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Sterling wobbles after Bank hints at rate cut

Tom Rees
Bank of England rate-setter Michael Saunders has turned dovish - PA

5:51PM

Markets wrap: Pound wobbles after Bank rate-setter hints at cut

We're closing the live blog for the week. Louis Ashworth will be with you bright and early on Monday morning to bring you the latest from financial markets. Before we go, let's remind you of the biggest story of the day here on markets.

The Bank of England has taken a strike towards cutting interest rates after one of its policymakers reversed course to hint at stimulus.

Sterling took a tumble after Michael Saunders, who is considered the most hawkish rate-setter on the Monetary Policy Committee, said that it was "plausible" the next move by the Bank would be to reduce its base rate.

He said that the more likely scenario for the Bank is that policy would be loosened even if a no-deal Brexit is avoided. Its rate-setters would be forced to act by prolonged uncertainty hurting the economy and "disappointing" global growth.

Sterling slipped as much as 0.5pc against the dollar before clawing back most of its losses, ending the week on a 0.2pc loss at just above $1.23.

4:43PM

The best comment and analysis from Telegraph business

Before we wrap up the live blog, let's point you towards some of the best business and economics analysis to sink your teeth into ahead of the weekend.

3:43PM

Poundland could be sold or listed, reveals owner

Our retail correspondent Laura Onita has some news from the budget end of the sector:

Poundland's parent company said on Friday that an outright sale or a stock market listing of the discounter could be on the cards.

Chief executive Andy Bond, who used to run grocer Asda, said: “Who knows what will happen in the future. The chief executive of Steinhoff has made it very clear that a number of assets have to be sold, that’s something for our shareholders to decide.” 

The owner of Poundland, Pepkor Europe, is now called Pepco. It is still part of struggling Steinhoff, the South African conglomerate, but Pepco no longer relies on Steinhoff for cash after a deal with its lenders. Mr Bond also pointed out that most of the group’s sales come from its business on the continent. It has almost 2700 stores, of which 840 are Poundland shops in the UK.

Poundland plans to cut rents on the majority of its stores in the UK in the next six years as leases come up for renewal. Pepco expects to hit revenues of around £2.9bn this year. It went through a string of refinancing deals and has access to £115m of emergency cash.

3:07PM

Sterling claws back losses as markets drift

Sterling has nearly clawed back all of this morning's losses as markets drift into the end of the week.

It is back above the $1.23 mark against the dollar after wobbling on a speech from Bank of England rate-setter Michael Saunders. Our economics editor Russell Lynch has done a full report on Mr Saunder's comments that have boosted the odds of an interest rate cut at the Bank.

Here's a snippet of his piece:

The Bank of England’s leading hawk made an abrupt U-turn on Friday, warning that prolonged uncertainty could force rate-setters into cuts even if the UK gets a Brexit deal.

Mr Saunders, a former Citigroup economist, has been a regular campaigner for interest rate rises on the Monetary Policy Committee, the Bank panel that sets interest rates each month. He has been in the minority pushing for a rate hike six times during his spell as a policymaker.

1:56PM

FTSE 100 enjoys another sterling boost

The FTSE 100 is being propelled higher this afternoon by sterling's latest slump boosting its big overseas earners.

The index has gained 12pc in the last five years but much of its strength can be pinned on the pound's woes. When converted into dollars, the FTSE has actually slipped 15pc (see chart below).

This afternoon it is leading Europe higher on a 0.9pc gain as global markets stage a rebound. 

1:30PM

Saudi Arabia launches tourist visa plan to cut oil dependence 

Potential draws for tourists include Madain Saleh, a Unesco World Heritage Credit: FAYEZ NURELDINE/AFP

Saudi Arabia is opening up a new visa scheme in a bid to attract more tourists, wean the economy off its dependence on oil revenues and open up to the world.

Crown Prince Mohammed bin Salman’s ‘Vision 2030’ programmeincludes privatisations, the development of a bigger financial sector and investment in technology in a bid to reduce its reliance on the oil industry.

The risk was underlined by this month’s attack on its giant oil facilities, while the war in Yemen and the murder of journalist Jamal Khashoggihave tarnished the country’s reputation, setting back efforts to rebrand it as a more open society.

Read the full report here

12:41PM

Why China's failure to bring home the bacon has Beijing worried

Would Britons take to the streets if the price of a bacon sandwich or a beef burger more than doubled?

Chinese consumers have faced a 120pc jump in pork prices in recent months after African swine fever wiped out a third of the country's pigs.

Click here to find out why China's failure to bring home the bacon has Beijing worried. It includes the French Revolution, the Tiananmen Square uprising and plenty of pig puns!

12:06PM

Pound claws back some losses

The pound has clawed back some of this morning's losses on currency markets following Michael Saunders' U-turn. It has touched back above $1.23 against the dollar but remains on a modest 0.3pc loss.

Here's the paragraph of today's speech that has spurred expectations of an interest rate cut on markets:

Another scenario, and this is perhaps more likely to me, is of prolonged high Brexit uncertainty (even without a no-deal Brexit actually occurring). In this case, it might well be appropriate to maintain a highly accommodative monetary policy stance for an extended period and perhaps to loosen policy at some stage, especially if global growth remains disappointing.

Translated into English that means  the policymaker at the Bank considered most reluctant to cut interest rates believes that one could be needed even if a no-deal Brexit is avoided.

The big question is whether this speech signals a shift in just Saunders' view or whether the rest of the Monetary Policy Committee is now leaning towards stimulus.

11:51AM

Thomas Cook, vacant shops and tobacco earnings going up in smoke

Michael Saunders' speech is hogging all the limelight on financial markets this morning with corporate news a little thin on the ground. Let's a quick look at what company news we do have.

11:08AM

Stuck in reverse gear

Aston Martin investors will bite off your hand to recover some of their huge losses racked up since its flotation flop.

Strategic European Investment Group Sarl, its biggest investor, had already committed to buying 3pc more shares at £10 each before its share price took a tumble to today’s price of 548p.

Unsurprisingly the chance to claw back some losses whetted the appetite of investors and a whopping 75pc of the free float wanted to sell the shares. Its shares have tumbled a further 6pc this morning. Ouch.

10:25AM

More gloom and doom for the global economy

We've got more dismal economics data that will add to global growth jitters this morning.

In China, industrial profits suffered a setback in August following a fleeting recovery the previous month. They dipped 2pc in September as China's slowdown and the trade war squeeze earnings.

Shortly after fresh figures from on Continent revealed that eurozone confidence has slipped to its lowest level in more than four years.

9:37AM

Markets surprised by Saunders U-turn

Why were markets so surprised by Michael Saunders' speech this morning?

The Monetary Policy Committee member has previously pushed for more interest rate hikes but Saunders appears to have changed course as Brexit worries persist and global growth struggles.

His voting record shows that Saunders was voting for a hike several months before the Bank finally took action in August 2018. Saunders' sudden U-turn has riled a few Bank watchers on Twitter...

In fairness to Saunders, the threat of a no-deal Brexit and stuttering global growth are two key factors that most believe is more important than a spot of strong wage growth.

9:26AM

Pound sinks after top Bank rate-setter reverses course

The Bank of England has taken a strike towards cutting interest rates after one of its policymakers reversed course to hint at stimulus.

Michael Saunders, who is considered the most hawkish rate-setter on the Monetary Policy Committee, said that it was "plausible" the next move by the Bank would be to reduce its base rate.

He said that the more likely scenario for the Bank is that policy would be loosened even if a no-deal Brexit is avoided. It would be forced to act by prolonged uncertainty and "disappointing" global growth.

The pound was knocked back into the red by the unexpectedly dovish stance from the rate-setter, dipping as much as 0.5pc against the dollar at $1.2271.

8:37AM

FTSE hits two-month high

London's blue-chip stocks haved jumped to a near two-month high this morning.

The index is being helped by a hit to sterling after signals from the Bank of England that it is looking at an interest rate cut.

Britain's second-largest housebuilder Persimmon is up 1.6pc after brokers at Jefferies upgraded the stock and said Brexit risks were overplayed in the sector. 

8:03AM

More than 40pc of Thomas Cook passengers flown home to UK

More than 40pc of stranded Thomas Cook passengers have been flown home to UK as part of the Civil Aviation Authority's repatriation effort. 

About 61,000 people have been repatriated in four days as part of Operation Matterhorn, the CAA said. 

So far, about 95pc of passengers have been returned to the UK on the day they were scheduled to return on board a Thomas Cook flight. 

CAA boss Richard Moriarty said the mission to bring home 150,000 Britons by Sunday October 6 was "on track". He added: 

"An operation of this scale and complexity will inevitably cause some inconvenience and disruption and I am very grateful to holidaymakers for bearing with us as we work around the clock to bring them home.”  

Latest on Thomas Cook: Lawyers billed Thomas Cook weekly in run-up to its collapse to ensure they were paid, the Telegraph has revealed. 

Top City lawyers advising Thomas Cook on its failed rescue plan are said to have demanded weekly payments from the travel company to ensure they received their fees in the run-up to its collapse into insolvency

Read the full story here.

7:44AM

FTSE set to open higher

Futures trading this morning indicates the FTSE 100 is set to open about 0.25pc higher. 

The blue-chip index is tipped to rise, in contrast to Asian markets which fell overnight on the back of the release of a whistleblower complaint against US President Donald Trump. 

The release added to worries about the global economy, already reeling from the China-US trade war. 

Asian shares hit three-week lows overnight. 

7:19AM

Boris Johnson's tax cuts could blow £26bn hole in the public finances

Good morning. The FTSE 100 touched eight-week highs yesterday but failed to hold them, on a day marked by a striking spree of profit warnings that didn’t stop the blue-chip index from shining. London’s top bourse outperformed its peers on the Continent, closing up just over 0.8pc.

5 things to start your day

1) Boris Johnson’s tax cuts giveaway could blow a £26bn hole in the public finances, the Institute for Fiscal Studies has warned in a withering critique of the prime minister’s plans. The influential research group found Mr Johnson's “substantial and expensive” plans to raise the higher-rate income tax threshold from £50,000 to £80,000 would take 2.5 million workers out of the top band, cutting their tax bills at a cost £9bn per year.

2) The global economy faces a prolonged slump as the US slows, the UK and eurozone struggle to recover historic growth rates and China sinks towards 5pc annual growth over the foreseeable future, economists have warned. World GDP growth will slide to 2.7pc this year and stay below 3pc out to at least 2023, according to experts at Citibank, who trimmed forecasts for this year and next by 0.1 percentage points.

3) Would Britons take to the streets if the price of a bacon sandwich or a beef burger more than doubled? Pork protests may seem like hogwash but Beijing is increasingly worried that an unprecedented surge in the price of China’s favourite meat could be a match that lights the tinder.

4) Are the tobacco industry’s hopes for vaping going up in smoke? The billions spent on marketing e-cigarettes as trendy, safer alternatives to smoking started out as a vital exercise in future proofing. Instead, a growing backlash on vaping has wiped billions off UK tobacco stocks, stubbed out a $200bn merger and is now threatening to turn the fast growing segment into a cautionary tale.

5) Care homes 'could run short of medical supplies in no-deal Brexit': Care homes risk running out of vital medical supplies if Britain leaves the European Union without a deal next month, the spending watchdog has warned.

What happened overnight

Asian shares were on course for a second straight week of losses on Friday as the release of a whistleblower complaint against US President Donald Trump heightened uncertainties about the global economy, already reeling from Sino-US trade war.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.09pc, having fallen 1.4pc so far this week, while Japan's Nikkei slid 0.54pc.

In the US, S&P500 futures lost 0.08pc in early Asian trading after the index lost 0.24pc on Thursday.

A whistleblower report released on Thursday said President Donald Trump not only abused his office in attempting to solicit Ukraine's interference in the 2020 U.S. election for his political benefit, but that the White House tried to "lock down" evidence about that conduct.

The report came after the US House of Representatives Speaker Nancy Pelosi launched an impeachment inquiry into him this week.

"The start of the impeachment inquiry adds a new element of uncertainties to markets, in addition to ongoing concerns about the US-China trade war and the risk of a US recession," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"While no one thinks the Senate will vote for his impeachment given the Republican majority there, we could see more new revelations during a long investigation process," he added, noting that U.S. stocks fell considerably when former President Bill Clinton was impeached.

On trade issues, news headlines were too mixed for investors to show a clear reaction.

CNBC reported that trade war talks were scheduled for October 10-11 in Washington, citing people familiar with the arrangements, and China's top diplomat said China was willing to buy more US products.

But other media reports on Thursday that the United States is unlikely to allow American firms to supply China's Huawei Technologies undermined hopes of a complete deal.

The damage is already evident with Micron Technology Inc , a major Huawei supplier, which forecast first-quarter profit below Wall Street targets, pushing its share prices down 7pc in after-hours trade.

Coming up today

Jefferies analysts see water utility firm Pennon Group as already priced in for a solid performance, so don’t anticipate much of a surprise in Friday’s trading update.

Full-year results: CVS Group

Interim results: Dunedin

Trading update: Grainger, Pennon Group

Economics: GfK consumer confidence (UK), confidence (eurozone), personal income and spending (US)