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| Sterling hit by no-deal Brexit and economic slowdown fears - business live | |
| (32 minutes later) | |
| The pound is also suffering from worries that the UK economy could be shrinking. | |
| Overnight, new figures showed that UK retail sales experienced their “worst June on record”, as uncertainty over Brexit continued to affect the economy. | |
| The British Retail Consortium warned that “the picture is bleak”, with total sales falling 1.3% year-on-year in June. | |
| BRC chief executive Helen Dickinson said consumers were too worried about Brexit to risk major purchases. | |
| “Businesses and the public desperately need clarity on Britain’s future relationship with the EU. The continued risk of a no-deal Brexit is harming consumer confidence and forcing retailers to spend hundreds of millions of pounds putting in place mitigations – this represents time and resources that would be better spent improving customer experience and prices. | |
| It is vital that the next prime minister can find a solution that avoids a no-deal Brexit on 31 October, just before the busy Black Friday and Christmas periods. | |
| Consumer spending at weakest since mid-90s amid Brexit chaos – BRC | |
| Simon Harvey, FX market analyst at Monex Europe, says this slump has compounded fears that Britain’s economy began to contract in the second quarter of 2019. | |
| The final leg of support for a Brexit riddled economy looks to have been swiped away overnight as the BRC Sales Monitor points to a third consecutive decline in official retail sales figures, cementing the prospect of a negative Q2 GDP reading.” | |
| Tomorrow we learn how the UK economy fared in the three months to May (so not the full second quarter). Economists predict GDP only rose by 0.1% in February-May; a poor reading might fuel worries that Britain’s economy is stalling. | |
| Fears over the health of the UK economy, and worries about Brexit, are driving the pound down this morning. | |
| Sterling has lost half a cent against the US dollar, sliding as low as $1.246. | |
| That’s the lowest levels since early January, and 15% below its value before the 2016 referendum. | |
| Sterling is also down at a three-week low against the euro, at €1.119. | |
| The sell-off comes as Boris Johnson, the front-runner to become Britain’s next prime minister, insists he would take Britain out of the EU on Halloween, with or without a deal. | |
| He wrote yesterday: | |
| “We need a change of direction. That’s why we must treat 31st October as a real deadline for leaving the EU, come what may, not a fake one.” | |
| Larry Hatheway of Swiss asset management firm GAM says this talk of crashing out of the EU is worrying the markets. | |
| He pointed out on Bloomberg TV this morning that a hard Brexit can’t be ruled out. | |
| If the [31 October] deadline comes and goes, and the EU does not extend, then it happens. | |
| I think it’s going to be another one of those ‘down to the wire’ moments. | |
| No end in sight for #pound sell off…#GBPUSD below 1.2500-level opens door for retest of lows from late 2016/early 2017. More acute UK economic weakness , a dovish shift in #BoE policy, & heightened #Brexit uncertainty are weighing heavily.#FXDaily https://t.co/DZO7IvbOCG pic.twitter.com/rI6zwgYL4t | |
| Every European stock market is down this morning. | Every European stock market is down this morning. |
| Pierre Veyret, technical analyst at ActivTrades, says: | Pierre Veyret, technical analyst at ActivTrades, says: |
| European shares are extending yesterday’s losses, following a mixed trading session in Asia where tensions between Japan and South Korea scared stock investors. | European shares are extending yesterday’s losses, following a mixed trading session in Asia where tensions between Japan and South Korea scared stock investors. |
| In Europe, and even globally, investors’ sentiment is still being slashed by last week’s better than expected US job report. Most traders who were anticipating a more dovish Fed due to a global slowdown caused by President Trump’s trade war with China have shifted their trading stance. | In Europe, and even globally, investors’ sentiment is still being slashed by last week’s better than expected US job report. Most traders who were anticipating a more dovish Fed due to a global slowdown caused by President Trump’s trade war with China have shifted their trading stance. |
| Deutsche Bank is also having a bad morning. | Deutsche Bank is also having a bad morning. |
| Its shares are down 5% below €6.50, adding to Monday’s 5.4% slide. That means they’ve lost a tenth of their value since the bank revealed its new restructuring plan. | Its shares are down 5% below €6.50, adding to Monday’s 5.4% slide. That means they’ve lost a tenth of their value since the bank revealed its new restructuring plan. |
| Market to watch: Deutsche BankIt's been a bad start to the week for Deutsche Bank. The German firm's price has fallen over 13% after plans to cut 18,000 jobs globally were announced. 78% retail CFD accounts lose money. pic.twitter.com/rUKRtKvmR3 | Market to watch: Deutsche BankIt's been a bad start to the week for Deutsche Bank. The German firm's price has fallen over 13% after plans to cut 18,000 jobs globally were announced. 78% retail CFD accounts lose money. pic.twitter.com/rUKRtKvmR3 |
| Investors may be doubting DB’s plan to oust 18,000 staff over the next three years, suspend its dividend, scale back its investment bank and quit the equity sales and trading businesses. | Investors may be doubting DB’s plan to oust 18,000 staff over the next three years, suspend its dividend, scale back its investment bank and quit the equity sales and trading businesses. |
| Royal Bank of Canada analysts who raised their Deutsche Bank price target from €7.50 to €8 yesterday, have now cut it back to €7, warning: | Royal Bank of Canada analysts who raised their Deutsche Bank price target from €7.50 to €8 yesterday, have now cut it back to €7, warning: |
| The presentation of the strategic plan confirmed our view that execution of the new business plan remains key. Execution risk seems higher though than we initially expected given more headwinds to capital. | The presentation of the strategic plan confirmed our view that execution of the new business plan remains key. Execution risk seems higher though than we initially expected given more headwinds to capital. |
| European stock markets have hit a one-week low, dragged down by the chemicals industry. | European stock markets have hit a one-week low, dragged down by the chemicals industry. |
| Miners and industrial groups are also out of favour, amid fresh worries about the impact of the global slowdown on corporate profits. | Miners and industrial groups are also out of favour, amid fresh worries about the impact of the global slowdown on corporate profits. |
| This has pulled the EU-wide Stoxx 600 index down by 0.5%, with the German market particularly weak (-1%). | This has pulled the EU-wide Stoxx 600 index down by 0.5%, with the German market particularly weak (-1%). |
| BASF’s struggles will fuel concerns that Germany’s economy is dangerously close to a recession. | BASF’s struggles will fuel concerns that Germany’s economy is dangerously close to a recession. |
| Manufacturing companies across Europe’s largest economy have been hurt by trade tensions -- lower economic growth means less demand for German-made products. | Manufacturing companies across Europe’s largest economy have been hurt by trade tensions -- lower economic growth means less demand for German-made products. |
| Bloomberg explains: | Bloomberg explains: |
| Warnings of economic weakness had been racking up from chemical companies including German lubricant maker Fuchs Petrolub SE and U.S. manufacturer H.B. Fuller Co. amid a deterioration in manufacturing. | Warnings of economic weakness had been racking up from chemical companies including German lubricant maker Fuchs Petrolub SE and U.S. manufacturer H.B. Fuller Co. amid a deterioration in manufacturing. |
| The diminished outlook underscores the difficulties in the chemical sector as demand weakens in industries from cars to farming to electronics | The diminished outlook underscores the difficulties in the chemical sector as demand weakens in industries from cars to farming to electronics |
| Worryingly, BASF blamed its woes on “significantly weaker-than-expected industrial production”, particularly in China’s car industry. | Worryingly, BASF blamed its woes on “significantly weaker-than-expected industrial production”, particularly in China’s car industry. |
| BASF’s profit warning is hurting the wider German chemicals industry, as investors worry that trade conflicts are hurting the sector. | BASF’s profit warning is hurting the wider German chemicals industry, as investors worry that trade conflicts are hurting the sector. |
| Covestra, which makes high-tech polymer materials, have fallen 5%, while specialty chemicals group Lanxess are down 4%. BASF’s 6% plunge makes it the worst-performing major stock in Frankfurt. | Covestra, which makes high-tech polymer materials, have fallen 5%, while specialty chemicals group Lanxess are down 4%. BASF’s 6% plunge makes it the worst-performing major stock in Frankfurt. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| The world’s largest chemicals company, BASF, is taking a hammering this morning after the company became the latest victim of Donald Trump’s trade war with China. | The world’s largest chemicals company, BASF, is taking a hammering this morning after the company became the latest victim of Donald Trump’s trade war with China. |
| Last night,the German chemicals giant hit investors with a nasty looking profits warning. BASF slashed its full-year profits forecast for 2019 by up to 30%, warning that profits would half in the second quarter of 2019. | Last night,the German chemicals giant hit investors with a nasty looking profits warning. BASF slashed its full-year profits forecast for 2019 by up to 30%, warning that profits would half in the second quarter of 2019. |
| Sales are now expected to decline slightly in 2019 - down from a previous forecast of growth of 1%-5%, meaning the company is pressing on with 6,000 job cuts. | Sales are now expected to decline slightly in 2019 - down from a previous forecast of growth of 1%-5%, meaning the company is pressing on with 6,000 job cuts. |
| BASF makes a wide range of chemicals, plastics and foams which are used in a wide range of industries, from pharmaceutical and car-making to construction and textiles. | BASF makes a wide range of chemicals, plastics and foams which are used in a wide range of industries, from pharmaceutical and car-making to construction and textiles. |
| It blamed the profits warning on slowing global economy, and the damage caused by America’s trade conflicts with other major economies, saying: | It blamed the profits warning on slowing global economy, and the damage caused by America’s trade conflicts with other major economies, saying: |
| “To date, the conflicts between the United States and its trading partners, particularly China, have not eased. | “To date, the conflicts between the United States and its trading partners, particularly China, have not eased. |
| “In fact, the G20 summit at the end of June has shown that a rapid detente is not to be expected in the second half of 2019. Overall, uncertainty remains high.” | “In fact, the G20 summit at the end of June has shown that a rapid detente is not to be expected in the second half of 2019. Overall, uncertainty remains high.” |
| Investors are worried, driving BASF’s shares price down by 6% at the start of trading in Frankfurt. | Investors are worried, driving BASF’s shares price down by 6% at the start of trading in Frankfurt. |
| It’s another blow for Deutschland PLC, on top of the problems at banking giant Deutsche Bank which is slashing 18,000 jobs in a desperate turnaround bid. | It’s another blow for Deutschland PLC, on top of the problems at banking giant Deutsche Bank which is slashing 18,000 jobs in a desperate turnaround bid. |
| Deutsche Bank starts cutting London jobs with 18,000 at risk worldwide | Deutsche Bank starts cutting London jobs with 18,000 at risk worldwide |
| Reaction to follow.... | Reaction to follow.... |
| Also coming up | Also coming up |
| Two central bankers could move the markets today. | Two central bankers could move the markets today. |
| Federal Reserve chair Jerome Powell will discuss the Fed’s stress tests, at a conference hosted by the Boston Federal Reserve. Investors, though, will want to hear any hints on monetary policy -- and whether a rate cut is still likely in July. | Federal Reserve chair Jerome Powell will discuss the Fed’s stress tests, at a conference hosted by the Boston Federal Reserve. Investors, though, will want to hear any hints on monetary policy -- and whether a rate cut is still likely in July. |
| They’ll also be keen to hear from the European Central Bank’s new chief economist, Philip Lane, who’s answering questions on Twitter today. Lane’s views on the state of the eurozone’s economy will be crucial, as the ECB weighs up whether to launch fresh stimulus measures. | They’ll also be keen to hear from the European Central Bank’s new chief economist, Philip Lane, who’s answering questions on Twitter today. Lane’s views on the state of the eurozone’s economy will be crucial, as the ECB weighs up whether to launch fresh stimulus measures. |
| Online grocery group Ocado and housebuilder Bovis are both reporting results - Ocado has posted a half-year loss of £142.8m after taking a £98.5m hit from a warehouse fire earlier this year. | Online grocery group Ocado and housebuilder Bovis are both reporting results - Ocado has posted a half-year loss of £142.8m after taking a £98.5m hit from a warehouse fire earlier this year. |
| The agenda | The agenda |
| 11am BST: Marks & Spencer AGM | 11am BST: Marks & Spencer AGM |
| 1.45pm BST: US Federal Reserve chair Jerome Powell | 1.45pm BST: US Federal Reserve chair Jerome Powell |
| 3.15pm BST: ECB chief economist Philip R. Lane holds an online Q&A | 3.15pm BST: ECB chief economist Philip R. Lane holds an online Q&A |