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Wednesday, August 03, 2016


Is This the Light at the End of the Tunnel…?

Chancellor may 'reset' economic policy in Autumn Statement.

The new Chancellor of the Exchequer has said he may use the Autumn Statement to "reset" Britain's economic policy. At the start of a trip to China to strengthen post-Brexit business ties, Philip Hammond said he would review economic data over the coming months. He added that the Treasury will act "if we deem it necessary to do so". Labour's shadow chancellor, John McDonnell, dismissed Mr Hammond's plan as "just warm words from another Tory chancellor". And he added: "As at present the failed austerity policies of George Osborne are still going ahead and the government is still sticking to the failed fiscal framework. This means that Britain is on hold until Philip Hammond makes up his mind. The Tories clearly had no plan for Brexit and are making it up as they go along." Before becoming Prime Minister, Theresa May had said that the government would no longer seek to reach a surplus by 2020. Mr Hammond said on Friday: "Over the medium term we will have the opportunity with our Autumn Statement, our regular late year fiscal event, to reset fiscal policy if we deem it necessary to do so in the light of the data that will emerge over the coming months." Following Mr Hammond's statement, figures from IHS Markit's Purchasing Managers' Index revealed a "dramatic deterioration" in economic activity in the services and manufacturing sectors in July, which fell to the lowest level since April 2009.

Brexit heightens global economic risks, says G20.

The UK's vote to leave the European Union heightens risks for the world economy, finance chiefs have said at the end of the G20 summit in China. The outcome of last month's referendum "adds to the uncertainty" for the global economy, the group of the world's 20 largest economies said. "In the future, we hope to see the UK as a close partner of the EU," it said. Chancellor of the Exchequer Philip Hammond revealed the subject had come up "a great deal" at the two-day talks. "The reality is there will be a measure of uncertainty continuing right up to the conclusion of our negotiations with the EU," he told reporters. Following the meeting in the Chinese city of Chengdu, the G20 group said it was well placed to actively cope with the potential economic and financial impact from the Brexit vote.

Pound fall to 'hit Rolls-Royce by £2bn'.

Rolls-Royce will suffer a £2bn writedown this week as a result of the fall in sterling since the EU referendum result, according to analysts. It comes after Easyjet warned the pound's drop had seen costs rise £40m. Rolls-Royce's hit is not due to a cost increase, but is instead an accountancy adjustment from the falling pound. Analysts expect the charge will drag the FTSE 100 firm to a loss when it reports first-half results on Thursday. The Derby-based aero engine company trades in dollars and takes out complex hedging contracts to protect against currency gyrations. Rolls-Royce booked a £1bn charge on those forex contracts when the pound fell 8 cents against the dollar. Sterling has now fallen 16 cents compared with last year, leading analysts to expect a £2bn charge. The company, which employs 23,000 workers in the UK, said last month that it expected underlying profit for the first six months of 2016 to be close to breakeven. The Brexit vote would have "no immediate impact on our day-to-day business", it said. Rolls-Royce refused to comment on the currency writedown.

London shares turn negative on CBI industry survey.

(Close): London's main share index edged lower on Monday, while other major European markets saw gains. Shares had been in positive territory until publication of the CBI's latest industrial trends survey that showed Brexit hitting business confidence. By the close, the FTSE 100 was down 20 points, or 0.3%, at 6,710.13. The pound gained ground, rising 0.12% against the dollar to $1.3127, but was just 0.11% higher against the euro at €1.1963. The CBI's monthly total order book balance from its monthly industrial trends survey fell to minus 4 in July from minus 2, while a measure of output over the next three months fell to 6 in July from 23 in June. Quarterly business optimism balance plummeted to minus 47 from minus 5, the lowest since January 2009, during the depths of the financial crisis. Rain Newton-Smith, CBI chief economist, said: "It's clear that a cloud of uncertainty is hovering over industry, post-Brexit. We see this in weak expectations for new orders, a sharp fall in optimism and a scaling back of investment plans."

Theresa May: UK should be flexible over Brexit trade options.

Theresa May has said she retains an "open mind" about the UK's trading relationships after Brexit amid reports some cabinet colleagues want the UK to pull out of the EU's customs union. During talks with Italian counterpart Matteo Renzi, the UK PM suggested she favoured bespoke arrangements rather than replicating those used by others. "I think we should develop the model that suits the UK and EU," she said. Mr Renzi said the EU vote was sad but he hoped "some good would come of it". She restated her position that the UK would need time to prepare for official negotiations on leaving the EU and that it was her intention to guarantee the status of EU nationals already working in the UK while limiting the future free movement of EU nationals into the UK. Pressed on suggestions by the International Trade Secretary Liam Fox - who is on a trade mission to the US - that the UK could potentially leave the EU's customs union to facilitate trade deals with other countries, Mrs May said she was "looking at this with an open mind".

[The quiet continues with Brexit stories down to a trickle. I guess we’re in a holding pattern awaiting the first really concrete results rather than the speculation and opinion we’ve had so far. It does look like interest rates will drop to a new all-time low soon to try and stimulate things and there’s talk of another round of 'Quantative Easing' which just because it didn’t work last time or the time before that shows every sign of doing the job this time. After all it’s only tax payers’ money and mortgaging the future so what do ‘they’ care. But until something does happen I’ll continue holding my breath and flying the EU flag…..]

All details above from BBC News website.  

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