Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Boris Johnson may have achieved his ambition of getting into 10 Downing Street last week, but financial markets have served an early reminder at the start of his first full week in office that he has a daunting task ahead of him.
Sterling this morning hit a new two-year low against the US dollar, with one pound buying only $1.2358 in early trading following a weekend of no-deal Brexit tough talking from newly installed ministers. The pound weakened by 0.12% against the dollar and 0.1% against the euro.
Ministers are “turbo-charging” preparations to leave the EU without a deal on 31 October according to several senior cabinet ministers, reports the Guardian’s Rowena Mason. Johnson’s new cabinet Brexit fixer, Michael Gove, warned that the government was “operating on the assumption” that Britain would leave without a deal on 31 October and it was a “very real prospect”.
The stakes are clear for businesses in Britain. Carlos Tavares, the boss of PSA Group, used an interview last night with the Financial Times to warn that he could close the company’s factory in Ellesmere Port, which manufactures Vauxhall Astra cars, if there is a no-deal Brexit that disrupts exports from the factory. The jobs of 1,000 workers hang in the balance.
It seems unlikely that the EU will be willing to make material changes to the existing deal, according to Fernando Barajas, an analyst at Creditsights, a debt rating agency. “There is little sign” that the no-deal threats have made an impact on the EU’s stance.
A general election in the near term now seems a high likelihood outcome.
Yet all of the political noise has not put off the dealmakers in London. Over the weekend two large mergers have come through. The FTSE 100’s Just Eat and Dutch Takeaway.com have agreed a £8.2bn all-share deal to create one of the world’s biggest takeaway delivery players. Just Eat faces renewed competition from Amazon-backed Deliveroo and Uber Eats, and some activist investors have been pushing for a deal for some time.
Another big deal on the cards is the London Stock Exchange Group’s merger with data company Refinitiv, a potential $27bn deal. A formal announcement of the terms could come this week when the LSE publishes results.
Asian markets were mixed on Monday, with shares in Japan weakening, while Australia’s benchmark ASX 200 rose by 0.95%. However, many investors will have their eyes on events later in the week, when the Federal Reserve is expected to cut interest rates for the first time in a decade.
Trade talks to fix the relationship between the US and China, one of the biggest factors in the Fed’s desire to support the economy, will resume tomorrow, although few are holding out hope of a positive development.
- 9:30am BST: Bank of England consumer credit (June)
- 9:30am BST: Bank of England mortgage approvals (June)
- 3:30pm BST: US Dallas Fed manufacturing index (July)