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| Pound suffers further slide after Boris Johnson takes Brexit hard line – business live | Pound suffers further slide after Boris Johnson takes Brexit hard line – business live |
| (32 minutes later) | |
| British Gas owner Centrica’s shares are sputtering: they are now at a 21-year low. | |
| Silver and gold miner Fresnillo is the second-worst performer on the FTSE 100, after it reported a drop in production and higher costs. Profits dropped by two-thirds. | |
| And consumer goods company Reckitt Benckiser missed analysts expectations for sales thanks to slower sales of infant formula in the giant Chinese market. | |
| A bit more detail on those BP earnings: profits fell by 35% in the second quarter on the back of sliding crude oil prices. | |
| But investors of course know the effect of lower oil prices on oil company earnings; better than expected production figures helped make up for the lower prices. (Despite all of its talk of supporting the energy transition, BP is in the middle of a five-year plan to expand production.) | |
| Via AFP: | |
| BP said that its underlying replacement cost profit – a widely-watched measure which strips out exceptional items and changes in the value of oil inventories – was broadly unchanged at $2.8bn. That beat the average analyst forecast of $2.48bn, according to Bloomberg. | |
| Centrica shares have fallen by 10% in early trading on the FTSE 100. | Centrica shares have fallen by 10% in early trading on the FTSE 100. |
| Here is the chart which probably goes some way to explaining why Centrica boss Ian Conn is being shown the door. | Here is the chart which probably goes some way to explaining why Centrica boss Ian Conn is being shown the door. |
| London’s benchmark index is up by 0.35%, however, after stronger-than-expected BP results boosted the weighty mining contingent. | London’s benchmark index is up by 0.35%, however, after stronger-than-expected BP results boosted the weighty mining contingent. |
| And don’t forget that the FTSE 100’s multinationals are usually boosted by the falling pound, which makes their foreign currency earnings more valuable in sterling terms. | And don’t forget that the FTSE 100’s multinationals are usually boosted by the falling pound, which makes their foreign currency earnings more valuable in sterling terms. |
| Back on sterling, it’s “relentless selling pressure” says Neil Wilson, chief market analyst at Markets.com. | Back on sterling, it’s “relentless selling pressure” says Neil Wilson, chief market analyst at Markets.com. |
| If sterling weakens further “it’s anyone’s guess where cable [sterling against the dollar] could land,” he said. | If sterling weakens further “it’s anyone’s guess where cable [sterling against the dollar] could land,” he said. |
| Remember the previous post-2016 low was before no-deal was on the table – it was all talk of a hard v soft Brexit – no deal wasn’t even being discussed. | Remember the previous post-2016 low was before no-deal was on the table – it was all talk of a hard v soft Brexit – no deal wasn’t even being discussed. |
| The reasons behind the slide are well trodden but worth noting again: increased risk of a no-deal Brexit as the new government regime pivots squarely towards making no-deal a reality. | The reasons behind the slide are well trodden but worth noting again: increased risk of a no-deal Brexit as the new government regime pivots squarely towards making no-deal a reality. |
| And Johnson will not be endearing himself to many families about to go abroad ... | And Johnson will not be endearing himself to many families about to go abroad ... |
| Terrible timing for the holidays. Why is it always August? | Terrible timing for the holidays. Why is it always August? |
| Ian Conn’s departure came after what he described as an “exceptionally challenging environment in the first half of 2019”, resulting in Centrica slashing its dividend in half. | Ian Conn’s departure came after what he described as an “exceptionally challenging environment in the first half of 2019”, resulting in Centrica slashing its dividend in half. |
| Centrica slumped to a loss of £446m in the first six months of 2019, after making a profit of £704m in the same period last year. | Centrica slumped to a loss of £446m in the first six months of 2019, after making a profit of £704m in the same period last year. |
| The company blamed a litany of factors for the £1.1bn downturn in its fortunes: the UK default tariff price cap, low UK natural gas prices, extensions to outages at the Hunterston B and Dungeness B nuclear power stations, and warmer than normal weather in both the UK and North America. | The company blamed a litany of factors for the £1.1bn downturn in its fortunes: the UK default tariff price cap, low UK natural gas prices, extensions to outages at the Hunterston B and Dungeness B nuclear power stations, and warmer than normal weather in both the UK and North America. |
| The British Gas owner’s adjusted earnings for shareholders, which attempts to strip out one-off costs, slumped by 63% year-on-year to £134m. The dividend to be paid to investors fell to 1.5p per share, down from 3.6p last year. | The British Gas owner’s adjusted earnings for shareholders, which attempts to strip out one-off costs, slumped by 63% year-on-year to £134m. The dividend to be paid to investors fell to 1.5p per share, down from 3.6p last year. |
| Centrica’s UK consumer business will be “fundamentally rebased”, and it will seek another £250m of efficiencies per year, part of a £1bn cost-cutting programme. | Centrica’s UK consumer business will be “fundamentally rebased”, and it will seek another £250m of efficiencies per year, part of a £1bn cost-cutting programme. |
| British Gas owner Centrica has announced that its chief executive, Ian Conn, will step down next year. | British Gas owner Centrica has announced that its chief executive, Ian Conn, will step down next year. |
| Conn will remain with Centrica at least until the 2020 annual general meeting and “provide his full support to help with the transition”, the company said. | Conn will remain with Centrica at least until the 2020 annual general meeting and “provide his full support to help with the transition”, the company said. |
| The board said it will plan for his succession and provide an update at a later point. | The board said it will plan for his succession and provide an update at a later point. |
| Conn will remain on the same pay policy until the end of his employment, Centrica said. However, bonus payments whose conditions have not yet been fulfilled will “lapse in full” and no further bonuses will be granted. | Conn will remain on the same pay policy until the end of his employment, Centrica said. However, bonus payments whose conditions have not yet been fulfilled will “lapse in full” and no further bonuses will be granted. |
| Conn has previously been the object of criticism after receiving a 44% pay rise to £2.4m for 2018, despite a difficult year in which the company imposed two bill increases, warned on profits and announced thousands of job cuts. | Conn has previously been the object of criticism after receiving a 44% pay rise to £2.4m for 2018, despite a difficult year in which the company imposed two bill increases, warned on profits and announced thousands of job cuts. |
| Charles Berry, Centrica chairman, said: | Charles Berry, Centrica chairman, said: |
| Iain has now agreed with the Board that, while he will continue to focus on driving [the] transformation, including pursuing the announced divestments and continuing to drive performance and efficiency, he will also support an orderly succession before stepping down in due course. | Iain has now agreed with the Board that, while he will continue to focus on driving [the] transformation, including pursuing the announced divestments and continuing to drive performance and efficiency, he will also support an orderly succession before stepping down in due course. |
| Here’s a graph regular readers will have seen yesterday, but it certainly bears repeating: sterling against the US dollar since the start of 2016, ahead of the June 2016 referendum. | Here’s a graph regular readers will have seen yesterday, but it certainly bears repeating: sterling against the US dollar since the start of 2016, ahead of the June 2016 referendum. |
| Note that sterling popped to above $1.50 as the results of the referendum started to come through. It has since suffered, recovered somewhat, and then fallen back as it became clearer that a no-deal Brexit was increasingly likely. | Note that sterling popped to above $1.50 as the results of the referendum started to come through. It has since suffered, recovered somewhat, and then fallen back as it became clearer that a no-deal Brexit was increasingly likely. |
| Boris Johnson’s financial markets welcoming party has delivered another blow this morning, sending sterling to fresh lows. | Boris Johnson’s financial markets welcoming party has delivered another blow this morning, sending sterling to fresh lows. |
| When campaigning for the Conservative leadership, the new prime minister made it very clear that he intended to leave the EU on 31 October with or without a deal. Markets appeared not to believe him; they now appear to have caught up. | When campaigning for the Conservative leadership, the new prime minister made it very clear that he intended to leave the EU on 31 October with or without a deal. Markets appeared not to believe him; they now appear to have caught up. |
| Johnson again rejected the backstop, the insurance policy that aims to prevent a hard border between Northern Ireland and the Republic of Ireland. Speaking in Scotland, he said: | Johnson again rejected the backstop, the insurance policy that aims to prevent a hard border between Northern Ireland and the Republic of Ireland. Speaking in Scotland, he said: |
| We can’t accept the backstop, it was thrown out three times, the withdrawal agreement as it stands is dead and everybody gets that. But there is ample scope to do a new deal and a better deal. | We can’t accept the backstop, it was thrown out three times, the withdrawal agreement as it stands is dead and everybody gets that. But there is ample scope to do a new deal and a better deal. |
| Investors were not reassured and sterling tumbled again this morning, losing as much as 0.7% against the US dollar and 0.6% against the euro. One pound bought as little as $1.2121 US dollars this morning, the lowest since 14 March 2017. Watch for the $1.2106 level: that will be the lowest since January 2017. | Investors were not reassured and sterling tumbled again this morning, losing as much as 0.7% against the US dollar and 0.6% against the euro. One pound bought as little as $1.2121 US dollars this morning, the lowest since 14 March 2017. Watch for the $1.2106 level: that will be the lowest since January 2017. |
| It has been an uncomfortable month for the pound, making it one of the worst-performing currencies across the world in recent days. | It has been an uncomfortable month for the pound, making it one of the worst-performing currencies across the world in recent days. |
| On the bright side, the pound sterling is not the worst performing currency in the world today. That accolade goes to the Madagascan Ariary. The pound, on the other hand, is only the second-worst performing currency in the entire world pic.twitter.com/bwJLNID8Ho | On the bright side, the pound sterling is not the worst performing currency in the world today. That accolade goes to the Madagascan Ariary. The pound, on the other hand, is only the second-worst performing currency in the entire world pic.twitter.com/bwJLNID8Ho |
| Sterling’s Johnsonian weakness will also have tricky implications for the Bank of England, whose rate-setting monetary policy committee will be looking at the fall in the pound with a certain trepidation ahead of their latest interest rate decision on Thursday. | Sterling’s Johnsonian weakness will also have tricky implications for the Bank of England, whose rate-setting monetary policy committee will be looking at the fall in the pound with a certain trepidation ahead of their latest interest rate decision on Thursday. |
| Falls in the pound feed eventually through into higher inflation – but it is not the kind of inflation that signals an economy that is heating up. That leaves an uncomfortable decision to leave rising inflation, or to raise interest rates to combat it at a time when the economy may be struggling even more. | Falls in the pound feed eventually through into higher inflation – but it is not the kind of inflation that signals an economy that is heating up. That leaves an uncomfortable decision to leave rising inflation, or to raise interest rates to combat it at a time when the economy may be struggling even more. |
| The agenda | The agenda |
| 10am BST: Eurozone business confidence (July) | 10am BST: Eurozone business confidence (July) |
| 10am BST: Eurozone consumer confidence (July) | 10am BST: Eurozone consumer confidence (July) |
| 1pm BST: Germany inflation rate (July) | 1pm BST: Germany inflation rate (July) |
| 1:30pm BST: US personal spending (June) | 1:30pm BST: US personal spending (June) |