Closing summary
The Russian rouble has strengthened to around 93 against the dollar in a volatile week, as markets wait for more measures from the authorities to stabilise the currency.
The Bank of Russia’s 350-basis-point rate hike on Tuesday, to 12%, at an emergency meeting appeared to have only a limited effect. The day before, the rouble had slid through the symbolic 100 threshold to nearly 102 per dollar.
Analysts said more measures may be needed to return the rouble to the 80-90 range authorities have deemed acceptable. It is currently trading at 93.6 per dollar, up 1% on the day.
The Russian business daily Vedomosti and Bloomberg News reported that Moscow will not introduce capital controls for now, which would restrict the movement of capital, and instead prepare recommendations for exporters to coax them into surrendering more of their foreign revenues to help stabilise the rouble.
Following a meeting yesterday between president Vladimir Putin and top officials, authorities are now crafting informal measures of capital control, the news outlets reported.
Stock markets are in the red, with BAE Systems one of the biggest fallers on the FTSE 100 index in London, down 4%.
The shares fell after BAE, Britain’s biggest weapons manufacturer, said it had agreed to buy the US space technology company Ball Aerospace for $5.6bn (£4.4bn), in one of the largest takeovers by a UK company this year.
The FTSE 100 defence company said the purchase of the Colorado-based business would help it to expand in technologies that were US defence priorities.
The deal comes amid a surge in spending on global military and spying technology prompted by Russia’s invasion of Ukraine. It also follows the US setting up a separate arm of the military, space command, to try to keep up with China.
Our other main stories:
Thank you for reading. We’ll be back tomorrow. Take care – JK
Updated
Wilko's future in limbo as bid deadline passes
My colleague Sarah Butler has the latest on Wilko.
The future of Wilko’s 12,500 staff hung in the balance on Thursday as they waited to hear whether a serious bidder for the budget retail chain had emerged.
Interested parties in the household goods retailer, which has 400 stores, had until Wednesday night to put forward their best offers for the company that called in administrators last week as it faced running out of cash.
It is expected that dozens, if not hundreds, of Wilko stores will have to close because a bid for the whole group as a going concern is unlikely to have been made, say industry insiders.
However, the full chain is expected to continue to trade into next week as talks on parcelling up the group’s assets are expected to drag on. Administrators are negotiating with potential suitors, including Poundland, B&M, Primark and Home Bargains, for groups of up to 50 stores each.
On Wall Street, the Nasdaq is down 1.1%. UK and European stock indices have also drifted lower, with declines of 0.3% to 0.7%.
The US labour market remains resilient, according to the latest data. Initial claims for jobless benefits fell to 239,000 in the week of 12 August, in line with expectations, from 250,000 the week before, the US Labor Department said.
The four-week moving average of claims, which smooths some of the week-to-week volatility, rose by 2,750 to 234,250.
Initial jobless claims down to 239k vs. 240k est. & 250k in prior week; continuing claims at 1.716M vs. 1.7M est. & 1.684M in prior week … largest increases in VA (+1.1k), IA (+978), & IL (+866); largest decreases in CA (-3.5k), TX (-1.8k), & PA (-1.3k) pic.twitter.com/lLiBCutvgW
— Liz Ann Sonders (@LizAnnSonders) August 17, 2023
Firm building Liverpool’s Anfield Road stand files for administration
The redevelopment of Liverpool’s Anfield Road stand is facing further complications with the main contractor set to go into administration. Liverpool announced last month that their £80m stand was behind schedule and would not be fully open for the first home game of the season against Bournemouth on Saturday. The club has now been notified that Buckingham Group, the main contractors on the delayed project, has applied to enter administration.
Liverpool expect Buckingham to continue work on the planned phased opening of the stand, which will increase the capacity to 61,000, but it remains to be seen whether the contractor can meet the rearranged schedule completion date of October.
Updated
York biotech Aptamer to cut jobs
Aptamer Group, a York-based biotech that makes synthetic antibodies capable of binding to targets such as tumour cells, has raised £3.6m from investors and plans to lay off some people.
It hopes to break even within two years. To that end, the firm intends to slash costs from £6.4m last year to £3.5m this year, partly through job cuts. It had about 60 people at the end of last year, when I visited their labs next to the university campus in York. Aptamer said:
This reset of the cost base is expected to be completed by the end of September 2023 with a reduction in operational headcount to the level required to meet forecasted revenues over the next several years.
The company explained:
Since IPO [in late December 2021], Aptamer has found that whilst there is significant appetite for its technology, reaching and securing licensing agreements is taking much longer than anticipated and can be impacted by factors outside the Group’s control.
The board has been reshuffled, with Stephen Hull becoming executive chairman, replacing Dr Ian Gilham. Co-founder Dr Arron Tolley now serves as chief technical officer while the other co-founder Dr David Bunka, is chief scientific officer. The company is looking for a new chief executive.
Updated
EY cuts pay and jobs – FT
The accounting firm EY has reportedly told staff in the UK to expect lower pay rises and bonuses than last year, and will lay off some staff to save costs.
The Financial Times reported that bonus pools will be smaller than last year and will be split among a smaller group; for some teams they will more than halve this year.
The firm also prepares to axe more than 5% of its 2,300 strong financial services consulting practice, the newspaper reported. This is less than in the US, where EY is cutting 3,00 jobs.
EY’s UK partners were paid a record of £803,000 on average in the financial year ended June 2022.
Updated
Norges Bank hikes rates to 4%
Norway’s central bank raised its benchmark interest rate by a quarter point to 4% this morning to try and bring inflation down, and signalled it would hike again in September.
The move had been widely expected. A majority of economists are expecting rates to peak at 4.25% by the of the third quarter, in line with the Norges Bank’s projection.
Central bank governor Ida Wolden Bache told Reuters:
What we are signalling at today’s meeting is that most likely, if the economy evolves as projected, we will raise the policy rate in September
Norway’s annual core inflation, excluding energy costs, was 6.4% in July, down from a record 7% in June. It has been above the bank’s 2% target since February last year.
If the Norwegian krone is weaker than projected or pressures in the economy persist, the policy rate may have to rise to more than 4.25%, Norges Bank said.
Eurozone in €23bn trade surplus as Russia imports fall
The eurozone swung back to a big trade surplus in June from a deficit 12 months earlier because imports from Russia and China fell sharply.
The 20 nations sharing the euro posted a trade surplus of €23bn in June, compared with a deficit of €27.1bn in June 2022, according to the EU’s statistics office Eurostat.
Exports edged 0.3% higher while imports fell by 17.7%.
The improvement was mainly a result of a sharp decline in the trade deficit with Russia following western sanctions imposed over Moscow’s invasion of Ukraine, and with China.
The EU’s trade gap with Russia shrank to €8.7bn in the first six months of the year from €92.1bn a year earlier. With China, the trade deficit fell to €147.8bn from €189.3bn.
Gatwick airport strike called off after better pay offer
Strike action by workers at Gatwick Airport has been called off after an improved pay offer.
Members of Unite employed by the ground handling company Red Handling were due to strike tomorrow but they will now be balloted on the new offer.
Unite regional officer Dominic Rothwell said:
Unite has been consistent from the outset, we believed that Red Handling could afford to make an improved offer and that proved to be the case. Our members will now decide whether the deal on the table meets their expectations.
However, if workers reject the offer, strike action planned from 25 to 28 August will go ahead.
And the rouble continues to climb: now up more than 2% at 92.55 per dollar.
The rouble is now at 93.1 to the dollar, up 1.6% on the day.
Rouble recovers after Russia turns screws on exporters
The rouble seems to like it and has strengthened a bit, to 93.8 per dollar.
Here’s more from Bloomberg:
Russia’s government will hold off on stiffening restrictions on the movement of capital and instead prepare recommendations for exporters to coax them into surrendering more of their foreign revenues to help stabilise the rouble.
Following a meeting on Wednesday between President Vladimir Putin and top officials, authorities are now crafting informal measures of capital control, according to three people familiar with the discussions.
Guidelines for large exporters are being prepared on an individual company basis and will go beyond mandating the sale of foreign proceeds to include hard-currency transfers such as dividend payments and loans, said the people, who requested anonymity to speak about deliberations that aren’t public.
Putin was informed of the plans at the meeting that included central bank Governor Elvira Nabiullina and Finance Minister Anton Siluanov, according to the Russian business daily Vedomosti. Despite the ruble’s gains this week, it’s still among the three worst performers in emerging markets, having lost about 22% since the beginning of the year.
Updated
Russia won't tighten capital controls for now – reports
Russia won’t tighten capital controls for the time being after officials reached an informal agreement with exporters to surrender more of their foreign revenues, Bloomberg News reported, citing the business daily Vedomosti.
President Vladimir Putin discussed possible measures at a meeting that included Bank of Russia Governor Elvira Nabiullina and Finance Minister Anton Siluanov, the newspaper said. Authorities opted to monitor exporters for now, instead of mandating stiffer restrictions on sales of foreign-currency proceeds.
Russia won’t tighten capital controls for the time being after officials reached an informal agreement with exporters to surrender more of their foreign revenues, according to the business daily Vedomosti https://t.co/yYqca74UT6
— Bloomberg (@business) August 17, 2023
Detection tools being developed to combat the growing threat of deepfakes – realistic-looking false content – must use training datasets that are inclusive of darker skin tones to avoid bias, experts have warned.
Most deepfake detectors are based on a learning strategy that depends largely on the dataset that is used for its training. It then uses AI to detect signs that may not be clear to the human eye.
This can include monitoring blood flow and heart rate. However, these detection methods do not always work on people with darker skin tones, and if training sets do not contain all ethnicities, accents, genders, ages and skin-tone, they are open to bias, experts warned.
Over the last couple of years, concerns have been raised by AI and deepfake detection experts who say bias is being built in these systems.
A two-week strike due to hit a British munitions plant that supplies missiles to Ukraine has been suspended after the Ministry of Defence agreed to talks.
Nearly 50 workers at the site at Beith, in Ayrshire, which assembles the Storm Shadow and Brimstone missiles, had been due to walk out for a fortnight next Monday in a long-running row over pay and bonuses.
Strikes by GMB members were the first in the history of Defence Equipment & Support, the MoD agency that handles the military’s supplies, equipment and weapons and runs the Beith site.
Our special correspondent Heather Stewart has spoken to some older people who are returning to work – “unretiring,” either through choice or necessity.
“I’m into my fifth week now: I’m a newbie!” says 60-year-old Andy Barnard, who was a regular customer at his local Co-op in Lincoln before the manager suggested he apply for a job.
“It ranges from working on the tills, on the shop floor, stacking stuff and just generally doing everything,” he says of his new 16-hours-a-week role.
After 45 years in bricklaying, from which he retired in March, it’s taking Barnard a while to master the hi-tech tills and lottery machines. But he is enthusiastic. “All the girls and the staff they just take the mickey all the time, which is great fun. You get the regulars coming in and it’s good banter.”
Living locally with his mum and their four dogs, the money Barnard earns helps him avoid dipping into his savings.
During the pandemic and its aftermath, thousands of older workers left their jobs – whether for health or family reasons, or a straightforward decision to retire.
The sharp increase in economic inactivity among this age group concerned policymakers, coming at the same time as employers reported struggling to recruit suitable staff.
New offshore windfarms will be strangled by government red tape, costing UK billpayers £1.5bn a year, an analysis has found.
The latest government auction for new offshore windfarms, due to be completed in September, could result in few projects making it through Treasury rules, according to the Energy and Climate Intelligence Unit (ECIU), a non-profit organisation.
Rules set by the Treasury do not take account of predictions that the gas price will stay high and put an arbitrary limit on the number of farms that can be contracted. They mean that the budget set in the government’s contracts for difference auction is unlikely to be spent, because many windfarms will not get through the auction, so bills will be kept higher.
Covid vaccines should be made available for people to buy privately in Britain, leading scientists have urged, amid concerns over a new wave of the virus which could worsen in autumn and winter.
Unlike flu jabs, which individuals or employers can buy for about £15 from high street pharmacies, Covid jabs are only available on the NHS in the UK.
This month the UK government announced that the Covid autumn booster programme would cover a smaller pool of the population than earlier vaccination drives. The age limit has been raised from 50 to 65 and above, with some younger vulnerable groups also eligible.
Covid is on the rise, according to the UK Health Security Agency (UKHSA). Experts raised concerns the wave could continue to grow and add to winter pressures on the NHS.
Let’s have a look at the other news.
Rishi Sunak has pledged to stick to the pension triple lock despite signs the guarantee to older people will cost the Treasury an extra £10bn next year – £2.5bn more than estimated in the spring budget.
The prime minister insisted he was comfortable with pensioners receiving the full annual uplift. The state pension costs the taxpayer £124bn this year and is on course to rise by a further 8% in April, according to the latest economic data.
“Of course the government is committed to its policy on the triple lock,” Sunak told ITV, brushing aside concerns about the affordability of a scheme introduced by the David Cameron-led coalition government in 2010.
Under the triple lock, pensions rise each April by whichever is highest: pay growth, inflation or 2.5%. A period of soaring inflation has seen the cost of the scheme surge since 2022, causing the government’s own spending watchdog to question the long-term viability.
Here is our full story on the big BAE Systems deal:
Britain’s biggest weapons manufacturer, BAE Systems, has agreed to buy the US space technology company Ball Aerospace for $5.6bn (£4.4bn), in one of the largest takeovers by a UK company this year.
The FTSE 100 defence company said the purchase of the Colorado-based business would help it to expand in technologies that are US defence priorities.
The deal comes amid a surge in spending on global military and spying technology prompted by Russia’s invasion of Ukraine. It also follows the US setting up a separate arm of the military, space command, to try to keep up with China.
Ball Aerospace’s parent company, Ball Corporation, makes beer cans and aerosol bottles, but the defence business specialises in instruments, sensors and spacecraft, including some of the most sensitive satellite technologies, as well as civilian applications such as monitoring weather patterns.
Hunter added:
Asian markets were weighed down once more, with China at the eye of the storm. Despite some efforts by the central bank to boost the economy such as Tuesday’s move to cut key policy rates, investors have turned their back until further measures are announced. The high rate of youth unemployment, tepid consumer spending, deflation and weakening trade numbers are all playing their part in keeping the lid on any signs of optimism.
In particular, the beleaguered property sector remains under the spotlight, with the latest show of strain coming from Zhongzhi Enterprise Group, which announced that it was facing a liquidity crisis which would lead to a debt restructuring. The news followed hot on the heels of Zhongrong International Trust having revealed that it had missed several repayments since the end of July.
Meanwhile, the February record highs for the FTSE100 are now a distant memory, with the weight of money seeming to have moved onto pastures new. Indeed, after another weak opening taken from global cues elsewhere, the index is now in negative territory for the year to date, having fallen 1.6%. Further pressure came from the technical outcome of a number of heavyweight stocks being marked ex-dividend, such as GlaxoSmithKline, Imperial Brands and the London Stock Exchange Group.
Here in London, the FTSE 100 index has lost 36 points to 7,321, a 0.5% drop. European indices are also in the red.
Richard Hunter, head of markets at interactive investor, said:
Investors moved onto the back foot with inflation clearly remaining in play, forcing them to consider whether the rate hiking programme is over after all.
Minutes from the latest Federal Reserve meeting weighed on US markets, with the potential for further rate hikes still on the table. The Fed noted that inflation was still well above target and the labour market still tight, with most members seeing significant upside risks to inflation. In addition, with growth risks to the downside and inflation risks to the upside, the delicate balance between taming inflation and avoiding recession remain a live issue.
Other economic data has supported the resilience of the US economy, with strong hiring and retail sales numbers showing that the consumer is still alive and well, while the recent GDP number also pointed to a robust foundation. While the consensus continues to point to no change at the September meeting, the odds are rising for a further hike in November. Such uncertainty has led some investors to reconsider whether the fact that markets had been pricing in victory against inflation came too early, and in any event whether higher rates could remain in place for longer than had been anticipated.
He said technology stocks are seen as particularly vulnerable to higher interest rates and so the Nasdaq and also the S&P 500 have born the brunet of a wave of selling, although they are up 29% and 15% in the year so far, while the Dow Jones has added 5%.
Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics has sent us his thoughts on the drop in Japanese exports last month, the first in about two years.
Demand is unlikely to pick up until the global economy rebounds or innovation convinces people of the need to buy new gadgets and upgrade existing ones.
The Bank of Japan is likely to view the July export figures as the continuation of a gentle downward decline this year. The second quarter’s 0.7% q/q GDP growth was driven by inbound tourism and falling import prices, while goods exports were weak and domestic demand fell.
This uneven picture seems to be intact as we enter the second half, while inflation is cooling more slowly than the Bank projected. Tomorrow’s national consumer prices index probably will be unchanged at 3.2% y/y in July, propped up by the lagged effect of last year’s import cost surges. We think the Bank will focus on the soggy domestic economy and falling real wages in sticking to the negative policy rate, at -0.1%, to support the economy in the second half.
Updated
BAE Systems to buy US space firm for $5.6bn in one of UK's biggest takeovers this year
Britain’s biggest weapons company BAE Systems has agreed to buy US space technology company Ball Aerospace for $5.6bn (£4.4bn), in one of the biggest takeovers involving a UK company this year.
The move comes amid a surge in government spending on global military and spying technology prompted by Russia’s invasion of Ukraine in February last year.
BAE chief executive Charles Woodburn said:
The strategic and financial rationale is compelling, as we continue to focus on areas of high priority defence and intelligence spending.
Colorado-based Ball Aerospace, a subsidiary of Ball Corporation, designs makes instruments, sensors and spacecraft, including satellite technologies. Its parent company makes beer cans.
Foreign investors have been dumping Chinese stocks and bonds after losing confidence in Beijing’s promises of more measures to shore up the faltering economy.
Financial Times calculations based on data from Hong Kong’s Stock Connect trading scheme show that investors have almost completely reversed Rmb54bn ($7.4bn) in net purchases of Chinese equities that followed a pledge on 24 July from the politburo of top Communist party leaders to increase policy support.
Bondholdings of foreign institutional investors fell by Rmb37bn in July to Rmb3.24tn, according to figures released by China’s foreign exchange regulator yesterday, the FT said.
Introduction: China slowdown fears rattle markets; rouble weakens amid talk of capital controls
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Shares across Asian markets are down, following Wall Street lower, after minutes from the US Federal Reserve’s last meeting indicated America’s central bank may keep interest rates higher for longer to fight inflation. Japan’s Nikkei fell 0.4% while Hong’s Kong’s Hang Seng slipped 0.2%, paring earlier losses.
The minutes from July’s meeting, when rates rose their highest level in 22 years, cited “significant upside risks to inflation, which could require further tightening of monetary policy.”
The prospect of higher borrowing costs for a longer period pushed yields, or interest rates, on 10-year US government bonds to their highest level sine 2008 in New York.
Concerns about slowing growth in China are also weighing on markets.
Japan’s exports fell in July for the first time since February 2021, dragged down by lower demand from China for computer chips and cars. Exports dropped 0.3% year on year, while shipments to China were down 13.4%.
Russia’s rouble has weakened again against the dollar after plummeting on Monday. The Russian central bank stepped in with an interest rate hike to 12% the following day to stem the slide past the 100 threshold, but analysts say more measures are needed to return the currency to the 80-90 range preferred by the authorities.
At the moment, the rouble is trading at 95.1 per dollar, down 0.5%, after briefly falling to close to 102 on Monday, the lowest since March 2022.
There has been speculation that capital controls could be reintroduced to help prop up the struggling currency.
Citing a Russian finance ministry proposal, the Financial Times reported yesterday that large exporters could be forced to convert up to 80% of their foreign currency into roubles in order to raise demand for the currency.
Other proposals included a ban on foreign dividend payments and loan extensions, cancelling import subsidies, limiting currency swaps, and reducing the amount of foreign currency exporters can take out of Russia.
The Agenda
9am BST: Norges Bank interest rate decision (forecast: rise to 4% from 3.75%)
10am BST: Eurozone trade for June
1.30pm BST: US Initial jobless claims for week of 12 August (forecast: 240,000)
3pm BST: US Conference Board Leading Index for July
Updated
