Introduction: Under pressure as recession looms
good morning. Welcome to our rolling coverage of business, the global economy, and financial markets.
The pound is at risk of hitting its lowest level in 37 years against the US dollar as a looming recession, soaring inflation and political uncertainty hit the currency.
Overnight, the pound fell to just $1.15 against the US dollar, making a weak start to September.
It is approaching March 2020’s Covid crash low of just over $1.14, its worst level since 1985.
Forecasts of storm clouds gathering over the economy and the UK slipping into recession have hit demand for British assets.
Warnings that the UK is facing “frankly terrifying” cost-of-living pressures as inflation rises above 10% also weighed in. Real wages are expected to hit her lowest level since 2003, negating two decades of growth.
A weaker currency will drive up the cost of importing goods, adding to pressure on UK businesses in addition to higher energy prices, raw material costs and ongoing supply chain disruptions.
The pound isn’t the only one struggling against the US dollar. The dollar hit its 20-year high yesterday against a basket of currencies after economic data suggested the US Federal Reserve (Fed) would continue his rate hikes through 2023.
As Gym lead of German Bank points out:
Conversely, the euro fell below par to the dollar and the Japanese yen fell to 140 yen to the dollar for the first time since 1998. “
However, the pound has also fallen against the euro in recent weeks as the European Central Bank is likely to raise interest rates significantly due to a spike in eurozone inflation.
Sterling is currently trading at around €1.158, compared to around €1.20 in early August.
kit jacksCurrency Expert society generalsay:
The British pound has been supported by rising short-term interest rates in recent weeks. But support for the pound is weakening as more and more members of his ECB council push for his 75bp rate hike idea next week.
Gilt’s high yield, on the other hand, doesn’t help much if you look at it as the price the UK pays to soak up the huge amount of money it needs to balance its budget in the coming months and years.
With the UK economy in recession and the balance of payments disastrous, more or even faster rate hikes will not do much to restore confidence.
Appearing today
Investors brace for the latest US jobs report that could point to a slowdown in hiring last month. Nonfarm payrolls are expected to rise by about 300,000 in August, after his 528,000 in July.
We also hear about the performance of UK construction companies last month and how fast factory gate prices are rising in the Eurozone.
agenda
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7am BST: German trade balance for July
-
9.30am BST: UK Construction PMI Report for August
-
10am BST: Eurozone PPI indicator for producer price inflation
-
1.30pm BST: US Nonfarm Payrolls Report for August
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After four days of decline, the UK blue chip index opened modestly higher this morning.
The FTSE 100 Index is up 35 points, or 0.5%, slightly recovering Thursday’s 1.8% drop.oil giant blood pressure When shelland retailers JD sportsin the riser.
But UK homebuilders, a leader in domestic economic confidence, have fallen after HSBC cut its share price target. Berkeley group (-4.7%), ballat (-3.5%), persimmon (-2.1%) and taylor Wimpy (-1.6%) is the top drop.
UK house prices are likely to stall next year as inflation continues and mortgage rates rise.
But tenants will continue to be hit by rising rents despite the financial strain.
Here’s a prediction from real estate and rental agent Hamptons. We expect prices in the fourth quarter of 2023 to remain unchanged from the same period in 2022.
Sales are expected to hit again next year as rising interest rates deter first-time buyers, but 2024 could prove to be a ‘year of recovery’.
Despite tenant affordability issues, Hamptons said it expects rents to rise by 5% annually next year and in 2024, slowing slightly to 4% in 2025.
The report states:
“London’s low rental yields will make it harder for landlords to absorb rising costs than their northern peers.
“This is why we believe the supply of rental housing in the capital will drop further, pushing up rents.”
If so, it’s another blow to tenantsLast month, homeless charity Shelter warned that London’s private tenants were facing “increasingly unaffordable” rents due to high demand and a shortage of properties in the city.
Celebrity chef Tom Kerridge He revealed that his pub’s annual utility bill has jumped from £60,000 to £420,000 as the hospitality sector faces a “horrific situation”.
“It’s a very volatile market space at the moment,” he told The Telegraph, adding:
“There is no way companies can absorb 4, 5, 600% price increases.”
Mr Kerridge told the BBC that one of his pubs has a monthly electricity bill of £5,000, which is set to soar to £35,000 when the contract ends in December.
Tom Kerridge’s pub electricity bill jumps from £60,000 to £420,000. Chef warns hospitality sector faces ‘horrible and terrifying situation’, says owner could close for Christmas https://t.co/WtjoYIBkC4
— Mark Winget (@Wingers76) September 2, 2022
Kerridge is certainly not alone. Earlier this week, brewery bosses warned that thousands of pubs were facing closures without urgent government support to cushion the blow from soaring energy prices.
According to one study, more than 70% of pubs thought they wouldn’t survive the winter without help to cut energy costs.
Finance ministers of the Group of Seven (G7) nations are expected on Friday to finalize plans to impose price caps on Russian oil in a bid to cut revenues from the Moscow war in Ukraine. Reuters reports.
Ministers of the Wealthy Industrial Democracy Club will hold virtual meetings and may issue a communiqué outlining the implementation plan.
The aim, according to G7 officials, is to keep oil flowing to avoid price spikes.
Here are the details:
European G7 officials said a “deal is likely to go through” and beyond what extent, such as the level per barrel of the price cap, above which adherents will refuse insurance or financing of Russian oil. He added that it was unclear if any details would be revealed. Petroleum product cargo.
UK Finance Minister Nadim Zahawi said in Washington on Thursday that he hoped the G7 finance ministers would “make a statement that means we can accelerate the pace and move forward to make this happen”.
“We want to get over this oil price cap,” he said at a think-tank event in Washington, the day after he discussed the cap with Treasury Secretary Janet Yellen.
Yellen is also pushing for a price cap on Russia’s oil — she warned that failing to reach a deal would hurt the global economy.
Engie CEO: Energy Markets Face a Tipping Point
Europe’s energy sector is facing an “exceptional crisis”, the CEO of French gas importer Engie has warned.
“The energy world as we know it will never be the same again,” Katherine McGregor told RTL Radio, citing Russia’s curbing of energy imports and transition to green energy as a “turning point.” explained.
Tensions between France and Russia escalated this week after Gazprom announced it would cut supplies to Engie over a contract.
Asked whether Engie, France’s main gas supplier, could face gas shortages this winter, McGregor said unless particularly severe weather conditions lead to unusually high demand, “hopefully very I’m sure,” he said.
“This is why the energy drinking message is still so important.”
Read more: Engie CEO: Energy Markets Face a Tipping Point
The severity of the winter will be a key factor in determining whether Europe will survive the next few months without gas rationing or blackouts, as will Russia’s gas supply cuts.
I listened to a conference call on European gas for several hours. Interesting “gotcha” (thread)
— Paul McNamara (@M_PaulMcNamara) September 1, 2022
A key variable is the severity of the winter, as low or zero flows in Russia matter.A mild winter would seem like nothing but a fuss, no room to prepare for the bad
— Paul McNamara (@M_PaulMcNamara) September 1, 2022
European wholesale gas prices fell this week from August’s record highs but remain significantly higher than before the war in Ukraine.
Gazprom’s Nord Stream 1 is scheduled to reopen on Saturday after three days of maintenance.
Introduction: Under pressure as recession looms
good morning. Welcome to our rolling coverage of business, the global economy, and financial markets.
The pound is at risk of hitting its lowest level in 37 years against the US dollar as a looming recession, soaring inflation and political uncertainty hit the currency.
Overnight, the pound fell to just $1.15 against the US dollar, making a weak start to September.
It is approaching March 2020’s Covid crash low of just over $1.14, its worst level since 1985.
Forecasts of storm clouds gathering over the economy and the UK slipping into recession have hit demand for British assets.
Warnings that the UK is facing “frankly terrifying” cost-of-living pressures as inflation rises above 10% also weighed in. Real wages are expected to hit her lowest level since 2003, negating two decades of growth.
A weaker currency will drive up the cost of importing goods, adding to pressure on UK businesses in addition to higher energy prices, raw material costs and ongoing supply chain disruptions.
The pound isn’t the only one struggling against the US dollar. The dollar hit its 20-year high yesterday against a basket of currencies after economic data suggested the US Federal Reserve (Fed) would continue his rate hikes through 2023.
As Gym lead of German Bank points out:
Conversely, the euro fell below par to the dollar and the Japanese yen fell to 140 yen to the dollar for the first time since 1998. “
However, the pound has also fallen against the euro in recent weeks as the European Central Bank is likely to raise interest rates significantly due to a spike in eurozone inflation.
Sterling is currently trading at around €1.158, compared to around €1.20 in early August.
kit jacksCurrency Expert society generalsay:
The British pound has been supported by rising short-term interest rates in recent weeks. But support for the pound is weakening as more and more members of his ECB council push for his 75bp rate hike idea next week.
Gilt’s high yield, on the other hand, doesn’t help much if you look at it as the price the UK pays to soak up the huge amount of money it needs to balance its budget in the coming months and years.
With the UK economy in recession and the balance of payments disastrous, more or even faster rate hikes will not do much to restore confidence.
Appearing today
Investors brace for the latest US jobs report that could point to a slowdown in hiring last month. Nonfarm payrolls are expected to rise by about 300,000 in August, after his 528,000 in July.
We also hear about the performance of UK construction companies last month and how fast factory gate prices are rising in the Eurozone.
agenda
-
7am BST: German trade balance for July
-
9.30am BST: UK Construction PMI Report for August
-
10am BST: Eurozone PPI indicator for producer price inflation
-
1.30pm BST: US Nonfarm Payrolls Report for August
