What to Watch: Deutsche Bank's 'bad bank', Kier cuts jobs, and Babcock rejects merger

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Deutsche Bank CEO Christian Sewing. Photo: Daniel Roland/AFP/Getty Images

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

Deutsche Bank plans ‘bad bank’

Shares in Deutsche Bank (DBK.DE) were up around 2.6% on Monday morning after it was reported the lender is planning to create a new “bad bank” with billions of euros of troubled assets.

The Financial Times reported late on Sunday that Deutsche Bank is planning a radical overhaul of its business that will see it shut or shrink its US equities operation and hive off €50bn (£44.5bn, $56bn)of assets into a new “bad bank.”

The plans are not final and the FT said CEO Christian Sewing will likely announce the final plan at Deutsche Bank’s July half year results.

“This is Sewing’s big play — we await to see whether it’s enough to really convince shareholders that we’ve hit the bottom,” Neil Wilson, chief market analyst at Markets.com, said in an email to clients. “Profitability targets still look rather distant.”

Kier cuts 1,200 jobs

Construction firm Kier Group (KIE.L) said it will cut around 1,200 jobs by next year as part of accelerated restructuring plans.

The job cuts are set to save £55m in annual costs, the company said.

Chief executive Andrew Davies said: “These actions are focused on resetting the operational structure of Kier, simplifying the portfolio, and emphasising cash generation in order to structurally reduce debt.

“By making these changes, we will reinforce the foundations from which our core activities can flourish in the future, to the benefit of all of our stakeholders.”

Babcock rejects Serco merger

Aerospace and defence giant Babcock (BAB.L) has confirmed it received a merger approach from outsourcing giant Serco (SRP.L) in January, but rejected the proposal due to its lack of “strategic merit”.

The Sunday Times reported over the weekend that Serco had made two bid attempts for Babcock, both of which were rejected.

Babcock confirmed in a statement on Monday that it received “an unsolicited and highly preliminary proposal” but “unanimously rejected it, having concluded that a combination of the two companies had no strategic merit and was not in the best interests of Babcock's shareholders, customers or wider stakeholders.”

Huawei’s sales hit

China's Huawei Technologies expects sales to drop to $100bn (£79.4bn) in 2019 and 2020.

Huawei’s sales went up by 19.5% in 2018, with revenue of $104.16bn.

However, Huawei CEO Ren Zhengfei said at an event at the company's Shenzhen headquarters, reported by Reuters, that he expects a revival in the business in 2021. He said the group would not cut research and development spending despite the gloomy outlook for growth over the next two years.

Huawei is under fire from companies, governments, and agencies around the world for being a potential threat to security.

Brexit stockpiling continues to drag

Businesses stockpiling goods has boosted UK economic growth in the short-term but over the next two years it is likely the nation will feel the detrimental impact on the country’s finances, says British Chambers of Commerce (BCC).

The major lobby group, which represents around 75,000 businesses in all sectors ranging from start-ups to large multi-national firms, said in a report that it has upgraded its growth expectations for the UK in 2019 to 1.3%, from 1.2%.

However, the BCC downgrade its forecasts for 2020 to 1.0% (from 1.3%) and cut its forecast for 2021 to 1.2% (from 1.4%).

Europe start the week in the green

European markets were higher on Monday morning ahead of a major week for central banks.

The US Federal Reserve will deliver its latest interest rates decision on Wednesday, followed by the Bank of England on Thursday. Investors think the Fed could provide some stimulus to the US economy in the face of growing fears about global growth.

“There does appear to be a growing belief that for all of the growing concern about a global economic slowdown, that central banks will step up to the plate and ease policy, in the coming months,” Michael Hewson, the chief market analyst at CMC Markets, said in an email to clients on Konday.

“Investors are growing increasingly convinced that the US Federal Reserve may well cut interest rates up to three times this year, though judging by the rally in the US dollar in the last few days foreign exchange markets have a different view.”

Britain's FTSE 100 (^FTSE) was up by 0.2%, Germany's DAX (^GDAXI) was up by 0.1%, France's CAC 40 (^FCHI) was up by 0.2%, and the Euronext 100 (^N100) was up by 0.1%.

Asian markets were mixed overnight. Japan's Nikkei 225 (^N225) closed flat, Hong Kong's Hang Seng index (^HSI) was up by 0.5%, but China's benchmark Shanghai Composite (000001.SS) was down by 0.7%.

What to expect in the US

US stock futures were pointing to a higher open later today.

S&P 500 futures (ES=F) were up by 0.1%, Dow Jones Industrial Average futures (YM=F) were up by 0.1%, and Nasdaq futures (NQ=F) were up by 0.3%.