Pound slides, stocks tumble as no-deal Brexit looms – as it happened

Kalyeena Makortoff

from on 2020-12-11 14:00 (#5BGZX)

Rolling coverage of the latest business and markets news, as Brexit fears hit currency and stock markets

2.00pm GMT

1.59pm GMT

Full story: A 14bn class action against Mastercard for allegedly overcharging 46 million British consumers during a 15-year period has been given the green light to proceed, my colleague Shane Hicky writes.

Almost every adult in the UK - even if they never had a Mastercard - could receive a payout of up to 300 from the credit card company after a supreme court ruling paved the way for the class action lawsuit.

Mastercard has been a sustained competition law breaker, imposing excessive card transaction charges over a prolonged period in a way it must have known would impose an invisible tax on UK consumers.

1.37pm GMT

DATA FLASH: US producer prices barely budged in November, with the PPI index showing a 0.1% monthly rise.

That compares to a 0.3% rise in October, and marked the smallest gain since April. It is also lower than economist expectations for a 0.2% increase.

1.21pm GMT

The pound is now at its lowest level since mid-November against the US dollar at 1.314.

12.58pm GMT

It's lunchtime! So if you need a break from markets news, our team have put together a Christmas business quiz to put your memory to the test.

How well do you remember some of the biggest (and quirkiest) business stories of the year?

12.42pm GMT

Another note on oil prices, which are paring losses. Brent crude is now down just 0.2%, bringing it back up above $50 per barrel and putting it on track for its highest weekly close since early March.

But Rystad Energy's senior oil markets analyst Paola Rodriguez-Masiu says another correction could be right around the corner:

Although optimism is certainly justified as the vaccine has removed uncertainty for the market in the mid-term, the short-term crude demand remains anything but given as winter is fast-approaching and governments warn of a third wave of cases in the northern hemisphere, while we are still handling the consequences of the second-wave.

A correction could be across the corner once the consequences of winter's lockdown are more evident, possibly in further stocks build and real-time traffic data that will hint the hit road fuels are currently getting.

12.41pm GMT

Clarification: We've amended two posts here and here to make clear that the US FDA has yet to formally approve the Pfizer vaccine, but that it is on track to do so after an advisory panel to the FDA recommended doing so.

12.12pm GMT

The news has yet to lift the FTSE 350 travel and leisure index, but governments across the UK to set announce a reduction in the coronavirus self-isolation period, from 14 to 10 days.

Our political correspondent Peter Walker explains that the change will be helped by the mass use of rapid coronavirus tests, which can help reassure people without symptoms that they are not carrying the virus.

12.02pm GMT

Heathrow could lose 2,000 retail jobs because of the government's decision not to offer tax-free shopping for tourists, my colleague Mark Sweney writes.

2021 should be the year of Britain's economic recovery but recent announcements, such as the tourist tax, could be the final nail in the coffin for struggling businesses such as restaurants, hotels and theatres that rely on inbound tourists, as well as for retailers.

11.51am GMT

Oil prices are also taking a hit today. Brent crude prices were holding steady above $50 per barrel this morning but are now down 0.8% at $49.85.

It follows sharp gains for oil prices on the back of vaccine progress, which raised hopes that there would soon be a rise in demand for fuel once social distancing rules are relaxed.

11.33am GMT

Correction: Our previous post on the Bank of England's stance on mortgage lending been amended to reflect that the central bank was discussing capping mortgage distribution on a loan-to-income basis, rather than loan-to-value, as originally suggested. You can see the updated post here (might require refreshing your browser).

11.23am GMT

US futures are pointing to a weak start on Wall Street this afternoon:

11.00am GMT

Morgan Stanley has warned that the domestically-focused FTSE 250 could tumble by as much as 10% if the UK crashed out of the EU without a deal at the end of December.

The impact would be even worse for UK-listed banks, which are expected to plunge between 10-20%, due to fears that the Bank of England could introduce negative interest rates to try encourage lending and spending across the country.

Under a no-deal outcome we would expect little reaction in the FTSE100 given the support from GBP depreciation.

However, we would see potential for 6-10% underperformance from the FTSE250 and 10-20% downside for UK banks (given additional concerns around negative rates).

10.36am GMT

Full story: EU leaders have been told by Ursula von der Leyen that Britain exiting the transition period without a trade and security deal is now the most likely outcome, our Brussels bureau chief Daniel Boffey writes.

10.10am GMT

BREAKING: The UK's Supreme Court has said it will allow an 14bn British class action suit against Mastercard to proceed.

It upholds last year's Court of Appeal ruling on the case and sets the stage for the UK's first ever mass consumer claim.

9.43am GMT

The growing odds of a no-deal Brexit are also dragging on the FTSE 100 which has extended losses this morning.

Within the past hour, the FTSE 100 was down as much as 0.9% but is now trading 0.5% lower.

9.24am GMT

Negative rates are also in discussion at the Bank of England press conference.

9.12am GMT

Bank of England governor Andrew Bailey has been holding a press conference this morning following the release of the Financial Stability Report.

It would have been far more eventful if the central had been able to put out its notice that it was allowing banks to re-start dividends - within limits - in the new year.

8.50am GMT

The pound has tumbled 0.5% against the US dollar to 1.323 this morning on no-deal Brexit fears.

The probability of a no deal is higher than of a deal...To be seen by Sunday whether a deal is possible.

With the UK now looking like its hurtling towards a no-deal Brexit, investors should adopt the brace position for swings in sterling and shares in domestic focused companies. This morning the pound is struggling to rise above 1.09 against the euro with a distinct lack of direction before the fresh deadline of Sunday looms.

Warnings from Prime Minister Boris Johnson, that companies should prepare for a no-deal scenario, will not have added to confidence, given that there are just three weeks until January 1, when WTO rules would come into force.

8.41am GMT

Threadneedle Street is reviewing rules capping the proportion of higher loan-to-income mortgages banks can sell, in a development that could make it easier for first time buyers and homeowners to borrow money.

8.28am GMT

The UK competition has launched a full in-depth investigation into the 31bn merger of Virgin Media and O2, our media business correspondent Mark Sweney writes.

There is sufficient evidence at an early stage of the investigation for the CMA to conclude that there is a realistic prospect that the transaction would result in a substantial lessening of competition in one or more markets.

8.23am GMT

Time to plan your first coffee break this morning:

The Financial Stability Report Press Conference will be live streamed here from 0830 this morning
https://t.co/3vzdSvzX6Q

8.07am GMT

Major indexes are in the red at the start of trading:

8.05am GMT

The Bank of England also reiterated that banks are able to absorb more than 200bn worth of losses, which is much more than would be expected based on the Monetary Policy Committee's central forecast.

And that takes Brexit into account.

Some market volatility and disruption to financial services, particularly to EU-based clients, could arise.

Market volatility could be reinforced in the event that some derivative users are not fully ready to trade with EU counterparties or on EU or EU-recognised trading venues. Financial institutions should continue taking measures to minimise disruption.

Irrespective of the particular form of the UK's future relationship with the EU, and consistent with its statutory responsibilities, the FPC remains committed to the implementation of robust prudential standards in the UK.

7.51am GMT

Our latest #FinancialStabilityReport shows what measures we are taking to ensure the financial system remains strong and resilient. https://t.co/0ViHmiHvRP pic.twitter.com/8WNwaHsKo3

7.41am GMT

The Bank of England will let lenders keep their so-called countercyclical capital buffer (CCyB) at zero throughout 2021, in a bid to keep banks lending throughout the Covid crisis.

The CCyB level was set at 1% of risky assets before the crisis and was meant to rise to 2% before coronavirus hit the UK in the spring. The central bank set the rainy day fund rate to 0% in March to help banks absorb any losses arising from the Covid pandemic.

The eventual pace of return to a standard 2% UK CCyB rate will depend on banks' ability to rebuild capital while continuing to support households and businesses.

7.17am GMT

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

Stocks lost steam on Friday, as Brexit jitters threatened to overshadow progress on Covid vaccines.

European Opening Calls:#FTSE 6602 +0.04%#DAX 13273 -0.17%#CAC 5537 -0.22%#AEX 617 -0.17%#MIB 21891 -0.11%#IBEX 8154 -0.35%#OMX 1901 -0.28%#STOXX 3516 -0.19%#IGOpeningCall

Overall, there still seems to be some optimism that pragmatism will prevail as the 31^st December deadline gets closer, and the realisation slowly dawns of the potential economic damage that could ensue in the days after a no deal outcome.

An outcome that in the current circumstances would simply heap economic pain on top of economic pain.

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