Glaxo’s decision to abandon plans to build a new factory in Cumbria is a major blow to the area.
Five years ago, GSK announced it would create a new “state-of-the-art biopharmaceutical manufacturing facility” at Ulverston. The site was expected to cost around £350m, and create 500 permanent jobs.
At the time, Prime Minister David Cameron said it was “excellent news for Cumbria”.
“A major investment that will create many highly-skilled jobs and provide a huge boost to the area.”
But those hopes have now been thrown into uncertainty.
at 8.58am EDT
Glaxo to cut jobs, and sell Horlicks
Breaking: Pharmaceuticals group GlaxoSmithKline is cutting more than 300 jobs in the UK.
The company has announced details of a plan to “improve the efficiency and competitiveness of its manufacturing network”.
Under the scheme, Glaxo will sell its ‘Horlick’ brand in the UK, and shut the factory in Slough where the malt milk drink is produced.
GSK is also outsourcing some manufacturing activity at its Worthing site in the UK.
And in another blow, the company is abandoning plans to build a biopharmaceutical facility in Ulverston, Cumbria, as it no longer needs the additional capacity.
Local MP John Woodcock says it’s ‘terrible news’.
Glaxo insists that it remains committed to UK manufacturing, and is today pledging an extra £140m for sites in Hertfordshire, County Durham and Montrose, in Scotland.
This new investment is in addition to the £275million announced last year and investment of over £1.2billion in UK manufacturing since 2012.
It also points out that it is a major employer:
Overall, GSK employs a total of around 17000 people across the UK of which 5000 are in UK manufacturing operations. The proposals announced today for Worthing and Slough will result in a reduction of approximately 320 permanent jobs over the next 4 years.
Is it Brexit’s fault? Apparently not. Glaxo says:
None of the announcements made today by the company have resulted from the UK’s decision to leave the European Union.
Morgan Stanley’s results have cheered the markets:
Morgan Stanley profits jump despite bond trading struggles
Newsflash from Wall Street: Morgan Stanley has become the latest bank to warn that bond trading has struggled.
But that hasn’t stopped the bank beating expectations with its financial results for the last quarter….
MS’s net earnings rose to $1.8bn for the April-June quarter, up from $1.6bn a year ago. That equates to earnings of 87 cents per share, compared to forecasts of just 76 cents
CEO James Gorman says it’s a decent performance, given the ‘subdued’ trading conditions.
And those ‘subdued’ conditions seem to have hit in MS’s bond trading division.
Fixed income sales and trading net revenues fell to $1.2bn, from $1.3bn, due to “lower volatility and sporadic activity during the quarter”.
Yesterday, Goldman Sachs reported a 40% slump in second-quarter bond trading revenue, which was also blamed on the current environment of low volatility.
at 7.23am EDT
Over in Paris, the governor of the Bank of France has dropped a hint that the ECB will take a cautious approach at this week’s meeting.
Villeroy de Galhau, who serves on the ECB’s governing council, told French MPs that the central bank has defeated the threat of deflation.
However, he added, it’s too early to end its asset purchase scheme or raising interest rates from their current record lows.
De Galhau argued:
“We have made progress, but we have not yet reached the target and so there is still a need for our accommodative monetary policy…
We are adapting its intensity depending on the economic situation and progress towards the target.
Here’s a photo from the session:
European stock markets have crept higher, helping to keep global stocks at record levels.
In London the FTSE 100 has gained 6 points, with Reckitt Benckiser leading the way following the sale of its food business.
That follows a decent session on Wall Street last night, where the Nasdaq tech index surged to a fresh record high.
Chris Beauchamp of IG says traders are hoping that the European Central Bank doesn’t drop any nasty surprises tomorrow:
A record high for the Nasdaq and a fresh overnight surge in the euro’s ongoing rally will be the key themes on an otherwise relatively quiet day. As the ECB meeting gets closer, the market’s attention will increasingly focus on the likelihood of any further hawkish commentary from the central bank that could squeeze the euro even higher against the dollar.
European markets failed to capitalise on last week’s rally, hamstrung by euro strength, so the hope for this particular crowded trade is that Mario Draghi will row back on the change in language from earlier in the month. Given the bank’s predilection for easing, it seems unlikely that they will err too much on the hawkish side.
Eurozone construction output drops
Newsflash: Europe’s construction sector cooled a little in May.
Construction output across the eurozone shrank by 0.7%, compared to May, due to a 0.9% decline in civil engineering and a 0.7% drop in building construction by 0.6%.
Across the wider EU, construction dropped by 1.1%.
The largest decreases in production in construction were recorded in Slovenia (-10.6%), Sweden (-7.1%) and Slovakia (-4.9%), and the highest increases in Hungary (+7.6%), Bulgaria (+3.6%) and Italy (+2.7%).
Despite the month-on-month decline, eurozone construction production was still 2.6% higher than a year ago:
This may encourage the European Central Bank not to rush into unwinding its stimulus programme….
Hot news for sauce lovers! Consumer giant Reckitt Benckiser has sold off its food business in a deal worth $4.2bn (£3.2bn).
The division, which produces French’s mustard, Franks’ RedHot and Cattlemen’s sauces, has been gobbled up by America’s McCormick & Co – which owns Schwartz herbs and spices.
This follows a bid battle with Unilever and Hormel Foods, maker of Spam.
The deal should allow Reckitt to focus on its cleaning and healthcare operations. Shares in the company have jumped 1.5%.
Peter Rosenstreich of Swissquote Bank predicts that the Bank of Japan will reaffirm its commitment to loose monetary policy when it monetary policy meeting ends tomorrow.
The BoJ is currently buying 80 trillion yen of bonds each year, hitting banks with negative interest rates, and trying to keep long-term government borrowing costs around zero, in a bid to drive inflation and growth up.
But with inflation still weak, Rosenstreich doesn’t believe the BoJ can consider slowing its stimulus programme yet.
While most major central banks have begun tightening money supplies, the BoJ has not. The Central bank has been unable to boost inflation to its target of 2%, and success is not in sight for 2017-2018. The Bank is likely to focus on controlling the yield curve, one of its primary targets will be to pin 10-year government bond yields at 0%….
Rosenstreich adds that two hawkish BoJ policymakers are leaving the board, giving governor Haruhiko Kuroda more freedom to continue his expansive policy.
Australia’s stock market had a good day, driven by its banks.
Shares in Australia’s largest lenders rallied after regulators unveiled new capital requirements which are less onerous than feared.
Bloomberg has the details:
“The new requirements look relatively benign,” said Anthony Ip, a credit analyst at Citigroup Inc. “The majors may well be able to meet the new requirements organically without equity raisings, assets sales or changes to dividends.”
ANZ Bank shares rose as much as 4.2 percent, the most in more than eight months, and Commonwealth Bank added 3.4 percent. National Australia Bank rallied as much as 3.7 percent and Westpac climbed as much as 4 percent.
That sent the S&P/ASX index up by 0.8%
The euro is dipping this morning, down 0.2% against the pound at 88.4p.
That suggests that traders expect the European Central Bank to calm expectations that it might rein in its stimulus programme soon, at tomorrow’s meeting.
Benjamin Schroeder, a rates strategist at ING, believes the ECB have had a rethink after president Draghi gave an upbeat speech in late June. Those upbeat comments drove the euro up, and sparked a selloff in eurozone government bonds.
Schroeder adds (via Reuters):
“A strong euro has also raised expectations that they will not sound overly hawkish.”
The US dollar’s weakness has boosted the Chinese yuan.
Beijing just fixed its currency at the strongest level in nine months, as Trump’s healthcare woes continue to weigh on the greenback.
This news clearly calls for a cute panda…
at 3.50am EDT
The agenda: Investors await ECB and BoJ tomorrow
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s an end of term feeling in the markets today.
I don’t think any traders have actually turned up with a Kerplunk set, but they could be forgiven for risking a quick game of Top Trumps across their trading terminals.
In short, there’s not much going on today.
So with nothing to scare investors right now, global markets remain at their highest ever levels. MSCI’s gauge of shares around the world has risen this morning, putting it on track for its fifth daily rise in a row.
But although the summer lull is nearly upon us, we’re not there quite yet, class.
Investors need to prepare for a busy Thursday, when the Bank of Japan and the European Central Bank both hold monetary policy meetings. They could move move the markets, if policymakers offer any hints that monetary policy will be tightened soon.
In particular, the ECB could provide fresh guidance on when it will start to taper its bond purchase scheme. Any bullish comments from president Draghi could send the euro spiking.
Mihir Kapadia, CEO of Sun Global Investments, says:
Any comments which are perceived are more hawkish then expected could result in further pressure on the US dollar. The dollar is also weaker against the yen and the pound.”
Over in Asia, optimism over China’s economy, following this week’s GDP figures, has pushed shares higher.
The US dollar is languishing around a 10-month low today, following Donald Trump’s inability to get healthcare changes though Congress.
Investors are increasingly sceptical that that the president can implement tax reforms or push through a big infrastructure spending bill.
As Michael Hewson of CMC Markets puts it…
The Trump administration is also helping by appearing to undermine the US dollar at every available opportunity with what can only be described as either incompetence or sheer stupidity. Another failure to enact policy reforms this time on health care is raising serious questions as to whether this administration will deliver on any of the promises it made at the end of last year, with serious doubts now being expressed about tax and banking reform.
It seems that even with a majority in both Houses the Republicans appear unable to even agree amongst themselves as to what is best for the US economy. It appears that the US government is giving the UK government a run for its money in the incompetence stakes. It doesn’t help that neither country has a competent opposition to offset this.
President Draghi will certainly have his work cut out in keeping a lid on the euro at this rate, as the market gears up for tomorrow’s ECB rate meeting, with a move to the $1.2000 level a distinct possibility on a break of $1.1620 and last year’s high.
It looks like a quiet day, but we do get new eurozone construction figures, US housing data, and new oil inventory figures this afternoon….
- 10am BST: Eurozone construction output for May
- 1.30pm BST: US housing starts and building permits
- 3.30pm BST: US crude oil inventories
at 3.45am EDT