Investors cheer Mark Carney’s decision to serve an extra year as BoE governor, as weak pound helps manufacturers sell goods abroad but makes raw materials pricier
BAML: Some investors think Brexit won’t happen
UK manufacturing PMI shows growth
Virgin Money CEO: Thank goodness Carney’s staying longer
Carney stays until 2019: What the papers say
Nils Pratley: Mark Carney has last laugh on amateurish Theresa May
2.04pm GMT
And the other manufacturing survey does indeed also show signs of improvement.
The ISM manufacturing activity index climbed from 51.5 in September to 51.9 last month, better than the 51.7 expected.
1.57pm GMT
Despite the good US manufacturing performance, firms are reluctant to take on staff, says IHS Markit, partly due to caution ahead of the election. IHS Markit chief business economist Chris Williamson said:
October saw manufacturing enjoy its best performance for a year. Factories benefitted from rising domestic and export sales, driving output higher to mark an encouragingly strong start to the fourth quarter.
The survey also picked up signs of manufacturers and their customers rebuilding their inventories, often filling warehouses in anticipation of stronger demand in coming months.
However, a widespread reticence to take on extra staff highlights lingering caution with respect to investing in capacity, at least until after the presidential election.
Hiring is also being subdued partly by worries about escalating costs, with the October survey recording the largely monthly rise in factory prices for five years.
1.47pm GMT
And here is the first manufacturing survey, and it’s fairly positive.
The final IHS Markit manufacturing PMI figure for October has come in at 53.4, marginally higher than the initial estimate of 53.2 and up on September’s final reading of 51.5. This is the highest level since October 2015.
US Manufacturing PMI reaches highest level for a year in Oct. Gains in output/new orders underpin sharp improvement in operating conditions
1.37pm GMT
Ahead of two US manufacturing surveys due shortly, the US market is slightly ahead at the open, but with continuing nervousness about the forthcoming election - with one new poll showing Donald Trump ahead of Hillary Clinton - investors remain cautious.
The Dow Jones Industrial Average is currently up around 12 points while the S&P 500 and Nasdaq Composite both opened around 0.2% higher. As a reminder, all three indices recorded their worst monthly performances since January in October.
1.22pm GMT
Alert! Bank of America Merrill Lynch has predicted that the pound could plunge to just $1.15 by the first quarter of 2017.
In a new research note, analysts at the bank warn that sterling hasn’t fully adjusted to the reality of Brexit, and have slashed their forecasts for the pound.
BAML cuts its sterling forecast.
Now sees a low of $1.15 in Q1 next year vs $1.26 in Q2 previously. Also sees the euro up to 94p vs 88p.
Whilst the outcome is still unknown, client feedback suggests to us there is hope that the verdict may derail the governments’ intentions. The decision on the review is pending and is expected soon, but this will not be the end of the matter. In our view, an appeal to the Supreme Court is a possibility by whoever loses the hearing and if the verdict is appealed, this could be held before the end of the year.
A defining feature of our conversations with clients since the Referendum is the belief that Brexit may never happen. For this reason, we think some investors retain the hope that somehow the courts will able to prevent the triggering of A50.
The result of the Referendum has been accepted by most politicians’ and with seven out of ten Labour constituencies having voted to leave the EU we find it hard to imagine that Labour MP’s would go against that mandate.
We think Q1 could mark the low in the pound. A combination of US dollar weakness, Brexit fatigue and data stabilisation should see pound recover into end-2017.
12.41pm GMT
Back in the markets, two pharmaceuticals firms have both disappointed investors with their latest financial results.
Shares in Pfizer, the viagra-maker, have slipped by 2.2% in pre-market trading after it missed its profit and sales targets in the last quarter.
Pfizer’s new breast cancer treatment, Ibrance, generated sales of $550 million, missing the consensus forecast of $576 million compiled by Evercore ISI.
The company’s Lyrica pain drug brought in sales of $1.05 billion, missing expectation of $1.28 billion, but its Prevnar vaccine generated $1.54 billion, above the forecast of $1.48 billion.
Pfizer profit just misses; company scraps cholesterol drug https://t.co/O2gTnkJbt9
Shire Q3 16 Earnings Results:
-Non-GAAP Diluted Earnings Per ADS: $3.17 (Estimate $3.17)
-Revenue: $3.45B (Estimate $3.56B)
12.13pm GMT
Wall Street bank JP Morgan has got Mark Carney’s back.
Analysts Malcolm Barr and Allan Monks argue there are five ‘lines of defence’ against the argument that the Carney, and the rest of the monetary policy committee, violated the Banks independence by being so gloomy about Brexit.
In our view, the fact that the economy has held up better than expected thus far reflects a forecasting error that many have made, rather than being clear evidence of any abuse of office.
11.43am GMT
The opposition Labour party have tweeted their support for Mark Carney today:
Labour welcomes the decision by Mark Carney to ignore the briefings against him from senior Tories and to stay on as Governor @RLong_Bailey
“That a committed public servant like Mr Carney has been the subject of briefings, on and off the record, questioning his fitness for the role - when he himself has no opportunity to respond - is an indictment of the toxic atmosphere now brewing inside the Conservative Party.”
11.26am GMT
Duncan Weldon of Resolution Group is also concerned that UK manufacturers are suffering such a sharp spike in import costs:
File under: "important". https://t.co/0sFoB3wL3d pic.twitter.com/OiSwj4BAo1
11.12am GMT
We don’t want Mark Carney’s ego to expand too quickly, so here’s a rather critical assessment of the governor, from Ben Habib, CEO of First Property Group, a fund manager.
The pressure on Mr. Carney to go was portrayed as coming from Tory Brexiters and his decision to stay another year has been described as providing stability during the Brexit process. Both assertions are wrong.
“Mr. Carney should have resigned early because he is simply not competent. Perhaps the best of example of this was his assessment of the UK economy in August when he launched another wave of pernicious QE. He justified this decision in significant part because of his prediction that the economy would grow by only 0.1% in the third quarter. In fact it grew at five times this rate.
10.42am GMT
Carlo Alberto de Casa, chief analyst at spread-betting firm ActivTrades, also sees Carneys’ decision as positive:
‘The City has welcomed news that Mark Carney will stay one more year at the helm of the Bank of England. When he eventually leaves the post in summer 2019, the Brexit process should largely be over. Significantly, we have seen the FTSE 100 go up, whilst the pound is also performing well.
This appears to reflect a certain amount of relief and reassurance in the City that Carney will be at the controls for a while longer.’
10.32am GMT
Jayne-Anne Gadhia, chief executive of Virgin Money, has told us that she’s pleased Mark Carney chose to stay at the Bank of England until June 2019.
Thank goodness for that would be my comment.
When I think back to 24 June when an awful lot of people wondered who was leading the country I was pretty relieved when Mark Carney stepped up and was sensible. We need stability going forward.
10.19am GMT
Capital Economics have taken one look at Markit’s survey, and produced this excellent chart showing how UK inflation is heading a lot higher....
Sharp rise in Markit/CIPS manufacturing input prices balance in October suggests CPI inflation set to pick up sharply over next few quarters pic.twitter.com/RimvHrEmpT
10.13am GMT
Markit’s October manufacturing PMI should deter the Bank of England’s monetary policy committee from cutting interest rates again, at its meeting on Thursday.
As well as showing that companies are faring quite well, the data also shows how the slump in sterling has painful effects as well as benefits.
“The weaker pound is supporting improving demand from export customers, but price rises from higher import costs are becoming more significant and will be felt in consumer’s pockets sooner rather than later.
If any MPC members were on the fence about interest rate moves this month, this latest survey would argue against any further cuts right now.
10.03am GMT
Dave Atkinson, head of manufacturing at Lloyds Bank Commercial Banking, is encouraged by today’s UK factory report.
“Manufacturing activity remains at its highest level since January, and the fact that firms have maintained a positive outlook amid an uncertain landscape and a devalued pound is something to be applauded.
10.02am GMT
Markit also produced this chart, showing just how sharply import costs have jumped since the Brexit vote:
“The impact of the pound’s performance against the euro and dollar was particularly felt on imports as manufacturers experienced one of the fastest rises in average costs for raw materials in the 25-year survey history. Especially highlighted were costs for flour, dairy products, steel and zinc. These price hikes resulted in manufacturers passing on higher prices to their customers as charges rose for the sixth consecutive month and to the steepest degree since June 2011.
9.46am GMT
Newsflash: Britain’s manufacturing sector is probably returning to growth this quarter, as the weak pound helps factories to win export orders -- but also makes raw materials pricier.
The monthly healthcheck from data firm Markit shows that UK factories grew their output last month, with new orders rising and staffing levels picking up too.
“The UK manufacturing sector remained on a firm footing in October and should return to growth in the fourth quarter. Despite slowing from September’s highs, growth of output and new orders continued to defy expectations, rising at marked rates and supporting the fastest job creation in a year.
“The main topic of the latest PMI survey was, however, the impact of the sterling depreciation on manufacturers. On the positive side, the boost to competitiveness drove new export order inflows higher, providing a key support to output volumes. The down-side of the weaker currency is becoming increasingly evident, however, with increased import prices leading to one of the steepest rises in purchasing costs in the near 25-year survey history. Around 90% of companies offering a reason for increased costs made some reference to the sterling exchange rate.
9.23am GMT
Eek. Shares in Standard Chartered have just slumped by 5%, after it posting its latest financial results.
“We now have a stronger balance sheet...but income and profit levels are not yet acceptable.”
9.10am GMT
The FT’s Janan Ganesh has handed out a pasting to Mark Carney’s critics in Westminster this morning:
Brilliant and blistering @JananGanesh column on Carney and Brexit's "patient zero" https://t.co/dN6RQvDphQ pic.twitter.com/bO2obzQRg8
9.07am GMT
The pound is living up to its reputation for volatility, and dropping back from earlier highs.
Well, that was fast. So much for the morning #CarneyBounce. £/$ pic.twitter.com/a2BAhK7PzA
9.05am GMT
Not every investor is toasting Mark Carney this morning, though.
Savvas Savouri, chief economist of asset manager Toscafund, has been criticising the governor on Radio 5’s Wake Up To Money this morning, and on Sky News last night.
Mark Carney a 'force for instability' says Savvas Savouri of Toscafund on WUTM
Toscafund's Saavas Savouri going in for the Carney kill on @SkyNewsBiz "I'm amazed at the deification of this man..."
Savouri, though, says Carney's actions were "impetuous" and predecessor Mervyn King would not have acted in the same way
9.01am GMT
City veteran David Buik is also relieved that Mark Carney has decided not to leave in 2018:
Most observers will be delighted that he did not wait until after the Inflation Report and MPC meeting this coming Thursday, to announce his decision. Many hoped he would stay the full trip until 2021.
The reassurance he needed consisted, I think, of some TLC and an official ringing endorsement from Chancellor Philip Hammond to follow up positive comments made by senior government ministers. In terms of Mr Carney’s duty of care post the Referendum, he was right to point out that the UK’s economy might not be as robust immediately prior to the BREXIT and post its withdrawal.
However I think he ladled on the ‘Sodom & Gomorrah’ syndrome far too thickly, which gave the impression that he was massively pro-REMAIN and possibly an acolyte of George Osborne, who, after all appointed him.
8.46am GMT
The pound hit its highest level since 20 October this morning, nudging $1.228.
That’s up a cent this week, but still sharply lower than a month ago - when traders started worrying about a hard Brexit.
8.27am GMT
Shares are rising in London this morning, in another sign that Mark Carney’s 12-month extension has reassured the markets.
The FTSE 100 has gained 31 points, or 0.44%, to 6985 points.
#China's Manufacturing Sector: Old v New. pic.twitter.com/xDnO2BaZe7
8.17am GMT
The pound continues to climb, and is now trading at $1.227 - up almost one cent this week.
8.15am GMT
Labour MP John Mann argues that Theresa May, and chancellor Philip Hammond, have botched the whole issue of Mark Carney’s tenure at the BoE.
The day after the referendum saw the Prime Minister resign after previously promising he wouldn’t and the Chancellor disappear as the Treasury went silent at a time when the markets went into a panic. Into this breach stepped Mark Carney, speaking publicly from the Bank of England, who calmly stated the steps the bank had already taken to reassure the market and would be taking to ensure that the UK’s economic system remained functional.
It should never have to come to the point where his re-appointment became a such a test of strength for the Prime Minister and Chancellor.
During 2016 the Bank of England will have to have found two new deputy Governors to replace Andrew Bailey who was appointed to run the FCA by George Osborne, and Dr Minouche Shafik who is leaving her role as head of markets and banking. Their calls for a new Governor to be appointed at a time when the Government is about to start its negotiations with the EU was staggeringly short sighted and suggests a fundamental misunderstanding of the challenges facing the British economy.
7.54am GMT
Investors are relieved that Mark Carney won’t quit the UK in 2018, as had initially been his plan.
Kathleen Brooks, research director at City Index, says yesterday’s decision to serve an extra year is is “a welcome sign of stability in exceptionally uncertain times”.
The markets are breathing a collective sigh of relief that Carney has extended his term, after all, if he extended it once, could he do so again? The pound has enjoyed a major turnaround, and is the best performing currency in the G10 at the start of this week. It is higher by a decent 0.5% against both the USD and the euro, and has also done well against the yen
An extra year is good, however the uncertainty caused by Brexit makes it very difficult to anticipate the health of the UK economy in three years’ time. Thus, even after today’s announcement, Carney may still leave the Bank of England at a delicate time for the UK economy, as the government tries to navigate a smooth exit from the EU.
7.51am GMT
Mark Carney’s 2019 departure makes the front page of several newspapers today.
The Telegraph point out that the governor has decided to quit shortly after Britain’s exit from the EU has been concluded, following a “deterioration of relations” with Downing Street in recent weeks.
DTEL: Carney to quit straight after Brexit #tomorrowspaperstoday #bbcpapers pic.twitter.com/E4JkkXHd0y
Mark Carney surprised the government last night by turning down the chance to stay in his post until 2021 after receiving lukewarm backing from Downing Street. The governor of the Bank of England said that he would leave in June 2019 — the earliest opportunity to depart after Brexit.
TIMES: Britain will strike back at foreign cyberthreat #tomorrowspaperstoday #bbcpapers pic.twitter.com/8i14nk6bAM
FT: Carney extends term #tomorrowspaperstoday #bbcpapers pic.twitter.com/ZDaNHtSlRR
GUARDIAN EXCLUSIVE: MI5 chief warns of growing Russian threat to U.K. #tomorrowspaperstoday #bbcpapers pic.twitter.com/0cw1minxrL
7.42am GMT
The pound got an immediate lift last night when the Bank of England announced that governor Carney would serve an extra year.
And it’s still trading around $1.224 this morning.
Pound pops higher as Mark Carney to stay at Bank of England until June 2019 to help address #Brexit. https://t.co/JapTobDw85 pic.twitter.com/IhDjOko0dG
7.28am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
We get a new healthcheck on Britain’s economy today, when data firm Markit publishes its latest Purchasing Manager’s Index (PMI) covering the manufacturing sector, at 9.30am GMT.
UK PMIs enjoyed something of a rollercoaster ride in the three months after the Brexit referendum before returning to close to their long-run average at the end of Q3.
For today’s manufacturing print, we look for a slight weakening to 55.0 from 55.4, though that is coming off the highest reading for the manufacturing reading since June 2014.
Related: Mark Carney to serve extra year as Bank of England governor
You want me to stay for an extra three years? I’ll do one more and then I’m off. Mark Carney’s decision to leave the Bank of England in 2019 looks to be a straightforward snub to Theresa May.
Earlier on Monday, the prime minister’s spokeswoman described the governor as “absolutely” the best person for the job, which is the sort of thing you say if you think he’ll do the full eight-year term.
Related: Mark Carney has had the last laugh at amateurish Theresa May | Nils Pratley
Looking ahead, highlights include Manufacturing PMIs, API crude oil inventories and earnings from BP, Standard Chartered and Pfizer
Continue reading...