Closed Brexit live – Johnson pulls out, Gove to challenge May, Carney promises more easing

Britain's Home Secretary Theresa May attends a press conference in London

Boris Johnson will not be running to replace David Cameron, but Michael Gove will. He’ll face new favourite home secretary Theresa May – and a handful of others.

Key points

  • Boris Johnson pulls out of the race for Tory party leadership

  • Michael Gove launches surprise run

  • May, Leadsom, Fox and Crabb all launch candidacy

  • Jeremy Corbyn expected to face leadership challenge later today

  • Bank of England governor hints at more monetary easing, warning of a “materially slower” growth

  • FTSE 100 closes at highest since Aug 2015; Gilt yields fall negative for first time ever


Welcome back to the FT’s live coverage of the fallout from last week’s referendum result.


Good morning. Exactly one week after Britons voted for the UK to leave the EU, this is the FT’s front page today:

https://twitter.com/FT/status/748237678865432576

A full archive of our Brexit articles can be found here.


Some highlights from inside today’s FT….

Philip Stephens calls for the formation of the new political party, in his piece: Britain is starting to imitate Greece:

Political realignments do not happen often in British politics, mostly because the first-past-the-post electoral system has been merciless towards third parties. But the space may be opening up for a new, pro-European, economically liberal and socially compassionate alternative to pinched nationalism and hard-left socialism.


Philip Stafford suggests that the threat to Britain’s clearing business may not be as serious as it seems:

Crucially, the euro is a global reserve currency and so can be traded and cleared anywhere, just as the dollar is. A demand to have euro-denominated swaps only cleared in the eurozone would represent a step back from that.


John Gapper explains how the single market has helped foster the UK’s dominant position in services:

As yet, it is unclear what precisely the UK’s voters wanted, or what the next prime minister will eventually manage to negotiate on their behalf. But history shows why a future decision that is also in danger of sounding technical — whether the UK remains within the European single market even though it leaves the EU — is so crucial in limiting the economic damage.


With 15 minutes to go until European markets open, here’s what we’re expecting:

European equities are set to dip by around 0.3 per cent when trading gets underway as the market steadies following the post-Brexit volatility.

Currency action is muted, with sterling slipping just 0.1 per cent to $1.3412, while the less febrile mood is reducing demand for supposed havens, nudging government bond yields up by a few basis points.


And here is what the other papers are saying today, via the BBC’s Nick Sutton.

The Guardian and The Times eye up the Conservative leadership contest.

https://twitter.com/suttonnick/status/748260974931640320

https://twitter.com/suttonnick/status/748260255008698369

The Daily Telegraph splashes on a leaked email from justice secretary Michael Gove’s wife, Daily Mail columnist Sarah Vine, in which Vine warns her husband about backing Boris Johnson’s leadership ambitions.

https://twitter.com/suttonnick/status/748263379429654528

The Daily Mail looks at disputes over whether the UK could have access to the EU’s single market without accepting free movement of people.

https://twitter.com/suttonnick/status/748265787333427202

The Daily Mirror focuses on in-fighting on Labour’s frontbench, with the headline: “Now it’s civil war”.

https://twitter.com/suttonnick/status/748266993795604481

The Daily Express says Boris Johnson is the “clear favourite” to replace David Cameron in Number 10.

https://twitter.com/suttonnick/status/748261956868505600

The i says “Non!”, with details about France and Spain saying the oppose Scotland staying in the EU.

https://twitter.com/suttonnick/status/748267616083525633

City A.M strikes a more optimistic note, citing a survey from FTI Consulting finding that two-thirds of investors think London will retain its position as a global financial centre after the UK leaves the EU.

https://twitter.com/suttonnick/status/748269708240101377

The Sun splash ignores Brexit altogether, by focusing on apparent flashy behaviour from England football player Raheem Sterling.

https://twitter.com/suttonnick/status/748265065846083586


Gideon Rachman’s latest World Weekly podcast puts questions to the FT’s Europe-based correspondents on at how far Frankfurt and Paris will go to claim the business of the City of London once the UK has left the European Union.

https://twitter.com/FT/status/748279920598650881


Brexit may still be years off, but the uncertainty is already having an impact on business and investment decisions:

Singapore-based United Overseas Bank, Southeast Asia’s third-largest bank by assets, has suspended loan applications for London properties as investors assess the uncertainties caused by UK’s vote to leave the EU.

Full story here.


Klaus Regling, a senior eurozone official who controls the world’s single-largest bailout fund, the European Stability Mechanism, has thrown doubt on whether the UK will ever carry out its intention to leave the EU, writes the FT’s Mehreen Khan.

Speaking to German business magazine Wirstchaftwoche Mr Reging said: ” Let’s see whether the proposed referendum on United Kingdom membership of the European Union is all about.

“We are only at the beginning of a very long process, a lot can still happen.”

“The vote in the United Kingdom was primarily influenced by emotions. Perhaps the last word on this issue has not yet been spoken. “


The FT has launched a tracker to keep tabs of the company announcements on the impact of the Brexit vote on jobs and investment.

Take a look here


In case you missed it last night, French finance minister Michel Sapin did not rule out giving the UK access to the EU’s single market without making it sign up to freedom of movement.

“Everything will be on the table because Britain will make proposals, and we will negotiate all these aspects with a desire to come to an agreement,” he told the BBC’s Newsnight programme.

https://twitter.com/BBCNewsnight/status/748270365516828672


Another tough day ahead for Jeremy Corbyn. The Times reports sources saying hat the Labour Leader actually wants to quit but is being held back by his allies.

Mr Corbyn was being urged to remain in his post by John McDonnell, the shadow chancellor and his strongest ally, Mr Watson told the BBC. “He’s obviously been told to stay by his close ally John McDonnell and they’re a team and they’ve decided that they’re going to tough this out. So it looks like the Labour Party is heading for some form of contested election.” Another senior party source said that Mr McDonnell and Seumas Milne, Mr Corbyn’s communications chief, were stopping their leader from standing down. “This stuff about him wanting to leave but being persuaded to stay by Seumas and McDonnell is true,” the source told The Times.

Full story here

However, Mr Corbyn has won some plaudits – for his gardening skills. The Telegraph has the scoop that Alan Titchmarsh, celebrity gardener and TV presenter, quite likes his garden (though sadly it is not unqualified praise).

“I think it’s wonderful – he looks a bit overgrown himself, it rather matches his beard,” said Mr Titchmarsh. “I think it’s rather lovely that he letting it overflow with greenery.

“Please don’t discourage him, it’s about the only thing I agree on with Jeremy Corbyn. “Although I suppose it wouldn’t hurt to tie those roses back.”

Full story here


Leading Leave campaigner Liam Fox is out of the traps this morning, another to describe himself as the unity candidate in the Conservative party leadership race. The former defence secretary, forced to resign in 2011, told Sky News that after last week’s referendum the UK had “just broken free” from the European Union.

Mr Fox opposes the EU’s rules on free movement of labour, favouring an Australian style points system to manage migration. “I don’t believe the British people would accept the concept of free movement in exchange for full membership of the single market” . Instead he favours “a more free trade approach”.

On his resignation in 2011, after breaching the ministerial code by taking a close friend on official trips overseas, Mr Fox said the leadership contest was “about the future not the past”.

Instead he emphasised his experience as a foreign office minister, a one time party chairman and a doctor in the NHS, and said the race to be leader and prime minister is “not going to be just a contest about Europe”.


A YouGov poll out today shows that Theresa May is Conservative party members’ number-one choice to be the next Tory leader, with 36 per cent of members polled backing the home secretary.

Twenty-seven per cent of polled party members said they supported former mayor of London Boris Johnson as their “first choice”.

Energy minister Andrea Leadsom and work and pensions secretary Stephen Crabb trail significantly, with just 7 per cent of party members supporting each.


European stocks markets are open, and they are lower. More here at fastFT.

The FTSE 100 and FTSE 250 are both down -0.4%.


Home Secretary Theresa May has promised a “new and radical programme” of social reform, as she sets out her stall in the race to become leader of the Conservative Party and to succeeded David Cameron as Prime Minister.

In an article in The Times newspaper today, Ms May argues the party must become “more open, inclusive and representative of modern Britain”. She writes:

We have to be clear that there is more to life, and more to Conservatism, than individualism. We have to cherish not just our older institutions but those that are younger too, like the BBC and the NHS. And we have to restore one of the oldest principles of Conservative philosophy — the contract between the generations — so that young people get a fair crack of the whip.

And we need to contemplate changes to the Conservative Party itself, because we can’t build a country that works for everybody unless we are truly a party that works for everybody.

She adds:

As a member of parliament, I played a part in helping more female Conservatives get elected than ever before.

As home secretary, I haven’t only overseen a fall in crime to its lowest recorded level, I have made it my mission to tackle injustice wherever I have found it. From Stephen Lawrence to Hillsborough, where there has been evidence of police corruption, I’ve exposed it.

More here


If you’re wondering how much attention to pay to those YouGov polls on Tory leadership, then have a look at this:


The latest from the London market open from the FT’s Michael Hunter:

The FTSE 100 slipped back in opening trade, coming off a two-session rebound that took the blue-chip index back to where it was trading before the announcement of the outcome of the UK’s referendum on EU membership. London’s main index slipped 0.2 per cent to 6,346.58, with banking stocks coming back under pressure. Nonetheless, it outperformed its continental neighbours.

Germany’s Xetra Dax 30 fell 0.5 per cent, with the CAC 40 in Paris down 0.6 per cent and the region-wide FTSE Eurofirst 300 down 0.5 per cent.

Meanwhile, the FTSE 250, which is more closely related to the UK’s domestic economy opened unchanged at 16,004.36.


A steadier day for the pound, reports the FT’s global market watcher Jamie Chisholm:

The British pound, which has borne the brunt of market anxiety about the likely Brexit fallout, notched two days of gains on Tuesday and Wednesday but is now relatively becalmed, up just 14 pips at $1.3438.
That is up from the 30-year low of $1.3118 touched at the start of the week, but still down more than 10 per cent from levels held on June 23 before results from the Brexit referendum began to spill out. Other currency action is muted, with the euro off just 0.1 per cent to $1.1112.


Outgoing Prime Minister David Cameron enjoyed a little light relief last night at the Tory “Summer Ball” – an invitation-only Conservative party fundraiser held at London’s exclusive Hurlingham Club. Delivering a speech to individual supporters, mainly London businessmen, partygoers were encouraged to be generous:

https://twitter.com/garygoldsmith65/status/748263590063443968


The BBC reports that the decision on airport expansion in London is to be delayed, at least until the country has a new prime minister.

https://twitter.com/BBCBusiness/status/748422112860311552


One possible reason for EU leaders not to be precipitous in any punitive action against the UK – tanking European bank shares. After Deutsche Bank and Santander both failed US stress tests, it has been another bad day for European bank shares. Deutsche down 3.9 per cent, Unicredit down 4.05 per cent


US president Barack Obama has fired a warning about the global economy following the UK’s vote to leave the EU. This from the BBC:

US President Barack Obama has said the UK vote to leave the EU raises “longer-term concerns about global growth”.

He said Brexit would “freeze the possibilities of investment in Great Britain or in Europe as a whole”.

Economists have been slashing their forecasts for this year and next both for the UK and other western nations. This from Consensus Economics yesterday:


The pound has borne the brunt of market anxiety about Brexit.

On June 24 it chalked up an 8.1 per cent decline as the UK voted in favour of leaving the EU. That was the currency’s biggest one-day drop on record by a country mile, writes the FT’s Peter Wells.

Sterling fell a further 3.3 per cent on Monday, before clawing back 1.5 per cent over the next two sessions.

But trading around $1.34 on Thursday morning in Europe, the currency is down 7.4 per cent for month-to-date and down 6.6 per cent for the June quarter. That ranks as the sixth-worst monthly and 20th-worst quarterly performance on record, according to Financial Times analysis of Bloomberg data back to 1971.

Read more on fastFT here.


With nominations in the Conservative leadership contest due to close at midday, the Press Association has published this handy guide on how Prime Minister David Cameron’s successor will be chosen:

June 30 – At midday nominations close. There is no threshold for support beyond being formally proposed and seconded by fellow MPs, being willing to stand and agreeing to abide by the rules.

July 5 – If there are more than two challengers, MPs begin to vote to whittle them down in consecutive rounds of voting on Tuesdays and Thursdays. The MP with the least support is eliminated each time until only a final pair remain. Candidates can voluntarily withdraw at any time.

In 2005, Kenneth Clarke was the first to go out, followed by Liam Fox – who is making a fresh tilt this time – leaving Mr Cameron to battle it out with David Davis.

Hustings are scheduled around the country for the rivals to go head-to-head with their pitch to party members. In 2005, there were 11 such events.

The membership chooses between the two in a one-member-one-vote postal ballot. This was the system introduced under William Hague after the party’s crushing in the 1997 landslide that brought Tony Blair’s Labour to power. Previously the leader had been chosen by MPs. In 2005, Mr Cameron received 134,446 votes to 64,398 for Mr Davis. In total 78% of the 253,689 eligible voters took part. Party membership slumped during Mr Cameron’s tenure however, slipping to just 134,000 by 2013.

The party said it expected there to be around 150,000 eligible to vote this time.

September 9 – the winner is announced. The timing, which was put back a week from the original proposal by the 1922 committee executive, will allow Mr Cameron to attend the G20 summit in China as one of his last major engagements.


Banks across Europe are under pressure today following the latest US stress tests and Angela Merkel’s hard line on bank bailouts.

UK lenders are not the worst affected, but they are still suffering. RBS and Barclays, have not lost 30 per cent and 25 per cent respectively over the past month. In euro terms, those drops are 37 per cent and 33 per cent.


Nicolas Sarkozy, leader of France’s centre-right who is seeking a return to the Elysée Palace next year, has said he could see the UK re-joining the EU if the bloc was radically overhauled, writes the FT’s Ben Hall.

Addressing over a thousand well-heeled expatriates in Kensington, heartland of Britain’s French community, last night, Sarkozy said the UK prime minister had lost the referendum because he had no European project to sell to the people and had no allies to secure the changes he wanted, having pulled the Conservatives out of the centre-right European People’s Party.

“You change things from the inside, not the outside,” Sarkozy said.

Sarkozy wants powers returned to member-states, external border controls beefed up and no further enlargement to new members, especially Turkey, all enshrined in a new treaty that “will perhaps bring the English back”.

EU leaders had to respond to the roar of rejection from the British people, Sarkozy said. “If they are deaf, we’ll have to put others in their place to listen.”

Could this be a chance to change the right to free movement across the bloc?

Mr Sarkozy was having none of it. It was a fundamental principle of the union, he said. Britain could not pick and choose. “You can’t take all the rights and say all the responsibilities are for your neighbours.”

Sarkozy also became the most senior French political figure to call for the scrapping of the Le Touquet accords, which place UK frontiers on French soil, preventing migrants from reaching British shores.

“It is not our job to be British border patrol,” he said.


Emoticon Michael Gove has just announced he’s going to run for leader of the Tory party. He says he does not believe Boris Johnson can “provide the leadership or build the team for the task ahead”.

More to come.


Here is the full statement from Michael Gove, outlining his case to be PM:

“The British people voted for change last Thursday. They sent us a clear instruction that they want Britain to leave the European Union and end the supremacy of EU law. They told us to restore democratic control of immigration policy and to spend their money on national priorities such as health, education and science instead of giving it to Brussels. They rejected politics as usual and government as usual. They want and need a new approach to running this country.

“There are huge challenges ahead for this country but also huge opportunities. We can make this country stronger and fairer. We have a unique chance to heal divisions, give everyone a stake in the future and set an example as the most creative, innovative and progressive country in the world.

“If we are to make the most of the opportunities ahead we need a bold break with the past.

“I have repeatedly said that I do not want to be Prime Minister. That has always been my view. But events since last Thursday have weighed heavily with me.

“I respect and admire all the candidates running for the leadership. In particular, I wanted to help build a team behind Boris Johnson so that a politician who argued for leaving the European Union could lead us to a better future.

“But I have come, reluctantly, to the conclusion that Boris cannot provide the leadership or build the team for the task ahead.

“I have, therefore, decided to put my name forward for the leadership. I want there to be an open and positive debate about the path the country will now take. Whatever the verdict of that debate I will respect it. In the next few days I will lay out my plan for the United Kingdom which I hope can provide unity and change.”


Energy minister Andrea Leadsom is also throwing her hat into the ring.

https://twitter.com/andrealeadsom/status/748429124830662656


Full story here on Michael Gove’s surprise leadership bid.


Baroness Warsi reacts to the Gove news:

https://twitter.com/SayeedaWarsi/status/748431465332023296


Lord Ashcroft, pollster and former deputy chairman of the Tory party, just tweeted this:

https://twitter.com/LordAshcroft/status/748432592945430528


Bookmaker Paddy Power has immediately marked up Michael Gove as second favourite to replace David Cameron following his announcement:


Home secretary Theresa May is launching her leadership bid at an event in central London this morning.

She is being introduced by Chris Grayling, the leader of the House of Commons who campaigned for the UK to leave the EU. May backed Remain.

Grayling has said he will chair May’s campaign for the Tory leadership.


Theresa May, now the bookmakers’ favourite to be the next prime minister, is up.


May hasn’t finished her speech yet, but it looks like her campaign already has its own Twitter account.

https://twitter.com/TheresaMay2016/status/748427251713187840


Meanwhile, the Office for National Statistics has posted the latest current account deficit figures, showing the UK’s current account deficit stood at £32.6bn in the first quarter.

The ONS also revised up its assessment of the size of the deficit in the final three months of last year, bumping it up to £34bn from £32.7bn, at 6.9 per cent of GDP compared to 7.2 per cent at the end of 2015.

Read more on fastFT here.


And UK GDP figures also released by the ONS show the British economy grew 0.4 per cent during the first three months of the year, holding steady.

Economists now widely expect the UK economy to enter a significant slowdown following voters’ shock decision to leave the EU on June 23.



Theresa May is announcing her candidacy for the Conservative leadership.

She says the country needs “strong proven leadership to steer us through this period of economic and political uncertainty and negotiate the best possible terms as we leave the European Union”.

“There must be no attempt to remain in the EU. No attempts to rejoin it through the back door, and no second referendum, the country voted to leave the European Union and it is the duty of the government and parliament to make sure we do just that.”

Key points from Theresa May:
- No general election until 2020
- Should no longer race to reach budget surplus
- Tax rises must be avoided – would hurt jobs and spending

On Europe:
- No going back on leaving the EU
- No second referendum
- No invoking Article 50 until UK’s position is clear
- Free movement is not negotiable
- Ability to access the single market in goods and service ‘”a priority”
- Will take ‘several years’ to disentangle UK from EU laws


I told you so?

Former Polish foreign minister Radoslaw Sikorski, who went to Oxford with Boris Johnson and was a member of the Bullingdon Club, just tweeted this.

https://twitter.com/sikorskiradek/status/748441006551465984

Johnson is expected to announce his bid for the Conservative leadership imminently, even as multiple MPs say they are switching from backing him to supporting his former co-campaigner Michael Gove.

https://twitter.com/BBCNormanS/status/748435625821503488

https://twitter.com/Mike_Fabricant/status/748442979942162432


The FT Magazine ran a profile of Michael Gove in 2014. Here are a few choice lines from it on whether he’d ever want to be prime minister:

Gove himself voiced some doubts:


Meanwhile, former German chancellor Helmut Kohl has intervened in the Brexit crisis, warning the EU against overly hasty political reaction.

The FT’s Stefan Wagstyl reports from Berlin:

The 86-year-old veteran of European politics told Bild newspaper that closing the door on Britain from the EU side would be a huge mistake. The UK must be given time to make up its mind. Britain’s special status in the EU had always been a difficulty but rooted in history and formed part of Europe’s variety.

Mr Kohl, who presided over German reunification in 1990 and backed the EU’s eastward enlargement as well as the launch of the euro, has previously expressed concerns about the union’s current state, including the debt and refugee crises. He is worried that during Angela Merkel’s decade-long chancellorship his historic achievements may be tarnished.


The FTSE 100 has edged into positive territory for the session, now up around +0.3 per cent. The FTSE 250 is still down by -0.3 per cent.


What are the current Tory party leadership candidates offering? The FT’s Sebastian Payne has this:

It is important that in the middle of debating a short-term plan for Britain, a vision to renew conservatism is also delivered. It was one of Mr Cameron’s weaknesses that he never managed to define this, although none of the contenders will move significantly away from his legacy. His successor must be able to bring both the party and country back together.


A clip of Theresa May’s speech from earlier:


Brexit could be good news… for France.

The head of one of the world’s biggest advertising groups has said that France could be the biggest beneficiary of Brexit driving venture capital funding for start-ups away from London.

Full story here.


Janan Ganesh sums up the situation the Tory party – and the country – now finds itself in:

https://twitter.com/JananGanesh/status/748459006692306944


Home secretary Theresa May has set out her stall to be the new leader of the Conservative party.

Her personal pitch:

I grew up the daughter of a local vicar, and the grand-daughter of a regimental sergeant major. Public service has been part of who I am for as long as I can remember. And I know I’m not a showy politician. i don’t tour the television studios. I don’t gossip about people over lunch. I don’t go drinking in parliament’s bars. I don’t often wear my heart on my sleeve. I just get on with the job in front of me.

Her pitch as the compassionate Conservative candidate

If you’re from an ordinary working class family life is just much harder than many people in politics realise. You have a job, but you don’t always have job security. You have your own home but you worry about mortgage rates going up. You can just about manage but you worry about the cost of living and the quality of the local school because there is no other choice for you. Frankly not everyone in Westminster realises what it means to live like this. And some need to be told that what government does isn’t a game. Its a serious business, that has real consequences for people’s lives.

And finally her dig at Boris Johnson, likely to be her main rival for the job

Now of course I know other people have also negotiated in Europe. I think Boris negotiated in Europe. I seem to remember the last time he did a deal with the Germans he came back with three nearly-new water cannon.


It is 11:24am. As it stands, Boris Johnson has yet to declare his candidacy. He has 36 minutes, and counting. Journalists are in the launch room waiting for him…


In the meantime, Nicky Morgan won’t be running, and endorses Michael Gove. Here’s what she said:

The next leader must have the skill and credibility to put together the right team to renegotiate our exit from and future relationship with Europe and explain the final terms to the British people.

And Jeremy Hunt says he’s also out, but will back Theresa May.


Britain’s biggest employer group and the Trades Union Congress have issued a joint statement, saying it is “essential that the government does everything possible to secure jobs and investment, and to reassure workers worried about the potential implications for employment and social protections, as well as the impact on their working lives”.

CBI director-general Carolyn Fairbairn and TUC general secretary Frances O’Grady said:

This is not a job for the Government alone. It will require a national effort from businesses large and small, trade unions, the Westminster government and devolved nations, and a wide range of stakeholders at local and national level.

As a matter of urgency, Government needs to act to allay the concerns of EU nationals living and working in the UK, and UK citizens living and working in the EU.

It’s clear that the overwhelming majority of the UK public – whether they voted to leave or remain ­- would be appalled by the reported upsurge in racially motivated incidents and hate crimes we have seen over the past few days. We urge employers, unions and others to do all they can to bring together our communities in what are uncertain times, making our workplaces a beacon of inclusion and tolerance.


Dominic Raab, the Tory MP who backed Boris Johnson in The Sun this morning, has now… endorsed Michael Gove.

He told the BBC’s Daily Politics:

“Boris was cavalier with assurances he made … We’re picking a prime minister here to lead the country, not a school prefect.”

“Michael Gove is the right leader for the country… He can speak out to the aspirational underdog in our society, the kid from the council estate… I also think when it comes to delivering on Brexit… We need someone with a passion but also the mastery of the detail. He combines both.”

Here’s what he said in The Sun:

Throughout the referendum campaign, Boris made that case — for hope over fear, for belief in Britain, and for the opportunities Independence Day can deliver.

We’ll need a strong team to hammer out the detail.

But it has got to be led by someone with courage, optimism and belief that, freed from the shackles imposed by Brussels, we can do even better.


Former mayor of London Boris Johnson is now speaking at an event in central London, where he is expected to announce that he is standing for leader of the Conservative Party in an increasingly crowded field that includes home secretary Theresa May, justice secretary Michael Gove and work and pensions secretary Stephen Crabb.

Nominations in the contest close in 15 minutes.


Johnson has said now is a “moment for hope and ambition” and not a time for “wobbling or self doubt” in the UK, adding: “This is our chance to unite our party around those values and at the same time to unite our country and our society.”

He added: “It is vital now in the Conservative party that we bring together everybody that campaigned for both the Remain and Leave sides.”

The former mayor of London is now going through his track record in City Hall.


Johnson now appears to be talking about this TIME magazine cover from 2008, saying: “The prophets of doom were wrong then and they are wrong now.”


Emoticon Boris Johnson has said he will not be standing for leader of the Conservative Party.


Key points Boris Johnson’s speech:
- He’s not running


At the end of a speech that appeared to be building towards the announcement of his candidacy, Boris Johnson surprised many by saying he would not stand for Conservative party leader.

“You have waited faithfully for the punchline of this speech…Having consulted colleagues, and in view of the circumstances in parliament, I have concluded that person cannot be me.”

Johnson had long been seen as the favourite to replace Prime Minister David Cameron in Number 10, but his odds lengthened this morning after his one-time ally, justice secretary Michael Gove, announced he would no longer support Johnson and would put himself forward to be the next Tory leader, instead.


Meanwhile, across London, Boris Johnson’s brother, Jo, has also been speaking about the UK’s future outside of the EU.

In a speech at the Wellcome Trust, Jo Johnson, the minister for universities and science who backed the Remain campaign, tried to reassure scientists that Britain would remain an outward-looking global powerhouse for science and innovation and continue to attract “brilliant” researchers from around the world, reports the FT’s John Thornhill:

He said he would contest any attempts to exclude British citizens and projects from Horizon 2020, the EU’s main research funding body, while the country remained a full member of the EU. He had already called Carlos Moedas, the EU research commissioner, to tell him that Britain would remain “vigilant” on the issue, he said.

Britain’s science community had been among the strongest supporters of the country remaining in the EU, warning about the loss of European funding for important projects. It fears that a clampdown on the free movement of people could also damage universities’ chances of attracting the best foreign researchers.

Sir Paul Nurse, former president of the Royal Society, told the BBC earlier today that Brexit represented the biggest threat to British research in living memory.


Sir Nicholas Soames, Tory MP, Remain campaigner and this morning a supporter of Boris Johnson, has found his candidate: Theresa May.

https://twitter.com/nsoamesmp/status/748471795917938689


The markets may be breathing a sigh of relief now that Johnson is out.

The FT’s Gavin Jackson reports that both the FTSE 250 and the pound “bounced slightly on the news that Boris Johnson is not running for prime minister”.


Andrea Leadsom announced earlier today that she was standing for Conservative leader.

It doesn’t look like the energy minister will be holding a press conference, but she has set out her stall in this short YouTube video, posted on Twitter.

https://twitter.com/andrealeadsom/status/748465318356459520


Boris Johnson might have withdrawn from the Tory leadership race in unexpected circumstances but his advisers still have their wits about them

https://twitter.com/khaddon/status/748474115233841152


Favourites have a habit of disappointing in Conservative party leadership contests:

1990 Michael Heseltine lost out to John Major, following Margaret Thatcher’s resignation

1992 Michael Portillo pulled out of the “sack me or back me” leadership challenge to John Major

2005 David Davis came second to David Cameron in the leadership contest to succeed Michael Howard, who resigned after the Conservatives’ general election defeat


Some good Brexit news for the HQ. The chairman of HSBC has ruled out moving the bank’s headquarters away from London following the UK’s vote to leave the EU.

Speaking to journalists at a conference organised by lobby group The City UK , Douglas Flint said the referendum result would not prompt another review of the group’s base, writes Emma Dunkley.

HSBC, the UK’s largest bank, announced in February that it would keep its headquarters in London, in a seal of approval for the country’s attractiveness as a financial centre. The decision followed 10 months of internal debate about whether the bank would be better off based overseas – most likely in Hong Kong.

“We said at the time we made the decision that we’d taken that [a Brexit] into consideration and that in the event of this outcome we would not call for that to be revisited,” said Mr Flint.


A measure of the shock that the Boris withdrawl drew, even among seasoned political hacks

https://twitter.com/alexebarker/status/748481221211136000


The FT’s Henry Mance reports that Liam Fox, the former defence secretary, has launched his leadership campaign with a swipe at Michael Gove and David Cameron, saying that key jobs should not depend on “which dinner party you attend” or which school you attended, and that too many talented MPs had been left on the backbenches.



so this how we are are on the UK stockmarket and the pound at London lunchtime…an update from the FT’s Michael Hunter

The FTSE 100 ticked up 0.2 per cent to 6,369.74 in mid-session trade, with mining stocks providing the most support at sector level, with shares in Antofagasta up 5.1 per cent and Glencore 5 per cent stronger. Financials were limiting the gains. Royal Bank of Scotland was down 5 per cent and Lloyds Banking Group down 3.3 per cent.

The more UK-centric FTSE 250 was also up 0.2 per cent at 16,040.19., with industrial companies leading the modest rally and consumer stocks at the bottom of the index.

The pound ticked 0.1 per cent higher to $1.3432.


Are we seeing the Brexit bounce wobble? Here also is FT Markets Edtior Michael Mackenzie with a short, sharp video explainer


Britain will launch high-level trade missions to China, India, the US and the Commonwealth as it gears up for its split from the EU, the FT’s Sarah Gordon reports.

At a meeting of the prime minister’s group of high-level business advisers at Downing Street on Thursday morning, where the atmosphere was described as that of “people in mourning”, Mr Cameron said that business should start saying what it wanted “in the house, because we are moving house”.

He called on business to help stabilise the mood in the UK during the next few months of political void and said the government would set up a ministerial group, chaired by the Business secretary, to engage with business on Brexit.

Read Gordon’s full story here.


The chairman of the UK’s financial watchdog has called upon the City of London to come up with an industry-wide response to put to government in the wake of the UK’s seismic vote last week to leave the EU, reports the FT’s Caroline Binham.

In his first public remarks since Brexit, John Griffith-Jones, chairman of the Financial Conduct Authority, said that financial institutions should make “broad brush” plans of how to proceed in the wake of the vote, even if the precise nature of the UK’s future relationship with the EU will not be known for many months or even years.

“The position is uncertain and it will not be settled for some time. But it is important for firms to resist the temptation to cite chicken and egg – ‘we cannot design a strategy without knowing the rules’,” Mr Griffith-Jones told a conference in London hosted by CityUK, the lobbying group.

“It is important for the UK that, at the appropriate moment, you are able to inform the government where your major opportunities and risks lie, along with other industries, as it forms its plans for the negotiation of our exit.”

Read more on fastFT here.


From earlier, here is the moment that Boris Johnson surprised everyone by saying he would not stand in the Conservative party leadership contest.


Meet Valdis Dombrovskis – the former Latvian prime minster nicknamed “the teddy bear” who is now in charge of financial regulation in the EU following the resignation of Lord Hill of the UK after the vote for Brexit.

We have just published a profile by FT’s Jim Brunsden. Some key points:

Whatever Britain’s eventual relationship with Europe, the promotion means Mr Dombrovskis will be one of the most important rulemakers for the City of London. That is because EU officials and City executives believe that, for the sake of continuity, many EU financial regulations will remain in place in the UK even after a new trading arrangement is eventually secured. Meanwhile, any new EU rules will have to be taken into consideration for UK banks hoping to operate on the continent.

“Unless the UK is prepared to burn all of its legislative bridges to the single market, Dombrovskis and his commission are likely to remain the primary legislators for the City,” said Simon Gleeson, a financial regulation lawyer at Clifford Chance in London.

and

Mr Dombrovskis’ main brush with public prominence had been a two-year stint as finance minister in the early 2000s and a year as chief economist of the Bank of Latvia. His background is in the sciences — he holds a masters degree in physics from the University of Latvia and has worked as a laboratory assistant in Germany.

Former colleagues say his calm, technocratic style was well suited to the troubled times in which he took power. So were his frugal habits: his home in Riga is a flat in a Soviet-era apartment block.

more here


Jamie McGeever, chief markets correspondent at Reuters, offers this commentary on Michael Gove’s recent moves inspired by an old Joy Division song

https://twitter.com/ReutersJamie/status/748427578646667264


Nicola Sturgeon, Scotland first minister, has hinted the potential choices for the Conservative Party leadership and the next prime minister could have some influence on her country’s decision to stay or not in the UK:

https://twitter.com/NicolaSturgeon/status/748488404636209153


Business minister Anna Soubry has been on BBC Radio 4, throwing her support behind Theresa May – and perhaps, more surprisingly, Labour’s Angela Eagle.

“We need Angela Eagle in Labour and we need Theresa May now to lead the Conservative party, both of whom of course are women,” Soubry said. “Perhaps we have had enough of these boys messing about.”

Soubry added that while she does not agree with “everything” May says, she believes the home secretary “has great composure, dignity and experience”.


How much the UK stockmarket has recovered since the Brexit night shock has become a matter of political debate. But signs of more optimistic investor sentiment about the company and corporate health are showing up in the credit markets. As the FT’s market team reports:

Prices for corporate bonds issued by indebted UK companies exposed to a slowdown in consumer spending have recovered most of their post-Brexit declines, as buyers have returned to credit markets.

The recovery comes as banks have begun to launch sales of new bonds issued by high-quality borrowers, in the latest sign that investors are returning even as British politics becomes consumed by dual-leadership battles in the aftermath of the vote to leave the EU.

High-yield subordinated bonds issued by retailers New Look and Debenhams, restaurant chain PizzaExpress and Travelodge, a hotel group, had been among the hardest hit earlier this week: dropping between 5 per cent and 7 per cent in price.

However, all of the bonds, judged subinvestment grade by rating agencies, have since moved to stand about 2 per cent below pre-Brexit prices.

more here


Andrea Leadsom, who tweeted her decision to contest the Conservative party leadership before the news broke about Boris Johnson, said she was “shocked and disappointed” by his decision not to stand.

But the energy minister and Leave campaigner could be the main beneficiary if Boris’ supporters now back her candidacy.

Ms Leadsom told Sky News:

I’m shocked and I’m disappointed.

But she refused to see Michael Gove’s move as an act of betrayal.

I don’t talk about betrayal. Michael is a – just a brilliant person and no one can be in any doubt he was taking the view about what was best for the country.

You know the shenanigans – the internal politics. People really have to accept that both Boris and Michael have given up a lot for what they see is the right thing for this country, and genuinely I believe both have made their decisions on the grounds of what’s best for the country.

She said it had been a “tough decision” to throw her own hat in the ring. But while other candidates have pleaded with colleagues to put the divisions of the campaign aside, Ms Leadsom was clear:

“It would be very difficult for someone who campaigned to stay in – who thinks there will be disaster if we leave and so on – to suddenly turn it around and start believing that we can make a go of it. In the end that’s why I’ve put my name forward.”


The FT’s Andrew Ward reports that Ben van Beurden, chief executive of Royal Dutch Shell, used a speech in London today to express concern about the uncertainty created by Brexit and stressed his support for freedom of movement within the EU:

“It’s crucial that the European governments keep a steady hand on the tiller of the economy in these unprecedented, unpredictable circumstances.

“Shell has always been clear about the benefits of the single market and free movement of people, both to the UK and the EU as a whole. I hope that the future relationship between the UK and the rest of Europe will continue to provide the right conditions for economic growth.”

Answering questions afterwards, Mr van Beurden said a £4bn investment programme in the UK due for completion in 2018 would go ahead and expected little near-term impact from Brexit. The longer-term impact would depend on the nature of the relationship agreed with the EU, he added.

Freedom of movement was especially important to Shell as an Anglo-Dutch company, said Mr van Beurden, but he rejected a suggestion that Brexit could prompt the company to abandon its London joint-headquarters in favour of its other base in The Hague. He said: “Do I see major changes in our commitment to the UK? Absolutely not.”


The UK’s official fiscal watchdog has cancelled the publication of its annual assessment of the long term outlook for the public finances, which was due to have been published on July 12, the FT’s Emily Cadman reports:

The Office for Budgetary Responsibility said that given the vote to leave, any forecast it could do now “would not necessarily be very informative”.

Its forecasts have to be based on the current policy of the current government, and with the politics in turmoil, it is not clear what reasonable assumptions its economists could have made.

It notes:

“In addition to incorporating any new tax and spending measures, we will need to take on board any information on the trade arrangements the Government wishes to pursue. This would affect prospective trade volumes, migration flows and the size of any remaining financial contribution to the EU, all of which would have consequences for the public finances.”

All of this will feed into the OBR’s judgement on how much Brexit will impact the UK economy, and knock-on effect for the sustainability of the public finances.


The FT’s political editor George Parker has just filed this story on how justice secretary Michael Gove launched a rival bid against Boris Johnson, leading the former mayor of London to make the surprise announcement that he would not stand in the Conservative leadership contest:

https://twitter.com/GeorgeWParker/status/748510898336243712

Boris Johnson chose London’s St Ermin’s hotel for what was meant to be the launch of his Conservative leadership campaign for its associations with his hero, Winston Churchill, for it was here that Churchill set up Britain’s wartime special operations team.

But when Mr Johnson turned up, it was not to deliver a Churchillian call to arms but to run up the white flag. The victor of the Brexit campaign was now the vanquished, his hopes of becoming prime minister in ruins.

With rumours swirling that Mr Johnson was considering pulling out, one of his supporters implored him: “March to the sound of gunfire.” Some 25 Conservative MPs had gathered in the hotel to cheer him on but grew increasingly anxious as their candidate failed to appear.

When he did emerge, Mr Johnson initially sounded like he was still making the pitch of a man who hoped to become prime minister. Then the bombshell: as his wife Marina looked on, the former London mayor declared that the person needed to take Brexit Britain forward “cannot be me”.

Read Parker’s full take here.


Political cartoonists are already jumping on today’s machinations in the Tory leadership contest.

This from the Daily Telegraph ‘s Christian Adams:

https://twitter.com/Adamstoon1/status/748503133815451648


There are now over 1,000 comments on our news story about Boris Johnson’s decision not to stand for the Tory leadership.

Here is a sample of our readers’ views:

GT:

Welcome to Game of Tories… hopefully it will have less nudity from the protagonists.

Chris Dickinson:

As a Remainer who has been a deep depression for the last week, I’ve now moved into the hysterical laughter stage. This is so funny – and the wonderful thing is that the series has years to run.

Clearly a PM can’t trigger exit – only Parliament can. The likelihood of this Parliament being able to do this any time in the near future is next-to-nothing. The likelihood of the next Parliament being able to do so is vanishing. And tragedy has been replaced by comedy.

Messenger:

Westminster hospital A&E overrun by mass stabbing in the back incident.

InsideTheBeast:

Another scrap between ex Uni mates with the UK economy as a pawn in the game. Wonderful.


Tarzan has roared, reports Andrew Bounds, our Northern correspondent, in Liverpool.

Lord Heseltine, the former deputy prime minister, is the latest to call for a second referendum. He told a business audience there:

A great deception has been perpetrated on the British people.

That decision has got to be reversed. We have to have access to the single market. That is 47 per cent of our trade – it is massively important to our service industries. The idea that you can cut yourselves off from that is economic illiteracy.

Heseltine, now 83, has long been a pro-European. But he is also a businessman, founder of the Haymarket publishing group. He added in an unprepared speech:

I know that in boardrooms there will be questions about investment decisions and people will say, ‘Wait. Wait until we know.’ Any politician trying to pretend that is not a reality has never sat in a boardroom. As long as no one can answer the basic questions that doubt will prevail.

It will require a revisiting of the decision. It will require another referendum or a general election and it is imperative that Britain does remain associated with our partners, not just for economic reasons. Day by day, week by week, month by month the consequences will unfold and will continue to unfold until there is an answer…as to Britain’s economic future.


IMF: UK needs “smooth and predictable transition” to life outside EU.

The International Monetary Fund has called on the UK and EU to work towards a “smooth and predictable transition” as Britain negotiates its exit from the bloc.

Warning that the UK’s decision had created “significant uncertainty” for Britain and the wider global economy, the IMF said the fall out from the referendum would dampen near-term economic growth.

Speaking in Washington today, IMF spokesman Gerry Rice said there would be a “prolonged period of uncertainty”.

Should this persist, UK economy could be hit further as volatility would lead to “associated declines in consumer and business confidence, which would mean even lower growth”.

In the run up to the referendum, the IMF made consistent warnings about the economic and political threats from a “Brexit”.

The fund said it would provide a full update on the consequences in its World Economic Outlook released in July.

In the meantime, policymakers should “do everything they can to mitigate” the impact, said Mr Rice, praising efforts from the Bank of England and European Central Bank, who have pledged additional liquidity to global markets if necessary.

Mr Rice added:

The fund will continue to monitor developments continuously. We are engaged in maintaining global stability in the period ahead and to provide support to our members as needed.

Read more on FastFT


Why Boris’ decision is bad for markets and bad for the EU

Financial markets had a mixed immediate reaction to Boris Johnson’s shock decision not to run in Tories leadership contest.

Although most eyes were on the pound, it did not move as much as equities, where the FTSE 100 and FTSE 250 wiped out their daily gains in a matter of minutes following the former London mayor’s decision not to enter the contest.

One interpretation is that Mr Johnson was actually the man the EU would rather do business with given his relatively softer views on immigration, compared to leadership candidates Michael Gove and Theresa May. With many ‘Leavers’ claiming limits to free movement are non-negotiable in talks with Brussels, the task of thrashing out a deal to secure UK access to the single market, may just have got much harder.

Mujtaba Rahman, practice head of Europe at Eurasia group, explains:

Despite taking a very tough stance on immigration during the referendum campaign, Johnson has always been pro-immigration over the course of his journalistic and political career. He therefore would have been more likely, in our view, to renege on the Leave campaign’s commitment to control EU immigration in order to ensure near-full membership of the Single Market, especially given the benefits this would afford the City of London in terms of passporting rights.

That is, although the domestic and internal politics involved with such a flip would have been difficult, Boris would probably have taken the UK in the direction of a Norway-type model. However, Boris’s perceived backsliding on free movement in interventions since the referendum lie behind Gove’s decision to run in the leadership race this morning.

Now, the Tory contest will be between Theresa May and Michael Gove. Both are more hawkish on immigration. And this will make a deal which preserves the UK’s membership of the Single Market harder to achieve.


For anyone looking for signs of who the “Continuity Cameron” candidate might be to lead the Tory party, this tweet from the Cameron-loyalist energy secretary Amber Rudd is enlightening:

https://twitter.com/AmberRudd_MP/status/748526576384499712


Brexit chill heads for Portugal?

The economic consequences of the UK’s vote will be just as keenly felt in the eurozone as the UK, according to many analysts.

And following its warning on UK growth today, the IMF has also called on Portugal to redouble its austerity efforts as the global economy could be heading towards a period of turmoil following Britain’s decision to leave the EU.

Writing in its latest post-programme monitoring for Portugal, the IMF lowered its growth outlook for the former bailout economy, writing

Downside risks to the outlook are elevated due to declining household savings, still subdued investor confidence and greater uncertainty in the external environment, including as a result of the UK referendum.

You can read more on FastFT,


Bank of England: easing is coming

Speaking in London today, the governor of the Bank of England has said the central bank expects to have to cut rates or embark on more quantitative easing this summer following the UK’s decision to leave EU, governor Mark Carney has said.

“The economic outlook has deteriorated and some monetary policy easing will likely be required over the summer,” Mr Carney said in a speech on Thursday.

He told an audience of bankers and business executives that the BoE “can be expected to take whatever action is needed to support growth” – as long as inflation was projected to return to target “over an appropriate horizon”.

In the coming weeks, the BoE will assess the “extent of the deceleration”, he said, adding that the rate setting committee will make an “initial assessment” at its July meeting, and a full assessment in August.

Mr Carney stressed that he was not “pre-judging the views of other members” in suggesting more monetary policy easing is needed. But considering the monetary policy committee collectively signed up to many of the pre-election warnings of the potential economic damage, he is unlikely to encounter much opposition.


This is how the pound has reacted to Mark Carney’s speech announcing that he expects to embark on a fresh round of QE or interest rate cuts this summer (via Fast FT).


Carney: time for hard truths

In the conclusion to his stark speech being delivered in London today, Mark Carney will say the Bank is considering a “host of other measures” to support the economy in the aftermath of the vote.

He has also warned his job involves some ruthless truth telling about just what monetary policy can do to fight off recessionary headwinds:

And one uncomfortable truth is that there are limits to what the Bank of England can do.

In particular, monetary policy cannot immediately or fully offset the economic implications of a large, negative shock. The future potential of this economy and its implications for jobs, real wages and wealth are not the gifts of monetary policymakers.

These will be driven by much bigger decisions; by bigger plans that are being formulated by others. However, we will relentlessly pursue monetary and financial stability. And by doing so we will facilitate the adjustments needed to realise this economy’s full potential.


A sober outlook

The FT’s economics editor Chris Giles gives his verdict on a very sombre set of forecasts from Mark Carney on the future state of the UK economy:

https://twitter.com/ChrisGiles_/status/748534477396320256


Things could be even worse for the economy than the Bank of England previously predicted, says Mark Carney:

https://twitter.com/ChrisGiles_/status/748535199365881856


Stocks jump on more easing from BoE, FTSE reaches 2016 high

Equities are trading higher across Europe on today’s speech from Mark Carney.

The expectation of more monetary stimulus has sent the FTSE 100 trading nearly 2 per cent higher to a 2016 high, with the FTSE 250 up 1.5 per cent. They had been up around 0.5 per cent ahead of the speech in London today.

Germany’s 10-year bond yield meanwhile is trading at a historic low.


Stocks up, pound down, Gilts hit record low

Mark Carney’s verbal stimulus is having the desired effect on markets. Equities are up, while the pound has slipped on the expectation of more stimulus measures.

Government bonds are also rallying, with yields on the 10-year gilt, which move in the opposite direction of the bond’s price, dropping 6.2 basis points to 0.883 per cent – the lowest since 1989, the farthest Bloomberg records go back.


Bank of England facing trade off

Finishing his speech today, Mr Carney has highlighted the “trade off” between growth and inflation now facing policymakers:

The MPC will face a trade-off between stabilising inflation on the one hand and avoiding undue volatility in output and employment on the other.

The implications for monetary policy will depend on the relative magnitudes of these effects.

In my view, and I am not pre-judging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.


It’s somber speech but Mark Carney has time for an uncomfortable laugh.

Finishing off his speech the governor jokes the UK economy has become “more complex” in recent times, and the Bank’s forecasts have not always panned out as expected…

It’s now Q&A time


Carney: I will work with any government

The FT’s Gemma Tetlow asks Mr Carney whether he can work with people who have been highly critical of his role at the helm of the BoE.

The governor replies that he has a “personal responsibility as a member of the MPC…all of whom came to the same conclusion about the risks to the economy”.

All of those individuals are committed to discharging his or her responsibilities whatever the form of the government.

This is a professional technocratic institution.


Is Carney the only man with a plan?

Mr Carney is asked whether in effect, he is the only person in Britain with a plan for the UK economy.

He responds in diplomatic fashion, saying only that the Bank can act more “rapidly” than other institutions.


Carney: Sterling move was expected

Sterling’s largest move in history in the post-referendum hours was”to be expected give the extent of the change” says Mark Carney.

He said the markets continued to function well despite huge volumes on June 24. “There was a need for the currency to find a new level”.

Here’s what the pound has done since Mr Carney’s comments, falling 1.2 per cent against the dollar:


Carney doesn’t comment on King
The governor is asked about his predecessor Mervyn King’s thoughts that the apocalyptic economic warnings made by Remain campaigners were over done.

“I virtually always agree with Lord King” says Mr Carney, but he adds he hasn’t heard the comments so “I am going to pass on that”.

But despite the diplomatic stance, it’s very clear that Mr Carney thinks the hit to the UK economy will be very significant and will provoke a shift towards easing policy later on in the year.


The attacks on Mark Carney by some Leave campaigners, as documented by Chris Giles in this piece, continue:

https://twitter.com/Nigel_Farage/status/748539701724864512


Mr Carney ends his speech, warning of “materially lower” growth for the UK, raising the prospect of further monetary easing to come, and saying in no uncertain terms that the Bank would do what it could to fight off recessionary forces, but it was not all-powerful.

As an accompaniment, here’s a very telling chart on just how financial markets were rocked on referendum night:

https://twitter.com/EdConwaySky/status/748537407709003776


FTSE closes at its highest level since August

Britain’s benchmark index has closed 2.2 per cent higher today, closing at its highest level since last summer.


What will Carney’s critics say now

The governor batted away any suggestion that he could not work with Conservative party members who have been highly critical of his role at the helm of the central bank.

Among them is prospective Tory candidate Andrea Leadsom who has accused Mr Carney of “encouraging” financial stability and damaging the reputation of the Bank.

As the FT’s Chris Giles notes, the ball is in the critics courts:

https://twitter.com/ChrisGiles_/status/748543303205986304


Over in Westminster, the Tory party is still feeling the after-effects of this morning’s dramatic announcements that a) Michael Gove would stand for leader; and b) Boris Johnson would not.

This is Tory MP Jake Berry’s less-than-diplomatic reaction:

https://twitter.com/JakeBerry/status/748543644202852352


Some useful summary tweets on the governor’s speech from the Bank of England.

For a more comprehensive summary, read more on FastFT

https://twitter.com/bankofengland/status/748542921650089984

https://twitter.com/bankofengland/status/748542921650089984


Carney could still disappoint

Markets are rejoicing in today’s words from Mark Carney with risk assets such as equities rising, while haven assets are also rallying.

But despite his own version to do “whatever it takes” (I paraphrase from another central banker), some economists are already pondering whether the measures, which include likely rate cuts and more QE, will be enough.

“The degree of easing is far from certain”, says Samuel Tombs, adding:

Mark Carney’s speech is littered, as usual, with caveats. The Governor has not pre-committed to substantial easing, and he is not dubbed the ‘unreliable boyfriend’ for no reason. The Governor repeatedly has signalled that interest rate rises would be six to nine months away, only to back-track later on.

Our base case now is that the MPC cuts interest rates to 0.25% from 0.5%, but holds back from easing policy further due to the much higher outlook for inflation.

The MPC has said that interest rates are the marginal tool of monetary policy, so we do not expect any asset purchases. We think August is the most likely month for action, but a move in July clearly is possible. Both the timing and extent of easing are very dependent on how market conditions evolve over the coming weeks.


Michael Gove has given an interview to the BBC in which he explains his thinking behind ditching his support for Boris Johnson, his fellow Leave campaigner, and declaring his own candidacy instead:

In the last four days I have had the chance to see up close and personal how Boris dealt with some of those decisions that we need to take in order to take this country forward.

During that period I had hoped that Boris would rise to the occasion because inevitably when we have a leadership election, people are tested, questions are asked of them, tests are set.

Boris has formidable qualities but I saw him seek to meet and not pass those tests. I also thought ultimately, can I recommend to my friends that this person is right to be prime minister?

There were many of my friends who were saying to me, Michael, we understand your reluctance to run, but we believe you are better equipped, we believe your experience in government, your deeply-held convictions, we believe your vision for this country, is right.

I reflected on this, reflected on what I had seen in the course of the last week and came reluctantly but firmly to the conclusion that I should stand and that Boris should stand aside.


Following the comments of Jake Berry (see below), it is clear that there is unconcealed fury among supporters of Boris Johnson towards Michael Gove. This is what Kwasi Kwarteng, the pro-Leave MP who is now backing Theresa May, has just told the BBC.

Calling Mr Gove’s decision “craziness” and “a spasm of immaturity”, he added:

He has known Boris for 30 years and today he has thought he is not ready to be prime minister. This is the kind of thing we see in student politics and I have had enough of it, and I think a lot of people in the country have had enough of it.


QE or rate cuts – which comes first?

Mark Carney did not specify just what kind of monetary stimulus measures could be heading the UK’s way, with analysts speculating that a rate cut could well be postponed in favour of more QE.

With Bank rate currently at 0.5 per cent, Mr Carney has warned against the prospect of the UK following the eurozone or Japan by heading into negative territory.

Marc Ostwald at ADM Investors thinks “the MPC might rather opt for more QE to accompany the move to have weekly rather than monthly term repo operations”.

It is worth noting his observation that if interest rates go too low, this will hit bank profits and potentially constrict credit availability.

While some markets may rejoice at the prospect of more “easing” (aka stimulus), there will be a lot of criticism that he has undermined confidence even more with his comments above all GBP, when he should be looking to soothe investors, particularly after another shambolic display of the current state of UK politics.


Is the ECB running out of bonds?

With Mark Carney promising to turn on the taps in the UK, his counterparts at the European Central Bank may be hitting the buffers with their own stimulus measures.

A report from Bloomberg has suggested the ECB will now loosen its QE rules to expand the pool of eligible assets that qualify for its bond-buying. As it stands, the ECB can buy government debt with a maturity between 2-30 years and which yields nothing below 0.4 per cent.

That has become trickier since the Brexit vote ramped up demand for safe assets and crammed yields lower across the board. (Bond yields fall when prices rise.)

Bloomberg cites unnamed officials in saying that the central bank may loosen its constraints so it can buy more bonds. A spokesman for the ECB declined to comment.

But peripheral bond yields across Europe have declined sharply following the report.

Portuguese 10-year yields are down by 21 basis points at 2.85 per cent. Italian yields are down by 18 basis points to 1.16 per cent, a 15-month low.

The euro fell as low as $1.1022 but has since picked up a little.

Read more on FastFT.


Caught off guard by Boris

Here’s a brilliant clip of Boris backer Nadine Dorries reacting to the shock news that the former London mayor would not be running for the Tory leadership

https://twitter.com/SkyNews/status/748557818421080065


Gilts turn negative for first time in history

Mark Carney has driven UK government bonds to another milestone today as yields on Gilts have fallen into negative territory for the first time in history.

Britain now joins its counterparts in Germany, Japan, and Switzerland below zero, after the March 2018 gilt has now fallen to 0.003 per cent – down from 0.14 per cent at the start of the day.

Brexit has led to a mass flight to safety among jittery investors, sending the universe of negative yielding bonds to just under $12tn.


It seems European cities are already gearing up to try and steal business from the City of London. An array of FT reporters from around Europe have filed this piece on the pros and cons of each one.


S&P downgrades EU to AA/Stable

Following a flurry of ratings actions for the UK this week, Standard & Poor’s has downgraded the credit rating of the entire EU.

The rating agency reduced the EU one notch to AA/stable from AA+/negative on Thursday, in a largely symbolic move which underscores the political and economic pressures facing the continent, including the UK.

In a statement, S&P said the move reflected “weakening political cohesion” on the back of Brexit, and will force the remaining EU leaders to overhaul their fiscal plans, including the framework for its budgetary contributions, following the departure of its third largest economy.

Other “key financial buffers will be subject to greater uncertainty”, said S&P, adding:

After the decision by the U.K. electorate to leave the EU as a consequenc of the June 23 consultative referendum, we have reassessed our opinion of cohesion within the EU, which we now consider to be a neutral rather than positive rating factor.

We think that, going forward, revenue forecasting, long-term capital planning, and adjustments to key financial buffers of the EU will be subject to greater uncertainty.”


On a day full of dramatic news, here are two of the key moments:


Boris’s former economic adviser backs Carney

Gerard Lyons, a former economic adviser to Boris Johnson and prominent Leave-supporting economist, has thrown his support behind Mark Carney today after the governor has come under repeated attack from some quarters of the Brexit campaign.

https://twitter.com/DrGerardLyons/status/748568277669019649


After yet another dramatic day in Westminster, we’re closing down the live blog for tonight. Thanks for reading, and join us again tomorrow.