Bank of England hints at Brexit interest rate cut; eurozone confidence slides - business live

BoE's Michael Saunders says Brexit uncertainty could trigger interest rate cut

• Breaking: Saunders says Brexit uncertainty could mean lower rates
• Saunders: Persistent high uncertainty hurts economy
• Pound falls below $1.23
• Eurozone business confidence hits five-year low

Earlier

• Chinese industrial profits slide

8.29pm BST

Here's our news story on Bank of England policy Michael Saunders' hint that interest rates could be cut soon:

Related: Bank of England hints at interest rate cut even without no-deal Brexit

5.45pm BST

Heads-up: the US government is considering curbs on US investors putting money into China, according to CNBC.

The movewould intensify the trade war, so the report has knocked shares in Chinese companies listed in New York.

The White House is considering limits on U.S. investment into China, aggravating the protracted trade dispute between the globe's two largest economies....

One of those options includes limiting all U.S. investment in China. Though the person cautioned that the discussion was still in early stages, such an action could send shockwaves throughout financial markets and involve the billions of dollars in investments tied to major indexes.

BREAKING: Stocks slide sharply after report that the White House is weighing U.S. portfolio flows into China; Alibaba plunges over 6% https://t.co/0m9bH1lPWg pic.twitter.com/8Qu0WOSk0D

4.25pm BST

Our latest health check on the UK economy is out:

Related: How has Brexit vote affected the UK economy? September verdict

3.29pm BST

The latest economic data out of America is a little mixed.

On the downside, consumer spending rose by just 0.1% last month, weaker than the 0.3% expected.

#consumer #spending grew by a weaker-than-expected 0.1% in August, following a 0.5% gain in July. The strongest gains were in purchases of durable goods. Personal #income rose by 0.4%. Real #inflation-adjusted) consumer spending was up 2.3% Y/Y, a declining comparison. pic.twitter.com/z31ULu8TDb

Michigan Consumer Sentiment: Remains Favorable in September https://t.co/bKfisaNTIa pic.twitter.com/LzsTGkjXET

3.06pm BST

The latest high-profile Wall Street flotation is going badly.

Peloton, which sells exercise bikes and treadmills that can stream online classes, joined the New York stock exchange yesterday - and promptly tanked by 11%.

$PTON pic.twitter.com/cZ587CXXmr

2.41pm BST

There's a lot of drama in the oil price today.

Crude prices fell sharply, following reports that Saudi Arabia has agreed to a partial ceasefire in Yemen, where it has been fighting Houthi militants since 2015.

Brent Crude #Oil drops on report Saudi Arabia agrees to partial cease fire in Yemen. pic.twitter.com/XAuSGoh7Kh

Iran wanted me to lift the sanctions imposed on them in order to meet. I said, of course, NO!

2.10pm BST

The process to bring Thomas Cook's holidaymakers home is continuing today.

By the end of the day, the Civil Aviation Authority expects to have returned another 16,000 people. That means 77,000 customers will have been repatriated since the company went into liquidation on Monday morning.

Related: Thomas Cook rescue effort brings back half of all holidaymakers

Pleased to confirm that we've managed to set up an Employment Fair for ex-Thomas Cook employees on 3/10/2019 at Manchester Airport with many big employers in attendance & free travel provided by @OfficialTfGM. See below for details. https://t.co/Kf776VgSBz

12.42pm BST

Despite ongoing Brexit uncertainty, and the drop in eurozone business confidence, European stock markets are all rising today.

London is leading the way, thanks to the weaker pound. But Germany is also up, on hopes that Berlin could boost public spending to boost growth.

12.18pm BST

Over in the eurozone, economic sentiment has tumbled to its lowest level in five years.

The European Commission reports that factories became even more glum this month, as trade war worries hit confidence.

Euro area economic sentiment indicator (ESI) fell markedly in September (by 1.4 points to 101.7). The decrease resulted from a significant deterioration of confidence in industry (-3.0 to -8.8). pic.twitter.com/NS34tfX1ut

11.41am BST

Michael Saunders' speech has highlight the marked weakening of the UK economy over recent quarters, says Fiona Cincotta of City Index.

She points out that Brexit uncertainty will linger for a long time, so the BoE will be cautious about risking higher interest rates.

Even if the UK did manage to pull the rabbit out the bag and leave the EU with a deal, the elevated levels of uncertainty are unlikely to end there. Uncertainty over future trade agreements with the EU and other countries could leave companies in the lurch and unsure how to prepare for the different possible outcomes of those trade agreements.

The other scenario, that Brexit is once again extended, would also mean continued uncertainty over the future. As BoE Governor Mark Carney pointed out earlier this month, this scenario could also lead to a rate cut.

11.23am BST

The Bank of England is right to keep interest rates low, argues Artur Baluszynski, Head of Research at Henderson Rowe.

Even if we avoid a no-deal Brexit, the last three years have done enough damage to the UK economy to warrant a 'lower for longer' approach to interest rates.

With a short average fixed-term period on their mortgages, UK households are very sensitive to any hikes in interest rates so unless we experience a currency crisis, the Bank of England should continue to keep the 'cost of money' reasonably low."

10.44am BST

Here's another chart from the Saunders speech, showing the drop in business investment since the Brexit vote:

Business investment in the U.K. and the G7 (ex UK), courtesy Michael Saunders @bankofengland pic.twitter.com/DBqkEHfoyH

10.39am BST

A no-deal Brexit could be very bad news for rural businesses, with fears that one in four could go bust.

Our environment correspondent Fiona Harvey explains:

Farmers are particularly vulnerable to a no-deal Brexit because tariffs would be levied on exports, imports of cheap food could flood the market, and because decisions must be made now which will have an impact for the next year. Arable farmers are putting crops in the ground now for spring, and livestock farmers are preparing to breed sheep and other livestock for next year.

Tim Breitmeyer, president of the Country Land and Business Association, said farms and the rural businesses that rely on them were not in a position to absorb the shock of Brexit, and estimates suggested a large number would be in danger.

Related: Quarter of rural businesses 'could be bankrupted by no-deal Brexit'

10.23am BST

To no-one's surprise, the drop in sterling has pushed up the FTSE 100 index of blue-chip shares.

The Footsie has hit 7,420 points, up 70 points or 0.95% today, to its highest level since late July (just before its August plunge).

9.28am BST

Sebastien Clements, currency analyst at OFX, says Michael Saunders' dovish speech has given the pound a jolt:

"Sterling had a rude awakening this morning, tumbling downwards after BoE member Saunders' comments on the future of the British economy soured market sentiment.

"Saunders considers current monetary policy inadequate, and claims the BoE could conceivably cut rates, even if a no-deal Brexit is avoided.

9.27am BST

Michael Saunders is now taking questions from business people at the Barnsley & Rotherham Chamber of Commerce, having given his speech on the 'shifting balance of risks' created by Brexit uncertainty.

Saunders says he's not a fan of negative interest rates, as they weaken the banking sector and threaten financial stability (Reuters reports).

"The economy has not crashed," Saunders says. "But the effect of Brexit uncertainties is perhaps akin to the economy developing a slow puncture such that growth has slowed to a mere crawl."

9.08am BST

Joumanna Bercetche of CNBC says this is the first time that the Bank of England has said explicitly that a Brexit extension beyond October 31 could prompt a rate cut.

Key line from Saunders :"prolonged high brexit uncertainty could warrant looser monetary policy if global growth is disappointing"

This is 1st time they suggest a rate CUT with ongoing brexit uncertainty (i.e: an extension)

Finally catching up with the interest rate market..

So they went from 'rate hikes in any case post-Brexit', to 'rate cut in event of no-deal Brexit', and now 'Rate cut irrespective of the outcome'. The BoE switcheroo https://t.co/GGbP0YltYs

Michael Saunders just saying what we know

BOE'S SAUNDERS: U.K. MAY NEED RATE CUTS EVEN WITH BREXIT DEAL
via @RedboxWire

9.01am BST

Michael Saunders has also provided two charts for his audience of business leaders in Barnsley, showing how the Brexit crisis is hurting the UK economy.

The first shows that more than 50% of firms say that Brexit is an important source of uncertainty for their business:

This index of Brexit uncertainty is close to the peaks seen around the turn of the year, just before the previous cliff edge, and is far above the levels seen in 2017 and most of 2018.

The high level of Brexit uncertainty is broadly based across industry sectors, reflecting the widespread impacts of Brexit across the economy.

There is extensive evidence that high uncertainty with downside risks is bad for economic growth. The key point is that for households and businesses, many major decisions (eg on investment, house purchase, hiring, R&D) are costly to reverse.

Hence, when uncertainty - and especially the scale of downside risks - is high, there is a clear incentive to defer such major decisions until the situation is clearer

8.44am BST

Michael Saunders helpfully put the three key points from his speech at the top, presumably to make sure we didn't miss them.

They are:

8.37am BST

The pound has fallen to a two-week low, following Michael Saunders' rate cut hint.

Sterling has shed half a cent to $1.228, tumbling as soon as Saunders' comments hit the wires.

8.22am BST

Newsflash: Bank of England policymaker Michael Saunders has suggested that UK interest rates will be cut soon, due to Brexit uncertainty.

If the UK avoids a no-deal Brexit, monetary policy also could go either way and I think it is quite plausible that the next move in Bank Rate would be down rather than up.

One scenario is that Brexit uncertainty falls significantly and global growth recovers a bit... In this case, some further monetary tightening (limited and gradual) is likely to be needed over time.

8.18am BST

Chipmaker Micron has added to the gloom, by issuing disappointing profit guidance last night.

It blamed trade war tensions, and weaknesses in the global economy.

"We have applied for licenses with the U.S. Department of Commerce that would allow us to ship additional products, but there have been no decisions on those licenses to date."

8.08am BST

Worries about China's economy have knocked the oil price.

Brent crude has fallen nearly 1% today to $62.22 per barrel.

8.05am BST

Most Asia-Pacific stock markets fell into the red today, with Japan down 1.1% and South Korea losing 1.3%.

The fall in Chinese factory profits was one factor, but there's also plenty of political anxiety.

Related: White House tried to cover up Trump's Ukraine conversation, whistleblower alleges

The market's destiny is at Donald Trump's fingertips. A single tweet from Donald Trump could send equities rallying, as it could shatter the market sentiment. And Trump's next move is anybody's guess.

"The impeachment of Trump will now become a drawn-out saga that feels like annoying supermarket music."

7.51am BST

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

#China China Aug industrial profits -2%yoy, revenue +3.2%yoy

Consistent with soft growth pic.twitter.com/PMeGCNpu9U

"Given strong growth headwinds and elevated U.S.-China trade tensions, we expect the economy to worsen before getting better and believe Beijing will likely ramp up its policy stimulus."