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The Guardian - UK
The Guardian - UK
Business
Julia Kollewe

Pound rises on Brexit deal optimism – as it happened

Britain’s Prime Minister Boris Johnson.
Britain’s Prime Minister Boris Johnson. Photograph: POOL/Reuters

Closing summary

On Wall Street, the Dow Jones hit a new record high above 28,004.89 but the Nasdaq and S&P 500 index have slipped. In Europe, Germany’s Dax, France’s CAC and Italy’s FTSE MiB are down between 0.19% and 0.69%. The FTSE 100 index in London is flat at 7,302.72.

Despite Chinese state media reporting that weekend trade talks were “constructive,” markets have been jittery as doubts crept in over the likelihood of a trade deal between the world’s two biggest economies. CNBC reported that the mood in in Beijing is pessimistic, citing a government source.

Asian markets had a better start to the week, after the People’s Bank of China unexpectedly cut its short-term funding rate, raising hopes of more stimulus.

The pound has pushed higher against the dollar, to $1.2965, up 0.48%.

Good-bye – we’ll be back tomorrow. Thank you for all your comments!

Dow Jones hits new record high

The opening bell has rung on Wall Street: The Dow Jones opened nearly 12 points lower – but then ticked up above 28,004.89, hitting a new record high.

The Nasdaq opened 0.14% lower while the S&P 500 slipped 0.15% at the open.

Updated

Mood in markets dampened by trade deal fears

While Asian markets enjoyed a good start to the week, following China’s rate cut, European markets are more mixed.

  • UK’s FTSE 100 index up 8.77 points at 7,311.72, up 0.12%
  • Germany’s Dax down 0.48% at 13,178.62
  • France’s CAC down 0.44% at 5,913.40
  • Italy’s FTSE MiB down 0.55% at 23,457.12

Wall Street opens in just a few minutes and the Dow is expected to rise slightly, while the Nasdaq is seen opening flat to slightly negative.

The mood in markets has been dampened by a report from CNBC that cast doubts over whether a trade deal can be struck between the US and China. A government source told the broadcaster that Chinese officials were troubled by Donald Trump’s comment that there was no agreement on phasing out tariffs.

Updated

Ben Chu, economics editor at Newsnight, has tweeted a chart showing estimates by the Institute for Fiscal Studies that the planned corporation tax cut (now shelved) would cost £6.8bn a year between 2020 and 2022.

Updated

Jonathan Portes, professor of economics at King’s College London, tweets about Boris Johnson’s abandonment of the planned cut in corporation tax:

Back to the CBI conference, where Jeremy Corbny has announced plans to create 320,000 new apprenticeships and reform the apprenticeship system.

The plans would give employers more flexibility in how they spend their apprenticeship levy funds, allowing them to be used for a wider range of accredited training opportunities, says Sophie Wingfield, head of policy and public affairs at the Recruitment & Employment Confederation.

Giving employers more flexibility in how they spend their apprenticeship levy funds is the right call. The REC and many other businesses have been calling for the apprenticeship levy to be broadened for some time. The current system is too restrictive, and it also completely excludes the almost 1 million workers who are on flexible and temporary contracts.

We hope that Labour’s proposals will allow these workers to benefit from levy-funded training courses, and we will continue to campaign for this change. With a more flexible levy, we can improve training opportunities for flexible workers, address the country’s skills shortages, and boost productivity across the UK.

The pound has held on to most of its gains against the dollar, trading up 0.44% at $1.2959. The latest polls have suggested a 10- to 17-point lead for the Conservative party. Sterling has also been boosted by Boris Johnson’s comments at the weekend that all Conservative candidates in the election will support his Brexit deal.

Johnson and Jeremy Corbyn will go head to head in tomorrow’s first TV election debate, on ITV at 8pm.

Thompson says:

Assuming Tuesday’s debate between the two leaders provides no major upset, we also believe the risk of a Labour majority is low.

Updated

Equities have paused for breath today, with the FTSE 100 index now some 25 points ahead at 7,328.73, a 0.35% gain. The main markets in Europe – Germany, France and Italy are flat. What happens in the trade talks between the US and China will be key to further market moves.

Rupert Thompson, head of research at investment firm Kingswood, says:

Equity markets have seen little change. Investor focus remains firmly on the steady, but often conflicting, stream of sound-bites regarding the state of US-China trade negotiations. While progress remains slow, we still seem on course for a limited trade deal to be agreed eventually. Such a deal will be critical if the market rally over the last month is to be sustained.

While US-China trade talks are centre-stage, a US decision on whether to impose tariffs on auto imports is also looming in coming days. This will not be unimportant, particularly for Europe. The general expectation is that Trump will delay the decision for a further six months, pending further negotiations with the EU.

Beyond trade, the attention is on whether or not the economic numbers support the idea, which the market is now partially embracing, that global growth is bottoming out. As is often the case at turning points, the data is still rather ambiguous.

Speaking at the CBI’s annual conference earlier, Boris Johnson joked that business leaders might storm the stage in protest – but no one batted an eyelid when he announced that the planned corporation tax cut, from 19% to 17%, had been postponed.

Here is some reaction to Boris Johnson’s pledge to “reduce the overall burden” of business rates if the Conservative party wins the election, made at the CBI conference.

Tom Leman, head of retail and consumer at the law firm Pinsent Masons, welcomed this but stressed that greater economic certainty is also needed to revive consumer spending.

Business rates are one part of the puzzle when it comes to the challenges faced by the retail sector. It is encouraging that high street retailers could see a reduction in their overheads and that looking for solutions to the challenges they are facing is high up on the political agenda.

However, the issues faced by our high street goes beyond business rates alone, there has been a change in the way consumers spend and the expectations they have of the service that retailers will provide. If we want to encourage consumer spending then we need to create greater economic certainty overall.

Updated

Corbyn has also defended Labour’s nationalisation plans.

The Labour leader has sought to dispel concerns among business leaders that he is anti-business.

Jeremy Corbyn is speaking now – more on our politics live blog.

The prime minister has just finished speaking. So aside from a package of measures designed to help businesses, Johnson sprang the news on business that the planned corporation tax cut will be abandoned.

Updated

This doesn’t mean the government is averse to tax cuts for businesses, Johnson adds somewhat apologetically before he starts taking questions from journalists.

Johnson: Corporation tax cut postponed

Johnson says the government is postponing further cuts in corporation tax, to save £6bn that will go towards the NHS. Corporation tax was due to be reduced to 17% from 19% from the year starting 1 April 2020.

Updated

“We need to get Brexit done,” repeats Johnson, so we can get on with other things.

You can watch live here.

Boris Johnson has taken the podium at the CBI conference, at the InterContinental hotel near the O2 arena. My colleague Andrew Sparrow is blogging on our politics live blog.

Updated

Over the weekend, Fairbairn expressed concerns about the Conservatives’ immigration policy.

CBI sees danger on right and left

The CBI, the UK’s biggest business lobby group, has warned about a threat to businesses from both the right and the left of politics. Its director general Carolyn Fairbairn said at the group’s annual conference in southeast London:

I believe we are facing a danger that could get in the way of a bright future, and it takes the form of extreme ideology. And we see it on both sides of the political divide.

On the right we have the threat of, even a preference, for no deal as the end point of our Brexit negotiations.

She also said Labour’s nationalisation programme had sent a “chill through boardrooms”.

Updated

Mid-morning summary

Several major European stock markets have turned negative. Traders are clinging to hopes of a preliminary trade agreement between the US and China, but there is precious little news. Chinese state media reported that a weekend phone call to discuss trade was “constructive”.

Sterling has risen through $1.2960, apparently boosted by comments from Boris Johnson. He said all 635 Conservative Party candidates in the general election on 12 December have pledged to back his Brexit deal, speaking to the Sunday Telegraph. Sterling is trading at $1.2963, up 0.49% and is 0.36% higher against the euro, at 85.35p.

Some traders say that polls showing the Conservatives in the lead are also boosting the pound. The Tories lead Labour by 10 to 17 percentage points, according to four polls on Saturday, while a poll published by Good Morning Britain today showed a 14-point lead for the Conservatives.

Here are the main moves in stock markets:

UK’s FTSE 100 index up nearly 6 points, or 0.08%, at 7,308.83

  • Germany’s Dax down 0.8% at 13,231.20
  • France’s CAC down 0.25% at 5,924.55
  • Italy’s FTSE MiB down 0.2% at 23,538.7

Updated

A survey on UK household finances shows that people reported further strain this month. The headline index from IHS Markit remained at 44.4 in November, pointing to a negative assessment of household finances.

The outlook for the year ahead also remained stuck in downbeat territory during November, although the respective index was broadly unchanged from that seen in October.

UK households retained their pessimistic view towards job security during the latest survey period. Those employed in sectors such as retail and manufacturing reported a negative outlook towards job security. Nevertheless, growth of both incomes from employment and workplace activity was registered in November.

Households’ financial wellbeing
Households’ financial wellbeing Photograph: IHS Markit

More than one in five households still expect the Bank of England to cut interest rates, although the vast majority (79%) think its next move will be a rate hike, with 58% expecting this to come within the next year.

The index uses survey data collected by Ipsos Mori and is the first consumer survey published each month.

Updated

The prime minister is speaking at 10:40am GMT, followed by the Labour leader at 11:15am GMT at the CBI conference at the InterContinental in southeast London. Swinson, the Lib Dem leader, addresses the business group at 2:25pm GMT.

She will be followed by Ivan Menezes, the chief executive of drinks maker Diageo, who will be speaking about the UK as a place to invest, from a global perspective.

Updated

The CBI’s annual conference is getting underway in London, where the main party leaders – Boris Johnson, Jeremy Corbyn and Jo Swinson – are due to speak.

Attendees are seen before the annual CBI Conference in London.
Attendees are seen before the annual CBI Conference in London. Photograph: Simon Dawson/Reuters

The prime minister will announce a range of tax cuts for businesses, including tax relief for the construction and research industries, and a tax cut for small employers by raising the allowance for their national insurance bills from £3,000 to £4,000. This comes on top of a previous pledge to lower business rates. Business rates are a tax based on rental values of the properties that firms occupy.

Updated

Sterling hits six-month high vs euro

European shares have opened slightly higher while US futures are pointing to a good start on Wall Street too.

In currency markets, sterling is making the biggest gains, rising to a six-month high of 85.345p against the euro. Against the dollar, it is up 0.43% at $1.2958. China’s yuan has fallen following a rate cut by the People’s Bank of China, which triggered hopes of more stimulus.

Jasper Lawler, head of research at London Capital Group, says the pound has been boosted by news that all Tory candidates in the general election are supporting Boris Johnson’s deal.

All 634 Conservative candidates in the coming December 12 election have pledged to back Boris Johnson’s deal. In the narrow context of this election, if all candidates are promising to back the deal, it makes it more believable that Boris can “get Brexit done”. The general take in markets is that a Conservative majority offers relatively more certainty on both Brexit and on business matters than Labour.

Ashik Musaddi, European insurance analyst at JPMorgan Cazenove, says Aviva’s decision is somewhat disappointing.

Aviva, following the strategic review, has reported this morning that it has decided to retain its Singapore business and China JV, which we perceive as a small disappointment, as we were expecting a sale of the whole Asia units which could generate £1.5bn-£2bn.

The UK insurer Aviva, which sells life, car, household and business insurance, has decided to hold on to its operations in Singapore and joint venture in China, despite receiving takeover offers for the Singaporean business. Both delivered double-digit growth in operating profits last year.

But the company said it is still looking at possibly selling off its businesses in Vietnam, Indonesia and Hong Kong, whose status as a major financial centre in Asia has been knocked by months of pro-democratic protests.

Aviva is continuing to explore strategic options for its operations in Hong Kong, Vietnam and Indonesia, with its respective partners in each country.

British insurance giant Aviva’s headquarters in London.
British insurance giant Aviva’s headquarters in London. Photograph: Ben Stansall/AFP/Getty Images

The economic calendar is thin this week. We do have the latest monthly house price data from the UK property website Rightmove. The average asking price across Britain fell by £3,900 in November, or 1%, from the previous month to £302,808. Rightmove also reported that the number of new listings dropped nearly 15%, the biggest year-on-year decline since August 2009.

Miles Shipside, commercial director at Rightmove, said:

Elections normally dampen activity as uncertainty causes a degree of hesitation, but this one is being called to try to break the deadlock. A more certain outlook, whatever it may be, would be a welcome change for those who are contemplating moving.

Updated

H&T Group, the pawnbroker, said it is working closely with the Financial Conduct Authority, which is conducting a regulatory review of its “high-cost short term credit” unsecured loans business. The review focuses on the assessment of the company’s creditworthiness and its lending processes.

The pawnbroker has stopped all HCSTC unsecured lending while it works through the review process with the City watchdog, and is reviewing its lending over the past six years, and whether it needs to pay any compensation to customers.

It has had unsecured loans of £3m, on average, rising to a peak of £4m in December 2016, and now at £3m. The firm collected total interest payments of £24m over the period. However, it noted that HCSTC unsecured lending is only 4% of its overall business.

The news sent H&T shares down 17.5% to 305p.

H&T recently paid £8m to buy out the loans and “pledge books” of Albemarle & Bond, a rival pawnbroker which abruptly shut all its 116 stores in September. This means A&B customers can collect their pawned items from H&T outlets.

H&T pawnbrokers in Kingston-upon-Thames.
H&T pawnbrokers in Kingston-upon-Thames. Photograph: Martin Godwin/The Guardian

Updated

Here in London, there is little corporate news this morning. There is another revenue warning from IQE, which makes semiconductor wafers for chips used in Apple products and for Asian customers in Taiwan and Singapore.

The company warned on annual revenues for the second time in less than five months, sending its shares down 21% to 52.1p.

IQE has experienced very challenging market conditions in 2019. Shortfalls in revenue relate predominantly to two major customers.

Updated

The local economy has been hit by the protests, which have continued for months. The Hong Kong government warned on Friday that the city’s economy could shrink by 1.3% this year – the first annual recession since 2009.

You can follow the latest developments in Hong Kong on this live blog.

The BBC’s China correspondent Stephen McDonell tweeted:

And we’re off. The UK’s FTSE 100 index opened some 5 points higher and is now down 0.47 points, or 0.01%, at 7302.

  • Germany’s Dax up 0.11%
  • France’s CAC down 0.01%
  • Spain’s Ibex up 0.06%
  • Italy’s FTSE MiB down 0.07%
  • Portugal’s PSI 20 up 0.17%

News flash on Reuters: China’s foreign ministry says no one should underestimate China’s will to safeguard its sovereignty and Hong Kong’s stability.

On the latest clashes in Hong Kong, Erlam says:

The stand-off between the protesters and the police has become increasingly violent this last couple of weeks and, worryingly, it’s difficult to see how this ends without further clashes and bloodshed.

At this point, the economy is the least of the concerns for both residents and observers. But a place once viewed as being stable and peaceful is looking increasingly less appealing for investors who may continue to pull cash out the longer this goes on and more fierce it becomes.

Craig Erlam, senior market analyst UK and EMA at trading platform OANDA, sounded a note of scepticism on the latest trade talks over the weekend.

While this is arguably a positive conversation that enables a deal to be reached, we were meant to be at the point of agreeing a date and location for it to be signed off. Trump looks to have been a little premature in his assertion that a deal is done last month with there clearly still being plenty more work to do.

It always seemed a little odd how one sided the deal looked, with the Chinese clearly expected a greater commitment from the US side of tariff rollbacks, which is one issue that seems to be holding things up. This could well go on beyond the end of the year and even fall apart altogether which could be troublesome for the markets which have already invested so heavily into it.

Introduction: Asian stocks rise, Europe to open flat

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Hong Kong’s stock market has bounced back with a 1.1% rise, following heavy losses last week when it lost nearly 4.8% as protests escalated.

The rise comes despite news that Hong Kong police have trapped up to 800 people inside Polytechnic University, which has been occupied by protesters since last week, firing tear gas at any protesters trying to escape the campus.

Other Asian stock markets also rose, after the People’s Bank of China cut its repo rate by five basis points to 2.5% – the first cut in the short-term funding rate since 2015. The authorities also injected 180 billion yuan into the financial system.

The move comes a fortnight after the PBOC cut the rate on its medium-term lending facility by the same margin. Both cuts raised expectations that the central bank may also reduce its new benchmark loan prime rate, on which many lenders base their mortgage rates, to prop up economic growth.

China’s CSI 300 index closed 0.8% higher and Shanghai Composite Index rose 0.6%, while Japan’s Nikkei gained 0.49%.

Investors are waiting for further news on the trade talks between the US and China. The two sides held “constructive talks” in a high-level phone call on Saturday, according to the Chinese state media agency Xhinhua. In the call, Chinese vice premier Liu He, the US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer discussed the main concerns that stand in the way of a phase one deal being signed off.

In Europe, stock markets are expected to open flat.

David Madden, market analyst at CMC Markets UK, says:

Trade talks between the US and China remain at the forefront of traders’ minds. The positive sounds from the US side helped boosted European as well as US equity markets last week. Larry Kudlow, economic advisor to President Trump, plus Wilbur Ross, US commerce secretary, expressed optimism that a deal is in the offing. The commentary from the Trump administration helped the Dow Jones, S&P 500 and the NASDAQ 100 rack up fresh all-time highs on Friday.

The language is driving the bullish sentiment even though President Trump doesn’t appear to be keen to roll back on the tariffs. The US side would like to see more concessions being made in relation to intellectual property, while the Chinese side are balking about the size of agricultural purchases the US are calling for.

The Agenda

  • CBI annual conference

Updated

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