Future of Arcadia hangs in the balance as landlords decide whether to back a restructuring that would see stores closed and jobs lost, or put the company into administration

Here’s some photos of Arcadia’s chief executive, Ian Grabiner, arriving at County Hall in central London for today’s vote.

The Telegraph’s Ashley Armstrong has heard that the mood among Arcadia’s creditors was “fairly fatalistic”, as they voted on whether to accept the restructuring plan.

Apparently only 3 questions from landlords during Arcadia CVA. Landlord says the mood was fairly fatalistic about the support

The BBC’s Jamie Robertson says a decision on Arcadia could be imminent….

Arcadia CVA decision by its creditors expected in next half hour. Future of Topshop, Topman, Miss Selfridge et al in the balance – or so the company says

One of Arcadia’s biggest landlords has decided to oppose the restructuring deal, according to Sky News.

It reports that Intu Properties, which owns Manchester’s Trafford Centre and Lakeside in Essex, is to vote against Arcadia’s company voluntary arrangements (CVAs) today.

A source close to Arcadia confirmed that Intu – which declined to comment – had informed it of its decision not to support the proposed overhaul of Sir Philip’s company, which would involve steep rent cuts at more than 150 stores, and the closure of about 50 more.

Other major landlords, including British Land, are understood to be leaning towards backing the CVA plans, although many will not make their decisions until the meeting in Central London gets under way.

Revealed: Fresh doubt cast over the future of Sir Philip Green’s high street empire as Intu Properties, Arcadia Group’s second-biggest landlord, decides to oppose a restructuring to be voted on by creditors later today. https://t.co/9HO255LH6d

I’m told that Aviva Investors, another Arcadia landlord, may also be voting against the retailer’s CVA proposals at today’s crunch meeting of creditors; a spokeswoman for the asset manager says, however, that it is not commenting on its voting decision.

Oliver Buhus, operations director of clothing supplier Paragon, is also attending the CVA meeting.

He told us that said if Arcadia collapsed it would have “severe implications for the industry as a whole.”

“I believe in the CVA and the plans for the business as a whole.”

“It’s a storm that needs to be weathered. The ship needs to be renavigated and hopefully to come out the other side in a better place.”

My colleague Sarah Butler is outside today’s crunch meeting on Arcadia’s future.

She spoke with Julian Lochrane who attended the meeting to vote on behalf of three landlords. Lochrane told her that they had all backed the restructuring deal as there was “not much alternative”

“They threatened administration and [if that happened] we don’t get even what they are offering at the moment.”

The Sunday Times’s Sam Chambers also suspects today’s vote will be very close:

Hearing Arcadia CEO Ian Grabiner emailing landlords yet to vote pleading them to back the CVA.
Looks like it’s going to the wire

Back in London, the future of Sir Philip Green’s Arcadia retail empire is hanging in the balance.

Related: Sir Philip Green agrees to put £25m into Arcadia pension fund

The International Monetary Fund has weighed in on the US-China trade dispute, warning that it will cost the world economy deeply.

In a new blogpost, IMF chief Christine Lagarde warns that more than $450bn will be wiped off global output if Washington and Beijing impose tariffs on all reciprocal trade, as has been threatened.

The International Monetary Fund has called for a speedy end to the deepening trade war between the United States and China after calculating that the tit-for-tat tariffs will cost $455bn (£357.5bn) in lost output next year – more than the size of South Africa’s economy.

Christine Lagarde, the IMF’s managing director, underlined her organisation’s growing concern at the most serious outbreak of trade tension since the 1930s and said “self-inflicted wounds” had to be avoided.

Related: US-China trade war to cost $455bn in lost output, says IMF

The latest surveys of America’s services sector paint a rather contradictory picture.

Data firm Markit has just reported that services growth hit a three-year low last month, with companies reporting a slowdown in new orders and meagre output growth.

The US service sector joins manufacturing in the slow lane. @IHSMarkit PMI surveys point to marked slowing of GDP in Q2 (1.2% grwoth signalled in May) and weakening jobs growth. Read more at https://t.co/DCtciPz8Y6 pic.twitter.com/wffyCpTAFf

US services, both ISM and Markit —> Read More: https://t.co/6FVIyXJyAm pic.twitter.com/pfvOjjtVS2

I mentioned in the opening post that investors are treating bad news as good news this week.

One of the leading players in Italy’s government has hit back at the EU, suggesting that Rome is being treated unfairly.

“We will go to Europe and sit around a table with responsibility, not to destroy but to construct.

“But it’s very annoying that every day a new way is found to speak badly about Italy and this government.”

Getting back to Italy…. the EC’s main concern is that its debt is ‘snowballing’, as its deficit grows and asset sales fail to bridge the gap.

Bloomberg explains:

“Italy’s public debt remains a major source of vulnerability for the economy,” the commission said in its report.

The ratio of the nation’s debt to gross domestic product will “rise in both 2019 and 2020, up to over 135%, due to a large debt-increasing ‘snowball’ effect, a declining primary surplus, and underachieved privatization proceeds,” according to the report.

Newsflash from America: Job creation by US firms fell sharply, and unexpectedly last month.

There were just 27,000 new hires by private sector companies in May, according to the closely watched payroll report from ADP.

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US private sector employment growth slumps to lowest since March 2010, ADP data show. Likely to fuel US slowdown/rate cut/possible recession expectations… pic.twitter.com/oIgrDIe2Hi

Green party MEP Sven Giegold says Germany should also face the wrath of the EU — for not spending enough!

Giegold argues that it’s wrong to penalise a country for running a budget deficit, without penalising those who also run large surpluses (they are, after all, part of the same situation).

“The Commission must end its selective approach to dealing with transgressions in the Eurozone. The excessive current account surplus of Germany is destabilising the Eurozone, just as the excessive budget deficit of Italy does.

This Janus-faced approach to dealing with instability in the Eurozone only serves to undermine the long term stability of the whole project.”

Unfortunately, Italy continues to flaunt the rules of the Stability Pact, so an excessive deficit procedure is logical. A common currency needs common rules, and we will only have stable Eurozone if the rules are adhered to.

“However, while the Commission is forced to act, it must ensure that the Italian people do not suffer at the will of the market or the whims of their fractious government. Prime Minister Conte’s appeal to revise common budget rules should be listened to carefully, as governments need more scope for spending during crises and incentives for investment as well as binding rules for reserves during the good times.”

Markus Ferber, an MEP representing Germany, has welcomed the Commission’s recommendation to plunge Italy into an excessive deficit procedure.

Ferber says Italy deserves everything it gets — and wants France to also face disciplinary action for failing to cuts its borrowing.

“Italy deliberately decided to ignore the European fiscal rules and it feels like groundhog day. Unlike before, the European Commission has to be tough this time. The Italian government does not seem to understand any other language after all. Had the European Commission not backed off the last time, the current escalation could have been avoided.

It is a mistake only to look at Italy though. The European Commission’s own Spring Economic Forecast predicted that France will also miss the deficit threshold. If the European Commission wants to be a credible defender of the Stability and Growth Pact, it has to treat all offenders equally and that means also launching a procedure against France.”

This chart shows how Italy is only at the start of the excessive deficit procedure process (the bottom of the pyramid).

The identification by the @EU_Commission of a breach of either the deficit or the debt criterion by a Member Stat is the very first step of an Excessive Deficit Procedure (#EDP) – from the Vade mecum on the Stability and Growth Pact, 2019 ed. pic.twitter.com/TJicuxW7bS

Today’s Commission report on Italy shows that its public debt stood at 132.2% of GDP in 2018, far above the EU’s 60% limit.

Many other countries have debt piles over 60% of GDP too, but the EC is unhappy that Italy’s deficit isn’t falling fast enough (in its view).

“Moreover, Italy is not projected to comply with the debt reduction benchmark in either 2019 or 2020 based on both the government plans and the commission 2019 spring forecast.”

.@EU_Commission report recommends launch of a debt-based Excessive Deficit Procedure (#EDP) against Italy. pic.twitter.com/3SgP9DFU56

.@EU_Commission report on : “Based on notified data and the Commission 2019 spring forecast, Italy did not comply with the debt reduction benchmark in 2018 (gap of some 7 ½% of GDP).” pic.twitter.com/KB2IUCrZP0

“Moreover, based on both the government plans and the Commission 2019 spring forecast, Italy is not expected to comply with the debt reduction
benchmark either in 2019 (gap of some 5% and 9% of GDP, respectively) or in 2020 (gap of some 4 ½% and 9 ¼% of GDP respectively).” pic.twitter.com/gdvPAfKysJ

The EC has good news for Madrid — it recommends that Spain should be removed from its excessive procedure, having brought its deficit into line.

Spain was sanctioned back in 2016, and threatened with fines unless it lowered its deficit (leading to tax rises and spending cuts).

I would like to congratulate #Spain as we are proposing to abrogate the Excessive Deficit Procedure for the country! #EuropeanSemester pic.twitter.com/kDhBNZDQjf

Today, the Commission recommends that the Excessive Deficit Procedure (EDP) be abrogated for Spain

Press release https://t.co/TUe3DgDpvX #EuropeanSemester pic.twitter.com/uPWpsIJAGL

Italy’s stock market has fallen into the red, as traders digest the EC’s recommendation.

The FTSE MIB is now down 163 points, or 0.8%, to 20,065, with banks stocks falling by 1.7%.

European commissioner Pierre Moscovici is making more conciliatory noises towards Rome – suggesting that sanctions can yet be dodged.

Speaking alongside Dombrovskis in Brussels, he says Italy’s government can still avoid being dragged into an excessive deficit procedure:

“As always with all member states, we are ready to look at new data that could change this analysis….. My door is open.

Journalist Dave Keating has also flagged up that Italy hasn’t been hit by disciplinary action yet — but the process has certainly moved closer.

Important to point out that EDP sanctions haven’t been applied to Italy *yet*. This is just the Commission recommending them. The final decision needs to be taken by the 27 other EU governments in #EUCO, and they share the same concerns about Salvini using this for political gain

Valdis Dombrovskis, the EC’s vice-president for the euro, is explaining today’s decision – and putting the boot into Italy.

He tells reporters that Italy has not complied with Europe’s debt rules. That’s because its deficit is forecast to hit 2.5% of GDP this year, over the target of 2%.

For #Italy, there is a path to recovery and growth. Other countries have already taken it, with success. This path follows a renewed reform effort to address long-standing structural weaknesses in its economy. #EuropeanSemester pic.twitter.com/TsrwvtFyKw

In theory, an excessive budget deficit procedure could end with Italy being fined by Brussels, and being forced to accept stricter oversight of its tax and spending plans. We’re not there yet, though.

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The EC says disciplinary action is warranted against Italy, because it has only made limited progress in hitting European budget targets.

It also says Italy has backtracked on structural reforms, a criticism of its coalition of right-wing and anti-establishment parties who took power last year.

NEWSFLASH: The European Commission has escalated its battle against the Italian government over its debt levels, recommending that disciplinary procedures are launched.

The drop in UK car sales last month is another sign that the Brexit crisis is acting like an anchor on economic growth.

Jonathan Moss, partner and head of transport at law firm DWF says:

“New car registrations figures have again declined 4.6% in part because of the current economic and political ambiguity around the impact of Brexit and uncertainty around the changes in political leadership.

“From an industry perspective, the current market also puts a significant strain on manufacturers, who are dealing with increasing pressure on carbon emission standards in the face of significant uncertainty and declining registrations numbers.”

Here’s our news story on the weak UK purchasing managers reports.

Related: UK economy is stalling despite service sector growth

It’s still early (barely 6am in New York), but there are signs that Wall Street will rally again today.

The Dow Jones industrial average is up almost 145 points on the futures marker, following Tuesday’s 512-point spike (the second-biggest jump of 2019).

The Dow rebounds more than 500 points on Tuesday. We’ll see if the rally continues today. Dow futures are up 145 points right now.

One of Britain’s largest service sector companies has just announced a sweeping office closure plan, as it tries to cut costs.

BT is slashing its UK offices from 300 to just 30, shrinking its property footprint and obviously worrying its staff.

The company has announced the first eight locations for its UK workforce, which is being whittled down to about 75,000.

London, Manchester, Cardiff, Edinburgh, Belfast, Bristol, Ipswich and Birmingham have been named as “key locations” for BT maintain a presence.

Related: BT to close offices in more than 270 UK locations

UK purchasing managers index for May slips closer to stalled economy: manufacturers losing export orders: construction down and with lowest optimism since 2013: services and manufacturing more upbeat on outlook as Brexit worries eased. For now.@IHSMarkitPMI

There are bright spots in today’s PMI report, despite the slowdown in growth.

For example, business optimism has hit its highest level in eight months. That may suggest companies are less worried about a no-deal Brexit, now that Article 50 has been extended until at least the end of October.

There were reports citing cautious optimism about the outlook for customer demand, as well as confidence regarding forthcoming business expansion plans.

Some firms also commented on efforts to mitigate rising staff costs through improved productivity. However, survey respondents also noted that domestic political uncertainty remained a key factor holding back their growth expectations for the year ahead.

Despite slightly faster services growth, @IHSMarkit /CIPS ‘all-sector’ UK #PMI fell from 50.9 in April to 50.7 in May, indicative of the economy more or less stalled when compared to official GDP data. However, optimism about the year ahead hit an 8-month high. pic.twitter.com/gqrudL351z

Britain’s economy will only managed “muted growth” in the current quarter after a “difficult May”, predicts economist Howard Archer of EY Item Club.

Here’s his take on the latest PMI report:

Sam Tombs of Pantheon Economics suggests the PMI surveys are being dragged down by the political uncertainty which has gripped Britain for months (and may not relax its grip for some time).

The UK PMIs remain at levels that have persuaded the MPC to cut rates before. But the pick-up in their fwd-looking components, their tendency to understate growth when pol. uncertainty is high and exclusion of the still-growing retail & public sectors suggest the MPC won’t budge pic.twitter.com/7u6lc9q4po

Economists are concerned that Britain’s economy lost momentum in May, even though the services sector grew a little faster. Here’s some snap reaction:

May’s IHS Markit/CIPS services #PMI rose from 50.4 in April to 51.0, and was thankfully not as bad as the manufacturing and construction surveys. Nonetheless, the all-sector PMI fell from 50.9 to 50.7, suggesting the economy has lost momentum since the start of the year. pic.twitter.com/cAoYijSKXd

Services pickup more than offset by sharp slowdown in manufacturing + construction says @IHSMarkitPMI all sector PMI at 50.7 down from 50.9 in April pic.twitter.com/GPath1XSFz

bounce in service sector activity prevents economy flatlining in May according to latest PMI survey – has diverged from official data of late (sentiment vs reality?) but overall evidence pointing to slower growth Q2 vs Q1

Good News! The UK Services PMI improved to 51 in May from 50.4. This meant that the Composite output PMI at 50.7 showed growth albeit not very much #GDP

Newsflash: Britain’s economy is close to stagnation, despite a pick-up in service sector growth last month.

Data firm Markit has just reported that its composite PMI index, which tracks activity across the UK private sector, fell last month to just 50.7, from 50.9.

“Although service sector business activity gained a little momentum in May, with growth reaching a three-month high, the pace of expansion remained disappointingly muted and failed to offset a marked deterioration in manufacturing performance and a fall in output of the construction industry during the month. As a result, the PMI surveys collectively indicated that the UK economy remained close to stagnation midway through the second quarter as a result, registering one of the weakest performances since 2012.

“Companies reported that activity, order books and hiring were all subdued by a combination of weak demand – both in domestic and overseas markets – and Brexit-related uncertainty.

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UK May Services PMI 51.0; Median 50.6; Apr 50.4 pic.twitter.com/Pj8AsTScqz

Back in the UK, car registrations have fallen in another sign that economic confidence is weak.

Modest growth in registrations of petrol (1.0%) and alternatively fuelled vehicles (11.7%) was not enough to offset the significant decline in demand for diesels, which fell for the 26th consecutive month.

Ongoing anti-diesel sentiment and the forthcoming introduction of low emission zones continues to affect buyer confidence.

Just in: The eurozone economy grew a little faster than expected last month, despite geopolitical worries.

Data firm Markit reports that European service sector firms expanded solidly last month.

Germany’s service sector continues to defy the same fate as its manufacturing economy, growing solidly in May. (Services PMI at 55.4), only slightly below April’s 7-month high. More: https://t.co/C0bfcM4bvg pic.twitter.com/4qNgSLqLTG

Newsflash: The International Monetary Fund has cut its growth forecast for China, and warned that the trade war with the US is hurting.

The Fund now expects China’s economy to grow by 6.2% this year, down from 6.3% previously. That reverses a small upgrade earlier this year.

“The near-term outlook remains particularly uncertain given the potential for further escalation of trade tensions.”

Everyone loses in a protracted trade war. If tensions escalate, China’s growth could be significantly affected & stimulus would be needed. But China needs to focus on expanding social safety net rather than expanding infrastructure —Kenneth Kang, IMF Deputy Director pic.twitter.com/9aUJ9M6TPt

European stock markets have also risen in early trading.

Britain’s FTSE 100 has gained 30 points to a one-week high of 7,244.

Powell gave the markets what they wanted to hear, and the result was a spectacular rally, as traders increased their bets of a rate cut happening before the year end.

Jerome Powell’s speech followed similar comments from other Fed officials earlier in the week. This is usually a sign that the Fed wants to prepare investors for a shift in policy.

100% chance of a rate cut in the states, monetary policy is too tight says Michael Howell CEO @crossbordercap on @SquawkBoxEurope #rates #fed

The US Federal Reserve’s dual mandate is to keep American inflation steady and unemployment as low as possible.

But… it often feels like there’s a third mandate – keep the stock markets up.

“The market wanted to hear from Powell. When Powell says ‘we are watching the market’ — whether it’s right or wrong — the market starts believing in a Powell put,” said Keith Lerner, chief market strategist at SunTrust Private Wealth. He also noted “sentiment became extremely negative on a short-term basis.”

These comments come amid increasing expectations for a Fed rate cut. The CME FedWatch tool indicated a 90% chance of a September rate cut. Expectations for a second rate cut in December were also above 80%.

Wow – “These comments come amid increasing expectations for a Fed rate cut. The CME FedWatch tool indicated a 90% chance of a September rate cut. Expectations for a second rate cut in December were also above 80%.” https://t.co/xQEoYyyK3N

Government bond prices are also being driven higher, by the prospect of interest rate cuts.

This has pushed down the yield (effectively the rate of return) on Japan’s sovereign debt today. Two-year Japanese bonds are now deeper into negative territory, meaning an investors is guaranteed to lose money if they hold them until they mature.

#Japan’s 2-year bond yield falls to -0.22%, the lowest since March 2017. pic.twitter.com/u1lbmlSnuB

The #Fed leaning towards cutting rates isn’t just affecting #US markets. 10-year JGB yields have fallen to their lowest since August 2016 as #BOJ rate cut odds rise. https://t.co/4p6wZ9VR3f pic.twitter.com/SExdKncYYU

Japan’s stock market has matched last night’s Wall Street rally, by jumping by 2% as well.

How much truth there was in the big rally for markets yesterday and how much was dramatised is open for question.

Indeed, the last 24 hours has seen a marked change in sentiment and although it’s hard to completely attribute the move to Powell’s comments at the Fed conference yesterday, the fact that the Chair seemingly didn’t push back on very dovish market pricing did at least fill investors with a bit more confidence.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

DOW JONES closing at 25332 +512 Points Up…. pic.twitter.com/S290D6C874

We do not know how or when these issues will be resolved.

“We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion…

Related: Fed chair Powell promises to protect US economy from trade war – as it happened

Related: Trump’s trade wars sent global investment tumbling – World Bank

@AP Dow Jones industrials gain 512 points after Fed signals it could cut interest rates if US trade conflicts slow economy

US stocks recorded their second best day of the year on Tuesday. The Dow closed up 512 points, or 2.1%. The S&P 500 ended 2.1% higher. The Nasdaq closed 2.7% higher, erasing its losses after a steep selloff on Monday driven by worries about tech regulation https://t.co/WahQuztSUw

Equity investors love cheap money, and U.S. stocks posted their best day in five months Tuesday as traders lifted themselves off the mat after Chair Powell suggested a willingness to lower interest rates if the economy slows in response to escalating tariffs.

The odds were doubtlessly in favour of rate cuts from the Fed in 2019 but overnight and ahead of the upcoming June FOMC meeting, Chair Powell changed the Fed messaging just enough to avoid signalling a shift from patient to panicked. And while falling well short of confirming the markets overly dovish expectations, it was music to U.S. investors ears who have been starved of positive news of late.

Related: Sir Philip Green agrees to put £25m into Arcadia pension fund

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