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Sterling hits new two-year low as ministers prepare for no-deal Brexit – business live Sterling hits new two-year low as ministers prepare for no-deal Brexit – business live
(32 minutes later)
The FTSE 100 has gained almost 100 points, or 1.3%, to reach 7,640 points.
The index has been buoyed by the London Stock Exchange Group, up 14%, and Just Eat, flying along at a 30% gain.
The latter’s increase is particularly notable. A Just Eat share will set you back £8.24 at the time of writing, compared to an implied offer price of £7.31 per share in this morning’s announcement.
The offer represents a premium of only 15% over Just Eat’s share price on Friday, so the scale of the move suggests that investors may be eyeing a possible counter offer.
Analysts at Peel Hunt this morning doggedly stuck to their target price of £5.20 and a “sell” rating on the stock – “nothing changes just yet” because Just Eat still faces the same tough competition and there will be little chance of cutting costs because of its different footprint to Takeaway.com.
Just Eat was a pure-play, high margin takeaway platform, focusing on restaurants that do their own delivery, but it is now investing in its own delivery as competition takes its toll. Uber will dominate the smartphone real estate, as its Taxi app will accelerate the distribution of its Eats app. It can also take advantage of a fast-growing, captive audience inside the taxis themselves by making timely suggestions.
Moreover, as Uber opens its platforms to restaurants that do their own delivery, its margins will improve, while Just Eat’s diminish as it does the opposite.
But Jocelyn Paulley, a partner at law firm Gowling WLG, said that the deal will allow cross-border scale in a business that can vary significantly from country to country. She said:
Whilst technology can cross borders, other issues which are specific to each country such as taxes, traffic, urban settlement patterns and customer expectations would explain why an international tie-up is preferable compared to pushing into a new market and having to redesign systems to cope with local variations.
A big media job move today: the boss of the company that owns the Mirror, Express and Star newspapers will step down to be replaced by a former betting executive.A big media job move today: the boss of the company that owns the Mirror, Express and Star newspapers will step down to be replaced by a former betting executive.
Simon Fox, the chief executive of Reach (formerly Trinity Mirror), will be replaced by the former Ladbrokes Coral boss Jim Mullen, writes the Guardian’s Mark Sweney.Simon Fox, the chief executive of Reach (formerly Trinity Mirror), will be replaced by the former Ladbrokes Coral boss Jim Mullen, writes the Guardian’s Mark Sweney.
Under Fox, Reach’s share price has almost tripled as the business has made a series of acquisitions to build scale as the newspaper market has struggled from declining sales of printed copies and the shift of digital advertising spend to Silicon Valley giants Google and Facebook.Under Fox, Reach’s share price has almost tripled as the business has made a series of acquisitions to build scale as the newspaper market has struggled from declining sales of printed copies and the shift of digital advertising spend to Silicon Valley giants Google and Facebook.
You can read more here:You can read more here:
Simon Fox to step down as chief of Daily Mirror owner ReachSimon Fox to step down as chief of Daily Mirror owner Reach
An update on Neil Woodford has come through this morning: the investor could be kicked out as manager of the fund he founded.An update on Neil Woodford has come through this morning: the investor could be kicked out as manager of the fund he founded.
The board of the Woodford Patient Capital Trust today said it will assess other options for the fund. While it bears his name, legally it is a separate company from Woodford Investment Management, so the board has the ability to kick him out.The board of the Woodford Patient Capital Trust today said it will assess other options for the fund. While it bears his name, legally it is a separate company from Woodford Investment Management, so the board has the ability to kick him out.
It all follows the suspension of client money redemptions from his separate Equity Income Fund last month after a string of investments went sour. An announcement is due later today on whether the fund will remain suspended.It all follows the suspension of client money redemptions from his separate Equity Income Fund last month after a string of investments went sour. An announcement is due later today on whether the fund will remain suspended.
Neil Woodford himself sold shares in the Patient Capital Trust between 3-8 July, according to a separate regulatory filing.Neil Woodford himself sold shares in the Patient Capital Trust between 3-8 July, according to a separate regulatory filing.
The investor sold the shares, which Reuters reports would have netted him just under £1m, to cover a tax bill, according to the statement.The investor sold the shares, which Reuters reports would have netted him just under £1m, to cover a tax bill, according to the statement.
The number of Boeing 737 Max planes available to Ryanair next summer could fall to zero unless the planemaker “gets its shit together”, Michael O’Leary said, according to Reuters.The number of Boeing 737 Max planes available to Ryanair next summer could fall to zero unless the planemaker “gets its shit together”, Michael O’Leary said, according to Reuters.
The Ryanair boss has never been one to hold back, and says that Airbus – Boeing’s major rival – has cut prices. “The world has moved in their favour,” O’Leary said.The Ryanair boss has never been one to hold back, and says that Airbus – Boeing’s major rival – has cut prices. “The world has moved in their favour,” O’Leary said.
O’Leary also said that he expects more airlines to fail this winter. He predicted the same thing last year as well.O’Leary also said that he expects more airlines to fail this winter. He predicted the same thing last year as well.
Ryanair boss Michael O’Leary has warned that the airline will not rule out making job cuts if the return to service of the Boeing 737 Max plane is delayed further.Ryanair boss Michael O’Leary has warned that the airline will not rule out making job cuts if the return to service of the Boeing 737 Max plane is delayed further.
The Irish budget airline reported a 21% drop in quarterly profit on Monday as price wars in several European markets drove ticket prices lower, but it stuck to its annual profit target as passengers continued to spend on onboard extras, Reuters reported.The Irish budget airline reported a 21% drop in quarterly profit on Monday as price wars in several European markets drove ticket prices lower, but it stuck to its annual profit target as passengers continued to spend on onboard extras, Reuters reported.
However, O’Leary said that Boeing has pushed back the date at which it will carry out software upgrades to the grounded 737 Max fleet from September to October. The planes have been banned from flying across the world after two fatal crashes.However, O’Leary said that Boeing has pushed back the date at which it will carry out software upgrades to the grounded 737 Max fleet from September to October. The planes have been banned from flying across the world after two fatal crashes.
Connor Campbell, financial analyst at Spreadex, a spreadbetting firm, said:Connor Campbell, financial analyst at Spreadex, a spreadbetting firm, said:
It is effectively a worst-case-scenario end to July for the pound, one that sets up three months of intense Brexit anxiety heading into All Hallows’ Eve.It is effectively a worst-case-scenario end to July for the pound, one that sets up three months of intense Brexit anxiety heading into All Hallows’ Eve.
The decline in sterling came against the dollar, even as the US Federal Reserve prepares for an interest rate cut, usually a “headache” for owners of the greenback that would drive down its value.The decline in sterling came against the dollar, even as the US Federal Reserve prepares for an interest rate cut, usually a “headache” for owners of the greenback that would drive down its value.
Will we see the pound below $1.23 today? The day’s low point is now $1.2318 against the US dollar.Will we see the pound below $1.23 today? The day’s low point is now $1.2318 against the US dollar.
Analysis by US investment bank J.P. Morgan suggests it could get worse for the pound before it gets better.Analysis by US investment bank J.P. Morgan suggests it could get worse for the pound before it gets better.
Dialogue with the EU is ongoing but is likely to prove fruitless, and may segue into a general election and subsequent extension of Article 50 later this year. In the interim, the expectation is for him to push toward a “no deal” outcome as negotiations make little progress.Dialogue with the EU is ongoing but is likely to prove fruitless, and may segue into a general election and subsequent extension of Article 50 later this year. In the interim, the expectation is for him to push toward a “no deal” outcome as negotiations make little progress.
At the same time, there is a “deteriorating macro landscape” – the economy may even have contracted in the second quarter. And the UK is highly dependent on fickle foreign investors.At the same time, there is a “deteriorating macro landscape” – the economy may even have contracted in the second quarter. And the UK is highly dependent on fickle foreign investors.
Layering Brexit concerns with downward momentum in the local economy and a concerning balance of payments setup should therefore allow GBP shorts to extend yet further.Layering Brexit concerns with downward momentum in the local economy and a concerning balance of payments setup should therefore allow GBP shorts to extend yet further.
The Bank of England also published its latest mortgage data on Monday, showing that banks approved lending for 66,400 house purchases in June – 800 more than the previous month and slightly more than economists had expected.The Bank of England also published its latest mortgage data on Monday, showing that banks approved lending for 66,400 house purchases in June – 800 more than the previous month and slightly more than economists had expected.
Net mortgage borrowing for the month by households was £3.7bn, close to the average of the previous three years, the Bank said. This followed a slightly weaker net flow of £2.9bn in May.Net mortgage borrowing for the month by households was £3.7bn, close to the average of the previous three years, the Bank said. This followed a slightly weaker net flow of £2.9bn in May.
British consumer borrowing growth slowed in June to a five-year low, according to new Bank of England figures published on Monday.British consumer borrowing growth slowed in June to a five-year low, according to new Bank of England figures published on Monday.
Consumer credit, which includes borrowing such as credit cards and unsecured loans but excludes mortgages, grew at an annual rate of 5.5% year-on-year, the lowest level of growth since April 2014.Consumer credit, which includes borrowing such as credit cards and unsecured loans but excludes mortgages, grew at an annual rate of 5.5% year-on-year, the lowest level of growth since April 2014.
Consumer credit growth has fallen steadily since its late 2016 peak. While many economists believe that credit growth has been unsustainable for years – meaning a slowdown is in some ways welcome – its link to households’ willingness to spend also means that it can act as a bellwether for broader economic weakness.Consumer credit growth has fallen steadily since its late 2016 peak. While many economists believe that credit growth has been unsustainable for years – meaning a slowdown is in some ways welcome – its link to households’ willingness to spend also means that it can act as a bellwether for broader economic weakness.
The dealmaking and the weak pound (which boosts multinationals’ foreign currency earnings) have helped the FTSE 100 to a flying start to the week.The dealmaking and the weak pound (which boosts multinationals’ foreign currency earnings) have helped the FTSE 100 to a flying start to the week.
London’s benchmark index is now up by 1% at 7,628 points, after shortly after hitting its highest point since August 2018.London’s benchmark index is now up by 1% at 7,628 points, after shortly after hitting its highest point since August 2018.
On currency markets your new low point for the pound against the US dollar is $1.2324.On currency markets your new low point for the pound against the US dollar is $1.2324.
An earlier post has been corrected. Please refresh to see the updated version.An earlier post has been corrected. Please refresh to see the updated version.
Takeaway.com’s swoop for Just Eat may not be a done deal, however.
“It is a possibility that Delivery Hero could table a rival bid,” say analysts at Canaccord Genuity.
Sky News previously reported that South African internet and media company Naspers was also interested in a deal, after a round of consolidation in the sector.
You can read the full report on the deal here:
Just Eat agrees £9bn merger with Takeaway.com
The Just Eat/Takeaway.com deal “makes sense in the long term,” said analysts at Barclays.
Just Eat chief executive Peter Duffy* is understood to be on his way out of the company, which will instead be led by Takeaway.com’s boss Jitse Groen.
Barclays said:
Just Eat shareholders would be getting the best operator in the space to run the business – a notable shift from missed execution from management in the last few years.
We are believers in the value of being a global player increasing in time, with more cash flow to fight off rising competition and tech platform synergies getting more and more relevant. This is a unique opportunity to build scale and that should benefit both parties in the long term.
*This post has been corrected to clarify that Peter Duffy is the chief executive of Just Eat, not Peter Plumb, who he replaced.
Some important details on the Just Eat deal: the new company will be headquartered in Amsterdam (the home of Takeaway.com).
However, it will still be listed on the London Stock Exchange, where Just Eat is currently a member of the FTSE 100, with a “significant part of its operations” in the UK.
Analysts appear to have welcomed the deal. Here’s the view of Russell Pointon, of Edison Investment Research:
The key feature of the combination of Just Eat and Takeaway.com is the limited geographic overlap between the companies. Therefore there will be limited consolidation of market shares in their combined markets.
The companies would share best practice and know how etc. to help improve profitability to invest further behind their less profitable markets and fund the fights for market share in what is likely to be a very competitive market.
He also points out an interesting contrast between the companies: Just Eat had annual revenues three times higher than Takeaway.com, yet still traded at a discount to its Dutch rival.
The sell-off in sterling is gathering pace: the pound has now lost 0.34% against the US dollar and 0.3% against the euro.
It’s now a new low of $1.2330 for the pound against the dollar. That is now the lowest since 16 March 2017 – before new Conservative backbencher Theresa May triggered Article 50 and her disastrous decision to call a general election.
Newly installed foreign secretary Dominic Raab does not appear to have offered traders much succour this morning: he had more fighting talk this morning on the BBC’s Today programme.
He warned the EU that it needed to change its “stubborn” Brexit position to avoid a no-deal Brexit, Reuters reported.
“We want a good deal with our EU partners,” Raab said, adding that there had been a “series of fairly stubborn positions staked out by the EU.”
Remember the “magic money tree”? The Conservative party appears to have found it, if the rash of spending promises of new Prime Minister Boris Johnson are anything to go by.
Johnson appears to be doing two things with his promises of billions for railways, tax cuts and “left behind” towns, write the Guardian’s Larry Elliott and Richard Partington: revving up the economy to gain support for his plans with a fallback that more spending could cushion the fallout of a no-deal departure.
Although framed by Johnson as spending headroom at his disposal, economists say the additional firepower is something of an illusion. Thomas Pugh, of the consultancy Capital Economics, said:
This isn’t money sitting in a savings account waiting to be spent. It’s more like borrowing from an overdraft where the limit is set at 2% of annual income. So spending it would result in a higher deficit and more borrowing.
You can read the full story here:
Boris Johnson says he’ll spend, but who will pay?
The London Stock Exchange Group has also enjoyed a strong morning on the weekend’s merger talk: shares are up by 13% at the time of writing.
LSE boss David Schwimmer (not that one) has been in the job for just over a year, but has clearly taken a leaf from Xavier Rolet, his predecessor, in going for big deals.
As well as running the stock exchange and the FTSE Russell index group (which produces the FTSE 100 index), the LSE already has a lot of data services that fit in well with its trading technologies.
Refinitiv, the data company carved out of Thomson Reuters last year, runs Eikon terminals which collect trading and financial data into one place for investors.
At the other end of the scale from Sports Direct, Just Eat 22% shares have popped by 22% following the news of the proposed takeover by Dutch competitor Takeaway.com.
The deal will give the new company a strong presence across the EU, and will also give it the scale to take on other well resourced rivals.
The two companies do not compete directly in any of their major markets, so investors have long been pushing for a tie-up.
Takeaway.com shares have risen by 3.7% to a record high after the deal. German rival Delivery Hero has gained 4.6% on the news as well.
Sports Direct shares have fallen by as much as 20% after the retailer issued an extraordinary results statement on Friday that revealed massive tax bills, poor trading and a retail industry warning.
The results were delayed throughout the day on Friday, so this morning was the first chance investors had to react. They have not welcomed the news.
Here is your guide to what is going wrong at the retailer. Warning: there’s a lot.
The state of Sports Direct: key points from results statement
The FTSE 100 has gained 0.1% at the open, but European markets are struggling a bit more.
The Euro Stoxx 600 index is down by 0.2%, led by the 0.2% declines on Germany’s Dax and France’s Cac 40.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Boris Johnson may have achieved his ambition of getting into 10 Downing Street last week, but financial markets have served an early reminder at the start of his first full week in office that he has a daunting task ahead of him.
Sterling this morning hit a new two-year low against the US dollar, with one pound buying only $1.2358 in early trading following a weekend of no-deal Brexit tough talking from newly installed ministers. The pound weakened by 0.12% against the dollar and 0.1% against the euro.
Ministers are “turbo-charging” preparations to leave the EU without a deal on 31 October according to several senior cabinet ministers, reports the Guardian’s Rowena Mason. Johnson’s new cabinet Brexit fixer, Michael Gove, warned that the government was “operating on the assumption” that Britain would leave without a deal on 31 October and it was a “very real prospect”.
The stakes are clear for businesses in Britain. Carlos Tavares, the boss of PSA Group, used an interview last night with the Financial Times to warn that he could close the company’s factory in Ellesmere Port, which manufactures Vauxhall Astra cars, if there is a no-deal Brexit that disrupts exports from the factory. The jobs of 1,000 workers hang in the balance.
It seems unlikely that the EU will be willing to make material changes to the existing deal, according to Fernando Barajas, an analyst at Creditsights, a debt rating agency. “There is little sign” that the no-deal threats have made an impact on the EU’s stance.
A general election in the near term now seems a high likelihood outcome.
Yet all of the political noise has not put off the dealmakers in London. Over the weekend two large mergers have come through. The FTSE 100’s Just Eat and Dutch Takeaway.com have agreed a £8.2bn all-share deal to create one of the world’s biggest takeaway delivery players. Just Eat faces renewed competition from Amazon-backed Deliveroo and Uber Eats, and some activist investors have been pushing for a deal for some time.
Another big deal on the cards is the London Stock Exchange Group’s merger with data company Refinitiv, a potential $27bn deal. A formal announcement of the terms could come this week when the LSE publishes results.
Asian markets were mixed on Monday, with shares in Japan weakening, while Australia’s benchmark ASX 200 rose by 0.95%. However, many investors will have their eyes on events later in the week, when the Federal Reserve is expected to cut interest rates for the first time in a decade.
Trade talks to fix the relationship between the US and China, one of the biggest factors in the Fed’s desire to support the economy, will resume tomorrow, although few are holding out hope of a positive development.
The agenda
9:30am BST: Bank of England consumer credit (June)
9:30am BST: Bank of England mortgage approvals (June)
3:30pm BST: US Dallas Fed manufacturing index (July)