Sterling dips on Brexit deal fears

EU flag and Union Jack 
The pound has dropped slightly today Credit: AP Photo/Frank Augstein

Wrap-up

Time to wrap up. The FTSE 100 has once again closed flat, with an increasing sense on inertia taking hold on European markets.

These were some of the day’s top stories:

Thanks for following along today. We’ll be back tomorrow morning!

FT: Barnier expects talks to extend beyond next week

The FT’s Jim Brunsden tweets:

UK close to deal that retains European Court of Human Rights ties

British negotiators are close to clinching a deal that commits the UK to remaining subject to rulings by the European Court of Human Rights after Brexit. 

My colleague James Crisp reports:

The UK would sacrifice a new extradition treaty and access to EU criminal databases if it quit the international agreement, under the terms of the potential deal,  Brussels sources said. 

The EU insists that respect for the European Convention on Human Rights (ECHR), and its Strasbourg court, is a condition for cooperation in law enforcement after the end of the transition period on December 31. 

Either party can trigger a “guillotine clause” suspending or terminating the judicial cooperation agreement if they had serious concerns about the protection of human rights and the rule of law, under a British proposal put to the EU.

Heathrow presses ahead with third runway despite pandemic

Demonstrators in favour of a third Heathrow runway gather outside the Royal Courts of Justice today Credit: Kirsty O'Connor/PA Wire

Heathrow is doubling down on efforts to build its controversial third runway despite the impact of the Covid-19 pandemic on the airline industry.

My colleague Emma Gatten reports:

Lawyers for the airport told the Supreme Court that Heathrow Airport Ltd intended to complete construction by 2030 at the earliest.

Speaking on the first day of hearings to challenge a  Court of Appeal ruling that the planned expansion is incompatible with the UK's climate change goals,  Lord Anderson QC said:  

"My instructions are very clear on this. Heathrow Airport limited does still wish to construct the Northwest runway."

He added that construction could not be completed "before 2030 at the earliest", at which point the pandemic will be “a distant memory”.

In May, Heathrow Executive John Holland-Kaye told the transport select committee that it could be 10 to 15 years before the UK needs a third runway at the airport because of the effects of the pandemic.

Manchester Airports Group plans 900 job cuts

Britain’s biggest airport group will axe almost 900 jobs after a second spike in coronavirus snubbed out hopes of a recovery.

My colleague Oliver Gill reports:

Manchester Airports Group, which also owns Stansted and East Midlands airports, has launched a consultation on the cuts.

Since March demand for air travel has fallen dramatically as travel restrictions and tighter border controls grounded all but a handful of flights.

Passenger levels have averaged 90pc lower than normal, the airport operator said.

Under the proposed job cuts, to be discussed with unions, some 465 jobs at Manchester, 376 at Stansted and 51 at East Midlands are under threat.

Pound flattens out again against dollar

After a brief dip following that Bloomberg report, the pound is once again flat against the dollar. Traders are simply shrugging off warnings by both sides at this point.

Follow Scottish announcements live

You can follow Nicola Sturgeon’s announcements live here:

My colleague Dominic Penna reports:

Greater Glasgow and Clyde, Lanarkshire, Ayrshire and Arran, Lothian and Forth Valley areas will see the following restrictions:
  • All licensed premises with the exception of hotels for residents will be required to close indoors and outdoors.
  • Takeaways will be permitted.
  • Hotels will remain open for residents.
  • Cafes without an alcohol licence will be able to stay open until 6pm to “support social isolation”.
  • Snooker and pool halls, indoor bowling alleys, casinos and bingo halls will close in these areas for two weeks from October 10.
  • Contact sports for people aged 18 and over will be suspended with an exemption for professional sport.
  • Outdoor live events will not be permitted in these five regions for the next two weeks.
  • People in these areas should avoid public transport unless “absolutely necessary” i.e. going to school or work.

Correction

My 15:09pm post initially said London in the title, rather than Scotland, due to a typo. I have corrected this error, apologies for any confusion.

More details

Newsnight’s Lewis Goodall has more details on the change, although I believe the rules he is tweeting about here apply to non-central parts of Scotland: 

Pubs and restaurants in central Scotland to close – BBC

The BBC reports:

All pubs and restaurants across central Scotland to be closed under new measures aimed at tackling a surge in coronavirus cases.

Vehicle usage falls

Vehicle usage across the UK was 5pc lower last week than the previous week, according to new figures released by the Department for Transport.

New restrictions have stifled a near recovery in vehicle usages, which was at 89pc of pre-virus levels. The running weekly average has been steadily declining since mid-September.

US stocks climb at open

Wall Street stocks have risen solidly at the open, shaking off much of last night’s losses.

Credit: Bloomberg TV

Pound drops on report UK could quit talks with EU next week

The pound has dropped to the day’s lows in recent minutes, after Bloomberg reported the UK government will pull out of negotiations with the EU next week if no clear deal is in sight.

The news service reports:

Boris Johnson has said he wants the outlines of a deal to be clear by Oct. 15. EU officials, however, have said they won’t be pressured into making concessions and are prepared to call the prime minister’s bluff if he doesn’t compromise, effectively daring Johnson to walk away.

A person familiar with the British position said Johnson’s team would indeed pull the plug on talks if no clear landing zone for a deal has been identified by that date. The analysis adds to pressure on the talks which are resuming in London.

It continues a long run of brinkmanship to which currency markets are becoming increasingly inured

Mortgage costs for first-time buyers soar 

The cost of typical first-time-buyer mortgages has rocketed since Covid-19 struck, according to Bank of England data that highlights the scale of Boris Johnson's ambition to turn “Generation Rent” into “Generation Buy”. 

My colleague Russell Lynch writes:

Borrowers are now paying £100 a month more on higher-risk home loans than before the pandemic.

The average cost of a two year fixed-rate deal with a 5pc deposit has jumped to a two-year high of 3.95pc, compared to 3.02pc in February. 

According to Moneyfacts, buyers taking out a deal with an average £200,000 mortgage would pay an extra £99.61 a month, or £2,391 over the first two years of their deal. Most products also require extra security such as guarantors.

Financial services and trade commissioners approved

Speaking of all things Brexit, the European Parliament has approved Mairead McGuiness as the new financial services commissioner and Valdis Dombrovskis as new trade commissioner, our Brussels correspondent James Crisp writes. 

The vote means the Commission reshuffle after the resignation of Ireland's Phil Hogan for breaking coronavirus restrictions will go ahead. 

Ms McGuinness will have an influential role on Brexit and act as gatekeeper to the single market for City of London. 

She had been a member of the Brexit steering group for the European Parliament. 

Dollar weakness persists 

Sterling is up a fraction against the dollar, however. That is largely a reflection of the greenback’s performance after Donald Trump said he was breaking off talks on a new round of stimulus, says Lee Hardman at MUFG.

The President's tweet triggered a selloff in risk assets, boosting demand for the safe haven dollar, but Mr Hardman notes: “That momentum for the dollar hasn’t continued.”

Sterling dips on no-deal fears 

The pound is under €1.10 today over fears that a fisheries standoff could skewer a Brexit trade deal.

Susannah Streeter at Hargreaves Lansdown says:

The EU stance appears to be hardening, leading to speculation that negotiations will now be forced to extend into November. Concessions on either side are likely to cause a stink for domestic politics given the emotional power of the fisheries lobby, but negotiators will be navigating the waters carefully, highly conscious of the economic damage that could ensue in the event of a no-deal Brexit.

Wall Street set to rise

With a bit over an hour until the Wall Street open, futures trading points to moderate gains for US stocks after losses last night. The S&P 500 is set to open up 0.7pc, while the Nasdaq is looking at 0.8pc gains.

Vertu boss says car dealers expect blowout Christmas

Car dealers could be set a Christmas sales bonanza as frustrated consumers splash the cash on new vehicles, according to the boss of Vertu Motors.

My colleague Alan Tovey says:

Robert Forrester said the company had seen a “sales rebound far exceeding what I thought was possible” after dealerships were forced to closed for more than two months because of the pandemic.

In the six months to the end of August, Vertu reported revenues a third lower at £1.1bn and pre-tax profits down 75pc to £3.9bn. The number of cars sold fell by 68pc to 55,386.

But in the second quarter once the company’s 120 showrooms had reopened fully, revenue was 9pc higher than in the same period a year ago, and vehicle sales were just 1.4pc lower at 39,697.

Greene King plans closures and job cuts – Sky News

Pub chain Greene King plans to close 25 sites and cut 800 jobs following a pandemic-induced drop in trade, Sky News reports.

The broadcaster says:

Sources close to the company, which has an estate of almost 1,700 managed pubs and 1,000 tenanted venues across Britain, said it would seek to redeploy affected staff wherever possible despite the continuing Covid-19 crisis.

In total, 79 of Greene King’s pubs and restaurants will close, with roughly one-third of the closures expected to be permanent.

The redundancies represent a small fraction of Greene King’s 38,000-strong workforce but underline the anxiety of employers as the government's furlough scheme nears its end.

Spain plans €72bn spending spree to revive economy

Pedro Sanchez announced the plans today Credit: JM CUADRADO JIMENEZ HANDOUT/EPA-EFE/Shutterstock

Spain will spend €72bn over the next three years as it attempts to revive its battered economy, its prime minister Pedro Sanchez has announced.

Bloomberg has more details:

The 2021-2023 plan unveiled Wednesday is the “road-map for the new modernization of our country for the next six years,”, Sanchez said in a televised speech. The the majority of the funds will be split between green projects and digitalization, with a combined 70pc of the total, Sanchez said.The fiscal boost will come from the European recovery funds and will be used in projects that can be developed over a three year period.

Lenders tap Bank of England’s emergency lending facility

Commercial banks were forced to tap a seldom-used Bank of England emergency lending facility last month, after a glitch in CREST, the financial markets settlement system.

Reuters has more details:

The BoE said a record £3.003bn was outstanding through its Operational Standing Lending facility – designed to manage “unexpected ‘frictional’ payment shocks” – in the period ending Sept. 16.

Around that time the CREST financial markets settlement system, which sits at the heart of more than 1 trillion pounds’ worth of daily share and bond trades, suffered technical problems.

BoE data show that the standing lending facility was last used in July 2011. It previously never had more than £43m outstanding since its launch in 2008.

Pound dips slightly

The zzzzzzzzz mood extends beyond equities, with currencies also doing their utmost to be uninteresting this morning. The pound, which had been moderately higher for much of the day after yesterday’s knock, is now slightly down against the dollar.

Frasers Group: the room where it happens

My colleague Laura Onita tweets from a brief Frasers Group (the company formerly known as Sports Direct) AGM:  

Codemasters pops after strong trading

A still from Codemasters’ F1 2017 game Credit: Codemasters

Shares in Codemasters have zoomed ahead this morning, after the game developer – which makes titles including the F1 racing series – said its trading was “strong” during the six months to the end of September.

The Warwickshire-headquartered group anticipates revenues of approximately £80.5m for the period, compared to £39.8m for the first half of 2019.

Video games have proved hugely popular over recent months, with many people turning to virtual distractions amid job furloughs and lockdowns.

New titles including F1 2020 droves sales, with the franchise growing as Formula 1 attracts more fans in the United States. Back catalogue sales also remained strong as the group expanded its digital offering.

Codemasters’ next major launch is racing game Dirt 5, which should arrive to coincide with the launch of a new generation of games consoles.

TalkTalks takes aim at BT with cost claims

TalkTalk has taken a swipe at BT’s prices, claiming more than 1,000 hospitals are facing millions of pounds in extra broadband costs.

My colleague Ben Woods reports:

The low-cost telecoms firm said around 1,250 hospitals would see their broadband prices rise by £10m over the next five years. That is being driven by BT’s broadband infrastructure builder Openreach, which is increasing prices by inflation next year as opposed to cost. TalkTalk is urging ministers and the regulator Ofcom to rewrite the rules to prevent the price rise coming into force when families, businesses and public services are grappling with the pandemic. The call comes after TalkTalk failed to secure a wholesale deal with BT over the use of its ultra-fast broadband network.

Market moves

Those early gains didn’t last, and European shares have dropped just south of flat. 

Ministers looking at powers to block London listings

The London Stock Exchange building Credit: Simon Dawson/Bloomberg

Ministers could gain the power to block foreign companies listing on the London Stock Exchange on national security grounds. 

My colleague Ben Gartside reports:

The Treasury is set to open a consultation on new powers after MPs called on the Government take action, The Times reported.

The move follows the 2017 listing by Russian energy company EN+, which is associated with oligarch Oleg Deripaska. 

The Financial Conduct Authority was powerless to stop the listing despite Mr Deripaska being subject to US sanctions and being accused of close ties with President Putin.

A report by the Commons foreign affairs select committee criticised the Government for inaction, saying it was unfair to expect the financial watchdog to identify and prevent threats to national security. 

More details

Out economics editor Russell Lynch has more detail on those productivity figures. He writes:

A huge surge in spending to tackle the virus between April and June was combined with the cancellation of most routine operations in the NHS and the closure of schools. 

That triggered a dramatic 35.7pc tumble in productivity across the public sector over the quarter, the figures showed. Spending on PPE and the Nightingale hospitals drove spending 15.8pc higher, while output slumped 19.9pc.

Productivity – the most important driver of economic prosperity – also collapsed across the wider economy as a record 19.8pc slump in GDP due to lockdown was accompanied by the government’s furlough scheme to protect employment.

Public sector productivity plunges

Alongside those unit labour cost figures, the ONS says public-sector productivity dropped 35.7pc in the second quarter, the largest drop since records began in 1997.

Unit labour costs rise most on record

The UK’s unit labour costs – the full labour costs incurred in the production of each unit of economic output – soared by the most on record during the second quarter this year, up 27.4pc compared to the same period in 2019.

That’s “easily the largest increase since records began”, according to the ONS, and reflects in part the furlough scheme keeping labour costs elevated between April and July, even as output fell sharply.

Money round-up

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

GardaWorld and G4S continue war of words

A G4S worker in Medellin, Colombia Credit: Tom Parker/OneRedEye

Security outsourcer G4S and would-be buyer GardaWorld have continued their war of words this morning.

The UK-headquartered group has hit back at GardaWorld, after the Canadian company – which has launched a hostile takeover bid – began engaging with G4S shareholders in a bid to win them over to its 190p/share offer.

GardaWorld released a presentation for investors last night, saying “missteps” by G4S have led to the group’s share price decline, and claiming there are “serious issues” in the funding of the FTSE 250 company’s pension scheme.

Chief executive Stephan Cretier said:

We have said before that the business needs a new owner, not a face-saving change of management or a shake-up of the Board. That will not produce the root and branch change to the company’s operating practices that is so urgently needed. Only after such a profound operational programme - which will take years, not months - will customers, and the public at large, begin to trust this business to deliver.

GardaWorld said it would not raise its offer price due to the issues highlighted.

G4S fired back in a regulatory filing this morning, once again calling GardaWorld’s offer “opportunistic” – coming, as G4S claims, just as the company begins an operation turnaround.

It said the offer “significantly undervalues G4S and its prospects”, adding:

GardaWorld’s focus on legacy issues, which are now substantially resolved, and its misleading statements are designed to provide support for its opportunistic and clearly inadequate offer.

House price growth strongest since 2016

UK house prices jumped 7.3pc over the twelve months to September – the strongest pace of growth since 2016 – according to the latest house price index data from Halifax.

It found average prices climbed 1.6pc during the month, hitting a fresh record high of £249,870. Prices have shrugged off the pandemic, quickly recovering a minor fall to notch up new heights. But economists have warned looming economic pressures may weigh on prices in the coming months.

Period 1 Index Jan 1992=100 2 Standardised Average Price £ Monthly Change % Quarterly Change %* Annual Change %** Sep 2019 401.5 232,806 -0.3 0.5 1.1 Oct 400.4 232,201 -0.3 0.3 0.9 Nov 405.0 234,886 1.2 0.3 2.1 Dec 412.1 238,998 1.8 1.0 4.0 Jan 2020 413.7 239,927 0.4 2.2 4.1 Feb 414.7 240,461 0.2 2.8 2.8 Mar 413.6 239,838 -0.3 2.0 3.0 Apr 410.9 238,314 -0.6 0.7 2.7 May 410.2 237,855 -0.2 -0.5 2.6 Jun 410.1 237,834 0.0 -0.9 2.5 Jul 417.0 241,808 1.7 -0.2 3.8 Aug 424.0 245,889 1.7 1.3 5.2 Sep 430.9 249,870 1.6 3.3 7.3

Halifax’s Russell Galley said:

Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May. Across the last three months, we have received more mortgage applications from both first time buyers and homemovers than anytime since 2008.

There has been a fundamental shift in demand from buyers brought about by the structural effects of increased home working and a desire for more space, while the stamp duty holiday is incentivising vendors and buyers to close deals at pace before the break ends next March.

German industrial production recovery stalls

German industrial production fell 0.2pc in August, ending a string of gains since the lockdown-driven plunge earlier this year. 

The fall came despite a jump in orders during the month, as recorded in statistics released yesterday, which would suggest the recovery still has some distance left to run.

Another blow for cinemas: Jurassic World sequel delayed

The bad news doesn’t stop coming for cinemas.

The latest release to be canned is Jurassic World: Dominion, with the Universal Pictures titled pushed back by a year due to current restrictions. It’s a hugely preemptive move: the film had been slated for release in June 2021, and will now come out 12 months later.

European stocks open higher

European markets have opened slightly higher. The FTSE is outperforming narrowly, with Tesco gaining at much as 5.1pc after this morning’s interim results.

Credit: Bloomberg TV

Tate & Lyle’s Nawaz to join Tesco as CFO

Alongside those interim results, Tesco also announced Imran Nawaz – currently chief financial officer at food manufacturer Tate & Lyle – will be joining the supermarket as its new CFO in April next year.

Here’s some background on the new appointee, via Tesco:

[Mr Nawaz] started his career with Deloitte and then with Philip Morris in corporate audit.  He spent 16 years working at Mondelēz and Kraft Foods in a variety of roles gaining broad financial, business and international experience.

Chair John Allan said:

After an extensive search and selection process, I am delighted to welcome Imran to our Board as CFO.  He brings a wealth of skills, experience and knowledge in the food sector and will be an incredibly valuable asset to Tesco.

Mr Nawaz will receive a basic salary of £700,000 per annum, as well as “standard benefits and incentive awards commensurate with his position”.

Tate & Lyle said it has begun the search for a successor.

Tesco profit jump amid pandemic spending

Tesco’s profit jumped higher Credit: Rui Vieira/PA Wire

Profits at Tesco jumped during during the six months to the end of April, as shoppers stocked up to food during lockdown.

The supermarket’s profit before tax rose 28.7pc to £551m, despite only a slight rise in revenues.

The results – the first interims to be reported under new chief executive Ken Murphy – show the impact of higher demand for at-home consumption brought on by the pandemic. Categories such as groceries and household goods saw strong growth as customers stocked up, while Tesco said it has seen heightened demand for food products even as restrictions ease.

The group doubled its online delivery capacity to 1.5m slots a week in response to the pandemic.

Mr Murphy said:

Tesco is a great business with many strategic advantages.  I'm excited by the range of opportunities we have to use those advantages to create further value for our customers and, in doing so, create value for all of our other stakeholders.

The FTSE 100 group was bullish about its prospects for the rest of the year, saying:

Whilst significant uncertainties remain, we now expect retail operating profit in the current year to be at least the same level as 2019/20 on a continuing operations basis.

Wall Street suffers, Asia rises

Good morning. Asian markets shook off a slump on Wall Street overnight, after US President Donald Trump called off talks on a Covid-19 relief bill, delaying support until after the election. The FTSE is tipped to open slightly higher.

In a tweet late last night, Mr Trump said: "Immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans." The comments dashed hopes that had been mounting in recent days after talks took place between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin.

5 things to start your day 

1) Covid loan rescue plan bounces back on taxpayers:  Rishi Sunak's flagship coronavirus rescue loan scheme could cost taxpayers £26bn after being exploited by fraudsters and companies on the brink of going bust, the National Audit Office (NAO) has warned this morning. 

The hugely popular Bounce Back loans programme has so far doled out £38bn to 1.2m small businesses, much more than originally anticipated - but there are rising concerns it is being targeted by criminals and unsustainable companies in a massive debt binge.

2) US investigation says tech companies may need breaking up to curb 'monopoly power': The world's biggest tech companies must not be allowed to compete with rival businesses on their own platforms and may even need to be broken up, an investigation from US politicians has concluded.

Democrats on the House Judiciary Committee's antitrust panel last night published a series of proposals to curb the "monopoly power" of Apple, Amazon, Google and Facebook.

3) UK Finance names new boss after sexism storm: Britain’s largest bank lobby group UK Finance has chosen David Postings as its new chief executive, as it seeks to recover from a sexism row earlier this year. 

Mr Postings, the former chief executive of Bibby Financial Services and Moneycorp, will be taking up the post from next January, UK Finance said.

4) Johnson's wind power dream to cost £50bn, analysts say: The prime minister's pledge to power every home in the country with offshore wind turbines by 2030 will cost £50bn and require massive reform of the power market, experts have warned. 

Speaking at the Tory party conference yesterday, Boris Johnson set in stone a manifesto target to quadruple offshore wind capacity to 40GW within the decade. 

5) Billionaire wealth hits record $10.2 trillion: Technology magnates such as Amazon founder Jeff Bezos have been the biggest winners as the wealth of the world’s billionaires hit a record $10.2 trillion (£7.8 trillion) this year, a new study has found.

The latest Billionaire Insights report from investment bank UBS and accountant PwC, published this morning, said the super-rich had benefited from a V-shaped rebound from the first Covid wave by the end of July,

What happened overnight 

Asian stock markets edged higher on Wednesday, brushing off Wall Street's weaker finish, which came after US President Donald Trump abruptly broke off economic stimulus negotiations with lawmakers.

That sent Wall Street tumbling and safe assets like the dollar and bonds higher. Investors in Asia, however, seemed less rattled, holding a view that stimulus would be delayed rather than derailed.

MSCI's broadest index of Asia-Pacific shares outside Japan crept 0.2pc higher to a fresh two-week peak, led by a 0.8pc gain in Australia, where an expansionary budget lifted stocks.

Broad gains in Hong Kong lifted the Hang Seng 0.7pc while Japan's Nikkei fell 0.2pc.

China's stock, bond and currency markets are closed for holidays until Friday.

Coming up today

Interim results: Tesco

AGM: Frasers Group

Economics: Halifax House Price Index (UK), mortgage applications (US), crude oil inventories (US)