Trading is over for the day in London, leaving the FTSE 100 down 51 points or 0.7% at 7,471.
Natural resource companies helped to pull the index away from yesterday’s six-month high.
David Madden of CMC Market has picked out some highlights:
Associated British Food shares are slightly higher today after the company announced a 1.5% rise in first-half revenue to £7.53 billion, which was broadly in line with forecasts. The company cited higher costs for the dip in pre-tax profit. It’s the same old story with Associated British Foods, whereby Primark performed well and the sugar business let the side down. Primark posted a 4.4% rise in sales, and maintained its outlook, while the sugar revenue declined. The fact that Primark managed to register an increase in sales in a tough trading environment is impressive.
Credit Suisse shares hit their highest level since October today on the back of solid first-quarter figures. Net profit increased by 8% and the bank’s wealth management division performed well. The global markets division was previously struggling, and now it posted a profit of SFr282 million, topping forecasts. The bank’s common equity tier ratio remained steady at 12.6%, which shows the balance sheet is in rude health.
Airline maker Boeing has been forced to scrap its financial guidance today, following the two fatal crashes that forced its 737 Max jet to be grounded.
It’s also revealed that the issue will cost it more than $1bn.
The Bank of Canada has just joined the ranks of dovish central banks.
The BoC has left interest rates on hold (not unexpectedly), but has also lowered its 2019 growth forecasts. It now expects its economy to grow by just 1.2% this year, down from 1.7% previously.
Plus, its policy statement no longer includes a reference to rates needing to rise in future.
Wall Street has opened cautiously, after the excitement of yesterday’s record closing high on the S&P 500 and the Nasdaq.
The Dow has dipped by 47 points, or 0.2%, to 26,609, while the S&P 500 is down 0.1%.
Constructions and digging machinery giant Caterpillar is the biggest faller on the Dow, down over 3%, after reporting disappointing sales figures earlier today.
Reuters explains:
Caterpillar Inc spooked investors for a second straight quarter on Wednesday with a 4 percent drop in Asia-Pacific construction equipment sales that pointed to more weakness in China, its key growth market.
Ladbrokes also have Andrew Bailey as the favourite to succeed Mark Carney:
Who'll be the next Governor of the Bank of England?
— Ladbrokes Politics (@LadPolitics) April 24, 2019
Latest odds from Ladbrokes: pic.twitter.com/PyucGPJiMC
Bailey isn’t a BAD option, but he may not quite match Philip Hammond’s desire for a central banking star.
As our economics editor Larry Elliott wrote earlier this week:
Andrew Bailey, the chief executive of the Financial Conduct Authority, is another considered a safe pair of hands, although perhaps a bit too safe.
It is not that Bailey’s time running the watchdog has had its share of problems because that is always going to be the case with a body that is supposed to root out wrongdoing. Rather, the question is whether anyone actually fears the FCA. A Bank of England governor needs to be feared, as Carney certainly is.
Taking a look at the markets, and it’s been a mixed day across the main European bourses so far.
London’s FTSE 100 has fallen back from yesterday’s six-month high, currently down 46 points or 0.6% at 7476. Mining firms are among the fallers, with Anglo American losing over 3%.
That follows a drop in commodity stocks, which analysts are blaming on concerns that China could slow its stimulus plans.
The French CAC is in the red too, with Renault losing 4% following a profit warning from Japanese partner Nissan overnight.
Germany’s DAX is up, though, thanks to a 10% surge from mobile payment group Wirecard, which is receiving a $1bn investment from Japanese investor SoftBank.
Nick Kirk, managing director of global recruitment specialists Page Executive, reckons the next Bank of England governor may break the mould:
The next Governor will not only need a deep understanding of policy, financial acumen and extensive banking experience, but also strong interpersonal skills and an ability to demonstrate leadership if they are to navigate an incredibly complex economic landscape. Historically, candidates have been selected from within the Bank, but the Government needs to cast the net as wide as possible to ensure it is recruiting from the whole of the talent pool - not just looking at a few select or “obvious” candidates. The Government should make sure any candidate shortlist demonstrates diversity, in order to reflect the nation.
As a result, we believe it is strongly possible we could be seeing our first Governor to break the white, male stereotype. What is undeniable, however, is that this is one of the most crucial decisions in the United Kingdom’s financial history and the Government can’t afford to get it wrong.
Here’s my colleague Angela Monaghan on today’s UK public finances:
Philip Hammond has missed his annual target for bringing down the budget deficit, despite borrowing dropping to the lowest level since 2002.
The Office for National Statistics said that borrowing in the latest full financial year, which ended in March, was £24.7bn, down by 41% from a year earlier but above the target set for the chancellor.
Public sector net borrowing was £1.9bn more than the £22.8bn forecast by the Office for Budget Responsibility, the government’s tax and spending watchdog, in last month’s spring statement.
While higher than Hammond’s target for the year, the latest analysis of the public finances reveals a steadily improving picture over the past decade as the UK economy has gradually recovered from the last recession....
Place your bets....
Bookmaker Coral has declared that Andrew Bailey, who currently runs the UK’s City watchdog the FCA, is the hot favourite to replace Mark Carney.
Bailey is a former BoE deputy governor, meaning he’s also no stranger to the top central banking circles. However, he’s not as strong as heavy hitter as Raghuram Rajan, the second favourite.
Coral’s John Hill says:
“Andrew Bailey has held a number of high profile positions in the financial industry which makes him the clear favourite for the role as next Bank of England governor,” said Coral’s John Hill.
We have seen plenty of support behind the former governor of the Reserve Bank of India, Raghuram Rajan, as punters feel as though the chancellor may turn to him to tackle the challenges which will naturally come with Brexit.”
Here’s Coral’s odds:
- 2-1: Andrew Bailey
- 5-1: Raghuram Rajan
- 6-1: Ben Broadbent (BoE deputy governor)
- 6-1: Jon Cunliffe (BoE deputy governor)
- 8-1: Shriti Vadera (chair of Santander UK)
- 10-1: Andy Haldane (BoE chief economist)
- 16-1: Dave Ramsden (BoE deputy governor)
- 16-1: Robert Chote (Head of the Office for Budget Responsibility)
- 20-1: Haruhiko Kuroda (Bank of Japan)
Here’s our round-up of likely candidates to replace Mark Carney:
(don’t be shy about applying if you’re not on the list!)
Hammond, the key points
Last month’s Spring Statement didn’t contain many fireworks, so it’s not surprising that Philip Hammond’s appearance before the Treasury committee went fairly smoothly.
But there are a few key points to note.
1) Hammond kicked off the race to replace Mark Carney at the Bank of England by calling for a top-notch central banker of the “highest calibre”. By insisting that the next governor must already be deeply respected at the top of central bank circles, Hammond seems to be ruling out an internal promotion, or a left-field candidate from outside the sector.
2) With Britain’s deficit hitting a 17-year low this morning, the chancellor remains confidence of balancing the books in the next decade. However, he also pointed out that this is a political choice; he or his successor could choose to borrow more to invest, and ease austerity.
3) On Brexit, Hammond warned that the uncertainty is still hurting the UK... deterring businesses from investing. He also guided MPs not to expect a spending review to be launched this summer, if Britain’s exit hasn’t been agreed.
The chancellor also told the committee that the crisis teams who prepared Britain for a no-deal emergency have been stood down, but could be back in action if the Brexit cliff-edge looms again.
4) On fiscal issues, Hammond pinned the blame for rising taxes on the cost of caring for Britain’s growing number of older citizens. That burden will only increase over the next few decades, he added.
Finally, the Treasury committee try to tackle Philip Hammond about security concerns around Huawei, the Chinese telecoms firm.
It’s not Hammond’s core area, but he is off to China this week to build closer business links.
Q: So it is correct that Britain has approved Huawei equipment to be used in our new 5G network, despite security warnings?
Hammond won’t say exactly what has been decided, but argues that security and cost need to be balanced:
“It’s essential that we get the balance right, ensuring that our networks are built in a way that is secure against interference from whatever source, but also are competitive.”
“But where our security experts tell us that there are ways in which we can maintain security -- whether it’s in networks or installations -- that avoid the most economically costly outcomes, then we should look very carefully at those options.”
That could be a hint that Huawei kit – often cheaper than its rivals – will be deployed in the UK, despite having been banned in Australia and the US.
Last week, Huawei told us that the US government was ignorant about security, and denied being a security danger.
Rushanara Ali MP asks Philip Hammond about Loan Charges -- affecting people who were paid their income in loans, and are now facing tax demands from HMRC.
She says that the issue has been badly mishandled, leading to depression, suicidal thought, and to six people killing themselves (as reported in the FT). What is the Treasury doing to help?
Hammond says HMRC takes seriously its obligations to protect and support people who are vulnerable through their financial affairs.
And he concedes that some of the people hit with tax demands will have had no idea they had done anything wrong:
Whether people have knowingly and egregiously entered into tax avoidance arrangements or if they’ve unwittingly found they owe the Revenue a large amount of money...it will be a very stressful and traumatising experience.
HMRC estimates that around 50,000 people were paid in loans, which it says were actually ‘disguised remuneration’ as they weren’t meant to be repaid. Many worked in business services such as IT contractors, but others were in construction, engineering and accountancy.
Those involved now face paying tax on all this income in one year. That can mean a higher tax bill than would have been the case otherwise (because the personal tax-free allowance can’t be applied more than once).
Q: But aren’t you concerned about reports of suicides?
HMRC is aware of one case where, sadly, a taxpayer committed suicide and an loan charge investigation was underway, Hammond says. That doesn’t mean there was a link, but HMRC has reported itself to the police, he adds.
He also sounds unimpressed when Ali points out that agency workers such as nurses have been caught in this problem, saying he’d like evidence of these “oft-quoted” cases.
Updated
PwC chief economist John Hawksworth is a little disappointed by today’s UK borrowing figures, but argues that the underlying picture is brighter.
Public borrowing in March was £1.7bn, up from £0.8bn in March 2018. As a result, the total budget deficit for 2018/19 is estimated at £24.7bn, slightly higher than the OBR’s £22.8bn forecast in March.
These are only preliminary estimates. The bigger picture is one of significant improvement in the public finances. The budget deficit is down by more than £17bn on a year earlier and now stands at its lowest level in 17 years. Gordon Brown’s ‘golden rule’ of borrowing only to invest was met with a margin of £19bn in 2018/19, showing that the underlying state of the public finances is now relatively healthy.
The bond-trading experts at City firm M&G have been canvassing suggestions for the next Bank of England governor....
Some female candidates suggested to us: Minouche Shafik, Shriti Vadera, Janet Yellen, Helen Rey, Christine Lagarde, Mariana Mazzucato.
— Bond Vigilantes (@bondvigilantes) April 24, 2019
Hearing a smallish shout for Andy Haldane, who some regard as a bit far out.
— Bond Vigilantes (@bondvigilantes) April 24, 2019
John McDonnell MP, Shadow Chancellor, has criticised the government’s handling of the economy, in the light of today’s borrowing figures.
He says:
“So much for the deficit being eliminated – something the Tories told us they would achieve by 2015.
“Four years on and the Government has added another £1.7 billion to the deficit in March alone.
“Nine hard years of austerity have held down growth, and shifted deficits onto the shoulders of local councillors, NHS managers, and head teachers.”
Onto Brexit planning....and Philip Hammond says it’s “prudent” to keep planning for a no-deal crisis, in case the UK crashes out of the EU.
He tells MPs on the Treasury committee that the crisis management teams who were working to protect the UK from a cliff-edge exit in April have been stood down (now that Article 50 has been extended up to October). However, they could be reactivated if the crisis blows up.
He says:
The work can’t be kept going at that intensity as people were working incredibly long hours, seven days a week.
However, other preparation is continuing.... such as HMRC work on new IT at the UK border. That work will also be useful if Britain leaves the EU under the withdrawal agreement.
Updated
Hammond: Brexit could delay spending review
Philip Hammond has hinted that the government may be forced to delay its next major Spending Review (which outlines public spending plans for the next few years), because of Brexit.
If we’re going to do a full three-year spending review, we need to start it before the summer recess so the conclusions are complete before the autumn, Hammond tells the committee, adding:
My own view is that if we have not found a solution to the Brexit conundrum, it probably wouldn’t be appropriate to begin a three-year spending review in the summer...
A final decision will be taken in the next few months, he adds.
Hammond has also agrees that the highest earners (who pay 28% of all tax) often have the greatest ability to move their assets abroad.
But he also jokes that colleagues who want taxes cut are often the ones who want public spending raised. The only way to balance that tension is to grow the economy.
The chancellor also refuses to say when the government will release its long-awaited Green Paper on social care, a key issue when examining the ageing population challenge.
Hammond adds that the UK’s international rivals are all facing the same demographic challenges.
We’re all wrestling with the same questions of how to support a growing older population, and to deliver technology-related healthcare on a smaller base of tax-paying workers, he explains.
Hammond: Aging population is pushing taxes up
Another teaser for Philip Hammond at the treasury committee:
Q: Tax revenues are expected to hit 34.6% of GDP this year - a level only exceeded once since 1950. What’s your reaction and what should this level be?
34.6% is below the OECD average, Hammond replies, adding that he’d “like to think” that Britain could keep itself at, or below, that average.
But tax, as share of GDP, is rising worldwide, he adds -- due to ageing populations.
The chancellor warns firmly:
We have to recognise that as the population ages, the pressure on public services and public spending will increase.
The independent Office for Budget Responsibility’s long-term forecasts suggests that forecast will keep rising up to the forecast horizon 50 years out, Hammond adds -- a hint that the tax take won’t fall soon?
Although borrowing is down, today’s public finances show that Britain still hasn’t managed to eliminate its deficit and run a surplus.
And with excellent timing, the Treasury committee have just asked Philip Hammond when the fabled surplus might turn up.
The chancellor replies that the government is on track to hit its long-term targets, so could run a balanced budget in the mid-2020s if it chooses too.
But he then makes an important point --- that’s a choice, not a certainty.
Ministers have options about what we want to do, and that’s a “very good place to be”, says Hammond. There’s no sense in plumping for one or the other now (especially as events have a nasty habit of knocking plans off course).
Britain’s total debt mountain has now swelled to £1.801 billion, or 83.1% of GDP.
That’s £2bn less than forecast, and a smaller share of the economy than a year ago.
Britain’s deficit has now shrunk by four-fifths since the dark days of the financial crisis.
In 2008-09, the UK borrowed £153bn, or 9.9% of GDP, as the economy plunged into recession and the taxpayer bailed out the banks.
At £24,7bn, last year’s borrowing was just 1.2% of GDP.
Updated
UK budget deficit hits 17-year low
Newsflash: Britain’s budget deficit has hit its lowest level since the middle of Tony Blair’s premiership.
The UK borrowed £24.7bn to balance the books in the last financial year, new figures show. That’s the lowest since 2001-2002, and sharply down on a year ago.
However, the bad news for chancellor Hammond is that borrowing in the latest full financial year was £1.9bn more than the £22.8 billion forecast by the Office of Budget Responsibility.
More to follow...
Philip Hammond has dropped a loud hint that the next Bank of England governor will come from abroad.
By emphasising the need for someone who “commands respect” at the highest levels of international central banking (see here), the chancellor seems to be ruling out internal options.
So who could it be? Here’s a few thoughts:
Raghuram Rajan: The former Bank of India governor certainly has the leadership experience needed. He’s also a top economist, who warned in 2005 that a financial crisis was looming. One problem: he’s said he doesn’t want the job. But perhaps he could be persuaded….
Agustín Carstens: Another experienced option, having run the Bank for International Settlements (the central bankers’ central bank) and the Bank of Mexico. Lost out on the IMF job to Christine Lagarde in 2011. He also served as Mexico’s finance minister, so will understand the politics….but might lack Carney’s communications verve.
Janet Yellen: The former head of America’s Federal Reserve was disappointed not to be reappointed by Donald Trump last year. But the Fed’s loss could be the Bank of England’s gain. As vice-chair to Ben Bernanke, then chair, she helped steer America’s economy through the financial crisis, and then began to unwind its stimulus programme. Her experience of raising interest rates and selling government bonds could be handy at the BoE, when the time comes to reverse QE....
Rajan, incidentally, is leading this internet poll....
As the Chancellor opens the job search for the next @bankofengland Governor, who would be the best choice? Poll option, or write in your better pick...
— Bond Vigilantes (@bondvigilantes) April 24, 2019
Updated
Q: What pro-growth policies will you focus on, once Brexit uncertainty is over?
Hammond talks about the government’s efforts to boost productivity.
Once we’ve resolved the Brexit issue, we can decide the future trajectory of public spending, he says (a hint that there could be tax and spending changes).
The chancellor then warns that Brexit is sucking up a lot of the Treasury’s ‘bandwidth’.
We have 1,500 full-time equivalent staff, and there are currently 400 working on Brexit -- that’s a huge chunk.
Once we can redeploy those people, it will make a difference, he adds.
Q: Should the government step up its investment, to cover the drop in private sector investment?
Hammond says not, as the economy is still running at almost full capacity despite Brexit uncertainty.
Hammond: Need to end Brexit uncertainty ASAP
The Treasury committee moves onto other business...
Q: Why is UK business investment so weak?
Philip Hammond agrees that business investment is weaker than hoped, and he pins the blame firmly on Brexit.
It’s pretty clear to me that the principle reason is uncertainty created by how we are going to leave the European Union.
Many businesses are deferring spending decisions until they have more clarity, he adds.
Q: When will this uncertainty lift?
Hammond points out that while Britain’s Brexit extension now runs until the end of October, the UK can leave earlier if parliament passes the withdrawal agreement.
He hopes MPs will break the deadlock, saying the sooner we can bring this uncertainty to an end, the better, “both for the state of our politics and the state of investment in our economy.”
Businesses also want the situation resolved soon, he adds.
Hammond: We want "highest calibre" appointment
Philip Hammond is appearing before the Treasury committee now.
And we're off! pic.twitter.com/UInKLs9MyS
— Treasury Committee (@CommonsTreasury) April 24, 2019
Nicky Morgan MP begins by asking about the search for a new Bank of England governor.
Q: Will you insist that the next governor serves a full eight-term?
Hammond says it’s usually an eight-year term, but Carney was allowed to serve a shorter term,.
Our expectation is to appoint for eight years, but if an “outstanding candidate” couldn’t commit that long, the Treasury would consider it, the chancellor explains.
Q: What qualities are you looking for?
We want a candidate of the highest calibre, Hammond replies. As Britain leave the EU, it’s important that the UK still plays an important role globally.
The chancellor explains that the next BoE governor needs to be “recognised and respected at the highest levels of the central bank circuit”.
We need someone who commands respect in the international arena, as well as doing a top-notch job at home.
Q: When will you make the appointment?
The closing date is June 5th, Hammond replies, and the government hopes to make the appointment in October. Whoever gets the job will start in February 2020.
UK Chancellor Hammond: We Expect To Appoint Next BoE Governor For An 8Yr Term
— LiveSquawk (@LiveSquawk) April 24, 2019
- If An Outstanding Candidate Could Not Commit For An 8Yr Term, We Could Consider
- Very Much In UK Interest To Have BoE Governor Who Is Recognised
The BBC’s Katie Prescott points out that Sapphire Partners have already helped add two women to the Bank’s Financial Policy Committee in recent years:
Choice of headhunter for the next Bank of England governor suggests we could see a woman in the role. Sapphire focus on diversity & placed Jayne-Anne Gadhia & Colette Bowe in the FPC for them in Jan @BBCBusiness
— Katie Prescott (@kprescott) April 24, 2019
The government’s choice of headhunters to find a new Bank of England governor may be significant.
Sapphire Partners was set up in 2005 with a specific remit to help women keep climbing the corporate career ladder towards the top, while also juggling family responsibilities.
Here’s a piece we wrote about the firm, back in 2007.
Currently the Bank of England only has one woman, Silvana Tenreyro, on its Monetary Policy Committee, alongside eight men.
Founder Kate Grussing (named as a contact for BoE hopefuls to call), is adamant that there’s no excuse for companies and organisations not to hire women. She said last year:
“The appalling excuses given by many companies for why they can’t appoint more women to board or executive roles are truly disgraceful, lame and lazy,” she said.
“Companies and recruiters have to be more creative and persistent in looking for diverse talent but it exists in greater numbers than ever.
“Putting token women on their boards or photographs on their careers website won’t make a difference to the executive pipeline.”
Updated
During his time at the Bank, Mark Carney has faced criticism for (in some eyes) being too negative about Brexit.
Tory MP Jacob Rees-Mogg struck the lowest blow, calling Carney a “failed-second tier politician” who shouldn’t be at the Bank at all.
Carney seemed to shrug such barbs aside. But... the FT’s Chris Giles has heard that Hammond is worried that such attacks may deter potential successors.
The chancellor is seeking a candidate with the calibre to turn heads and make people sit up and listen in international meetings, he has told journalists although he said this month he worried that vicious politics surrounding the Brexit process might deter some suitable candidates
Here’s our news story on the race to succeed Mark Carney:
Some instant reaction....
Surely it's time to finally have a female Bank of England governor? Though wouldn't envy anyone that gig at the moment... https://t.co/Cln60mfcry
— Alex Lawson (@MrAlexLawson) April 24, 2019
Treasury formally launches search for next Bank of England Governor - plenty of current/former internal talent but use of exec search agency for first time suggests might be keen for fresh blood
— Dharshini David (@DharshiniDavid) April 24, 2019
For the first time, the government will use headhunters to find the next BoE governor.
It says:
The Treasury will be using a specialist executive search agency to ensure we find the best qualified appointee from the widest, most diverse pool of candidates possible.
That’s another sign that they’re casting the net wider than usual (or at least keen to show that they are.....)
The successful candidate will be paid £480,000 per year, the same as Mark Carney has received each year since 2013.
But.... Carney’s pay package has been bolstered by a £250,000/year housing allowance, to assist with his family’s move to the UK from Canada. A successor from overseas might want similar help....
Add in pension contributions, and Carney actually received £881,574 last year.
Updated
Wanted: Outstanding candidate for governor
The official advert for the governorship has been published, making it clear that Britain is looking for a heavy hitter to succeed Carney.
It says:
The successful candidate must demonstrate that she/he can successfully lead, influence and manage a complex and powerful financial institution, inspiring confidence and credibility within the Bank, throughout financial markets, in the wider public arena and on the international stage.
Economic expertise will obviously be vital too...
She/he will need a broad range of capabilities ranging from macroeconomics, to understanding developments in, and the structure of, financial markets, to macro-prudential and micro-prudential supervision.
As will experience at the top:
Potential candidates will have substantial experience of working at the most senior level in a major bank or other financial institution or of working in, or involvement with, central banking (e.g. the Bank for International Settlements or the International Monetary Fund).
In addition, the next governor must also show leadership, communication skills, and “sound judgement to make decisions in a timely manner against a background of uncertainty”.
UK launches search for new Bank of England governor
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s one of the biggest jobs in the UK, responsible for setting interest rates and helping the economy navigate the rapids of political and financial crises at home and abroad.
And this morning, the race to become the next Bank of England governor formally began. With Mark Carney scheduled to leave at the end of January 2020, the government is looking for a top-notch replacement to run the UK’s central bank.
The Chancellor of the Exchequer, Philip Hammond, fired the starting gun this morning, saying:
“In today’s rapidly evolving economy the role of Governor is more important than ever. Finding a candidate with the right skills and experience to lead the Bank of England is vital for ensuring the continuing strength of our economy and for maintaining the UK’s position as a leading global financial centre.
“I look forward to working with Mark Carney over the remaining months of his term as Governor. His steady hand has helped steer the UK economy through a challenging period and we are now seeing stable, low inflation and the fastest wage growth in over a decade. And under Mark’s leadership the Bank of England has been at the forefront of reforms to make our financial system safer and more accountable.”
Cue a flurry of speculation about likely candidates.
Will Britain look abroad again, or choose a domestic candidate to follow Canadian Carney? Will the Treasury favour an experienced hand, perhaps one (like Carney) who’s already run a central bank? Or perhaps a rising star from within the BoE, or beyond?
More to follow....
Also coming up today
Hammond is testifying to the Treasury committee this morning, on last month’s Spring Statement. He’ll also field questions on the Bank of England governorship, and might drop some clues about the sort of candidate he’s after.
We also find out whether Britain’s public finances continued to improve, with new borrowing figures for March out this morning.
And Wall Street could be buzzing later, after the S&P 500 closed at a new all-time high last night.
The agenda
-
9.15am BST: Philip Hammond testifies to Treasury Committee
- 9.30am BST: UK public finances for March released
- 3pm BST: Bank of Canada interest rate decision
Updated
