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Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Pound holds strong gains above $1.22 versus dollar
Carney admits impact of worst case no-deal Brexit now less severe
Sluggish services-sector data puts UK on track for second quarterly contraction
Global banks see Corbyn thelesser of two evils as no-deal looms
The pound is down in the dumps, and there could be worse to come
9:58PM
Markets wrap: Sterling rallies to new intraday highs
Sterling is hitting fresh intraday highs on currency markets after MPs rejected the motion for an early election. Labourwill not back a snap vote until the Brexit delay bill gains Royal Assent.
The pound is finishing the day 1.4pc higher against the dollar at $1.2250, one of its best rallies this year. Can sterling continue its surge higher tomorrow?
Join us for more live coverage from business and markets tomorrow morning. Have a good evening.
Markets Hub - US Dollar
9:21PM
The double shock of global recession and a no-deal Brexit may be more than Europe can withstand
The latest column from our international business editor Ambrose Evans-Pritchard is now up on our website. It's gloomy reading for the battered eurozone economy.
He warns that Europe is facing the twin threats of a no-deal Brexit and global downturn while having littleammunition to fight off a recession. Here is a snippet from his piece, which can be read here.

Britains constitutional crisis has hit before the next great spasm of Europes intractable monetary crisis. But they are in close competition.
The eurozone faces a category five economic storm. It is structurally defenceless as the world slides into recession. This will not be an ordinary downturn because central banks no longer have the instruments to fight it.
If there is an October election in the UK - and if it delivers a bigger Tory majority as polls suggest - EU leaders will have to decide whether to risk adding the shock of a no-deal Brexit to all the other shocks hitting their industries.
8:24PM
Sterling barely budges as MPs back Brexit delay bill
Sterling has barely budged on currency markets this evening despite MPs backing the Brexit delay bill.
While it is a rather unremarkable reaction to the latest dramaticdevelopment in the Brexit saga, sterling has been building on its strong gains throughout the day.
After sinking to its lowest level in more than three decades yesterday morning (whenexcluding the October 2016 "flash crash"), it has recovered back above $1.22 this afternoon. surging 1.1pc.
It's a small dent in its huge losses in recent weeksbut sterling appears to have finally regained some upward momentum. Holidaymakers rejoice!
#GBP intraday ? after the House of Commons passed the Hilary Benn #Brexit Bill. @business pic.twitter.com/QtDP8yn3T3 Kieran Joseph Morgan (@KJM_Lawyer) September 4, 2019
7:44PM
The best from today's economics news
It has been another busy day on the economics team with Chancellor Sajid Javid'sspending review and Mark Carney's grilling from the Treasury Select Committee.
Fear not, our economics team has the best stories and analysis from the day here on the Telegraph website.
Tim Wallace has written this piece onJavid declaring an end to austerity with a ?13.8bn spending spree.
Our economics editor Russell Lynch has provided his insight on the spending review, writing thatJavid's magicmoney tree is the ultra-low interest rates that governments can currently borrow at.
Finally, we have latest services sector PMI, which suggests that the economy could be sliding into recession.
6:39PM
Sterling rebounds back to $1.22
Sterling has enjoyed one of its best days of trading of 2019 as MPs move to block a no-deal Brexit.
Sterling has jumped 1.1pc against the dollar to burst back over the $1.22 mark, a strong recovery from the 34-year low it dropped to yesterday.
Jane Foley at Rabobank has the latest on why sterling has surged:

"The boost stems from the increased likelihood that the UK Opposition supported by Tory rebels will be able to push legislation through parliament to stop a no deal Brexit on October 31. While this reduces political risk, the poundremains a very vulnerable currency."
Markets Hub - US Dollar
5:39PM
Stocks surge as relief sweeps markets
Traders' computer screens are awash with green this afternoon as a relief rally sweeps global stock markets.
Why the sudden jump in stocks? Three key risks that have been threatening to boil over have been calmedin the last 24 hours.
First, MPs made a stride towards blocking a no-deal Brexit in Parliament last night. Second, tensions in Hong Kong have been dialed down by its leader Carrie Lam withdrawing the extradition bill. And finallyin Italy, members of Five Star Movement approved its new coalition with the Democratic Party, meaning far-right leader Matteo Salvini will not get the chance to seize power in new elections.
That has triggered a 0.6pc rise in the FTSE 100, a 1.6pc jump on Italy's FTSE MIB index and a 4pc surge on Hong Kong's Hang Seng.
Markets Hub I FTSE 100
4:59PM
Bank revises Brexit doomsday scenario but Carney strikes gloomy tone
With Mark Carney's grilling from MPs over, let's look at the best bits from the Treasury Committee hearing.
The Bank of England making its worst-case Brexit scenario much less severethan first feared will grab the headlines but Mr Carney still struck a rather gloomy tone.
The peak-to-trough drop in GDP is now expected to be around 5.5pc in the Bank's doomsday scenario, compared to its previous estimate of 8pc.
On the current performance of the economy, the Governorsaid that "the underlying pace is weak" and"close to zero"
He also believes that the global economy is struggling, saying that the trade tensions have "shifted into an actual trade war". Click below if you want to read the Bank's latest analysis.
We're just published the Bank of England's updated economic analysis of #Brexit ?https://t.co/G8SjLfJWWI

Our evidence session with the Bank of England on Brexit and the latest Inflation Report is just about to start. Watch it live here:?https://t.co/RCT89ZcwGe pic.twitter.com/qKOMmB92x0 Treasury Committee (@CommonsTreasury) September 4, 2019
4:07PM
Handover
With another evening of Westminster excitement ahead of us, Im handing over to economics correspondentTom Rees, who will steer the live blog through the next few hours. Thank you everyone who has followed along today stay tuned for the latest business, markets and economic news Louis
3:55PM
Back to Westminster...
...Mark Carney has been taking questions for over and hour and a half now, including a discussion of the difference between shocks meaning strong, fast movements, or unexpected movements (The Bank favours the former definition in its forecasting).
Mark Carney explaining the taxonomy of economic "shocks": "They call it the dismal science for a reason" Oscar Williams-Grut (@OscarWGrut) September 4, 2019
Mr Carney says the monetary conditions heading towards the October Brexit deadline are less slack than those leading up to the referendum in June 2016 reducing the Banks ability to impact events. He has repeated he would be more likely to ease rates in the event of a no-deal Brexit.
3:42PM
Round-up: Greens Arcadia loses second boss in a week, Barratt says it doesnt fear Corbyn, Just Group constricted by regulation
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Arcadia owns Sir Philips stable of brands

Credit:
Isabel Infantes/PA
Here are some of this afternoons big stories:
Sir Philip Greens Arcadia loses second boss in a week:Sir Philip Green lost a second senior executive a day after one of its key lieutenants resigned from his retail empire.Jamie Drummond-Smith stepped down as interim chairman of Arcadia, which owns Sir Philips stable of brands, after he was drafted in six months ago to help with the company's restructuring plan.
Barratt boss says housebuilder is not worried by a Corbyn government:The boss of Barratt Developments, Britains largest housebuilder, has said he hasno concerns about Jeremy Corbyn coming to power in a possible general election.
Just Group profits fall as stricter regulation bites:Just Group shares took a hit after the life insurer said first-half profits fell by more than a quarter to ?114m as it seeks to comply with new rules forcing it to hold more capital behind its lifetime mortgage products.
3:26PM
Spending Review reaction round-up
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Chancellor Sajid Javid

Credit:
Chris J Ratcliffe/Getty Images Europe
In the chamber of the Commons,debate is now underway ahead of tonights key vote, which would be a major step towards forcing Boris Johnson to seek a Brexit delay in the event it appears Britain is heading for no-deal. Heres some of the reactioncoming in from business groups to Chancellor Sajid Javids SPending Review plans.
The Federation of Small BusinessesMike Cherry says:

This Spending Round marks a welcome if brief return to the domestic agenda. While parliament has long-been absorbed by Brexit, the issues of crime, derisory broadband and skills shortages that millions of small firms face day in, day out have been overlooked.
Its important to stress that what small firms really want is a return to an environment where they can plan for the long-term, and policymakers consistently tackle domestic challenges head on. With the latest UK economic data painting a bleak picture, small businesses urgently need tangible support on the ground.

The FSB welcomed Mr Javids statements on crime and infrastructure, but said the Chancellor should not neglect apprenticeships.
TheFederation of Master Builders Brian Berry (I promise not all the business groups leadersnames will rhyme) says:

If we are to increase productivity and improve our competitive edge on the world stage, then building more new homes must form part of the Governments campaign to upgrade our infrastructure... Todays Spending Round set the scene for a positive outlook for builders, but we need more details about how more new homes will be delivered.

The FMB welcomed commitments to spending on towns, but said more details and a better sense of the Treasurys long-term strategy were needed.
The Institute of Directors Tej Parikh says:

The Spending Round saw the Chancellor turn on the taps, but the under-pressure business community still needsmore direct support...
...many firms may still be left wanting an emergency Budget soon, whatever happens with Brexit. One-off reliefs to business rates would support margins in a challenging period, and a moratorium on the implementation of potentially disruptive regulations would help cut down business to-do lists and get directors focusing on adjusting to Brexit and investing in their firms.
Earmarking departmental spending is a vital exercise, but firms would much rather see longer-term outlines to inform their own investment plans. The accelerated process also afforded little space for businesses to feed in their priorities. Meanwhile, there is concern that, without official forecasts alongside, the money allocated mayeat into future funding.
3:08PM
Carney: Brexit could create supply shock
The Governor is describing the possibility of a supply shock to UK manufacturers and exporters in the event of an unruly Brexit, saying not amount of monetary policy can soften the disruption element.
3:04PM
The Banks GDP impact model, visualised
Here are the graphs Mark Carney shared with the Treasury Select Committee to demonstrate its shifting forecasts for a no-deal Brexit:
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Credit:
Bank of England
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Credit:
Bank of England
More key points:
Mr Carney says the world has not yet shifted towards a global recession, but that a manufacturing recession is close. He says a trade-war induced slowdown could take 1pc off the UK economy.
Mr Haskel says Brexit uncertainty has started having a more persistent impact on the economy
Mr Carney says there is still space for monetary policy to provide easing
Mr Haldane says interest rates should be held until fog of Brexithas passed
Mr Carney says the Bank does not need new powers currently
Pressed on whether he would stay on beyond the end of his tenure, which is set to finish on January 31, Mr Carney said he has already served two extensions and said the governorship is a matter for the government of the day.
2:55PM
UK bonds bounce back for yesterdays drop
One key measure of sentiment about the UK economy is the yield on government 10-year bonds, which hit an all-time low yesterday at the same moment the sterling hit a 34-year low.
Theyre bounced back strongly since then however, and are now standing closer to their average over the past month. Obviously though, that jump looks a little less impressive in a long-term view:
2:43PM
Carney: Key answers so far
Questions from John Mann were fairly broad. Mr Carney and Mr Haldane haveso far said:
The Bank wont commit to a monetary response to Brexit
Mr Carney cant see the Bank ever intervening over foreign-exchange prices
The impact of Sajid Javids spending review cant yet be known
As a reminder, you can watch live here.
2:29PM
Mark Carney: Impact of worst-case scenario Brexit has been reduced
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Mark Carney is currently speaking to MPs

Credit:
Parliament TV
Speaking to the TSC, Mark Carney has confirmed that the Bank of Englands latest assessments suggest the impact of a worst-case-scenario Brexit has been somewhat reduced because of recent efforts to prepare companies.
Here is an outline of the worst-case scenario envisaged by the Bank during its planning efforts:
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Mr Carney is now outlining as he has at several points recently that the UKs financial sector is well-prepared for Brexit, whatever form it takes, and has plans in place to offers support depending on the outcome of negotiations.
That policy response would not be automatic, he says, saying the Bank would need to be reactive to maintain price stability.
2:19PM
As blow are traded in the Commons...
...were going to move into a (hopefully slightly quieter) atmosphere at the Treasury Select Committee hearing on the UKs economic relationship with the EU, and the Bank of Englands Inflation Reports. Heading over from Threadneedle Street are:
Mark Carney, Governor of the Bank of England
Andy Haldane, chief economist and executive director, Monetary Analysis & Statistics
Professor Jonathan Haskel, external member, Monetary Policy Committee, Bank of England
Dr Gertjan Vlieghe, external Member of the Monetary Policy Committee, Bank of England
A live video will be showing here.
Ahead of Mr Carneys appearance, the TSC has published a letter the Governor sent to new acting committee chair John Mann MP. It can be viewed here.In it, Mr Carney says:
The worst-case Brexit scenarios are now less severe than in 2018 because of preparation activities
The initial peak-to-trough drop in GDP during a worst-case scenario Brexitwould now be 5.5pc, not 8pc, with a rise in unemployment to 7pc, and inflation rise to 5.5pc
The core of the UKs financial system is prepared for Brexit
2:03PM
Ultimate Performance sale means big payday for former City boy
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Fitness chain Ultimate Performance could be valued at more than ?100m

Credit:
AMER HILABI/AFP
NickMitchell, who owns the majority of the high-end personal training business Ultimate Performance, is in line for a big payday from the partial sale of the company. My colleague Vinjeru Mkandawire reports:

The fitness chain, which charges as much as ?150 an hour for one-on-one time with a personal trainer and tailored workout regimes, has been approached by private equity investors, City sources said.
It took on a $10m investment three years ago from Hong Kong private equity firm Cassia Investments, which focuses on consumer businesses.
You can read her full report here:Former City worker set for big payday from Ultimate Performance stake sale
1:52PM
Spending review in full
You can read the full details of the Spending Round on the governments websitehere.
The Treasury has summed up some of the key points here(bear in mind that the Treasury does not contextualise most of its numbers in terms of real-terms increases and long-term cuts).
Shadow Chancellor John McDonnell has labelled the plans the a sham, and accused the government of failing to deliver a real end to austerity.
Wowsers. Boris Johnson was shouting at John McDonnell. McDonnell: The last time he was shouting at someone they had to call the police. A joke at the expense of the PMs row with his partner. Kate McCann (@KateEMcCann) September 4, 2019
1:36PM
US trade deficit narrowed in July despite trade truce
The United States trade deficit narrowed to $54bn in July, less than the expected drop. Goods exports from the US to China continued to shrink, despite the truce between the countries that was still in place then (how things have changed).
Heres everything you need to know about the US-China trade war
Heres how tariffs now stand:
US China trade war
1:31PM
Sterling holds steady as Javid announces spending plans
The pound has been pretty level since PMQs started an hour and a half ago, and is currently up around 0.9pc against the dollar. The Chancellor is running through the specifics of intra-departmental budgets currently.
You can follow the latest details on the specifics on our politics live blog, with my colleague Danielle Sheridan:
Brexit latest news: Boris Johnson faces first PMQs as Jeremy Corbyn seeks to block general election
Heres Telegraph deputy political editorAnnaMikhailovastake:
Chancellor's first major statement is painful to watch.

Reprimanded repeatedly by Ken Clarke and Bercow for talking politics

Heckled as he tries to tell personal story about how public services helped him

Heckled as finally gets to announcements after 15 minute intro Anna Mikhailova (@AVMikhailova) September 4, 2019
1:18PM
Javid: We can now turn the page on austerity
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Sajid Javid is addressing the Commons currently

Credit:
House of Commons/PA
Details are starting to come out now...
The Chancellor has announced plans for extra day-to-day spending of ?13.8bnnext year.
The UK must focus on improving productivity.
A new economic plan will be developed
Investment can increase due to low present cost of borrowing
Javid will review fiscal framework ahead of budget later this year to ensure it meets the economic priorities of today, not a decade ago..., in coordination with Bank of England
Infrastructure will be a key focus, from the motor highway to the information superhighway
Telegraph business editor Ben Wright tweets...
Sajid Javid's inner credit trader getting an airing here with a long section of the speech dedicated to interest rates #spendingreview Ben Wright (@_BenWright_) September 4, 2019
1:07PM
Six minutes into the speech, we have no details on spending plans...
...and Mr Bercow is once again telling off the Chancellor for veering into matters... unrelated to the spending round. So far, the Chancellors speech has primarily been talking about Britains prospects post-Brexit.
Sajid Javid getting a telling off for electioneering in a financial statement. Old School. Mikey Smith (@mikeysmith) September 4, 2019
Bercow really winding up Tory MPs by suggesting that @sajidjavid can't make political attacks on Labour during financial statement. Surely every Chancellor does that? Albeit stimes with the polite convention of 'I've had representations from...[cue ridicule of Lab policy]' Paul Waugh (@paulwaugh) September 4, 2019
1:02PM
Javid interrupted
Mr Javid was just interrupted after saying: A strong economy can only be built on a strong democracy.
After an point of order by Kenneth Clarke who was ousted from the Conservatives yesterday Speaker John Bercow has criticised the Chancellor, saying his speechs political frills were out of order.
12:59PM
Javid: A new economic era needs a new economic plan
The Chancellor is speaking now. He has promised the fastest increase in day to day spending in 15 years. He said:

...after a decade of recovery from Labours great recession were turning the page on austerity and beginning a new era of renewal
Boris Johnson forgot about his governments spending round and tried to leave the chamber at the end of PMQs. Matt Hancock pointed it out and told him to go back Henry Zeffman (@hzeffman) September 4, 2019
The Prime Minister gets up to leave after PMQs, but is reminded by the Health Secretary Matt Hancock that it might be a good idea if he sticks around. He returns to his seat Chris Mason (@ChrisMasonBBC) September 4, 2019

12:57PM
Sajid Javid up now...
12:49PM
It looks like the Spending Review will start late...
...as questions remain in full flow in the Commons.
I think its fair to say PMQs today has produced more heat than light. Hopefully wellbe dealing slightly more with solid numbers soon.
12:42PM
The force of Trumps Twitter
Its probably still a while until the US command-in-chief awakens, but in meantime, here is a fascinating analysis of an apparent correlation between his tweets and underperformance on Wall Street:
Trump tweet analysis taken to the next level by BAML: 90th and 10th percentile of the number of tweets (quite why they think this is a normal distribution who knows but fun) pic.twitter.com/T38c77uyqM James Mackintosh (@jmackin2) September 4, 2019
Heres more on that phenomenon:Can investors protect themselves from Trumps Twitter tirades?
12:28PM
Full report: Services slowdown shows UK slipping into recession
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Services businesses are struggling to grow as weak demand plagues the economy and threatens a recession

Credit:
Simon Dawson/Bloomberg
Deputy economics editor Tim Wallace has a full report on this mornings PMI figures, which indicate Britain is spiralling towards a recession. He writes:

Services companies, which make up the biggest part of the private sector, stalled last month, whilethe manufacturing and construction industries contracted.
This puts the economy on track to shrink by 0.1pc in the third quarter of the year, according to the purchasing managers index (PMI), a survey of businesses compiled by IHS Markit.
You can read his full report here: UK slipping into recession as businesses clam up before Brexit
Economic Intelligence newsletter SUBSCRIBER (article)
12:22PM
Cathay Pacific chair exits amid Hong Kong protests
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Rupert Hogg (left) quit last month as chief executive of Cathay Pacific and has been followed out the door by chairman John Slosar

Credit:
Paul Yeung/Bloomberg
Airline Cathay Pacific caught in severe turbulence due to its exposure to events in Hong Kong has lost another senior leader, with the exit of chair John Slosar. The Telegraph reports:

The Hong Kong-based airline has become the biggest corporate casualty of anti-government protests after Beijing demanded it suspend staff involved inor supportingdemonstrations that have plunged the former British colony into a political crisis.
John Slosar, 63, will be replaced by Patrick Healy, a long-time executive at the airline's biggest shareholder Swire Pacific.
You can read a full report here:Cathay Pacific loses chairman as well as chief executive in wake of Hong Kong protests
12:02PM
PMQs is about to begin...
...you can keep up with all the fun here(BBC Parliament) or here (Parliament TV).
11:51AM
Pound sentiment stays strong
Sterlings cheer is showing little sign of abating, up 0.85pc against the dollar in todays session, and 0.43pc against the euro. As a reminder, the boost is also being helped by a knock to the dollar on the past day following poor US manufacturing data.
11:48AM
Tweet: Corbyn will not support election until threat of no-deal has been removed
Heres the clearest line yet on what to expect from the Rebel Alliances strategy:
Corbyn hosted opposition leaders in the Commons office this morning, including LibDems, SNP and Plaid, saying Labour will only support a general election when the threat of no deal has been removed. Jessica Elgot (@jessicaelgot) September 4, 2019
Corbyn has just had another meeting with opposition leaders this morning - concluded they wouldnt support election until confident no deal threat has gone ... suggestion watering down position from last night? Laura Kuenssberg (@bbclaurak) September 4, 2019
11:45AM
Javid may need to rely on tax cuts to stimulate economy
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Sajid Javid leaving 11 Downing Street earlier today

Credit:
Victoria Jones/PA
Sajid Javids Spending Review, details of which the Chancellor will announce to the Commons from 12:45pm (about an hourfrom now), is likely to include some big spending commitments as the Government tries to offset the current downturn.
Royal Bank of Canada analysts have looked at Mr Javids options, and concluded he may find it easiest to focus on tax cuts as a means of injecting money into the UK economy without breaking rules on spending limits. They write:

Given the backdrop, it came as no surprise to us that the UK government was also said to be preparing a package of fiscal measures to be rolled out in the event of a no-deal Brexit. Nor were we surprised that a VAT cut was under consideration as part of any fiscal stimulus package.
Why? Casting our mind back to 2008, the last time the UK undertook a fiscal stimulus to counter an economic shock, there was a broad consensus that any stimulus should meet three broad principles; namely, that it should betimely,temporaryandtargeted.
Against those criteria, government spending has a couple of potential drawbacks. Increasing spending quickly, particularly in the middle of a fiscal year can be difficult in practice (shovel ready projects dont tend to be that plentiful and those that are tend not to have been given the go-ahead for reasons other than a lack of funding). In addition, it can be difficult to bring government spending, particularly day-to-day spending, back down once it has been increased.
Therefore, any large fiscal stimulus has to rely on tax cuts to a large degree. Tax changes have the advantage that they can be made relatively quickly, can be time limited and can be targeted at certain individuals and/or firms.

Theyve shared the following table, based on HMRC data, showing the impact different cuts could have:
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

The analysts conclude:

Obviously, if the UK parliament does block a no-deal Brexit this week then discussions of a fiscal stimulus will recede. However, for the reasons outlined above, should it fail to do so expect VAT changes to feature prominently in any possible fiscal response.
Profile | Sajid Javid
11:28AM
Meanwhile, in Westminster...
We are just over half an hour away from what is likely to be a fairly painful session of PMQs for Boris Johnson, who dramatically lost his majority yesterday.
The question-and-answer session marks the beginning of an afternoon of heavy Parliamentary activity, which could well end with a General Election being called.
For now, Labour leader Jeremy Corbyn is saying he would block an attempt to call an election. Mr Corbyns fear and that of many other members of the so-called Rebel Alliance is that an Mr Johnson would stall an election until after Britain exit the EU at the end of October.
You can follow the latest updates here:
Brexit latest news: Jeremy Corbyn to block snap general election as hes accused of leading juntalive updates
11:13AM
Initial reaction to bill reversal suggests problems are not over
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Hong Kong leader Carrie Lam

Credit:
Jae C. Hong/AP
Carrie Lam just made a video address to the people of Hong Kong, in which she announced the extradition bill would be withdrawn.
The initial reaction has not been overwhelming positive, not least because the Hong Kong chief executive only agree to one of the pro-democracy protesters five key demands.
Most significantly, she rejected a call for an independent investigation into police actions during the protests, something both businesses and civic groups have supported.
Futures trading on the Hang Seng index, which closed up 3.9pc, are currently indicating a 0.9pc drop when trading re-opens.
10:59AM
Breaking: Extradition bill withdrawn
JUST IN: Hong Kong leader Carrie Lam says controversial extradition bill has been fully withdrawn pic.twitter.com/Jm5g4T26gC Reuters Top News (@Reuters) September 4, 2019
Hong Kong leader Carrie Lam formally withdraws legislation that would have allowed extraditions to China https://t.co/gafHsWZ42a pic.twitter.com/L52pSNIPOA Bloomberg (@business) September 4, 2019
10:57AM
Hong Kong-exposed stocks charge forward on expectations of bill withdrawal
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Secondary school students attend an anti-government rally in Hong Kong

Credit:
ROMAN PILIPEY/EPA-EFE/REX
Reports that Ms Lam will announce the formal withdrawal of the controversial China extradition bill have put a fire under Hong Kong-exposed stocks.
Prudential, which conducts around half its business in Asia, is up 5.3pc
Standard Chartered is up 3.6pc
Burberry, which does well in the territorys luxury markets, is up 3.5pc
10:42AM
Tweet: Hong Kong leader Lam to announce withdrawal of extradition bill shortly
Wire reports suggest Carrie Lam, chief executive of Hong Kong, will at 6pm Hong Kong time (11am London time) announce plans to withdraw the extradition bill that has sparked months of large-scale protests in the country.
SOURCE SAYS CARRIE LAM WILL ANNOUNCE THE DECISION TO WITHDRAW THE BILL IN A SIX TO SEVEN-MINUTE PRE-RECORDED MESSAGE ON ALL TV STATIONS AT 6PM First Squawk (@FirstSquawk) September 4, 2019
An expectation that the bill will be dropped sent the Hang Seng Index to close 3.9pc up, but has also raised worries over Beijings response.
Oandas Edwards Moya said:

Violence might ease in Hong Kong, but the protests are likely to continue until we see the other four demands met; Beijing accepting of Lams resignation, an inquiry into police brutality, the release for those who have been arrested and more democratic freedoms. Todays withdrawal is quite the pivot from yesterdays comments from Chinas top office that hinted they could unilaterally declare a state of an emergency.
Hong Kong protesters seem focused on a September 8th rally that will petition US congress to pass the Hong Kong Human Rights decency, a possible major complication that could derail longer-term solution. Beijings concession here appears to have happened too late and we may just see temporary reprieve with Hong Kong assets.
10:34AM
Scottish judge rejects legal challenge to block shutdown of Parliament
Last week feels like a very long time ago, but as a reminder: opponents of the PMs plan to shut down Parliament launched a series of legal challenges against the prorogation attempt. The second of them, lodged in Scotland, has been rejected by a judge meaning the move has been deemed lawful. The Guardian reports the judge as saying:

In my opinion, there has been no contravention of the rule of law. Parliament is the master of its own proceedings. It is for parliament to decide when it sits. Parliament can sit before and after prorogation

An appeal is expected.
10:27AM
Dunelm shares drop despite fresh rise in profits
Despite those upbeat results, Dunelm shares are having a bit of a mare this morning, reversing early gains currently to languish 7pc down at the bottom end of FTSE 250 movers.
My colleague Yolanthe Fawehinmi reports:

Chief executive Nick Wilkinson said the strong growth demonstrated the breadth and depth of our specialist customer offer.
However he warned thebusiness remainedcautious about the full-year outlook due to increased Brexit uncertainty and specifically the impact it may have on consumer spending as we enter our peak period.

That warning seems to have chimed with analysts and investors.
RBC analysts Richard Chamberlain andWassachon Udomsilpa said:

Dunelmhasmade an effort to refocus its offer on the core, resulting in a consistentcoreperformance over the past year following the Worldstores acquisition. Despite this, we still have reservations regardingDunelms medium-term sales target of ?2bn and think it will be challenging toachieve this without sacrificing margin.

Peel Hunt analysts held their recommendation on the stock, adding:

Were it not for the macro and political uncertainty, we would be upgrading this morning.
10:12AM
Round-up: Dunelm continues winning spree, late PPI purge bites RBS, Goldman Sachs cuts Marcus rate
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

DuneIm has defied the gloom on the high street and upgraded its profit forecasts

Credit:
Andrew Paterson / Alamy Stock Photo
Here are some of this mornings top business and money headlines:
Dunelm defies high street gloom as sales surge in store and online:Home furnishing retailer Dunelmshrugged off the doom and gloom of the high streetto post a rise in profits of more than a thirdlast year.
Late surge in PPI claims forces RBS to put aside nearly ?1bn:Royal Bank of Scotland has warned over a hit of up to ?900m for payment protection insurance after a last-minute surge inclaims ahead of the August deadline.
Goldman Sachs cuts rate on former best-buy Marcus account:Goldman Sachs has cut the rate on its once market-leading Marcus savings account for new savers.The decision comes less than a year after the launch of the account,whichmade headlinesfor offering a sign-up rate of 1.5pc for the first year, dropping to 1.35pc thereafter.
10:04AM
Reaction: Stockpiling shift could still let Britain swerve recession
Pantheon Macroeconomics Samuel Tombs says the recession signalled by Augusts activity data should not be taken too literally, with the expectation remaining that pre-Brexit stockpiling will mean companies will start spending quickly over the coming month.

The chances of a second consecutive drop in GDP, however, are remote, given that inventories will shift from dragging on GDP growth in Q2 to boosting it in Q3. In addition, the PMIs are excessively influenced by business sentiment and have given a misleadingly weak steer during the past 12 months of heightened political uncertainty. Note too that they exclude the retail and government sectors, which still are growing.

That pattern of growth ahead of a Brexit deadline, followed by a winding down process after a delay is what we saw in the first part of the year.
Theres some reason to take solace from this mornings figures, especially as the services sector, which is the biggest and most important part of the UKs economy, stayed above contraction levels.
But theres also good reason not to prejudge what companies will thinking currently. With Boris Johnsons major defeat in the Commons last night, several (now former) Tories have taken their gloves off.
If it looks likely that Parliament can steer the country away from a no-deal Brexit, companies might not bother stockpiling, so a wait-and-see attitude on investment would be the prevailing wind.
9:43AM
Heres how PMI data trends versus UK GDP
Might the second Brexit-preparation boost not arrive? Thats what sluggish PMI data may suggest. Heres how indexs measurements (whichtrack orders and purchases to indicate activity) look versus UK GDP, the overall measure of economic growth:
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Credit:
IHS Markit/ONS
Forward-looking indicators continue to hint at the malaise persisting or even intensifying in coming months. Inflows of new orders fell for the sixth time this year in August, dropping at one of the steepest rates seen over the past decade. pic.twitter.com/fL1RdJXois Chris Williamson (@WilliamsonChris) September 4, 2019
9:38AM
Recession fears grow Brexit-related worries underpinned service-sector fall
Analysts say those lukewarm August figures put the UK on track for a 0.1pc contraction in the third quarter, which would mean Britain enters a technical recession.
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Credit:
IHS Markit/CIPS
The IHS report says:

At 49.7 in August, the seasonally-adjusted All Sector Output Index dropped from 50.3 in July and registered below the 50.0 no-change mark for the second time in the past three months.
The fractional decline in UK private sector output reflected a sharp drop in construction work and another fall in manufacturing production, which more than offset a marginal rise in service sector activity.

Chris Williamson, IHS Markits chief economist, says:

Business activity in the service sector almost stalled in August as Brexit-related worries escalated, curbing spending by both businesses and consumers. So far this year the services economy has reported its worst performance since 2008, with worrying weakness seen across sectors such as transport, financial services, hotels and restaurants, and business-to-business services.
After surveys indicated that both manufacturing and construction remained in deep downturns in August, the lack of any meaningful growth in the service sector raises the likelihood that the UK economy is slipping into recession. The PMI surveys are so far indicating a 0.1pccontraction of GDP in the third quarter.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, adds:

The services sector clung on by its fingertips this month remaining just above the no-change mark as domestic and export clients abandoned spending in favour of a wait-and-see approach and the political environment became increasingly murky.
9:35AM
Business activity lost momentum during August, confidence hits three-year low
Heres what the services PMI figures look like over the longer term:
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Credit:
IHS Markit/CIPS
IHS Markit and CIPs say:

UK service providers indicated that business activity growth lost momentum during August and remained subdued in comparison to the trends seen over much of the past decade. The latest survey also revealed slower increases in new work and staffing levels, which was often linked to sluggish underlying economic conditions.
Service sector firms meanwhile indicated a sharp drop in optimism towards the business outlook. Confidence regarding activity during the next 12 months hit its lowest since July 2016, primarily reflecting concerns about the impact of domestic political uncertainty on client decision-making.
I suppose soggy services pmi is better than collapsing construction but its rather like the weather - dispiriting Kit Juckes (@kitjuckes) September 4, 2019
Some growth at least for UK Services athough it means overall that we are flatlining in the UK at best #GDP https://t.co/8Fzre9dAh4 Shaun Richards (@notayesmansecon) September 4, 2019
9:31AM
BREAK: UK misses forecasts for services activity, narrowly misses overall contraction
Ouch! A double miss, with the UKs composite purchasing managers index data dropping just above flat following weak services data, It follows weak numbers across construction and manufacturing.
Services PMI: 50.6 (prev. 51.4, surv. 51)
Composite PMI: 50.2 (prev. 50.7, surv 50.5)
A score over 50 indicates growth. Heres an explanation of what PMIs mean:
An investors purchasing managers index (PMI) primer
9:26AM
Sterling stays bullish
Poor PMI data could rattle the pound shortly, but for now sterling is holding strong gains against the dollar, and a solid but slightly more muted rise against the euro.
The currencys long term decline, couple with recent events in the Commons, has inspired several photoshop-savvy market watchers to make the same jokes:
pic.twitter.com/XHyAPb0rdP Paul Mason (@paulmasonnews) September 3, 2019
A rare Resting Rees-Mogg pattern spotted in sterling. Bearish. pic.twitter.com/VtsWq7IYJn Tracy Alloway (@tracyalloway) September 4, 2019
9:20AM
Eurozone growth looks muted despite expectation-beating result
Composite purchasing managers index data for the eurozone indicates activity in the bloc grew narrowly during August, rising to 51.9 from 51.8 in July (where a score above 50 indicates growth).
Thats pretty sluggish, but after some shock drops in US manufacturing and UK construction, it will come as a relief that pollsters (who thought activity would be flat), were at least too pessimistic for once.
A deep manufacturing downturn, fueled by deteriorating exports and most intensely felt in Germany, continued to be offset by resilient growth in the service sector, the latter in turn propped up to a large extent by solid consumer spending in domestic markets pic.twitter.com/sUBXOuQxf2 Chris Williamson (@WilliamsonChris) September 4, 2019
UK services and composite PMI data is coming up in about 10 minutes...
UK PMI up next... pic.twitter.com/LvhLKUI3KI Rupert Seggins (@Rupert_Seggins) September 4, 2019
9:13AM
Europe markets post solid gains
As yesterdays lacklustre session, blue-chip indices are looking strong across Europe, with a strengthening pound pushing the FTSE 100 into slightly lagging its continental peers at 0.9pc up.
Pound extends rally above $1.22 as MPs back Brexit delay bill: as it happened

Credit:
Bloomberg TV
Italys FTSE MiB is leading risers, up 1.7pc, on hopes that a new government will be able to form after Five Star party (M5S) supporters showed apparent approval for its proposed coalition with the Democratic Party (PD).
If the parties can form a government, they will avoid an election putting paid, for now, to Matteo Salvinis power grab.
How the Left can block out Salvini
Sterling is making strong gains against the dollar: a combination of traders hopes that a no-deal Brexit will be averted, and negativity over the dollar after shock data yesterday showed the US manufacturing sector underwent a contraction in August, raising fears about the health of the worlds biggest economy.
Spreadexs Connor Campbell said:

The complicating factor here, and the reason that sterlings gains, while notable its up 0.5pcagainst the dollar and 0.4pcagainst the euro arent even greater, is the potential for a general election. Boris Johnson is seeking a snap vote, while Labour will only back a trip to the polling booth once the no-deal-blocking bill is successful.

CMC Markets Michael Hewson adds:

After hitting its lowest levels against the US dollar since the flash crash lows of 2016 the pound has rebounded strongly on the expectation that MPs will succeed in forcing the PM to ask the EU for a Brexit extension. This may well be premature if we do get a subsequent new election before the Brexit date and any new government reverses the legislation.
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