Bank of England's Vlieghe: no-deal Brexit could mean near zero interest rates - business live

Policymaker Gertjan Vlieghe said rates might have to be cut to virtually zero if the UK crashes out of the EU without a deal

• Full story: no-deal Brexit could mean near 0% rates
• Greg Clark: no-deal Brexit would destroy thousands of jobs
• Dow hits record high on hopes of a rate cut
• Thomas Cook in 750m rescue deal

3.22pm BST

The big corporate news of the day is that Thomas Cook is in advanced talks to receive a 750m bailout from its largest shareholder - China's Fosun - and its main bank lenders.

The equity injection would allow the debt-ridden travel company continue trading through winter.

2.57pm BST

US producer prices picked up by just 0.1% June, suggesting wider inflationary pressures are weak, according to Michael Pearce, senior US economist at Capital Economics:

The small gain in producer prices in June suggests the increase in tariffs on $200bn of imports from China has yet to generate a pick-up in inflation and confirms that underlying domestic inflationary pressures remain subdued.

That should help ease any fears, following the June CPI figures released yesterday, that underlying consumer price inflation will rise back above 2%.

2.48pm BST

Wall Street is open and the Dow Jones and S&P 500 have both hit record highs, after comments from Fed chairman Jerome Powell boosted expectations of a US rate cut this month.

2.40pm BST

Figures published earlier showed industrial production in the eurozone increased by 0.9% in May, beating economists' expectations of a 0.2% rise.

Chris Hare, economist at HSBC, said that although it was better than expected, the broader trend remains soft.

Good news is good news, and it's fair to say that May's bounce in the eurozone ... was materially stronger than we had expected. But there are a couple of caveats worth mentioning in the form of erratic factors. First, German car production, which has been highly volatile recently, rose by 7.4% m-o-m. Second, there was a 3.6% m-o-m increase in transport equipment output in France, possibly relating to aircraft production, which can be lumpy. Strength in both these sub-categories is unlikely to be sustained in June.

Meanwhile, the broader trend remains soft. The level of production in the eurozone, Germany and Italy is still below levels seen at the start of 2018. And output would need to grow by 0.2% in June - despite the possible unwinding of erratic factors - to achieve positive growth in Q2 as a whole. What's more, the eurozone manufacturing PMI remains in contractionary territory, notably in June where world trade tensions escalated - that could pose a risk to the 'hard' data in the coming months .

2.03pm BST

A cryptocurrency exchange in Tokyo has halted services after it lost $32m (25m) in the latest apparent hack on volatile virtual monies.

Full story here:

Related: $32m stolen from Tokyo cryptocurrency exchange in latest hack

12.56pm BST

Bank of England policymaker Gertjan Vlieghe has won support today for suggesting the MPC should publish its own preferred interest rate, rather than focusing its forecasts on the market's expectations for rates.

Professor Costas Milas of Liverpool University's Management School, has written in on the point:

MPC Member Gertjan Vlieghe suggested that the Bank of England's Inflation Report should publish its preferred path of interest rates. Currently, the Bank's Inflation Report conditions its inflation and output growth forecasts on two alternative scenarios: (a) the current interest rate (which stays the same in the future) and (b) an interest rate moving up or down in line with the expectations of financial markets.

Nevertheless, as my colleague Michael Ellington and I have recently argued, the Bank's forecasting record under the assumption of constant interest rates is pretty weak. The same holds under the assumption of interest rates moving in line with market expectations.

12.27pm BST

Deutsche Bank has scaled back its redundancy packages for laid off City workers, according to a report in Financial News.

The German bank is offering less generous terms compared with previous rounds of redundancy, the report claims:

Deutsche is offering staff affected by its latest round of sweeping job cuts a package of statutory redundancy pay plus a one-off payment of less than 10% of salary, according to people familiar with matter. They are also being paid for notice periods - typically three months - which is taxable.

Those in the first wave have received less than the German lender has historically paid out, according to people affected and recruiters. Deutsche has traditionally paid a lump sum that amounts to around a month's salary for every year of service, former staff at the bank and employment lawyers told Financial News.

Sacked Deutsche Bank workers: Thank god it's over, it's kinda of a relief you know, at least things can't get worse:
Deutsche Bank: *DEUTSCHE BANK SCALES BACK REDUNDANCY PACKAGES FOR U.K. STAFF

12.00pm BST

Deutsche Bank chief executive Christian Sewing has spoken out after it emerged that top executives at its City of London office were fitted for 12,000 suits on the day that thousands of the bank's staff lost their jobs.

That someone would let a tailor come on such a day is disrespectful. In no way is this behaviour in keeping with our values.

I assume in any case that the two colleagues will not forget my telephone call.

Related: Deutsche Bank bosses fitted for 1,200 suits as thousands lose their jobs

11.24am BST

The business secretary Greg Clark has urged his fellow Conservatives to do everything possible to avoid a no-deal Brexit, warning that it would lead to the loss of "many thousands" of jobs.

It's evident that if you have the disruption that comes from a no-deal Brexit there will be people that will lose their jobs. It's many thousands of jobs. Everyone knows that.

I think every person that considers the evidence that companies have given - whether it's in the automotive sector, whether it's in the food sector, whether it's in aerospace, in industries up and down the country - you know if you become less efficient and your ability to trade is impeded, then of course losing your competitiveness means there will be jobs lost.

Related: Greg Clark: no-deal Brexit would destroy 'thousands' of jobs

11.10am BST

Equity markets are fairly subdued across Europe this morning:

10.54am BST

It's fair to say there hasn't been a huge response from currency traders to Vlieghe's speech and his assertion that UK interest rates could be cut to virtually zero in the event of a no-deal Brexit.

The pound is up 0.07% against the dollar at $1.2535, and up 0.1% against the euro at a1.1131.

10.33am BST

The full speech from MPC member Gertjan Vlieghe:

We are continuously trying to improve how we communicate monetary policy. Gertjan Vlieghe argues that by explicitly showing the Monetary Policy Committee's own view on future interest rates, we could make our forecasts easier to understand. https://t.co/LOC8uf33hr pic.twitter.com/3zbFljASxr

10.28am BST

Gertjan Vlieghe's speech this morning was ostensibly about how the Bank of England could improve its communication of monetary policy to the wider public.

He said the Monetary Policy Committee should publish its own preferred interest rate, rather than continue to make market expectations the focus of its forecasts.

I have argued today that publishing an MPC forecast based on a preferred path for policy, rather than based on a market path, would be a further improvement in our communications.

Our current forecasting approach is unnecessarily complex, and at times, the growth and inflation forecasts are not consistent with the MPC's objectives, and not consistent with the MPC's intended actions.

9.55am BST

The Bank of England might have to cut interest rates to virtually zero if Britain crashes out of the EU without a deal, and it is not clear how long it would take for them to rise again.

That is the verdict of Gertjan Vlieghe, a member of the Bank of England's nine-strong Monetary Policy Committee.

On balance I think it is more likely that I would move to cut Bank Rate towards the effective lower bound of close to 0% in the event of a no-deal scenario.

It is highly uncertain when I would want to reverse these interest rate cuts.

9.30am BST

The Guardian's Kalyeena Makortoff reports:

The boss of Thomas Cook has been speaking to journalists and insists a deal with Fosun is the best (and only?) option to keep the company trading.

That is up to Fosun then to decide... the priority is no to complete the recapitalisation of the business.

What happens to jobs? Today's announcement is really about a plan that ensures the business to continue to trade and operate as normal, and the deal preserves our brand with a sustainable balance sheet, giving us the stability to invest and grow our business.

9.08am BST

Here's our full story on Thomas Cook:

Related: Thomas Cook in 750m rescue deal talks with biggest shareholder

9.05am BST

To put Thomas Cook's woes into context, it has a market value of around 200m and net debts of 1.25bn.

As Neil Wilson, chief analyst at markets.com, says, "it's desperate times". He adds:

Thomas Cook largest shareholder Fosun is in advanced talks with management over a deal that would effectively hand over the company to the Chinese firm.

Shareholders face significant dilution - basically it's wipe out time. They can take part in the recapitalisation alongside Fosun should they so choose...

8.26am BST

News of a deal with Fosun has gone down badly with investors and Thomas Cook shares have hit a record low of 7.5p in early trading, down 44%.

Under the terms of the deal, the shareholding of existing investors will be diluted. The sell off also reflects the cautious tone from Thomas Cook, which highlighted an uncertain consumer backdrop, "particularly in the UK". It expects earnings in the second half of the year to be behind the same period last year.

All future reporting dates, as previously disclosed, are now under review pending the outcome of the recapitalisation of the Group. As a result, the third quarter trading update originally scheduled for 18 July 2019 is cancelled.

7.45am BST

Fosun has issued a statement on its plans to inject capital and take a bigger stake in Thomas Cook:

Fosun is a shareholder in Thomas Cook, because it is a British company operating in the global travel industry, in which we have extensive experience.

We are committed investors, with a proven track record of turning around iconic brands including ClubMed and Wolverhampton Wanderers FC.

7.41am BST

Thomas Cook boss Peter Fankhauser has been speaking to BBC Radio 4's Today programme and says a deal with Fosun is the "best available option for us".

He added:

It secures the value for our employees, for our suppliers and as well for our customers and that is the main focus that we have.

This is a very good option to secure the business and to put the business on the solid financial footing for the future.

7.33am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Thomas Cook has confirmed this morning that is in talks with its largest shareholder and the owner of Club Med, China's Fosun, over a rescue deal.

After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the board has decided to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks.

While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees.