Business Live: Monday 27 June

PACopyright: PA

Optimism is outweighing pessimism among consumers following the Brexit vote, according to market research agency Consumer Intelligence.

Its study shows 48% of adults feel optimistic compared with 32% who are pessimistic - with 20% of consumers saying they're neither optimistic nor pessimistic.

However, the research also found the Brexit vote is increasing uncertainty with more than half of consumers who were planning major purchases this year cancelling or deciding to wait and see.

About  21% of people who said they were planning to buy a house, buy a car, invest in the stock market or withdraw money from their pension said they had cancelled plans.

A further 29% said they had delayed the decision. 

Quote Message: Consumers are generally keeping calm and remaining optimistic about the future following the referendum result. The situation is changing rapidly and clearly it is just over 72 hours since the result but the “don’t panic” message seems to be getting through. That also seems to be having an impact on decisions to make major purchases with people deciding to wait and see. from Ian Hughes Chief executive, Consumer Intelligence

Consumers are generally keeping calm and remaining optimistic about the future following the referendum result. The situation is changing rapidly and clearly it is just over 72 hours since the result but the “don’t panic” message seems to be getting through. That also seems to be having an impact on decisions to make major purchases with people deciding to wait and see.

APCopyright: AP

Wall Street was down sharply again on Monday following last week's Brexit vote.

Major US stock indexes saw their biggest two-day percentage drop for 10 months. 

All three main indexes were down at least 1.5 percent in the wake of Thursday's referendum that has roiled global markets and led investors to seek safe-haven assets. 

The tech-heavy Nasdaq was the worst hit amid fears that fallout from the UK's decision could hit business investment spending in the technology sector. 

Along with tech, materials, energy and financials were the worst-performing sectors. 

"The momentum has continued downward because there continues to be a lot of uncertainty," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago.

"It's important to note that it's orderly. It doesn't feel panic-inspired." 

At the close the the Dow Jones was at 17,140.24 - a fall of 1.50%. 

The Nasdaq was at 4,594.44 - that's down 2.41%.

And the S&P 500 closed down 1.81% at 2,000.54.

Credit rating agency Fitch has joined S&P in downgrading the UK's credit rating. 

It has downgraded it to 'AA' - outlook negative - from AA+.

It said the UK's vote to leave European Union in the referendum on 23 June would have a negative impact on UK economy, public finances and political continuity.

It added that it believed that uncertainty following the referendum outcome would  induce an abrupt slowdown in short-term GDP growth. 

And it said medium-term growth to likely be weaker due to less favourable terms for exports to EU, lower immigration, reduction in foreign direct investment. 

The uncertainty caused by Brexit is unlikely to die down in the short term said Francisco Torralba, senior economist for Morningstar’s Investment Management group. 

Politicians are likely to be wary of making comments about the Brexit timeline, but central banks could take action quickly if markets get too volatile. 

“Because both EU officials and British leadership are wary of making statements they might have to backpedal on, it’s unlikely they will clear up the uncertainty in the short term. 

"Any reassurance for the markets, I think, will come from a bold reaction by the Federal Reserve, the Bank of England, and the European Central Bank.”

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Germany's car makers have said the UK will have to accept the "bitter pill" of the free movement of people to ensure tariff-free access to the single market, saying "everything comes with a price".

In a surprisingly tough message from a key German export sector, Matthias Wissmann, the President of the VDA German Automotive Industry Association, told World Business Report on the BBC World Service: "If you want full access to the market, that comes necessarily with the free movement of people. That's the bitter pill the Brexiteers have to accept."

Mr Wissman - a former CDU politician - acknowledged there could therefore be a trade impact. "Unravelling Britain's relationship could be costly and could also be disruptive," he said. 

"If you want to be part of the single market you have to accept its conditions. If you want to have just free trade contracts, like with other countries in the world, you can find a different model but then the access would be more limited," he added.

"We don't like to build new barriers - but any bid to secure full access to the single market would necessarily come with conditions. Everyone who negotiates on the British side will understand that."

"Given the importance of exports for Britain to the European Union and of exports from the EU to Great Britain, some of the big emotions of the campaign have to be taken aside to get a clearer view of reality."

In response to the interview, the Conservative MP John Redwood told the BBC: "The contacts I've had over recent months have always stressed to me that Germany doesn't wish to impose new tariffs or other barriers in the way of our trade, and Germany in particular doesn't want the World Trade Organisation external tariffs on cars because that's one of the few which is quite a bit higher.” 

ReutersCopyright: Reuters

Poland's Foreign Minister, Witold Waszczykowski, says the European Commission had failed to give Britain a better offer to remain inside the European Union, reports BBC World Service.

Speaking after a meeting in Warsaw with nine EU foreign ministers, Mr Waszczykowski said Britain should not now be forced out of the EU as fast as possible. 

He said Poland would soon present Brussels with its proposals for EU reform to create a looser grouping of sovereign member states.  

Moritz Kraemer S&P's chief sovereign ratings officer has been speaking to Bloomberg TV.

The main reason(for the downgrade)  is our reassessment of the institutions and the predictability of the governance of the UK, he said. 

He added that a divided society- in terms of an age divide, a regional divide - would put continued stress on the UK. 

S&P would continue to watch the situtation in the UK, he said. 

Other things being equal, a downgrade can mean higher borrowing costs. But this time other things are not equal at all, writes BBC World Service economics correspondent Andrew Walker.  

Since the event which led to the downgrade – the referendum - those costs have gone down. The risk associated with UK government debt or bonds might in some sense be a little higher than before, but they are still seen as a safe investment compared with other assets.

In a situation where investors have become more reluctant to hold risky assets they buy safer ones including government bonds and that tends to lower the interest rate the government has to pay when it next goes to the market to borrow. 

And then there is the increased chance that the Bank of England will reduce its own interest rates because of concerns about the economic impact of Brexit. That tends to push government borrowing costs in the same direction.

The sell-off on Wall Street has deepened, with the Dow Jones now 1.4% lower, the S&P 500 1.7% down and the tech-heavy Nasdaq dropping over 2%.

Unless investors' mood improves in the next three hours, the falls will mark the Dow Jones and S&P's biggest two-day percentage drop for 10 months. 

"What I can say with certainty is uncertainty will remain," said Tina Byles Williams, chief executive officer of FIS Group. 

ReutersCopyright: Reuters

Shares in London may have fallen sharply today, but the domino effect meant that in Frankfurt and Paris they were hit even harder as EU countries got to grips with what the Brexit vote means for them.

Germany's Dax was down 3.02% at 9,268.66.

And in France the CAC 40 lost 2.97% to end at 3,984.72.