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Huawei heiress to be freed after deal with US

·41-min read
Meng Wanzhou - REUTERS/Taehoon Kim
Meng Wanzhou - REUTERS/Taehoon Kim

Tensions between Beijing and Washington DC are expected to ease after the Huawei heiress Meng Wanzhou agreed a deal with US prosecutors that will end her three-year battle against fraud charges and allow her to return to China.

Ms Meng, chief financial officer of the controversial Chinese telecoms behemoth and the daughter of its founder Ren Zhengfei, appeared by video in a US court hearing on Friday. The US is to defer and then later drop charges of wire and bank fraud against her, while Ms Meng has admitted wrongdoing but will not face any punishment.

It ends a three-year diplomatic and legal battle which has been a major flashpoint in relations between East and West.

Ms Meng, known in China as the “princess of Huawei”, has been under curfew and fighting extradition to the US since 2018 when she was arrested at Vancouver Airport.

She was charged with fraud for allegedly misleading HSBC about dealings with Iran that it is claimed broke US sanctions.

The case made the 49-year-old a symbol of the escalating technology war between the US and China, and then-President Donald Trump’s campaign against Huawei.

The company, one of China’s most successful tech firms, has been accused of acting as an arm of Beijing’s international surveillance apparatus, and has endured a sales slump in the last year after being hit by US export controls. It has always denied spying claims, and said it follows the law wherever it operates.

Under pressure from the Trump administration, Britain banned Huawei from its 5G mobile networks last year. Operators are forbidden from installing its equipment and must remove existing Huawei products from networks by 2027.

The White House has also implemented bans on US companies doing business with it. The controls have cut it off from the world’s most advanced microchips, crippling its smartphone division.

MS Meng’s arrest sparked a diplomatic stand-off, with China detaining two Canadian nationals in what was seen as an attempt to exert pressure on Justin Trudeau’s government to release Ms Meng. Friday’s deal could provide a path for China to release the pair, Michael Spavor and Michael Kovrig.

Mr Spavor and Mr Kovrig, a businessman and diplomat, have been in Chinese prisons since shortly after Ms Meng’s arrest, and charged with spying. Chinese officials had said Ms Meng’s arrest was politically motivated and intended to harm the country’s technology industry.

The deal could be seen as an indicator of a more conciliatory attitude towards Huawei from Joe Biden’s administration than the aggressive position adopted by Mr Trump, and could open him up to criticism from hawkish US politicians. Mr Biden’s officials have so far maintained Trump-era sanctions against the Chinese company and said they are willing to go further.

Ms Meng was arrested in December 2018 when changing flights en route to Hong Kong from Mexico, and has been under nighttime house arrest in a Vancouver mansion since.

Charges against her related to a subsidiary called Skycom, allegedly used for Huawei to do business with Iran in 2013 without tripping sanctions controls.

Ms Meng had reportedly turned down a previous plea deal because she did not want to admit wrongdoing.

The plea deal applies solely to Ms Meng. The US has separately charged Huawei with stealing trade secrets.

Huawei did not comment.

05:23 PM

Wrapping up

That's all from us today – here are some of our top stories:

Thanks for following along. Have a great weekend!

05:02 PM

Irish data regulator puts Facebook's smart glasses in its sights

Facebook Ray-Ban smart glasses
Facebook Ray-Ban smart glasses

Ireland's data privacy regulator has asked Facebook to prove that an LED indicator light on its new smart glasses is an "effective means" to let people know they're being filmed or photographed.

Facebook smart glasses, which were created in partnership with Ray-Ban maker EssilorLuxottica, allow wearers to listen to music, take calls or capture photos and short videos and share them across the social media giant's platforms using a companion app.

In a statement today Ireland's Data Protection Commission (DPC), which is the EU's lead regulator on data privacy, said it shared concerns previously raised by Italy's data watchdog, the Garante.

The DPC said: "While it is accepted that many devices including smart phones can record third party individuals, it is generally the case that the camera or the phone is visible as the device by which recording is happening, thereby putting those captured in the recordings on notice.

"With the glasses, there is a very small indicator light that comes on when recording is occurring. It has not been demonstrated to the DPC and Garante that comprehensive testing in the field was done by Facebook or Ray-Ban to ensure the indicator LED light is an effective means of giving notice."

04:40 PM

London City Airport investor demands cut to carbon emissions

British airports are coming under pressure from one of the industry's biggest investors not to return to pre-pandemic flying patterns as the drive to cut carbon emissions gathers pace, reports my colleague Oliver Gill.

He writes:

Ontario Teachers’ Pension Plan, which owns large stakes in London City, Bristol and Birmingham airports, has pledged to “reduce demand for fossil fuels and build a sustainable economy”.

Insiders said the £130bn retirement fund, which also owns National Lottery operator Camelot and a property development on what was BBC’s White City studios, would seek to influence the airports' strategy rather than sell its stakes.

A source said: “Divestment will only pass the problem on."

Ahead of the UN’s Cop26 climate change gathering in Glasgow in six weeks’ time, OTPP wants to reduce carbon emissions across its investment portfolio by 45pc by 2025, and 67pc by 2030.

Read the full story here

04:33 PM

US to buy hundreds of millions more Pfizer vaccine doses

The US is reportedly set to buy hundreds of millions more doses of the Pfizer-BioNTech vaccine to donate to the world.

The Washington Post reports that the announcement of the purchase is planned for early next week and timed to coincide with the United Nations General Assembly meeting.

In June, the Biden administration purchased 500m doses of the vaccine to be distributed by Covax, the World Health Organization-backed initiative to share doses around the globe, and officials said the vaccines would be targeted at low- and middle-income countries.

04:18 PM

BAE and Rolls-Royce handed £85m after Australia submarine deal

Royal Navy submarine Astute Class - Will Haigh
Royal Navy submarine Astute Class - Will Haigh

The government has awarded BAE and Rolls-Royce £85m each to work on a new generation of nuclear submarines, a day after the UK unveiled a deal to supply the vessels to Australia.

The companies will deliver design work over the next three years on a successor to Astute Class submarines used by the Royal Navy, Defence Secretary Ben Wallace said in a statement.

The funding will support 350 jobs and is likely to lay some of the ground work for the Australian project, which will see the government in Canberra scrap an existing deal for diesel-powered subs from France.

03:53 PM

Amber list scrapped in travel revamp

The amber list has been scrapped and double-vaccinated travellers will no longer have to take a PCR test when returning from a non-red list country in a major shake-up of UK travel rules.

Eight countries, including Turkey, Pakistan and the Maldives will also be taken off the red list, Transport Secretary Grant Shapps has confirmed.

The revamp will come as a major boost to airlines and the wider travel industry.

03:39 PM

FTSE 100 falls to six-week low

The FTSE has dropped to a six-week low as a sharp fall for miners erased gains earlier in the day.

The blue-chip index fell 1.2pc, or 83.46 points, to 6,994.

03:30 PM

HSBC hires key Johnson ally

Lord Edward Udny-Lister - REUTERS/Toby Melville
Lord Edward Udny-Lister - REUTERS/Toby Melville

HSBC said today it had hired one of Prime Minister Boris Johnson's former advisers to support chairman Mark Tucker by “providing strategic advice on international business issues".

Lord Edward Udny-Lister - who was considered one of Johnson's closest and longest serving advisers - will also advise chief executive Officer Quinn and other senior executives, the bank said. Lord Lister left his position of Gulf envoy in April.

Read more about his departure here.

03:06 PM

FTSE 100 drops below 7,000

The FTSE 100 has dropped 0.8pc this afternoon, falling below 7,000.

It is currently trading at 6,973 points as miners' losses accelerate. Anglo American is the biggest faller, down more than 7pc.

02:56 PM

Superdry slides after mid-week spike

Superdry has shed 6.7pc today as the fashion retailer's shares resumes their slide after spiking earlier in the week.

After falling throughout much of September, the company's shares suddenly jumped 18pc on Wednesday after it reported its losses had significantly shrunk to £36.7m over the past year compared with a £166.9m a year earlier.

However, today it seems the slump has resumed, with the company trading at 306.5p – a 13pc fall from the start of the month.

02:37 PM

US consumer confidence edges higher from decade-lows

US consumer sentiment inched higher in September from decade-lows in August.

The University of Michigan’s final sentiment index edged up to 71.0 in September from a score of 70.3 in August. However the figure fell below economists' expectations of 72.0.

"The steep August falloff in consumer sentiment ended in early September, but the small gain still meant that consumers expected the least favorable economic prospects in more than a decade," said Richard Curtin, director of the survey.

02:14 PM

Juventus crashes to record loss after Covid hit

Juventus Alvaro Morata - ANDREAS HILLERGREN/TT News Agency/AFP via Getty Images
Juventus Alvaro Morata - ANDREAS HILLERGREN/TT News Agency/AFP via Getty Images

There's more financial woe in the football world today. After Manchester United saw its losses almost quadruple in the last year, Juventus has said its net loss doubled to its highest ever level.

The Serie A side reported losses of €209.9m in its 2021-2021 financial year as revenue plummeted due to closed-door matches during the pandemic.

Juventus last month agreed to sell Cristiano Ronaldo to Manchester United as part of its efforts to curb costs.

02:02 PM

Iron ore slump weighs on London-listed miners

Iron ore producers Rio Tinto and BHP are among the stocks leading losses on the FTSE 100 this afternoon, as the commodity sank below $100 a ton.

Both miners' shares have tumbled more than 3pc compared to yesterday's close, with the drop in iron ore prices expected to weigh on the companies' profit.

Iron ore prices have more than halved since their peak in May in response to China's attempts to curb its steel industry to cut emissions. China is the world's biggest metals consumers.

Futures have slumped more than 20pc this week and were trading at $99.55 a ton in early trading in New York.

01:52 PM

Finsbury Glover Hering in talks to buy PR rival

Roland Rudd Finsbury Glover Hering -  Jason Alden/Bloomberg
Roland Rudd Finsbury Glover Hering - Jason Alden/Bloomberg

WPP-backed PR group Finsbury Glover Hering is said to be in discussions to snap up US rival Sard Verbinnen.

Talks have been underway for several weeks and have been partly driven by US private equity group Golden Gate Capital, which holds a 40pc stake in Sard, the Financial Times reported.

If confirmed, the deal will be the latest example of consolidation in the sector amid growing demand for strategic and financial communications advice, as well as lobbying services.

New York-based Sard is one of the best known advisers on communications around mergers and acquisitions and activism.

Finsbury Glover Hering was itself formed from a merger of three WPP-controlled firms last year.

01:39 PM

US stocks open flat

Wall Street opened flat this afternoon as uncertainties over higher corporate taxes and the upcoming Fed meeting weighed on investors.

The Dow Jones opened 0.04pc lower at 34,737 points, while the S&P 500 slipped 0.09pc to 4,469 points. The tech-heavy Nasdaq fell 0.12pc.

01:31 PM

IoD: UK listings reform must not damage governance standards

Measures aimed at boosting listings must not endanger the UK's position as a leader in governance standards, the Institute of Directors (IoD) has warned.

Dr. Roger Barker, IoD director of policy and corporate governance, said the reforms were "justified by the extent to which London has fallen down the global league tables for IPOs in recent years".

However, the baby must not be thrown out with the bathwater. The UK has an enviable reputation for high standards of corporate governance, and the UK Listing Rules form an important component of this.

The FCA should think long and hard, for example, about meddling with its existing regimes regarding related party transactions, controlling shareholders and significant transactions. These are crucial bulwarks of good governance on the London market.

The Government may also live to regret its desire to attract SPACs, or blank cheque shell companies, to the London market, through recent changes to the regulatory regime. The current review of the Prospectus regime should also take into account the important role played by pre-IPO due diligence and disclosure.

When making regulatory changes, the right balance needs to be achieved between reform and high standards of governance. The UK should not engage in a self-defeating race to the bottom, aimed at boosting listings in the short-term while undermining our hard-won position as a governance leader.

01:18 PM

US markets set to stall

Wall Street looks set to open lower after the opening bell this afternoon despite robust US retail sales growth, as China growth fears weighed on stocks.

The S&P 50, Dow and Nasdaq all looked set to inch down into the red from 2.30pm amid weak economic data and fears of fallout if a major Chinese company collapses.

Debt-ridden property developer Evergrande fell another 3.4pc today to land 30pc down for the week ahead of an $80 million bond coupon payment next week, on top of $310bn in liabilities.

The editor-in-chief of state-backed Chinese newspaper Global Times warned Evergrande that it should not bet on a government bailout on the assumption it is "too big to fail".

"The underlying risk for markets is if Evergrande is not bailed out by the Chinese government," said Giles Coghlan, chief currency analyst at HYCM, though he added: "I don't think Evergrande is a Lehman scenario - it's not going to be a massive systemic risk."

Nevertheless, it hit trader sentiment along with data from China earlier this week showing an economic slowdown is likely in the second half of the year.

On top of that traders expect the Federal Reserve is expected to open up the possibility of tapering stimulus next week, linking future decisions to the health of the US jobs market.

"There remains an underlying tension with concerns about the growth outlook and central bank tightening weighing on sentiment," said Seema Shah, chief strategist at Principal Global Investors.

"Perhaps there is too much caution – although growth in the U.S. and likely in Europe is slowing, it will still be at a solid pace – but the combination of slowing growth and tightening monetary policy will inevitably weigh on returns going forward."

12:59 PM

Pound loses momentum

The pound is stuck below a recent one-month high versus the dollar today, after UK retail sales undershot expectations and some investment banks brought forward their forecast for a Bank of England rate rise.

“A poor UK August retail sales report may take some of the momentum out of the rise in the UK money market rates and also GBP,” ING said.

Goldman Sachs said yesterday that it had moved its baseline forecast for a rate rise forward to May 2022.

The pound is currently 0.1pc higher against the dollar at $1.3799 - below the multi-week high of $1.3913 the currency hit on September 14.

12:35 PM

Stanlow Refinery owner braced for tax crunch

The owner of the Stanlow oil refinery is said to be facing a squeeze on its finances as it approaches a deadline to repay hundreds of millions of pounds in deferred taxes, writes James Warrington.

Sky News reports that Essar Oil UK, which acquired the site in north-west England for $350m in 2011, is facing a funding shortfall that could amount to several hundreds of millions of pounds.

The company is now seeking an extension to a so-called Time to Pay arrangement struck with HMRC in April, which gave it more time to repay its debts.

According to the report, the government is closely monitoring the situation due to the importance of the refinery to UK fuel production.

Around one-sixth of Britain’s transport fuels – comprising petrol, diesel and jet fuel – are produced at the site.

12:22 PM

Transport secretary Shapps confirms travel changes are coming

12:15 PM

Oxbridge denied top spot in university ranking

Both Oxford and Cambridge have been denied the top spot in The Times' university league table by Scotland's St Andrews, the first time the two "Oxbridge" universities have failed to lead a British ranking.

This is what The Times' university league table looks like this year:

  1. University of St Andrews

  2. University of Oxford

  3. University of Cambridge

  4. Imperial College London

  5. London School of Economics and Political Science.

Read the full list here.

12:04 PM

Return to the office threatened by new flexible working rules

All employees will be able to request flexible working patterns when they start a new job, potentially derailing plans to bring workers back to offices in city centres, reports James Warrington.

He writes:

Millions of workers will be able to make such requests immediately rather than having to wait 26 weeks under proposals set to be announced by the Department for Business.

Plans could be announced as soon as next week, Sky News reported.

The move is understood to have been planned since 2019 but has become more urgent following the huge shift in working patterns during the pandemic.

Read the full story here.

11:49 AM

Deutsche boss says sorry to Berlin for report criticising government

Deutsche Bank chief executive Christian Sewing - Krisztian Bocsi /Bloomberg 
Deutsche Bank chief executive Christian Sewing - Krisztian Bocsi /Bloomberg

The boss of Germany's largest lender, Deutsche Bank, has been forced to apologise to politicians weeks before the country's elections after one of its analysts criticised the government with views that were "not authorised" by the bank's management, reports Lucy Burton.

Christian Sewing has told German officials that the bank doesn't share the views of one of its analysts, who dismissed a “failed” government-backed pension system in a note earlier this week, those close to the matter told Bloomberg.

Mr Sewing's charm offensive comes just weeks before Germans will go to the polls to elect a new parliament and ultimately decide a successor to Angela Merkel, the outgoing chancellor who has dominated the country's politics since 2005.

The chief executive's attempt to soothe relations highlights how important it is for the bank to be on good terms with government officials after a rocky few years for the lender.

Finance Minister Olaf Scholz, of Germany’s Social Democratic Party, is currently leading the polls and has been credited with bringing the Left back from the political dead. Images of him and the slogan “Scholz will tackle it” have been emblazoned on posters across the country. Christian Odendahl, chief economist at the Centre for European Reform (CER), a think tank, said "he’s easily the most experienced, sober and Merkel-like candidate".

A spokesman for Deutsche Bank said: "On Tuesday, Deutsche Bank Research published a report on the status of the financial sector in Germany. In this report the author expresses his views and opinions. These are not shared by Deutsche Bank and were not authorized by Deutsche Bank Research leadership.

"In particular, Deutsche Bank and Deutsche Bank Research distance themselves from the inappropriate criticism in substance and tone of regulators and policymakers which were expressed in the research report."

11:36 AM

Inflation expectations rise to 2.7pc, survey shows

British consumers expect inflation to stay above the Bank of England’s target for at least the next five years, a survey showed.

The central bank’s quarterly inflation attitudes survey - by the market research firm Kantar - showed that survey respondents expect a 2.7pc increase in prices over the next year, up from 2.4pc in May.

Over the next five years, respondents expected a rise a rise of 3pc.

The readings are all above the Bank of England's 2pc target.

The central bank pays close attention to inflation attitudes in order to prevent a spiral of expectations that would drive up costs and wages across the economy.

11:21 AM

Manchester United losses almost quadruple

 Cristiano Ronaldo of Manchester United celebrates with Bruno Fernandes after scoring their side's second goal during the Premier League match between Manchester United and Newcastle United - Laurence Griffiths /Getty Images Europe 
Cristiano Ronaldo of Manchester United celebrates with Bruno Fernandes after scoring their side's second goal during the Premier League match between Manchester United and Newcastle United - Laurence Griffiths /Getty Images Europe

Losses widened at Manchester United in the last year, after pandemic lockdowns and empty stadiums curbed matchday sales and commercial revenue.

The football club said its net loss for the year to June 30 almost quadruped to £92.2m, compared with a loss of £23.2m in the same period a year ago.

11:08 AM

US stock futures fall

US stock futures fell this morning in New York, after a week of mixed economic data that showed inflation cooled, retails sales rose and the number of Americans applying for unemployment support increased.

Dow, D&P 500 and Nasdaq futures each fell 0.3pc, although all three major indexes were headed for small weekly gains.

Technology stocks dipped - including Apple and Google owner Alphabet - as investors pivoted into sectors most likely to benefit from an economic recovery this year.

“What this week tells us is that there’s going to be this bumpy normalisation for the foreseeable future. All this mixed data puts us a bit in limbo,” Ludovic Subran, chief economist at Allianz, told the Wall Street Journal.

“The return of volatility in an environment that is a bit of an in-between time is very probable.”

10:44 AM

Vectura barred from major medical conference after Philip Morris takeover

British inhaler developer Vectura has been barred from a major medical conference amid a growing backlash over its £1bn takeover by tobacco giant Philip Morris International, reports James Warrington.

He writes:

The drugmaker had been listed as a sponsor and participant at an Oxford Global event on inhaled drug delivery in London next week, but has been banned from taking part after other speakers threatened to withdraw.

Philip Morris International, which makes Marlboro cigarettes, seized control of Vectura on Thursday after securing 74.8pc of the company’s shares, fending off a rival offer from private equity firm Carlyle Group.

One of Vectura’s largest shareholders, Legal & General Investment Management (LGIM), confirmed it had accepted the offer and vowed to “exert influence from within”. It has built a reputation for speaking out on the importance of ethical investing and in 2017 launched a tobacco-free pension fund for Cancer Research UK.

Read James' full story here.

10:28 AM

FTSE 100 erases gains

The FTSE 100 has now erased its gains from this morning and has fallen into the negative.

The index is currently 0.1pc below yesterday's closing price, after rising as much as 0.8pc in early trading.

Miners are weighing heavily on the blue-chips. BHP is down 2.5pc and Rio Tinto is fell 2.7pc.

Anglo American tumbled 4.2pc, after Morgan Stanley and UBS downgraded the stock.

Worries about slowing Chinese growth also mean the European mining index is heading for a 5pc weekly decline.

10:16 AM

Hostel company invites bids after takeover approach

Larry Lipman, Chairman of Safestay, pictured outside the company's 368-bed hostel in Holland Park in London - Geoff Pugh for the Telegraph 
Larry Lipman, Chairman of Safestay, pictured outside the company's 368-bed hostel in Holland Park in London - Geoff Pugh for the Telegraph

Hostel company Safestay has received a "very early stage and highly conditional" approach from a potential buyer, bosses said today as they launched a review of the business.

Directors said the review could lead to them launching a formal sales process and invited bids from potential suitors.

The company has been hammered by the pandemic and has since focused on cutting costs, tapping into Government support and renegotiating rent with landlords.

It has recently sold two parts of the business to raise nearly £17m - saying it will use the cash to compete once the market recovers.

Chairman Larry Lipman said:

From May we began reopening our portfolio of premium hostels and we have seen occupancy improve month on month in line with internal forecasts.

Following the two disposals earlier this year for a combined total of £16.8 million, we reduced borrowings by 35% and injected £6.3 million in cash to support the transition back to being fully operational.

"Individual and group bookings are coming in for the winter and for 2022 and underpin our confidence of returning to pre-Covid levels of trading.

09:49 AM

New tax rise fears as Sunak plans rules to slash borrowing

Rishi Sunak, UK chancellor of the exchequer, during a news conference inside number 10 Downing Street in London - Neil Hall /EPA
Rishi Sunak, UK chancellor of the exchequer, during a news conference inside number 10 Downing Street in London - Neil Hall /EPA

Rishi Sunak is planning to rein in borrowing with a new set of fiscal rules that will bite over the next three years, reports Tim Wallace.

The record £298bn deficit in the last financial year combined with growing concerns over the potential impact of rising interest rates has raised fears over the expense of servicing the £2.2 trillion national debt.

The new rules will aim to stop the Government borrowing for day-to-day spending, the Financial Times reported.

It is a sign that new spending giveaways and tax cuts are likely to be tightly limited in next month’s Budget, despite the economic recovery holding down borrowing so far this financial year.

Read Tim's full story here.

09:40 AM

On The Beach Group surges

All inclusive holiday company On The Beach is surging this morning, in anticipation that the government will announce plans to scrap PCR tests for vaccinated travellers and simplify the current "traffic light" travel system.

The Manchester-headquartered company, which specialises in short-haul beach holidays, jumped 8.2pc to 349p - rising in tandem with other travel companies including British Airways owner IAG, RyanAir and the InterContinental Hotels Group.

On The Beach will be hoping this marks another sign of its recovery. The company has been hit hard by the pandemic.

In May, bosses said the business would temporarily pause its holiday sales after their research pointed to "a market wide lack of appetite for booking amber destinations, as well as the likely loss of customer goodwill for holidays that might be booked only to be cancelled or re-arranged".

09:30 AM

Pinduoduo founder suffers world's steepest wealth drop

The Pinduoduo logo - Thomas White /REUTERS 
The Pinduoduo logo - Thomas White /REUTERS

The founder of Chinese e-commerce giant Pinduoduo has suffered the world's biggest wealth drop this year.

Colin Huang’s fortune has shed more than $27bn (£19.6bn) as a result of China's crackdown on its internet giants, according to Bloomberg.

Huang, who’s now worth about $3bn (£2.2bn) stepped down from his role as chief executive of the company last year and left his role as chairman in March.

Shares of Pinduoduo have fallen more this year than China's other internet giants, Alibaba or Tencent.

PDD is “more vulnerable to the crackdown compared to those peers with mature and profitable models” like Alibaba and Tencent, Kenny Ng, a securities strategist at Everbright Sun Hung Kai in Hong Kong, told Bloomberg.

Huang's is the biggest decline among the 500 members of the Bloomberg Billionaires index and is the starkest example of how the tide has turned for China’s wealthy as President Xi Jinping calls for “common prosperity” and reins in private-sector companies.

Of the 10 billionaires with the biggest net worth declines this year, six are from China, according to the Bloomberg index.

They include Zhong Shanshan, the chairman of bottled water company Nongfu Spring, who has lost $18bn (£13bn), Hui Ka Yan of the besieged developer Evergrande, and Tencent’s Pony Ma, whose fortune has dropped by more than $10bn (£7.2bn).

09:08 AM

Money round-up

Here's the daily round-up from The Telegraph's Money team:

08:53 AM

Focus falls to next week's Monetary Policy Committee meeting

Catherine Mann  - TT News Agency /Thomas Karlsson/DN/TT 
Catherine Mann - TT News Agency /Thomas Karlsson/DN/TT

The drop in retail sales this morning has eased concerns about a sooner-than-expected policy tightening by the Bank of England, boosting the FTSE 100 as much as 0.8pc earlier this morning.

The index has pared gains slightly but still remains 0.3pc higher than yesterday's close.

Investor focus will now be crystallising around the outcome of the central bank's policy meeting next Thursday.

“The Bank of England’s meeting next week comes at a potentially awkward moment for the UK economy," said Luke Bartholomew, senior economist at Aberdeen Standard Investments.

"With growing evidence that inflationary pressures are mounting at the same time that growth is slowing, the Bank may be facing a trade-off over which factors it prioritises."

He added: "Speculation is mounting that the Bank will start to increase interest rates next year. We think the current bout of higher inflation will prove to be transitory and that unemployment may increase around the end of furlough which could stay the Bank’s hand. But the Bank will need to signal to markets quickly if it thinks current hiking speculation has gone too far, otherwise it risks these predictions having a certain self-fulfilling logic."

Further uncertainty stems from the two new members of the nine-member Monetary Policy Committee, Catherine Mann and newly appointed Chief Economist Huw Pill.

“The other interesting thing to watch out for will be how the new members of the Bank’s decision making body use their votes. A vote against the committee’s majority in their first meeting is unlikely, but any hints to their future voting intentions will be watched closely," said Bartholomew.

08:38 AM

Next to manage Gap's online business

Clothing and homeware retailer Next has struck a deal to manage Gap's UK and Ireland business as a franchise partner.

The agreement will form a joint venture which is owned 51pc by Next and 49pc by Gap.

Next will operate Gaps' digital operations, concessions and click and collect service across the region.

The deal follows Gap's announcement in June that it would close all of its stores in the UK and Ireland, as part of the US brand's wider retreat from Europe.

Read more about this story here:

08:24 AM

Foxtons names new chairman after shareholder rebellion

A Foxtons estate agent sign is seen outside a branch in west London - Peter Nicholls /REUTERS 
A Foxtons estate agent sign is seen outside a branch in west London - Peter Nicholls /REUTERS

Estate agency Foxtons Group has announced its new chairman, after shareholder backlash ousted his predecessor, Ian Barlow.

Barlow, who had been with the business for eight years, had faced criticism from investors over company salaries and dividend payments. Hosking Partners - which holds an 11pc stake - called for "radical board-level change"in June, after around 40pc of shareholders voted against the group's payment plan for bosses.

Barlow will be replaced by Nigel Rich, a chartered accountant and former chair of estate agent Hamptons International.

Rich has also chaired warehouse landlord Segro and held non-executive positions at Harvey Nichols and broadcaster ITV.

He will join the board on October 1, when Barlow is due to step down.

"As the UK, including London, recovers from the economic effects of the pandemic, Foxtons is well placed to take advantage of the resurgent activity in the residential market," Rich said.

"I look forward to working with the management team to accelerate Foxtons' recovery and returns to shareholders."

08:12 AM

JPMorgan to launch UK digital bank next week

A sign of JP Morgan Chase Bank is seen in front of their headquarters tower in New York - Amr Alfiky /REUTERS 
A sign of JP Morgan Chase Bank is seen in front of their headquarters tower in New York - Amr Alfiky /REUTERS

JPMorgan Chase & Co will launch a digital bank called "Chase" in the UK next week, the US investment bank's first overseas retail operation.

Chase will initially offer only current accounts but the product range will widen over time, Sanoke Viswanathan, head of JPMorgan’s International Consumer division told the Financial Times.

He added that the bank plans to invest “hundreds of millions” in the venture.

JPMorgan agreed to buy UK online wealth manager Nutmeg Saving and Investment in June and Viswanathan said more acquisitions may be considered.

07:58 AM

CMA to investigate Pennon's Bristol Water acquisition

Britain's competition watchdog said today it will investigate whether utility company Pennon's plans to buy Bristol Water could reduce competition in the water industry.

Competition and Markets Authority (CMA) officials will examine the deal to understand if it might result in a "substantial lessening of competition within any market or markets in the United Kingdom for goods or services".

The regulator will also assess whether the deal "is likely to prejudice [the water regulator] Ofwat's ability, in carrying out its functions, to make comparisons between water enterprises".

07:42 AM

FTSE risers and fallers

Alongside BA owner IAG, other top risers on the FTSE 100 this morning include InterContinental Hotels Group (up 2.6pc) and publishing and events group Informa (up 2.4pc).

Miners dragged, with Anglo American leading losses (down 3.3pc).

Among the mid-caps, Wickes was leading gains (up 4.8pc) on the FTSE 250 index, after publishing strong results yesterday.

Airline TUI was close behind (up 3.8pc) with Virgin Money also among top risers (up 3.2pc).

Review website Trustpilot was trailing, down 4.3pc.

07:29 AM

BA owner rises ahead of travel rule changes

British Airways owner IAG is leading gains on the FTSE 100 in early trading today, in anticipation that the government will announce plans to scrap PCR tests for vaccinated travellers and simplify the current "traffic light" travel system.

The airline is up 3.4pc this morning, following suggestions that ministers could suggest the amber travel list could be removed entirely and dozens of countries could be taken off the red list.

Tui is also up 2.8pc, Wizz Air is up 1pc and Easyjet has lifted 0.8pc.

07:14 AM

Shortages hit department, clothing and food stores

Shortages weighed on the latest retail sales figures, with almost one-fifth of department stores unable to get the materials, goods or services they needed and food stores forced to switch suppliers to get what they needed.

More than 18pc of department stores suffered from shortages in August, followed by 11pc of clothing services, the Office of National Statistics said today.

Meanwhile, more than 22pc of food stores had to change suppliers or find alternative solutions in order to get what they needed.

“Shoppers and shops were stymied by shortages in August, " said Sarah Coles, personal finance analyst at Hargreaves Lansdown.

"Keeping the shelves full was a real battle, especially for department stores, which is one reason why we spent less in these stores in August. Supermarkets had a fight on their hands to keep supply chains flowing, but the might of these retailers meant they were able to track down alternative suppliers so we could keep filling our trolleys."

07:03 AM

FTSE 100 jumps 0.8pc higher

The FTSE 100 has jumped 0.8pc on opening to 7,082.87 points.

The FTSE 250 has also lifted 0.3pc to 23,713.79 points.

07:02 AM

'Near-term outlook for households’ spending is overcast'

Although retails sales were still were 4.6pc above their February 2020 level and the decline in food store sales was likely a consequence of more people visiting restaurants, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, sees the near-term outlook as overcast.

He says:

So far, households’ spending appears to have been no stronger in September. The BoE’s CHAPS data show that the non-seasonally adjusted value of credit and debit card transactions was 5.4pc below its February 2020 level in the seven days to September 9, compared to 3.1pc below in the seven days to August 9.

In addition, Google’s mobility data show that the number of people visiting retail and recreation locations in the first 11 days of September was 7.5pc below its January 2020 level, slightly exceeding August’s 6pc shortfall.

[...] The near-term outlook for households’ spending is overcast. Households’ real disposable incomes will decline in Q4 as CPI inflation soars to about 4pc, labour income drops in the wake of the closure of the furlough scheme, and the £20 per week uplift to Universal Credit is withdrawn. In addition, the 1.25pp increase in the rate of employees’ NICs in April will hit disposable incomes by about 1pc, while the income tax threshold freeze will impose an additional modest drag.

At the same time, still-high levels of Covid-19 circulation likely will ensure that some households remain cautious about spending money on indoor services. Accordingly, we continue to think that households’ spending will take until Q3 2022 to return to its pre-Covid peak.

06:46 AM

Retail sales: 'This is the new normal'

Oliver Vernon-Harcourt, head of retail at Deloitte, says:

Many businesses talk about ‘waiting for the new normal’, but the reality is that consumer behaviours have now steadied, and this is the new normal.

In August, online purchases accounted for 27.7pc of all retail sales, compared to nearly 20pc pre-pandemic. As a result, retailers are wrestling with the conundrum of where to invest and where to allocate capital, whether in-store or online.

Many retailers are also experimenting with new ways to improve the consumer experience and remain attractive to, for example, the more conscious consumer, including zero waste trials and hybrid shopping. A perfect storm of labour shortages, supply chain issues and increased demand will continue to test retail leaders as we enter the Golden Quarter.

Christmas will be impacted by these headwinds; there will very likely be shortages in some categories which will force consumers to make different choices. Retailers – particularly grocers – will have to decide which products to put on the shelves, prioritising higher-margin products where possible.

06:40 AM

Clothing and fuel defy retail sales slide

A shopper holds bags from the Selfridges & Co. Ltd. department store on Oxford Street in central London - Jason Alden /Bloomberg
A shopper holds bags from the Selfridges & Co. Ltd. department store on Oxford Street in central London - Jason Alden /Bloomberg

Paul Dales, chief UK economist at Capital Economics, adds:

Coming on the back of a 2.8pc m/m drop in July (revised from -2.5pc), retail sales have fallen by 3.8pc in two months and are now just 4.5pc above the pre-pandemic peak after having been 10.1pc above it in April.

This probably isn’t as gloomy a sign for the overall economic recovery as it may seem as at least some of it reflects households shifting their spending to elsewhere after the lockdowns.

Indeed, the 1.2pc m/m fall in food sales may be because people are eating less at home and more in cafes, pubs and restaurants. And the 1.7pc m/m decline in online sales suggests people are shopping less from home on their phone, tablets and laptops.

At the same time, the 1.5pc m/m rise in fuel sales was the sixth rise in a row as people travelled more. Clothing was the only other area where sales rose, by 0.7pc m/m perhaps as people ditched the hoodies and bought new shirts for the return to the office.

06:31 AM

Expert reaction: 'Trade headwinds likely to intensify'

Hussain Mehdi, macro and investment strategist at HSBC Asset Management, says:

August activity was expected to rebound from July’s sharp pullback, driven by one-off factors such as bad weather, the end of the Euro 2020 tournament, and the impact of the “pingdemic”.

The disappointment reflects sales volumes already back at pre-covid levels, a switch into services spending over the summer as the economy re-opened, and ongoing supply disruptions.

These factors are likely to prove a meaningful constraint to sales growth in the coming months, while next April’s hike in national insurance contributions will also be a headwind.

Positively, however, robust consumer confidence and high savings piles should continue to underpin overall consumer activity.

Aled Patchett, head of retail and consumer goods at Lloyds Bank, comments:

Pent up demand and lockdown savings may have sustained growth this summer, but this latest set of figures indicates that supply chain issues and weakening consumer demand are beginning to bite.

Worryingly, those trade headwinds are only likely to intensify as we head into autumn, with product limitations potentially restricting sales volumes during the critical golden quarter. Many big retailers have already issued warnings in relation to their ability to get the right products on shelves, while the UK’s Covid-fuelled appetite for online fulfilment will be tested in the run up to Christmas if current driver recruitment issues aren’t addressed.

“With the government also mooting the reintroduction of certain Covid restrictions this week, the coming months make for a heady mix of complex challenges that retailers have planned for but hoped were behind them.”

06:24 AM

'Shortages also weighed on sales'

Here's some snap reaction from Lynda Petherick, head of retail at Accenture:

After July’s sharp dip, August was another underwhelming month for retail sales as macro issues put a dent in consumer spending.

The easing of self-isolation rules, summer staycations and further easing of hospitality restrictions helped maintain a healthy level of consumer spending. However, the continued impact of labour shortages and supply chain disruption weighed heavy on the sector, in a month that was characterised by images of bare shop shelves and delayed deliveries.

Retailers will already be concerned as we head into the Golden Quarter as the horse may have bolted for businesses who haven’t already acted to sure-up their supply chains. Order fulfilment and securing stock will be challenging, while many brands could find themselves short-staffed over this busy time. Without meticulous planning, consumers may be forced to get creative this Christmas if retailers can’t meet their needs.

06:21 AM

Retail sales post surprise fall as Brits return to restaurants

Good morning.

Retail sales fell to a surprise 0.9pc slump in August, as Britons spent less in shops in favour of returning to restaurants and pubs following the end of lockdown.

Economists had expected to see a monthly increase of 0.7pc last month after July's 2.8pc drop, but food store sales shrank 1.2pc while non-food retail sales declined 1pc following further easing of hospitality restrictions.

Department store sales plunged 3.7pc while sports equipment sales and computer sales fell 1.2pc, the Office for National Statistics said.

Jonathan Athow, deputy national statistician for the ONS, said: "Sales fell again in August, though not nearly as much as in July and, overall, remained above their pre-pandemic level.

"Other data suggest that the drop in food stores' sales is linked to an increase in eating out following the lifting of coronavirus restrictions."

5 things to start your day

1) Piers Morgan signs up for Rupert Murdoch's new channel TalkTV: Rupert Murdoch has signed up Piers Morgan and will launch a new TV network to challenge the BBC and GB News in a move likely to further inflame Britain's culture wars.

News UK said TalkTV would offer hourly news bulletins on current affairs, sports and entertainment from its journalists as well as "exceptional new talent".

2) Scotland faces £8.5bn black hole after independence vote: An independent Scotland faces painful austerity and currency attacks as it struggles to fill an £8.5bn financial black hole, a leading think tank has warned.

In a blow for Nicola Sturgeon’s bid to break with Westminster, the Institute for Government (IFG) warned Scotland would struggle to borrow the sums it needed to address a deficit worth 8pc of its economy even before the pandemic struck.

3) Brexit red tape bonfire to scrap paper driving licences and share certificates: Physical driving licences face the axe and farmers may be allowed to spray pesticides from drones as part of a package of post-Brexit regulatory reforms.

A string of policies ranging from reintroducing pounds and ounces in the shops to scrapping paper share certificates were unveiled by Lord Frost as he pledged that UK would seize the opportunities of leaving the European Union.

4) Australian submarine deal boosts Ultra Electronics takeover prospects: A new security pact between Britain, America and Australia has weakened the rationale for blocking the US private equity takeover of Ultra Electronics, which supplies kit for Britain's nuclear submarines, experts have said.

Advent International's pursuit of Ultra is thought to be more likely to succeed after the three countries agreed to share sensitive data under the so-called Aukus agreement.

5) Oracle pumps £150m into Oxford Nanopore float: Oracle will invest £150m in a British biotech company tracking Covid mutations in its upcoming London float.

The $240bn (£175bn) Texas-based software giant, founded by Larry Ellison, will become a cornerstone investor in Oxford Nanopore, which is set to go public next month.

What happened overnight

Asian shares steadied on Friday after losses earlier in the week, but China jitters and global growth concerns weighed on investors' minds, while the dollar sat near a three-week high.

European shares also looked set to rise on opening with pan-region Euro Stoxx 50 futures up 0.61% and FTSE futures 0.41% higher.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.12% on Friday but was set to finish down 2.7% on the week, which would be its worst week in four.

"We're looking at a market that is nervous, though hasn't seen sentiment turn outright bearish," said Kyle Rodda, an analyst at IG markets.

"If you look for catalysts that could justify the next move to the upside in equities and risk assets, they are nowhere to be seen because global growth concerns are keeping investors on edge."

Hong Kong's Hang Seng Index rose 0.23% with traders looking for oversold stocks after the benchmark posted its lowest close in 10 months the day before, as the saga around China Evergrande Group lurched towards a conclusion

Coming up today

  • Corporate: WANdisco (interim)

  • Economics: Retail sales (UK); consumer prices index (EU)

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