Closing summary
Mike Ashley’s Frasers Group has decided not to make a further bid for the British luxury handbag maker Mulberry, following the rejection of its previous offers, expressing concern for what it called the brand’s “clear lack of a commercial plan”.
Frasers, which already owns 37% of the company, had made a series of offers for the luxury fashion brand, all of which have been rebuffed.
Mulberry’s largest shareholder, Challice, a group controlled by the Singaporean entrepreneur Christina Ong and her husband, had previously said it had no interest in selling its shares. Challice has a 56% stake, meaning that is able to block any deal.
The final offer from Frasers on 22 October, of 150p a share, was rejected by Mulberry’s board as being “untenable”.
The dollar has rallied, rising by 0.3% to 104.44 against a basket of major currencies. Against sterling, it firmed by 0.3% to $1.2945.
The US economy has been boosted by strong economic data and investors betting that Donald Trump can clinch next month’s presidential election.
Gold prices hit a new all-time high amid rising geopolitical tensions in the Middle East. Spot gold hit $2,752 an ounce but is now trading 0.8% lower at $2,727 an ounce.
Oil prices fell more than 2% earlier and Brent crude, the global benchmark, is now down by 0.7%, or $0.54 a barrel, at $75.51 a barrel, after industry figures pointed to a rise in US inventories.
Our other main stories:
Thank you for reading. We’ll be back tomorrow. Take care! – JK
Bank of Canada cuts rates by half point
The Bank of Canada has cut interest rates by half a percentage point to 3.75%, and economists are expecting another cut of the same magnitude at the next meeting in December.
It said in a statement:
With inflation now back around the 2% target, Governing Council decided to reduce the policy rate by 50 basis points to support economic growth and keep inflation close to the middle of the 1% to 3% range. If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further.
Stephen Brown, deputy chief North America economist at Capital Economics, said:
The weak economic backdrop means there is a strong case for the Bank of Canada to follow its larger 50bp cut today, which took the policy rate to 3.75%, with another 50bp move at the next meeting in December.
it seems unlikely to us that the 50bp cut today will be a one-off. The Bank seemed to leave the door open to another larger move.
With little sign that economic growth is accelerating fast enough to close the output gap, and assuming further encouraging CPI [consumer price inflation] data releases, we continue to expect another 50 basis point cut from the Bank in December. That would take the policy rate to 3.25% by year-end, the top end of the Bank’s 2.25% to 3.25% neutral range estimate, after which we would expect the Bank to revert to 25bp cuts until the policy rate reaches 2.25% in mid-2025 - although the risks to that terminal rate forecast now seem to lie to the downside.
Boeing CEO promises ‘fundamental’ culture shift amid strike and cash crunch
Boeing’s chief executive, Kelly Ortberg, has laid out a turnaround plan, including a push for a “fundamental culture change”, as the struggling planemaker grapples with a crippling strike, mounting debt and heightened cash burn.
The company plunged to a $6.2bn loss between July and September, as revenues fell by 1% to $17.8bn. It reported a work backlog of $511bn, including more than 5,400 commercial planes.
Ortberg stressed the need for improving performance in its defence business and its 737 Max and 777 programmes while broadly stabilising Boeing, which is “at a crossroads” after lapses in its performance disappointed customers and eroded trust.
Ortberg told the planemaker’s employees in a message containing prepared remarks for his first earnings call as CEO:
This is a big ship that will take some time to turn, but when it does, it has the capacity to be great again.
Ortberg’s call to arms follows sweeping plans for significant downsizing announced earlier this month as a strike by about 33,000 workers that has dragged on for more than a month hit production of models including its bestselling 737 Max jet.
The former Rockwell Collins executive, who took the helm of the US planemaker in August, said he was hopeful that a new contract proposal being voted on Wednesday by more of the striking workers would be approved, though analysts say ratification is not certain.
It is a crucial day for the planemaker, which was already struggling with the fallout from a regulator-imposed cap on production of Max aircraft after a harrowing midair door panel blowout.
Updated
Unilever is relocating its ice-cream business from Rotterdam to the heart of Amsterdam’s city centre, as it gears up for a potential sale or stock market flotation of the business.
About 450 employees are expected to move into the new office in the touristy flower market area in Reguliersdwarsstraat early next year, Bloomberg News reported, citing a spokesperson. Along with the rest of Unilever’s nutrition business, the division is currently based in Rotterdam.
In July, Unilever said it was “on track” to demerge its ice-cream business, which includes Magnum, Ben & Jerry’s, Cornetto and Wall’s, by the end of next year. It wants to focus on faster growing products like beauty that don’t require freezing.
That kicked off a battle over whether the ice cream business, which reported revenue of €7.9bn last year, will be listed in Amsterdam or in London, where Unilever is headquartered.
The company has entered initial discussions with buyout firms interested in buying the ice-cream business, valued at about £15bn, Bloomberg reported previously.
Sports Direct owner Frasers walks away from Mulberry bid
Mike Ashley’s Frasers Group, the owner of Sports Direct and other retail brands, has walked away from plans to mount a takeover of the British handbag maker Mulberry.
The moves a day after Mulberry rejected an increased £111m bid from Frasers Group, describing it as “untenable”. Frasers owns 37% of Mulberry but has faced firm opposition from the company’s biggest shareholder, Challice, a group controlled by the Singaporean entrepreneur Christina Ong and her husband. Challlice has a 56% stake and can block any deal.
Frasers, which owns the House of Fraser department stores, Evans Cycles and the Flannels luxury streetwear chain, said in a statement today:
Frasers has become increasingly concerned over the governance of Mulberry, the apparent lack of a commercial plan against a backdrop of increasing market headwinds, and critically, the financial position in which Mulberry currently finds itself…
Frasers also remains concerned about the governance of Mulberry, and in particular, would not like to see another scenario where the board chooses to exclusively engage with Challice in private on significant matters, such as the emergency subscription of £10m announced on 27 September.
Frasers said that it “remains a long-term supporter of the well-loved British brand” and expressed hope that Mulberry will now appoint a Frasers representative to the board.
Mulberry shares have fallen by 8.5% today, valuing the company at £74m.
Updated
Alzheimer’s drug rejected for widespread NHS use in England
A new Alzheimer’s drug has been rejected for widespread use by the NHS in England after the health spending watchdog said that it “does not currently demonstrate value for the NHS”.
The news comes as the UK’s medicines regulator said donanemab could be licensed for use in the UK.
It is the second disease-modifying Alzheimer’s drug to be rejected by the National Institute of Health and Care Excellence (Nice) in a matter of months.
Donanemab, manufactured by US pharmaceutical company Eli Lilly, is a targeted antibody drug that slows down the early stages of Alzheimer’s.
The drug, and another new drug for Alzheimer’s called lecanemab, sold as Leqembi, developed by Japan’s Eisai and the US firm Biogen, have been billed as a huge step forward in research because they target a known cause of the disease, rather than just treating the symptoms.
HSBC CEO: 'some' senior staff face redundancy
Some senior HSBC staff should brace for job cuts after the bank’s latest restructuring, the bank’s new chief executive Georges Elhedery told staff in a memo seen by Reuters.
After announcing one of the bank’s biggest shake-ups in recent years, he wrote in the memo to staff:
Inevitably some of our colleagues will face redundancies as we streamline duplicative senior roles.
The leadership team will spend more time with you in the coming days to explain these changes in more detail and to give you the opportunity to ask questions.
Yesterday, the London-headquartered bank, which focuses on Asia, said it would merge some operations and split its geographic footprint into east and west, in an effort save money, partly by stripping out overlapping management roles.
HSBC is splitting its operations into four main businesses: UK, Hong Kong, corporate and institutional banking, and wealth banking.
Those changes should “boost accountability for each of the businesses, identifying underperforming areas more clearly,” Morningstar analyst Michael Makdad said.
The reorganisation follows a similar one by Barclays earlier this year, which split its business into five units in a move that chief executive C.S. Venkatakrishnan said would help to make clearer how each was performing.
Oil prices fall 2% on US crude stocks
Oil prices are tumbling after industry data showed US crude inventories rose more than expected,
Brent crude futures dropped by $1.50 a barrel, to $74.54 a barrel while US crude fell by $1.50 to $70.24 a barrel, both down by around 2%.
US crude stocks rose by 1.64m barrels last week, Reuters reported citing market sources and figures from the American Petroleum Institute.
Oil prices are still up by 2% this week, though, amid worries about the continuing conflict in the Middle East.
Taylor Swift fans and Olympic visitors pushed record-breaking numbers of passengers to travel through Heathrow between June and September, leading the airport to raise the possibility of reinstating its dividend for the first time in four years.
The airport said it saw consecutive weeks with record passenger numbers during the summer, with a total of 30.7 million travellers passing through from June to September. This brought the total number of passengers for the first nine months of the year to 63.1 million.
Heathrow said it saw a late summer spike in departures thanks to Olympic travellers enjoying European city breaks following the Paris games, as well as music stars playing in London, where Bruce Springsteen, Kylie Minogue and Shania Twain all took to the stage.
The airport experienced the busiest day for departures in its history on 24 July, followed by its busiest-ever arrivals day on 2 September.
As a result, Heathrow has increased its 2024 passenger forecast to 83.8m, up from the 82.4m it forecast in April.
The airport also raised the prospect of restarting its dividend this year. It said in a statement to the stock market that no dividends are currently forecast for 2024, but are “probable subject to financial performance”.
It comes as Heathrow made a pretax profit of £696m in the first nine months of the year, compared with £618m during the same period a year earlier.
Finance bosses eye fresh UK return to office push, KPMG says
More than three quarters of Britain’s financial sector bosses plan another push to get workers to spend more time in the office over the next 12 months, according to a survey of 150 industry leaders by KPMG UK.
The findings, shared with Reuters, also showed more than a third of those bosses will expect employees to be in the office at least four days a week.
Many employers have struggled to lure their workforces back to the office since the pandemic, when lockdowns forced millions to work from home.
An earlier study by KPMG in July 2023 found just 10% of financial services staff wanted to work in the office full time.
But the reluctance to return to pre-pandemic working patterns has led to a sharp drop in occupancy rates at many expensive city centre headquarters and junior staff are finding it tougher to work from home than older workers, some bosses argue.
Some are also worried about the regulatory and risk pressures posed by hybrid working, though 58% of those polled said flexible working could help their firms be more competitive.
Amazon has decreed a five-days-a-week office-working policy, and one of its top executives told staff this month they should look for a job elsewhere if they did not like the policy, echoing similar sentiments expressed by executives at Goldman Sachs and JP Morgan.
According to the latest KPMG survey, bosses intend to monitor office attendance in various ways, with 45% planning to track staff using swipe systems and just under a third saying they would install digital cameras.
Karim Haji, global and UK head of financial services at KPMG, said:
There is no one-size fits all approach to this and businesses are still trying to find the hybrid working sweet spot more than two years on from the pandemic.
Leaders see the commercial value of hybrid working models, particularly when it comes to attracting and retaining talent, but they are still expecting greater office attendance in the coming months to retain collaboration with colleagues and clients.
Volvo expects sales growth to stall
Volvo Cars has said it expects sales growth to stall through to the end of the year as demand drops across the global car industry.
The Swedish carmaker said it will experience “minimal volume growth during the fourth quarter”, and cut its forecasts for sales across the whole year. It said it expects sales growth of 7% and 8%, down from an earlier forecast of 12% to 15%.
Car companies around the world are battening down the hatches as sales slow, amid higher interest rates and slowing economies in some key markets.
The slowdown has also prompted several companies to slow their transition to battery electric vehicles, because manufacturers for now make less money on the cleaner technology compared to petrol and diesel. Volvo last month delayed its plan to sell only battery electric cars by 2030, opting instead to continue to sell hybrids.
The carmaker, which is owned by China’s Geely Group, said today that “weakness in the market has recently accelerated” across the entire car market. That has also dragged down demand for premium cars, such as its £96,000 EX90 electric SUV.
Volvo said that “the car market in the company’s main regions of Europe, China and the US is increasingly under pressure which affects demand”. Jim Rowan, Volvo’s Scottish chief executive, said:
Our industry is facing an increasingly volatile environment. Macroeconomic headwinds are intensifying, as is geopolitical complexity.
The company expects premium sales to increase by only 1% this year. The premium segment had previously been more resilient than the market for cheaper cars. Volvo will also have to contend with tariffs on Chinese imports to Europe, the US and Canada, which will affect its ability to export from Chinese factories.
Here’s our full story on the UK’s competition watchdog’s decision to launch a formal investigation into the £3.3bn takeover of the UK soft drinks maker Britvic by the Danish brewer Carlsberg.
Reckitt 'thriving' in China, says CEO
Reckitt Benckiser boss Kris Licht said the consumer goods company’s business in China is “thriving” with double-digit sales growth there while rivals struggle.
The company, whose products include the stomach pill Gaviscon and Durex condoms, posted a 0.5% drop in like-for-like sales in the third quarter, but this was not as bad as feared. Analysts had pencilled in a 1.7% decline.
Reckitt took a £100m hit to sales of its Mead Johnson baby formula powder after a tornado damaged a key warehouse in the US in July.
Reckitt shares rose by about 3%, making it one of the biggest risers on the FTSE 100 index. The stock fell sharply earlier this year as investors worried about an internal investigation into its Middle Eastern business and litigation over its premature baby nutrition formula Enfamil made by its US-based Mead Johnson division. The company is considering whether to sell the business.
Licht’s remarks on China contrast with other companies such as L’Oréal, which yesterday blamed worsening demand in China for weaker-than-expected quarterly sales. And Procter & Gamble, the world’s biggest consumer goods company, was downgraded by some analysts in recent months due to its exposure to China.
China’s economy has struggled to recover since the Covid-19 pandemic, and grew at the slowest rate since early last year between July and September.
Licht said Reckitt, whose Dettol disinfectant is popular in China, regularly launches products in the country on an initially exclusive basis, before launching them elsewhere, and the company has invested in China in recent years. He told Reuters:
Our business in China is thriving, and we’re seeing double-digit growth in that business year on year.
We’re feeling very optimistic, actually, about our business in China.
Adam Vettese, market analyst at eToro, said:
Some investors may have been fearing the worst this morning as Reckitt issued their latest trading statement. The firm is beset with legal issues in relation to its baby formula product and a multi-million dollar verdict hanging over them. Instead, there was a sigh of relief as the company, whose brands include Nurofen, Dettol and Durex, reported better-than-expected like-for-like sales than analysts expected. The health division did a lot of the heavy lifting.
Shares have climbed 20% since plunging to decade lows off the back of the legal issues, which is great for any opportunists that got in at that level and somewhat of a relief for longer-term investors, although they are not out of the woods yet. The firm says it is on track to meet its full year guidance which I’m sure shareholders are happy to hear. It is the legal woes however that they really want to see the end of.
Updated
McDonald's shares fall after E coli outbreak
McDonald’s shares have dropped 6% in pre-market trade, after news of an E coli outbreak that resulted in at least one death was linked to the fast food chain’s “Quarter Pounder” hamburgers, according to US public health authorities.
The US Centers for Disease Control and Prevention (CDC) said on Tuesday that there have been 49 cases in this outbreak which spans 10 states. Ten people have been hospitalized in this onset of cases. The CDC said:
This is a fast-moving outbreak investigation. Most sick people are reporting eating Quarter Pounder hamburgers from McDonald’s and investigators are working quickly to confirm which food ingredient is contaminated.
The agency noted that “McDonald’s has pulled ingredients for these burgers” and they won’t be available for purchase in some states. Most of the people who have fallen ill are in Colorado and Nebraska, officials said.
Let’s get back to the rallying dollar, and the “Trump trade” which has lifted the US currency against a basket of rivals – along with stronger economic data that led markets to scale back expectations of interest rate cuts.
The dollar index rose by 0.2% to 104.36, the highest since early August. Against the pound, the dollar ticked up to $1.2984 this morning.
In bond markets, yields (or interest rates) on US government bonds known as Treasuries rose to three-month highs.
Alix Stewart, fund manager at Schroders, explained on BBC radio 4’s Today programme:
Markets seem to be pricing in pretty much in line with the betting markets, which are now moving pretty much in Trump’s direction. Actually, when you look at the polls, it is much, much closer.
Looking at the wider impact of a second Trump administration, she said:
If it’s Trump with a clean sweep so he has both houses, then it’s expected that he can enact more contentious policies, like his tariff policy, which would obviously have impacts on inflation and also the cost of borrowing longer term in the US.
The International Monetary Fund has warned that the trade tariffs favoured by US presidential candidate Donald Trump could hurt global growth, as it upgraded its forecast for the UK economy.
Q: So how do those policy decisions impact inflation and therefore the cost of borrowing?
The tariff trade is one part of it. But people are looking back to when he was elected the last time, and what happened in terms of being quite aggressively going for growth and not being quite so bothered about the public debt limits and how much he’s borrowing. And obviously that’s one of the things that bond markets particularly are concerned about, particularly in terms of the cost of borrowing.
Updated
Lloyds backs upcoming budget
Lloyds Banking Group has backed the Labour government’s upcoming budget and played down the impact of potential tax hikes, which its chief executive said would likely be part of a “constructive, pro-growth agenda.”
The bank’s support for Labour’s agenda will come as a boost to the government, as it faces criticism from some employers over plans to increase workers’ rights and hike employer national insurance contributions (NICs).
Chief financial officer William Chalmers would not be drawn on the potential impact of specific tax proposals on Lloyds – including raising NICs, or the potential cancellation of stamp duty exemptions. However, he said he welcomed a budget package that was “consistent” with government pledges to kick-start growth and investment in key areas like energy, infrastructure and housing.
“Whatever the tax changes might be, we believe that they will be pursued in the context of a constructive, pro-growth agenda. And it’s that overall balance that we’re really looking for, and indeed it’s that overall balance, that pro-growth agenda, that we would seek to be a part of going forward.”
Lloyds has been working more closely with Labour in recent months, with the party having launched a charm offensive in the City in the run-up to July’s general election.
Last year, chief executive Charlie Nunn started advising Labour on its investment plans as part of its British Infrastructure Council, which relaunched last week as a government taskforce. And earlier this month, the bank was a headline sponsor of the government international investment summit, which is said to have come with a price tag of up to £250,000.
Co-op boss: Real living wage rise lifts wage bill by £100m
The boss of the Co-op Group said the impact of mooted business tax hikes, such as employers paying national insurance on their workers’ pensions, will cost the company “millions” while the real living wage increase has increased its wage bill by £100m.
Shirine Khoury-Haq welcomed Labour’s proposed workers’ rights package but, like business groups, urged the government to introduce the measures in consultation with businesses. Speaking on BBC radio 4’s Today programme, she said:
Please give as much advance warning as possible and work with business to be able to implement this in a considered way.
Asked about the impact of the rumoured rise in employer national insurance contributions (NICs) that the government could announce in the budget next Wednesday, she said:
It’s in the millions. We’re still working that through, but it is a significant impact, as the real living wage increase was as well, our wage bill increased by about £100m. For me as a business leader, I have to balance wanting to pay my colleagues absolutely fairly and linking pay to inflation as it should be with how we run our business and how we make sure that we can continue to maintain the profitability that we need.
Business groups have warned that the NICs rise could hit hiring and limit pay rises, but the Co-op chief executive said it would have no impact on pay rises at the company, which employs 65,000 people.
Absolutely not the case. They will be getting the pay increases we have committed to paying the real living wage. The question then becomes, how we balance everything else in the business to be able to afford that.
Employment rights reforms could cost businesses up to £5bn a year, according to the government’s own analysis, which also found the changes will benefit low-paid employees the most, with some shift workers potentially earning an extra £600 a year.
Khoury-Haq also called for an overhaul of the business rates system.
We’ve long called for reform of the business rate system, which we believe is fundamentally broken. And you only have to look at our UK high streets to see that it’s an issue for us. Our business rates have increased £20m over the last two years. That’s 20% up to £111m per annum. So we are hoping that the budget will address that in order for us to be able to revitalise our high streets.
Updated
Real living wage rises to £12 an hour as cost of living crisis continues
Almost half a million workers in the UK whose employers are signed up to pay the voluntary real living wage are in line for a pay rise to at least £12 an hour, taking their annual wage to £3,000 a year above the government’s minimum wage.
The Living Wage Foundation said employers in London that are part of the scheme will pay an enhanced rate of £13.15 an hour to cope with the extra costs of living in the capital.
According to the charity that sets the rate, the rise was needed after research found the cost of living crisis continued to affect many of Britain’s low-paid workers.
It said recent polling of those earning below the real living wage found 60% had visited a food bank in the past year and 39% regularly skipped meals for financial reasons.
Cop29 host Azerbaijan set for major fossil gas expansion, report says
Azerbaijan, the host of the Cop29 global climate summit, will see a large expansion of fossil gas production in the next decade, a new report has revealed. The authors said that the crucial negotiations should not be overseen by “those with a vested interest in keeping the world hooked on fossil fuels”.
Azerbaijan’s state-owned oil and gas company, Socar, and its partners are set to raise the country’s annual gas production from 37bn cubic metres (bcm) today to 49bcm by 2033. Socar also recently agreed to increase gas exports to the European Union by 17% by 2026.
The Cop29 summit, starting on 11 November, comes as scientists say that continued record carbon dioxide emissions means “the future of humanity hangs in the balance”. The International Energy Agency said in 2021 that no new fossil fuel exploitation should take place if CO2 emissions were to fall to zero by 2050.
‘Utter ruin’: Gaza economy would take 350 years to return to pre-conflict level, UN says
Gaza’s economy has been left in “utter ruin” by the year-long war between Israel and Hamas, and it would take 350 years to return to its pre-conflict levels, the United Nations has warned.
In a report on the economic costs of the war prepared by its trade and development wing (Unctad), the UN said the fighting since Hamas killed more than 1,000 Israelis on 7 October last year had devastated the remnants of Gaza’s economy and infrastructure.
The report, presented to last month’s UN general assembly, said economic activity across Gaza – which had been weak before the war – had ground to a halt, apart from minimum humanitarian health and food services provided under conditions of severe water, fuel and electricity shortages, and significant access constraints.
Sellafield cleanup cost rises to £136bn amid tensions with Treasury
The cost of cleaning up Sellafield is expected to spiral to £136bn and Europe’s biggest nuclear waste dump cannot show how it offers taxpayers value for money, the public spending watchdog has said.
Projects to fix buildings containing hazardous and radioactive material at the state-owned site on the Cumbrian coast are running years late and over budget. Sellafield’s spending is so vast – with costs of more than £2.7bn a year – that it is causing tension with the Treasury, the report from the National Audit Office (NAO) suggests.
Officials from finance ministry told the NAO it was “not always clear” how Sellafield made decisions, the report reveals. Criticisms of its costs and processes come as the chancellor, Rachel Reeves, prepares to plug a hole of about £40bn in her maiden budget.
Local transport funding at risk as Reeves considers big budget cuts
Hundreds of millions of pounds of local transport funding in England could be cut in next week’s spending review despite having been agreed with regional mayors, putting bus, tube and tram improvements at risk, report my politics colleagues, Kiran Stacey, Jessica Elgot and Pippa Crerar.
The mayors, most of whom are Labour, are engaged in a last-minute lobbying campaign to stop the Treasury raiding their transport budgets as Rachel Reeves looks for immediate savings.
Officials say that without this moneybus subsidies, rolling out electric buses and schemes to increase walking and cycling could all be delayed or cut. One official said:
The mayors have been pushing back on the idea that their sustainable budgets should be cut, not least because many of them thought the money was guaranteed until 2027.
New Starbucks boss to shake up ‘overly complex’ menu
The new boss of Starbucks has pledged to shake up its “overly complex menu” in an effort to turn around the struggling coffee chain.
Brian Niccol, who joined the company as chief executive in September, said Starbucks needed to “fundamentally change” its strategy in order to win back customers.
The coffee chain reported falling sales, revenue and profit in the fourth quarter, amid weak demand in its US home market and in China, highlighting the challenges facing its new boss.
In a video message, Niccol said he had heard from customers that the chain had “drifted from [its] core” and were visiting less often.
To welcome all our customers back and return to growth, we need to fundamentally change our recent strategy.
UK watchdog launches formal probe into Carlsberg-Britvic deal
Britain’s competition watchdog has launched a formal investigation into Carlsberg’s £3.3bn acquisition of the British soft drinks maker Britvic.
In July, the Danish brewer Carlsberg struck a deal to take over Britvic, known for Robinsons squash and J2O, as it tries to establish a UK beverage “powerhouse”.
The Competition and Markets Authority (CMA) said it is assessing whether the deal will result in a substantial reduction in competition in any market in the UK for goods or services. It has set a deadline of 18 December for its phase-1 decision.
“This is a normal process that was expected, and we look forward to working constructively with the CMA as it progresses,” a Carlsberg spokesperson told Reuters in an emailed statement.
UK government 'closely monitoring' Thames Water
The UK government is “closely monitoring” Thames Water and ready to take action if necessary, according to the environment secretary, as Britain’s biggest water company is battling for its survival, blighted by sewage scandals, fines and huge debts.
Steve Reed told LBC Radio:
We’re closely monitoring the situation with Thames… the company remains viable, but if we have to take action, we are prepared to do that.
The news came after it emerged that water companies in England could be banned from making a profit under plans for a complete overhaul of the system.
The idea is one of the options being considered by a new commission set up by the Department for Environment, Food and Rural Affairs (Defra) amid public fury over the way firms have prioritised profit over the environment.
Sources at the department said they would consider forcing the sale of water companies in England to firms that would run them as not-for-profits. Unlike under nationalisation, the company would not be run by the government but by a private company, run for public benefit.
The nonprofit model, which is widely used in other European countries, allows staff to be paid substantial salaries and bonuses but any profits on top of that are returned to the company.
Deutsche Bank reports profit rise after smaller hit from lawsuits
Deutsche Bank, Germany’s biggest bank, has reported higher profits for the third quarter, after taking a smaller-than-expected financial hit from shareholder lawsuits over its Postbank division. The bank said it would resume share buybacks.
Deutsche paused plans for more share buybacks in July, after booking a €1.3bn litigation charge linked to its botched acquisition of the lender Postbank more than a decade ago. The group has since settled with 80 plaintiffs, about 60% of the lawsuits, and cut provisions by €440m. However, provisions for credit losses doubled from a year earlier.
The investor lawsuits going through the courts in recent years claim that the bank underpaid for Postbank. This has weighed on Deutsche’s share price.
Deutsche reported a profit before tax of €2.3bn between July and September, up 31% from a year earlier, boosted by the litigation provision release. Excluding this, profits rose by 6% to €1.8bn.
Its investment bank beat expectations, with revenues up 11% from a year earlier, mirroring gains at US rivals like JPMorgan and Goldman Sachs.
Deutsche’s chief executive Christian Sewing said:
In these three months, we made important progress in putting legacy litigation matters behind us, while also producing a record third-quarter profit in our operating business.
However, revenues at the retail division, which includes Postbank, were flat, while the corporate bank posted a 3% decline in revenue, worse than expected.
Lloyds shares rose by 0.7% after the results, which came in better than expected.
Richard Hunter, head of markets at interactive investor, said:
Lloyds has kicked off the quarterly reporting season in unspectacular fashion, although there are signs of improving momentum as the year progresses…
Overall, these results do not shoot the lights out, but they do provide a large element of comfort that Lloyds continues on its positive direction of travel towards a more streamlined and digital business, underpinned by a healthy financial position. Moves into other income streams such as credit cards and insurance could well bolster its major mortgage revenue, and the group’s confirmation of its year-end targets is proof that the bank remains on track.
Introduction: Trump trade drives dollar rally and gold hits record high; Lloyds beats profit expectations
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The dollar has rallied, boosted by strong economic data and investors betting that Donald Trump can clinch next month’s presidential election, while gold prices hit a new all-time high amid rising geopolitical tensions in the Middle East.
The dollar is up again today, as markets shortened the odds of a second Trump administration. Strong US jobs figures earlier this month drove investors to scale back their expectations for Federal Reserve rate cuts, also lifting the currency. The dollar index – which measures the US currency against six other major currencies – rose to 104.17, the highest since early August.
Gold prices have hit a fresh record as the conflict in the Middle East along with uncertainty around US interest rates and the US election fuelled demand for safe-haven assets.
Spot gold climbed to $2,752 an ounce, while silver prices also rose, by 3% to $34.78 an ounce.
Over here, Lloyds Banking Group, Britain’s biggest mortgage lender, predicted higher house prices as it reported third-quarter profits ahead of expectations. Chief executive Charlie Nunn credited income growth, cost discipline and strong asset quality.
It made a statutory pre-tax profit of £1.8bn between July and September, down from £1.9bn a year ago, but above City forecasts of £1.6bn.
The bank has raised its forecast for UK house prices to rise by 3.1% this year, compared with an earlier prediction of 1.9%.
The Agenda
Noon BST: US MBA Mortgage applications
2.45pm BST: Bank of Canada interest rate decision
3pm BST: European Central Bank president Christine Lagarde speech
3pm BST: Eurozone Consumer confidence flash estimate for October
3pm BST: US Home sales for September
Updated
