Markets unsettled by Brexit uncertainty as pound struggles to recover

The pound suffered one of its sharpest tumbles of the year on Wednesday as Boris Johnson moved to suspend parliament. 

 

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German inflation figures trickle through

Consumer price index (CPI) figures for Germany are due out later today: this morning, we’re getting a slow trickle of region-by-region figures.

I’m going to take a punt and assume blog readers don’t need blow-by-blow figures from Baden Wuerttemberg and North Rhine Westphalia (let me know if I’m wrong down in the comments), but the overall picture currently suggests an expected drop from will occur.

A survey of economists by Bloomberg predicts a CPI fall from 1.7pc to 1.5pc year-on-year.

earlier this week:” data-reactid=”28″>Here’s what Tom Rees and I wrote on the topic earlier this week:

Expectations for inflation in the eurozone have hit record lows amid fears that the European Central Bank will struggle to lift already subdued CPI as growth stutters.

Investors will be paying close attention to Germany’s consumer price index inflation figures, due for release on Thursday. Inflation in the country has recovered from deflationary lows hit in 2016, but fallen again slightly this year.

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Tweet: Climate activists plan Heathrow drone disruption next month

Adam Vaughan, chief reporter at New Scientist, tweets:

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German jobless claims rise to 4,000

German unemployment claims have risen steadily since May Credit:  Peter Juelich/ Bloomberg

The German unemployment rate stayed steady at 5pc during August, as jobless claims rose to 4,000 — with both figures in line with consensus.

Those figures continue a trend of rising uncertainty, with a fall in openings suggesting the private sector is feeling the impact of economic woes in the country, which may be headed for a recession.

Paetheon Macroeconomics’ Claus Vistesen said:

The relatively modest increase in jobless claims is still not enough drive headline unemployment higher, but these data are clear evidence that the German labour market is now deteriorating, as a lagged response to the slump in GDP growth since the middle of last year…

…The big question is whether these data will prompt the pressure on the government to increase spending and investment. We think it will, eventually, though this is probably a story for 2020.

Credit: Pantheon Macroeconomics

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Firstgroup confirms West Coast award

The West Coast route was previously operated by Virgin Trains Credit:  PHIL NOBLE/ REUTERS

Firstgroup and partner Trenitalia have formally signed the agreement for their 70:30 joint venture to operate the UK’s West Coast rail services, according to a filing this morning.

A review of the award, which will form the First Trenitalia West Coast Rail Limited, will be carried out by the Competition and Markets Authority.

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The pound: What happens now?

 

Sterling looked at one point like it would steal the show yesterday, dropping up to 1.1pc against the dollar as reports of Boris Johnson’s plan to suspend parliament came to light.

It had pared back around half those losses by the end of the day, however, and against the backdrop of a fortnight of gains the drop seemed less striking.

Spreadex’s Connor Campbell says:

The currency is now going to be watching those opposed to the Prime Minister’s plans to see if they can come up with a cohesive, effective way of trying to avert disaster.

Here’s how the pound’s performance has looked so far this year.

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Jefferies stays bullish on FTSE 100

In a note this morning, analysts at American investment bank Jefferies said they remained ‘moderately bullish’ on the FTSE 100’s performance prospects in the context of the global market.

Looking at current positions on the pound, analysts predicted a continued weakening for sterling would help the exporter heavy index, noting:

UK equity markets deliver some of the highest payouts globally while the bulk of the revenues are international

Jefferies highlighted the dramatic difference in performance between domestically-focused FTSE 100 stocks and their internationally-slanted peers:

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FTSE 100 holds gains despite Micro Focus weight

Micro Focus’s offices in Newbury Credit:  Eddie Keogh/ REUTERS