Pound plunges as Irish PM rules out Brexit border post plans
Pound falls to lowest level in a month as sentiment sours over prospect of a Brexit deal
Data confirms sharpest German manufacturing contraction since financial crisis
UK manufacturing sector contraction is smaller than expected
House price growth hits lowest year-on-year level in eight months
Juliet Samuel: Brexit conspiracies and crackpot blogs are taking us all for mugs
Wrap-up: European stock indices close blood-red after weak economic data rattles markets
That’s an ugly finish for European markets, with the FTSE shielded from the worst of the damage by currency movements.
The pound, which mounted a comeback for much of September as a series of setbacks for the PM, looks to be on a trend of decline again now as investors trade with a view to weeks of upcoming uncertainty.
For the third session of the trot, individual stock performances appeared greater than any sector shifts, with a particularly poor performance for Greggs.
That’s all from me today. Join me again tomorrow for the latest news on business, markets and economics!
Greggs on course for worst one-day drop since December
With markets closed, it looks like bakery chain Greggs has finished with its biggest drop since December.
Hargreaves Lansdown leads FTSE fallers
Investment service Hargreaves Landown is the biggest faller on the FTSE 100 today, down nearly 4pc following a brace of bad notes from analysts.
Credit Suisse initiated coverage of HL with an “underperform” rating, saying its “premium valuation” was “difficult to support in the face of near-term revenue and earnings growth headwinds”.
Panmure Gordon analysts added:
Hargreaves Lansdown has in our eyes confounded economic theory over the years by gaining market share despite never having a price leading product. We believe that this dynamic is explained by the breadth and quality of service offered.
They gave it a “sell” rating.
Sterling extends losses against euro
The pound’s fall against the dollar looks to have levelled out somewhat, but its fall against the euro has grown worse in recent minutes, sending it to its lowest level against the common currency since September 13.
Round-up: Leaked tapes reveal Zuckerberg confidence over regulatory fight, Ryan boss pronounces the death of the package holiday, UBS reinstates chief economist in ‘Chinese pig’ row
Here are three big stories from this afternoon:
Zuckerberg confident of winning a regulatory battle with Warren, leaked tapes reveal: Mark Zuckerberg has told staff he is confident of winning any legal fight with Democratic presidential hopeful Elizabeth Warren amid an “existential threat” to break up the social media giant, leaked tapes reveal.
Thomas Cook collapse has killed the package holiday, Michael O’Leary claims: Ryanair boss Michael O’Leary has enraged the travel industry by claiming the package holiday is “screwed” following the failure of Thomas Cook.
UBS to reinstate chief economist after ‘Chinese pig’ row: Asenior UBS economist suspended over controversial remarks about pigs in China will return to work on Wednesday, marking a spectacular climbdown by the world’s largest wealth manager.
Here’s how stock markets stand
As you can see, things have taken an ugly turn, with the FTSE 100 being propped up by a falling pound.
Looks like I spoke to soon on Trump...
The US President has criticised Federal Reserve chair Jerome Powell, labelling the Fed “their own worst enemies”.
As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!
— Donald J. Trump (@realDonaldTrump) October 1, 2019
ISM data is ‘big burn’ for bullish investors
Reacting to that manufacturing data, Markets.com’s Neil Wilson writes:
Big burn for the bulls on that ISM print, which showed a 10-year low for US factory activity. Welcome to October.
The S&P 500 was going well at 2992 ahead of the print [3:25pm] but sold off heavily as the market saw this data a recession figure, hitting 2966. A 20-pt-odd swing on this data may be over-cooking it, particularly as we know the Fed is ready and willing to step in on softer data. Things start to look shaky at 2962 and then decidedly dicey at 2944. I don’t see how this fundamentally snaps the bulls’ confidence – not yet.
Danske Bank says market pricing now indicates a further Fed rate cut is likely:
����According to market pricing, the probability of a #Fed cut later this month is now 55% versus 40% yesterday pic.twitter.com/RA4hL7os2M
— Danske Bank Research (@Danske_Research) October 1, 2019
Here’s some reaction from Twitter to that big US factory data miss
The #global#manufacturing contagion is spreading to the USA as ISM PMI fell 1.3 points to 47.8, a deepening contraction. Nearly all details are contracting. #tariffs and #trade tensions are fostering uncertainty and largely to blame for the weakness. Not good for the #economy. pic.twitter.com/OaSIVA7fGO
— Dr Thomas Kevin Swift (@DrTKSwift) October 1, 2019
#BREAKING! The S&P 500 has to fall 14% from the current level to match the drop in the #ISM Manufacturing Index to 47.8. Fortunately, other factors also impact equity markets... pic.twitter.com/VnfOgldO6F
— jeroen blokland (@jsblokland) October 1, 2019
Historically, the ISM has to fall below 45 (or even 43) to indicate the overall economy is falling into a recession. We aren't there yet. But we're also closer than most economists expected we'd be right now.
— Ben Casselman (@bencasselman) October 1, 2019
US factory drop may heighten calls for rate cuts
Donald Trump hasn’t been tweeting about the economy quite so much lately, but if he was, one might imagine he would be seizing this opportunity to call for rate cuts.
US manufacturing activity fell the second month in a row, further extended its move away from a 14-year high hit just more than a year ago.
The ISM’s factory index fell to 47.8, the lowest since 2009 — a sign made all the more worrying as upcoming jobs data is expected to be fairly subdued.
The slowdown has been driven by global trade headwinds, and the pressure of a gradually-strengthening dollar on exporters.
US ISM new export orders. No comments needed. pic.twitter.com/DKEbwjiNx9
— Frederik Ducrozet (@fwred) October 1, 2019
Big miss for US manufacturing activity
Ouch! Purchasing managers’ index data for the US manufacturing sector is out, and it’s shown a shock contraction.
ISM gave an activity reading of 47.8, where a score above 50 indicates growth. Analysts polled by Bloomberg had expected a score of 50 exactly, to grow on August’s figure of 49.1.
Worst number since June of 2009. https://t.co/kALVRT1fRk
— Carl Quintanilla (@carlquintanilla) October 1, 2019
As things stands, it looks like the slowdown accelerated, the the worst score since the financial crisis.
June 2009 was the last month of the Great Recession. It's also the last time the #Manufacturing@ISM® Report On Business® composite index was this low. The PMI® was 47.8% in September, the second consecutive month of sector contraction. https://t.co/qqaZb4XyxC#ISMROB#economy
— Institute for Supply Management (@ism) October 1, 2019
Pound sinks further
The pound’s losses (against a strengthening dollar) are growing incresingly eye-watering, with nearly an entire cent shaved off the currency today. Here’s how that looks over the past month:
Here’s a reminder of the pound’s tough recent history with Tory conference:
Losses double at fintech Revolut
Losses at online bank Revolut more than doubled in 2018 as the firm ploughed cash into winning new customers. Telegraph Technology Intelligence’s James Cook reports:
The start-up lost £32.8m in 2018, up from £14.8m a year earlier, but saw total customer numbers jump above 7m for the first time.
This drove a big rise in Revolut’s revenues, which more than quadrupled to £58.2m — up from £12.8m in the previous 12 months.
Revolut - which is led by founder Nikolay Storonsky - has embarked on an aggressive international expansion drive in a bid to take on established banking titans such as HSBC.
The boost to its finances comes one day after the firm announced a deal with Visa which will allow it to launch services in 24 new countries.
Read more here: Losses at UK fintech start-up Revolut double to £32m
Sterling extends losses as Irish PM dismisses border post proposal
Looks like that volatility isn’t coming back soon: the pound is now sharply off, blasting past $1.224 to hit its lowest level since September 5. That’s a 0.5pc drop since London trading opened this morning.
The fall has extended following comments from the Irish Taoiseach Leo Varadkar, who has rejected a reported proposal for posts at the Irish border to avoid a hard border.
Follow the latest political updates here: Brexit latest news: Boris Johnson dismisses reports his Brexit deal will impose checks away from Irish Border
Full report: Credit Suisse board defends boss Thiam over spying scandal
My colleagues Lucy Burton and Michael O’Dwyer have a full report on one of the strangest stories going at the moment: the Credit Suisse spying scandal. They write:
Credit Suisse's board has been forced to defend chief executive Tidjane Thiam after two of the bank's top executives resigned over a botched spy operation.
Chief operating chief Pierre-Olivier Bouee and head of security Remo Boccali resigned after the board received a report into the surveillance of senior banker Iqbal Khan, who was followed after he quit the bank for arch-rival UBS.
It has also emerged that a security expert involved has killed himself.
In a hastily arranged press conference in Zurich on Tuesday morning, Credit Suisse chairman Urs Rohner apologised for the saga, which he admitted had severely damaged the bank’s reputation.
Read their full report here: Credit Suisse board defends Thiam as execs quit over spying scandal
FT: Nissan will review plans to build Qashqai in Sunderland if Britain leaves EU without a deal
The Financial Times reports that Nissan will review its decision to manufacture its Qashqai SUV at its plant in Sunderland if the UK leaves the UK without a deal.
Citing sources, the FT says the Japanese car giant’s decision to remain manufacturing in Britain was contingent upon a “soft” Brexit, which would be reevaluated in the event of a hard exit. It reports such a move would lead to the plant’s closure, putting up to 7,000 jobs at risk.
Nissan said:
While we don’t comment on speculative scenarios, our plans for Qashqai production in Sunderland have not changed.
Since 1986, the UK has been a production base for Nissan in Europe. Our British-based R&D and design teams support the development of products made in Sunderland, specifically for the European market.
Frictionless trade has enabled the growth that has seen our Sunderland plant become the biggest factory in the history of the UK car industry, exporting more than half of its production to the EU.
Gold continues to fall as sentiment improves over trade talks
The price of gold is falling further today, as sentiment continues to improve over the prospects of a trade deal between the US and China ahead of talks set to begin later this month.
Since early August, when a rush for save-haven assets pushed the yellow metal over $1,500 an ounce, gold has mainly stayed above that level. It broke through on Friday, however, and now it’s hard to tell exactly how far it could drop.
OANDA’s Craig Erlam said:
Gold has finally broken through $1,480 support and could be facing further losses in the coming weeks as sentiment shifts towards the yellow metal. The move has been coming for some time and a failure to break $1,535 last week was the final nail in the coffin, with gold tumbling almost 5pc in the week that followed.
It's found some support around $1,460 following the initial drop but could come under further pressure in the coming weeks. In the meantime, it will be interesting to see whether it tests $1,480 from below, with the level having been such a notable level of support since August.
House prices: A tale of two Britains
By all common metrics, it should be boom time for house prices. So why has growth been so slow?
Deputy Economics editor Tim Wallace set out to answer that question. Here’s what he found:
The trick is to look beyond the headline numbers. Britain’s housing market is often spoken of as if it is one beast, but it is not a unified entity at all.
Instead it is very much a local market. Buyers know roughly where they want to live, tweak it depending on variations in local prices, schools, jobs, family concerns and more.
Pound fluctuates as Tory conference rumbles on
The pound is currently down about 0.3pc against the dollar, having been blown sharply in both directions during today’s session.
The drop could be quite notable if it holds — the pound is currently at its lowest level against the dollar in three weeks — but so far today we have mainly seen volatility. The currency’s movements have been driven by Brexit news and a strengthening dollar recently.
Here’s the latest on the politics: Brexit latest news: Boris Johnson dismisses reports his Brexit deal will impose checks away from Irish Border
Heavyweights drag on FTSE 100
The FTSE 100 is down 0.25pc currently, with a big downwards pull from pharma companies GlaxoSmithKline and AstraZeneca. The biggest downer overall remains Reckitt Benckiser (see 11:01 update), though HSBC is also falling as Hong Kong-exposed stocks suffer amid increased tensions in the city.
Germany’s DAX and France’s CAC have both turned red.
Round-up: Manufacturing slowdown, Australia slashes rates, John Lewis shake-up
As we hit lunchtime, here are three of the day’s biggest stories:
Manufacturers cut jobs at fastest pace in six years as global pain mounts: Manufacturers are cutting jobs at the fastest pace for six years as the sector endures its longest downturn since the financial crisis, alarming new data showed on Tuesday.
Australia cuts interest rates to new record low: Australia has cut interest rates for a third time this year to a new record low as the central bank signalled that more reductions could be on the way.
John Lewis axes jobs and Waitrose boss departs in sweeping shake-up: The owner of John Lewis and Waitrose on Tuesday went ahead with a drastic shake-up of the business, which will bring the two retailers closer together in a bid to save £100m, leading to 75 job losses.
John Lewis shake-up
Some big news in from John Lewis Partnership. It’s axing 75 manager roles at head office and Rob Collins, managing director of Waitrose, is to step down.
Its two companies, John Lewis and Waitrose, will operate as one unit from now on, and Paula Nickolds, currently Managing Director of John Lewis & Partners, will become “executive director, brand”. The company will also have a slimmed down board.
The changes, which hope to save JLP £100m, come ahead of Sharon White taking over a chairman from Sir Charlie Mayfield next year.
Sir Charlie said:
The lesson of the last two years is that we need more innovation, faster decision making and bolder steps to align our operating model with our strategy.
Although there will be little or no disruption to our shops or websites in the near term, there will be considerable change in many other areas of the Partnership as we bring the two businesses much closer together.
Ms White added: “There is huge potential to unlock from Partners working across our two great brands.”
Is it time for some Merkonomics?
Should Germany unleash some economic stimulus, wonders Seema Shah, chief strategist at Principal Global Investors. The country has had “a shocker of a year”, she adds:
Can we expect some Merkonomics?
There has surely never been a better time for it. Not only has the Federal Government built up a significant budget surplus giving it more than enough room to provide fiscal support but, with the entire German yield curve in negative territory, markets are essentially paying the government to borrow.
In fact, the German government has announced a climate package worth €54 billion over four years. Yet the measures are budget neutral. The “Black zero” (commitment to a balanced budget), which has long been a doctrine since the trauma of hyperinflation in the 1920s, continues to hold firm.
She suspects that “a meaningful fiscal stimulus” would likely require an “outright recession” before it is triggered.
Prospect of a German recession “all too real”
Katharina Utermöhl, senior economist at trade credit insurer Euler Hermes, has weighed in on those German PMI numbers:
The automotive sector — the darling of the country’s manufacturing industry — has experienced a decline in production since early last year that is comparable to the crisis years of 2008 and 2009...
Up until now, construction investment and private consumption have kept the German economy afloat. However, the weakness in industry is increasingly spreading to other sectors of the economy. The longer German industrial troubles persist, the more they will hurt private investment and spending decisions...
While the prospect of a recession is an all-too-real concern, we still expect overall economic growth in 2019 and 2020, albeit a weak 0.6pc each year.
Australia cuts rates
Australia has cut interest rates for a third time this year to a new record low as the central bank signalled that more reductions could be on the way, Chris Johnston writes:
The cut to 0.75pc is intended to a modest revival in growth following a year of weak growth, while keeping a lid on unemployment that reached 5.3pc last month as well as boosting consumer confidence.
Reserve Bank of Australia governor Philip Lowe said the move took account of the "forces leading to the trend to lower interest rates globally" and was prepared to "ease monetary policy further if needed”.
He added: "Employment growth is likely to slow from its recent fast rate. The economy still has spare capacity and lower interest rates will help make inroads into that.”
The cut, which had been widely predicted by economists, sent the Australian dollar down 0.5pc to about 67.3 US cents.
Opel cuts hours in Germany
More on gloom in Germany. AP has this report:
German carmaker Opel said on Tuesday it would slash hours for workers at its main factory, highlighting a car industry hit by falling demand and a challenging technological transformation.
Peugeot subsidiary Opel "has registered reduced hours for six months from October" at its historic home base in Ruesselsheim, near Frankfurt, a spokesman told AFP.
Bosses and worker representatives have agreed to cut hours for the majority of the 2,600 workers at the plant, business daily Handelsblatt reported citing "company sources".
Jefferies on Reckitt Benckiser: Get to the (decimal) point
Shares in Reckitt Benckiser are slipping for the second session in a row today, after Jefferies analysts cast doubt over the Dettol-maker’s sales forecasts.
Crunching the numbers, analysts said they think the consumer giant’s growth projections (which have already been cut once) are “under pressure”.
They added: “arithmetical contortions such as these are indicative of the need to level with the market and start disclosing performance to one decimal place”.
Ultimately, they said, it means there’s a challenge ahead for new boss Laxman Narasimhan, writing:
[E]xperience suggests that when supertankers like these start to drift, the task of regaining course can be long and difficult, no matter how good the master is.
Ryanair boss: Europe will end up with four main carriers
Ryanair chief executive Michael O’Leary has been speaking at a Reuters event in London this morning.
I believe we’ll have a full report later, but here are some of the key takeways. Mr O’Leary said:
Environmental laws will push the airline sector into consolidation, eventually leaving just four carriers
The tour-operator model will decline, as evidenced by the failure of Thomas Cook
Brexit will not harm Ryanair — “If you look out long enough”
The national interest of the UK would be best served by remaining the European Union
KPMG: UK manufacturing PMI ‘makes for grim reading’
Here’s professional services and audit giant KPMG’s Stephen Cooper on this morning’s UK manufacturing PMI data:
We expected grim news from this month’s UK Manufacturing PMI readings and that unfortunately came to fruition, albeit with marginal improvement on last month’s performance.
A backdrop of global trade wars, Brexit uncertainty and concerns regarding the slowing global economic growth continue to weigh heavily on the industry, with Europe, our leading trading partner, far from immune. Indeed Europe posted their worst performance since October 2012.
Lower orders for new work, job losses and reduced investment levels due to prolonged uncertainty paints a rather bleak set of conditions which are unlikely to abate any time soon. This reinforces the importance for manufacturers to ensure that their working capital and supply chains are as robust as possible to weather these challenging times.
Eurozone inflation slows
Inflation in the euro area slowed unexpectedly last month, in a boost for supporters of the European Central Bank’s recently-unveiled monetary stimulus package.
Consumer prices rose by 0.9pc during September. Analysts had been expecting growth of 1pc. Both figures, of course, are well off the ECB’s 2pc target.
Core inflation, which strips away volatile additions such as energy, food and tobacco, hit 1pc, beating the wider headline rate for the first time since 2016.
���� #Euroarea#HICP drops below 1% for the first time since Nov 16, driven by a decline in energy & food prices. Core #inflation at 1.0% is unlikely the halt the continued slide in #5y5y. #ECB inflation worries remain ahead of the 24 October meeting. pic.twitter.com/SCvcVI07wJ
— Aila Mihr (@aila_mihr) October 1, 2019
Euro area core inflation comes in at 1.02% in the September flash HICP estimate. Next few months are going to be more interesting with modest upward drift, base effects and super core pointing to slightly higher core inflation by year-end. pic.twitter.com/9uFwAcSYTE
— Frederik Ducrozet (@fwred) October 1, 2019
Reports: Hong Kong protestor shot in chest with live round
Reports are coming in that a protestor in Hong Kong has been shot with a live round during demonstrations in the financial hub.
The crowd at Admiralty falls silent as protesters and media are simultaneously receiving the news over their phones that a protester has been shot with a live round in Tsuen Wan. pic.twitter.com/0UPfXiTBOu
— Antony Dapiran (@antd) October 1, 2019
Police in Hong Kong have fired live rounds at protesters who are holding a demonstration on China's national day
— Sky News Breaking (@SkyNewsBreak) October 1, 2019
JUST IN: A protester was hit in the chest by a live round fired by police in Tsuen Wan, the South China Morning Post reported, citing an unnamed source https://t.co/06S4RMcNw6pic.twitter.com/cbOeR5ceZC
— Bloomberg (@business) October 1, 2019
The Guardian reports:
In a major escalation in their use of force, police appear to have hit a protestor with a live round for the first time.
The protestor was injured in the chest; video shared by local Standnews website apparently showed him begging for medical help as he bled on the street. “Send me to hospital, my chest is hurting. I need to go to hospital”.
Disruptions caused by protests in the city has has major repercussions for geopolitics and the global economy, so this could represent a major escalation.
Reaction: ‘UK will avoid recession unless there is a no-deal Brexit’
Capital Economics’ Thomas Pugh has offered his take on those UK PMI figures:
Despite the rebound in the manufacturing PMI in September, it remains at a low level and suggests the industrial sector contracted in Q3. However, we still doubt that manufacturing will pull the economy as a whole into recession...
...Nonetheless, the big picture is that manufacturing is on track to contract for a second consecutive quarter, and a meaningful recovery is unlikely given the ongoing struggles of global manufacturing. Admittedly, the US manufacturing PMI ticked up in September. But the eurozone equivalent slumped and at 45.7 it points to manufacturing output from the bloc continuing to contract.
What’s more, if Brexit is delayed again the stocks of purchases balance could fall back in October and November. However, given that the services sector is typically unfazed by contractions in manufacturing, we think that the UK will avoid recession unless there is a no-deal Brexit.
ScS shares plunge after it warns of shaky start to financial year
Shares in furniture retailer ScS are down around 7pc currently, having touched lows of 11pc down — its steepest fall since December — after it warned of a “challenging” start to its financial year.
The company said:
Whilst it is still very early in the new financial year, the Group has had a more challenging start to FY20, with like-for-like order intake falling 7.6pc for the period from 28 July 2019 to 29 September 2019.
On a two year basis, like-for-like order intake was down 3.0pc. The period has been impacted by the record temperatures seen over the key August bank holiday weekend and the increased political and economic uncertainty that the UK is currently facing.
Peel Hunt analysts remained upbeat on the small-cap firm’s shares, writing:
We continue to class SCS as one of the clear winners in the sector, and with the valuation very low and the yield at 7pc, we remain firm buyers despite the downgrade.
More on those UK PMI figures...
IHS Markit and CIPS (who gathered the data together) say:
The downturn in the UK manufacturing sector continued in September. Although the contraction was shallower than the prior survey month, levels of output, new orders, new export business and employment nonetheless fell further. Stocks of purchases and input buying volumes also rose for the first time in recent months, as some companies restarted their Brexit preparations.
Here’s how those activity those look in the longer term.
CIPS director Duncan Brock says:
As the Brexit October deadline came into view, the sector offered two opposing strategies to prepare for the UK’s departure. Where some companies were burning through their levels of materials, others began building stocks up again, fearful of an imminent and abrupt rupture in their supply chains. European clients became more resigned and made concrete plans to move away from UK suppliers and business closer to home seemed more reliable.
This exhausting set of conditions meant companies shed jobs at a rate not seen since 2013 as redundancy packages were prepared and new staffing plans abandoned.
Break: UK manufacturing sector activity slows less than expected
That’s a beat! UK manufacturing activity rose against expectations to 48.3, up from 47.4 in August, to a four-month high. That’s still a contraction overall however.
UK manufacturing activity data coming shortly...
Analysts polled by Bloomberg are expected a figure of 47 (where above 50 indicates growth), down from 47.4 in August.
Forever 21 collapse ‘could benefit Boohoo’
The demise of US retailer Forever 21, which is planning to close 178 stores worldwide after filing for bankruptcy protection, opens up a $1bn market share gap that market darling Boohoo could grab, say Jefferies analysts.
They wrote: “whilst there are channel differences we see global market share opportunities for the Boohoo group”. They added:
Although we estimate only 16pc of Forever 21’s sales are online, we believe the rise of online retailers like boohoo (with very quick to market, inexpensive, high fashion) have put considerable pressure on Forever 21.
Read more on Forever 21 here: Forever 21’s bid to crack Britain ‘was always doomed to failure’
Economist: Health of eurozone manufacturing sector gone ‘from bad to worse’
Here’s IHS Markit chief economist Chris Williamson on those eurozone PMI numbers:
The health of the eurozone manufacturing sector went from bad to worse in September, with the PMI survey indicating the steepest downturn for nearly seven years and sending increasingly grim signals for the fourth quarter.
The September PMI points to manufacturing output falling at a quarterly rate in excess of 1pc, representing a severe drag on GDP in the third quarter. Germany is leading the downturn, with the PMI down to levels not seen since 2009, but Italy and Spain are also in deepening downturns, whilst France’s manufacturing sector has stalled.
There’s likely worse to come, with forward-looking indicators (such as the orders to-inventory ratio) deteriorating further during the month.
Euro Area manufacturing PMI came in at 45.7 in September, down from 47.0 in August. Rough indicator of official stats suggests output is declining at the fastest rate in 7 years, led in particular by Germany, where the PMI has now hit 41.7, its worst reading since June 2009. pic.twitter.com/ohDdDQ24D5
— Rupert Seggins (@Rupert_Seggins) October 1, 2019
German manufacturing sector puts in worst performance since financial crisis
Here’s how the longer-term manufacturing activity data looks for Germany:
IHS Markit said:
Germany's manufacturing sector recorded its worst performance since the depths of the global financial crisis in September... as contractions in output and new orders accelerated. Job shedding also intensified, with factory employment falling to the greatest extent for almost a decade.
The fall further emphasises the economic problem nibbling at Europe’s biggest economy, which is likely to have contracted during the third quarter, sending it into a technical recession.
Markit added:
September saw output fall for the eighth month in a row. Moreover, the rate of decline accelerated and was the quickest since July 2012. New orders fell even faster, however, dropping to the greatest extent since April 2009 and leading to a further reduction in backlogs of work.
Key point from eurozone PMIs
Here are the key findings by IHS Markit, which gathered the PMI data (which monitors activity using using company sales and purchases):
The analytics group said:
The region’s manufacturing downturn was led in the main by rapidly deteriorating operating conditions in Germany, with the respective PMI falling to its lowest level since June 2009. Austria also experienced a notable deterioration, whilst Spain, Italy, and Ireland also recorded sub-50.0 PMI readings during September.
Meanwhile, France barely grew whilst there was only modest growth in the Netherlands. Greece remained the best-performing of all countries, despite the rate of expansion slipping to a three-month low.
Here’s how those eurozone figures look in the long term...
���� Final Eurozone Manufacturing PMI for Sept comes in at 45.7 (Sep flash: 45.6), down from 47.0 in Aug, its lowest for 7 years. Strong declines in both total and export demand were registered, while jobs fell at strongest rate since April 2013. pic.twitter.com/vdq6HNjEUT
— IHS Markit PMI™ (@IHSMarkitPMI) October 1, 2019
Break: Activity data shows sharpest German manufacturing activity contraction since 2009
New purchasing managers’ index data has been released from across the eurozone. Focusing on the continent’s economic heavyweight, final PMI data for September showed a score of 41.7 (where a number above 50 indicates growth), down from 43.5 in August.
Dire September #German#manufacturing#PMI shows activity contracting at sharpest rate since mid-2009. #PMI down to 41.7 (43.5 in August). Output declined at fastest rate since July 2012 while weakest new orders for over a decade bodes ill for future activity. Export orders weak
— Howard Archer (@HowardArcherUK) October 1, 2019
Grim times for the economy of Germany "The severity of the job losses across manufacturing we are now seeing could start to weigh more heavily on consumer confidence" https://t.co/tFZu7tGxNw
— Shaun Richards (@notayesmansecon) October 1, 2019
Across the euro area, manufacturing PMIs were at their lowest level in almost seven years, at 45.7
From markit - #eurozone manufacturing PMI$EURpic.twitter.com/dHXv4yLH3R
— Michael Brown (@MrMBrown) October 1, 2019
Greggs shares drop as in-line sales suggest falling momentum
Shares in bakery chain Greggs have slipped nearly 4pc this morning, after it met sales expectations for the year: a muted outcome for a company that has delighted investors with repeated recent outperformances.
Like-for-like sales at the FTSE 250 company rose by 7.4pc during the 13 weeks to the end of September, results which Shore Capital analysts branded “tremendous”.
It kept expectations for the full year steady, saying it had “ontinued to trade very strongly in the third quarter”.
The company added:
We are progressing trials to open a number of shops later into the evening, supported by an extended range of great value ‘post-4pm’ deals.
It warned Brexit had the potential to disrupt supply chains, and was “preparing for the potential impact of the UK’s departure”.
Revolution Bars shares drop as falling sales extend losses
Shares in small-cap bar chain Revolution has slid 5pc this morning, after it announced its annual losses had increased amid a fall in sales.
Branding 2018/19 a “year of transition” in preliminary results, the company said pre-tax losses in the 52 weeks to June has hit £5.6m, from £3.6m the year before. Sales fell 3.5pc on a like-for-like basis.
It said results remained in line with expectations.
Revolution chief executive Rob Pitcher said:
Our progress demonstrates that our business is delighting our guests, and is both profitable and cash generative. We will utilise surplus cash to reduce debt to such an extent whereby any return to expansion of the estate will be self-funding.
Ferguson beats profit expectations
Ferguson is leading risers on the FTSE 100 currently, after the plumbing parts distributor posted an expectation-beating 7pc rise in profit for the full year.
The company, which last month revealed plans to split off its UK business, said its trading profit had risen to $1.6bn, amid a 6pc increase in revenue to $22.01bn.
Its chief executive John Martin said:
We recently proposed the demerger of our UK operations and work on this is progressing well. We have also announced that as part of our orderly succession plans Kevin Murphy will succeed me as Group Chief Executive in November. We are assessing the most appropriate listing structure for the Group going forward and we will continue to consult with shareholders.
Peel Hunt analysts said:
Full-year results contained few surprises, but once again highlighted the group’s consistency in growing its market share in the US.
Shares are up nearly 4pc currently:
FTSE makes small advance as Europe opens in the green
Markets have been open for half an hour, and the FTSE is slightly lagging behind its continental peers.
JD Sports acquisition of Footasylum faces probe
Sportswear and fashion retailer JD Sports says it has accepted a full-blown, ‘Phase 2’ investigation of its acquisition of rival Footasylum, to be carried out by the Competition and Markets Authority.
In a statement to the City this morning, JD said:
JD firmly believes that there is clear evidence that the acquisition would not result in a substantial lessening of competition in the relevant clothing and footwear retail markets where the two businesses operate.
In light of the content of the CMA's full Phase 1 decision, JD has informed the CMA that it does not consider that there are any appropriate remedies that can be offered at this time to avoid a reference to Phase 2 being made. The CMA has therefore confirmed today that the transaction will be referred to a Phase 2 investigation.
JD has, and will, continue to co-operate fully with the CMA in its review to firmly establish that both JD and Footasylum operate in an extremely competitive and dynamic retail market and that they will continue to face strong competition following the acquisition.
The CMA, which has expressed concerns that a tie-up between the companies could result in “a substantial lessening of competition”, confirmed it will now launch a probe.
Credit Suisse COO out amid spying scandal
The right-hand man of Credit Suisse chief executive Tidjane Thiam has quit after a botched surveillance operation on one of the bank’s most senior executives. My colleague Michael O’Dwyer reports:
Pierre-Olivier Bouee, the Swiss bank’s chief operating officer, has resigned after it commissioned an investigation into the circumstances surrounding the surveillance of senior banker Iqbal Khan, who left in July to join arch-rival UBS.
Credit Suisse said on Tuesday morning: “The board of directors considers that the mandate for the observation of Iqbal Khan was wrong and disproportionate and has resulted in severe reputational damage to the bank.”
Read more here: Senior Credit Suisse banker quits after corporate spying scandal
WPP poaches Argos boss
Ad giant WPP has poached the boss of Argos, John Rogers, to be its new chief financial officer.
Mr Rogers, who was Sainsbury’s CFO between 2010 and 2016, before moving to Argos after it was acquired by the supermarket chain.
WPP boss Mark Read said:
John is not only an accomplished CFO, but also a leader with extensive experience of business transformation. His priority will be to lead a finance function that best fosters investment in creativity, technology and talent in support of WPP’s new strategy for growth.
Sainsbury’s said Mr Rogers would leave at the end of October.
Our retail correspondent Laura Onita notes that the move may have robbed Sainsbury’s of a potential future leader:
John Rogers often tipped as the next boss of Sainsbury’s. Sudden departure, end of October. https://t.co/VlBF2fDGwQ
— Laura Onita (@LauraOnita) October 1, 2019
Nationwide index: UK house prices growth hit an eight-month low in September
British house price growth hit its lowest annual level in eight-months during September, according to mortgage lender Nationwide.
House prices claimed 0.2pc on the year, after a 0.6pc increase in August. A Bloomberg poll had anticipated a rise of 0.5pc.
For September, prices fell 0.2pc versus expectations of a 0.1pc rise.
As part of his new daily column, The Think Tank, Economics Editor Russell Lynch has taken a close look at Nationwide’s figures. He says falling prices could be a warning sign for the Prime Minister:
According to precedent, the last thing that BoJo should be doing is driving us to the polling station.
Up until fairly recently, according to data from Capital Economics, the sitting government’s poll lead tracked broadly in line with annual house price growth.
When homeowners feel wealthier, they’re less likely to rock the boat and prefer to stick to what they know. That explains why Osborne decided to tickle up a house price boom (and enrich housebuilding bosses like Persimmon’s notorious Jeff Fairburn) with the Help to Buy scheme in 2013 to unleash the feel-good factor in time for the 2015 election.
Read more here: The Think Tank: Are falling house prices a sign Boris Johnson should be wary of a general election?
Audit watchdog to probe Thomas Cook
The Financial Reporting Council, Britain’s audit and governance watchdog, has announced an investigation into EY’s audit of Thomas Cook ahead of the tour operator’s dramatic collapse last week. The FRC said:
The investigation will be conducted by the FRC’s Enforcement Division under the Audit Enforcement Procedure.
The FRC will keep under close review both the scope of this investigation and the question of whether to open any other investigation in relation to Thomas Cook, liaising with other relevant regulators to the fullest extent permissible.
Questions have been raised about Thomas Cook’s employment of “exceptional items” in its accounts, which can make a company’s bottom line look more healthy.
The probe will run in parallel with an investigation by the Insolvency Service.
European shares hit highest level of the year
Good morning. Yesterday Europe’s cross-continental STOXX 600 index closed at its highest level of the year, following a strong performances across several indices. The FTSE 100, however, failed to hold off the pressure from several heavy sinkers, closing the day down 0.24pc.
5 things to start your day
1) Revolut shocks rivals with plan to hire 3,500 new employees and expand worldwide: While rival digital banks have spent years tweaking their products and corporate culture before launching overseas, Revolut seems to have focused on one main objective: growth.
2) Are falling house prices a sign Boris Johnson should be wary of a general election? For the country at large, the prospect of a third general election in four years is up there on the joy list with a lengthy session of root canal surgery. But Boris Johnson wants one, and he’ll probably get it before long. Should he be careful what he wishes for?
3) Investors are getting twitchy about Elizabeth Warren making it to the White House: The Massachusetts Senator is not only rapidly eclipsing Sanders on the party’s left flank, but moving in on Joe Biden – taking the lead in one poll and slashing his once insurmountable lead in several others.
4) Plans to radically hike the minimum wage could force businesses to go bust and hit jobs for young workers, industry groups have warned. Sajid Javid, the Chancellor, launched plans to hike the minimum wage from £8.21 now to £10.50 over the next five years.
5) Neil Woodford's troubled Patient Capital Trust isscrambling to extend a lifeline from its lender after plunging to a £232m loss. Patient Capital is locked in talks with US bank Northern Trust over extending a loan agreement which it has used to borrow £111m for investing in stocks, and is considering axing Mr Woodford as manager.
What happened overnight
Asian share prices ticked up on Tuesday as some investors clung to hopes that the fourth quarter will bring progress in resolving the United-States trade war that's cast a shadow over the global economy.
Japan's Nikkei rose 0.74pc while MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.24pc and Australia's benchmark by 0.25pc.
Chinese markets will be shut for a week, starting on Tuesday, to mark 70 years since the founding of the People's Republic of China.
US stock futures rose 0.35pc in Asia, a day after the S&P 500 gained 0.5pc.
Meanwhile, Australia’s central bank lowered the cost of borrowing, slashing interest rates for the third time this year amid fears about the flagging domestic economy.
The Reserve Bank of Australia announced it had cut rates by another 25 basis points to 0.75pc, a decision that brings the country's interest rates to a historic new low.
Coming up today
Greggs has suffered from performing too well recently: judging by some analysts’ reports, and the share price reaction to its latest results, there’s a sense that the FTSE 250 bakery chain’s increasing swagger is priced into its shares. Not so, said UBS analysts last month, saying the company – whose vegan sausage roll become a blockbuster hit – “is well positioned to drive like-for-like growth given slowing competitor openings, increased investment in strategic initiatives announced with first-half results, and leading value perception”.
Full-year results: Ferguson, James Halstead, Revolution Bars Group, SCS Group
Interim results: Next Fifteen Communications
Trading statement: Greggs, Renew Holdings
