Yahoo Finance Pound unsettled by Mark Carney speech warning of 'limited' and 'gradual' interest rate rises; attention turns to Fed meeting
Pound has volatile day of trading following Mark Carney speech warning that interest rate increases will be 'limited' and 'gradual'; after rallying this morning, sterling reversed its gains before rebounding again in the afternoon
Sterling currently trading 0.2pc higher against the dollar at $1.3520
FTSE 100 nudges down into the red; J Sainsbury jumps to the top of the leaderboard after recording a 2.1pc rise in sales in Kantar Worldpanel's latest prognosis of the sector
Dow Jones and S&P 500 hit fresh all-time highs overnight; two-day US Federal Reserve meeting begins today
Markets wrap: Choppy day of trading for sterling finishes well; attention turns to the Fed
Sterling has finished a choppy day of trading on the right side of the dotted line this afternoon, moving 0.3pc higher against the dollar at $1.3520 as traders struggled to digest Bank of England governor Mark Carney's speech warning that interest rate rises will be "gradual" and "limited".
Although Mr Carney doubled down on the Bank of England's hawkish talk of an interest rate hike in the coming months in his speech yesterday, the currency couldn't stay at the highs it hit this morning against the dollar for long with the US Federal Reserve's two-day monetary policy meeting swinging into view on forex markets.
The markets largely ignored Donald Trump's latest chest-beating at the UN this afternoon as stocks in the US moved up tentatively ahead of the Fed's decision on winding down its balance sheet and guidance on interest rates.
The FTSE 100 has continued to rebound after being battered by the soaring pound at the end of last week. The blue-chip index has moved 0.3pc higher with WM Morrison and J Sainsbury both boosted by the latest prognosis of the sector by Kantar Worldpanel.
There has been a clear degree of hesitancy on the markets today, according to IG market analyst Joshua Mahony.
He said:
"The optimistic tone seen throughout US markets looks set to continue today, with early trade seeing the Dow hit its 41st record high of the year so far. Despite the optimism evident throughout European and US markets, much of the day has seen a clear degree of hesitancy. With gains across havens such as gold and the yen, there is clearly an incomplete picture of risk sentiment today.
"Donald addressed his UN appearance to address the existence and support of ‘rogue regimes’, including the likes of North Korea, Iran, Cuba, and Venezuela. However, for the markets perspective, the focus is clearly on the potential repercussions from Pyongyang following Trump’s declaration that US would be willing to ‘totally destroy’ North Korea."
Wetherspoons is cutting all food and alcohol prices tomorrow in protest over tax
Wetherspoons will cut the price of food and drink in all 900 of its pubs tomorrow in a protest over Value Added Tax (VAT).
The pub chain announced that its England, Wales and Northern Ireland outlets will reduce the price of all food and alcohol by 7.5pc on Wednesday September 20, while in Scotland food and soft drinks only will undergo the same price cuts.
The move is in protest over the high prices faced by pub-goers, as all food and drinks in pubs are currently subject to 20pc VAT, whereas food and alcohol in supermarkets benefit from zero-rate VAT, allowing retailers to use that saving to undercut pubs and sell alcohol at a discounted rate.
Wetherspoons will be protesting alongside thousands of other pubs tomorrow in honour of national Tax Equality Day which aims to highlight the benefit of a VAT reduction in the hospitality industry.
Read Sophie Christie's full report here
Donald Trump threat to North Korea ignored by the markets
Markets pretty chill as Trump screams at the UN pic.twitter.com/rOSIWe26u7
— Steve Goldstein (@MKTWgoldstein) September 19, 2017
Stocks in the US haven't really kicked on from that tentative start to trading this afternoon while Donald Trump's threat that he might have to "totally destroy" North Korea has elicited a shrug of the shoulders from the markets.
Nuclear obliteration has been sufficiently priced in apparently.
Back to the Fed's meeting, Mike Dowding, co-head of investment grade at BlueBay Asset Management, has pointed out there is a major divergence between when the central bank says it will hike rates and when the markets actually believe it will.
He said:
"With markets currently pricing only one hike through December 2018, compared to the four hikes from the Fed's last projections in July, there is a marked divergence in thinking.
"It will be interesting to see if the Fed leans in a more dovish direction at this meeting, reflecting on recent downside inflation misses, or if instead it chooses to reaffirm this path of steady and gradual rate normalisation against a robust economic backdrop."
French Connection names new directors as it targets return to profitability
French Connection has taken its biggest step towards addressing the intense criticism of its poor corporate governance by hiring two retail veterans to its board as it prepares to open its first new UK shop since the financial crisis.
The beleaguered fashion chain, which has suffered five consecutive years of losses, is attempting to steer itself back to profitability by shutting unprofitable stores, reducing its head office space and making its fashion more affordable.
The company reduced losses by £2m in the first half of the year, reporting a pre-tax loss of £5.7m in the six months to the end of July, compared to a loss of £7.9m in the first half of last year. Analysts at Cantor Fitzgerald said that the performance was “slightly ahead of expectations.”
Stephen Marks, executive chairman, founder and majority shareholder, said that he had was focused on returning the group to profitability "as soon as possible."
Read Ashley Armstrong's full report here
UK watchdog closes probe into KPMG's auditing of doomed HBOS
KPMG has been cleared over its work with HBOS in 2007, the year before the bank had to be rescued, after the UK's audit watchdog found it could not have predicted the "extreme funding conditions" created by the financial crisis.
The Financial Reporting Council is closing its probe into the accounting giant's conduct after finding its audit of HBOS just before it collapsed and was taken over by Lloyds "did not fall significantly short of the standards reasonably to be expected."
The UK regulator kicked off the probe last June, having been criticised by MPs for missing earlier opportunities to investigate the audit. It had looked at whether there were grounds to investigate KPMG in 2013, but decided against it.
Read Lucy Burton's full report here
Attention turns to key Fed meeting
With the Federal Reserve's policy meeting beginning today and now firmly in the sights of investors, US stocks have had a tepid start to trading in the US.
Finishing even one point higher is enough to take the Dow Jones and S&P 500 to fresh all-time closes, however, and both have nudged up early on with Nike's 1.8pc fall after a broker downgrade the outlier in New York.
The Fed is expected to announce tomorrow that it will begin to wind down its balance sheet with RBC chief economist Eric Lascelles predicting the central bank to start reducing its collection of bonds at a rate of $10bn per month from October.
He said on the prospect of an increase in interest rates before the end of the year:
"The market has so aggressively priced out tightening over the next year that the best bet is on a more hawkish message from the Fed to recalibrate expectations higher again.
"We think market expectations for a rate hike by December should be above 50% rather than below. In addition to the strong economic growth motivating many central banks, U.S. policymakers are further enabled by a weak greenback."
Billionaire Ineos founder reveals plans to produce his 'son of Land Rover Defender'
Billionaire businessman Jim Ratcliffe wants to launch Britain’s biggest independent car company, building “uncompromising off-roaders” that can take over where the Land Rover Defender left off.
The founder of chemicals giant Ineos wants to produce a “rugged offroader, which is unbreakable, go anywhere and does not have the reliability problems of the Defender” and is “100pc not a Chelsea tractor”.
Mr Ratcliffe is a fan of the now discontinued Land Rover Defender, which went out of production in 2016, and said he wants to create a car that fills its gap in the market - something he believes Jaguar Land Rover will not do when it launches a new version of the car in two years' time.
Read Alan Tovey's full report here
Pound jumps higher; economists split over BoE hiking plan
The pound is all over the place today and has rebounded back up to the levels it reached this morning before technical factors exacerbated by jitters from Mark Carney's speech yesterday dragged it back down. It's now 0.3pc up against the dollar for the day, trading back above the $1.35 mark.
Doubts still linger on the markets over whether the Bank of England is using a sleight of hand to lift the pound and bring down inflation in its hawkish turn.
David A. Meier, an economist at Julius Baer, is one of a number to doubt the prospect of a hike in November.
He said:
"Markets are buying into the BoE’s hints of a rate hike already in November. We remain cautious and believe that policy makers are talking up the pound to limit the inflation overshoot.
"A BoE rate hike seems like the wrong medicine. Given the potential for further Brexit-related uncertainty, we think that rate expectations could well be disappointed."
Meanwhile, UBS head of UK rates strategy John Wraith believes that we'll get a second hike in May as well as an increase in November.
Speedy Hire cost-cutting plan begins to bear fruit
Plans to turn around tool equipment firm Speedy Hire appear to be taking effect as the company reported that figures for the first half of the year are likely to be better than originally forecast.
The firm said its revenues for the period to August 31 were around 7.5pc ahead of the same time last year, primarily thanks to growth in its services division, which provides advisory services to construction projects. Pre-tax profits will be “well ahead” of the previous year, Speedy Hire said.
Net debt for the half year has also dropped to £70m, down from £85.4m a year previously.
Speedy Hire returned to profit in May after two volatile years during which it endured the loss of its chief executive, a string of profit warnings and a row with an influential shareholder over its board make-up.
Read Rhiannon Bury's full report here
Supermarkets enjoy best performance in more than four years
Supermarkets are enjoying their most sustained growth in more than four years after sales increased by more than 3pc for the sixth consecutive month.
Fresh figures from Kantar Worldpanel show that supermarket sales jumped by 3.6pc in the three months to September, thanks in part to a 1.5pc increase in the volume of goods sold.
“We have not seen sustained market growth of this kind since May 2013,” said Fraser McKevitt, the head of retail and consumer insight at Kantar Worldpanel.
Lidl was once again the fastest-growing retailer, with a sales increase of 19.2pc taking its market share to a record 5.3pc.
Read Sam Dean's full report here
Lunchtime update: Mark Carney speech keeps the pound under pressure
Bank of England governor Mark Carney's warning that interest rates rises will be "limited" and "gradual" in his speech at the IMF late yesterday afternoon has kept the pound under pressure this morning.
After initially shaking off worries early on over Mr Carney's caution, sterling has retreated back to the post-speech low it hit yesterday, trading in flat territory against the dollar at just below $1.35.
As the US Federal Reserve's policy meeting swings into view on the markets, stocks in Europe are having a mixed morning with the suppressed pound paving the way for the FTSE 100 to continue its rebound.
Of the big individual movers this morning, Ocado has pared some of its early heavy losses after investors were initially spooked by the online grocer saying that it will experience higher short-term cost pressures while elsewhere in the sector Sainsbury's has jumped to the top of the FTSE 100 after a recording a sales boost in Kantar Worldpanel's latest statistics.
Spreadex analyst Connor Campbell highlighted a number of factors holding back the pound this morning:
"There were a few factors preventing sterling from getting back to its early in the week highs. First were the lingering effects of Mark Carney’s claim last night that any Bank of England rate hikes would be ‘limited and gradual’, as well as the continued negative reaction to Boris Johnson’s widely disparaged Brexit claims, which has brought Britain’s EU exit back to the forefront of investors’ minds."
Stocks stagnate ahead of Fed meeting
Stocks are largely stagnant this morning as investors await the US Federal Reserve's two-day monetary policy meeting which begins this afternoon.
Accendo Markets head of research Mike Van Dulken noted that this is quite normal given the meeting's importance.
He said:
"This is not unusual as the US Federal Reserve begins its latest two-day monetary policy meeting. After all, investors from all asset classes are preparing to hear - tomorrow evening - more about the unwinding of its QE-bloated balance sheet (imminent?) and the timing of its next rate hike (Dec?)."
Just a reminder on what investors are expecting.
The markets believe that the Fed will announce the unwinding of its huge $4.5tn balance sheet and investors will be itching for further guidance on interest rates and whether a third hike will arrive before the end of the year.
We'll have a more detailed look at the meeting just before markets open in the US later on.
Petra Diamonds shares wilt again amid labour unrest
Shares in Petra Diamonds fell for a second consecutive day after the FTSE 250 miner warned that some of its operations had been affected by strike action.
Just one day after reporting disappointing results for its financial year and updating the market on a legal wrangle in Tanzania, the company revealed that it was experiencing “labour disruption” at two of its mines in South Africa.
Workers have gone on strike at its Finsch mine and its Kimberley Ekapa joint venture, Petra said. Underground and surface mining have been affected at both sites but its treatment plant is running “near normal” capacity, the company added.
The stock fell nearly 5pc to 75.38p in morning trade, having closed down nearly 6pc on Monday.
Read Jon Yeomans' full report here
Ryanair shares rebound as impact on earnings expected to be under €25m
Ryanair's pilot holiday scheduling cock-up might have bruised the low-cost carrier's reputation and boss Michael O'Leary's ego but its share price has barely blinked.
After suffering a mild 1.9pc fall as the airline announced that 40-50 flights every day for the next six weeks would be cancelled, the Irish firm has erased yesterday's losses this morning and jumped 2.5pc higher.
Ryanair has done thousands out of compensation by publishing flight cancel lists to end Oct. You only get it if not notified within 2 weeks!
— Sinead Ryan (@sinead_ryan) September 19, 2017
The financial impact being under €25m seems to have cheered up shareholders with Liberum analyst Gerald Khoo noting that while disappointing the set-back will not alter the long-term direction of the company.
Panmure Gordon market commentator David Buik pointed out that the small print could save Ryanair's skin:
"Those passengers looking for compensation, which analysts say could cost Ryanair £20 million, perhaps should look at the small print. If like easyJet alternative flights are available within 48 hours, it may not be necessary for Ryanair to settle some claims. We await developments."
Ocado revenues surge by 15pc as order numbers jump
Revenues at online grocer Ocado climbed by around 15pc in the third quarter as it enjoyed a surge in the number of orders it receives each week.
Ocado posted group revenues of £344.5m in the 13 weeks to the end of August, a 14pc increase on the same period in 2016.
Retail revenues, meanwhile, were up 13pc from £276.5m to £312.7m as chief executive Tim Steiner hailed the company’s “industry-leading technology”.
Ocado said its average orders per week jumped by 16pc from 219,000 to 254,000, although the average order size dipped slightly from £107.56 to £106.25.
Read Sam Dean's full report here
Eurozone construction sector rebounds
The eurozone's construction sector rebounded in July, recording a 0.2pc rise in output, Eurostat data showed this morning.
Pantheon Macro eurozone economist Claus Vistesen believes that the solid construction report will help support GDP figures in the third quarter.
He added:
"Base effects are challenging for Q3 output in construction, following the 1.6% quarter-on-quarter jump in Q2. Survey data, however, suggest the trend is accelerating, indicating that this pace will be sustained in Q3.
"Construction has provided a sustained boost to GDP growth since the beginning of 2016, and we think this trend will remain in place in the second half of the year."
Struggling Toys R Us files for bankruptcy protection
Toy giant Toys R Us has filed for bankruptcy protection in the United States and Canada as the retailer struggles under its heavy debt load and a shift towards online shopping.
The retailer said it was beginning a court-supervised process that allows it to restructure its finances while remaining open for business.
It said operations in Europe, Asia and Australia are not included in the Chapter 11 filing, which is often referred to as a "reorganisation" bankruptcy.
Toys R Us has a debt pile of more than £3.5bn, which is largely a result of a leveraged buyout in 2005, when it was taken private by Bain Capital, KKR, and Vornado Realty Trust.
Read Sam Dean's full report here
Pound erases gains; technical factors blamed for retreat back to flat territory
Sterling has erased its gains against the dollar in the last half an hour and dropped back into flat territory, trading at $1.3493.
No obvious speech or economics data has been given the blame with a couple of analysts I've spoken to pointing the finger at technical factors for the retreat back to the lows it reached yesterday following Mark Carney's speech.
The FTSE 100 has moved in the other direction in lock-step with the pound's fall and is now safely in the green, moving 0.3pc higher.
IG chief market analyst Chris Beauchamp said on the pound this morning:
"Yesterday’s speech from Mark Carney, while broadly reiterating the shift in tone from last week, failed to add much more to the overall picture, and thus we have continued to see selling of cable, although without putting much of a dent in the uptrend.
"Investors still clearly feel that the Bank of England is hedging its bets, and while the change from the summer’s ‘lower for longer’ outlook has changed markedly, the fact that we have been here before is causing many to hold back and refrain from chasing cable higher in the short-term."
Number of people on zero-hours contracts drops for first time in seven years
The number of people employed on zero-hours contracts as their main job has dropped for the first time in seven years, the ONS has revealed this morning.
Some 883,000 people, or 2.8pc of all those in employment, were on a zero-hours contract as their main job with a total of 1.4 million contracts under the controversial terms.
Big businesses used zero-hours contracts most with 24pc of businesses with 250 or more employees having employees on the contracts.
Ocado shares slump nearly 6pc despite 15pc jump in revenue; FTSE 100 reverses poor start
The FTSE 100 has reversed a poor start but is devoid of any big movers this morning with plumbing and heating specialist Ferguson's 1.5pc rise on a broker note and NMC Health's 2.5pc retreat on very low trading volumes book-ending the blue-chip index.
Ocado revenues up another 14.3%. Name another supermarket growing like that. You can't. Watch out, Iceland. $OCDO
— Jim Edwards (@Jim_Edwards) September 19, 2017
We have to move a little lower to get an semblance of volatility this morning.
On the mid-cap FTSE 250, online grocer Ocado is being ruthlessly punished by investors despite the company's revenues climbing 15pc in the third quarter as orders soar.
The company, which is thought to be in the crosshairs of online giant Amazon, has slumped 5.8pc this morning with the markets focusing on an increase in short-term costs.
Pound rebounds against a jittery dollar ahead of key Federal Reserve meeting
How to explain why you're raising rates while also saying Brexit means UK econ is in trouble. Annotated Mark Carney: pic.twitter.com/bTTv7eA7AX
— Ed Conway (@EdConwaySky) September 18, 2017
Mark Carney's speech warning late yesterday afternoon of "limited" and "gradual" interest rate hikes weakened a pound already suffering a hangover from its post-Bank of England meeting rally.
Mr Carney punctured hopes in his speech yesterday that the expected rate hike in November would mark the start of a more traditional hiking cycle. He had previously said that the speed of interest rates rises would be somewhere in between a traditional hiking cycle and the slow pace the market was pricing in.
After dropping 0.7pc back below $1.35 yesterday, a jittery dollar ahead of the US Federal Reserve's key meeting over the next two days and sterling putting in a firmer performance today against most major currencies has lifted it against the greenback this morning.
London Capital Group analyst Ipek Ozkardeskaya said this on the pound's volatile few days:
"In the aftermath of the latest BoE meeting, the market brainstorming has resulted in a ‘one and done’ consensus if the BoE would eventually raise the interest rate. Hedge fund managers believe that Governor Mark Carney may simply be bluffing.
"Yet despite the fading hawkish BoE bets, an important medium-term support is eyed at 1.3420 and should lend a basis to a sustained pound appreciation following the recent hawkish development on the UK’s monetary policy."
Agenda: Pound shakes off Carney speech warning of 'limited' and 'gradual' interest rate rises
The pound has shaken off Bank of England governor Mark Carney's warning that interest rate rises will be "gradual" and "limited" and rebounded back towards the highs it hit at the end of last week.
While Mr Carney reinforced the central bank's Monetary Policy Committee's plan to increase rates later this year in his speech at the IMF late yesterday afternoon, he dashed hopes that the hike would mark a shift towards a more traditional hiking cycle.
Sterling retreated against the dollar and euro immediately after the speech but has quickly bounced back, trading at $1.3530 versus the greenback. There's little on the economics calendar to interrupt its momentum this morning with eurozone construction and US housing starts readings the only scheduled releases of note on the calendar.
Asian stock mkts wobble as macro narrative seems to shift from Goldilocks to reflationary regime w/ rising yields ahead of Fed. Yuan slipped pic.twitter.com/v5ht8PIo4t
— Holger Zschaepitz (@Schuldensuehner) September 19, 2017
Across the Atlantic, the US Federal Reserve is beginning its two-day meeting today but it won't be until tomorrow evening that we are expected to hear the central bank's plan to wind down its quantitative easing programme.
Meanwhile, the FTSE 100 has edged down into the red early on with J Sainsbury the top riser after advancing 1.3pc on stronger sales figures in Kantar Worldpanel's latest prognosis of the battle for market share among supermarkets. Elsewhere in the sector, online Ocado has dropped 4.8pc after warning of a short-term rise in costs in its latest trading update to the market.
Interim results: Yu Group, Gulf Keystone Petroleum, Anpario, Nahl Group, Flowgroup, Judges Scientific, Maxcyte, Augean, Keywords Studios, Gulf Marine Services, DP Eurasia N.V., Escher Group Holdings, Sinclair Pharma, Bango
Full-year results: Eagle Eye Solutions Group, Purecircle
Trading statement: Ocado Group, Babcock
AGM: Miton Global Opportunities, HML Holdings, Marlowe, ECO Animal Health Group, Leeds Group, Enteq Upstream, Safeland
Economics: Housing Starts (US), Building Permits (US), Import Prices m/m (US), ZEW Economic Sentiment (EU), Current Account (EU), Construction output (EU)
