Pound ‘flash crash’ to $1.14 attributed to automated trading

(qlmbusinessnews.com via news.sky.com via uk.reuters.com – – Fri, 7 Oct, 2016) London, UK – –

The pound has endured a temporary collapse in value to new 31-year lows, sparking market chaos and a Bank of England probe.

Having traded as low as $1.26 to the dollar on Thursday it slumped to $1.18 within minutes during Asian trading – hitting $1.14 briefly at one stage according to Thomson Reuters – a fall of up to 9%.

But official market charts did not measure the lowest figure because trades were later cancelled, the data provider said.

It settled at $1.24 before slipping to $1.22 when US traders returned to the market in late-morning European trading.

The volatility also saw sterling slip to €1.11.

There were several initial theories on what caused the pound panic in Asia – including a ‘fat finger’ mistake in inputting data – but the most likely explanation was a rogue algorithm in an automated trading system triggering a wider sell-off.

It happened shortly after the publication of a report by the Financial Times that French president Francois Hollande had demanded a tough stance on Brexit negotiations.

IG Markets’ analyst Angus Nicholson said it “looks like it was an algorithm-driven flash crash”, adding that “given low volumes in the Asian session, it would have forced other algorithms to join in and magnify the fall”.

The Bank of England said that while it has no powers of regulation over the market, Governor Mark Carney has asked the Bank for International Settlements to look into the events in order to discover whether any lessons can be learned.

It has been a rollercoaster week for sterling in the wake of the EU referendum fallout.

Investors were spooked by confirmation that the Prime Minister would trigger Article 50, the official Brexit process, by March next year and comments the market saw as Britain keen to leave the European single market so the Government could tighten its grip on immigration.

The pound had been trading near $1.30 on Monday before starting its latest decline.
Its erosion in value helped lift the FTSE 100 to near its record high as the week progressed, and it finished 150 points up from its start on Monday morning.

The mid-cap FTSE 250 did strike a new top level – with export-facing firms and those making dollar sales seeing the biggest individual gains on both indices.

Meanwhile, Asian and European markets were either in negative territory or flat.

Naeem Aslam, chief market analyst of Think Markets, warned it was likely to be a “heavy day” for trading on Friday on world currency and stock markets.

He said of the pound’s dramatic decline: “What we had was insane – call it a flash crash – but the move of this magnitude really tells you how low the currency can really go.

“Hard Brexit has haunted sterling,” he warned.

Yosuke Hosokawa, head of the currency sales team at Sumitomo Mitsui Trust Bank, said there could be more bloodshed to come.

“We thought today’s plunge was a matter of time. Negative factors were mounting against the pound, and eventually the dam broke.”

He added: “We have not seen the bottom yet. Breaking the 31-year low is now in sight.”

U.S. Economy set to take possible hit of $2.5B in the wake of Hurricane Matthew

(qlmbusinessnews.com via www.bloomberg.com – – Thu, 6 Oct, 2016) London, Uk – –

Hurricane Matthew could become the first major hurricane, with winds of 111 miles per hour or more, to hit the U.S. Since Wilma struck Florida in 2005. The storm’s track up the coast could mean $25 billion to $35 billion in damage, with some worst-case scenarios pushing that figure as high as $50 billion.

Bloomberg’s Brian Sullivan reports on “Bloomberg Markets.”

 

British companies show steady hiring for September but pay growth slows for temporary workers

 

Employment
Seeking out a job by Sarah Hartley/ Flickr

(qlmbusinessnews.com via uk.reuters.com – – Fri, 7 Oct, 2016) London, UK – –

British companies kept hiring staff last month after a brief lull around June’s European Union membership referendum, but pay growth for temporary workers slowed, a monthly survey of recruitment agencies showed on Friday.

The Recruitment and Employment Confederation (REC) said businesses hired permanent staff last month at a similar rate to August after cutbacks in June and July, while a separate YouGov/Cebr survey of businesses showed a rebound in morale.

But pay rates for temporary staff rose at the slowest pace in more than three years, pointing to a risk that higher inflation could catch up with wage growth, the REC said.

“We hope the government will address this issue … with fiscal stimulus. This should help to settle the nerves so that employers feel confident enough to keep hiring,” REC policy director Tom Hadley said.

The REC also said Britain faced skill shortages and would continue to need workers from overseas in sectors such as engineering and healthcare.

“The business community must have a role in developing an immigration model that strikes the right balance,” Hadley said.

Prime Minister Theresa May pledged earlier this week to curb migration from the EU. One of her ministers proposed requiring firms to state how many immigrants they employed and take steps to train more British staff.

A monthly survey by polling company YouGov and economics consultancy Cebr showed business sentiment had returned to the level seen in May and June, after a sharp fall in July and a partial recovery in August.

YouGov’s Stephen Harmston said sentiment could deteriorate once businesses had taken on board May’s emphasis on curbing EU migration in her speech at this week’s Conservative Party conference, rather than on maintaining full access to the bloc’s single market.

“We will have to wait to see whether the rebound in confidence is itself hard and resilient to such talk or whether it is soft and causes another spasm of panic among organisations,” Harmston said.

“Whichever it is, these figures could well represent the end of the pre-Brexit honeymoon period,” he added.

The YouGov/Cebr poll of 500 ‘business decision makers’ took place between Sept. 15 and Sept. 23.

(Reporting by David Milliken; Editing by Hugh Lawson)

UK Economy set for expected third quarter expansion of 0.4 percent – NIESR

(qlmbusinessnews.com via uk.reuters.com – – Fri, 7 Oct, 2016) London, Uk- –

 

 

Economy
Image Money /TaxRebate.org.uk/flickr.com

British economic growth probably slowed in the three months that followed June’s Brexit vote, but not by quite as much as the Bank of England expects, a leading think tank said on Friday.

The economy likely grew at a quarterly pace of 0.4 percent in the three months to September, down from the 0.7 percent growth reported for the second quarter, the National Institute of Economic and Social Research (NIESR) said.

Last month the Bank of England predicted growth of 0.3 percent in the third quarter.

“While retail sales have been buoyant in recent months, the production sector has acted as a drag on economic growth,” NIESR research fellow James Warren said.

Industrial output fell unexpectedly in August, according to official data earlier on Friday.

“We estimate that output from the production sector declined by 0.2 per cent in the third quarter of this year,” Warren added.

NIESR had previously suggested Britain faced a 50 percent chance of a recession by the end of 2017 because of the vote to leave the European Union.

((Reporting by Andy Bruce, editing by David Milliken))

Chancellor Philip Hamond states London’s Euro Clearing possibly not up for grabs

(qlmbusinessnews.com via www.bloomberg.com — Thu, 6th Oct, 2016) London, Uk —

Clearing has become a pawn in the post-Brexit battle for London’s financial services industry, but U.K. Chancellor of the Exchequer Philip Hammond says it may not necessarily be up for grabs after all.
Most interest-rate swaps trading and clearing in the euro currency takes place in the U.K., a feature that for years has made the European Central Bank uneasy. Hammond’s predecessor, George Osborne, fought a legal battle to protect that business and won. The battle for London’s $570 billion of daily euro derivatives trading was reawakened after Britons voted in June to leave the European Union.
“If the ECB was minded to try its hand, as it were, to try again, to dictate how euro-denominated clearing takes place, that would be a legal process that would take time,” Hammond said today in a Bloomberg Television interview in New York. “I think that’s some way down the line.”
Officials in France and Germany have targeted euro clearing as an industry that belongs in the bloc. Global bank executives are taking that threat seriously and are making plans to deal with the fallout. It could be legally difficult for the ECB to strip clearing from the U.K. without discriminating against some EU members, Hammond said in the interview during his first trip to New York’s Wall Street as finance minister. He noted that other EU countries also clear euro derivatives, and they’re entitled to single-market protections. For example, euro interest-rate swaps are traded in Sweden, which is part of the EU but doesn’t use the common currency.
“It’s by no means clear to me that the rules of the single market, even after Britain has left, would permit the ECB to require euro-denominated instruments to be cleared inside the euro zone,” Hammond said.
Clearinghouses are designed to prevent a default from spiraling out of control — they act as a firewall by holding collateral and monitoring risks. Regulators see them as one of the best ways to prevent another financial crisis, and so their role in global finance has become far more entrenched in recent years.
London Stock Exchange Group Plc is the majority owner of LCH, the world’s largest clearinghouse for over-the-counter derivatives linked to interest rates. CEO Xavier Rolet said earlier this month that 100,000 U.K. jobs would be at risk if clearing leaves the country. About 700 people are directly employed in London’s clearinghouses, including more than 500 at LCH.
The chancellor was seeking to calm nerves among businesses and bankers after Prime Minister Theresa May used her Conservative Party’s annual conference this week to attack “international elites” and pledged to make capitalism fairer for workers.

by John Detrixhe and John Micklethwait

Government to purchase unsold new homes to stimulate construction growth

(qlmbusinessnews.com via uk.reuters.com — Thu, 6th Oct, 2016) London, Uk —

Britain’s government will buy unsold homes built by developers using a 2 billion pound fund announced earlier this week, a move designed to get construction firms to commit to bigger projects, a trade journal reported on Thursday.

On Monday Britain launched a 5 billion-pound housing stimulus package, including plans to borrow 2 billion pounds to increase the pace of house-building which will now be used to guarantee housing developments.

“It’s about us going to a house builder and instead of expecting the normal build-out rate of 50 units a year, we’ll say: ‘We want you to build all 500 in one go, and what we’ll do is guarantee to take them off you if you can’t find a buyer’,” Edward Lister, chairman of the Homes and Communities Agency, told Property Week.

Although the housing market has shown signs of cooling since the vote to leave the EU, a chronic shortage of properties keeps prices out of the reach of many young and low-income Britons.

A committee of lawmakers estimated that Britain needs to build 300,000 homes per year to meet demand and cool price growth. The country has not built more than 200,000 homes in a single year for a decade.

(Reporting by Andy Bruce; Editing by Raissa Kasolowsky)

The competitiveness of Britain and how it retains a wealthy economy

(qlmbusinessnews.com via uk.finance.yahoo.com — Fri, 30th Sept, 2016) London, Uk —

Earlier in the week the UK economy received its ranking report from the World Economic Forum (WEF) and over the last year it has risen to being the seventh most competitive economy around the globe.
Well that’s good news for jobs and your wealth – especially as the three countries the UK overtook during the last year were the dynamic Hong Kong, the robot futuristic Japan and the regularly lauded Finnish economy. So why has the UK risen up these competitiveness rankings? What can we learn from the six countries even higher up the rankings? And is it all going to go wrong with Brexit?

First the good news. The ranking has gone up because of even more ‘efficient goods and labour markets’, ‘sophisticated business processes’, a ‘high level of digital readiness’ and apparently a ‘partial recovery in the macroeconomic environment’. I am not sure if that wholly reminds me of the UK economy I know and see…but I guess the WEF are the experts.

The three most competitive countries in the world as per this week’s WEF data are Switzerland, Singapore and the United States much to the glee I am sure of the average Brexiteer as you would struggle to name three more dynamic, flexible and global advanced economy countries in the world. The route is clear: rip up regulation, liberate business and don’t be afraid to be inherently global.

And yet…sitting just behind these three countries are Germany, the Netherlands and Sweden, three inherently capitalist with a social edge countries where redistribution is important, taxes can be high and the untethered market is discouraged. You can imagine disappointed Remain voters from late June pointing to these countries and bemoaning the future direction of the UK economy.

If I have learnt anything about economics over the last twenty years it is that you will get a range of different opinions from a range of different economists…and one set of economic criteria or policies generally do not work everywhere – and often the political and social shifting sands change views and opinions over time.

What matters more than anything is ‘buy in’. The day American citizens do not believe they cannot become rich or become President will be the day the amazing economic performance of the United States comes to an end.

Similarly the vision the average Swiss, Singaporean, Swedish or Dutch citizen has about their country’s general direction and values – which all subtly differ from one another. After such a split Brexit vote, this ‘vision thing’ is the key for UK policy makers – and the key is that it has little to do with being in the European Union or not.

The UK is a very international economy and if you invest in the UK markets you are getting inherently global exposures with well over two-thirds of FTSE-100 earnings from outside of this country. That’s why we have those ‘sophisticated business processes’ and flexible and efficient goods and labour markets. UK corporates have no choice but to be competitive with all types of economies around the world – either compete or commercially die.

So no ‘little Englander’, tariff barriers or even defensive postures. If you want to be competitive and rank well in WEF surveys then you have to embrace the world. The UK’s got some natural advantages here but it is not God-given.

In short if you want to stay wealthy then embrace the world – as an individual, investor, employee or entrepreneur. And if we all do this then the UK’s competitiveness ranking will take care of itself irrespective of the increasingly tedious post Brexit vote debate.

By Chris Bailey

Fintech pursues business start-ups as HSBC prepares to slash small business charges.

(qlmbusinessnews.com via uk.finance.yahoo.com — Tue, 4th Oct, 2016) London, Uk —

HSBC has unveiled plans to cut charges to small business customers in a move, it says, will save firms £13m ($16.7m) a year.

The move said it will scrap or cut back many of the charges for many of the 960,000 small and medium-sized firms who bank with the lender, saving them an average of £70 a year.

The bank said it will today extend its electronic banking service, which has fewer charges, from firms with a turnover of £500,000 or less to businesses with annual sales of up to £2m.

This will mean 35p charges to make direct debits will now be free and charges for ATM withdrawals will also go among a number of other fees.

HSBC UK head of commercial banking Ian Stuart said: “These charges sound small, but they mount up over a year. And they also niggle customers. Growing small firms often don’t have time to review existing contracts with suppliers, but we looked at what we can do better and how we can help with costs.”

HSBC estimates the changes will benefit 190,000 customers. The bank added it will review customer accounts every 12 months to make sure they are on the best tariff for their business.

Established banks and financial services companies are investing digital technology in a bid to attract customers, cut costs and buoy profits.

However, they are coming under increasing pressure from a number of more nimble start-ups. Digitally focused fintech companies have attracted billions of dollars of investment. Figures from advisory company KPMG show global investment in fintech companies totalled $9.4bn in the second quarter of the year.

UK financial services watchdog the Competition and Markets Authority’s (CMA) said in August that “older and larger banks do not have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow”.

The CMA added that only 4% of business customers switch to a different bank in any year, adding that small firms could save around £80 a year by switching their provider.

Roger Baird | International Business Times

Pound Sterling slumps to an all time low in 31 years amid Brexit worries as UK stocks rise

(qlmbusinessnews.com via uk.finance.yahoo.com via Reuters- Uk Focus– Tue, Oct 4, 2016) London, Uk —

* Sterling down to lowest level vs dollar since mid-1985

* Pound’s weakness gives lift to UK stocks

* FTSE 100 closes up near 2015 record highs

* FTSE 250 mid-cap index touches new record highs

* Pound’s slump has hit dollar value of UK shares (Adds fund manager quote, details)

By Anirban Nag and Sudip Kar-Gupta

LONDON, Oct (HKSE: 3366-OL.HK – news) 4 (Reuters) – Sterling slid to its lowest level in more than three decades on Tuesday on fears of a “hard Brexit” from the European Union and its single market, although the weaker pound sent UK stocks surging higher.

The pound has already lost 1.7 percent against the U.S. dollar since Prime Minister Theresa May said on Sunday the formal process to take Britain out of the EU would start by the end of March 2017.

On Tuesday, she added the divorce from the EU will not be “plain sailing” and there would be “bumps in the road”.

The pound fell to $1.2735, its weakest since mid-1985. Earlier, sterling also hit a three-year low of 87.65 pence per euro and a 6-1/2 year low on a trade-weighted basis.

Many economists and investors fear May’s government will back a “hard Brexit” option where Britain quits the single market in favour of imposing controls on immigration.

That could hinder inward and outward trade and constrict the foreign investment needed to fund Britain’s huge current account deficit, one of the biggest in the developed world.

Economic activity has held up better than many had expected since Britons voted in a June referendum to leave the EU, but many policymakers are anxious about the prospects for future investment. The Bank of England launched a stimulus package and cut rates to record lows in August and may ease policy again in coming months, which could drag the pound lower.

“Most of the key (BoE) members have expressed a willingness to continue acting pre-emptively … and an expectation that more easing is likely to be necessary,” UBS (LSE: 0QNR.L – news) strategist John Wraith said.

“Additional stimulus would likely drive further sterling weakness,” he added, reiterating the bank’s forecast for $1.20 per pound and parity with the euro by end-2017.
FTSE 100 RALLIES

UK stocks benefited from the pound’s weakness.

The blue-chip FTSE 100 index, dominated by international and export-driven companies that often benefit from a weaker pound, closed up 1.3 percent at 7,074 points – close to a record high of 7,122.74 points set in April 2015.

The fall in sterling has given a boost to many of the FTSE 100’s international companies which earn much of their revenues in U.S. dollars, and therefore get a currency-related accounting lift as those dollars are converted back to pounds.

However, the slump in sterling has also impacted the U.S. dollar value of FTSE 100 stocks, a potential negative for overseas investors for whom the dollar is their benchmark currency reference.

“Investors may feel optimistic now that the FTSE 100 has broken through the 7,000 barrier, but we might not want to crack open the Champagne yet,” said Nick Peters, multi-asset portfolio manager at Fidelity International.

“The market has primarily been boosted by the sharp depreciation in sterling post-Brexit, with the pound having fallen by around 13 percent from its pre-referendum highs. Around 75 percent of the earnings from FTSE 100 companies come from outside the UK, so sterling depreciation effectively makes these earnings worth more,” added Peters.

The FTSE 250 mid-cap index, whose companies are more exposed to the state of the domestic UK economy, also closed 0.9 percent higher, having touched a record high earlier in the day.

The FTSE 250 index has gained around 24 percent since the lows struck just after the referendum result on June 24.

The mid-caps have benefited from recent upbeat data and surveys of British households and businesses that have led many forecasters to drop predictions that the British economy will slip into recession this year.

Paul Spencer, portfolio manager at Franklin Templeton’s UK equity team, added the slump in sterling also meant UK stocks had become cheaper for overseas investors, and also more affordable for takeover from foreign companies.

Earlier this year, technology group ARM agreed to be bought by Japan’s Softbank, while SVG Capital (Other OTC: SVGCF – news) has also had bid interest, with such deals helping lift UK share prices.

“The same value assessments that make UK mid-cap stocks attractive to overseas investors could, we think, lead to heightened levels of mergers and acquisitions in this space in the coming year,” said Spencer. (Writing by Anirban Nag; Editing by Janet Lawrence)

Survey shows small businesses in the Uk still confident after Brexit vote.

(qlmbusinessnews.com via uk.finance.yahoo.com/news via Reuters -– Thu, Sep 8, 2016) —

LONDON (Reuters) – Small businesses in Britain remain confident about the economic and political landscape following the historic vote in June to leave the European Union, according to a survey by research firm BDRC Continental.

Early responses from a third quarter survey of 4,500 small and medium-sized companies (SMEs) show little sign of any drop in confidence according to BDRC.

A survey taken during the second quarter of the year as the EU referendum took place, showed that 13 percent of the SMEs rated the current economic climate as a major barrier to business while 10 percent rated political uncertainty as a major barrier. Those figures were unchanged from the first quarter.

Within the overall figures however, larger SMEs with 50-249 employees did show increasing concern about the economy, BDRC said.

Britain’s economy on Monday showed its clearest sign to date of bouncing back from the initial shock of the June referendum outcome, as data firm Markit said the country was unlikely to enter a recession in the July-September period.

BDRC Continental said its surveys dating back to 2011 show a continuing decline in appetite for external funding, with small businesses preferring to self-fund. That sentiment could change in the coming months, according to Shiona Davies, director at BDRC.

“Brexit has the potential to change the business context. For now, most SMEs are reporting ‘business as usual’, albeit there are signs of concern amongst some specific groups,” she said.

BDRC’s findings are used by the government to inform policy making, the company said.
(Reporting By Lawrence White; Editing by Elaine Hardcastle)