Closing post
Time for a recap
More companies across England and Wales went bust in the past year than during the financial crisis, new data shows.
In the year to July, there were 25,551 insolvencies.
In July alone, 16% more companies failed than a year ago, despite a 7% drop compared with June.
The gold price has hit a series of record highs today , to above $2,530 per ounce, lifted by hopes of cuts to US interest rates soon.
More than £1bn has been wiped off the value of BT, after Sky struck a broadband deal with one of its largest rivals.
The pound is on track to close at its highest level against the US dollar in over a year – its trading at $1.3022 this afternoon.
The dollar has been pushed down by expectations of US interest rate cuts in September.
Sweden’s Riksbank has cut its key interest rate today.
Inflation has ticked up in the euro area, but dropped in Canada.
Germany’s central bank is optimistic that its economy will avoid recession.
In Italy, the search for the six missing passengers of the Bayesian yacht is continuing. They are Mike Lynch, a British tech entrepreneur, and Hannah Lynch, his 18-year-old daughter. Chris Morvillo, a lawyer who represented Lynch during his recent fraud trial, and his wife Neda Morvillo as well as Jonathan Bloomer, the chair of Morgan Stanley International bank, and his wife Judy Bloomer.
There are several reasons why the gold price could rise higher, argues Ole Hansen, head of commodity strategy at investment platform Saxo:
The most important, he says, are:
Geopolitical risks related to Russia/Ukraine, the Middle East and not least uncertainty regarding the November US presidential election.
Strong retail demand in China amid the desire to park money in a sector seen as relatively immune to a struggling economy and property woes and the outside risk of the Yuan devaluing.
Continued central bank demand amid geopolitical uncertainty and de-dollarisation, and not least gold’s ability to offer a level of security and stability that other assets may not provide.
The US presidential election outcome also a cause for concerns as both candidates are prepared to spend money they haven’t got, thereby lifting the US debt levels further.
Rising debt-to-GDP ratios among major economies, not least in the US, raising some concerns about the quality of debt. A worry that saw record demand in Q2 from rich individuals and wealthy family offices through the OTC market.
In addition, we are now increasingly seeing the positive impact of an incoming US rate cutting cycle, a period that historically has seen the yellow metal perform well.
Rate cuts could see interest rate-sensitive investors return to gold via exchange-traded funds (ETFs), which have seen consistent net selling since 2022 when the Federal Market Open Committee (FOMC) began its aggressive rate-hiking campaign.
Tesla faces lowest duty on Chinese-made cars exported to EU
Tesla will face a 9% levy on its Chinese-made cars exported to the EU, the European Commission has said, as it issued an update on its sweeping investigation into Beijing’s “unfair” subsidies of electric vehicles.
The tariff on Tesla – far lower than the 21.3% average on companies that cooperated with the EU investigation and 36.3% on those that did not – came after the California-headquartered firm requested individual treatment as part of the wider Brussels inquiry.
The levies – far lower than the 100% tariffs imposed by the US – come on top of the EU’s existing 10% duty on EVs from China.
EU officials visited Tesla’s Shanghai operations in June and said on Tuesday that the company had benefited from Chinese state subsidies, mainly below-cost batteries, but also cheap land and grants for exporters.
Sarah Rayment, head of global restructuring at Kroll, has said the year-on-year rise in company insolvencies in England and Wales “isn’t cause for alarm”.
Rayment says:
“Certainly, compared to recent years, looking at the big picture, there are reasons to be cheerful.
We are keeping a watchful eye on inflation, but broadly there is growth, as well as confidence and economists expect more cuts to the base rate over the next few months. There is therefore more natural activity with businesses looking to expand and acquire.
However, green shoots do not immediately translate into good news for all companies.
Borrowing costs are still high and many companies are looking to refinance in the coming months.
The question is whether they will have enough financial headroom with higher borrowing costs or whether their lenders will give them enough leeway.”
Updated
The gold price is continuing to climb to new highs.
The spot price of gold has now hit $2,531.60 per ounce, up around 1% today, a new record.
John Reade, EMEA market strategist at the World Gold Council, says hopes of interest rate cuts are pushing gold higher:
Against a backdrop of strong demand from Central Banks, ongoing political and geopolitical related buying, the recent move appears to have been mostly driven by speculators and investors in the Comex Futures Market in New York, probably in anticipation of interest rate cuts from the US Federal Reserve, which is widely expected to start reducing rates in September.
“Later this week we will be monitoring the Fed’s meeting in Jackson Hole, where Jerome Powell will give a speech on the outlook for the economy for the rest of 2024. This is a significant event and will provide insight into whether we can expect a rate cut which will inevitably have an impact on the market.
“We know that gold reacts positively to lower interest rates and can potentially expect further rises as we head into September.”
Stocks are extending their losses in London today, defying the recent optimism that had supported markets.
The FTSE 100 share index is now down 81 points, or 1%, at 8275 points.
BT are still the top faller, down 8%, after rival internet provider CityFibre won a contract to roll out Sky’s broadband services.
Warehouse operator Segro has lost 2.8%, after UBS lowered their price target and lowered their recommendation on the stock from ‘buy’ to ‘neutral’.
Retailers are alsao weaker, with JD Sports (-2.8%), Frasers (-2.7%) and B&M (-2.5%) among the losers.
R3, the insolvency and restructuring trade body, points out that July’s corporate insolvency figures are the highest for any July since 2019.
As covered at 9.51am, were 2,191 registered company insolvencies in England and Wales in July 2024 – 16% more than a year ago, but 7% less than in June.
R3 is hopeful that economic improvements will help companies avoid collapse, saying:
“Recent improvements in market and economic conditions, driven mainly by a successful summer of sport and more stability for businesses following the General Election, have led to better trading conditions for retail, hospitality, and construction businesses. The construction sector is expected to receive a further boost through the government’s planned housing and infrastructure initiatives, although it will take time for them to have an impact.
“The improved economic and business climate should also result in greater acceptance and success of rescue proposals, and businesses of various sizes are showing a growing interest in Restructuring Plans, which is positive news for the profession.
Over in Canada, inflation has dropped to a 40-month low, despite rising fuel prices.
The Canadian consumer price index (CPI) rose 2.5% on a year-over-year basis in July, down from 2.7% in the year to June. That’s the slowest increase since March 2021.
Cost of living pressures eased thanks to cheaper travel tours, passenger vehicles and electricity.
Statistics Canada says:
The decline was largely due to a base-year effect, as prices for travel tours rose 15.5% month over month in July 2023 during the first summer without restrictions related to the COVID-19 pandemic. Similarly, prices for traveller accommodation (-3.7%) and air transportation (-2.7%) fell year over year in July.
Year over year, electricity prices fell 0.8% in July, while prices for passenger vehicles fell 1.4% year over year in July.
But, Canadian motorists paid more at the pumps, with gasoline prices rose up 1.9% year-on-year in July
Prices accelerated the most in the Prairie provinces, partially attributable to reduced supply amid a refinery shutdown in the Midwestern United States [Exxon Mobil’s refinery in Joliet], Statistics Canada added.
Bundesbank predicts Germany will avoid recession
Germany’s central bank has predicted that Europe’s largest economy will avoid falling into recession this year.
In its latest monthly report, the Bundesbank said Germany would avoid a severe economic slump – despite a surprise contraction in the second quarter.
It predicted German GDP would rise in the July-September quarter, having shrunk by 0.1% in April-June.
The Bundesbank explained:
“From today’s perspective, a recession in the sense of a significant, broad-based and long-lasting decline in economic output isn’t to be expected as long as no new negative shocks occur.”
But, while output is expected to “increase slightly” in the third quarter, the Bundesbank cautioned that “this means that the expected slow economic recovery will be further delayed.”
Germany’s economy will avoid a recession, Bundesbank says https://t.co/3X7ndXpnpI pic.twitter.com/VLXQuOHZSi
— Zoe Schneeweiss (@ZSchneeweiss) August 20, 2024
Rising energy costs could push more companies into insolvency, fears John Cullen, insolvency partner at Menzies:
“The increase in compulsory liquidations appears to be a legacy of businesses that have failed since Covid and that is likely to continue for a time yet. The slight decrease in the amounts of insolvencies, seasonally adjusted, is hopefully a sign that we have seen the worst.
However, with the cost of energy possibly on the increase, we will have to wait and see if this trend continues. January and February next year will be telling months in my opinion.”
Insolvency rate still lower than in 2008-09 crisis
One in 177 companies on the Companies House effective register went bust between 1 August 2023 and 31 July 2024, today’s insolvency data shows.
That’s a rate of 56.6 per 10,000 companies – rather lower than during the financial crisis, as there are more companies in existance today.
The Insolvency Service explains:
While the insolvency rate has increased since the lows seen in 2020 and 2021, it remains much lower than the peak of 113.1 per 10,000 companies seen during the 2008-09 recession. This is because the number of companies on the effective register has more than doubled over this period.
More companies went bust in past year than during financial crisis
More companies in England and Wales went bust in the last year than at the height of the financial crisis, the latest insolvency figures show.
There were 25,551 insolvencies in the 12 months from August 2023 to July 2024, new data from the Insolvency Service released this morning shows.
That’s more than in the year from August 2008 to July 2009, when 25,186 insolvencies were recorded (see data here). That period covered the collapse of Lehman Brothers in September 2008, which was followed by the ‘Great Recession’ of 2009.
Rebecca Dacre, partner at Forvis Mazars, the international audit, tax and advisory firm, says:
“The latest insolvency figures are a strong reminder that many businesses are still a long way off from recovery.”
“Despite initial signs of improvement in the economy, some sectors are still experiencing severe difficulty as interest rates remain high. Falling consumer spending during the cost of living crisis has also made it incredibly difficult for some businesses to survive. The retail and hospitality sectors have borne much of the brunt.”
As covered at 9.51am, company insolvencies fell by 7% month-on-month in July, to 2,191, or 2150 on a non-seasonally-adjusted basis.
The worst month for insolvencies in the last year was November 2023, when 2,467 were recorded.
But during the financial crisis, company failures peaked in October 2008 at 2,732.
David Hudson, restructuring advisory partner at FRP, says high interest rates, weak demand and rising costs have all pushed up insolvency levels in recent months.
Hudson adds:
We expect insolvency levels to remain elevated for some time yet.
While economic conditions are improving, there are many businesses that have had their resilience ground down since the onset of the pandemic and that are now carrying large amounts of debt, which they’ll struggle to maintain even with falling rates and strengthening consumer confidence.
Updated
£1bn wiped off BT's value after CityFibre wins Sky deal
One billion pounds has been wiped off the value of telecoms company BT this morning, after Sky struck a broadband deal with one of its biggest rivals.
Sky has decided to roll out its Full Fibre Broadband on internet provider CityFibre’s network.
CityFibre can currently reach 3.8 million customers, and is aiming to more than double that to 8 million premises “over the coming years”.
The partnership looks to be a blow to BT, which currently hosts Sky’s broadband customers on its high-speed Openreach network.
Greg Mesch, CEO at CityFibre says:
“This partnership with Sky is a huge vote of confidence in our business and has cemented CityFibre’s position as the UK’s third digital infrastructure platform.
With demand for digital connectivity continuing to grow, CityFibre’s network can provide the quality and reliability that people need and the infrastructure competition the UK deserves.”
Shares in BT have dropped by 6.8% this morning, down 9.9p to 135.6p, to the bottom of the FTSE 100 leaderboard.
That knocks its market capitalisation down to £13.47bn, down from £14.44bn last night.
AJ Bell’s head of financial analysis Danni Hewson says BT’s shares came under pressure on fears of an enhanced competitive threat for its Openreach broadband operation.
But, she adds:
CityFibre’s modest scale and focus on rural areas suggest it shouldn’t be a huge issue.”
Updated
Gold now over $2,525/oz
Gold is continuing to rally, and has now hit a new alltime high of $2,525.24 per ounce.
Gold traders are refocusing on the prospect of lower U.S. interest rates, attracting Western safe-haven seekers back to the market, as shown by inflows into physically backed products, said Carsten Menke, an analyst at Julius Baer (via Reuters).
Eurozone inflation confirmed at 2.6% in July
We have confirmation that inflation ticked up across the eurozone last month.
The euro area annual inflation rate was 2.6% in July 2024, up from 2.5% in June, statistics body Eurostat reports. That’s in line with the preliminary estimate, at the end of last month.
Eurostat says:
The lowest annual rates were registered in Finland (0.5%), Latvia (0.8%) and Denmark (1.0%). The highest annual rates were recorded in Romania (5.8%), Belgium (5.4%) and Hungary (4.1%).
Compared with June 2024, annual inflation fell in nine Member States, remained stable in four and rose in fourteen.
Core inflation, which strips out energy, food, alcohol & tobacco, was 2.9% for the third month running.
Euro area annual #inflation at 2.6% in July 2024 https://t.co/JeInzNEIEZ pic.twitter.com/LKB05mIauI
— EU_Eurostat (@EU_Eurostat) August 20, 2024
Updated
More than 10,000 people fell into insolvency last month.
Official data shows that 10,524 individuals entered insolvency in England & Wales in July, which is 24% more than in July 2023. It’s slightly lower than in June, when there were 10,548 individual insolvencies.
Company insolvencies fall in England and Wales
Just in: there’s been a welcome fall in the number of companies collapsing in England and Wales.
The Insolvency Service reports that there were 2,191 registered company insolvencies in England and Wales in July 2024. That’s a 7% fall compared with June.
However, it’s 16% higher than a year ago, as there were 1,890 insolvencies in July 2023.
The Insolvency Service says:
The number of company insolvencies remained much higher than those seen both during the COVID-19 pandemic and between 2014 and 2019.
Company insolvencies in July 2024 consisted of 320 compulsory liquidations, the highest monthly number since before the COVID-19 pandemic.
There were also 1,691 creditors’ voluntary liquidations (CVLs), 155 administrations and 25 company voluntary arrangements (CVAs).
Chris Tate, partner at accountancy firm Azets, says poor cashflow management is often the biggest killer for strugging companies, explaining:
“Despite recent encouraging signs, a great many businesses are still being pushed into insolvency while the challenges faced by many others are often proving to be almost insurmountable.
“The August interest rate reduction from 5.25% to 5%, being the first in over four years, was welcomed by business but will not be enough to significantly aid those businesses who are highly leveraged.
“The traditional summer slowdown, added to ongoing economic challenges – extra costs, supply chain issues, pay increases, cautious customer spending – may be a decisive factor for many companies.
Pound hits one-month high
Sterling is also having a strong morning, gaining ground against the weakening US dollar.
The pound has hit its highest level again the US dollar in almost five weeks. It has hit $1.3012, which would be a one-year high if it closed there.
The pound has benefitted from optimism about the UK economy, which has been the fastest-growing G7 economy so far this year.
Gold now over $2,520
The spot price of gold is continuing to climb – and just hit $2,520.67 per ounce….
Update: Hang on, make that $2,521.36…. the rally continues….
Updated
Why gold has hit an alltime high
Interest rate cut hopes, the weaker US dollar, geopolitical instability, demand from some central banks, and the pursuit of safe assets have combined to push gold to its record high today.
So explains Ernesto Di Giacomo, senior market analyst at brokerage XS.com:
One of the main drivers behind this historic surge has been the expectation of a more dovish monetary policy from the U.S. Federal Reserve. With the possibility of further interest rate cuts and increased quantitative easing, financial markets have responded predictably, driving up the price of safe-haven assets like gold. The prospect of a weakened dollar has made gold more attractive to both domestic and international investors.
Additionally, instability in geopolitically sensitive regions, such as Ukraine and the Middle East, has significantly contributed to this rise. Ongoing tensions in these areas have created an environment of uncertainty, leading investors to seek refuge in gold, considered a safe asset in times of crisis. Geopolitical instability has acted as a catalyst, further boosting the demand for this precious metal.
Another critical factor has been the decline in bond yields and the dollar’s depreciation. With falling bond yields, investors have sought alternatives that offer greater security and returns. In this context, gold has emerged as a standout option, attracting a growing number of investors. Moreover, a weaker dollar has made gold more accessible to buyers outside the United States, further driving its demand in international markets.
So far this year, gold has experienced a more than 20% increase, a notable growth driven by central bank purchases and strong demand in China. Central banks, seeking to diversify their reserves, have increased their gold acquisitions, while Chinese demand for jewelry and investment remains robust. This behavior has significantly contributed to the sustained increase in gold prices in global markets.
Updated
Gold hits record high, meaning gold bars worth over a million dollars
Newsflash: the gold price has hit a new alltime high.
Spot gold has risen over its previous record high, set last Friday, to trade at $2,513.79 per ounce this morning.
This extends its recent gains, as gold has been lifted by expectations of cuts to US interest rates starting in September.
Falling interest rates support the gold price, as they make alternative assets such as bonds and cash reserves – which pay interest – less attractive.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
The recent demand boom can be put down to growing expectations that the US Fed is set to cut interest rates in the coming months. Add in central bank buying, demand for portfolio hedges, and global uncertainty; it’s been a recipe for strong demand over the year.
Gold has now risen almost 22% so far this year. And it may have further to rise, with investment bank UBS forecasting prices could reach $2,600 an ounce by the end of 2024.
At current levels, a standard bar of gold is worth one million dollars.
With gold bars typically weighing about 400 ounces, that would make each one worth more than $1 million.
Gold Bars Are Worth a Million Dollars for the First Time
— Amit Paranjape (@aparanjape) August 20, 2024
The common 400 troy ounce (12.4 kg) gold bar is worth a million dollars nowhttps://t.co/LFHfax50Yx
Updated
Sweden's Riksbank cuts interest rates
Newsflash: Interest rates have been cut in Sweden.
The Riksbank has lowered its policy rate by a quarter of one percent, to 3.5%.
It has also hinted it could make three more rate cuts this year – more than previously expected – saying:
Inflation is in the process of stabilising at the target and economic activity is weak.
The Executive Board has decided to cut the policy rate by 0.25 percentage points to 3.5 per cent. If the inflation outlook remains the same, the policy rate can be cut two or three more times this year, which is somewhat faster than the Executive Board assessed in June.
The Swedish cavalry has arrived!
— Shaun Richards (@notayesmansecon) August 20, 2024
The Riksbank has cut interest-rates by 0.25% to 3.5% this morning. https://t.co/vXhFaF0pTy
The UK government is to hold talks with unions this week over pay rises for rail workers and seafarers, as it tries to end industrial unrest and stimulate growth.
The Rail, Maritime and Transport union (RMT) will meet with officials at the Department for Transport on Tuesday to discuss a pay rise for its members at train-operating companies.
The union will be seeking a deal for this year, without any changes to terms and conditions, PA Media reports.
The RMT will also meet Network Rail on Thursday to discuss pay, and will also hold talks later this week with the Ministry of Defence to try to resolve a pay dispute at the Royal Fleet Auxiliary (RFA).
RMT general secretary Mick Lynch said that all offers would be dealt with by the union after talks are completed.
He said:
“We really need to move on from the belligerent and hostile attitude of the last government and reset industrial relations to allow rail workers and RFA seafarers to get on with the job.”
The meetings follow a suggested deal aimed at ending the long-running train drivers’ pay dispute.
Members of the Aslef union are being recommended to vote in favour of a three-year increase worth over 14%.
Key event
European stock markets have opened mostly higher, with the pan-European Stoxx 600 index gaining 0.3% in early trading.
Germany’s DAX and France’s CAC are both 0.3% higher.
But in London, the FTSE 100 has dipped by 14 points or 0.15%. Shell and BP are among the fallers, tracking the decline in the oil price.
Updated
Over in Italy, as fresh search is underway for six people – including tech entrepeneur Mike Lynch – after the Bayesian yacht capsized off Sicily before dawn on Monday.
Lynch’s 18-year-old daughter Hannah, Morgan Stanley International chairman Jonathan Bloomer, and Clifford Chance lawyer Chris Morvillo are also among those missing.
China's July oil imports from Russia fall 7.4%
Speaking of oil….China’s crude imports from top supplier Russia have fallen.
Official data shows that China imported 7.4% less oil in July than a year ago.
Russian oil arrivals, including via pipelines and shipments, totalled 7.46m metric tons last month, or 1.76m barrels per day (bpd), according to data from the General Administration of Customs.
That’s lower than the 1.9 million bpd recorded in July 2023, as well as June’s 2.05 million bpd.
That suggests weaker demand for energy in China, as its economy remains subdued – as export growth slows and factory activity weakens.
This will also make a dent in Moscow’s revenues; Russia has redirected its oil exports from Europe to China, and India, after Western countries imposed sanctions following its invasion of Ukraine.
Oil drops on hopes of easing Middle East tensions
Oil is not joining the rally, though.
Brent crude, the international benchmark, has dropped 0.5% this morning to a near-two-week low of $77.29 per barrel.
That adds to its $2/barrel fall on Monday, on hopes of success in the Middle Eastern peace talks.
#CrudeOilPrices #WTI #Brent #oil has started to fall again pic.twitter.com/GspbcPcM15
— Polyestertime (@Polyestertime) August 20, 2024
US secretary of state Antony Blinken is visiting the region, again; yesterday he met with Israel’s prime minister Benjamin Netanyahu for three hours. Netanyahu’s office says the meeting was “positive and conducted in a good spirit”.
Kyle Rodda, senior financial market analyst at Capital.com, says:
Reports that the US have cajoled Israeli Prime Minister Benjamin Netanyahu into a ceasefire agreement raised hopes of a de-escalation in the Israel-Gaza war.
The markets remain on the lookout for potential reprisals from Iran on Israel for the assassination of Ismail Haniyeh, which could reinflame tensions. Regarding a potential ceasefire, the onus shifts to Hamas and whether it accepts the arrangement.
Introduction: Markets lifted by soft-landing hopes
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Global stocks continue to push higher, on hopes that policymakers are executing a ‘soft landing’ in their battle against inflation.
After gains on Wall Street last night, shares across Asia have hit a one-month high today – as investors continue to move on from the volatility that gripped markets last week.
MSCI’s index of Asia-Pacific shares outside Japan hit a one-month high, before dipping back slightly, while Japan’s Nikkei has surged by 1.8%, or 674 points, up to 38,062 points.
The rally is being driven by expectations that the US Federal Reserve will start to cut its key policy rate next month, and that America will dodge a recession.
Jerome Powell, the head of the US Federal Reserve, could cement those hopes – or shake them – when he speaks at a major economic symposium in the Rocky Mountains resort of Jackson Hole on Friday.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
The week kicked off on a positive note on expectation that when Federal Reserve (Fed) Chair Jerome Powell speaks at the Jackson Hole meeting on Friday, he will deliver a strong hint that the rate cuts will begin soon in the US.
How soon? Probably in September? By how much? Probably a reasonable 25bp? Would the markets be upset with the idea of a 25bp cut instead of a 50bp? Probably not, because a 50bp cut would require a severe economic slowdown, a crisis or a panic mode, which is not good for risk appetite.
Therefore, the best of both worlds would be the hint of a 25bp cut that would keep the market mood in the sweet soft-landing spot. And this is what investors hope to hear.
European markets are set for a mixed open, with Germany’s DAX being called higher but the FTSE 100 expected to fall a little.
The agenda
8.30am BST: Sweden’s Riksbank interest rate decision
9.30am BST: UK insolvency statistics for July
10am BST: Eurozone inflation report for July (final reading)
1.30pm BST: Canadian inflation report for July
Updated
