M&G suspends property fund amid Brexit uncertainty and retail crisis - business live

Rolling coverage of the latest economic and financial news, as UK asset manager surprisingly freezes a major property investment fund

• Latest: M&G temporarily suspends property fund
• Fund manager blames Brexit and high street crisis
• "Brexit-related uncertainty" causing high outflows
• M&G can't sell assets fast enough to meet redemptions
• Pound rallies as Conservatives hold lead

5.47pm GMT

Finally, back in the markets, renewed trade war optimism has pushed Wall Street higher.

The Dow is up 200 points, after Bloomberg reportedly earlier that the US and China were closer to a deal than Donald Trump suggested yesterday.

4.28pm GMT

Here's my colleague Patrick Collinson on M&G's property fund freeze:

One of the UK's biggest property funds, which owns shopping centres across the country, has alarmed investors by banning withdrawals and blaming both Brexit and the retail downturn for its problems.

The 2.5bn M&G Property Portfolio was suspended after "unusually high and sustained outflows" - demand from investors for their money back - prompted by "Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector".

M&G suspends 2.5bn property fund blaming retail crisis and Brexit https://t.co/4OlTsKPcqW

4.17pm GMT

Rival property funds are scrambling to reassure investors.

Aviva says it has build a 30% cash level in its property fund, due to "heightened market uncertainty". BMO has said its fund holds 24% of its assets in cash, and is still open (vie Reuters).

"It's a disgrace. These funds are offering something that they are not delivering. It is plain wrong to charge investors the full annual fee on a fund when only 70% of their money is being invested."

4.04pm GMT

M&G investors could be trapped in the Property Portfolio fund for some time.

Laura Suter of stockbroker AJ Bell points out that the fund was closed for two months after the Brexit vote:

Worth noting that M&G Property fund took the longest to re-open in the post-referendum suspensions - was closed from July to November

3.45pm GMT

M&G's problems may have been exacerbated by the crisis at Neil Woodford's asset management empire.

Woodford was forced to freeze his once-popular Woodford Equity Income fund this summer, after a wave of redemption requests. Investors now face massive losses - they could lose two-thirds of their money once the fund is wound down.

3.26pm GMT

M&G's move is the first suspension of a major property fund since the panic after the Brexit vote (explained here), says the Financial Times.

Here's its take:

Fund manager M&G has suspended trading in its 2.5bn Property Portfolio, which is marketed to retail investors, after facing "unusually high and sustained outflows" it blamed on Brexit and the retail downturn.

The fund is the first major open-ended property fund to halt redemptions in this way since the crisis in the sector that caused seven funds to "gate" in 2016 following the Brexit referendum - one of the most high-profile market consequences of the vote to leave the EU.

3.17pm GMT

Signs of distress at M&G's Property Portfolio fund have been building in recent weeks, leading to today's suspension.

Last month, M&G carried out an unusual 'intra-month valuation update', having spotted a material (downward) move in its assets.

It is has been well documented that the bricks and mortar retail sector is suffering substantial headwinds. The rise of e-commerce coupled with recent retailer failures is increasing uncertainty across the sector. Retailers are reluctant to pay high rents and investors are decreasing their appetite for retail assets.

(Transaction volumes have decreased by 24% compared to the same period in 2018). Even in highly sought after locations such as Bath and Manchester, rents have declined over the last 12 months.

3.10pm GMT

The BBC's Simon Gompertz has also heard that the cash reserves in M&G's property fund have run rather low, forcing today's suspension.

M&G fund suspension: I understand the Property Portfolio fund had only 5% cash and dropping, as investors pulled out money, compared with 15-20% with other property funds

3.08pm GMT

Readers might also remember that a swathe of property funds were temporarily frozen after the EU referendum in 2016.

Two weeks after the vote, around 18bn was locked up as asset managers barred the doors, to give time to sell office blocks and shops in order to meet redemption requests.

M&G Property Portfolio. Dealing suspended. Time for another conversation about liquid assets in open ended daily traded vehicles? Letter blames #Brexit. But better to blame the structure? https://t.co/DmH0501OXU

2.52pm GMT

The BBC's Simon Gompertz is tweeting a handy explanation to M&G's shock property suspension:

Temporary suspension in dealings in M&G's big Property Portfolio investment fund, worth 2.7bn. Blames blight on UK shopping centres and streets, along with Brexit

Property funds are like funds dealing in unlisted shares (eg Woodford Equity Income) in that they can't sell assets quickly if investors start pulling their money out

Investors pulled 750m out of the M&G Property Portfolio fund in the first 8 months of the year

2.45pm GMT

Shares in M&G have fallen by 2% since it suspended the Property Portfolio fund.

2.45pm GMT

M&G is also waiving around a third of the management fee it charges investors -- to address the frustration they'll feel about being locked into the Property Portfolio.

It says:

The funds will still be actively managed during suspension, but we understand that being unable to deal in the funds is very frustrating for our customers. In recognition, M&G is waiving 30% of its annual charge, which will end when the funds resume dealing.

Suspension will be formally reviewed on a monthly basis and we will inform investors if the level of discount changes. In all other respects, the funds will operate as normal and you will continue to receive income payments, fund reporting and updates as usual

2.39pm GMT

This surprise suspension will allow M&G breathing room to raise cash (by selling property) so it can pay people who want to redeem their investment in the Property Portfolio.

It says:

In accordance with the Fund's strategy, the suspension will allow the fund managers time to raise cash levels to pay redemptions, whilst ensuring that asset sales are achieved at market prices and investors in the Fund are safeguarded. In all other aspects, the Fund will continue to operate as normal throughout the suspension and customers will continue to receive income payment.

2.29pm GMT

NEWSFLASH: One of Britain's biggest fund managers has just suspended dealing in its multi-billion property fund.

M&G has blamed Brexit for the temporary move, saying political uncertainty has made it hard to sell property assets to meet redemption requests from investors in its Property Portfolio.

In recent months, continued Brexit-related uncertainty and ongoing structural shifts in the UK retail sector have prompted unusually high outflows from our property fund for retail investors.

Given that these circumstances and deteriorating market conditions have significantly impacted our ability to sell commercial property, we have temporarily suspended dealing in the interests of protecting our customers.

2.04pm GMT

Back on trade.... Donald Trump has told reporters in London that talks with China are going "very well".

During a press event with German chancellor Angela Merkel, Trump said:

Discussions are going very well, and we'll see what happens.

Related: Trump describes Trudeau as 'two-faced' over Nato hot-mic video

1.42pm GMT

Boom! Sterling has now hit its highest level against the euro since May 2017.

General election speculation has driven the pound up to a1.182 against the single currency, a 31-month high.

"The pound is now trading at its highest level in over two-years off the back of more election rumours and polls, showing once again how it is at the mercy of British politics. As it stands the pound is at 1.18 against the euro which we haven't seen since May 2017."

"However, the outcome of next week's general election will not spell the end of the pound's rocky journey as the future of the UK's relationship with the EU remains uncertain. We've seen in the run-up to past elections that the pound has had a turbulent time, and with more than just a new Prime Minister at stake we shouldn't get used to these kinds of rates just yet."

1.27pm GMT

Newsflash: Rather fewer jobs were created at American companies last month than expected, a new report shows.

The ADP payroll, which measures US employment, has risen by 67,000 in November, much weaker than the 140,000 which Wall Street expected.

12.57pm GMT

Sterling is continuing to climb, and is now up a whole cent today at $1.309.

That's a new seven-month high against the US dollar, the strongest position since May 7th.

12.55pm GMT

Aviation News: Budget airline Ryanair is planning to close two bases, due to the ongoing delays to Boeing's 737 MAX jet.

Ryanair says it now expects to only receive 10 737 MAX aircraft in time for next summer, not the 20 previously expected. That means it will carry a million fewer passengers -- 156m, not 157m -- and force it to shutter operations at Nuremberg and Stockholm Skavsta.

12.40pm GMT

John Goldie, FX Dealer at Argentex Group, predicts the pound could rise to at least $1.33 if Johnson wins a majority next week.

But victory isn't assured, so sterling could yet slide back to $1.25, Goldie suggests.

It may seem like the political equivalent to Ronny Rosenthal vs. Aston Villa circa-early 90s, but missing an open goal, as the first YouGov MRP suggests it is, seems like an entirely feasible thing for Boris to do.

"Given that the market has already positioned itself to some degree on a Tory majority,... from today's $1.3000, I'd expect 1.25-1.27 to be the initial fallout for the pound's nightmare scenario in the early hours of Friday the 13^th next week."

It's 27 years to the day since Ronny Rosenthal's memorable miss for Liverpool against Aston Villa - but was it the worst-ever miss in the Premier League?

Watch a selection here and vote for the worst miss in Premier League history: https://t.co/niIu99jlw5 pic.twitter.com/PJaLDP7AYf

12.16pm GMT

Pollsters, such as YouGov, have been giving the Conservatives a solid lead in the polls for months.

Latest Westminster voting intention (2-3 Dec)

Con - 42% (-1 from 28-29 Nov)
Lab - 33% (-1)
Lib Dem - 12% (-1)
Brexit Party - 4% (+2)
Green - 4% (+1)
Other - 6% (+1)https://t.co/JKgmm8lfYQ pic.twitter.com/HcqiuNeOGt

This single graph from Martin Baxter at Electoral Calculus should terrify the Tories.
It tracks the Conservatives' dwindling 'poll of polls' lead at this election against the Tory lead at the 2017 election.
The similarity is striking. pic.twitter.com/8x4dkIB5FI

11.47am GMT

Wall Street is expected to recover yesterday's slump too, thanks to Bloomberg's report that a US-China trade deal could still happen soon.

Stocks bounce as @jendeben reports the U.S. and China are still close to a deal despite the heated rhetoric of the last 24 hourshttps://t.co/BErAUjULcD pic.twitter.com/mhS9iITOzl

11.24am GMT

Sterling is also climbing against the euro, hitting a near-nine month high of a1.1786.

That's because Boris Johnson appears to be on track for victory in next week's election, says Dean Turner, economist at UBS Wealth Management.

The election is Boris Johnson's to lose. However, turnout rates, tactical votes, and the usual campaign trail pitfalls could all swing the final result.

"Sterling has strengthened on days when the prospects for the Conservative Party have seemingly improved, and vice versa. One interpretation of this phenomenon is that investors favour the prospect of clarity on Brexit.

11.10am GMT

The pound has hit its highest level in seven months, as City traders show increased confidence that Boris Johnson will win next week's general election.

Sterling has jumped to $1.3039, up nearly half a cent, to levels not seen since May 2019.

Even so, while the polls continue to point to the Conservatives gaining a majority, it is still not a done deal. The danger of an outright Labour victory may be slight but if it did transpire, it would likely cause a slump in the pound.

So, if market hopes of a Conservatives victory are vindicated, the pound will very likely strengthen further from $1.30 currently to maybe $1.35 or so. Even at $1.35, the pound would remain below the levels seen prior to the 2016 Brexit referendum. This would seem appropriate as, even with a Conservative victory, significant Brexit uncertainty will remain.

While Johnson's Brexit deal would almost certainly be ratified in short order if the Conservatives win, doubts will remain over whether the UK will be able to finalise a trade deal with the EU by the end of the transition period in December 2020. The risk of a No-Deal exit may be much reduced but it has not been eliminated altogether."

10.50am GMT

In a surprise twist, European stock markets are all rallying.... as hopes of a US-China trade deal grow again.

Every index is up, with France, Italy andGermany rallying by over 1%, after unnamed sources claimed that Donald Trump had painted a too-gloomy picture of negotiations yesterday.

The people, who asked not to be identified, said that U.S. President Donald Trump's comments Tuesday downplaying the urgency of a deal shouldn't be understood to mean the talks were stalling, as he was speaking off the cuff. Recent U.S. legislation seeking to sanction Chinese officials over human-rights issues in Hong Kong and Xinjiang are unlikely to impact the talks, one person familiar with Beijing's thinking said.

U.S. negotiators expect a phase-one deal with China to be completed before American tariffs are set to rise on Dec. 15, the people said. Outstanding issues in the talks include how to guarantee China's purchases of U.S. agricultural goods and exactly which tariffs to roll back, they added.

10.32am GMT

Andy Bruce of Reuters shows how UK service sector growth has fizzled out this year:

UK services sector hobbled by politics - PMI https://t.co/IH7O7lPaXR pic.twitter.com/NCwgV4VniO

10.26am GMT

If today's PMIs are accurate, they suggest the UK could be sliding back to the brink of recession.

Howard Archer of EY Item Club is revising down his hopes for growth in the fourth quarter of 2019, having seen November's gloomy PMIs.

Even allowing for the fact that the purchasing managers' surveys are prone to portraying an overly gloomy picture at times of heightened uncertainties, there now looks to be a very real danger that the economy will stagnate in the fourth quarter.

We had originally thought the economy could eke out GDP growth of 0.2% quarter-on-quarter in the fourth quarter but this now looks pretty optimistic. Any growth in the economy in the fourth quarter is likely to be pretty dependent on consumers - who have been the most resilient part of the economy - spending a decent amount over the critical Christmas period.

Final November #UK services #PMI revised up to 49.3 from "flash" estimate of 48.6. Means was at an 8-month low rather than a 40-month low but still points to modest contraction and down from 50.0 in October. New business contracted for 3rd month & fastest since July 2016 https://t.co/pD1XCgN6JN

10.13am GMT

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, blames Brexit for the drop in UK service sector activity last month.

Here's his take on November's PMIs:

"The sector was hemmed in with no room for improvement in November by the fastest fall in the pipeline of new work since July 2016, and the biggest drop in export orders since this index began in September 2014.

As Brexit nerves continued to affect domestic client decision-making, a veil of silence also descended over European clients in particular who were reluctant to commit until there is more clarity in the UK's future direction.

9.57am GMT

Tim Moore, economics associate director at IHS Markit, says the UK economy is "staggering" through the final quarter of the year, with output falling at services companies and factories.

"November's PMI surveys collectively suggest that the UK economy is staggering through the final quarter of 2019, with service sector output falling back into decline after a brief period of stabilisation.

"Lacklustre demand remains centred on business-to- business spending. Service providers have attributed

9.51am GMT

Britain's private sector shrank in November, as the ongoing Brexit uncertainty hurts the country's dominant services sector.

That's according to data firm Markit, which says its services PMI slumped to 49.3 last month. That's down from October's 50, which showed stagnation.

9.36am GMT

Heads-up.

Bloomberg is reporting that Washington and Beijing are making progress towards a trade deal.

The U.S. and China are moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions over Hong Kong and Xinjiang, people familiar with the talks said, Bloomberg News reports.

9.31am GMT

The eurozone's private sector had a lacklustre November.

The composite PMI, which measures activity across service sector firms and manufacturers, was unchanged at 50.6 -- showing modest growth.

Eurozone Composite PMI unchanged at 50.6 in November, as growth in service sector activity slowed and offset a softer decline in manufacturing output. France signalled the best performance, whereas Germany noted a further deterioration. More here: https://t.co/j8Shs5sK53 pic.twitter.com/8IUMkkI5lI

9.24am GMT

The latest economic data from Hong Kong is an absolute shocker.

Private sector activity slumped alarmingly last month, at the fastest rate since the Severe acute respiratory syndrome (SARS) virus crisis gripped the city, causing hundreds of deaths.

"The average PMI reading for October and November combined showed the economy on track to see GDP fall by over 5% in the fourth quarter, unless December brings a dramatic recovery.

he survey showed that the escalating political unrest saw business activity shrinking at the steepest rate since the survey started in July 1998. This occurred concurrently with the sharpest decline in new sales since the depths of the global financial crisis.

Latest #Hongkong PMI signals steepest private sector downturn since SARS crisis during Nov. Average #PMI reading for Oct and Nov combined points to GDP falling by over 5% in Q4, unless Dec brings a dramatic recovery. Read more: https://t.co/0vHtOFSObs pic.twitter.com/geGXWzme28

9.17am GMT

Away from trade, we have bleak news from the UK high street

Fast fashion chain Quiz has warned it could close a swathe of stores, after slumping into a 6.8m loss in the last six month. It blames the decline in visitors to physical stores, and hinted that it could close loss-making outlets when its leases expire.

Related: Fashion brand Quiz makes 6.8m loss amid high street sales slump

9.14am GMT

The Chinese government has hit back against Donald Trump's criticism.

At a press briefing, China's foreign ministry warned that Beijing will take "the necessary countermeasures" to defend its interests. That sounds like a warning shot to Washington not to implement the tariffs planned for 15 December.

8.58am GMT

After tumbling on Monday and Tuesday, European stock markets are attempting to clamber off the mat this morning.

The Stoxx 600 index, which includes the largest EU companies, has gained 0.4% - which recovers a chunk of yesterday's losses.

Uncertainty is everywhere with negative sentiment among market players after VIX [the volatility index] rebounded from its lowest level in 2019.

This rebound and rally was fueled by the unexpected comments by Trump, the only thing which is certain now is that we face a highly volatile environment!

8.39am GMT

Many parents look to their sons-in-law for help, perhaps with a tricky computing problem or a DIY task.

Donald Trump, though, is turning to his eldest daughter's husband to resolve the China trade war!

While the talks have made some progress, these people said the two sides have not yet agreed on the extent to which the United States will remove existing tariffs on Chinese goods and on specific commitments by China to increase purchases of U.S. agriculture products.

A White House official confirmed Kushner's involvement, but declined to provide specific details on the influence he has had on the negotiations. Speaking on condition of anonymity, the official said Kushner has recently met with Cui Tiankai, the Chinese ambassador to the United States.

Jared Kushner, Trump's son-in-law, takes bigger role in China trade talks https://t.co/EuL2rWT2oX pic.twitter.com/VR047xhEZZ

8.06am GMT

Neil Wilson of Markets.com has sent over some salient points about the trade war situation, and how investors may react.

7.52am GMT

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

Related: Trump says China-US trade deal could wait until after 2020 election

Mr Trump has completely taken the momentum out of financial markets this week and the December 15th date will increasingly become a focal point over the next couple of weeks.

Last week the mood music suggested that even if a "phase one" deal hadn't been reached by then, then there was a good chance tariffs planned to be implemented on that date would be postponed. After the stepping up of negative global tariff rhetoric over the last 48 hours, yesterday's headlines suggesting that the US is going forward with the December 15 tariffs grabbed the limelight, although markets had already been trading weaker prior to that.

Related: Markets in tailspin amid fears US-China trade deal is in peril

Chinese #nickel futures tumbled 4% amid concerns about oversupplies.

Indonesia recently resumed nickel exports and the market expects the country's nickel exports to hit a new high in December. pic.twitter.com/ymAGPCXo6d