The Daily Telegraph - 06.08.2019

(C. Jardin) #1

The Daily Telegraph Tuesday 6 August 2019 *** 27


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Inside


England


expects
Don’t have a
go at Mark

Carney – it’s
a tough job
to do well

Ben Wright


Shanghai


surprise
HSBC chief
executive

John Flint
exits the
banking

giant


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Business


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China’s yuan


devaluation


is a slap in the


face for Trump


By Ambrose Evans-Pritchard

CHINA has hit back at the Trump ad-
ministration with a drastic exchange
rate devaluation, almost guaranteeing
a superpower showdown and a lurch
towards full trade war.
The yuan blew through the symbolic
line of seven to the dollar for the first
time since the global financial crisis,
with the offshore rate in Hong Kong
spiking to 7.07 in moves that stunned
seasoned traders.
The calculated action by the People’s
Bank (PBOC) threatens to unleash a
wave of deflation across the world and
risks pushing East Asia and much of
Europe into recession. It is certain to
provoke a ferocious response from the
White House.
Capital Economics said Beijing has
taken the fateful step of “weaponising”
its exchange rate and is digging in for a
long struggle. “The fact that they have
now stopped defending 7 against the
dollar suggests that they have all but
abandoned hopes for a trade deal with
the US,” it said.
Commerzbank said China’s decision
to engineer such a sudden move in its
tightly-managed currency has far-
reaching implications for the whole in-
ternational system. “It looks like a
tsunami is coming,” it said.
The shock waves were felt instantly
through the nexus of global bond, eq-
uity and commodity prices. It triggered
a flight to safe-haven currencies such
as the Japanese yen and Swiss franc, an
effect compounded by the thin liquid-
ity conditions of August trading.
Yields on 10-year German bunds
plummeted to -0.53pc, taking much
Continued on Page 29

Berkeley scraps its bumper bonuses


By Jack Torrance


BERKELEY Group has
drawn up a new pay policy
for bosses including its
founder Tony Pidgley after
payouts worth tens of mil-
lions of pounds prompted
outrage.
The housebuilder, that
handed its three highest-
paid executives a combined
£21m last year, has scrapped
its annual bonus. Bosses will
now be forced to hang on to


shares earned through the
company’s long-term incen-
tive scheme for an extra two
years.
Mr Pidgley, Berkeley’s ex-
ecutive chairman, and his
fellow directors will have to
re-earn any shares that have
not vested through the
scheme by 2021 over the fol-
lowing four years.
Glyn Barker, head of
Berkeley’s pay committee,
said the new policy would
encourage bosses to focus

on the company’s long-term
future rather than annual fi-
nancial performance.
Berkeley capped the max-
imum amount its bosses
could earn through the
scheme in 2017 following an
outcry over combined pay-
outs to six bosses worth
£92m – including £29m for
Mr Pidgley.
He was still able to take
home £8.3m last year, put-
ting him among the best-
paid bosses in the FTSE 100.

Ashley adds struggling Jack Wills to stable


as clothing retailer enters administration


By LaToya Harding


SPORTS Direct owner Mike Ashley has
added yet another struggling clothing
chain to his retail empire after acquir-
ing Jack Wills for £12.7m.
The tracksuit tycoon, who recently
admitted to regretting purchasing
House of Fraser, snapped up the high
street brand in a pre-pack administra-
tion deal immediately after adviser
KPMG put the business into adminis-
tration yesterday.
The deal includes all 100 of Jack
Wills’ UK and Ireland stores, as well as
its distribution centre. Suzanne Har-


low, the chief executive, said the com-
pany had sought to improve  its
proposition and financial performance
over the past year.
“Despite significant progress, the
challenging trading environment led
us to conclude that the company’s
long-term future would be best served
as part of a larger group and Sports Di-
rect will enable us to do this,” she said.
Will Wright, partner at KPMG and
joint administrator, said: “Jack Wills
has a strong brand and proud British
heritage, so it is pleasing to have been
able to secure this agreement with
Sports Direct.” The chain was put up

for sale earlier this year by its private
equity owner Bluegem Capital after
racking up steep losses and struggling
to compete in a fiercely competitive re-
tail environment.
It sunk to pre-tax losses of £29.3m
on sales of £139m last year and suffered
a £7.5m loss in its latest financial year.
The sale attracted a number of other
potential suitors, including British bil-
lionaire Philip Day, Ben Sherman
owner Marquee Brands, along with
turnaround funds Alteri and Hilco.
In the past year Mr Ashley has also
added Evans Cycles and Sofa.com to his
stable.

Market meltdown as trade war hots up


By Tom Rees


US stocks suffered their worst day of the
year after China upped the ante in its
rapidly escalating trade war with the US.
The global stock market sell-off saw
investors rushing for so-called “safe-
haven” assets and analysts warning that
a bear market “beckons”.
The S&P 500, New York’s benchmark
index, plunged 2.98pc after Beijing
refused to bow to pressure from Donald
Trump and ignited fears the trade war is
spilling over into currency markets.
China halted imports of American
agricultural products and let its currency
tumble below a crucial level in retalia-
tion for the latest round of US tariffs.
The fall marked its sixth consecutive
day of declines and its longest losing
streak in 10 months, wiping hundreds of
billions of pounds off the value of global
stocks. The Dow Jones Industrial Aver-
age, closed 2.9pc lower while the tech-
heavy Nasdaq Composite ended 3.47pc
down. The stocks rout extended into a
second day as the Vix index – a measure
of future volatility expectations known
as the “fear gauge” – surged 33pc to a
three-month high, sparking fears that
Asian markets might lurch further on the
back of the US sell-off.
A “bear market beckons” and “credi-
ble triggers for a significant market cor-
rection are materialising”, warned
Oxford Economics analyst Gaurav
Saroliya. A bear market is a fall of more
than 20pc from an index’s previous peak.
London’s blue-chip stock index en-
dured its biggest plunge this year, sink-
ing 2.5pc to close at 7,223.85 points as
investors piled into government debt,
safe haven currencies and gold. The
FTSE has tumbled 6pc in a week and the
global sell-off showed no sign of abating
after the end of play in Europe. Mr
Trump shocked markets last week by
breaking a tentative trade truce with


US stocks drop further


than at any point in the


year as investors flee to


so-called safe haven assets


China and announcing a 10pc tariff on
the remaining $300bn (£247bn) of
unaffected Chinese goods.
He launched another broadside at Xi
Jinping’s government yesterday, accus-
ing Beijing of currency manipulation af-
ter the Chinese yuan beached the crucial
7 per dollar mark, hitting an 11-year low.
“China has always used currency ma-
nipulation to steal our businesses and
factories, hurt our jobs, depress our
workers’ wages and harm our farmers’
prices,” Mr Trump said on Twitter.
Cowen analyst Chris Krueger said the
yuan’s “massive” slump yesterday
“clearly signalled a change in policy” in
Beijing and will be interpreted as a
warning that the “Chinese are not
seeking a near-term deal”.
Stewart Cook at Berenberg, warned:
“We are now in an open trade war. This
time it does feel different.”
He said investors should brace for
more volatility in the coming months,
adding: “There are some technical sup-
port levels on the S&P 500 and Dax that
could provide some support in the short-
term but if they are broken then these
aggressive falls could continue.”
The darkening outlook for the global
economy boosted gold prices to a six-
year high and triggered a rally in govern-
ment bonds.
Last week the Federal Reserve linked
future interest rate cuts to developments
on trade policy with the latest escalation
bolstering hopes of more stimulus in the
US. The US 10-year Treasury yield
tumbled to 1.73pc, a near three-year
low, as a closely-watched part of the
yield curve sank deeper into feared
inversion territory, hitting its lowest
level since 2007.
An inversion in the US Treasury yield
curve is one of the market’s most trusted
recession indicators and signals that in-
vestors expect central banks to cut inter-
est rates to revive growth.
The cost of UK government debt
dropped to a record low while German,
Dutch and French government bonds
slipped further into negative territory.
The benchmark 10-year gilt yield briefly
sank below 0.50pc to an all-time low,
pushing past the mark set in August 2016.

By Michael O’Dwyer

TESCO will axe 4,500 jobs as part of
cutbacks at 153 of its Metro stores, Brit-
ain’s biggest supermarket chain said
yesterday.
The retailer claimed the cuts were
aimed at “simplifying” the operations
of its Metro stores, which were origi-
nally aimed at shoppers doing a larger
weekly shop but are now largely used
as convenience stores.
The cull is in addition to Tesco’s an-
nouncement in January that up to
9,000 workers could be made redun-
dant as part of a restructuring plan to

“simplify” the business and cut costs.
“In a challenging, evolving retail envi-
ronment, with increasing cost pres-
sures, we have to continue to review
the way we run our stores to ensure we
reflect the way our customers are shop-
ping and do so in the most efficient

way,” said Jason Tarry, head of Tesco’s
UK and Irish business.
“We do not take any decision which
impacts colleagues lightly, but have to
make sure we remain relevant for cus-
tomers and operate a sustainable busi-
ness now and in the future.”
The job cuts are part of a number of
changes, which will include a reduc-
tion in the amount of stock being held
at stores and a “leaner management
structure,” Tesco said. Opening hours
will also be reduced at 134 of the less
busy Tesco Express stores. Changes are
planned at a small number of larger
stores, the company added.

9,000


The number of positions that the retailer
has already announced as part of
restructuring plan to simplify business

AP

Tesco to cull 4,500 jobs at Metro stores in


‘challenging, evolving retail environment’


The global stock markets reacted dramatically as the ongoing trade war between the US and China took a severe turn for the worse

Losing streak for Hong Kong stocks the worst since UK handover


By Louis Ashworth


HONG KONG stocks are on a record-
breaking losing streak as they flail un-
der the pressure of global economic
woes and escalating local protests.
The MSCI Hong Kong index, which
measures the performance of the terri-
tory’s blue-chip and mid-cap segments,


has dropped for the past nine days, its
longest unbroken fall since the hando-
ver in 1997.
The Hang Seng index, comprising
Hong Kong’s biggest companies, has
lost most of its gains so far this year,
down more than 13pc from its 2019
high in April. It closed down nearly 3pc
yesterday, its fourth day of declines.

The communications and real estate
sectors hold the biggest weight on the
HSI, with landlords, casinos and retail-
ers battered on the MSCI.
As China and the US spiral closer to a
full-scale trade war, businesses listed
in Hong Kong have found themselves
battered by trade tensions and weeks
of highly disruptive rallies. Matters

were worsened by the sharp fall in the
value of the renminbi yesterday, with
Hong Kong – long seen as a gateway to
trading into China for Western compa-
nies –  likely to find itself at the sharp
end of a currency war.
Activists brought the city to a stand-
still as they continued a non-coopera-
tion protest against an extradition law.

Trains were disrupted and more than
170 flights were cancelled as the major
escalation got under way. Rabobank
analysts said the timing of the protests
“probably couldn’t be worse”.
Carrie Lam, Hong Kong’s embattled
chief executive held her first press con-
ference in a fortnight, saying protest-
ers were taking the city towards a “very

dangerous situation” and warning their
actions threatened its financial hub.
Alvin Cheung, associate director at
Prudential Brokerage, said: “I would
advise investors to tread extra carefully
when buying Hong Kong shares ...
Subsiding fluctuations in the offshore
and onshore yuan is now a prerequisite
for any kind of stability in stocks.”

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