Pound jumps as Ursula von der Leyen says UK–EU trade deal still possible

Ursula von der Leyen
EU Commission president Ursula von der Leyen Credit: Olivier Hoslet/Pool via REUTERS

Wrap-up

The time has come to wrap up. These were some of the day’s top stories:

  • Sterling on a rollercoaster: The pound found itself tossed about today, ending the London session basically flat, after being knocked by the Bank of England’s hint at negative rates and then boosted by Ursula von der Leyen’s optimism on a potential UK/EU trade deal.
  • Bank of England moves a step closer to negative ratesThe Bank of England took another step towards controversial negative rates on Thursday amid rising Covid infections and a looming unemployment crisis.
  • Ryanair suffers investor rebellion over executive pay: Ryanair has suffered a shareholder rebellion, with more than a third of investor votes against executive pay at the budget airline’s annual meeting.
  • John Lewis to axe staff bonus after slumping to loss: John Lewis Partnership is to axe its famous staff bonus for the first time in more than 60 years after slumping to a loss for the first half of the year. 
  • ‘Optimistic’ Next reports recovery in salesNext managed to turn a small profit in the first half and raised its outlook for the rest of the year after trading beat expectations post-lockdown.

Once again, we’ll be starting bright and early tomorrow for UK retail sales data. Thanks for following along today!

Agreement reached on TikTok terms – Bloomberg

Oracle is likely to take over TikTok’s US operations Credit: REUTERS/Dado Ruvic/Illustration

The US Treasury Department, TikTok-owner Bytedance and Oracle – the would-be buyer of the social media app’s US business – have “tentatively” agreed terms for a takeover, Bloomberg reports.

The news service says:

Treasury sent Bytedance a revised terms sheet late Wednesday and the company and Oracle accepted it, the people said. They described the changes as addressing national security concerns about the transaction and asked not to be identified because of the sensitivity of the matter.

Bytedance is trying to win US approval for a transaction with Oracle Corp. that would leave the Chinese-headquartered parent company with majority ownership of TikTok. President Donald Trump demanded the sale of the service in August, declaring in executive orders that the popular video sharing app is a national security threat.

Pound jumps to erase losses against dollar

Sterling briefly erased its losses against the dollar in the wake of the FT report, which has raised hopes that a deal might still be forthcoming. 

FT: Von der Leyen ‘convinced’ UK and EU can still reach a trade deal

Ursula von der Leyen Credit: Olivier Hoslet/Pool via REUTERS

EU Commission president Ursula von der Leyen reaineds convinced that the UK and EU can still find their way to a trade deal, the FT reports.

The paper says:

 Ursula von der Leyen said Britain’s decision to pursue legislation overriding elements of the withdrawal agreement had come as a “very unpleasant surprise” to the EU and that it was down to London to restore trust and remove the question mark it had put over the treaty. 

But she said that EU-UK talks should continue, with the dispute kept at arm’s length from the sides’ future relationship negotiations, which centre on a trade deal.

“I am still convinced it can be done,” Ms von der Leyen said in an interview. “It is better not to have this distraction questioning an existing international agreement that we have, but to focus on getting this deal done, this agreement done — and time is short.” 

Over a third of Ryanair shareholders rebel over pay

Boss Michael O’Leary is in line for a major bonus Credit: Simon Dawson/Bloomberg

Ryanair has suffered a shareholder rebellion, with more than a third of investor votes against executive pay at the budget airline’s annual meeting.

My colleague Alan Tovey reports:

The protest came with chief executive Michael O’Leary in line for a bonus of €458,000 (£416,000) despite the crisis in the airline industry.

Ryanair has taken £600m in support from the UK Government and furloughed thousands of employees, with plans to make thousands more redundant.

Some 34.2pc of the vote was against executive pay, with 65.8pc supporting it, and 1.9pc of shares abstained, meaning the pay resolution was approved.Mr O’Leary received a total of €3.47m.

Of this €500,000 was base pay down from €1m a year ago, and which will be halved next year in response to coronavirus.

It also included €2.5m of shares-based payments.  His €458,000 bonus was below the maximum €500,000 he could have received.  

Breakdown

Apologies for some of the formatting issues with the blog today – our block quote styles have some issues with paragraph spacing that are being addressed. Thank you for your patience!

CNBC: Walmart to partner with Oracle in Tiktok deal

This just in. CNBC is reporting that Oracle will now partner with Walmart in purchasing Tiktok. 

According to reports, Oracle will own roughly 20pc of TikTok and Walmart will partner with the tech company. President Trump is also expected to rule on TikTok/Oracle deal in 24 to 36 hours.

Telegraph hits record 522,000 subscribers as profits surge

Some news about us...

Telegraph Media Group has reached a record 522,000 paying subscribers to its digital and print journalism, the company said on Thursday. 

We report:

Digital subscription growth increased dramatically during the first eight months of the year, driven by strong interest in coronavirus coverage, according to a trading update from the company that publishes the Daily Telegraph, the Sunday Telegraph and Telegraph.co.uk.

The milestone of 500,000 paying subscribers was passed in May and the total as of 8 September was 522,000 - a 23.4pc growth rate for the year to date.Subscribers increased by 60,000 (16.4pc) from 363,000 in December 2018 to 423,000 by December last year. The company now has 6.8m registered users, up from 3.6m in December 2018.

Nick Hugh, chief executive of Telegraph Media Group, said: "2019 represented another successful year for TMG as we continued our transformation to a subscription-first business. Our substantial and consistent subscription growth has continued into 2020, with the important milestone of 500,000 subscribers surpassed in May 2020.”

Digital subscription revenues increased by 48.9pc to £17.8m in 2019, with average net revenue per digital subscriber up 7.6pc to £99.40.Average revenue per subscriber reached £193.90 as of December 2019, up from £191.80 a year earlier. Subscription revenues are also expected to grow strongly in 2020. 

Wall Street slumps at the open 

US stocks have fallen sharply at the open as signs of a gradual economic recovery added to investor anxiety over the level of stimulus.

Credit: Bloomberg

New Zealand suffers record contraction

New Zealand’s prime minister, Jacinda Ardern Credit: Mark Tantrum/Getty Images

New Zealand has plunged into recession for the first time in a decade, forcing Prime Minister Jacinda Ardern to defend her pandemic response ahead of next month’s general election.

My colleague Lizzy Burden reports:

The national data agency Stats NZ said the 12.2pc contraction from April to June was “by far the largest” on record, with the country strictly locked down and its borders closed for almost two months. The construction and manufacturing sectors fell particularly sharply.

During the Great Depression, GDP fell 5.3pc in 1931 and a further 7.1pc in 1932, according to academic research.Ms Ardern rejected opposition accusations that the measures had pushed the economy “off a cliff”, adding that New Zealand’s Covid-19 death toll  – 25 out of a population of five million – compared favourably to other nations. Her aim has been to eliminate the virus altogether rather than only to contain its spread.

US jobless claims continue to ease

Around 860,000 Americans made initial claims for unemployment benefits last week – massive by historic standards, but a continued wind-down of the pandemic’s huge labour market ructions.

After rising slightly the previous week, the number of people making continuing claims dipped to 12.6m:

Full report: BoE steps close to negative rates

My colleague Russell Lynch has a full report on today’s MPC decision. He writes:

Minutes of the meeting said the MPC had been briefed on the Bank's plans “to explore how a negative Bank Rate could be implemented effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates”.

The Bank of England and the Prudential Regulation Authority “will begin structured engagement on the operational considerations” of the move in the final quarter, the minutes said. Major central banks including the Bank of Japan, the Swiss National Bank and the European Central Bank have already taken rates below zero, although retail depositors have been shielded.

The Bank’s remarks fuelled expectations of further stimulus in November as local lockdowns spread. Financial markets are pricing a move into negative territory next year as economic prospects darken. 

Pound extends losses

The pound, after a patchy morning, moved down sharply against the dollar following the Bank of England’s decision:

Investors are likely to be focused on the dovish hint from the MPC’s acknowledgement that it will be briefed on implementing negative rates.

Bailey and Sunak exchange letters over inflation

In a move required by the MPC’s remit, Bank of England Governor Andrew Bailey has written a letter to Rishi Sunak explaining why August’s inflation rate was more than 1pc below the 2pc target. The Chancellor has sent a letter in response, concurring with the Governor’s reasoning. All very conventional!

Lithium explorer makes ‘globally significant’ Cornwall find

Lithium explorer Cornish Lithium says it has found "globally significant" grades of lithium underground in Cornwall, raising hopes it could meet a large amount of the UK's demand for the battery material. 

My colleague Rachel Millard reports:

The private business, headed by former mining analyst Jeremy Wrathall, has been sampling geothermal water near Redruth and says "it almost couldn't believe" the results showing average concentrations of 220mg per litre. Lithium is a key ingredient in electric car batteries but China, Australia and Chile currently dominate supply, triggering efforts to develop supply chains closer to home. Cornish Lithium received some funding last year from a government-backed study to assess the feasibility of developing a UK lithium supply. It has also used crowdfunding. It has been studying lithium deposits in hot water brines that welled up in many of Cornwall's disused tin mines.

QE expected to finish by end of year

The MPC still believes its £745bn bond-buying programme should be wrapped up by the end of 2020:

The Committee continued to expect the UK government bond asset purchase programme to be completed, and the total stock of purchases to reach £745 billion, around the turn of the year. With liquidity conditions having stabilised, purchases could now be conducted at a slower pace than during the earlier period of market dysfunction.

Should market conditions worsen materially again, however, the Bank stood ready to increase the pace of purchases to ensure the effective transmission of monetary policy.

Brexit up for discussion at next meeting

The MPC will discuss Brexit developments at its next meeting, given that its current assumptions for the economy are based on a smooth trade transition. The minutes say:

The MPC’s latest central projections were also conditioned on the assumption of an immediate, orderly move to a comprehensive free trade agreement with the European Union on 1 January 2021.

The Committee would consider economic issues relating to Brexit within the context of its wider forecast discussions ahead of the November MPC meeting.

MPC briefed on negative rates

A interesting point in the full minutes of the MPC meeting – members were briefed on how the BoE could implement negative rates:

The Committee had discussed its policy toolkit, and the effectiveness of negative policy rates in particular, in the August Monetary Policy Report, in light of the decline in global equilibrium interest rates over a number of years.

Subsequently, the MPC had been briefed on the Bank of England’s plans to explore how a negative Bank Rate could be implemented effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates. The Bank of England and the Prudential Regulation Authority will begin structured engagement on the operational considerations in 2020 Q4. 

MPC: Outlook is ‘unusually uncertain’

The MPC said the outlook for the UK economy remains “unusually uncertain”, saying that despite a recovery in line with its expectations, risks remain from Brexit and a second virus wave:

Recent domestic economic data have been a little stronger than the Committee expected at the time of the August Report, although, given the risks, it is unclear how informative they are about how the economy will perform further out.

The recent increases in Covid-19 cases in some parts of the world, including the United Kingdom, have the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year. As in the August Report, there remains a risk of a more persistent period of elevated unemployment than in the central projection.

It said it will not tighten interest rates “until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2pc inflation target sustainably”.

Rates and QE unchanged

Just in: as expected, the MPC left the Bank Rate and its bond purchase target unchanged:

Trainline shares rise as passenger number slowly improve

Shares in ticket booking site Trainline have risen slightly this morning, after the FTSE 250 group reported a modest recovery in passenger numbers in its first-half results.

The group said its net ticket sales were at 19pc of 2019 levels during the six months to the end of August – rising to 30pc in the second quarter after just 9pc in the first. Overall, revenues were at 24pc of 2019 levels.

It said:

Group net ticket sales in the second quarter stepped up to £280 million – equivalent to 30pc of the same period in the prior year – as operating conditions began to recover.

This followed the relaxation of government lockdowns and social distancing measures, first in International markets and then several weeks later in the UK. There was also a notable shift of ticket volumes to online and digital channels.

Chief executive Clare Gilmartin said:

By acting quickly and remaining agile, we continue to successfully navigate through the significant disruption Covid-19 has caused to the rail and coach industry. We have rapidly processed unprecedented levels of customer refunds, reduced costs and ensured we have enough liquidity to operate for the foreseeable future.

Coming up: Bank of England decision

At midday, we’ll get the latest decision on monetary policy from the Bank of England. The MPC is not expected to adjust the dials at this meeting: markets aren’t pricing in any cuts to rates or an expansion to Threadneedle Street’s bond-buying programme.

Plus, since it isn’t a forecast round and the BoE has exited what could be called ‘crisis mode’, there’s no press conference afterwards either.

Instead, people will be watching closely for any sign of division between its policymakers. We already know that chief economist Andy Haldane is optimistic about the pace of recovery, but other members might take a more dovish tilt. Money markets still expect the key Bank Rate to shift lower (i.e., to zero) in the not-too-distant future – and Brexit nerves add to motivation for a policy move.

As our economics editor Russell Lynch wrote earlier this week:

The consensus is that the Bank will stand pat on interest rates and leave the scale of its quantitative easing unchanged at £745bn. The pace of its latest £100bn injection is slower, and set to expire in December, giving the chance to reassess with updated November forecasts.Unfortunately, as events in the past week demonstrate, the Monetary Policy Committee may not have the luxury of waiting a further two months. Its August forecasts were at the optimistic end of the spectrum on growth, and it also said unemployment would “only” peak at 7.5pc this year.But Covid-19 – as the soaring case numbers demonstrate – moves fast: the Bank’s musings were based on the assumption that “the direct impact of Covid-19 on the economy dissipates gradually over the forecast period”.That no longer holds water in a world of local lockdowns, and the “rule of six” now in force is set to depress economic activity into the autumn.

Ocado shares hit a record high

Online grocer Ocado has hit a record high today after Jefferies lifted its price target on the FTSE 100 group.

Its shares have gained as much as 2pc this morning, following the upgrade by analyst James Grzinic. 

He said the company’s sales figures earlier this week confirmed it has felt the benefits of “ideal” UK trading conditions, but cautioned that a lack of “sizeable wins on the enterprise solutions front” is a cause for concern.

Kier Group shares pop after full-year results

A Kier Group worker at a Crossrail construction site Credit: REUTERS/Stefan Wermuth/File Photo

Kier Group shares have bounced back after touching record lows yesterday, after the construction outsourcer reported full-year results that topped analysts’ expectations.

The group’s annual loss before tax remained fairly flat at £225.3m, compared to 2019’s £229.5m loss. Revenues slipped 13pc to £3.42bn. It incurred direct Covid-19 costs of £45m.

Chief executive Andrew Davies said:

This financial year has been a difficult one for the Group. The progress made in the first nine months, despite challenging market conditions, reflected the successful execution of many elements of our strategic plan, as we began to experience the benefits of the decisive cost reduction actions taken. 

Looking past the virus-linked costs, Liberum’s Joe Brent said the performance was ahead of expectations, adding the company now has some much-needed breathing space after renegotiating its debt covenants.

Co-op sales surge

The Co-op said it anticipates rising competition in the groceries sector Credit: REUTERS/Hannah McKay/File Photo

The Co-operative Group has said that half-year sales surged higher on the back of “exceptional” food and wholesale trading after the pandemic drove grocery demand.

My colleague report:

The business said total revenues increased by 7.6pc to £5.8bn for the 26 weeks to July 4.Funeral volumes increased dramatically, but revenues rose at a far lower rate, impacted by pricing restrictions amid coronavirus.It said food revenues increased by 5.2pc to £3.9bn for the period, with 9.9pc like-for-like growth in the second quarter, after customers shopped closer to home and ate out less frequently during the lockdown.The Co-op said it expected competition to “intensify” in the grocery sector, but believes it remains “well-positioned”.It has resumed its store opening programme and made a commitment to invest £130m in opening 50 stores, extending 15 stores and giving 100 further sites makeovers, creating 1,000 jobs before the end of the year.

Money round-up

Here are some of the day’s top stories from the Telegraph Money team:

ONS: 10pc of workforce was on furlough as of September 6th

One in 10 British workers was on furlough leave as earlier this month, according to the latest fast indicators from Office for National Statistics.

The ONS’s latest surveys, covering the period from August 24th to September 6th, found the figure stodd at almost 70pc for companies that have temporarily closed or paused trading.

Additional, it found:

  •  The proportion of adults travelling to work rose above 60pc for the first time since lockdown
  • Every region and country of the UK except Yorkshire and The Humber saw an increase in the volume of online job adverts
  • Department for Transport (DfT) traffic count data show that on Monday 14 September, all motor vehicle traffic was three percentage points below traffic seen on the equivalent Monday in the first week of February, the highest recorded level since the Prime Minister’s announcement on 16 March

Next ekes out small profit

Next ramped out its profit expectations Credit: Yui Mok/PA Wire

Next managed to turn a small profit in the first half and raised its outlook for the rest of the year after trading beat expectations post-lockdown.

My colleague Simon Foy reports:

The high street bellwether said its central scenario now assumed full year pre-tax profits of £300m, up from the £195m it forecast in July. In the last seven weeks, full price sales grew 4pc on last year, driven by cool weather and fewer overseas holidays.The company said its "sales performance through the pandemic has been more resilient than expected".The robust performance was driven by its online business which, even before lockdown, accounted for more than half of its turnover. It came as Next posted pre-tax profits of £9m for the six months to July, while revenue declined by a third to £1.29bn.

IG Group climbs as revenues and clients continue to soar

IG boss June Felix Credit: Eddie Mulholland

Spread-betting company IG Group is leading risers on the FTSE 250 today, after reporting another jump in revenues and client numbers.

Net trading revenues during the three months to the end of Augus, IG’s first quarter, were £209m, up 62pc on the same period last year.

The group said its performance was driven by “a combination of continued high levels of trading activity from existing clients and growth in the active client base”, with total active clients up 50pc on 2019’s levels.

Chief executive June Felix said:

This was a great start to the year, and although there was some moderation from the exceptional performance in Q4, our first quarter results demonstrate IG's continued strength across the core markets, while also highlighting the growth potential in the significant opportunities.

Royal Bank of Canada’s Ben Bathurst said the results were strong, adding IG’s strong performance through the pandemic would continue to produce long-term benefits for the group.

Playtech shares sink after cautious results

Shares in gambling software group Playtech have fallen this morning after management sounded caution over its outlook.

The group’s revenues to the end of June fell 23pc to €564m compared the same period in 2019, with profits sinking 71pc to €10.5m.

It said it was performing well, but remains “cautious about the outlook for retail”.

Chief executive Mor Weizer said:

Despite Playtech being severely impacted by COVID-19 through the cancellation of sporting events worldwide and the closure of retail shops, the group navigated the pandemic exceptionally well and had a resilient H1 2020.

The group said it experienced “strong trading and cash generation” in July and August, although July was the stronger of the two.

Shore Capital’s Greg Johnson said the results were “solid”, driven by strength in Playtech’s TradeTech markets sub-division.

Stocks tumble

European equities have dropped sharply at the open, following Wall Street into the red. 

Credit: Bloomberg TV

Pound slips

The pound has edged lower against the dollar this morning, amid a ‘risk-off’ mood across global markets that has sent equities tumbling.

 The Federal Reserve firmly set the mood last night. As my colleague Russell Lynch reported:

Interest rates will be held near zero for at least three more years as the US economy struggles to recover the economic ground lost to Covid-19, the Federal Reserve signalled on Wednesday.The world’s most powerful central bank held interest rates unchanged at 0 to 0.25pc after drastic cuts in February and March to battle the shock of a pandemic that has claimed almost 200,000 American lives.Fed chairman Jay Powell has given himself more firepower to boost the economy after switching to a new “average” inflation targeting regime in August. 

John Lewis scraps bonus for first time since 1953

Dame Sharon White said the group may on course to make a small loss or profit for the year

The John Lewis Partnership board has confirmed it will not pay its famous partner bonus next year amid a poor profit outlook.

The group, which runs the eponymous department stores as well as Waitrose supermarkets, posted a loss before tax of £635m for the first half of the year, compared a £192m profit for the same period last year.

The group estimated it had lost £200m in sales and incurred an extra £50m in costs over the period, which was only partially offset by £55m in furlough money from the Government, and £51m from the business rates holiday.

Boss Dame Sharon White said:

The outlook for the second half is clearly uncertain given the broader macroeconomy. Christmas trade is also particularly important to profits in John Lewis and I would ask Partners to do everything we can to serve customers brilliantly both in John Lewis and Waitrose.

In April, we set out a worst case scenario for the full year of a sales fall of 5pc in Waitrose and 35pc in John Lewis. That remains our worst case view. We now believe the most likely outcome will be a small loss or a small profit for the year. 

JLP said it now expects to begin paying a bonus once again once profits exceed £150m and its debt ratios fall below 4 times. It added: 

Once our profits rise above £300m and a debt ratio below 3 times, we would expect to pay a bonus of at least 10pc…The Partnership found itself in a similar position in 1948 when the bonus was halted following the Second World War. We came through then to be even stronger than before and we will do so again. 
  • Correction: An earlier version of this post said it is the first time JLP had scrapped its staff bonus since 1948. It is actually the first time since 1953.

European new car registrations fall

 New car registrations in Europe grew worse during August, down 18.9pc year-on-year compared to a 5.7pc fall in July.

ACEA, the European Automobile Manufacturers Association, said total demand for passengers cars was down 32pc in the first eight months of 2020:

In total, 6,123,852 new cars were registered across the European Union from January to August, almost 2.9 million less than during the same period last year.

Although the decline was less dramatic than seen earlier this year, it suggests post-lockdown demand quickly lost steam. The biggest declines were seen in Germany and France, the continent’s top economies.

Deloitte slapped with £15m fine over failing in Autotnomy audit

Deloitte is one of audit’s Big Four firms Credit: REUTERS/Hannah McKay

Deloitte has been fined £15m by the accounting regulator over misconduct in its audit of scandal-hit software firm Autonomy.

My colleague Simon Foy reports:

The Financial Reporting Council said the auditor would also have to pay more than £5.6m to cover the costs of the watchdog's investigation. The tribunal found that Deloitte was culpable of “serious and serial failures in discharge of this public interest duty” and was “liable for failures to act with integrity and objectivity”. 

Elizabeth Barrett, executive counsel, said: “The significant sanctions imposed by the independent tribunal and announced today reflect the gravity and extent of the failings by Deloitte and two of its former partners in discharging their public interest duty concerning Autonomy's audits.”

Agenda: FTSE set to slide 

Good morning. The FTSE 100 is set to tumble at the open following the lastest Nasdaq sell-off last night. 

Meanwhile all eyes will be on the Bank of England's MPC meeting later this afternoon when it will issue its latest interest rates decision. 

5 things to start your day 

1)  Share surge makes Hut Group founder a billionaire: Shares in the online health and beauty group soared by almost a third on their trading debut on Wednesday amid strong demand. 

2) Lower for even longer as Fed holds fire on interest rates: US rates will be on hold until at least 2023, according to the Federal Reserve's new forecasts.

3) Mark Carney nabs advisory role at bond giant Pimco: Canadian fattens portfolio with a new job at the $1.92 trillion fund

4) John Lewis to shrink flagship Oxford Street store: Its sister business, Waitrose, is also slimming down - by closing branches in Caldicot, Ipswich Corn Exchange and Shrewsbury.

5) Ban on business evictions extended until end of the year: The emergency moratorium on serving notice against companies that fail to pay rent was due to expire at the end of September

What happened overnight 

Stocks fell and the dollar advanced on Thursday after the Federal Reserve pledged to keep interest rates low for a long time but stopped short of offering further on stimulus to shore up a battered US economy.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.82pc, running out of steam after five straight days of gains. Japan's Nikkei shed 0.45pc.

US S&P 500 futures fell 0.87pc in Asia on Thursday following a 0.46pc drop in the S&P 500 on Wall Street.

Tech shares fared worse, with the Nasdaq Composite dropping 1.25pc on Wednesday. Nasdaq futures dropped 1.13pc in Asia.

The US dollar gained against most other currencies.

The euro dropped 0.4pc to $1.1767 while the Australian dollar lost 0.35pc to $0.7279, having erased earlier gains made after stronger-than-expected local jobs data.

Coming up today

Full-year results

Kier Group

Interim Results 

Hilton Food, IG, Next, Oxford Biomedica, Playtech

Economics

Car registrations, Bank of England MPC decision (UK); Bank of Japan decision; inflation (eurozone); housing starts, building permits (US)