Pound falls as EU prepares to ignore Johnson’s Brexit ultimatum

City of London
The FTSE is flat today Credit: Dominic Lipinski/PA Wire

Wrap-up

Despite a moderate rise across Europe, the FTSE 100 has closed flat, following a pretty uninspiring performance. It was another quiet day overall, with an increasing sense that that markets are waiting for next month’s US election. Here are some of the day’s top stories:

Thank you for following along today – we’ll be back at the same time tomorrow!

Powell warns US recovery may prove weak without further support

Federal Reserve chair Jerome Powell has warned the US’s economic recovery may be weak if America’s government can’t provide sufficient fiscal aid.

Mr Powell’s comment during a speech for a virtual conference, comes as Congress remains in a stalemate over relief spending.

The Fed chair said:

Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. By contrast, the risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste.

Boohoo faces grilling in new probe

Boohoo has been in the spotlight over its supply chain ethics Credit: Charlotte Rutherford

Boohoo has said it will give evidence to MPs following up on an inquiry into the fast fashion industry and textile waste. 

My colleague Laura Onita reports:

The online retailer, which is seeking to move on from controversy about its suppliers in Leicester, said it had contacted the Commons Environmental Audit Committee and would answer any questions its 17 members may have. 

The cross-party committee will follow up on its 2018 inquiry to determine if fast fashion practices have improved in the light of revelations about illegal pay and poor working conditions. 

Its chairman, Philip Dunne, has asked for written evidence from the fashion industry by November 13. Witnesses will later appear in front of MPs.

Last year, the Government rejected all 18 recommendations from MPs that were intended to keep the fashion industry in check including tackling waste and eradicating illegal pay. 

US job openings fall for first time in four months

The number of US job openings dropped in August, declining for the first time in four months.

There were 6.5m openings compared to July’s 6.7m, according the Department of Labor’s Job Openings and Labor Turnover Survey. The fall is in line with economists’ estimates.

US trade deficit widest since 2006

The US’s trade deficit continued to widen in August, reaching $67.1bn.

That’s the biggest deficit since 2006, and reflects a further increase in imports as companies responded to higher domestic demand. The surplus in services fell to the smallest since 2012.

Wall Street opens flat

Surprising precisely nobody, Wall Street has opened flat as a pancake. 

Credit: Bloomberg TV

Wall Street set for flat open

European shares are now edging slightly higher – which means it’s America’s turn to be flat. The S&P 500 is set to open up 0.2pc, while Nasdaq futures are down 0.1pc.

High hopes for McLaren’s ‘High Performance Hybrid’

McLaren's High Performance Hybrid

McLaren has begun final testing of its first production electric hybrid supercar before it goes on sale early next year. 

My colleague Alan Tovey writes:

The new “high performance hybrid” is part of the company’s move to incorporate electric power into its portfolio. Its arrival was delayed by six months, partly because of the pandemic.

It will be the first McLaren to be built around the carbon-fibre lightweight chassis made at the company's new composites technology centre in Sheffield.

As well as a V6 petrol engine, the hybrid will have an battery electric powertrain to give the car a “medium range” capability on electric power only. The hybrid system can also work with the internal combustion engine for even greater performance.

Glaxo expands Covid trial

GlaxoSmithKline and Vir Biotechnology will expand their trial of an experimental Covid antibody after initial use by a group of volunteers did not raise any safety concerns.

The companies started testing the antibody on early-stage patients in August, hoping to keep symptoms from progressing.

Several firms are running tests in this promising class of antiviral drugs to combat the pandemic.

After testing the drug on 20 US participants for safety, the trial will now expand to 1,300 patients globally. Half will be randomly assigned to a control group receiving a placebo.

Interim trial results may be available as early as the end of this year, with complete efficacy results expected by the first quarter of 2021.

Picture is ‘less dire’, says IMF chief

The global downturn sparked by the coronavirus pandemic will not be as bad as originally feared, but the crisis is far from over, according to IMF chief Kristalina Georgieva.

“The picture today is less dire... allowing for a small upward revision to our global forecast for 2020,” she said ahead of its updated forecasts next week.

Ms Georgieva credited the “extraordinary policy measures that put a floor under the world economy”, which amounted to $12 trillion in fiscal support to households and companies.

But the economic shocks, especially to low-income countries, have been “profound”, adding: “All countries are now facing what I would call ‘the Long Ascent’ – a difficult climb that will be long, uneven, and uncertain.”

The Batman delay adds to cinema nightmare

Robert Pattinson is in the lead role Credit: Handout

Warner Bros blockbuster The Batman has been postponed as the pandemic continues to play havoc with the blockbuster release schedule. 

My colleague Ben Woods reports:

The caped crusader’s latest installment starring Robert Pattinson was slated for October 1 next year but will now hit the silver screens on March 4, 2022. 

The upheaval will see Denis Villeneuve's remake of Dune fill the gap, with the sci-fi opus moved forward from December 18 to October 1 next year. 

Production delays have hobbled Warner's attempts to release movies on time, with The Batman's filming paused after Pattinson caught coronavirus. 

It is the latest in a series of setbacks for the cinema industry, which has been left reeling by MGM’s decision to move the latest James Bond installment No Time to Die from November to April 2021.

Full report: Construction boosted by demand growth

My colleague Russell Lynch has a full report on this morning’s construction PMI. He writes:

Pent-up demand and the tailwind of the Chancellor’s stamp duty holiday drove the fastest rise in new business since before the lockdown, the Chartered Institute of Procurement and Supply said. 

House builders saw a “sharp” rise in activity for the fourth month running as construction activity “took off”, according to CIPS director Duncan Brock.

Tonik Energy becomes latest supplier to collapse

Birmingham-based Tonik Energy has ceased trading with 250 employees expected to lose their jobs. 

My colleague Ed Clowes reports:

Tonik has more than 130,000 customers who will now be moved to a new supplier by energy regulator Ofgem.

A message on the firm's website told customers that their supplies were secure and credit balances would be protected.

It was understood to be behind on £8.7m worth of payments to Ofgem and had been recently flagged by network administrator Elexon as being in credit default. That sometimes indicates a company is struggling financially. 

EU ready to call Johnson’s bluff on Brexit – Bloomberg

The European Union is preparing to call Boris Johnson’s bluff over next week’s Brexit deadline, betting that the PM won’t walk away if he fails to draw concessions, Bloomberg reports.

The news service says:

The bloc is ready to let U.K. talks drag on into November or December, and even take a chance on Johnson pulling the plug on the deliberations rather than compromise on its red lines, according to a senior EU diplomat. The high-stakes strategy was confirmed by a second EU official.

Johnson is already softening his demands somewhat, telling the EU last week that Oct. 15 – the first day of an EU summit – isn’t the final date for concluding a deal but rather for establishing that an agreement is possible. U.K. officials are nonetheless adamant they need to see significant progress.

The pound has dropped to a session low following that report:

Johnson: Economy had problems before pandemic

Reuters’ Andy Bruce tweets:

Johnson gives conference speech

Boris Johnson is currently giving his keynote speech to the Conservative Party conference.

You can follow live via the link below, or the video embedded above:

FCA bans sale of crypto-derivatives to retail customers

The Financial Conduct Authority has banned the sale of derivatives and exchange-traded notes related to some cryptoassets to retail customers, calling them “ill-suited” for such buyers.

The City watchdog said such products cannot be reliably valued for a number of reasons:

  • inherent nature of the underlying assets, which means they have no reliable basis for valuation
  • prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
  • extreme volatility in cryptoasset price movements
  • inadequate understanding of cryptoassets by retail consumers
  • lack of legitimate investment need for retail consumers to invest in these products  

It warned such feature mean “retail consumers might suffer harm from sudden and unexpected losses if they invest in these products”.

The regulator estimated customers would save around £53m due to the ban.

The ban covers a range of tokens that are not defined as “specified investments”, and includes tokens for well-known cryptocurrencies including Bitcoin, Ether and Ripple.

The FCA’s Sheldon Mills said:

This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.

Significant price volatility, combined with the inherent difficulties of valuing cryptoassets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives. We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection.

The ban will come into effect from January 6th.

Trading groups IG and Plus500 have both dipped in response to the decision.

Apple pulls rival headphones from store ahead of product launch

Apple has pulled rival speakers and headphones from its physical and online stores as the iPhone-maker readies a shake-up of its audio line up.

My colleague Michael Cogley reports:

The Cupertino-based giant has taken down products from the likes of Bose, Sonos, Logitech and Ultimate Ears, and is only selling headphones and speakers from itself or its subsidiary Beats, according to a report by Bloomberg.The move has fuelled speculation that Apple is due to announce its own pair of over-ear headphones later this month to complement its in-ear AirPod range.The latest leaks suggest the over-ear headphones will be named Apple AirPods Studio and will come with active noise cancellation, a USBC port and magnetic ear cups.

Money round-up

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

Market moves

European equities are stuck in the red, although they’ve edged upwards in recent minutes.

Watches of Switzerland raises sights after strong second quarter

Swiss watches on display Credit: REUTERS/Arnd Wiegmann

Retailer Watches of Switzerland’s shares have popped higher this morning after it raised its guidance following booming sales since the start of the quarter.

The FTSE 250 group said revenues for the first ten weeks of its second quarter (from the start of August) were 20.2pc higher than 2019 on a constant-currency basis.

Its performance in the UK “continues to be driven by strong domestic sales offsetting lower tourist and airport business”, the company said.

It now expects revenues of £880m to £910m for the full year, versus previous estimates of £840m to £860m.

Net debt is expected to be slightly lower than anticipated, at £80m to £100m versus an earlier estimate of £90m to £110m.

Chief executive Brian Duffy said:

Trading momentum has further improved in Q2.  Stronger than anticipated UK domestic sales are offsetting lower tourist and airport traffic, whilst regional stores are continuing to outperform London stores.  Furthermore, the strong momentum we have established in the US has further accelerated.  All US regions are contributing to this positive trend.

BBC’s Kuenssberg: Barnier in London for talks this week

The BBC’s political editor tweets: 

Builders ‘enjoying this resurgence in activity’

Commenting on those PMI figures, Duncan Brock of the Chartered Institute of Procurement & Supply, which helped gather the data, said:

UK Construction took off in September, soaring ahead of both the manufacturing and service sectors in terms of output growth and recording the fastest rise in purchasing activity since October 2015…

Government support schemes are winding down, so the bigger worry remains levels of job creation. With another drop in employment numbers, vacancies were sparse and further redundancy schemes could be on the cards once this pent-up demand for work is satisfied.

But for now, builders are stocking up for Brexit and Covid preparations, so purchasing remains strong in spite of longer delivery times and some shortages. Optimism is at a seven-month high, so builders are enjoying this resurgence in activity following the summer lows.

Construction PMI: Key points

Here are some salient points from today’s construction PMI report:

  • Sentiment towards future activity was the strongest for seven months
  •  The strongest performing category was home building, where firms registered a sharp expansion in activity for the fourth month running. Work undertaken on commercial projects also rose strongly, increasing at quickest pace for over two years. Meanwhile, civil engineering activity fell for the second month running and at the sharpest rate since May.
Credit: IHS Markit
  • Anecdotal evidence suggested that the expansion in overall activity was predominantly driven by an improvement in demand conditions
  • New orders rose for the fourth time in as many months
  • UK construction firms recorded another marked increase in purchasing activity
  • Staff numbers continued to fall in September. However, the rate of workforce contraction eased to the slowest for seven months
  • Cost burdens faced by building companies continued to rise

Momentum builds in construction sector

A recovery in UK construction gained pace in September, with activity rising at a faster pace than during August, according to the latest purchasing managers’ index data from IHS Markit.

The gauge rose to 56.8 (where a score above 50 indicates growth) – beating expectations for a reading 54, and indicating a faster pace of expansion than the previous month’s 54.6.

IHS Markit said:

The expansion came amid the sharpest rise in new business since before the pandemic-induced lockdown, with firms increasing their purchasing activity at the quickest pace for nearly five years. Meanwhile, employment continued to fall, but the rate of job shedding eased. 

The Restaurant Group sales cut in half by pandemic

The Restaurant Group owns brand including Wagamama Credit: Jason Alden/Bloomberg

Wagamama-owner The Restaurant Group said it has seen improved sales since July, after ditching its financial guidance and revealing the pandemic cut its first-half revenues by around 56pc.

The company – which recently lost its spot in the FTSE 250 – posted a £234.7m pretax loss for the six months to the end of June, compared with a £87.7m loss for the same period last year.

It has closed around 180 restaurants as part of a rapid downsizing operation in response to the pandemic, with its Frankie & Benny’s locations particularly hard-hit.

Trading between early July and late September had been “very encouraging”, the group added, saying like-for-like sales had improvement into all its divisions expect concessions, which have “been heavily impacted by the well-reported travel disruptions”.

It noted that lower pressure from rivals meant there had been a “greater availability of skilled and experienced labour for the remaining operators”.

It warned the outlook for the sector “remains extremely challenging”, and withdrew all previous guidance.

Shore Capital’s Greg Johnson said The Restaurant Group’s post-lockdown performance had been “highly encuraging”, adding:

The rationalisation of the estate, strength of Q3 trading and broader industry dynamics is supportive of the investment case.

Employers planned 58,000 redundancies in August – BBC

British employers planned to make 58,000 workers redundant in August according to statutory filings, the BBC reports.

The broadcaster says 966 separate employers informed the Government of plans to cut 20 or more jobs – more than four times as many as during August last year.

The figures are lower than during June and July, with 150,000 job cuts indicated during each.

Here’s how many planned redundancies have been indicated by filings over recent months:

Credit: BBC

Sunak: Budget before April

In an interview with LBC radio this morning, Chancellor Rishi Sunak has confirmed that the Government will press ahead with a Budget before the end of this fiscal year – having cancelled a planned fiscal statement in November.

Mr Sunak said:

It won’t be in this calendar year. It has to be within the financial year which ends next spring.

Electrocomponents names Rona Fairhead as new chair

Rona Fairhead led the BBC Trust from 2014 to 2017 Credit: Stefan Rousseau/PA Wire

Baroness Rona Fairhead will join FTSE 250 group Electrocomponents as its new chair, the company has announced.

She will succeed Peter Johnson at the start of February, after joining as a non-executive at the start of November.

Formerly chair of the BBC Trust – and having held other roles across a 35 year career, including as chief executive of the Financial Times and chief financial officer of Pearson – Baroness Fairhead joined the House of Lords in 2017.

Mr Johnson said:

I am delighted to welcome Rona to the Board. It has been a privilege to be chair of this Company and it is time for me to hand over the baton. The Company has grown significantly and delivered increasing value for all its stakeholders.

Stocks flatten out

After edging higher at the open, European stock gains have faded – the pan-continental Stoxx 600 is flat, and the FTSE is narrowly in the red.

Premier Oil plans merger with rival Chrysaor

A Premier Oil facility in Indonesia Credit: Paul Talbot

Premier Oil is to merge with larger rival Chrysaor in a deal that will reorganise its massive debt pile and leave shareholders with just 5.45pc of the enlarged company. 

My colleague Jon Yeomans reports:

The companies said the deal would create “the largest independent oil and gas company listed on the London Stock Exchange”, focused on the North Sea.

Under the terms of the merger, Premier’s $2.7bn (£2bn) debt would be cancelled and repaid, with some of Premier’s creditors swapping debt for equity. Premier stakeholders including existing shareholders would hold 23pc of the combined company, while Chrysaor’s largest shareholder, Harbour, is expected to own up to 39pc.

The combined company would produce some 250,000 barrels of oil a day.

The merger is subject to approval by shareholders and creditors.

Premier’s shares have popped about 19pc higher at the open.

Markets edge higher

European stock markets have opened narrowly higher, with the FTSE up 0.1pc. 

Credit: Bloomberg TV

Looming rebellion over 10pm curfew may boost pub stocks

It’s worth watching UK pubs stocks at the open today, following a report in today’s Telegraph that dozens of Tory MPs may vote against Boris Johnson’s 10pm curfew for pubs, restaurants and bars.

As my colleague Christopher Hope reports:

The rebel Conservatives, due to meet at lunchtime on Tuesday to plot their next steps, have been emboldened by comments from the Chancellor, Rishi Sunak, questioning the measure.

Tory backbenchers have also been encouraged by Labour's refusal to say whether it will support the curfew until it has seen the scientific evidence that underlies it.  A Labour decision on how to whip the vote is not expected until Wednesday.

There were rumours in Westminster on Monday that Government whips might even pull the curfew vote on Tuesday in order to allow more time to work on bringing the rebels to heel.

German industrial order growth beats expectations

Industrial orders in Germany beat expectations during Auguast, rising 4.4pc versus the 2.8pc climb expected by economists.

However, orders (seen here as an index) remained below pre-pandemic levels.

Manufacturing PMI figures released last week suggested the country’s factory activity comeback continued in September, so we should expected this recovery to continue when we get the next round of figures. 

Co-Op bank boss leaves after just two years

Andrew Bester, chief executive of the Cop-Operative Bank, has announced plans to step down after just two years in charge.

Mr Bester, who joined the lender in 2018, has committed to remaining in place while chair Bob Dench leads the search for a successor. He departure date will be confirmed soon, the bank said.

The Bank said in August that it would cut 350 jobs and close 18 branches in response to the pandemic.

Agenda: Prime Minister to outline 'green' Covid recovery plan

Good morning. The FTSE is tipped open slightly higher as Asian markets rose after Donald Trump was discharged from hospital.

Boris Johnson is expected to unveil his plans to stave off surging unemployment rates later today, calling for a “green industrial revolution”​ in a move which he hopes will create hundreds of thousands of jobs.

5 things to start your day 

1) Treasury eyes tax raid as support grows for assault on the rich: Fears are growing that the Treasury has political cover for a tax raid on the rich after a new poll found that Britons overwhelmingly back an assault on wealth to plug the budget shortfall.

The public supports raising taxes instead of a return to austerity by a 15-point margin as ministers eye ways to bring the country's finances under control after debt rocketed above 100pc of GDP, according to the survey by pollster Ipsos Mori.

2) Cinema industry braced for further closures as Cineworld warns over 45,000 job losses: Experts warned that further cinema chains are likely to follow Cineworld’s lead as a second wave of Covid hits release schedules.

Britain’s largest cinema chain Cineworld said it would shut theatres in the UK from this Thursday after the latest James Bond film was delayed.

3) Italians eye up bread maker Hovis with takeover bid: The baker's current owners, London-listed Premier Foods and US investment company Gores Group, have been approached by Newlat bosses with an offer which would make the Reggio Emilia-based company one of the largest players in the European food industry.

Hovis employs 2,800 people and has eight bakeries, one flour mill and three distribution centres.

4) Peter Thiel enjoys $278m payday after Palantir floats:  The Silicon Valley tycoon has landed a $278m (£214m) payday by selling shares in his data mining company Palantir in the first two days after its stock market float.

Mr Thiel – a former PayPal boss, early Facebook investor and an outspoken supporter of Donald Trump – sold around 27.4m shares last Wednesday and Thursday, filings have revealed.

5) Bank of England official says evidence on negative rates is 'positive': Jonathan Haskel has become the latest Bank of England ratesetter to leave the door open to negative interest rates.

The Monetary Policy Committee (MPC) member echoed his colleague Silvana Tenreyro’s open-mindedness about the controversial policy, expressed in an exclusive interview with The Sunday Telegraph last month

Coming up today

No FTSE 350 companies are reporting.

Economics: Construction PMI (UK), balance of trade (US), factory orders (Germany)