BANKING
BoE’s debt purchase pledge fails to ease market strains
The Bank of England has said it stands ready to double the size of its daily gilt purchases as the central bank seeks to reassure markets ahead of the programme expiring at the end of this week. The Bank launched an emergency bond-buying support programme two weeks ago after the yield on long-dated bonds leapt to a 24-year high, threatening a meltdown of pension funds. But, having not used all the firepower it set aside, the Bank is now preparing to deploy the unused capacity. The Bank said fund managers operating LDI funds on behalf of pension funds had made substantial progress with improving their financial resilience over the past week, adding: “Beyond the end of this week’s operations, the Bank will continue to work with the UK authorities and regulators to ensure that the LDI industry operates on a more resilient basis in future.” However, the move failed to convince markets which sold off government debt, pushing the 30-year gilt yield up 0.29 percentage points to 4.68%. “We suspect the new measures are insufficient and do not fully recognise the long-term nature of the challenges,” said Daniela Russell, head of UK rates strategy at HSBC, who described the BoE’s moves as a “sticking plaster”.
Mortgage rates continue to rise
The average interest rate on a two year fixed term mortgage has risen to 6.3%, nearly triple the 2.25% rate just a year ago. According to data compiled by Moneyfacts, a similar rise has taken place in the average five year fixed term mortgage, which now has an average rate of 6.19%. The increase comes despite the number of products on the market gradually increasing in recent days. Lenders rapidly withdrew deals from the market after the Bank of England signalled it would raise rates in the aftermath of the Chancellor’s mini-Budget last month. "Mortgage products are starting to return after lenders temporarily withdrew deals amid interest rate uncertainty, but there is still much more room for improvement compared to the level of choice seen before the mini-budget," a Moneyfacts spokesperson said. "Consumers must carefully consider whether now is the right time to buy a home or remortgage, or to wait and see how things change in the coming weeks."
FCA questions banks over use of WhatsApp
The Financial Conduct Authority has been in talks with the UK’s top banks on the use of smartphone apps by staff as it looks to follow US regulators in a clampdown on the use of personal devices in banking. Deutsche Bank, Citigroup, JP Morgan and Nomura are among the firms to have received information requests from the watchdog. The FCA said: "We are actively discussing personal device use with a range of UK authorised firms, not limited to those who may have been subjected to other regulatory inquiries."
Santander puts more aside for potential defaults
Santander UK says it is putting aside more money for potential defaults after seeing an uptick in customers falling behind on mortgage and loan payments. CEO Mike Regnier said he was keeping a close eye on the “strain and pressure” facing customers as a result of the cost of living crisis. Santander UK has about 11% of the mortgage market, a book of £184bn of home loans as of July. It put aside £66m for potential defaults in the second quarter, up from £52m in the first three months of the year.
INTERNATIONAL
Jamie Dimon warns US recession ‘likely’ in 6 to 9 months
The CEO of JPMorgan Chase, Jamie Dimon, told CNBC on Monday that the American economy will probably tip into a recession next year, with rising interest rates and Russia’s invasion of Ukraine deemed key factors in driving the economy down. “These are very, very serious things, which I think are likely to push the US and the world - I mean, Europe is already in recession - and they’re likely to put the US in some kind of recession six to nine months from now,” Dimon said. Meanwhile, Josep Borrell, the high representative of the European Union, has blamed the Federal Reserve for leading a worldwide rush of central bank rate rises that risks tipping the world into a recession. “Everybody has to follow, because otherwise their currency will be [devalued],” Borrell said to an audience of EU ambassadors. “Everybody is running to increase interest rates, this will bring us to a world recession.”
AUTOMOTIVE
Amazon-backed Rivian sinks on recall of almost all its electric trucks
Rivian, the Amazon-backed electric truckmaker, saw its shares fall more than 7% to a three-month low on Monday after it announced a recall of almost all of its vehicles due to a defect.
FINANCIAL SERVICES
Quilter CEO to step down
Quilter has announced that Paul Feeney will step down as CEO at the end of October. He will be replaced by the firm’s platform head Steven Levin. Mr Levin has led Quilter’s Affluent segment since its formation and has experience across the business and successfully managed Quilter’s platform transformation programme. Ruth Markland, Quilter’s Chair thanked Mr Feeney for “transforming Quilter into the modern wealth manager it is today” and said he would be working with Mr Levin through the handover.
Lloyd's of London found no compromise from cyberattack
Lloyd's of London said on Monday that its investigation into a possible cyberattack last week had found no evidence of data compromise. “The investigation has concluded that no evidence of any compromise was found and as such Lloyd's has been advised that its network services can now be restored," a company spokesperson said in an email.
FCA wants real-time bond alerts
The Financial Conduct Authority has written to trading platforms for UK government bonds asking them to alert the City regulator in "real time" of "significant deteriorations in market conditions". The move comes after an intervention by the Bank of England on Monday failed to arrest the rise in gilt yields.
HEALTHCARE
Healthcare platform raises £20m
UK healthcare start-up, Elder, which connects Britain's growing population of pensioners to the 4,000 professional carers registered on its platform, has raised approximately £20m from IPF Partners, a Luxembourg-based investor. Elder says it has helped deliver more than 10m hours of care across the UK since its launch in 2015.
LEISURE & HOSPITALITY
Consumers cut spending on pubs and clubs
Figures from Barclaycard show that more than half of consumers are cutting back on non-essential spending with sales at bars, pubs and clubs down 0.4% in September compared with a year earlier. This marks the first time sales have fallen since March 2021 when pandemic restrictions began easing. Restaurant spend fell 12.2% in September, compared to a 11.4% drop in August.
Hollywood Bowl reveals expansion plans
The ten-pin bowling operator Hollywood Bowl has revealed an £81m war chest which it intends to use to pursue expansion on both sides of the Atlantic and perhaps pay out a special dividend. In a full-year trading update, it reported revenues up 42.3% to £184.9m compared to 2019 - up 28.3% on a like-for-like basis - and predicted underlying earnings growth of at least 40%, ahead of expectations. Shares rose 2.43%.
Getir in exclusive talks to rescue rapid delivery rival Gorillas
Delivery app firm Getir is in talks to take over its rival Gorillas, which has been suffering heavy losses as investor sentiment cooled on ecommerce start-ups after the pandemic ended.
RETAIL
Households paying more for their weekly shop
Figures from the British Retail Consortium show consumers are paying more for their weekly supermarket shop, with total sales up 2.2% in September amidst a drop in volume of goods sold. BRC chief executive Helen Dickinson said people were increasingly shopping "cautiously" and avoiding big-ticket items such as TVs and furniture "as consumer confidence continued to fall" and added: "A difficult winter looms for both retailers and consumers."
Morrisons' takeover of McColl's edges closer to completion
The Competition and Markets Authority has said it is "minded to accept" the acquisition of convenience store chain McColl's by supermarket giant Morrisons. McColl's operates more than 1,100 convenience shops across England, Scotland, and Wales, while Morrisons has around 500 grocery stores in the UK. The CMA said the deal raised competition concerns in 35 locations but has now agreed that the offloading of a total of 28 McColl's stores would remedy those concerns.
SPORT
Qatar expands football interests after buying stake in Portuguese team
The state-backed Qatar Sports Investments has bought a 22% stake in Portuguese football team SC Braga for about €19m. The fund already owns Paris Saint-Germain. Elsewhere in football investment, Saudi Arabia’s sovereign wealth fund has committed more than $2bn to new long-term football sponsorship deals this year.
ECONOMY
Chancellor told he faces £60bn bill to stabilise UK finances
The Institute for Fiscal Studies (IFS) claims in a new report that Chancellor Kwasi Kwarteng would need to cut spending by £62bn by 2026-27, or increase taxes if he is to decrease the share of debt to GDP. The IFS forecasts that government debt interest payments will top £100bn next year, some £71bn more than official forecasts showed in March. Much of this increase would be down to the tax cuts Mr Kwarteng announced last month. The IFS outlined a series of cuts that could achieve the savings, including spending £35bn less on public services. The think tank’s projections are based on relatively downbeat growth forecasts from Citigroup, which estimates that the British economy will grow by an average of just 0.8% a year over the next five years, with inflation peaking near 12% and interest rates at 4.5%. The IFS said faster growth would improve the outlook for the public finances, but even if the Office for Budget Responsibility added 0.25 percentage points to its forecast for GDP growth in each year, a fiscal tightening of £40bn would still be needed by 2026-27. The Treasury said: “Through tax cuts and ambitious supply-side reforms, our growth plan will drive sustainable long-term growth, which will lead to higher wages, greater opportunities and sustainable funding for public services.”
Chancellor brings forward strategy update
Kwasi Kwarteng will reveal his plans to balance Britain’s finances on October 31st, three weeks earlier than planned as the Treasury moves to reassure nervous markets. The updated financial strategy and independent economic assessment is due to set out how the Government will reduce borrowing in the longer term and pay for the tax cuts the Chancellor announced in his mini-budget last month. The OBR, the independent budget watchdog, will also publish a report alongside Mr Kwarteng's statement at the end of October. The new date means Mr Kwarteng's fiscal statement will be published before the Bank of England announces its latest decision on interest rates on the 3rd of November, leading to hope from some for a smaller rate rise. Meanwhile, Liz Truss, the Prime Minister, reportedly reversed a decision to appoint Antonia Romeo, the permanent secretary at the Ministry of Justice, to permanent secretary of the Treasury, deciding instead to install James Bowler, formerly permanent secretary in the department of trade and a senior Treasury official. The Times reports that Bowler is regarded as a safe pair of hands at a time when the department is under huge political and economic pressure.