- FTSE 100 defence giant BAE Systems will axe almost 2,000 jobs amid a slowdown in orders for its flagship Typhoon jet
- Pound continues rally on currency markets as Theresa May steadies her position; nudges up 0.4pc to $1.3190
- Sterling boosted by industrial, manufacturing and construction sectors all beating expectations in ONS output figures; trade deficit widens in the three months to August by £6.2bn due to a switch from a surplus to a deficit on the balance of erratic commodities
- Nervy markets await Catalan leader Carles Puigdemont's address to the region's parliament; IBEX 35 sheds over 1pc
Defence giant BAE Systems has axed almost 2,000 jobs amid a slowdown in orders for its flagship Typhoon jet.
The FTSE 100 firm said that the job losses, which were almost double the expected number, were to go as part of a restructuring effort intended to streamline the business with analysts noting in the run-up to this morning's update that progress in its US division was likely to be offset in the future by its decelerating UK business.
The bulk of the losses are expected to affect BAE's Warton factory in Preston, Lancashire, and, after initially dropping on the news, the firm's shares are now largely unchanged.
Markets' gaze firmly fixed on Barcelona ahead of key Catalonia speech
Markets are now closed in Europe and the FTSE 100 has finished today the sole index left in positive territory in Europe with the IBEX 35 slumping again on Catalonia jitters.
The markets' gaze is now firmly fixed on Barcelona with Catalonia leader Carles Puigdemont due to speak at the top of the hour. Update: it appears he has delayed the speech by an hour. Bottle job?
CMC Markets analyst David Madden believes a repeat of the ugly scenes last week could send the Spanish market into a "tailspin".
"The Catalan countdown continues and investors are waiting for the speech from Carles Puigdemont, the Catalan leader. Mr Puigdemont is due to speak at 17:00BST. There is a possibility the President of Catalonia will declare independence from Spain. It could be a symbolic declaration of Independence or perhaps a unilateral declaration, and the latter could prompt Madrid to strip the region of the autonomous powers and impose direct rule.
"The scene is set as Spanish police have surrounded the Catalan parliament, and Mr Puigdemont runs the risk of being arrested. Investors would prefer to see a reasoned negotiation about Catalonia’s future."
Britain’s builders try to dodge recession as orders bounce back
Growth has returned for Britain’s builders as the embattled sector benefitted from a resurgence in orders in August.
Factories also beat growth expectations, raising hopes that the UK's recent economic slowdown has passed its worst point.
The National Institute for Economic and Social Research (NIESR) estimates the economy grew by 0.4pc in the third quarter of the year, up from 0.3pc in the second quarter.
Construction had appeared to be on the brink of recession, but a 0.6pc rise in monthly production reversed some of the 1pc contraction in July. The ONS said the sector grew by 3.5pc year on year.
Dow Jones hits fresh peak; investor sentiment unchanged following IMF prognosis
US markets have nudged up following the bank holiday across the Atlantic with the Dow Jones hitting another fresh all-time high at 22,850.51 before quickly easing off it again.
The IMF's upbeat global outlook has failed to lift investor sentiment this afternoon, according to Spreadex analyst Connor Campbell.
"The Washington-based institution was relatively upbeat this Tuesday, stating that the world economy should grow by 3.7% in 2017, up from 3.2% in 2016, while maintaining those levels in 2018.
"However, the IMF wasn’t so positive about the UK, stating it was an ‘exception’ to the overall chirpy outlook due to the uncertainty of Brexit, and the subsequent impact on wages and household spending."
IMF: The global recovery is at risk from the forces of anti-globalisation
The increasingly momentum behind anti-globalisation movements is one of the main threats to the recovering global economy, putting productivity and living standards at risk, according to the International Monetary Fund (IMF).
The latest forecasts for future economic health are based on a "benign global financial environment and a recovery in advanced economies,” which are driving a strengthening in economic global activity, the report claimed.
Global growth is projected to rise to 3.6pc in 2017 and 3.7pc in 2018, marking an improvement of 0.1 percentage points on the April forecast from the IMF. The outlook for emerging markets was also very positive, with expectations for a 4.6pc acceleration in growth in 2017, and 4.9pc in 2018, largely driven by China's economy.
However, poorer than expected performance in the UK economy for the first half of 2017 led to a 0.3pc downgrading of UK growth, to 1.7pc for the current year and 1.5pc in 2018. This fall was due to lower levels of private consumption, caused by a weaker pound squeezing household incomes.
Boeing claims against Bombardier 'totally unjustified'
Business secretary Greg Clark has called the US Department of Commerce’s decision to impose punitive tariffs on plane maker Bombardier “totally unjustified”, writes Jon Yeomans.
Mr Clark said the Government would “leave no stone unturned” in its bid to throw out the ruling, which could see the US slap an import duty of 229pc on Bombardier’s C Series planes.
The US was acting on a complaint from Boeing, which has claimed that the Canadian company received state aid in developing the C Series, the wings of which are made in Belfast. The tariffs could threaten the jobs of around 4,500 people employed by Bombardier in Northern Ireland.
Mr Clark refuted suggestions the UK Government had provided state support to Bombardier to help develop the C Series jet. “We have a very rigorous system for scrutinising state aid. The allegation doesn’t have merit and I expect to see it thrown out,” he told the House of Commons.
The minister revealed the Government had held 24 calls or meetings over the matter with US officials, 20 with Canada and 12 with Boeing, which is also a major employer in the UK.
Mr Clark repeated hints that the Government could review its partnerships with Boeing. “This is not the behavior we expect from a trusted partner and could have implications for our future relationship [with them],” he said.
Spanish stocks sink again ahead of key Catalan leader address
Ahead of Catalonia leader Carles Puigdemont's crucial address on the region's future (due at 6pm BST), Spanish markets are looking a little nervy.
The markets appeared to have shaken off the jitters yesterday but the IBEX 35 has sunk into the red once again, erasing yesterday's modest move higher.
Although Spain's blue-chip index has shed just over 1pc this afternoon, Spanish government bond yields have only nudged up slightly, climbing 2 basis points to 1.68pc.
UK GDP growth picked up in the third quarter, according to NIESR
The UK economy picked up in the third quarter, growing at a rate of 0.4pc, according to unofficial data just released by NIESR.
Amit Kara, head of UK macroeconomic forecasting at NIESR, noted, however, that while "growth is likely to be a touch stronger in the second half of the year", activity has slowed since last year at a time when growth in the US and eurozone has been gaining momentum.
Regarding the UK's outlook, she added:
"Looking ahead, we expect the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth and weaker sterling and away from domestic demand."
Ted Baker profits strut ahead of rivals despite slowing US growth
Ted Baker has strutted ahead of its fashion rivals by delivering a 14pc jump in profits for the first half of the year on the back of its ambition to become a global brand.
The business, which has recently opened new stores in Los Angeles and Shanghai, recorded pre-tax profits of £25.3m for the six weeks to August 12, compared to £21.5m the year before.
Total sales also lifted by 14pc to £295.7m during the period, propelled by a 43.8pc surge in online sales to £42.7m.
Weaker sales in North America took some of the gloss off the otherwise upbeat numbers. Sales growth in the region has slowed from 28.7pc last year to 18.8pc due to "higher levels of competitor promotional activity... and lower international tourism", it said.
Economists split over whether strong industrial figures will lift Q3 GDP growth
Before the BAE Systems job losses announcement dropped and topped the news agenda, we were having a look at the reaction to today's strong industrial production figures. I wouldn't want anyone to be deprived of their econ data so let's have a quick look at what the economists are saying in reaction.
Capital Economics UK economist Paul Hollingsworth said that the better-than-expected figures were reassurances that the economy has not lost pace in the third quarter and "suggested that growth could even nudge up a touch".
Pantheon Macro UK economist Samuel Tombs counter-argued that the pick-up will be too weak to lift growth as stronger industrial figures will be "largely offset by a slump in construction output".
"As a result, quarter-on-quarter GDP growth in Q3 looks set to only match the MPC’s 0.3% forecast contained in August’s Inflation Report.
"Note that the MPC’s hawkish shift last month was driven by its judgement that there was upside risk to its GDP forecast, which no longer appears significant. As a result, we still think that investors are wrong to think that a November rate hike is a done deal; we continue to think that the MPC will wait until next year."
BAE Systems to cut 1,900 jobs as new boss rings in the changes
The new boss of Britain's biggest defence contractor BAE Systems has wasted no time in wielding the axe with confirmation of more than 1,900 redundancies.
Charles Woodburn, who took over as chief executive three months ago, is making cuts across the firm's air, maritime and cyber defence divisions.
The job losses will be phased in over the next three years and equate to almost 6pc of BAE's 34,600 UK workforce.
The largest cuts are planned in BAE's factories in Lancashire - where up to 750 jobs will go - due to a slowdown in Typhoon fighter jet orders.
The firm had been hoping for a large Typhoon deal with Saudi Arabia - which ordered 72 of the aircraft 10 years ago - but this has so far failed to materialise, and smaller existing contracts with other Gulf nations are not enough to keep up full production.
Government “reviewing what support we can lend" to BAE Systems to keep redundancies to minimum
Understand Govt help for BAE will focus on re-training/job support not on orders/bail out for company— norman smith (@BBCNormanS) October 10, 2017
Claire Perry, minister of state, Department for Business, Energy and Industrial Strategy, told Parliament the Government was “reviewing what support we can lend the company”, insisting that the job losses were "not related to any UK defence spending decisions".
BAE will enter a 30-day consultation period with its workers, with the Government looking to keep compulsory redundancies to a minimum. Ms Perry said it was “incredibly important” that the BAE workforce’s skills “are retained in the UK as far as possible”.
“We absolutely understand this is a worrying time for those affected,” she added. “We are determined to do all we can to support BAE’s future export opportunities.”
OBR: UK productivity growth will continue to disappoint amid heightened uncertainty
UK productivity growth will continue to disappoint as heightened uncertainty weighs on investment, the Office for Budget Responsibility has said in its forecast evaluation report today.
While productivity growth, which has averaged just 0.2pc over the last five years, will still begin to pick-up, the uncertainty means that the OBR anticipates that it will "significantly" reduce its forecast for the next five years in November, adding the downgrade "is likely to have the largest quantitative impact" on its forecasts.
Costa banks on rising demand for coffee in China as it buys out partner
Costa Coffee hopes to feed growing demand for caffeine in China after spending £35m on the remaining stake of one of its joint ventures in the country.
Whitbread, which owns the coffee chain as well as hotel business Premier Inn, will buy the 49pc stake in the 252 store-strong South China business, which has been run with Yueda for the past decade, for 310m Chinese yuan.
China returned to positive like-for-like sales growth in the year to March and the company reckons the small loss the business posted in that period could become a £12m-£15m operating profit by 2022 with 700 stores compared to the 408 it has now across its two joint ventures.
The North China joint venture, run with 50/50 partner BHG, is unaffected by the deal.
Lunchtime update: BAE Systems axes almost 2,000 jobs; sterling boosted by industrial and manufacturing output figures
Defence giant BAE Systems has axed almost 2,000 jobs as part of a restructuring effort amid a slowdown in orders for its flagship Typhoon jet.
The blue-chip company's shares have pared some of its early losses following the mid-morning announcement but BAE is still underperforming the wider FTSE 100, which has nudged into positive territory, underpinned by rising banking stocks.
Already buoyant from the calming situation at Number 10, the pound has been boosted by industrial and manufacturing production figures beating expectations.
Industrial output remained steady at 0.2pc in August compared to the previous month but beat economists' forecasts on a year-on-year basis. The construction sector smashed expectations to record 0.6pc growth but the UK's trade deficit widened by £5.6bn in August, double the figure that economists were expecting.
Domino's Pizza brushes off casual dining woes with a little help from Strictly
A surge in online orders, a major advertising campaign and a helping hand from TV show Strictly Come Dancing have helped Domino’s Pizza dodge the consumer gloom being felt by its peers in the casual dining sector.
Chief executive David Wild credited the company's ‘Official Food of Everything’ campaign for sparking an 11.9pc jump in group sales to £286m in the past three months, along with its offer to give customers any pizza for £9.99 when they buy two or more.
The company achieved a record 200,000 orders online in one day in September - equivalent to 140 a minute - which Mr Wild attributed in part to people ordering pizza to eat in front of the popular BBC dance show Strictly, which draws millions of viewers each week.
BAE Systems job losses due to slowing Typhoon and Hawk production
Corporate PR shouldn't use such robotic jargon as 'streamlining the business... sharper competitive edge' when cutting jobs #baesystems— Justin Richards (@CovertRecon) October 10, 2017
Although trading was in line with management expectations and the outlook for the year remains unchanged, the job losses at BAE Systems will steal all the headlines this morning.
BAE Systems said that the losses are the result of the company slowing down its Typhoon and Hawk production rates.
Jefferies analyst Sandy Morris has noted that it appears that the restructuring costs will be absorbed with this year's guidance, which given that it remains unchanged suggests "some outperformance exists somewhere" at the company.
"We believe Saudi Arabia plans to assemble Typhoon aircraft in Kingdom making it more certain a further Typhoon order will eventually be placed.
"Meantime, today’s Trading Update probably signals the decline in Typhoon and Hawk assembly activity we had forecast spread across FY18 and FY19 actually all happens in FY18. That works for us – reset expectations for FY18 and then look forward into FY19. And there should be things to look forward to, in our view."
BAE Systems shares unchanged despite restructuring leading to job cuts
After initially dropping on the back of the restructuring news, BAE Systems shares have rebounded back to where they were pre-announcement, a 0.8pc fall for the day.
In recent weeks, analysts have highlighted the slowdown in jet orders as a possible headwind for the company's earnings in the next couple of years. Progress made in BAE's US business was expected to be offset by declining orders, prompting the firm to take action this morning.
BAE Systems job losses part of restructuring plan
BAE Systems to cut almost 2,000 jobs in its military, maritime and intelligence services in order to streamline its business— Dylan Hayward (@DylanHayward94) October 10, 2017
UK defence giant BAE Systems will axe almost 2,000 jobs, it has announced this morning, nearly double the number rumoured to go yesterday.
BAE said that the move was part of a restructuring effort that will streamline the business as its backlog of Eurofighter jet orders diminishes.
Amid the slowdown in orders, the company has announced that 1,400 jobs will go from its Military Air & Information business with a further 375 and 150 roles being axed from its Maritime Services and Applied Intelligence divisions.
Defence giant BAE Systems axes almost 2,000 jobs
FTSE 100 defence giant BAE Systems will axe almost 2,000 jobs amid a fall in Typhoon jet orders, the firm has just announced.
Trade deficit widening less severe when excluding erratic commodities, says ONS
The only soft spot in this morning's batch from the ONS was the trade deficit in the three months to August widening by £6.2bn but when stripping out the effect of erratic commodities the figures are less disappointing.
The ONS said that this was "largely due to a switch from a surplus to a deficit on the balance of erratic commodities, such as non-monetary gold, that can have large effects on headline movements and make it difficult to discern underlying trends".
Excluding the erratic commodities balance the deficit widened by just £2.9bn to £10.8bn with the deficit being partially offset by a widening of the trade in services surplus by £0.8bn.
UK industrial, manufacturing and construction sectors all beat expectations
Sterling is extending its gains this morning after production figures from the ONS for the industrial, manufacturing and construction sectors all beat expectations. Here are the key takeaways from the release:
- Industrial production remained steady at 0.2pc in August compared to the previous month, but rose ahead of expectations by 1.6pc on a year-on-year basis.
- The manufacturing sector's growth held up better-than-expected to edge down to 0.4pc in August while jumping up to 2.8pc on a year-on-year basis.
- Construction output smashed expectations to rise 0.6pc compared to the previous month and 3.5pc on a year-on-year basis.
- The UK's trade deficit widened in August by £5.6bn, however, double the figure that economists were expecting.
- Sterling has pushed up to $1.3191 against the dollar, a 0.4pc rise, following the ONS release.
Industrial and manufacturing output preview
The consensus of economists believe that industrial output growth will remain steady when it drops at the bottom of the hour but Pantheon Macro believes that it will "surprise to the downside again", putting the Bank of England between a rock and hard place on interest rates.
If correct on the figures, it "would be touch and go" as to whether the first estimate of third quarter would undershoot the central bank's Monetary Policy Committee's estimate of 0.3pc growth, it said.
The MPC said that it would hike rates in November if the economy continues to perform as expected but warned that it could change its course if necessary.
Pantheon's UK economist Samuel Tombs added on the figures due soon:
"The surveys have misled repeatedly this year and data from the SMMT show that car production fell sharply in August. Meanwhile, loading estimates from North Sea oil producers point to around a 3% month-to- month decline in oil production.
"As a result, we look for zero month-to-month growth in total industrial production in August."
Retail sales jump but price increases underpin growth, says BRC
Retail sales growth picked up to 1.9pc in September, according to the BRC's retail sales monitor released overnight, but price increases underpinned the sales uptick on the high street.
BRC chief executive Helen Dickinson warned that "much of this growth is being driven by price increases filtering through, particularly in food and clothing, which were the highest performing product categories for the month".
Over the three months to September, food sales jumped 2.5pc on a like-for-like basis while non-food sales nudged up 0.5pc.
Ms Dickinson added that consumers were still "shying away from big ticket items", instead choosing to focus their spending on essential purchases.
KPMG head of retail Paul Martin also remained cautious, saying that with "potential interest rate rises on the horizon, shaky consumer confidence and ever increasing levels of household debt, uncertainty remains".
Agenda: Pound continues rally ahead of industrial and manufacturing figures
Buoyed by Theresa May steadying her position at Number 10, the pound’s rally on currency markets is continuing ahead of industrial and manufacturing output figures. Sterling's momentum has slowed a touch but it still has the upper hand against the dollar, rising 0.2pc at $1.3170.
Industrial production is expected to remain steady at 0.2pc in August compared to the previous month while economists forecast the manufacturing sector to take its foot off the gas a little to post growth of 0.2pc.
Markets in kind of lullaby mode on a landmark day as it's 10yrs anniversary of S&P 500 pre-GFC peak. Nikkei although on course to 21yr high. pic.twitter.com/2omJw7lQH5— Holger Zschaepitz (@Schuldensuehner) October 10, 2017
After underperforming its European peers yesterday, the FTSE 100 has nudged up into positive territory with the banking sector underpinning the index's gains early on.
Calming Spanish markets could be thrown back into a state of flux once again later today when Catalonia leader Carles Puigdemont addresses the region’s parliament, just days after threatening to declare independence from Spain.
His wings were clipped a little over the weekend by the huge anti-secession rally in Barcelona and he has been urged by the mayor of Barcelona to "de-escalate" the situation with a ratcheting up of rhetoric likely to be received negatively by the markets.
Full-year results: Volution Group
Interim results: Vedanta Resources, Redstoneconnect, 1Spatial, Ted Baker, LiDCO Group
Trading statement: Marston's, BAE Systems, easyHotel
AGM: Scancell Holdings, The Diverse Income Trust, Mortice
Economics: RICS House Price Balance (UK), BRC Retail Sales Monitor y/y (UK), Manufacturing Production m/m (UK), Goods Trade Balance (UK), Industrial Production m/m (UK), Construction Output m/m (UK), NIESR GDP Estimate (UK), NFIB Small Business Index (US)