The Daily Telegraph Tuesday 6 August 2019 *** 27

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Inside

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Shanghai

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banking

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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.”

-2. 5 p c

FTSE 100

7,223.85 points

-1.9pc

Euro Stoxx 50

3,310.93

-1.7pc

Nikkei 225

20,720.29

-2. 6 p c

S&P 500

2,865.56 points

-2. 9 p c

Hang Seng

26,151.32

-3.1pc

Dow Jones

25,620.62

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