BHP Billiton to sell US shale business

Mining giant BHP Billiton will sell its US shale assets after pressure from shareholders to offload the underperforming business. The miner said a number of parties are interested in the assets and it is “actively pursuing options to exit.” Shareholder Elliott Management has campaigned for strategic changes at BHP including the sale of its shale operations. It comes as the company reported $5.89 bn (£4.56 bn) annual net profit.

Crawford Falconer takes up post as UK’s top trade negotiator

The man in charge of negotiating the UK’s trade deals once Brexit is finalised, starts his job this week. Crawford Falconer will take up the post of chief trade negotiation adviser at the Department for International Trade. Leaving the single market would mean the UK would have to establish new bilateral trade agreements, but cannot formally do so until after Brexit. However, one economist suggested Mr Falconer would already be “building bridges” with the European Commission. The UK faces a huge challenge in resetting its trading relationship with the EU and other countries when Brexit takes effect. Trade pacts that have been negotiated by the EU with the rest of the world will no longer apply to the UK, while Britain will also need to define new trading relationships with the EU itself. Membership of the EU has meant the UK does not have a large bank of trade negotiators with recent experience. A New Zealander, Mr Falconer has more than 25 years trade experience. He has represented New Zealand at the World Trade Organization (WTO) and held various posts in foreign and trade affairs in his home country.

Trump scraps infrastructure council plan

President Trump is dropping plans to create an advisory group on infrastructure, a day after two other business panels were dissolved. The president has faced a backlash from business leaders over his remarks this week on white supremacists. A White House official said the infrastructure council, which was still being formed, “will not move forward”. Mr Trump signed an executive order last month to create the group as he looks to spend $1 trillion on infrastructure. He has made updating US roads, bridges and airports a key part of his legislative agenda. However, on Wednesday he was forced to disband two other White House business panels amid an exodus of chief executives. Business leaders quit over Mr Trump’s response to a far-right rally in Virginia, which left a woman dead and dozens hurt. The rally, supported by neo-Nazis and white supremacists, was in protest of the removal of a statue of Robert E Lee, a general who had fought for the pro-slavery Confederacy during the US Civil War. On Thursday, Mr Trump re-opened the heated debate by denouncing the removal of “beautiful” Confederate statues.

Forward Diary: 21st – 25th August

Company and economic announcements planned for the week commencing 21st August 2017

Trump ends business groups as CEOs quit

President Trump has said he is scrapping two business councils after more bosses quit over his handling of violent clashes in Virginia. Business leaders left the White House manufacturing council after the backlash against how he reacted to the far-right rally last weekend. The clashes culminated in a woman’s death and nearly 20 wounded when a car ploughed into a crowd of anti-fascists. Mr Trump’s reaction has sparked outrage and generated global headlines. His announcement on Twitter came as the heads of 3M, Campbell Soup, Johnson & Johnson and United Technologies announced their resignations on Wednesday. Mr Trump said: “Rather than putting pressure on the businesspeople of the Manufacturing Council & Strategy & Policy Forum, I am ending both.” Before Mr Trump’s announcement, the Strategy and Policy Forum announced it was a joint decision to disband the council. Businesses have been under pressure to distance themselves from Mr Trump over his handling of the clashes in Charlottesville, Virginia.

IMF warns on China’s credit boom

The International Monetary Fund has warned that China’s credit growth is on a “dangerous trajectory”. In a new report, the IMF says there is an increasing risk of a “disruptive adjustment” and/or a marked slowdown in economic growth”. The agency calls for decisive action to deflate the credit boom smoothly. Without the boom, the report suggests, China’s recent economic expansion would have been significantly slower. Since the global financial crisis, China’s economic growth has slowed, from an average of 10% a year in the previous three decades to a rate of 6.7% last year. The Chinese government expected a slowdown, since the earlier double-digit rate was not sustainable over the long term.

Brexit: UK suggests ‘temporary customs union’ with EU

The UK has set out the “ambitious new customs arrangement” it wants to secure with the EU after Brexit. Ministers said the plans would mean the “freest and most frictionless possible trade” with the rest of Europe. This could include a “temporary customs union” after Brexit to prevent border problems as the UK leaves the EU. Businesses have called for clarity since the UK said it was leaving the customs union – the EU’s tariff-free trading area – as part of Brexit. The customs union document is the first of a series of papers to be published by the UK government on key negotiation issues. On Wednesday it is expected to set out proposals for the border between Northern Ireland and the Republic of Ireland.

Pay growth to stay weak, says forecast

Pressure on incomes looks set to continue, with pay rises forecast at 1% over the next year, a survey predicts. Despite falling unemployment, wage growth is weak because the supply of labour has also gone up, says the Chartered Institute of Personnel and Development (CIPD). The CIPD said for every low-skilled job, there were 24 applicants. There were also 19 candidates for every medium-skilled job and eight for every high-skilled vacancy. The CIPD’s quarterly Labour Market Survey of employers, carried out in association with the Adecco Group, said the workforce had been boosted by more workers from other EU countries, as well as by older workers and former welfare claimants.

Beaufort’s Franklin Expects Markets to Move a Bit Lower – Mike Franklin on Bloomberg’s “Daybreak: Europe”

Michael Franklin, chief investment strategist at Beaufort Securities, discusses the tensions between North Korea and the U.S. and how it is impacting markets. He speaks on “Bloomberg Daybreak: Europe.” (Source: Bloomberg)

Wall Street lower on US-North Korea tensions

US stocks saw their largest losses since May on Thursday, as tensions mounted between North Korea and the US. Pyongyang, which has threatened to fire missiles toward the US Pacific island territory of Guam, gave more details of its plans. Meanwhile, President Donald Trump intensified his rhetoric, saying North Korea should be “very, very nervous” if it does anything to the US. Markets had been bracing for a correction after weeks of trading in record territory, as strong corporate earnings fuelled optimism. The sell-off on Thursday in the US was widespread, with the financial and consumer sectors leading the share price declines. Investors bought up safe-haven assets such as gold, helping the precious metal touch a two-month high, and the Japanese Yen rose. But Thursday’s decline fell short of the drops seen on 17 May, when political outcry mounted over Mr Trump’s dismissal of FBI director James Comey, who was investigating ties between the Trump campaign and Russia.

Forward Diary: 14th – 18th August

Company and economic announcements planned for the week commencing 14th August 2017

North Korea Guam missile strike plan ‘ready by mid-August’

North Korea says its plan to fire four missiles near the US territory of Guam will soon be ready, as a war of words with Washington intensifies. State media said Hwasong-12 rockets would pass over Japan and land in the sea about 30km (17 miles) from Guam, if the plan was approved by Kim Jong-un. It denounced Donald Trump’s warnings of “fire and fury” and said the US leader was “bereft of reason”. The US has warned the North its actions could mean the “end of its regime”. US Defence Secretary Jim Mattis said Pyongyang would be “grossly overmatched” in any war against the US and its allies. The BBC’s Rupert Wingfield-Hayes, who is in Guam, says there is a sense that the North Korean threat is rhetorical, as most people feel that if they really did strike with missiles it would be suicidal for the North Korean regime.

North Korea says considering missile strike on Guam

North Korea has said it is considering carrying out missile strikes on the US Pacific territory of Guam. The report in state media, quoting an earlier military statement, came hours after President Donald Trump threatened North Korea with “fire and fury”. The North’s official news agency said it was considering a plan to fire medium-to-long-range rockets at Guam, where US strategic bombers are based. The exchanges mark a sharp rise in rhetoric between the two countries. The UN recently approved further economic sanctions on North Korea, which Pyongyang said were a “violent violation of our sovereignty”, warning the US would “pay a price”.

Firms face £17m fine if they fail to protect against hackers

Firms could face fines of up to £17m or 4% of global turnover if they fail to protect themselves from cyber-attacks, the government has warned. The crackdown is aimed at making sure essential services such as water, energy, transport and health firms are safeguarded against hacking attempts. Firms will also be required to show they have a strategy to cover power failures and environmental disasters. Digital Minister Matt Hancock said any fines would be a last resort. They would not apply to firms which had put safeguards in place but still suffered an attack, the Department for Digital, Culture, Media and Sport (DCMS) said.

Google employee anti-diversity memo causes row

A Google employee’s opinion criticising the firm’s diversity initiatives is causing a furore at the firm. In an internal memo, a male software engineer argued the lack of women in top tech jobs was due to biological differences between men and women. “We need to stop assuming that gender gaps imply sexism,” he wrote in the piece which was widely criticised. But the author said he had received “many personal messages from fellow Googlers expressing their gratitude”. Posted on an internal discussion board, the article was published in full by tech website Gizmodo. It argues that “the abilities of men and women differ in part due to biological causes and that these differences may explain why we don’t see equal representation of women in tech and leadership”. The unnamed author says women generally “prefer jobs in social or artistic areas” while “more men may like coding”.

Business group urges Brexit transition deal

One of the UK’s biggest business lobby groups has urged the cabinet to stop “dancing around the edges” of Brexit. The Institute of Directors (IoD) called on the cabinet to come up with a “transitional agreement” to smooth the move to Brexit. It wants it to bridge the “the Brexit Gap” between leaving the EU and setting up new trading arrangements. It warned that without agreement, business faces “short-term chaotic cliff edges”. The group criticised the cabinet for engaging in what it called “a range of speculative arguments over transition”. In recent weeks cabinet members have given opposing views on how long a transition period would last and what it would involve. The IoD report Bridging the Brexit Gap: Options for Transition said: “Instead of dancing around the edges, this issue must become a policy discussion for the cabinet. “This could minimise the growing level of confusion and uncertainty in this area.” However, Gerard Lyons, an economist and leading figure in the Economists for Brexit group this week described concern about a “cliff-edge” Brexit as “alarmist talk” similar to the fear of the Y2K bug threat to computers at the turn of the millennium.

Forward Diary: 7th – 11th August

Company and economic announcements planned for the week commencing 7th August 2017

Bosses’ fall in pay ‘limited and late’

Top chief executives’ pay has fallen in the past year, but there is still “a huge gap” between them and the rest of their staff, a report has said. The bosses of FTSE 100 companies now make on average £4.5m a year, down 17% from £5.4m in 2015, according to the High Pay Centre’s research. The think tank said the fall was welcome but “limited and very late”. It would take the average UK full-time worker on a salary of £28,000 160 years to earn the same amount, it added. Stefan Stern, director of the High Pay Centre, said: “We have finally seen a fall in executive pay this year, in the context of political pressure and in the spotlight of hostile public opinion.” However, he added it was “so far, a one-off”. “We need to see continued efforts to restrain and reverse excess at the top.” The report said the pay ratio between FTSE 100 bosses and the average pay package of their employees had also fallen to 129:1 – meaning that for every £1 the average employee is paid, their chief executive gets £129. In 2015 the ratio was 148:1.

Apple sales boosted by apps and music

Technology giant Apple said newer lines of business such as Apple Pay, the App Store and Apple Music helped to drive growth in its third quarter. The services unit was what one analyst described as a “shining light” during a period with robust sales across Apple’s different product lines, including iPhones and iPads. Apple said quarterly revenues grew by 7% year-on-year to $45.4bn (£34.4bn). The news sent its stock surging more than 5% in after-hours trade. Apple, which also forecast strong sales, is expected to release new and updated iPhones next month. Apple chief executive Tim Cook was tight-lipped when it came to details on the new launch and said reports about the new phones may have caused some people to “pause” their purchases of the existing phones. But “while that affects us in the short-term, it probably bodes well”, he added. Even with some people waiting for the new models, Apple said the number of iPhones sold in the quarter increased a solid 2% year-on-year, driven by strong demand in markets such as Latin America and the Middle East. The growth lifted revenue from iPhones, which account for the bulk of the company’s sales, by 3% to $24.8bn. Apple also said the number of iPads sold climbed 28% year-on-year, while revenues from the product increased 2%. The rise follows the introduction of new models, as well as increased efforts to incorporate the tablets into operations at schools and in businesses. Revenue from other devices, such as the Apple Watch, Apple TV and Beats products, jumped 23% year-on-year.

Bank of England urged to share Brexit plan details

The Bank of England has been urged to share details of how prepared banks and insurance firms are for Brexit. Newly-appointed Treasury select committee chairwoman Nicky Morgan demanded the information, in one of her first moves since taking on the role. In a letter to the bank’s Prudential Regulatory Authority, she asked for the key risks of a “no deal” scenario. Sam Woods, the head of the body, which regulates banks and insurers, has been asked to reply by 2 August. “The cliff edge facing businesses in April 2019 is a cause for concern, particularly in the financial services sector,” Ms Morgan said, commenting on the letter. In April, the PRA asked all the firms it regulated for a summary of their contingency plans for the UK’s exit from the EU. The firms had until 14 July to respond.

HSBC sees half-year profits rise by 5%

HSBC has reported a 5% rise in profits in the first half of 2017. Europe’s biggest bank reported a pre-tax profit of $10.2bn (£7.8bn) for the first six months, up by about $500m. As widely expected, the bank has also announced a share buyback of up to $2bn which it expects to complete by the end of 2017. HSBC’s share price has rallied in the past year, helped by the weak pound which makes profits earned abroad more valuable when repatriated to the UK. Since the 2008 financial crisis, HSBC has been cutting jobs and selling assets to make the group more profitable while still making dividend payments to shareholders. “In the past 12 months we have paid more in dividends than any other European or American bank and returned $3.5bn to shareholders through share buy-backs,” HSBC’s chief executive Stuart Gulliver said. The bank has used share buybacks to offset the impact of shares being paid out as dividends. The announcement takes the total of HSBC share buybacks since the second half of 2016 to $5.5bn. Over the past year, HSBC’s share price has risen from less than 500p to 743p. “Like many of the other banks, HSBC has beaten modest expectations,” said Peter Hahn, of the London Institute of Banking and Finance. HSBC said it had spent about $500m on splitting its retail from its investment banking arm, which it described as “one of the largest projects ever undertaken by the group”. The bank’s new Birmingham headquarters for its UK retail business will begin operating in July 2018. “The ring-fence is a big expense creating lots of uncertainty,” said Mr Hahn. “It’s not just the headquarters, it’s separating lots of the systems in the bank.”

Air France-KLM is buying 31% of Virgin Atlantic

Air France-KLM is buying almost a third of Virgin Atlantic, leaving Sir Richard Branson’s parent company, Virgin Group, with a minority stake in the airline he founded. Air France-KLM is taking a 31% stake, worth £220m, in Virgin Atlantic as part of a four-way joint-venture with US partner Delta. Virgin Group’s share will fall from 51% to 20%, while Delta will retain 49%. Sir Richard said he would remain “very much involved” after the deal. He said in an open letter that the new joint-venture would be “extremely beneficial” to the airline, customers and the brand, and recalled key moments in Virgin Atlantic’s history, striking a valedictory tone. Jean-Marc Janaillac, chief executive of Air France-KLM, said the deal would give customers “even more choice between Europe, UK and the United States via twelve hubs on both sides of the Atlantic”.

Forward Diary: 31st July – 4th August

Company and economic announcements planned for the week commencing 31st July 2017

Car production falls almost 14% as UK sales dip

UK car production fell by 13.7% in June compared to a year earlier – the third month in a row that output has fallen. The Society of Motor Manufacturers and Traders (SMMT) said the UK market was cooling in line with forecasts, following a long period of record growth. The industry is likely to fall short of its ambition to produce more than two million cars a year by 2020, it said. The SMMT said uncertainty over Brexit was an added cause for concern. But a spokesperson for the Department for Exiting the European Union said the government was determined that the UK would continue to be “one of the most competitive locations in the world” for automotive manufacturing. The fall in production mirrored a decline in UK car sales. Over the first six months of this year, sales were distorted by a rise in Vehicle Excise Duty in April, which prompted drivers to bring forward purchases of new cars. But comparing the first six months of 2017 with the equivalent period in 2016 still showed a fall of 9.5% in UK sales, the SMMT said.

New diesel and petrol cars face 2040 ban

New diesel and petrol cars and vans will be banned in the UK from 2040 in a bid to tackle air pollution, the government is set to announce. Ministers will also unveil a £255m fund to help councils tackle emissions from diesel vehicles, as part of a £3bn package of spending on air quality. The government will later publish its clean air strategy, favouring electric cars, before a High Court deadline. Campaigners said the measures were promising, but more detail was needed. They had wanted government-funded and mandated clean air zones, with charges for the most-polluting vehicles to enter areas with high pollution, included in the plans. After a protracted legal battle, the government was ordered by the courts to produce new plans to tackle illegal levels of harmful pollutant nitrogen dioxide. Judges agreed with environmental campaigners that previous plans were insufficient to meet EU pollution limits. Ministers had to set out their draft clean air strategy plans in May, with the final measures due by 31 July.

Rise in personal loans dangerous, Bank of England official says

A sharp rise in personal loans could pose a danger to the UK economy, a Bank of England official has warned. Outstanding car loans, credit card balance transfers and personal loans have increased by 10% over the past year, the Bank’s financial stability director Alex Brazier said. In contrast household incomes have risen by just 1.5%, he said. “Household debt – like most things that are good in moderation – can be dangerous in excess”, Mr Brazier said. Mr Brazier, in a speech to the University of Liverpool’s Institute for Risk and Uncertainty, added that this increase in debt was “dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy”. He warned that High Street banks were at risk of entering “a spiral of complacency” about mounting consumer debt levels. “Lending standards can go from responsible to reckless very quickly. “The sorry fact is that as lenders think the risks they face are falling, the risks they – and the wider economy face – are actually growing,” Mr Brazier added. Mr Brazier hinted that the Bank of England could force banks to take further safeguards against the risk of bad debts if it was deemed necessary.

IMF downgrades US and UK growth

The UK and US economies will expand more slowly in 2017 than previously predicted, according to the International Monetary Fund (IMF). It said “weaker-than-expected activity” in the first three months of the year meant the UK would grow by 1.7%, compared with an earlier 2% forecast. And the IMF revised down its US outlook from 2.3% to 2.1%. However, its overall global economic predictions – of 3.5% growth in 2017 and 3.6% in 2018 – remain unchanged. Meanwhile the outlook for several eurozone economies is brighter than initially thought, with countries including France, Germany, Italy and Spain seeing growth forecasts revised up. In its latest World Economic Outlook, the IMF said the “pick-up in global growth” that it had anticipated in its previous survey in April remained “on track”. But it added that while the global growth projection was unchanged that masked “somewhat different contributions at the country level”.

UK air traffic controllers warn of over-crowded skies

Air traffic controllers are warning that UK skies are running out of room for record numbers of planes. Friday is likely to be the busiest day of the year, with air traffic controllers expecting to handle more than 8,800 flights – a record number. They have called for a drastic modernisation in the way aircraft are guided across UK airspace. It comes as the government launches a discussion to shape the UK’s aviation industry for the next 30 years. Air traffic controllers expect to manage a record 770,000 flights in UK airspace over the summer – 40,000 more than last year. But the ability of the the UK’s National Air Traffic Control Service (Nats) to deal with this surge is being stretched to the limit, it is claimed.

Forward Diary: 24th – 28th July 2017

Company and economic announcements planned for the week commencing 24th July 2017

One-third of card payments contactless

More than a third of all card payments are now contactless, according to new figures which also show a jump in pest control purchases. Trade association UK Finance said 33% of all spending on plastic was settled with a tap instead of a swipe in May. This is a rise from 18% in the same month last year. It also said that shopping on cards were strong at “pest control merchants”, followed by chemists. There was a particular rise in travel-related purchases, such as foreign currency exchanges and airport terminals. A total of £4.5bn was spent through contactless payments in May, out of £57.2bn on credit and debit cards. Compared with last May, people spent more on debit cards at £40.6bn, up from £37.9bn the year before. Credit card purchases increased to £16.6bn from £15.2bn.