Labour to vote against Theresa May’s deal as talks collapse
We finally have the confirmation of what everyone was expecting: talks between Labour and the Conservatives over Brexit are dead and Jeremy Corbyn’s party will vote against Theresa May’s deal.
Jeremy Corbyn today said talks have gone as far as they can go – and that jostling to be the next Tory leader has eroded the government’s authority.
Here’s the Sun’s political editor:
Thomas Cook shares have slumped even further today, after the troubled travel operator yesterday revealed losses of £1.5bn.
Shares fell by 27% in Friday trading, after a 15% collapse yesterday.
Those shares in the world’s longest-running tour company – which traces its heritage back to cabinet maker Thomas Cook’s day trips from Leicester to Loughborough in July 1841 – are worthless, according to a major investment bank.
Citigroup downgraded its rating on the stock to sell and put its target price at zero – essentially saying that the company is about to collapse.
Connor Campbell, an analyst at Spreadex, says there is a “general sense of hopelessness” around the prospects for a positive development.
The fact Theresa May is set to outline her exit date after the withdrawal agreement bill vote at the start of June means that a) cross-party talks are now almost completely dead, and b) the UK could be facing a hard-liner Brexit prime minister, especially if the European elections go as expected next week.
A reminder: the elections are not expected to go well for the Conservatives, to put it extremely kindly. Polling is showing a mass exodus of Tory voters on 23 May.
Let’s get some more from analysts on the weakness in sterling.
The pound is on track for its worst weekly decline in half a year, according to strategists Jon Gordon, Vincent Heaney, Sagar Khandelwal and Christopher Swann at UBS.
Theresa May’s fourth effort to get a withdrawal bill through – likely in the first week of June – represents one last go for the prime minister.
Though May’s EU departure plan failed to win a consensus during the previous three votes, she’s added a key sweetener this time – her own departure from 10 Downing Street.
And if you have any temptation to try a bit of currency speculation, UBS has some (rather evergreen) advice:
Given high levels of uncertainty, we advise investors against strong directional trades. We expect sterling to remain range-bound over the next six months, with no clear end to the Brexit impasse in sight.
Sterling hits four-month low against US dollar
And there it is – the lowest point for sterling against the US dollar since 15 January.
The pound just traded at a low of $1.2767 – and it’s now down by almost 0.2% for the day after a difficult week.
Against the euro the pound hit its lowest since mid-February, at €1.1427.
Metro Bank faces rebellion by major investor
Britain’s biggest investor, Legal & General Investment Management, plans to vote against the chairman of Metro Bank because of concerns over the lender’s governance.
Metro Bank shares have risen by 18% this morning after successfully raising £375m – but its troubles may not be over.
The bank was founded by outspoken chairman Vernon Hill, who has previously been criticised for governance issues (about work given to his wife’s company) unconnected to the accounting errors which have weighed on its share price.
LGIM on Friday said it will vote against his reappointment, as well as some members of the audit committee and other directors “with whom we have independence concerns”.
The pound is still hovering around three-month lows against the US dollar, as we wait for the latest update on the political front.
If sterling falls below $1.2770 – its lowest so far is $1.2774 – it will represent the lowest point since mid-January.
But Ian Whittaker and Harry Read, analysts at the Liberum investment bank, say that the selloff in Just Eat is “overdone”.
As an online classified marketplace portal like AutoTrader and Rightmove, Just Eat’s market leading position will be incredibly difficult to overcome, especially given its strength in smaller towns.
What we do think is more likely than a serious threat from competitors is that Just Eat – and the other portals – are bought by bigger players looking to dominate the food delivery portal market.
Domino’s Pizza and Just Eat are not the only takeaway food providers whose shares have fallen this morning.
Shares in Netherlands-listed Takeaway.com fell by 3.3% in early trading, while shares in German company Delivery Hero fell by 4.4%.
The selloff in takeaway companies could leave Just Eat vulnerable to a takeover, says Russ Mould, investment director at AJ Bell – even though Amazon has already failed to break into the food delivery market with Amazon Restaurants.
The curse of Amazon strikes again. The online giant is now so dominant the mere mention of its entry into a new industry can leave incumbent companies and their shareholders quaking with fear.
It is worth remembering that Just Eat remains the market leader in the UK. However, this development ramps up the pressure on management as they reshape the business to increasingly offer delivery services alongside an online takeaway platform.
The FTSE 1oo is down by 0.34%, with Just Eat the biggest faller among the blue chips.
Mid-caps on the FTSE 250 are faring worse, down by 0.38%. Drug company Indivior is the worst-performing stock, while Domino’s Pizza has also fallen by 3.1%.
Andrew Bailey is widely regarded as one of the frontrunners in the race to be the next Bank of England governor, but his image might be tarnished by an interesting story (£) in today’s Financial Times.
Bailey, the boss of the Financial Conduct Authority, was heavily criticised by a whistleblower in the scandal surrounding fraud at HBOS, which was taken over by Lloyds.
Sally Masterton was pushed out of Lloyds after writing a report that was heavily critical of Lloyds handling of the fallout from a fraud at HBOS’s Reading branch. She wrote to Bailey to protest about her treatment by Lloyds, the FT wrote.
Kevin Hollinrake, a Conservative MP who has taken a keen interest in banks’ treatment of small businesses, criticised the regulator. He said:
Anyone under consideration for the role of Bank of England governor must be able to demonstrate a willingness to tackle wrongdoing in the banking sector without fear or favour.
Staffline has had a tough few months. Shares in the company, which supplies major supermarkets including Marks & Spencer and Tesco, were suspended in January after it announced an accounting investigation.
And another precipitous fall in today’s trading – now down 53%.
However, recruitment company Staffline is having a worse day. Shares are down by 49% at the time of writing after it issued a profit warning.
Staffline blamed Brexit. Companies are hiring people permanently rather than using temporary workers from agencies in case there are fewer workers available after Brexit, Staffline said.
The ongoing Brexit uncertainty is impacting the UK labour market and led to a number of customers transferring a significant volume of their temporary workforce into permanent employment to mitigate the risk of that labour market tightening.
Just Eat shares slump after Amazon invests in Deliveroo
On the other hand, takeaway platform company Just Eat is the biggest faller on the FTSE 350 after news that a rival is now backed by technology behemoth Amazon.
Amazon is the lead investor in a $575m (£449m) funding round in Deliveroo, the British food delivery app.
Deliveroo, founded in London by former investment banker Will Shu, had been seen as a potential target for food delivery rivals such as Uber Eats – but the presence of the logistical might of Amazon could signal a new round in the intensely competitive sector.
Just Eat has risen to a dominant position in the UK, but shares have come under pressure in recent weeks as rivals have tried to step up their competition. Just Eat shares fell by 8% in early Friday trading.
Shares in Metro Bank surge by 17% after successful fundraising
Investors have welcomed Metro Bank’s efforts to strengthen its balance sheet. Last night it raised £375m in a move it hopes will quash rumours about its financial health that caused customers to pull cash last weekend.
Shares in the lender are the biggest riser on the FTSE 350, up by 17% to about £6.30 at the time of writing.
The bank closed the round on Thursday evening, after raising the amount it sought to raise – but at a steep discount to what investors would have paid before the bank admitted a major accounting error in January.
The error contributed to a run of negative headlines which saw customers start to empty deposit boxes and pull cash out. The Bank of England has this morning stepped in – in an unusual intervention clearly designed to show Metro Bank customers that their money is not at risk.
The Bank of England’s Prudential Regulation Authority said:
The Prudential Regulation Authority welcomes the steps taken today by Metro Bank. Metro Bank is profitable and continues to have adequate capital and liquidity to serve its current customer base. It has raised additional capital in order to fund future growth.
Britain’s FTSE 100 falls by 0.2% at the open. Germany’s Dax falls by 0.5%, while France’s Cac 40 and Spain’s Ibex both lose 0.3%.
Sterling falls below $1.28 for the first time since February
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
In three years of political turmoil it has sometimes seemed as if markets have become bored of following the twists and turns of Brexit, but sterling at three-month lows against the US dollar suggests that the imminent removal of a prime minister is at least worth noting, even in these strange times.
Prime Minister Theresa May has agreed to set a timetable in the first week of June for her departure, after she makes a final attempt to pass her Brexit deal – while the obvious names are already jostling to take her job.
In early Friday trading the pound had edged down against the dollar to hit a fresh low of $1.2780, a level last seen in mid-February. In March it had traded almost at $1.34. Against the euro nine consecutive days of sterling falls represented the longest unbroken slide since the start of the century, according to Bloomberg.
Traders’ optimism that the UK will agree a softer exit from the EU is fading fast, explains London Capital Group’s Jasper Lawler.
Given the Tories sharp losses in the polls and the Brexit party’s dominance in polling for European elections, a hard-line Brexiteer Prime Minister is becoming more likely. The overriding fear for currency traders is that this means that a hard no deal Brexit is back on the table as an option.
European stock markets have had a more bumpy time in the past few days. Concerns over an escalation in trade tensions between the US and China drove big falls on Monday, but some investors were taken aback by the ensuing bounceback. Futures indicate that that enthusiasm may be tempered at the end of the week across Europe’s main indices.
In the City, Easyjet has put out results this morning for the first half of its financial year, saying that weakness in the European economy and – you guessed it – Brexit uncertainty will hit their revenues per seat. The budget airline lost £272m for the six months ending on 31 March.
And the Bank of England has swung behind Metro Bank this morning, with regulators stating that the lender is “profitable and continues to have adequate capital”. Metro last night said it had raised £375m, after it had come under pressure from investors and customers.
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