Yahoo Finance Pound dips on cautious Bank of England comments; Whitbread retreats over 4pc on sinking Costa Coffee profits
Costa Coffee owner Whitbread sinks over 4pc as profit falls by 10pc at the coffee chain; the firm trails the flat FTSE 100
Nikkei 225 extends record-breaking run in Tokyo following prime minister Shinzo Abe's election victory; Japan's blue-chip index closes higher for a record 16th consecutive session
Sterling on the back foot on the currency markets; retreats 0.6pc against the dollar to $1.3125 on cautious tone on interest rates from Bank of England deputy governor Jon Cunliffe
Markets wrap: Sterling suffers pre-match nerves on Bank of England deputy governor comments
The pound has tumbled on currency markets this afternoon as nervy investors got pre-match jitters ahead of next week's Bank of England meeting after the central bank's deputy governor Jon Cunliffe doubled down on his interest rate hike caution.
Mr Cunliffe said that the timing of the first hike is still an "open question" and that the economy had cooled this year, sending sterling sliding 0.6pc against the dollar to $1.3120.
Sterling's retreat couldn't stop the FTSE 100 stagnating in flat territory for a third consecutive session with Whitbread's 4.8pc dive weighing heaviest on the blue-chip index.
The Costa Coffee owner retreated after profit in its key coffee shop chain sank by 10pc amid rising costs.
Over in the US, a round of strong corporate earnings from giants Caterpillar and 3M has lifted the Dow Jones to another record intraday high this afternoon.
It's 'first come, first served' for Brexit hubs but we'll say no to shells, Germany tells City
German's financial watchdog has said it will not let UK-based banks set up shell hubs in the country because of Brexit, adding that it will deal with requests on a "first come, first served" basis as a cliff-edge scenario looms.
Frankfurt is one of the leading contenders to lure banks and financial services companies from London in the event of a so-called hard Brexit. BaFin president Felix Hufeld said regulators now have to assume this will occur given that "negotiators have not made sufficient progress on the designated key separation issues".
He added: "For the time being, we therefore have to assume that the UK will not be member of the common market or anything close to it following Brexit. There are only 18 months to go before that happens, possibly leading to a so-called cliff-edge situation."
Read Lucy Burton's full report here
Electricals lender Brighthouse stumps up £15m in customer redress
Rent-to-own lender Brighthouse is facing a £15m compensation bill after agreeing to repay a quarter of a million customers following intense scrutiny from the financial watchdog over its lending practices.
The Financial Conduct Authority, which has been in talks with Brighthouse for the past two years, said that the company had not acted as a "responsible lender" and had not properly assessed whether customers had the ability to repay their goods.
Brighthouse, which rents out electricals and furniture to chains through 280 shops, now has to pay back 270,000 customers after the FCA found that some of its lending agreements "may not have been affordable" and some payments should have been refunded.
An investigation last year by the BBC highlighted that a £358 washing machine ended up costing Brighthouse customers more than £1,000.
Read Ashley Armstrong's full report here
Dairy farmers warn a no-deal Brexit could push up the price of milk
The cost of a pint of milk could rise unless Brexit negotiations settle a trade and labour deal, the UK’s dairy farmers have warned.
The industry - which employs more than 70,000 people - said Britain leaving the EU without striking a deal and having to resort to World Trade Organisation tariffs would be “the worst outcome”.
Calling Brexit a “monumental and game-changing challenge”, Paul Vernon, chairman of trade body Dairy UK, said the industry has “tremendous potential for exports and product development” if a deal can be reached.
Read Alan Tovey's full report here
Dow Jones rebounds on earnings beats
Markets are open in the US and the Dow Jones has rebounded after the dour finish to yesterday's session.
General Electric's plunge dragged down the seemingly ever-rising index but today, exceptional corporate earnings are helping the US's benchmark index rise once again.
Machinery making mammoth Caterpillar has jumped 5.2pc after upgrading its own forecasts to help it eclipse Boeing as the best performer on the index in the last three months while tech company Corning has advanced 5.4pc after beating its estimates.
On the economics front, the US had its own PMI readings this afternoon and both the manufacturing and services sectors performed ahead of economists' expectations in October with the composite figure jumping up to 55.7 (any reading above 50 indicates growth).
Insurers falling behind banks on gender equality, says Virgin Money boss
Banks are making progress in battling sexism and promoting women, but insurance companies in particular are failing to improve, Jayne-Anne Gadhia has warned.
The chief executive of Virgin Money and author of the Women in Finance charter told MPs that banks are under intense scrutiny and have worked hard to improve their cultures since the financial crisis, but other finance firms have escaped the same sort of attention.
“One area of financial services I think we should shine a spotlight on is insurance. The insurance sector is definitely less committed to this agenda than the banking sector,” she told MPs on the Treasury Select Committee.
Ms Gadhia said Inga Beale, the chief of insurance market Lloyd's of London, is leading the charge in that sector, but that other firms needed to join in.
Read Tim Wallace's full report here
European employment rockets, giving Macron room for reform
Strong order books for French and German firms have boosted employment growth in the eurozone to its highest level in a decade.
IHS Markit’s composite purchasing managers index (PMI), in which any reading above 50 suggests growth, showed France's private sector was in rude health in October, with a score of 57.5, up from 57.1 in the previous month and the highest reading for more than six years.
Germany's was slightly lower, at 56.9, down on the past two months, but businesses there are still picking up new orders at a strong rate, also the best seen in six years. This has resulted in job creation hitting a new five month high.
As the eurozone's largest economies, the two countries drove the general expansion in the bloc, with the rate of growth in business activity for the rest of the countries slowing to its weakest level for a year.
Read Anna Isaac's full report here
Premier Inn delivers the goods for Whitbread as Costa Coffee cools
Whitbread is plotting further growth in its Premier Inn hotel chain even as tough conditions on the high street and rising costs hit its Costa Coffee arm in the UK.
Chief executive Alison Brittain said she was particularly pleased with how Premier Inn had performed during the six months to August 31, pointing out it had kept occupancy levels in the half above 80pc in the regions and at 85pc in London, in spite of a huge expansion programme.
“We are opening 10,000 hotel rooms in two years, which is like an entire hotel chain,” Ms Brittain said.
“We are happy to open new rooms because we are full.”
Read Bradley Gerrard's full report here
Lunchtime update: Pound dips on dovish BoE deputy governor comments
Bank of England deputy governor Jon Cunliffe has knocked the pound this morning by reiterating his more cautious stance on interest rates to sow a small seed of doubt on the markets.
Mr Cunliffe said that the timing of the first hike was still an “open question” just a week after he and fellow policymaker Sir Dave Ramsden cast doubt over a hike at next week's MPC meeting.
Costa Coffee owner Whitbread has stumbled to the bottom of the FTSE 100 after reporting a 10pc drop in profit in its coffee chain division with the overall index stuck in flat territory for a third straight session.
Attention has now turned to earnings on Wall Street, according to Henry Croft, head of research at Accendo Markets.
He said:
"Global equities are trading higher into the afternoon as investors await key trading updates from five Dow Jones components. On the FTSE 100, buoyant commodity prices are helping to offset the impact of a disappointing set of results for Whitbread in which life-for-like growth at its Costa branches looked underwhelming, whilst positive Manufacturing PMI data and M&A speculation in the German banking space is helping the DAX higher. After breaking a run of six consecutive record closing highs, Dow Jones futures are pointing to a positive open on Wall Street ahead of results from constituents that make up over 15% of its overall weight."
Carpetright shares slide as boss warns of ‘volatile conditions’
Carpetright shares fell 6.36pc this morning after the flooring retailer said profits would be lower in the first half of this year and its chief executive warned of "volatile" trading conditions.
Group sales were up 1.8pc in the 25 weeks to October 21, boosted by 6.3pc like-for-like sales growth in its international arm. UK same-store sales were up 0.8pc, with a 2.1pc increase in flooring sales offset by declining demand for beds.
"Trading conditions in the UK remained volatile over the first half," said chief executive Wilf Walsh.
The company now expects profits in its first half to be lower than the £4.1m it reported in the same period last year.
Bank of England policymaker Jon Cunliffe puts the pound under the cosh
Sterling is still under the cosh on currency markets after Bank of England deputy governor Jon Cunliffe doubled down overnight on his more cautious approach on interest rates.
Nonetheless, the markets are still pricing in a 82.4pc probability of a rate hike next week. How did we get so close to our first increase in a decade?
June: BoE chief economist Andy Haldane comes out to say that he might vote for an interest rate rise soon, opening up a rift against the consensus of the central bank's policymakers.
September 14: The Monetary Policy Committee surprises the markets by strongly hinting that it will raise rates before the end of the year if the economy continued to perform as expected.
September 15: Gertjan Vlieghe, one of most dovish of the nine policymakers on the MPC, boosts the pound by putting himself in the pro-hike camp, indicating a shift in thinking at the bank.
October: Deputy governors Sir Dave Ramsden and Jon Cunliffe take a more cautious tone on hiking rates, raising doubts about the MPC's stance just weeks before the crucial November meeting.
RationalFX chief executive Paresh Davdra commented that the pound could be put under some pressure this week:
"Analysts have typically favoured the pound as the likelihood of a rate rise increases, and so any signals to the contrary could weigh on sterling.
"Investors will be watching closely to see how the pound reacts to both UK GDP data due for release this week and the ECB policy meeting. If the ECB meeting does indeed push the euro higher on Thursday, the pound could see a lot of movement in the coming days."
Carillion handed lifeline by lenders as it offloads healthcare contracts to Serco
Carillion has been handed a lifeline by its lenders after agreeing new debt facilities, while selling part of its healthcare division to rival Serco.
The company has agreed £140m of debt with two lenders and will defer some pension contributions and the repayment of other debt, which in total mean it estimates it is between £170m and £190m better off in terms of its cash position.
Carillion has suffered a bruising few weeks in which it lost around £800m of its market capitalisation amid heavy losses and a huge impairment charge linked to troubled contracts.
Chief executive Keith Cochrane said last month that there needed to be a “change of culture” if the company was going to come back from the brink, and outlined £75m of cost-cutting.
Read Rhiannon Bury's full report here
Eurozone PMIs: what the experts say
Eurozone composite PMI down slightly at start of Q4 but continues to support our growth estimate of 2.2% for 2017, fastest since 2007 pic.twitter.com/a7pwUKt7N7
— Pepijn Bergsen (@pbergsen) October 24, 2017
Let's get a quick round-up on what the experts are saying about our sole macro highlight of the day.
The eurozone's economic recovery has continued at a "healthy pace" in the final quarter, according to Capital Economics European economist Stephen Brown.
He added:
"While the euro-zone Composite PMI declined, it still points to healthy GDP growth. So the ECB is likely to feel that a decision to taper its asset purchases is justified. On Thursday, we expect the Bank to announce a full roadmap for tapering its purchases to zero over the first nine months of 2018."
This might be some way off but Mr Brown said that the survey indicated that inflationary pressure is rising slowly meaning that the ECB is unlikely to pull the trigger on interest rates until 2019.
Pantheon Macro analyst Claus Vistesen said that overall growth was robust.
He commented:
"The dip in the services index to 54.9 has to be watched for further weakness, but for now it signals robust growth in the private sector. In addition, strong export orders continue to support activity in manufacturing.
"The PMI has been too optimistic on GDP growth recently, but the chart shows that the headline index signals strong and stable momentum."
Market latches onto Costa Coffee profit decline
Whitbread can't exactly blame coffee prices for falling Costa profits... though importing in GBP not so good pic.twitter.com/QPVq8bO63B
— Jasper Lawler (@jasperlawler) October 24, 2017
Shares in Premier Inn owner Whitbread appear to have bottomed out for the morning at a 4.6pc fall on the FTSE 100.
A 9.8pc fall in pre-tax profit in its Costa Coffee business couldn't offset the 26.5pc jump achieved at Premier Inn but its the former division's weak figures which the market has latched onto this morning.
Although the firm still expects to meet expectations in its full-year figures, Costa Coffee's UK performance proved a "drag" this morning, according to ETX Capital analyst Neil Wilson.
He added:
"At Costa underlying profits were in line with expectations – which were not high. Profits were flat at £65m. The key metric that investors will be concerned by is the LFL sales growth in the UK – which as expected slid below 1% to 0.6% in the first half and just 0.1% in the second quarter.
"Last year LFL sales were running at 2%. Express sales growth also slowed to 17.7% from 21.9% a year ago despite a 25% jump in machines. Nevertheless, Costa remains a growing brand on the UK high street with total revenues in the UK up 8.3%, driven by the addition of 108 net new stores, which means it is still gaining market share."
Eurozone has continued its stellar year into the final quarter despite cooling services
����Despite another rise in #eurozone mfg #PMI in Oct, composite measure points to stabilization of Q3 & Q4 #GDP growth around current levels pic.twitter.com/4bUooJumV9
— Aila Mihr (@aila_mihr) October 24, 2017
Despite that slight cooling in services sector activity on the Continent, today's PMI figures still indicate that that the eurozone economy has continued its stellar year into the final quarter, according to IHS Markit.
Its associate director Andrew Harker pointed out that job creation hit its quickest pace in over a decade with the manufacturing sector recording another record rise in employment.
IHS Markit said that despite the slowdown, the figures were broadly consistent with 2017's very strong trend.
Mr Harker added:
"Firms don’t appear to have been unduly affected by recent euro strength, with growth of new export orders accelerating in October. Healthy demand in export markets appears to be outweighing any negative currency impacts."
Eurozone services sector cools in October
Eurozone PMI data mixed - services falls short of forecasts but manufacturing beats #Markit#PMI#EURpic.twitter.com/6iM4nWDR72
— Sigma Squawk (@SigmaSquawk) October 24, 2017
Sterling appears to have halted its drift downwards against the euro after PMI figures showed that the services sector cooled faster than expected in October.
Manufacturing's climb to a record reading of 58.6 (anything above 50 indicates growth) couldn't offset the slowdown to 54.9 in the services sector with the overall figure dipping to a still robust 55.9.
While we have the headline numbers, the release and commentary from IHS Markit seems to have gone walk about. My theory is that their release calendar is still on BST but I'll bring you some analysis beyond those probably quite arbitrary-looking numbers hopefully soon.
Pound dips as Bank of England deputy governor doubles down on cautious hike tone
Sterling has taken a knock on the currency markets this morning after Bank of England deputy governor Jon Cunliffe doubled down on his cautious tone on interest rates by saying that a hike at next week's meeting is still an "open question".
A rate hike at the central bank's meeting on November 2 seemed a done deal when Gertjan Vlieghe, one of its most dovish policymakers, came out in support of the Monetary Policy Committee's stance. But fellow rate-setters Sir Dave Ramsden and Jon Cunliffe have in the last week cast doubt over a hike with the maths getting much tighter than the markets have priced in.
Spreadex analyst Connor Campbell commented on this morning's action:
"Despite the pound slipping 0.1% against both the dollar and the euro, with the currency suffering on Bank of England deputy governor Jon Cunliffe claiming a November rate hike is an ‘open question’, the FTSE couldn’t find its way to any significant growth this morning.
"Part of the reason for the FTSE’s lack of momentum will be the near 4.5% plunge suffered by Whitbread following its half year results. On many fronts the interim update was stellar; total revenue rose 7.4% to £1.67 billion, while underlying pre-tax profit was up 6.7% to £328 million. Premier Inn’s figures especially impressed, with the hotel chain’s comparable sales surging 3.6%, an improvement on last year’s 2.4%, with revenue per available room (arguably the more important metric) up 1.8%."
Agenda: Costa Coffee owner Whitbread sinks; pound on the back foot
The Nikkei 225 has taken the Dow Jones' mantel as the perennial record breaker on the markets with Tokyo's blue-chip index closing higher for a record 16th-consecutive session this morning.
Following prime minister Shinzo Abe's victory in Japan's snap election, the index brushed aside a negative session in the United States after giant General Electric dived 6.3pc.
Back in London, the FTSE 100 has inched down into the red with Premier Inn owner Whitbread sinking just under 4pc on disappointing sales in its Costa Coffee brand.
Asia mkts shrugging off Wall St slide given positive macro narrative of strong growth & subdued inflation. #Japan extends 16d winning streak pic.twitter.com/jWGs3MMcjG
— Holger Zschaepitz (@Schuldensuehner) October 24, 2017
We have to go to Europe for our daily fix of economics data with no major releases due in the UK this morning. IHS Markit's manufacturing and services PMI surveys are due at the top of the hour for the eurozone.
Just before the headline release, a stronger-than-expected reading from France and a mixed set of data from Germany hint at a solid overall performance and the pound is already on the back foot against the euro this morning, dipping 0.1pc to €1.1231.
Interim results: Whitbread, Bloomsbury Publishing, Gear4music, St James's Place
Trading statement: Bunzl, Shoe Zone, Carpetright, Anglo American, International Personal Finance
AGM: Brooks Macdonald Group, Oil & Gas Development Company, Mcbride, Premaitha Health
