Morning Coffee: Traders enjoying ‘free lunch’ served up by Boris Johnson. Deutsche Bank, the landlord

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Morning Coffee: Traders enjoying ‘free lunch’ served up by Boris Johnson. Deutsche Bank, the landlord

New UK Prime Minister Boris Johnson has tried to make it rather clear that he’s willing to walk away from the European Union without a Brexit deal if EU leaders don’t tear up the original divorce accord agreed to by his predecessor. Johnson’s office has also hinted at the fact that it won’t soften its stance despite the plummeting value of the pound. While some Conservative politicians have privately expressed trepidation over the strategy, hedge fund managers and currency traders are apparently enjoying the ride.

“Deliberately promoting the no-deal Brexit risk" has provided an almost risk-free opportunity for traders to take advantage, according to Jim O'Neill, the former chairman of Goldman Sachs Asset Management who advised David Cameron's government.

"I'm pretty sure that a lot of big foreign exchange and hedge fund type people are...probably looking at what's being said coming out the UK as almost close to a free lunch," O'Neill told BBC Radio, according to Business Insider. "The world I was in a lot of them are saying thank goodness for Boris, he's giving us a chance to make some money."

Johnson, who has told government departments to prepare in earnest for a no-deal exit from the EU, has been equally blunt in his public appearances, leading to the pound’s plummeting value. As of late Tuesday, Sterling had reached a two-and-a-half-year-low. Johnson’s seemingly straight-line approach has drawn both applause and jeers, but there doesn’t seem to be much question around the stance of FX traders. Everyone enjoys a free lunch from time-to-time.

Elsewhere, Deutsche Bank has found itself in a unique situation where it will likely need to sublease office space two years before actually moving in. The embattled German lender is planning to move from its longtime Wall Street office in New York to a Columbus Circle tower in 2021. The new space has 600k less square footage – and the bank has already exercised an option to give back two floors it had originally planned on controlling – but it now apparently desires an even smaller footprint. The New York Post reported on Tuesday that Deutsche Bank is likely to put additional floors up for sublease ahead of its 2021 move-in date. The news comes just a week after the bank said it will transfer 35 operations jobs from New York to its Jacksonville, Florida office in a move the firm has classified as a layoff.

Meanwhile:

Recently reorganized under CEO David Solomon, Goldman Sachs’ real estate investment group is raising a $2.5b fund as part of a strategy similar to the one it abandoned a few years ago after several of the bets went south. Solomon is looking for the realigned real estate group to make more investments with third-party money, rather than that of the firm. (WSJ)

Longtime BlackRock executive Peter Sanderson has been chosen to succeed David Jacob as the next CEO of struggling asset manager GAM. He’ll assume the role on Sept. 1. (Financial News)

The data breach at Capital One that has affected roughly 100m people was snuffed out by a tipster that sent a 20-word email to the company’s anonymous inbox. A former Amazon cloud service employee is accused of breaking into the bank’s servers. (Bloomberg)

Just how hot has it been in London? British men who work at banks and other financial services companies have begun wearing shorts to work. (WSJ)

Jeff Talpins' Element Capital Management will increase investor fees to 40% – up 15 percentage points from its current structure – following a long run of solid returns. The fund will also lower its management fee from 2.5% to 2%, though that too is higher than the industry average. (Bloomberg)

J.P. Morgan, Citi and UBS are among the banks facing a more than $1b U.K. lawsuit over claims it colluded to rig the foreign exchange market. (The Guardian)

Apple’s Goldman Sachs-sponsored credit card will be launched during the first half of August. (Bloomberg)

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