What to Watch: Pound falls on parliament fears, recession fears hit markets, and Ted Baker's Japan deal
Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:
Pound falls on parliament fears
Sterling’s Brexit-driven volatility continues, with the pound falling on Wednesday after reports that Boris Johnson is going to try to dismiss parliament in a bid to force through a no deal Brexit.
The BBC reported that Boris Johnson is set to ask the Queen to suspend parliament just days after MPs return from summer recess, in a bid to stop rebels blocking a no deal Brexit.
David Cheetham, chief market analyst at trading platform XTB, said the report provoked “some selling seen in the pound.”
“This seems like a pre-emptive strike from Boris against those seeking to block a no-deal Brexit and once more it seems that the opposition are in danger of fluffing a big opportunity to have an impact,” he said.
“Having said that, as far as the markets are concerned there’s a fair bit of bad news already ‘baked-in’ to the pound and it is telling that after the knee jerk move lower in recent trade, the selling we’ve is far from panic stations.”
At just after 9.20am UK time, the pound was down 0.4% against the dollar to $1.2228 (GBPUSD=X) and down 0.4% against the euro to €1.1021 (GBPEUR=X).
Recession fears hit markets
European markets were in the red on Wednesday, amid deepening fears about a possible US recession.
“European markets have opened slightly lower this morning, as concerns over bond market recession warnings continue to weigh on investors’ minds,” Michael Hewson, chief market analyst at CMC Markets, said.
“There’s been a lot of talk of yield curve inversions as a portent of an approaching recession, however the more significant development is the decline in 30 year yields below the Fed funds rate, something that has never happened before.”
The yield curve — which measures the difference in interest rates of bonds maturing at different times — inverted further on Wednesday, adding to fears.
Britain’s FTSE 100 (^FTSE) was up 0.2%, boosted by the weak pound which flatters dollar earnings, but France’s CAC 40 (^FCHI) was down by 0.4%, Germany’s DAX (^GDAXI) was down by 0.2%, and the Euronext 100 (^N100) was down by 0.4%.
Overnight in Asia, Japan’s Nikkei (^N225) closed up by 0.1%, the Hong Kong Hang Seng Index (^HSI) was down by 0.1%, and China’s Shanghai Composite (000001.SS) closed down by 0.2%.
Ted Baker’s Japan deal
Ted Baker (TED.L) is giving up on efforts to crack Japan alone and has signed a five-year retail partnership in the country with Sojitz Infinity.
The deal to expand further into Japan will cost Ted Baker £4m but bosses said the deal will improve overall profitability.
Ted Baker chief executive Lindsay Page said: “We firmly believe that Japan has the long-term potential to be an important market for the Ted Baker brand.”
Sojitz Infinity boss Kohei Ono said: “Our knowledge and experience in building fashion brands through stores, concessions and online should add value to Ted Baker and we look forward to working together.”
Thomas Cook bailout
Struggling travel business Thomas Cook (TCG.L) has agreed to an emergency takeover that will see debtors and its largest investor pump new cash into the firm to save it from collapse.
Thomas Cook said on Wednesday that it has agreed to sell the majority of its tour operator business and a stake in its airline business to Chinese conglomerate Fosun, its largest shareholder.
Fosun will pay £450m ($548m) of new money for 75% of the company’s tour operator business and 25% of its embattled airline business. Fosun, which also owns football club Wolverhampton Wonderers and France’s Club Med, already owns 15% of Thomas Cook.
The rescue deal will also see the group’s lenders and bondholders bring around £450m into the business, while converting existing debt into approximately 75% of the equity of the airline and up to 25% of new equity for the tour operator arm.
Spending review before Brexit
The UK government will unveil its tax and spending policies before Brexit in a spending round announcement next week, the Treasury has confirmed.
Chancellor Sajid Javid had planned to give a speech on the economy this week, but it was delayed as he confirmed he will instead reveal the government’s spending plans in parliament on 4 September.
The fast-tracked spending round will only set departmental budgets for the 2020-21 year ahead, rather than across several years like a typical spending review. A full spending review will be held in 2020.
The Treasury said in a press release the spending round will “deliver on the prime minister’s priorities,” including cash for health, schools and the police.
What to expect in the US
US stocks future are pointing to higher open later today. S&P500 futures (ES=F) were up by 0.3%, Dow Jones futures (YM=F) were up by 0.2%, and Nasdaq futures (NQ=F) were up by 0.3%.
Companies reporting later today include:
Tiffany’s (TIF)
