GBP
It was a bad day for Britain’s biggest retailer, Tesco, after it shocked the
City by admitting that it had overstated its forecasts for profits by a
staggering £250m. The mistake, prompted the company to suspend four senior
executives over the weekend. City analysts said they were shocked by the latest
crisis at Tesco, which had already made three profit warnings this year.

The company’s share price has slumped to an 11-year low today, down 11.5% to

GBP
It was a bad day for Britain’s biggest retailer, Tesco, after it shocked the
City by admitting that it had overstated its forecasts for profits by a
staggering £250m. The mistake, prompted the company to suspend four senior
executives over the weekend. City analysts said they were shocked by the latest
crisis at Tesco, which had already made three profit warnings this year.

The company’s share price has slumped to an 11-year low today, down 11.5% to
203p. That wipes more than £2bn off off its Market capitalisation, from
£18.78bn to £16.5bn. Tesco shares have lost 40% of their value this year
alone.

EUR
The European Central Bank president said a planned asset-purchase program shows
that policy makers will steer the size of the institution’s balance sheet to
avert deflation. In comments in Brussels yesterday, he underlined the need for
that approach to revive the economy. Even after cutting borrowing costs for
banks to record lows and offering long-term loans, Draghi is struggling to
persuade them to take more ECB cash to finance lending to the real economy. In
contrast to other major central banks, the ECB’s assets have shrunk by a third
since 2012.

A more proactive way of injecting funds would be the program to buy
asset-backed securities and covered bonds, details of which are scheduled to be
unveiled next month. The ECB president has so far left open the option of
large-scale sovereign-bond purchases, or quantitative easing. Economic growth
in the euro area came to a halt in the second quarter and Draghi mentioned that
recent indicators have given no indication that the sharp decline in economic
activity in the region has stopped. Again this is more bad news for the
Eurozone and indicates there is likely to be further trouble ahead. 

USD
The president of the Federal Reserve Bank of New York said the strengthening
dollar could hamper efforts to spur growth and lift inflation. He is said that
the strength of the USD could keep dragging inflation down by lowering the
price of imported goods and will continue to reduce pressure on the Fed having
to increase interest rates.

Key Announcements
07:30 – EUR – Manufacturing and services PMI (Sept) – expected to come in at
50.5 from 50.7
13:00 – USD – House price index  – no predictions out currently
13:45 – USD – Manufacturing PMI (Sept) – expected to rise to 58 from 57.9

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