Introduction: Hunt says Thames Water prospects should not choose up the tab for its errors
Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world economic system.
Thames Water should kind out its personal monetary issues, chancellor Jeremy Hunt has declared, as the way forward for the difficulty water firm hangs within the steadiness.
Talking in Washington final night time, Hunt advised reporters that the federal government would by no means insure traders in opposition to poor selections.
Throughout a go to to Washington for the spring conferences of the IMF and World Financial institution, the chancellor mentioned:
“It could be fully mistaken for Thames Water prospects to choose up the tab for dangerous selections by Thames Water’s homeowners and managers.”
Hunt’s feedback come as Thames Water prepares to faucet the debt markets in an try and fund a rescue plan and restore its funds.
Its board is anticipated to fulfill in the present day to rubber-stamp a revised five-year spending plan, which could possibly be launched tomorrow; it will then method lenders to fund the proposals within the coming days.
The Guardian reported final weekend that Thames Water – which has money owed of £14bn – has simply six weeks to persuade its regulator that it has a viable survival plan for its enterprise.
Though it may have sufficient money to outlive for about 15 months, insiders and traders concern that it should transfer shortly to strike a cope with its watchdog to stave off insolvency.
Its dad or mum firm, Kemble Water Finance, missed an curiosity cost earlier this month, after its traders deserted plans to offer £500m of emergency funding in a row with the water regulator. Thames has been pushing Ofwat to let it elevate payments by 40%.
Hunt mentioned the federal government was ready for “all doable outcomes”, but additionally denied that the UK’s fame as a vacation spot for worldwide funding would undergo if Thames Water fell into administration.
The chancellor argues that markets have to work correctly, saying:
“After all we wish to appeal to funding into the UK however we do this on the idea of legal guidelines and ensuring we have now clear regulation and individuals are capable of get superb returns.”
The agenda
-
7am BST: EU automotive gross sales for March
-
10am BST: Eurozone development output for February
-
1.30pm BST: US weekly jobless information
Key occasions
Germany ‘set to keep away from winter recession’
Germany’s central financial institution is hopeful that Europe’s largest member will keep away from falling into recession, after a pick-up in exercise at first of this yr.
The Bundesbank has predicted this morning that the German economic system most likely expanded within the first quarter, because of an surprising increase from trade and development.
The Bundesbank had beforehand predicted that GDP would shrink within the first three months of 2024, which might have put Germany right into a technical recession (two quarterly contractions in a row), after it shrank in This autumn 2023.
However in the present day, the Bundesbank declares that Germany’s financial state of affairs has brightened considerably, that means there might have been a slight improve in progress in Q1 2024.
It warns, although, that the outlook stays poor, saying:
“There’s nonetheless no proof of sustained enchancment for the German economic system.
Demand for industrial merchandise from Germany and overseas stays weak and continues to say no.”
UK firms trimmed their job adverts final week.
The full variety of on-line job adverts on 12 April 2024 decreased by 2% in comparison with the earlier week, the Workplace for Nationwide Statistics reviews in the present day. That left the entire 19% decrease than a yr in the past.
Brent crude slips again in direction of $86/barrel
The oil worth has eased to its lowest stage for the reason that begin of April.
Brent crude is down 0.7% in the present day at $86.66 per barrel, including to a heavy drop yesterday.
Final Friday, Brent traded as excessive as $92 per barrel, as traders braced for Iran to take navy motion in opposition to Israel.
Joshua Mahony, chief market analyst at Scope Markets, says the droop in oil costs helps to raise sentiment within the markets in the present day, including:
The danger of an escalation between Israel and Iran seems to be easing with every passing day, whereas yesterday’s fourth consecutive weekly acquire for US crude inventories has signalled an oversupply regardless of a latest decline in US output.
Yesterday’s smaller-than-expected fall within the UK’s inflation fee hasn’t had any fast impression on the mortgage market.
Moneyfacts have reported that common borrowing charges are unchanged this morning, saying:
-
The common 2-year mounted residential mortgage fee in the present day is 5.81%. That is unchanged from the earlier working day.
-
The common 5-year mounted residential mortgage fee in the present day is 5.39%. That is unchanged from the earlier working day.
The cash markets this morning are pricing in a excessive probability that there are two cuts to UK rates of interest this yr, bringing Financial institution fee right down to 4.75% in December from 5.25% in the present day.
Residence furnishings group Dunelm has dampened the temper within the Metropolis a bit in the present day, by warning that shopper spending “stays beneath stress”.
Dunelm reported a 3% rise in whole gross sales within the first quarter of this yr, pushed by elevated volumes, although each the homewares and furnishings markets remained “difficult”.
It added
Buying and selling circumstances have continued to be risky with March specifically seeing softer ranges of demand.
Dunelm shares are down nearly 3% this morning, although the corporate reported a rise in its revenue margins as prices fall.
Kalyeena Makortoff
The embattled British music royalties funding fund Hipgnosis, which owns the rights to songs by artists from Beyoncé to Neil Younger, has agreed to a $1.4bn (£1.1bn) takeover by a music and theatrical rights rival after months of turmoil over the corporate’s construction and management.
The Harmony Refrain deal, which affords Hipgnosis shareholders a 32% premium to Thursday’s share worth at $1.16 a share, may put an finish to uncertainty over the FTSE 250 agency’s future.
The London-listed firm, which affords traders the possibility to earn money from the royalties of tracks by artists equivalent to Shakira, Barry Manilow, Crimson Scorching Chili Peppers and Blondie, had launched a strategic assessment final yr to evaluate its enterprise choices, together with a possible sale, after a revolt by shareholders over a deliberate catalogue sell-off and its enterprise plans.
Extra right here.
FT: Thames Water may gain advantage from a spell of public possession
The Monetary Instances’ Lex column argues in the present day that it may make sense to place Thames Water right into a particular administration.
Lex writes:
A swift demise is best than a sluggish one. That will surely be true for Thames Water.
A interval of momentary public stewardship is mostly framed as a worst-case situation in discussions about the way forward for Britain’s greatest privatised water utility. However placing Thames Water right into a particular administration regime — and shortly — would have its advantages.
To be clear, a situation the place Thames is run briefly by a particular administrator on behalf of the UK authorities stays, at current, hypothetical.
Lex warns that if Thames can’t elevate new fairness, it must slash prices, that means its already-poor service ranges would deteriorate additional. Alternatively, a particular administration would possibly restrict fallout for different utilities and provide an opportunity to sort out its unwieldy construction, they are saying.
This may not be widespread with Thames’s bondholders, Lex provides, as they could possibly be pressured to take a haircut, however traders in different water firms would possibly approve, because it may cease the disaster spreading.
Extra right here: Thames Water may gain advantage from a spell of public possession
A particular administration could possibly be triggered by the secretary of state or Ofwat.
Oxford professor Dieter Helm has argued it will be sensible to “grasp the chance” offered by a particular administration, and push via “a elementary re-set” of Thames.
In a superb evaluation final month, Professor Helm wrote that Thames Water’s complicated possession must be straightened out, and it must be fully separated from dad or mum firm Kemble.
He additionally suggests the corporate is just too massive, and could possibly be cut up into “London Water”; and “Better Thames Water”, and that the sewerage and water operations “can and may” be separated into totally different companies, which might enhance administration focus.
Final month, the Liberal Democrats known as for Thames Water must be put into particular administration by the federal government and reformed as a public profit firm.
Prof Helm says the federal government is reluctant to press the particular administration button within the Thames Water case comes from a concern of upsetting overseas traders.
He defined:
The UK has bought itself right into a place of counting on the kindness of strangers to permit its residents to dwell past their means, and for nearly all financing of funding throughout the economic system.
There are two causes for this uncovered state of affairs: internet saving (after capital depreciation) has been destructive for over a decade; and the present account of the steadiness of funds is in critical deficit, with imports exceeding exports. UK funding is basically overseas funding; and the commerce deficit requires a capital influx to offset the current-account deficit.
Within the property sector, London property agent Foxtons’ has reported a powerful begin to the yr.
Gross sales income grew by 17% within the first quarter of 2024, to £9.5m, because the company took a bigger share of the market.
CEO Man Gittins explains:
We entered the second quarter with the very best worth under-offer Gross sales pipeline for the reason that 2016 Brexit vote, giving us optimism for the remainder of the yr.
Lettings income rose by 5% within the quarter to £24.0m. Foxtons reviews that rental costs have “stabilised” as provide and demand of tenancies has normalised.
Water campaigner Feargal Sharkey is urging surroundings secretary Steve Barclay to ‘do your job’ and put Thames Water out of its distress…..
EasyJet narrows winter losses regardless of Center East turmoil
Price range airline easyJet has narrowed its losses, regardless of dropping income from cancelling flights to Israel and Jordon final winter.
EasyJet reported this morning that its losses for the six months to the top of March have fallen by over £50m, to between £340m and £360m.
The airline says it grew capability the place demand was strongest. It additionally benefitted from the early timing of Easter this yr, which led to extra demand for flights in March.
Shares in easyJet have jumped 4% in early buying and selling, to the highest of the FTSE 100 leaderboard.
Johan Lundgren, CEO of easyJet, argues the airline is properly arrange operationally for this summer season season, saying:
The significance that customers place on journey coupled with easyJet’s trusted model has pushed good demand for our flights and holidays. Our progress and give attention to productiveness have lowered winter losses by greater than £50 million.
“Now we have additional enhanced our community with the launch of recent bases in Alicante and Birmingham offering higher selection for customers throughout Europe
EasyJet additionally misplaced round £40m because of the battle within the Center East, after it paused flights to Israel and close by Jordan for security causes after the seventh October assaults.
It faces additional misplaced enterprise within the months forward, after suspending flights to Tel Aviv for the following six months earlier this week.
European electrical automotive gross sales take a tumble
Gross sales of electrical vehicles throughout the European Union tumbled by over 11% final month, new figures present, within the newest signal that demand for battery-powered automobiles is ebbing in favour of hybrid vehicles.
The European Vehicle Producers Affiliation (ACEA) reported this morning that new automotive registrations fell for the primary time this yr in March, dropping by 5.2% to round a million items.
The timing of the Easter holidays negatively impacted gross sales, ACEA says, together with within the EU’s 4 largest nations – Germany (‑6.2%), Spain (-4.7%), Italy (-3.7%), and France (-1.5%).
Battery-electric automotive registrations declined by 11.3% to 134,397 items, that means its market share shrank from 13.9% a yr in the past to 13% in the present day.
In distinction, hybrid–electrical automotive registrations rose by 12.6%.
There was additionally a drop in gross sales of inside combustion engine-powered vehicles; petrol gross sales decreased by 10.2%, whereas diesel registrations shrank by 18.5%.
Iran oil exports hit 6-year excessive as west prepares sanctions
Within the power sector, Iran is exporting extra oil than at any time for the previous six years, new information reveals.
Information firm Vortexa has reported that Tehran offered a mean of 1.56mn barrels a day through the first three months of the yr, nearly all of it to China. That’s its highest stage for the reason that third quarter of 2018.
That is giving Iran’s economic system a $35bn-a-year increase, the Monetary Instances reviews this morning, at a time when Western governments are drawing up contemporary sanctions following Iran’s drone and missile assault in opposition to Israel final weekend.
Iran’s oil sector is already beneath sanctions, but it surely was nonetheless the world’s second largest supply of provide progress in 2023.
Earlier this week US treasury secretary Janet Yellen mentioned the Biden administration was poised to take “extra sanctions motion in opposition to Iran within the coming days”, including that there could also be “extra to do” on Tehran’s oil commerce.
Vortexa’s information reveals how this could possibly be a problem.
As Fernando Ferreira, head of geopolitical threat service on the Rapidan Vitality Group within the US, put it to the FT:
“The Iranians have mastered the artwork of sanctions circumvention.
“If the Biden administration is admittedly going to have an effect, it has to shift the main focus to China.”
Extra right here….
Introduction: Hunt says Thames Water prospects should not choose up the tab for its errors
Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world economic system.
Thames Water should kind out its personal monetary issues, chancellor Jeremy Hunt has declared, as the way forward for the difficulty water firm hangs within the steadiness.
Talking in Washington final night time, Hunt advised reporters that the federal government would by no means insure traders in opposition to poor selections.
Throughout a go to to Washington for the spring conferences of the IMF and World Financial institution, the chancellor mentioned:
“It could be fully mistaken for Thames Water prospects to choose up the tab for dangerous selections by Thames Water’s homeowners and managers.”
Hunt’s feedback come as Thames Water prepares to faucet the debt markets in an try and fund a rescue plan and restore its funds.
Its board is anticipated to fulfill in the present day to rubber-stamp a revised five-year spending plan, which could possibly be launched tomorrow; it will then method lenders to fund the proposals within the coming days.
The Guardian reported final weekend that Thames Water – which has money owed of £14bn – has simply six weeks to persuade its regulator that it has a viable survival plan for its enterprise.
Though it may have sufficient money to outlive for about 15 months, insiders and traders concern that it should transfer shortly to strike a cope with its watchdog to stave off insolvency.
Its dad or mum firm, Kemble Water Finance, missed an curiosity cost earlier this month, after its traders deserted plans to offer £500m of emergency funding in a row with the water regulator. Thames has been pushing Ofwat to let it elevate payments by 40%.
Hunt mentioned the federal government was ready for “all doable outcomes”, but additionally denied that the UK’s fame as a vacation spot for worldwide funding would undergo if Thames Water fell into administration.
The chancellor argues that markets have to work correctly, saying:
“After all we wish to appeal to funding into the UK however we do this on the idea of legal guidelines and ensuring we have now clear regulation and individuals are capable of get superb returns.”
The agenda
-
7am BST: EU automotive gross sales for March
-
10am BST: Eurozone development output for February
-
1.30pm BST: US weekly jobless information