investors from quitting his equity income fund after a wave of redemptions. |
| Carney warned: | Carney warned: |
| “This is a big deal. You can see something that could be systemic. | “This is a big deal. You can see something that could be systemic. |
| “These funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid. And that leads to an expectation of individuals that it’s not that different to having money in a bank.” | “These funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid. And that leads to an expectation of individuals that it’s not that different to having money in a bank.” |
| Illiquid investment funds 'built on a lie', BoE's Carney says https://t.co/D2noTJdlMe | Illiquid investment funds 'built on a lie', BoE's Carney says https://t.co/D2noTJdlMe |
| Mark Carney finally turns to another issue -- investment funds, which are in the spotlight since Neil Woodford locked down his equity income fund to halt a wave of redemptions. | Mark Carney finally turns to another issue -- investment funds, which are in the spotlight since Neil Woodford locked down his equity income fund to halt a wave of redemptions. |
| Some funds are “built on a lie”, says Carney severely, the idea that you can have daily liquidity from a fund that holds illiquid assets. | Some funds are “built on a lie”, says Carney severely, the idea that you can have daily liquidity from a fund that holds illiquid assets. |
| That encourages small investors to treat such holdings as ‘money in the bank’, which you can get instant access to, the governor tells the Treasury committee. | That encourages small investors to treat such holdings as ‘money in the bank’, which you can get instant access to, the governor tells the Treasury committee. |
| Woodford investors now know the truth.... | Woodford investors now know the truth.... |
| That’s the end of the session. | That’s the end of the session. |
| Q: Are low interest rates allowing an army of zombie firms to “stagger on”, endangering financial stability, asks Steve Baker MP. | Q: Are low interest rates allowing an army of zombie firms to “stagger on”, endangering financial stability, asks Steve Baker MP. |
| Bank of England policymaker Michael Saunders isn’t too worried. He says the number of firms with low profits compared to their interest payments are stable. Yes, there would be more of them if interest rates were higher -- but that could also drive firms to the wall, hurting the wider economy (and creating another wave of zombies)..... | Bank of England policymaker Michael Saunders isn’t too worried. He says the number of firms with low profits compared to their interest payments are stable. Yes, there would be more of them if interest rates were higher -- but that could also drive firms to the wall, hurting the wider economy (and creating another wave of zombies)..... |