Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

Continue Reading

Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

Continue Reading

Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading

Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading

Categorized | Banks

Carney warns of ‘post-traumatic stress’


Posted on June 30, 2016

Mark Carney, governor of the Bank of England (BOE), speaks during a news conference in the City of London, U.K., on Thursday, June 30, 2016. Carney said the Bank of England will probably have to loosen policy within months to deal with the fallout of the Brexit vote as he warned that there's only so much he can do to protect the economy. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

Mark Carney at press conference by Bank of England governor

The Bank of England is preparing to unleash another round of monetary stimulus as it battles to contain the economic fallout of The UK’s decision to leave EU.

Full text of Mark Carney speech

Mark Carney, governor of the Bank of England (BOE), speaks during a news conference in the City of London, U.K., on Thursday, June 30, 2016. Carney said the Bank of England will probably have to loosen policy within months to deal with the fallout of the Brexit vote as he warned that there's only so much he can do to protect the economy. Photographer: Chris Ratcliffe/Bloomberg

‘To emerge from an uncertain world with confidence, people and businesses need a fixed point by which to navigate’

In a stark warning to politicians, governor Mark Carney said a downturn was on its way and Britain was already suffering from “economic post-traumatic stress disorder”.

He said the central bank would take “whatever action is needed to support growth”, which probably included “some monetary policy easing” in the next few months, in an attempt to reassure the markets and the general public.

But Mr Carney also said that central bankers could do only a limited amount to mitigate the pain.

Sterling fell more than 1 per cent to $1.32 as traders began preparing either for rates to be cut to historic lows, more quantitative easing, or a combination of both. The pound hit $1.50 just before the results of the referendum on EU membership last week. Equities rose, with the FTSE 100 index closing up 2.3 per cent on the day.

    British government bond yields entered negative territory for the first time following Mr Carney’s speech, with the yield on one two-year bond hitting -0.003 per cent. This put the UK alongside countries with negative yields including ­Germany and Japan. The global figure for government bonds in negative yield has soared to $11.7tn as borrowing costs around the world collapse.

    Part of the BoE’s plan to support growth involved “ruthless truth-telling”, Mr Carney said. “One uncomfortable truth is that there are limits to what the Bank of England can do. In particular, monetary policy cannot immediately or fully offset the economic implications of a large, negative shock,” he said.

    He added that the economic uncertainty generated by a series of crises over the past few years and the additional shock of Brexit risked causing businesses and households to delay spending and investment, hitting demand and employment levels.

    To guard against the risk of the banking system seizing up, the BoE is holding weekly liquidity auctions until the end of September to ensure that British banks have easy access to credit.

    Mr Carney, who faced a barrage of criticism from Leave campaigners over his warnings about the economic dangers of a vote to exit the EU, said the BoE was likely to cut its growth forecasts in its August inflation report.

    Despite the gloomy prognosis, there was a general sense of relief in the market that the governor was promising tangible action. Toby Nangle, co-head of asset allocation at asset manager Columbia Threadneedle, said Mr Carney had set out a “considered road map” for how the BoE would support the economy. “Institutional continuity and credibility in times like these are vital. Carney stepped up to the plate,” he said.

    Podcast

    Brexit carnage calls for calm Carney

    earphones

    With sterling heading south and no sign of an end to UK political instability, the market will be looking to the Bank of England governor to calm nerves, Baring Asset Management’s Alan Wilde tells Roger Blitz

    Charlie Diebel, head of rates for Aviva Investors, said that “Mr Carney is no doubt trying to steady the ship and provide solace that they will act as needed”.

    Mitul Patel, head of interest rates at Henderson said the Gilt market had responded strongly to the Carney speech: “The market now expects interest rates to fall to close to 0 per cent, and whilst Carney has previously stated a dislike of negative interest rates, nothing can be taken off the table.”

    In a swipe at the political disarray that has characterised the aftermath of the Brexit vote, Mr Carney said there needed to be a new strategy for engaging with the EU and the rest of the world — as well as clarity on the UK’s future trading arrangements. “To emerge from an uncertain world with confidence, people and businesses need a fixed point by which to navigate,” he said.

    One uncomfortable truth is that there are limits to what the Bank of England can do

    – Mark Carney

    But the deep animosity between Mr Carney and parts of the Leave campaign was undiminished. Ukip leader Nigel Farage said on Twitter that Mr Carney was “once again talking down Britain”.

    When asked whether he would work with Jacob Rees-Mogg, Andrea Leadsom or other critical Leave campaigners, the governor said he and the other members of the MPC and FPC would “continue to do our jobs . . . whatever individuals are in the government”.

    “This is a professional, technocratic institution,” he added.

    Additional reporting by Sarah O’Connor, Gemma Tetlow and Dan McCrum