Closing summary
The main market story has centred on investor reaction to Brexit talks after Boris Johnson urged the UK to prepare for no deal.
While EU counterparts suggested negotiations would continue next week, a spokesperson for the UK prime minister essentially said the EU shouldn’t bother unless the bloc fundamentally changes its stance.
t’s been a while since Brexit has had such a rousing effect on markets. But the back and forth news first sent the pound tumbling -0.3% to 1.2869 before it recovered to 0.1% at 1.2926, before it fell again.
But sterling’s weakness helped prop up the FTSE 100 which was up nearly 1.4%.
US stocks also opened in positive territory, thanks to Covid vaccine hopes and better than expected retail sales data for September. That was despite disappointing industrial production figures.
Meanwhile, in corporate news, British Airways was fined £20m for poor customer data handling that the ICO said contributed to the security breach in autumn 2018.
John Lewis also committed £1bn to accelerate its online business and transform its shops over the next five years. It also said it’s aiming to build homes for rent at 20 sites it owns around the country as part of its new strategy to rebuild profits to £400m within five years.
Pret a Manger announced it would cut 400 jobs and close six more outlets in London after a slowdown in sales growth since September as coronavirus infection rates increased in the UK.
That’s all from us today. Thank you for reading and have a safe weekend. -KM
US stocks are climbing in part due to vaccine hopes, after pharma giant Pfizer said it may apply for emergency use of its Covid vaccine as early as November.
The world is waiting for a safe and effective #COVID19 vaccine. Today our Chairman & CEO penned an open letter to help people understand the criteria we must meet and the expected timelines for our investigational vaccine program. https://t.co/RlhDYq4vK0
— Pfizer Inc. (@pfizer) October 16, 2020
Pfizer chairman and chief executive Albert Bourla said:
Assuming positive data, Pfizer will apply for Emergency Authorization Use in the U.S. soon after the safety milestone is achieved in the third week of November.
All the data contained in our U.S. application would be reviewed not only by the FDA’s own scientists but also by an external panel of independent experts at a publicly held meeting convened by the agency.
US stock markets have opened in positive territory:
- S&P 500 is up 0.35%
- Dow is up 0.4%
- Nasdaq is up 0.44%
Data flash: US industrial production has come in far lower than expected, having contracted 0.6% in September.
That’s compared with forecasts for 0.5% growth, according to a Reuters poll, and August’s growth of 0.4%
Pound drops again after UK spokesman says EU talks are over
And yet again, the pound has tumbles to around-0.3% versus the dollar to 1.2881 after a spokesman for Boris Johnson reportedly said trade talks with the EU are over unless the bloc fundamentally changes its stance.
Reuters reports the spokesman as saying:
The trade talks are over: the EU have effectively ended them by saying that they do not want to change their negotiating positions.
They added:
There is no point in trade talks if the EU does not change its position. The EU effectively ended the trade talks yesterday. Only if the EU fundamentally changes its positions, will it be worth talking.
The spokesman said the EU’s chief negotiator Michel Barnier should only come to London next week if he is prepared to discuss all the issues on the basis of a legal text or is willing to discuss practicalities on travel and haulage.
It’s easy to see why sterling is struggling to settle this afternoon, given that the UK’s ‘no-deal is looming’ statement is being interpreted as a sign of concession by others.
The latest comments from EU leaders comes from Dutch prime minister Mark Rutte. Reuters reports Rutte saying that he interprets Boris Johnson’s comments as a sign that Britain is prepared to compromise.
Updated
Fortunes have turned for US futures on the back of the stronger than expected retail sales:
Futures gaining in the pre-market after retail sales clobber expectations https://t.co/Vshxd2Niyi pic.twitter.com/i7PjIJFHLd
— Joe Weisenthal (@TheStalwart) October 16, 2020
- S&P 500 futures are up 0.3%
- Dow Jones futures are up 0.39%
- Nasdaq futures are up 0.6%
US retail sales top estimates in September
Data flash: US retail sales for September have comfortably beat estimates, having jumped 1.9% compared to a month earlier.
That compares to Reuters polls forecasting a 0.7% month-on-month rise.
It is also higher than August’s increase of 0.6%.
Sterling recovers as EU raises hopes of Brexit deal
Boris Johnson’s dismal Brexit update crucially did not rule out further talks with the EU, and markets are now taking cues from European leaders who said negotiations would continue in London next week.
It’s been a roller coaster ride for the pound this afternoon. After dropping more than 0.3% following Johnson’s comments, it’s now back in positive territory and is nearly up 0.1% at 1.2926.
Pret a Manger is to cut 400 jobs and close six more outlets in London after a slowdown in sales growth since September as coronavirus infection rates increased in the UK.
The coffee and sandwich shop chain has struggled to deal with the slump in commuter numbers since the pandemic struck, with branches in the City of London particularly hard hit.
The latest redundancies come on top of nearly 2,900 job cuts and 30 shop closures announced in August.
Pret, which employs 6,500 people in the UK, where it operates 389 shops, said it would be making a “number of adjustments” within the business to reduce jobs as well as closing the additional outlets.
Clare Clough, the UK managing director of Pret, said:
It’s absolutely right that we take steps to stop the spread of the virus and tackle the new wave of infections. Sadly, the result of the rise in infections and the necessary shift in public health guidance mean that our recovery has slowed.
We’ve said all along that it’s up to Pret to decide our own future and that we must adapt to the new situation we find ourselves in. That’s why we have to make these further changes as we continue to transform our business model and prepare for the six months ahead.
The EU Commission president confirms Brexit negotiations are set to continue in London next week.
🇪🇺-🇬🇧 talks: the EU continues to work for a deal, but not at any price.
— Ursula von der Leyen (@vonderleyen) October 16, 2020
As planned, our negotiation team will go to London next week to intensify these negotiations.
That news seems to have calmed the pound somewhat, with cable now trading down by around 0.05% at 1.2908.
Neil Wilson, chief market analyst at markets.com says there is still a risk that the pound could drop below 1.27 against the US dollar, if investors find more reason to be pessimistic following Boris Johnson’s Brexit comments:
Sentiment will remain fragile with risk of pullbacks on negative headlines. Lots of noise for the day traders to latch on to but no trend emerging. Longs may struggle against this backdrop and a retest of the bottom of the range at 1.27 is a distinct possibility in the near term if today’s support cracks.
What it is: A clearly signposted and choreographed set piece, following in the wake of the Oct 15th deadline, which is designed to force the EU to back down. The UK wants to gain the upper hand in the talks and hopes fissures will open up between member states (Germany and France in particular) and that the EU will eventually crack and go for what the UK is offering.
We knew before these statements that the UK and EU will continue to talk and work towards a deal. Boris wants to talk tough and ramp the no deal rhetoric but it’s for the crowds – talks are ongoing.
However, Wilson says it’s not entirely posturing on Johnson’s part:
It’s not entirely bluff – the UK would through gritted teeth accept a no deal because politically Johnson is taking so much flak over the pandemic that he has no room to ‘let the country down’ over Brexit.
The red/blue wall in the north has been hard hit by the pandemic – they would never vote Tory again if Boris backs down now over Brexit. And it’s pointedly not the UK walking away from trade talks – it’s important to lay blame at the feet of the other and Britain’s position has not materially altered.
For more on the political reaction to Boris Johnson’s statement, do follow our news live blog.
We’ll continue to bring you market and business reaction here. Stay tuned!
But in case you thought it was all over, some are taking Boris Johnson’s comments as potential posturing.
Reuters is reporting that the EU is getting ready for more trade talks in London next week, since the UK prime minister did not say explicitly he was walking away from negotiations.
Here’s a look at how the pound has reacted to Boris Johnson’s Brexit comments, and it’s continued to swing over the past 20 minutes:
But the pound’s decline has been positive for London’s blue chip index, pushing the FTSE 100 up by 1.3%, as most of its multinational constituents tend to benefit when sterling is weaker than its international peers.
More from our Brexit correspondent Lisa O’Carroll:
NEW NG: Boris Johnson : "since we have only 10 weeks until the end of the transition period. On January, the first. I have to make a judgment about the likely outcome, and to get us ..I've concluded that we should get ready for Jan 1 that are more like Australia's"
— lisa o'carroll (@lisaocarroll) October 16, 2020
Johnson hasn't said he will walk away but just prepare for no deal
— lisa o'carroll (@lisaocarroll) October 16, 2020
" it's clear from the summit that after 45 years of membership. They are not willing, unless there's some fundamental change of approach to offer these countries, the same terms as Canada. "
Johnson flipping it back to the EU - saying they have to come to us but not walking away.
— lisa o'carroll (@lisaocarroll) October 16, 2020
"They've abandoned the idea of a free trade deal it doesn't seem to be any progress coming from, from Brussels so what we're saying to them is only, you know, come here, come to us"
Updated
BREAKING: Pound drops as Boris Johnson signals no-deal Brexit on horizon
The pound has lost all of its gains and is now trading down 0.3% against the US dollar at 1.2869 as comments from Boris Johnson suggest there is a growing likelihood of a no-deal Brexit.
Reuters is reporting Johnson as saying that the EU has abandoned the idea of a free trade deal and unless the EU makes fundamental changes to its approach, the UK will go for no deal.
Johnson has said UK wanted nothing more than Canada-style deal.
He has also reportedly said that given that the EU have refused to negotiate seriously he has concluded the UK should get ready for an Australia style deal and has suggested businesses get ready for such an arrangement.
Mining giant Glencore has called time on new coal mine projects, after promising to run down its existing stable of 26 mines without replacing them.
Glencore’s chief executive Ivan Glasenberg said the decision not to invest in replacing its old coal mines is part of the company’s plan to reduce the carbon emissions in line with the Paris climate agreement.
But he added that Glencore would continue to run down its coal mines across Australia, Colombia and South Africa rather than sell them off.
“I don’t see how spinning off coal mines will help us reduce Scope 3 emissions,” Glasenberg said at a mining summit hosted by the Financial Times.
The decision to end investment in new coal projects follows a pledge made last year to cap the coal produced each year at 150 million tons per year.
Instead, Glencore is ploughing more of the revenues generated by its coal business towards mining metals such as copper, cobalt and nickel which can be used to make battery storage, electric vehicles and renewable energy projects.
A couple hours out from the US open and futures are pointing to a mixed start to trading.
- Dow futures are down 0.1%
- S&P 500 futures are down 0.05%
- Nasdaq futures are up 0.09%
US stocks came off their lows yesterday amid (yet again) renewed hopes of a Covid stimulus package stateside. But it seems that mild enthusiasm is fading for the final trading session of the week.
Naeem Aslam, chief market analyst at AvaTrade, said:
Over in the US, the stimulus hopes came back to life once again after House Speaker Nancy Pelosi showed more willingness to work with the House Democrats in order to address the stimulus need.
The economic conditions are deteriorating in the U.S. The Federal Reserve has even made it clear for the policymakers that they need to act as the U.S. economy needs a sizeable package—a small stimulus package is likely to harm the economy, according to the Fed Chairman, Jerome Powell.
Given that there are less than three weeks left for the U.S. election, it seems immensely difficult how the lawmakers will be able to pull a deal together before the U.S. elections, especially given their previous differences.
But there are still US retail sales figures for September due out about an hour before Wall Street opens, so that could change the direction of futures depending on whether it shows consumer demand still holding strong as Covid cases continue to rise.
Lancashire is reportedly going to be placed under the very high alert level tier 3 Covid restrictions.
Lancashire County Council spokesperson has confirmed Lancashire will move into Tier 3 restrictions which includes pubs and bars closing
— Sky News Breaking (@SkyNewsBreak) October 16, 2020
The FTSE 100 has lost of some its steam, and is trading higher by around 0.6% (compared to the 1%+ it was trading at about an hour ago).
But rather than taking theirs cues directly another local lockdown announcement, investors seem to be pulling back in line with the pound’s ascent, on the back of hopes that the UK will continue with Brexit talks.
Follow our news live blog for further updates on Lancashire:
My colleague Rob Davies has been live tweeting the Wetherspoons press conference this morning, where chief executive Tim Martin has been criticising government Covid rules and explaining the company’s first ever loss.
Live Tim Martin feed from Wetherspoons press conference, for all you fans. https://t.co/lEtLye87Nw
— Rob Davies (@ByRobDavies) October 16, 2020
Here are some highlights:
“I’m not on social media so it’s quite shocking to read some of the comments.”
— Rob Davies (@ByRobDavies) October 16, 2020
"People seem to believe our pubs are not clean."
Says Spoons is top of the league tables for cleanliness.
"The truth is you certainly can catch Covid in a pub but it's not the centre of transmissions."
— Rob Davies (@ByRobDavies) October 16, 2020
Here's the science bit...concentrate!
— Rob Davies (@ByRobDavies) October 16, 2020
"If you go out with 19 people who have Covid and social distance you'll be fine. If you go out in a group of six and think you're safe and start hugging everyone, you'll get the virus."
BREAKING: British Airways fined £20m for data breach
The Information Commissioner’s Office has fined British Airways £20m for failing to protect the personal and financial details of over 400,000 customers.
The ICO said the airline was processing a significant amount of personal data without having adequate security measures in place.
Not only did that failure to have proper security measures in place break data rules, but BA was also hit by a cyber attack in 2018 that was not detected for over two months.
ICO said its investigation found BA did not detect the attack on 22 June 2018 themselves, but were alerted by a third party more than two months afterwards on 5 September that year.
The ICO added that addressing those security issues would have prevented the cyber attack from being carried out in that way.
Information Commissioner Elizabeth Denham said:
People entrusted their personal details to BA and BA failed to take adequate measures to keep those details secure.
Their failure to act was unacceptable and affected hundreds of thousands of people, which may have caused some anxiety and distress as a result. That’s why we have issued BA with a £20m fine – our biggest to date.
When organisations take poor decisions around people’s personal data, that can have a real impact on people’s lives. The law now gives us the tools to encourage businesses to make better decisions about data, including investing in up-to-date security.
Facebook-owned Instagram is to crackdown on social media influencers and celebrities who make posts without telling followers when they have been paid to do so, following an investigation by the Competition and Markets Authority.
The CMA said it has been investigating the issue of so-called “hidden advertising” by social media influencers and has been concerned that Instagram has not been doing enough to tackle the problem.
Social media influencers can make considerable income by charging fees to companies to promote a product with posts that can be seen by thousands of followers of their Instagram profiles.
Clear labelling of incentivised posts is required under UK consumer protection law so that people are not misled.
Andrea Coscelli, chief executive of the CMA, said:
For too long, major platforms have shied away from taking responsibility for hidden advertising on their site,” said “So, this commitment to tackle hidden adverts and overhaul the way people post on Instagram - making it difficult for users to ignore the law - is a welcome step forward.
These changes mean there will be no excuse for businesses to overlook how their brands are being advertised either - making life a lot harder for those who are not upfront and honest with their followers.
The CMA, which said that Instagram will now report its progress tackling the issue to it regularly, said that the commitments apply to all Instagram users in the UK as well as anyone globally who directs their posts towards UK users.
So, Brexiteer Nigel Farage has popped up again, this time with a daily newsletter meant to save subscribers cash.
In a tagline that sounds awfully familiar, his website claims people should subscribe to ‘Fortune & Freedom’ because “It’s time to take back control of your money.”
It goes on to say they’ll answer burning questions like “why aren’t you told about what really makes money?” and “why are you not warned early about big financial threats?”
The first post explains:
We cover everything from the benefits of holding gold, why the Euro looks doomed, the potential for cryptocurrencies and how cancel culture is making critical thinking and public debate toxic.
But if your burning question is more about whether this is actually real, the FT’s Alphaville (£) has already confirmed: “no, it’s not a spoof”.
"gold is like insurance against monetary megalomaniacs at the Bank of England and Exchequer"
— Katie Martin (@katie_martin_fx) October 16, 2020
mmmmk
More from our retail correspondent Sarah Butler, following the John Lewis announcement earlier this morning.
John Lewis is to become a major landlord, aiming to build homes for rent at 20 sites it owns around the country as part of its new strategy to rebuild profits to £400m within five years.
The company said building homes would offer it a new kind of income alongside other ideas including financial and digital services as future profits from retail were unlikely to be sufficient for it to pay staff at the level it wanted.
The retailer has outlined a huge array of ideas under chairman Sharon White and her newly appointed heads of the John Lewis department stores and Waitrose.
She has confirmed plans to ditch the department store’s long-held Never Knowingly Undersold price pledge for a new price promise to be finalised next year and to enable shoppers to recycle or reuse more products and is spending £1bn on expanding further online.
It is a bold effort to try and move a business under pressure into new markets. Others might have chosen to stick to the knitting in the department stores and run them as effectively as possible - while rivals such as Debenhams and House of Fraser shrink and potentially disappear.
Can John Lewis learn new tricks? The company’s move into online retail paid off in the past - that was brilliantly executed. Can they do the same with house building, gardening and insurance during tough economic times? We’ll see.
Updated
JD Wetherspoon has slumped to a £95m annual loss as sales plunged during the coronavirus lockdown, with the pub chain’s outspoken founder renewing his criticism of the UK government’s restrictions to control the pandemic, my colleague Mark Sweney writes.
The chain, which reported a £95m profit in its previous financial year, said revenues slumped by 30.6% to £1.26bn as its pubs were hammered by the lockdown.
The pre-tax loss includes £60m of exceptional one-off costs, including £29m Covid-related costs for stock losses, staff costs and equipment.
The pub chain said it is in consultation to reduce the 1,000 staff at its pubs at six UK airports by 450, which it announced last month. It is also reducing head office staff numbers by 108.
Confirmation of the cuts come a day after the pub and brewer Marston’s announced it was axing 2,150 jobs, the biggest cuts in the sector since the pandemic began. Last week, Greene King said it is cutting 800 jobs and closing 79 pubs and restaurants.
Wetherspoons said since 4 July 429 employees have tested positive for coronavirus, 1% of its 43,000 total staff. The company said that is in line with the 0.9% rate testing positive in the total UK population and less than the 1.5% Amazon reported among its US employees.
Tim Martin, the founder and chairman of JD Wetherspoon, said:
If pubs were, indeed, ‘centres of transmission’ it might be expected that infection rates would be higher among employees than those of either the general population or companies like Amazon.
Raab’s Brexit comments have lifted the pound, which has pared its losses and is now nearly flat against the US dollar at 1.2909.
UK foreign secretary Dominic Raab has claimed the UK is close to a Brexit deal.
However, speaking to Sky News this morning, Raab said he was disappointed by the EU’s demand that the UK give further concessions to secure a trade deal.
Reuters reports Raab as saying:
We’ve been told that it must be the UK that makes all of the compromises in the days ahead, that can’t be right in a negotiation, so we’re surprised by that but the prime minister will be staying more on this later today.
However, he added:
Having said that, we are close. With goodwill on both sides we can get there.
And we’re off! Here’s how stocks are looking at the EU market open:
- FTSE 100 is up 0.9%
- Germany’s Dax is up 0.6%
- France’s Cac 40 is up 1.4%
- Spain’s IBEX is up 0.5%
John Lewis Partnership commits £1bn to online push
The John Lewis Partnership has committed to spending £1bn over five years to accelerate its online business and transform its shops.
In a statement this morning, the company also pledged to increase its Waitrose delivery capacity to more than 250,000 orders per week, up from 55,000 before the pandemic.
JLP is targeting around £400m profit for the group in five years and has promised to pay pay real living wage to all partners when they hit £200m profit. And it’s promised to pay partner bonuses by the time profits push past £150m and its debt ratio drops.
Few mentions of Covid and the pandemic generally, in the release but the digital shift comes as no surprise given retailers have really had to sit down and think about how to adapt to the rapid shift in consumer habits since the outbreak began.
Introduction: Investors wait for Boris' signal on Brexit talks
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
While England gets to grip with new Covid-19 restrictions set to come into force under the government’s new three-tier system, investors are waiting to hear what’s next for Brexit talks.
Today is the day that prime minister Boris Johnson confirms whether the UK will continue with Brexit talks. Last month, Johnson set a deal deadline of 15 October, saying that if nothing had been agreed, both sides should “accept that and move on,” giving the UK time to to focus on no-deal preparations.
At a summit in Brussels on Thursday, the EU proposed a further “two to three weeks” of negotiations. Markets are now poised to see whether Johnson tries to push ahead and reach a deal or stick to last month’s threats and walk away.
Pessimism around Brexit sent the pound down to back towards 1.2863 versus the US dollar, with cable now trading down by around 0.2% at 1.2886. Versus the euro, the pound is nearly flat at 1.1014.
But this is all taking place as the Covid crisis once again gains pace, with cases steadily rising across Europe. France has declared a state of emergency and London is set to face tighter restrictions from midnight on Friday.
Jasper Lawler, head of research at LCG, says tighter lockdown rules are threatening the economic recovery and could push European economies - including the UK - into a double dip recession:
The British government is under pressure to follow scientific advice for a 2-week circuit breaker national lockdown but has so far resisted, but has raised the capital to the Level 2 tier of restrictions. That means two different families can no longer mix indoors- be that in their home or in a pub or restaurant.
There is still no sign of the joint European recovery fund so in the meantime economies stand to take the hit – risking a double dip recession – from the new restrictions.
But after dropping on Thursday, European stocks are expected to rise this morning:
European Opening Calls:#FTSE 5876 +0.74%#DAX 12759 +0.44%#CAC 4885 +0.98%#AEX 563 +0.39%#MIB 19183 +0.62%#IBEX 6835 +0.26%#OMX 1826 +0.70%#STOXX 3209 +0.51%#IGOpeningCall
— IGSquawk (@IGSquawk) October 16, 2020
Stay tuned!
The agenda
- 10am BST: Eurozone inflation for September (final reading)
- 1:30pm BST: US retail sales for September
- 2:15pm BST: US industrial production for September
