BANKING
Consumer credit growth climbs to 7.2%
Bank of England data shows that the annual growth rate for consumer credit, which includes borrowing using credit cards, personal loans, overdrafts and car finance, accelerated slightly to 7.2% in September from 7.1% in August. Net unsecured consumer credit rose by £745m, the smallest monthly increase since December 2021. Ashley Webb of Capital Economics said: "September's money and credit figures point to further signs that consumers have been become more cautious in response to the weakening economic outlook." The Bank also revealed that UK households put an extra £8.1bn into banks and building society accounts in September. This compares with a £3.2bn rise in August and also represents the biggest increase since June 2021. It also compares with an average monthly rise of £4.6bn during 2019, the year before the pandemic started.
US court drops charges against ex-UBS trader
A New York court has dismissed a criminal indictment against Tom Hayes, a former trader at UBS and Citigroup who served five and a half years in prison in the UK for rigging the Libor lending benchmark. Prosecutors had filed a motion to dismiss the case against Mr Hayes and another former UBS trader, Roger Darin. The move came after a US appeals court threw out the convictions of two former Deutsche Bank traders in January.
PRIVATE EQUITY
Blackstone in $14bn Emerson unit deal
Private equity firm Blackstone has agreed to buy a majority stake in Emerson Electric's climate technologies business in an agreement which values the unit at $14bn. Blackstone, alongside sovereign wealth funds Abu Dhabi Investment Authority and Singapore's GIC, will take a 55% stake in the unit. The company will receive an upfront payment of about $9.5bn.
INTERNATIONAL
Goldman Sachs names M&A co-heads
Goldman Sachs has appointed Avinash Mehrotra and Brian Haufrect to head its mergers and acquisitions unit in the Americas. Both Mr Mehrotra, currently the head of global activism and takeover defence, and Mr Haufrect, who is global head of natural resources M&A, will continue to hold their existing roles. The move comes after CEO David Solomon unveiled a shake-up that saw investment banking and trading combined into one unit, while also merging asset management and wealth management.
Monte dei Paschi's cash call 93% covered
Italy's Monte dei Paschi di Siena said its up to €2.5bn capital increase had been 93% covered so far thanks to accords with investors that offset in part a low take-up by the bank's shareholders. However, it added it had placed another €475m worth of new shares with investors who had signed binding sub-underwriting accords. These investors include the bank's insurance partner AXA.
Wells Fargo hiring practices probed
Wells Fargo says the US Securities and Exchange Commission has begun investigating its hiring practices, after the Department of Justice opened a related probe. In its quarterly report, the bank said both agencies "have undertaken formal or informal inquiries or investigations regarding the company's hiring practices related to diversity."
AUTOMOTIVE
TuSimple fires CEO over ties to Chinese firm
Self-driving truck start-up TuSimple has removed CEO Xiaodi Hou in connection with the company's ties to China-backed autonomous truck firm Hydron. TuSimple said an investigation by its board showed some of its employees had spent paid hours working for Hydron and had shared confidential information that was not brought to the attention of audit and government security committees.
FINANCIAL SERVICES
Ministers set to have call-in powers over City regulators
The Government is set to push ahead with plans to give ministers the power to overrule decisions made by City regulators, despite Bank of England concerns over the measure. The Treasury has confirmed plans to hand ministers call-in powers which enable them to overturn decisions made by watchdogs like the Financial Conduct Authority (FCA) and Prudential Regulation Authority if it is deemed in the public interest. City Minister Andrew Griffith said this would only occur when a regulatory decision has unintended consequences for other areas of public policy, describing it as a “safety valve.” The Treasury said an “intervention power” will come via an amendment to the Financial Services and Markets Bill, with this enabling the Treasury to “direct a regulator to make, amend or revoke rules where there are matters of significant public interest.” In a letter to the Treasury Select Committee earlier this year, Bank of England governor Andrew Bailey said “anything that would weaken the independence of regulators would undermine” the City’s global reputation, while FCA chief Nikhil Rathi has said it is “vital” that regulatory “independence and agility at speed” are not undermined by call-in powers.
LEISURE & HOSPITALITY
Hospitality businesses reveal collapse concerns
More than a third of pubs and restaurants say they fear for their future due to the impact of high inflation. A poll by UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster saw 35% of hospitality businesses say they expect to be operating at a loss or unviable by the end of the year. The survey shows that 77% are experiencing a decline in customers, while 89% are either not confident or pessimistic that the current levels of Government support will protect the industry in the next six months. Industry leaders have called on ministers to issue further business rates relief and to cut VAT to help boost the sector.
MEDIA & ENTERTAINMENT
Musk dissolves Twitter board
Elon Musk has dissolved Twitter's board, appointing himself sole director of the firm as he pushes ahead with a major restructuring plan of the social media platform he snapped up in a $44bn takeover last week. A regulatory filing to the US Securities and Exchange Commission shows that Mr Musk, who had already sacked three of Twitter’s top chiefs including CEO Parag Agrawal, has now dissolved the firm’s board. A source says Tesla founder Mr Musk will now move to streamline the company, with it suggested the plan could affect 25% of the company's staff.
REAL ESTATE
95% mortgages could disappear
Experts have warned that low-deposit mortgages could disappear from the market amid concerns that borrowers will fall into negative equity. Moneyfacts data shows that there are just 32 loans available to customers with a 5% deposit, down from 35 a week ago, with Barclays the latest lender to withdraw its 95% mortgage offering. Aaron Strutt of broker Trinity Financial has warned that first-time buyers looking for low-deposit deals face rates of almost 7%. He notes that the average rate on a two-year fixed-rate loan with a 95% loan-to-value (LTV) has risen to 6.59%, up from 5.54% since the start of October. Karen Noye of wealth manager Quilter said lenders will be looking to reduce the number of high LTV deals “in light of a potential looming house price crash that could throw new buyers into negative equity,” adding that “with the cost-of-living crisis in full swing, lenders will be wanting to take on less risk.”
Mortgage demand declines as rates rise
Mortgage approvals for house purchases fell to 66,800 in September from 74,400 in August, according to figures from the Bank of England. This has been attributed in part to the impact of rising interest rates and a decline in the number of mortgage products following the Government’s mini-Budget. Alice Haine, personal finance analyst at investment platform Bestinvest, has warned that “mortgage pain is far from over," adding that those with deals expiring soon will have difficult decisions to make as rates rise, with Moneyfacts analysis showing that the average two-year fixed mortgage rate has risen to almost 6.5% from just over 4% in early September.
ECONOMY
Eurozone inflation hits record high
Eurozone inflation has risen to a new high of 10.7%, exceeding forecasts that the rate would climb to 10.2%. This comes despite the European Central Bank lifting borrowing costs by 75 basis points at two consecutive policy meetings. In July it lifted borrowing costs, which had been negative for several years, by 50 basis points. Two further increases have since taken the interest rate to 1.5%. The data shows that inflation in Germany hit 11.6% last month, up from 10.9% in August, with France and Italy posting year-on-year price rises of 7.1% and 12.8% respectively.
OTHER
Investor confidence in BoE slides
A poll for InvestingReviews shows that a majority of investors do not have confidence in the Bank of England, with almost three in four investors saying the Bank has got its rate-hiking cycle wrong. However, respondents were divided over whether interest rate rises had come too fast or too slow. The poll saw 37% say that monetary tightening had been too fast, while 36% thought the Bank should have acted sooner. The survey saw 44% of respondents say they think inflation will rise to the Bank’s previously forecasted peak of 11% or above. It was also found that 83% believe a recession is on the way, while just 8% say it can be avoided. InvestingReviews CEO Simon Jones said the Bank "faces a difficult balancing act as it tries to cool inflation without tipping the country into a deep recession.” He noted that while the public are “almost equally split on whether the current hiking cycle has been too fast or too slow … there doesn’t seem to be too much disagreement about the direction the country is heading.” “A huge majority believe the die is cast and a recession next year is now unavoidable,” Mr Jones added.