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What to Watch: Bank of England, EU cuts growth forecast, Sainsbury's woes

Edmund Heaphy
Finance and news reporter
Outgoing Bank of England governor Mark Carney. Photo: Chris J Ratcliffe/Pool Photo via AP

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Bank of England expected to hold rates unchanged

The Bank of England is set to keep interest rates on hold at 0.75% on Thursday, but downgrade Britain’s economic outlook as prolonged Brexit uncertainty takes its toll.

The noon rates decision will be accompanied by the bank’s latest set of forecasts in its now renamed Monetary Policy Report, which are expected to slash its 2020 growth outlook from the 1.3% previously pencilled in.

Economists believe it may also cut the ambitious 2.3% growth forecast for 2021, given signs of strain in the UK economy amid political wrangling and Brexit uncertainty, with the withdrawal deadline pushed back again to January 31.

The bank’s Monetary Policy Committee (MPC) warned in its last rates decision over the damage being inflicted by “entrenched” Brexit uncertainty.

It also hinted at the possibility that rates may need to be cut if Brexit is delayed again, and since then two MPC members have voiced support for the case for a rate reduction in such circumstances.

European Commission trims euro zone growth forecasts

Growth in the euro zone will be weaker than expected in 2019 and 2020 according to the latest forecast from the European Commission, which warned that global trade conflicts, Brexit, and geopolitical tensions would dent the economy.

The commission trimmed its growth forecast for the 19-member euro zone to 1.1% this year. It had previously said it expected growth of 1.2%. Growth in 2020 will come in at 1.2%, and and 2021 at 1.4%.

"Economic growth has continued, job creation has been robust and domestic demand strong,” said commission vice-president for the euro Valdis Dombrovskis.

“However, we could be facing troubled waters ahead: a period of high uncertainty related to trade conflicts, rising geopolitical tensions, persistent weakness in the manufacturing sector and Brexit.”

Sainsbury's profits crash as dozens of store closures loom

Sainsbury’s profits have crashed as the supermarket giant prepares for a wave of store closures and struggles to rebuild confidence after its failed Asda takeover.

Mike Coupe, chief executive of the leading UK supermarket group (SBRY.L), also warned Brexit uncertainty “weighs heavily” on its customers and said election day would hit supermarket sales.

It saw its underlying profits slide 15% in the first half of the year, but they were down 92% when the cost of a write-down of its store estate is included.

The company blamed “the phasing of cost savings, higher marketing costs and tough weather comparatives” with last year for a drop in underlying profits to £238m.

Meanwhile like-for-like sales were down 1% to £16.86bn, according to its latest half-year report released on Thursday.

Labour unveils £150bn spending plan

Labour is promising to spend £150bn “repairing our social fabric” after years of government budget cuts, as the election battle lines begin to emerge.

Shadow chancellor John McDonnell will pledge to upgrade schools, hospitals, care homes and council homes in a speech setting out his party’s plan for government on Thursday.

He also warned “the days of the City dictating terms to the rest of the country are over.”

But Conservative chancellor Sajid Javid called McDonnell and Corbyn “the anti-vaxxers of economic policy” and dubbed the proposals “fantasy economics” as he prepares his own speech on the economy today.

Javid is reported to be planning to loosen strict borrowing rules followed by his Conservative predecessors to “unleash Britain’s potential”, according to the Times.

Paddy Power owner Flutter sees surge in US business

Revenue at Paddy Power owner Flutter Entertainment (FLTR.L) climbed by 10% to £533m in the three months to the end of September, with the betting giant reporting substantial growth in its US operations.

Flutter said on Thursday that US revenue in the period jumped by 67% after it launched in five new states.

The trading update comes around a month after Flutter said that it was planning on a £10bn merger with the Stars Group (TSG), a Canadian firm that owns PokerStars, the world's largest poker site.

The Stars Group on Thursday also reported strong growth, with revenue increasing by 8.8% during the three months.

European stocks higher

European stocks climbed on Thursday, with the FTSE 100 (^FTSE) up 0.16%. Germany’s DAX (^GDAXI) is up by 0.71%, while France’s CAC 40 (^FCHI) is up by 0.16%.

The pound was trading 0.1% higher against the dollar (GBPUSD=X) at around $1.286. It fell 0.1% against the euro (GBPEUR=X) to just below €1.16.

What to expect in the US

Futures are pointing to a higher open for US stocks.

S&P 500 futures (ES=F) are up 0.46%. Dow Jones Industrial Average futures (YM=F) and Nasdaq futures (NQ=F) are up similarly.

Companies reporting later on Thursday in the US include:

  • Cloud Flare (NET)

  • Ralph Lauren (RL)