Carney sends pound rebounding as he says markets 'mistaken' to be so gloomy on Article 50

 

The pound rebounded strongly after Mark Carney hinted the Bank of England does not want the currency to dive too far, and called markets’ doom and gloom around Brexit “mistaken”.

Sterling has fallen 18pc since its pre-referendum spike, and the governor of the Bank indicated that the inflationary impact of that rapid drop could encourage him to vote against any further interest rate cuts or other monetary stimulus.

“That stimulus has its limits,” he told the House of Lords’ economic affairs committee, explaining that he was able to cut interest rates in August as the pound had only fallen modestly by that point.

GBP
Pound recovers on Carney's comments Credit: Bloomberg

“We are not a targetter of the exchange rate, we target inflation, but we are not indifferent to the level of the exchange rate. We have seen in recent weeks a fairly substantial shift in the exchange rate,” he said."

"It's undoubtedly something we will take into account over the course of the next week as we sit down, update our forecast and make our policy decision," he added, referring to next month's meeting of the rate-setting monetary policy committee.

The governor added that the pound has fallen particularly sharply since the Conservative Party conference at the start of October, when markets reacted strongly to Theresa May’s announcement that Article 50, kicking off the Brexit process, would be triggered by the end of March.

But he said the drop in the currency may be based on a “mistaken” analysis of the state of the economy.

“It is a bit early to be making those determinations [on Britain’s future relationship with the EU] as the Prime Minister has been very clear that we will pursue an orderly Brexit, we’ll get the best deal possible, that there have been no negotiations so far and there is no running commentary on the specifics, so it is a perception of the market,” said Mr Carney.

“That perception… influences a perception of where the supply potential of this economy will be in the next few years… that perception may well be mistaken.”

Mark Carney

The governor also said that the Bank of England will not “slavishly rely” on quantitative easing in future, taking away another factor which has pushed down the pound.

His comments helped support sterling, which had fallen to below $1.21 – its lowest level since the flash crash earlier this month – in the latest sharp fall on international markets.

Much of the latest fall in sterling was erased by the governor’s comments, as the pound rose back above $1.22.

Mr Carney told the Lords that the Bank of England’s independence is not under threat, despite commentators’ reactions to Theresa May’s comments that QE had some negative side effects on savers.

Instead the Governor said “I entirely agree with the spirit of [Mrs May’s] comments” as she drew attention to inequality in the UK, adding: “it is the role of government initiatives to address some of those distributional issues”.

And Mr Carney said that if he does choose to step down as Governor at the end of his five-year term at the Bank of England, it will be entirely due to “personal circumstances” rather than any disagreement with the government.

“It will be entirely a personal decision. You shouldn’t read anything into it on government policy or potential policies – it is a privilege for me to have this role,” he said.  Mr Carney took the position in mid-2013.

The job of Governor was advertised with an eight-year term of office, but Mr Carney initially only wanted to serve for five years, in part because of his family’s plans to move back to Canada. He is now considering whether or not to take the full eight years. 

                                                                                                    

Market Report: Countrywide skids to record low on rating downgrade

Shares in Britain’s biggest estate agency Countrywide tumbled to a fresh record low after it suffered a rating downgrade.

US investment bank Jefferies slashed its rating from “buy” to “hold” and revised its target price down from 300p to 180p. It believes the last two changes to stamp duty , which “disrupted” the UK housing market, coupled with Brexit uncertainties, are “trouble”. “Potential homebuyers have more reasons to play a waiting game with respect to house purchases,” Anthony Codling, of Jefferies, said, adding that weak housing transaction and mortgage approvals also contributed to the rating downgrade.

The UK housing and political landscape have changed “significantly” over the past year, and as such, the investment bank says it is no longer the “right time” for M&A sector-wide. The FTSE 250 stock plunged 16p, or 7.9pc, to 186p.

On the FTSE 100, mining stocks led the charge higher. Copper prices hit a one-week high as chatter of further stimulus by China fueled investor interest in commodities. Separately, Anglo American extended its gains so far this year to 272pc after it left output guidance broadly unchanged for most of its commodities. The mining giant also said conditions at its diamond business had improved. Shares in Anglo American bounced 48.5p to £11.14, Rio Tinto climbed 120.5p to £27.96, Glencore advanced 8.5p to 246.2p, BHP Billiton rose 37p to £12.61 and Antofagasta closed up 15.5p at 540.5p.

The move in miners lifted the FTSE 100 31.24 points, or 0.45pc, to 7,017.64.

Royal Bank of Scotlandwas also among the risers, up 4.3p to 192.3p, amid reports Clydesdale Bank made an offer to take over its Williams & Glyn business. Shares in Clydesdale dipped 3.8p to 272.1p.

Challenger bank OneSavings also made gains after Credit Suisse hiked its rating to “outperform”, sending shares 6.7p higher to 292p.

Elsewhere, a robust third quarter trading update lifted shares in St. James’s Place 15p to 964p. The FTSE 100 wealth manager posted an 8.9pc rise in assets thanks to financial market gains and strong demand for investment advice since the EU referendum.

On the other side, Costa Coffee owner Whitbread slumped 144p to £36.99 on the back of a disappointing second-quarter trading update.

Engineer GKN also dropped 9.3p to 313.9p after it warned growth rates are easing in its major markets.

Pub chain Mitchells & Butlers also came under pressure after Citigroup cut its rating to “sell”. Shares have rallied around 30pc from its July’s lows, but analysts cautioned the risk of a Brexit-induced slowdown as well as ongoing capital expenditure and pension payments continue to “depress” the bank’s cash flow forecasts. In its wake, shares tumbled 9.2p to 273.4p.

Finally, JustEat slipped 13.5p to 522.5p after Macquarie revised its rating down to “neutral” as it believes the stock’s valuation is now “less compelling” due to increasing competition.

On that note, it's time to close up for today. Thanks for following our markets coverage. 

Sterling fall 'undoubtedly' on agenda at BoE rate meeting, says Carney

Bank of England Governor Mark Carney said on Tuesday that the central bank would "undoubtedly" take the recent fall of sterling into account when its policymakers meet to consider cutting interest rates in the coming days.

"It's undoubtedly something we will take into account over the course of the next week as we sit down, update our forecast and make our policy decision," Carney told the House of Lords. 

He also said inflation, which hit 1.0 percent in the 12 months to September, could pick up to between 1.5 or 1.8 percent by the spring of 2017 and there were limits to the Bank's willingness to "look through" the effect of annual inflation rising past its 2 percent target.

The BoE is due to announce on Nov. 3 whether it has cut interest rates to a new record low. It said in September it expected most of its policymakers would back a rate cut, unless there was a significant change in the outlook for the economy.

Since then, signs have grown that the hit to the economy from the Brexit vote in June has not been as severe as the BoE had previously thought and the value of the pound has fallen further.

Report from Reuters

Large move in pound will boost exports, says Carney

Large movement in the pound will boost exports, reduce imports and help narrow the current deficit, the Bank of England governor told the House of Lords. 

He added that the sustainable size of the current account deficit hinges on the central bank independence, access to foreign markets and openness to investment .

And on that note, the grilling is over. 

Negative interest rates have 'something unnatural' to them, says Carney

On negative interest rates, Bank of England governor Mark Carney thinks they have "something unnatural" to them that would hurt confidence. 

Pound pops again as Carney says MPC will take into account currency movements at next week's meeting

Credit: Bloomberg

 The pound popped up towards the $1.22 after Mark Carney said  theMPC will take into account over the course of the next  as the bank sits down and updates its forecasts and makes its policy decision, Mark Carney says.

BoE will take sterling into account at next week's meeting 

Sterling is undoubtedly something the MPC will take into account over the course of the next  as the bank sits down and updates its forecasts and makes its policy decision, Mark Carney says. 

Carney: Effects of sterling depreciation on inflation will be seen 'relatively quickly'

Expect to see the effects of sterling depreciation on inflation "relatively quickly", Mark Carney has told the House of Lords. 

He added that by Spring, we should expect to see inflation of 1.5 to 1.8pc.

UK needs flexibility to adjust financial rules, says Carney

Back to Mark Carney's appearance before the House of Lords today. He told the economics committee that the UK needs flexibility to adjust financial rules: 

"Because the UK financial sector is what it is, it's the most complex, it's the biggest relative to the economy, it's the most important by orders of magnitude in Europe and to some extent the world, we need the flexibility to go a little bit farther sometimes, to adjust those regulations in a way that helps protect the domestic economy from the scale of that financial sector. So we wouldn't want to have, ultimately Parliament's decision, but we wouldn't want to have our hands tied to import ad infinitum rules that were made elsewhere."

European bourses close in negative territory 

Following mixed earnings, European bourses skidded into the red in afternoon trade, with the exception of the FTSE 100, which closed in positive territory, buoyed by mining stocks and the weak pound. 

By close of trade: 

  • FTSE 100: +0.45pc
  • DAX: -0.04pc
  • CAC 40: -0.26pc
  • IBEX: -0.83pc

Concerns about risks in global economy are elevated, says Carney

Commenting on concerns about the global economy, Mark Carney told the House of Lords Economics Committee: 

"Pessimism about future growth prospects relative to historic rates is quite high, expectations of future growth have steadily come down after serial disappointments, and concerns about risks in the global economy are quite elevated. So the constellation of asset prices is consistent with a low growth environment with downside risk.

"That's true of the United States, it's true of Europe, and unfortunately at the moment it's true of the UK as well."

No Carnage today. Pound recovering as Carney speaks. 

ECB aware ultra-low rates have rising cost, says ECB's Draghi

Away from Mark Carney momentarily. ECB president Mario Draghi is speaking at an event in Berlin. Reuters has the details: 

 The European Central Bank is aware of the growing costs of its negative interest rates on the financial sector and would rather not have to keep rates at such low levels for too long, ECB President Mario Draghi said on Tuesday

"We would certainly prefer not to have to keep interest rates at such low levels for an excessively long time, since the unwelcome side-effects may accumulate over time," Draghi told an event in Berlin.

Pound regains some momentum 

After sliding to its lowest level since the flash crash on October 7, the pound has since recovered some ground during Mark Carney's appearance before the House of Lords Economic Committee this afternoon. 

It is now trading down 0.4pc at $1.2160 against the dollar, having previously slumped to $1.2183.

Credit: Bloomberg

There's nothing quite like a McDonalds, Carney tells House of Lords

Carney cannot conceive circumstance where Chancellor would refuse QE 

Mark Carney cannot conceive any circumstance where the Chancellor would refuse to allow the Bank of England to carry on with QE if needed. 

The bank governor echoes the Chancellor's view. Earlier today, Chancellor Philip Hammond said  that he could not see a situation whereby he would reject a request from the Bank of England to buy more bonds. 

This is what the Chancellor told parliament earlier today: 

"Monetary policy - including measures such as quantitative easing - have been highly effective in supporting the economy." 

"Because of the fiscal implications of an indemnity for the Bank, packages have to be formally agreed by the chancellor. Although I cannot prejudge any hypothetical request, no request for quantitative easing has ever been refused. And I see no reason why circumstances would be different in future."

Bank of England will not 'slavishly rely' on QE

When asked if QE distorts markets, Mark Carney says he doesn't share that view.   

The Bank of England will not "slavishly rely" on QE if more stimulus is needed, he tells the economics committee, adding that the bank has a range of options. 

"The package that we put in place in August had four elements to it, to provide stimulus through different channels, and also to show that the Bank would not slavishly rely on QE if additional stimulus were to be required.

"We are mindful of the side effects of QE," he added. 

Sterling fall has been substantial, BoE to consider it

 Bank of England Governor Mark Carney said the fall in the value of sterling had been "fairly substantial" and the central bank's interest-rate setters would take it into account.

Speaking to lawmakers, Carney repeated a recent comment that the BoE did not target a particular level of sterling but was not indifferent to it.

He said the most recent weakening of the pound, since an annual conference of the ruling Conservative Party earlier this month, was not due to changing views about the BoE's most likely next moves on interest rates.

Prime Minister Theresa May caused investors to think that she would pursue a tough approach to the upcoming Brexit negotiations which could leave Britain with a lot less access to markets in the European Union once it leaves the bloc. May also said she would start formal Brexit talks by March of next year.

"Sterling starts to really move as it becomes clearer the timing of the Article 50 triggering, and the market's perception -- and I really underscore it's the market's perception -- of what the potential relationship will be between the United Kingdom and Europe," Carney said on Tuesday.

Report from Reuters

No supranational treaty for global financial system 

The Bank of England governor expects the EU to give serious consideration to equivalence of UK financial regulation, Mark Carney says. 

He adds that EU equivalence mechanisms could allow banks to maintain business models. 

There is not going to be 'a supranational treaty' for the global financial system, he adds. 

UK-based banks have contingency plans for Brexit at 'varying stages of readiness' 

UK-based banks have contingency plans for Brexit at varying stages of readiness, Mark Carney says when asked if there is any evidence banks are planning to relocate out of London. 

Carney says some banks would be able to activate contingency plans over the next year if they see fit. 

He adds that different banks have different risk tolerance and that some banks might take steps earlier than warranted. 

'Too early to reach conclusions about future relations between UK and EU', says Carney

Mark Carney reckons it is too early to reach conclusions about future relations between the UK and the EU. 

Perception about UK relation with EU "may well be mistaken", he adds. 

The MPC  needs to consider how persistent the move in sterling is likely to be, he continues. 

The move in the pound since the conservative party conference has not been driven by perceived shift in Bank of England policy stance, he said, adding that markets see a greater chance that the Fed will raise rates. 

Pound started to move as timing of Article 50 triggering became 'clearer', says Carney

The Bank of England does not target an exchange rate, but is not indifferent to it, Mark Carney told the House of Lords this afternoon. 

There has been a "fairly substantial" move in the exchange rate, he continues.

He adds that the pound started to move as it became "clearer" about timing of Article 50 triggering. Sterling moves reflects market perception of potential relation between UK and EU, Carney said. 

Carney's future with BoE will be 'an entirely personal' decision

When asked about his decision about staying on with the Bank of England, Mark Carney tells the economics committee that he wants to "find some time" to reflect but adds that it will be "an entirely personal decision". 

"It is a privilege to have this role, I fully recognise that," he continues. 

Politics is not a factor in whether Mark Carney continues in his role for longer as bank governor, he says. 

BoE governor does not think Theresa May was asking for a change in monetary policy

Mark Carney doesn't think Theresa May was asking for a change in monetary policy, when asked about her Conservative Party conference speech. 

'Undoubtedly frustrating' entering a decade where interest rates have been 'so very low', says BoE governor 

Weaker productivity expectations to blame for under-performance of some UK pensions, Mr Carney says. 

There is a "vital and essential" role for pensions for the individuals and society, he continues. 

"It is undoubtedly frustrating to be entering a decade when interest rates have been so very low. However, we have to step back and ask why have interest rates been very low," the BoE governor says, addressing the chair Lord Hollick. 

Mark Carney adds that evidence suggests that equilibrium interest rates have fallen quite sharply over the past decade. 

"Yes I have sympathy - Yes I understand the frustration", he concludes on the pension question. 

Most Britons have benefited from BoE policy, says Carney

The Bank of England's stance of monetary policy has supported the UK economy during a difficult period of adjustment, Mark Carney says when addressing the House of Lords Economics Committee. 

He adds that in general, most Britons have benefited from the bank's policy between 2009 and 2016. 

Bank of England is 'very clear' on what its remit is

The Bank of England's operational independence has stood the test of time in the UK, the central bank governor Mark Carney tells the economics committee. 

He adds that if the Bank of England's independence were to be called into question, he would expect to see risk premium on UK assets. 

"We are very clear on what our remit is," Carney continues, adding that the bank will use the instruments at its disposal. 

He says that markets have no reason to see risk premium on UK assets. 

Lawmakers' comments on the bank's policy has no effect on how it discharges its responsibility. The bank will not change how it conducts monetary policy unless the government changes its remit, Mr Carney adds. 

Monetary policy has been 'overburdened', says Carney

And it's underway. 

Monetary policy has been in many ways overburdened by providing support to the economy, Bank of England governor tells the House of Lords Economics Committee. 

He continues that monetary policy has been the principle, if not sole vehicle, to provide stimulus to the UK. 

Mr Carney welcomes that the government is signalling the resetting of balance between monetary, fiscal and structural policy. 

Pound hits lowest level since flash crash

With just 15 minutes until Bank of England governor Mark Carney's appearance before the House of Lords the pound has dropped to $1.2083 against the dollar - that's its lowest level since the 'flash crash' on October 7 and a drop of 1.05pc on the day.  

Credit: Bloomberg

Naeem Aslam, of Think Markets, said: "The British pound has taken a nose dive and given up most the gains which supported the sentiment that perhaps the currency is becoming stable. The reality is that there is no such thing called "Stable Sterling" until we are done with Brexit. Every single headline which is keeping the door open for more QE, lower uncertainty or an adverse deal for the UK is going to punish the currency. Philip Hammond's comment has taken the wind out of rally today and traders who were thinking that the chancellor may bring some headwinds to any further request for QE are thrashed. Room for more QE are still open and this is negative news for the currency." 

Industry calls for an 'end to dithering' and a quick start on new Heathrow runway

Companies and business groups have welcomed the government’s announcement that Heathrow will be the site of a new runway in the South East – but warned that work must start immediately.

The politically sensitive nature of where to locate the runway has repeatedly delayed the decision but now industry is demanding that the Government gets on with the job, with Ryanair boss Michael O'Leary calling for an end to "dithering".

The decision also sends a message that Britain is “open for business”, especially as government looks to foster new trade links as the UK prepares to leave the EU.

“We now need to see budgets committed and shovels in the ground as soon as possible,” said Mike Cherry, national chairman of the Federation of Small Businesses. “The green light for a major infrastructure project like this is essential to increasing exports, jobs and growth throughout the UK, with more long-haul routes and double the capacity for freight.”

Report from industry editor Alan Tovey (Read more here)

Wall Street flat at opening bell

US stocks were little changed as the opening bell sounded on Wall Street this afternoon, as investors digested a slew of earnings reports. 

  • Dow Jones: +0.03pc
  • Nasdaq: -0.08pc
  • S&P 500: -0.11pc

Pound under pressure ahead of Carney's testimony

Ahead of Mark Carney's appearance before the House of Lords the pound is heading towards the $1.20 mark. 

Anthony Cheung, of Amplify Tradingalso highlights there are "lots of technicals" giving way to the decline in the pound. 

He flags that overall bias from a broader perspective is "still negative", whether its the EU's tough line response to hard Brexit, to Sturgeon distruption, and Hammond's backing of QE. 

"The  trend is certainly lower in the weeks ahead," he added. 

The pound is currently down 1pc on the day at £1.2106 ahead of Carney's testimony. 

FTSE 100 extends gains as pound slides

As the pound slipped below $1.22 this afternoon, it has boosted the FTSE 100. It is now trading up 0.8pc at 7,042.76.

Pound hurtles towards $1.21

And Mark Carney has yet to appear before the House of Lords Economics Committee.... 

Credit: Bloomberg

 The pound is now down 0.73pc at $1.2120 against the dollar. 

US dollar hits seven-and-a-half month high after US August home prices data

After data from the US Federal Housing Finance Agency showed that home prices rose 0.7pc in August, the dollar surged to a seven-and-a-half month high. 

 The data which strengthened the pound has caused the pound to drop to a one-week low of $1.2142.

Pound tumbles below $1.22; hits four-day low

The pound has tumbled to a four-day low this afternoon on the back of the dollar strength. 

It fell to $1.2176 against the dollar, down half a percent on the day. The dollar hit its highest level sine early February yesterday  against other top currencies as traders continued to add to the bets on a Fed rate hike in December. 

Credit: Bloomberg

Meanwhile, the pound is likely to come under further pressure this afternoon as Bank of England governor appears before the House of Lords Economic Committee to discuss the economic consequences of the Brexit vote. 

John Lewis names Paula Nickolds as first female boss in its 152 year history

John Lewis has appointed Paulal Nickolds as its new managing director. Our group business editor James Quinn reports: 

Paula Nickolds has been named as the new boss of John Lewis, taking over the running of the department store retailer from the departing Andy Street.

Ms Nickolds, 43, who joined the retailer's board three years ago and has been working most recently as its commercial director, will take the helm of the national chain in January. 

When she does so she will become the first woman to run the retailer since its inception in 1864, and the only current female boss of a national high street department store group.

Her appointment marks the changing of the guard at the second of the John Lewis Partnership's two divisions within a year; Rob Collins took over from Mark Price as managing director of Waitrose in April. 

Continue reading here

Shares in British Airways owner IAG fall after government approves third Heathrow runway

Shares in British Airways owner IAG fell by as much as 2pc after the government backed plans to develop a third runway at Heathrow. 

Earlier this year, IAG boss Willie Walsh warned plans to expand Heathrow could lead to high charges for passengers. 

The FTSE 100 airline is currently changing hands at 399p.

Caterpillar cuts outlook citing global economic weakness 

The world's largest construction and mining equipment maker Caterpillar has this afternoon slashed its  its outlook for the year blaming global economic weakness.

It now expects revenue of $39bn, down from a previous guidance of $40.5bn.  

Third quarter profits fell sharply after sales of its new machinery sales due to an abundance of available used equipment. 

 Chief Executive Officer Doug Oberhelman said in a statement: ""In North America, the market has an abundance of used construction equipment, rail customers have a substantial number of idle locomotives, and around the world there are a significant number of idle mining trucks." 

Markets update: European bourses led higher by mining stocks

European bourses maintained their gains this lunch, with the exception of the Spanish IBEX which faltered, as mining stocks charged higher buoyed by a firmer copper and a solid production report from Anglo American. 

  • FTSE 100: +0.41pc
  • DAX: +0.34pc
  • CAC 40: +0.12pc
  • IBEX: -0.42pc

 Connor Campbell, of SpreadExsaid: "While the markets remained relatively placid there was still some big news from Europe this Tuesday morning.

"Following a 2 year high German Ifo business climate figure the DAX has spent the day grazing a fresh 2016 peak, the index trading just under the 10800 mark as investors cheer the news that Germany is like so over the Brexit. It hasn’t been all good news from the Eurozone, however. After announcing it intends to cut 2600 jobs, as well as sell off €28bn in bad debts, Monte dei Paschi (Italy’s oldest bank) went haywire, initially rising before plunging so much that trading had to be suspended. It is the kind of bitter pill the Italian banking sector as a whole better get used to taking if it wants to avoid being the biggest threat to the Eurozone’s stability."

Hammond cannot imagine rejecting Bank of England bond-buying

Chancellor Hammond also told the parliament today that he could not see a situation whereby he would reject a request from the Bank of England to buy more bonds. 

"Monetary policy - including measures such as quantitative easing - have been highly effective in supporting the economy." 

"Because of the fiscal implications of an indemnity for the Bank, packages have to be formally agreed by the chancellor. Although I cannot prejudge any hypothetical request, no request for quantitative easing has ever been refused. And I see no reason why circumstances would be different in future."

Looking at economic arguments alone in Brexit talks is to 'miss a very important point', says Hammond

European leaders are unlikely to think only about the economic implications of Brexit, Chancellor Hammond also told parliament today. 

"Looking at the economic arguments alone is to miss a very important point.

"There is a political debate going on here in Europe where European politicians are very conscious of the impact of Britain's departure on their political project, and I don't think that we can be certain that economics alone will dictate the course of this negotiation." 

Chancellor Hammond wants to put financial services at heart of Brexit talks

Chancellor Philip Hammond has reiterated that he wants to put financial services at the heart of Brexit talks. 

Earlier, he told parliament: 

"I certainly have been seeking to reassure financial services businesses that we will put their needs at the heart of the negotiation with the European Union.

"We understand their needs for market access. We also understand their needs to be able to engage the right skilled people." 

Monte Paschi eyes sweeping job and branch cuts to win support for rescue plan

Here's our full report by Ben Martin on struggling Italian bank Monte Paschi: 

Banca Monte dei Paschi di Siena has unveiled plans to cut 2,600 jobs and shut around 500 branches as the world’s oldest bank battles to win investor support for a rescue capital raising.

The struggling Italian lender, considered one of the most beleaguered banks in Europe, is seeking as much as €5bn (£4.4bn) by the end of the year.

To drum up support from nervous investors, new boss Marco Morelli, who has only been at the helm for six weeks, today laid out a fresh turnaround plan, which he hopes will propel the loss-making lender back to profit.

Monte Paschi plans to close just over a quarter of its approximately 1,900 branches and slash 2,600 roles to help it generate net profits of at least €1.1bn by 2019. The lender, which forecast that it will slump to a €4.8bn annual loss this year and today posted a €1.2bn loss for the third quarter, will also look to sell off almost €28bn of bad loans.

Continue reading here

Carpetright warns of price rises as exchange rate weighs on profits

Despite warning that the pound weakness has increased the costs of the carpets it imports, shares in Carpetright are trading up 1.2pc this afternoon. Tom Ough reports: 

Carpetright's chief executive has warned that it may have to increase prices after reporting a drop in like-for-like sales.

The UK's largest flooring company suffered a fall in like-for-like sales - which measure stores that have been open for more than a year - of 2.9pc in the first half of the year. The company has kept its full-year profit forecast of £18.5m unchanged.

Carpetright buys much of its material from Europe and has fallen foul of the plunging pound since the EU referendum in June.

Some of its prices have gone up 8pc, and the company's chief executive, Wilf Walsh, said that further increases could follow outside the company's value range.

"The price increases and inflation hitting our sector will hit everyone in our sector because we all buy from Europe," he said.

"We've left our essential value range untouched, but we're going to have to keep an eye on the exchange rates. We're also going to be looking at alternative supply in the UK and in Turkey."

Read more here

Heathrow runway: It's 'about time', says British Chamber of Commerce

Commenting on the government’s decision to approve the construction of a new runway at Heathrow Airport, Adam Marshall, Director General of the British Chambers of Commerce (BCC), said:

“Put simply, it's about time. Successive governments have prevaricated for far too long in the face of a blindingly obvious need for more runway capacity. Businesses will now want assurances that the final approval process for Heathrow's new runway will be smooth and swift, so that construction can begin as soon as possible.

"Westminster must not underestimate the impact that further delays would have on business confidence. The time for playing politics with our national connectivity is over.

"Building this runway will not only boost business confidence, it will also help firms access export opportunities, and attract investment from both UK and overseas businesses.

“For business communities around the rest of the UK, connectivity into an expanded Heathrow is critical, even as regional airports develop their own links to overseas business destinations. This new runway must be viewed as much about connecting the regions and nations to the world as it is about capacity for London and the South East. 

“While most business communities will celebrate Heathrow expansion, this cannot and must not be the only new runway to be built in Britain over the coming decades. One new runway is not enough to give the UK the aviation capacity it requires to trade the world successfully. Airports like Gatwick, Birmingham, Stansted, and others with growth aspirations should also get the chance to expand and grow in the future.”

Head over to our live politics blog for the latest:  Heathrow expansion gets green light by ministers - but Boris Johnson is set to open Cabinet rift over plans ​

Twitter to cut hundreds of jobs, reports say

Twitter may cut 8pc of its work force, that's according to reports that surfaced overnight. Our technology reporter Cara McGoogan has the latest:  

Twitter is said to be planning hundreds of job cuts as early as this week, amid fears that the company’s growth has dried up and that it has few options available following the failed attempt to entice a buyer earlier this month.

The loss-making company could cut as many as 300 members of staff, slimming down its operations by as much as 8pc, according to reports.

The reports of job cuts to its 3,860-strong workforce come just days before Twitter is due to announce its third quarter earnings before the market opens on Thursday. Analysts expect the company’s earnings per share to fall 10pc, while its revenue could have risen by around 6pc to $606m (£495m).

Although it isn’t expected to have hit negative figures, the results could mark the embattled social network’s ninth consecutive fall in revenue growth, which was as high as 124pc in the second quarter of 2014.

Read more here

St. James's Place climbs on Q3 beat

Wealth manager St. James's Place rose 2.3pc towards the top of the blue chip index after it said third quarter assets rose 8.9pc thanks to financial market gains and strong demand for investment advice following the EU referendum. 

David Bellamy, chief executive, said: "The third quarter fell between two political turning points in the UK: the EU referendum result announced on 24 June and Theresa May's first Brexit planning speech on 3 October. 

"However, despite the backdrop of political uncertainty, it's been very much business as usual and we've maintained good momentum in the business since the half year, with new investments in the most recent three months 21pc higher at £2.8bn.  Together with the continued high retention of clients and their investments, this resulted in net inflows in the period of £1.66bn.  At £71.4 billion, Group funds under management are £12.8bn higher than at the beginning of the year."

Carney prepares to face House of Lords on economic consequences of Brexit

The pound may have settled above the $1.22 mark but don't expect that to last too long. David Cheetham, of XTB, says Bank of England governor Mark Carney's appearance before the House of Lords Economic Affairs Committee later this afternoon on the economic consequences of the Brexit vote could "trigger some volatility in the pound". 

"Recent economic indicators have suggested that the economy has shrugged off the initial shock of the vote in June, and this viewpoint was supported by Mr. Carney in a speech during which he claimed the central bank’s swift and decisive action had played an important role in dampening the shock.

"With third-quarter GDP data out on Thursday expected to show growth of 0.3pc for the three months post-Brexit vote, doom-mongers warnings of an imminent recession appear misplaced. However news from the continent that the EU-Canada trade pact was thrown into chaos last night after the Wallonia region in Belgium voted against a deal that has been in the offing for seven years should serve as a timely reminder that there remains many pitfalls ahead in the UK’s separation from the EU."

Anglo American surges as output cheers investors

Here's our full report on the robust production update from Anglo American by Jon Yeomans: 

Global mining group Anglo American enjoyed a 4.4pc jump in its share price on Tuesday morning after its third quarter production report pleased investors.

The South Africa-based company, which is in the process of selling off mines and slimming down its portfolio, chalked up better-than-expected production in commodities it is looking to exit, including iron ore – used in steelmaking – and coal.

However output of the commodities it is looking to keep – diamonds, copper and platinum – was lower than some analysts had expected.

Diamond production, through Anglo’s De Beers subsidiary, rose 4pc year-on-year, as it continued to keep a lid on supply in the face of subdued prices, with the company maintaining a “cautious outlook” on the sector.

Copper output fell 9pc due to problems at its Los Bronces mine in Chile, where Anglo has been unable to dig higher grades of the metal due to heavy snowfall. Strike action in the country also hit production.

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Heathrow decision good for UK plc

Neil Wilson, of ETX Capital, thinks that if the government backs a third runaway at Heathrow, the decision to do so will serve as a "firm signal" that the UK is open to global trade post-Brexit. 

“After decades of uncertainty, the message is very much that Britain is an outward looking nation ready to trade and do business.

"It will be essential for our long-term prospects as Britain starts to look to trade more with countries further afield, particularly in Asia. It will also do a huge amount to boost the construction sector short term. Benefits will trickle down through the supply chain and boost the wider economy over the coming years.

"Of course we are well short of a firm decision and there could yet be some turbulence for Heathrow to clear before ground is broken. A strong legal challenge could yet derail this project.

"Markets haven’t really reacted too much as we are a long way from this being a done deal but certainly not doing any harm as the FSTE is buoyant today, holding up above 7,000.”

Follow all the action on our live politics blog here

National Express top mid-cap riser on robust trading trading update

Shares in National Express jumped to the top of the mid-cap index, up 3.9pc to 369.5p, after its third-quarter operating profit increased by 9pc, buoyed by strong performances in its overseas businesses. 

The bus and rail operator also said it is on track to "at least" deliver its targets for profit, cash flow and gearing for this year. 

Rail revenue has grown by 43pc so far this year, including the first time contribution from the group's German rail operations.

It also said its UK bus and coach  businesses are proving "relatively resilient" against a backdrop of "subdued demand" for travel in the UK. 

Analyst Joseph Thomas, of HSBC, said: "We see no areas of material concern in the business and raise our forecasts for FX. Even in potentially difficult areas, the group is managing well." 

Shares in Italian bank Monte dei Paschi suspended after falling 23.3pc

Well that's quite a turnaround. Earlier this morning shares leapt 20pc after troubled Italian bank Monte dei Paschi di Siena announced its turnaround plans. 

However, minutes ago shares have been suspended after falling some 23.3pc. 

 Earlier today, Italy's third-largest bank announced plans to write down bad loans, lay off a tenth of its staff and raise five billion euros in an overhaul. 

Since then, the group's chief executive Marco Morelli said no assumption can be made for now about amount of money to be raised by bond conversion, including take-up - if any - by retail investors

Capita to be a huge beneficiary of new Heathrow runway

Amid reports that Heathrow "did get the nod" at a meeting at 10 Downing Street this morning., Jasper Lawler, of CMC Markets, said the decision will be welcomed by London businesses. 

"It will be a multi-year boom for the businesses that win contracts to build and serve a bigger Heathrow.

"As far as blue-chip shares, outsourcing firm  Capita  is bound to be a huge beneficiary of a new Heathrow runway," Mr Lawler added. 

Shares in Capita have inched up 3.5p to 619p. 

US earnings season returns with a vengeance

Chris Beauchamp, of IG, looks ahead to this afternoon ahead of the Wall Street opening bell and speeches from Mark Carney and Mario Draghi: 

"The lull in US earnings comes to an end today, as a swathe of corporate giants post their figures. In addition, we get US consumer confidence figures and speeches from key central bankers Mark Carney and Mario Draghi. It promises to be an exciting afternoon, with US markets apparently poised to break higher after drifting lower since the middle of August.

"Ahead of the open, we expect the Dow to start at 18,247, up 24 points from last night’s close."

European miners rally on solid Anglo American production

The European basic resources index jumped 2.4pc to its highest level since August last year on the back of solid production from Anglo American and a 1.7pc rise in copper pries. 

Anglo left its output guidance unchanged for most o fits commodities and said that conditions for its diamond business had improved. 

Shares in Anglo rose 3.7pc to £11.05, Antofagasta advanced 3.5pc to 543.5p, Rio Tinto added 2.7pc to £27.49 and Glencore edged up 2.7pc to 244p.

German Ifo expectations confirm yesterday's signal from strong PMI

 Yesterday, data from Markit showed that Germany's private sector expanded at its fastest pace in a year,  suggesting Europe's largest economy is firing on all cylinders at the start of the fourth quarter after losing momentum in the previous two months. A flash composite reading from Markit  jumped to 55.1 this month, up from 52.8 in September. 

Meanwhile, today Germany's Ifo business climate index surged to a two-year high, rising unexpectedly this month. 

BHS closures to dent income at shopping centre owner Intu

Shares in Intu Properties are 1pc in the red at 288p after it said the collapse of BHS would weigh on its rental income. 

Kate Palmer reports: 

BHS’ collapse is expected to dent rental income at shopping centre developer Intu, which unveiled an otherwise confident trading update today as it announced the sale of a London mall for a post-Brexit premium.

The disappearance of BHS stores from British towns and cities in August could hit rental income next year, Intu warned, as it had 10 BHS stores in its portfolio, amounting to 1pc of its total rent. 

The company predicted that the job of re-letting BHS shops would hit 2017 sales growth by between 2pc and 3pc and cause rental income to come in at a “lower level” in 2017 than this year.

The company, which rebranded from Capital Shopping Centres in 2013, said it “fully expects” to re-let the empty spaces with an “improved” set of tenants, saying that it has already handed BHS’ old space in Gateshead over to fashion retailer Next for its flagship store.

Intu, which owns 18 shopping centres across Britain, said “consumer confidence has remained robust” since the referendum, with footfall at its sites increasing 1.2pc between July and October 24. 

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Carney's appearance before House of Lords could prompt 'volatility' in pound

It's been a choppy start to the day for the pound and Caxton FX analyst Alexandra Russell-Oliver thinks the pound remains vulnerable to Brexit uncertainty. 

Bank of England governor Mark Carney's appearance on the economic consequences of the Brexit vote before the House of Lords economic affairs committee could prompt "volatility" in the pound, she added. 

The pound is currently trading up 0.14pc on the day at $1.2228 against the dollar.

Credit: Bloomberg

German company execs have absorbed Brexit shock, says Ifo economist 

German company executives have digested Britain's vote to leave the European Union and positive signals from China and the United States are pleasing exporters in Europe's largest economy, Ifo economist Klaus Wohlrabe told Reuters on Tuesday.

"The Brexit vote has been digested," he said.

Wohlrabe said an impasse over a free trade deal between the European Union and Canada - which has not yet been signed because the French-speaking Wallonia region in Belgium opposes it - was not putting a dampener on the German economy.

Executives have long priced in the European Central Bank's expansive monetary policy, he said.

Report from Reuters

Is the German economy accelerating? 

Weighing in on the unexpected rise in the German Ifo business climate, Claus Vistesen, of Pantheon Macroeconomics, described the data as "strong" and reckons it suggests that the German economy started Q4 on a very strong note.

"If we continue to see these numbers, it would suggest that GDP growth is accelerating. Across industries, the services index fell marginally, but the expectations index rose, which matters most as this is the key leading component. The other details of the survey also were strong.

"The aggregate manufacturing sentiment index rose to a 30-month, although we have to wait for tomorrow to see the indices for new orders and production expectations due to IFO’s data embargo on these details. Finally, the headline construction sentiment index rose to a record high, indicating that capex in the building sector will rise sharply soon."

Credit: Pantheon Macroeconomics

Meanwhile, Naeem Aslam, of Think Markets, said the Ifo data has provided further evidence that the "economic engine of the eurozone is picking up steam". 

"There is no doubt that there will be spill over effects of this in other eurozone countries and the economic picture will look a lot more better there. The German economic data has helped the sentiment and traders are falling more in love with equities. The news has also provided a support for the Euro."

German Ifo business climate index rises unexpectedly this month; hits two-year high

German business moral improved unexpectedly this month, a survey showed today. 

The Ifo economic institute said its business climate index, which is based on a monthly survey of 7,000 companies, rose to 110.5 this month, up from 109.5 in September and it's highest reading since April 2014. Consensus forecasts expected the reading to be unchanged month-on-month. 

Ifo head Clemens Fuest said: "The upturn in the German economy is gathering impetus." 

Fest said it was driven by improved sentiment in manufacturing and construction sectors. 

Costa looks to 'finer coffee' as Whitbread gains a boost

Costa Coffee owner Whitbread has tumbled 2.4pc to £37.49 this morning after it said Costa's like-for-like sales slowed to 2pc in the second quarter. 

Cristina Criddle reports: 

Costa Coffee owner Whitbread has reported a perk in profits as it looks to woo coffee connoisseur with "finer" brews.

The coffee chain enjoyed a 2.3pc increase in like-for-like sales - which compare shops that have been open for more than a year - in the 26 weeks to September 1. Total sales grew 10.7pc, while pre-tax profits climbed 4.3pc to £65.5m.

Costa is trialling "finer coffee" and fresh food as it looks to take on independent cafes. 

Its first finer coffee concept store launched in London's Covent Garden in June, selling artisan coffee and an "enhanced beverage range". A second store opened in Wandsworth, south-west London, earlier this month.

The chain said it was making "good progress" rolling out Costa Pronto and Drive Thru formats, which serve motorists and customers in a hurry. 

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DAX touches new 2016 high

Frankfurt's DAX charges to fresh 2016 high, up 0.6pc at 10,819 points. 

Credit: Reuters

Dollar firm near nine-month highs

Staying with forex markets, the dollar is holding firm near nine-month highs against a basket of major currencies after robust US manufacturing activities and comments from a Fed official cemented expectations of a US rate hike by the end of the year. 

It hit its highest level since early February - up 3.6pc this month so far at 98.846. 

A flash survey from Markit showed US manufacturing activity levels reached their highest level in a year. While Chicago Fed president Charles Evans said yesterday the Fed could raises three times between now and the end of next year by as many as three times. 

Euro remains near seven-month low 

The euro remains near a seven-month low this morning after the tiny Belgian region of Wallonia succeeded in stalling a landmark trade Canada-EU trade deal. 

Carney unlikely to help the pound

Bank of England governor Mark Carney's appearance before the House of Lords Economic Committee has the potential to unsettle the pound (again). It is currently floundering at $1.2218, up just 0.05pc on the day. However, with little economic releases on today's agenda, markets will shift their attention to Mr Carney later today. 

Kathleen Brooks, of City Index, thinks the markets will primarily be looking for "any hints that Carney and co. at the BOE have plans to cut interest rates further".

"The market has pretty much priced out the prospect of a near-term rate cut from the BOE, but a dovish tone from Carney could see the market start to re-price the prospect of a cut, and the pound could take a hit."

She also thinks Mark Carney’s testimony comes at "an interesting time", as relations between the BOE and the government remain "tense after the PM appeared to criticize QE, and threaten the Bank’s independence".

Credit: Bloomberg

"It also comes as Carney has two months to decide whether or not to leave the BOE in 2018, or stay on until 2021, he will make a formal announcement by the end of the year.

"If Carney voices concerns about the deteriorating relationship with the government then this would be the worst outcome for the pound in our view, as the last thing an already Brexit-frazzled FX market needs now is discord between the UK authorities. It could also make it more likely that Carney will quit his post in 2018, right in the middle of the UK’s Brexit negotiations. "

Engineer GKN reports slowing growth

Engineer GKN has slumped to the bottom of the blue chip index this morning, down 2.4pc to 315.2p, after it said it sees growth rates easing in its major markets. 

Tom Ough reports: 

GKN, the engineering group, has reported slowing growth as it continues to grapple with its pension black hole and takeover rumours.

In its nine-month trading statement, the FTSE 100 company said it had performed in line with expectations, with sales growing 21pc to £6.9bn in the nine months to September 30. However, the topline was flattered by acquisitions and currency movements; organic sales growth was just 2pc in the same period, totalling £151m.

GKN also said that its trading margin was lower than the equivalent period last year. Though it did not disclose the size of this margin, GKN put it down to its £35m restructuring programme, a number of one-off costs, and the absence of last year's one-off benefits in GKN Aerospace, one of its divisions.

Shares in GKN, whose pension deficit is understood to have put off prospective buyers, dipped 2.8pc to £3.14 in early trade.

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European bourses lifted by mining stocks

Mining stocks led the charge higher in Europe this morning, while strong earnings results from Randstad and Orange also lifted bourses in the region. 

  • FTSE 100: +0.53pc
  • DAX: +0.37pc
  • CAC 40: +0.29pc
  • IBEX: +0.07pc

 Henry Croft, of Accendo Markets, said: "A positive opening call comes after a mostly positive Asian trading session, driven by further US Dollar strengthening as the chances of a US Fed hike in December reach their highest since before Brexit. Earnings releases will once again be the focus for markets as four FTSE 100 components report this morning, whilst across the pond the world’s most valuable company Apple reports how it fared in the third quarter. Note, an announcement from the UK Transport secretary at 12:30pm regarding South East England airport expansion could have repercussions for UK Airlines as the Heathrow vs Gatwick debate is settled. For now." 

Nikkei surges to six-month high on weak yen

Japanese stocks rose to a six-month high overnight buoyed by a weaker yen, which lifted hopes that exporters' earnings will recover. Meanwhile, Kyushu Railway jumped 15pc in its market debut.

The benchmark Nikkei share average rose 0.8pc to 17,365.25, the highest closing level since April 25.

Credit: Reuters

Agenda: Mark Carney to appear before House of Lords economic affairs committee

Good morning and welcome to our live markets coverage.

The pound remains subdued below the $1.23 mark against the dollar as markets turn their attention to Thursday's third quarter GDP data. 

Today's economic calendar is relatively light and so attention shifts to Bank of England governor Mark Carney, who speaks in front of the House of Lords economic affairs committee this afternoon to discuss Brexit and the bank's response. 

Ahead of his appearance, Michael Hewson, of CMC Markets, said: "With questions being asked about whether he will serve out his full eight year term as Bank of England governor, Mark Carney will be the focus of attention today as he speaks to the House of Lords economic affairs committee, ahead of next week’s rate decision and quarterly inflation report, where he is likely to face questions about the recent Brexit vote and the central Banks reaction to it."

Also on the agenda: 

Interim results: Atlas Mara Co-invest, Whitbread, Braemar Shipping Services

Trading update: National Express Group, St James’s Place, Anglo American, GKN, Carpetright

Economics: Ifo business climate (GER), HPI m/m (US), Richmond manufacturing index (US), CB consumer confidence (US)

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