48 hours and counting…

Inevitably, Monday’s electioneering clashes between Labour and the Conservatives pivoted around national security and the terrorist threat. A call from Mr Corbyn for Mrs May to resign on her record as Home Office Secretary in reducing police numbers needed to be countered by Mr Corbyn’s own parliamentary history of voting against anti-terrorist measures. While elections tend to generate a lot of heat, rarely is enough light emitted for voters or the markets to make a seriously-informed judgement. According to the Daily Telegraph’s ‘rolling average of eight polls’, the proportion of votes for the Tory and Labour parties have been converging since the 21st April with the gap now standing at 7 points overall – Conservatives 43.4% and Labour on 36.5%. For those inclined to ignore the polls, betting odds continue to point to the Conservatives being returned with a majority but it must be remembered that the odds are a function of betting activity which may not necessarily prove to be correct. Something that is adding piquancy to this particular election, apart from the high number of marginal constituencies being contested, is the effect of the Brexit vote where voters may decide to switch from normal allegiances to whichever party they feel will best protect their interests in dealing with the European Union. It is against this background that Sterling moved marginally higher to the $1.29 level and the FTSE 100 eased…

US interest rate prospects moderating

The big news from the US on Friday was the large drop in the May Non-farm payroll number to a gain of just 138,000 against the widely-expected 185,000. At 4.3%, the unemployment rate hit a 16-year low but the underlying message was of a slowing economy. Consequently, the outlook for the trend in future interest rates has turned softer. However, despite this dip towards a more typical jobs growth rate, it is still widely expected that at the US Federal Reserve’s next FOMC meeting on the 14th June will produce another 25-basis point rise. A question mark is raised though over the outlook for the rest of the year, particularly September, for any other rate rises. Inevitably, the US bond market yields eased in line with the implied lower rate trajectory while the Dollar also lost ground.

Now it’s for real

With just a week to go to Polling Day, another YouGov poll has indicated a further erosion of the Conservatives’ lead over Labour to just 3 points. Just for good measure, other polls are giving the Tory Party a moderately comfortable win. Where does the truth lie and can the polls, misleading in the past, be expected to be any more accurate this time ? The bookmakers’ betting odds still point to a Conservative win but the much lower odds being offered on the Conservatives compared to the Labour Party has, unsurprisingly, made a hedge bet for Labour a much more active option.

Forward Diary: 5th – 9th June 2017

Company and economic announcements planned for the week commencing 5th June 2017

Polls driving Sterling driving the FTSE-100

The revelation of a new-style YouGov poll on Wednesday shattered any complacency about the likely outcome of next week’s election. Having inherited a Conservative majority in the last General Election courtesy of David Cameron, Theresa May appears to have risked it all for nothing with the poll suggesting a possible loss of 20 seats to 310 seats (out of 650), resulting in a hung parliament.

Sterling dips on new UK election poll

The value of the pound dropped after a projection suggested the Conservatives could fail to win an outright majority in the election on 8 June. Previous opinion polls suggested Prime Minister Theresa May’s party would increase its majority, which is currently 17 seats. But the projection, published in the Times and based on YouGov research, suggests a possible hung parliament. Sterling fell by more than half of one per cent, but recovered some losses. By early Wednesday morning, it was trading 0.44% lower against the dollar at $1.28020 and 0.29% lower against the euro at 1.14600 euros.

Ryanair expects lower fares but reports record profits

Ryanair (RYA.L) expects its fares will fall further this year, although the drop will be less steep than in 2016. The airline said fares would fall by between 5% and 7% in the year to the end of March 2018, down from a fall of 13% in the past financial year. Europe’s largest carrier by passenger numbers also reported a record annual net profit of 1.316bn euros, up 6%. But the carrier warned that Brexit and the risk of terror attacks in Europe remained a threat to its business.

OPEC and Non-OPEC nations agree extension but not deeper cuts

An extension for a further nine months of the 1.8 million barrels per day reduction in output agreed last year is the result of the latest meeting. Global oil stock levels have remained high despite these efforts and on the back of sustained growth in US shale production. After a day of swings, the price of Brent crude has slipped to the $51 pb. Level. As usual, part of the challenge for the success of these arrangements is a genuine attempt by nations to exercise self-discipline. Apart from President’s pledge to reduce US inventories, OPEC is expected to reduce the total volume of oil it ships to the US.

Forward Diary: 29th May – 2nd June 2017

Company and economic announcements planned for the week commencing 29th May 2017

White House denies ‘egregious’ budget accounting error

The White House has denied the president’s budget proposal contains an “egregious” maths error. Former US Treasury Secretary Larry Summers pointed out the spending plan double-counts $2tr (£1.5tr). But White House budget director Mick Mulvaney told reporters: “We stand by the numbers.” Unveiled on Tuesday, the budget proposes deep cuts to welfare programmes. Mr Summers, also formerly chief economist of the World Bank, was one of the first to spot the apparent mistake.

Moody’s downgrades China’s credit rating

China has received a downgrade on its credit score, on worries about the future state of the economy. Moody’s Investors Services brought down China’s long-term local currency and foreign currency issuer ratings by one notch to A1 from Aa3. But China’s finance ministry said Moody’s was exaggerating the mainland’s economic difficulties and underestimating reform efforts. The downgrade could raise the cost of borrowing for the Chinese government. The ratings agency also changed its outlook for China to stable from negative. Moody’s said in a statement that the downgrade reflected expectations that China’s financial strength would “erode somewhat over the coming years, with the economy-wide debt continuing to rise as potential growth slows”. The Chinese economy expanded by 6.7% in 2016 compared with 6.9% the previous year, the slowest growth since 1990.

Manchester Arena blast: 22 dead and 59 hurt

Twenty-two people, including children, are now known to have been killed and 59 injured in a suspected terror attack at Manchester Arena. The blast happened at 22:35 BST on Monday following a pop concert by the US singer Ariana Grande. Greater Manchester Police said the lone male attacker, who died in the blast, was carrying an improvised explosive device which he detonated. Relatives are using social media to hunt for missing loved ones. Home Secretary Amber Rudd said it was “a barbaric attack, deliberately targeting some of the most vulnerable”.

Ex-RBS boss Fred Goodwin under scrutiny in court hearing

Former Royal Bank of Scotland boss Fred Goodwin is set to come under scrutiny in court for the first time since the bank’s near-collapse in 2008. Some 9,000 people who lost money on shares are demanding £520m in compensation from the bank and four former directors, including Mr Goodwin. They say they were misled over the bank’s financial health in the run up to its £45bn government bailout. The bank and former directors deny any wrongdoing. Mr Goodwin, who was stripped of his knighthood in 2012, oversaw the multi-billion-pound deal to buy Dutch rival ABN Amro at the height of the financial crisis in 2007, which led to the RBS bailout. The case at London’s High Court is expected to last 14 weeks and centres on the rights issue aimed at funding the deal which asked existing shareholders to pump £12bn into the bank in exchange for discounted extra shares.

Brazil’s stock market plunges after corruption claims

Brazil’s Bovespa stock market was briefly halted as investors reacted to corruption allegations against Brazilian President Michel Temer. Stocks plunged more than 10% at the start of trading, prompting circuit breakers to kick in and halt dealings. President Temer was forced to deny a newspaper report that he had given consent to paying off a witness in a huge corruption scandal. The Supreme Court has authorised an investigation into the allegations. On Thursday Mr Temer said in a TV statement: “I never authorised any payments for someone to be silent. I did not buy anyone’s silence. I fear no accusations.” “I have nothing to hide. I never authorised anyone to use my name” “We cannot throw so much hard work [on reforms] done for our country in the rubbish bin.” “I will not resign. I will not resign. I know what I have done.” Investors are concerned that Mr Temer’s reform plans could be derailed. The Ibovespa index closed more than 8.8% down at 61,575 points. Mr Temer is trying to get pension reforms through Congress that would mean men would have a minimum retirement age of 65, and women 62, and most people would contribute more. There is currently no minimum retirement age. There are also labour reforms on the cards to weaken trade union bargaining powers and make hiring and firing workers easier.

Forward Diary: 22nd – 26th May 2017

Company and economic announcements planned for the week commencing 22nd May 2017

Greeks walk out in general strike over cuts

Hospitals, transport services and government offices across Greece have been severely affected by a general strike over new austerity measures. Industrial action began on Tuesday but was ramped up nationally by members of the big trade unions. Thousands of people stopped work on Wednesday and marched through Athens to demonstrate over the measures being demanded by international lenders. There were isolated clashes, but the most of the protest were peaceful. Elsewhere in the country ferry services stopped and buses and trains were limited. Flights were also hit for several hours by the strike.

Share sale returns Lloyds to private sector

The government has confirmed its remaining shares in Lloyds Banking Group (LLOY.L) have been sold, eight years after pumping in £20bn to save it. Lloyds Bank said the government will see a return of £21.2bn on its investment. At the height of the financial crisis taxpayers owned 43% of Lloyds. Its return to the private sector is in stark contrast with the other bailed-out bank – Royal Bank of Scotland – that is still 73% owned by taxpayers. The government has been slowly selling down its stake in Lloyds for the past five years. Ministers have claimed that all the public money used to buy Lloyds shares has been returned.

Labour ‘plans water industry nationalisation’

Labour would nationalise the multi-billion pound water industry if elected. Under proposals to be outlined in its manifesto on Tuesday, Labour would create nine new public bodies to run the water and sewage system in England. By ending the practice of paying dividends to shareholders, party sources say bills would be reduced by around £100 a year per household. Labour will also promise 30 hours free childcare for two to four-year-olds. Jeremy Corbyn will unveil a “radical and responsible” plan for government, pledging to change the country and govern “for the many not the few”. He will vow to reverse the austerity of recent years but also to “manage within our means”. A draft version of the document, which was leaked last week, committed a future Labour government to taking the railways and the Royal Mail back into public ownership while also nationalising the electricity distribution and transmission networks. Labour’s plans would also see the water industry, which was sold off by the government of Margaret Thatcher in 1989, return to public hands. If elected on 8 June, it would create nine new public bodies to run the water and sewage system in England and Wales, that would be publicly accountable, retaining the existing workforce.

Microsoft: Cyber-attack a ‘wake-up call’

A cyber-attack that has hit 150 countries since Friday should be treated by governments around the world as a “wake-up call”, Microsoft says. It blamed governments for storing data on software vulnerabilities which could then be accessed by hackers. It says the latest virus exploits a flaw in Microsoft Windows identified by, and stolen from, US intelligence. There are fears of more “ransomware” attacks as people begin work on Monday, although few have been reported so far. Many firms have had experts working over the weekend to prevent new infections. The virus took control of users’ files and demanded $300 (£230) payments to restore access. The spread of the virus slowed over the weekend but the respite might only be brief, experts have said. More than 200,000 computers have been affected so far.

UK virtual reality firm Improbable raises $500m

A London-based virtual reality firm has raised $500m (£388m) in one of the biggest investments in an early stage European technology business. Japan’s Softbank is backing Improbable in a funding round that values the business at more than $1bn. The deal is further evidence that the UK’s technology sector can now compete with the best. There may also be relief that despite the cash injection from Japan, Improbable will stay independent. Improbable was founded just five years ago by Herman Narula and Rob Whitehead, who had studied computer science together at Cambridge University. Their aim was to build large-scale virtual worlds and simulations – mainly for games developers but also for other clients who could use them in applications such as modelling transport systems. The company believes it has developed revolutionary technology with its Spatial OS operating system, which it has opened up to other developers. It has partnered with Google to put its system on the search giant’s cloud, allowing small developers to create massive simulations without much infrastructure of their own.

Forward Diary: 15th – 19th May 2017

Company and economic announcements planned for the week commencing 15th May 2017

Snap shares slide as growth slows

Shares in Snapchat’s owner have sunk after it reported disappointing growth in the first three months of the year. In its first results since floating, Snap said the number of daily active users rose just 5% to 166 million compared with the last three months of 2016. That was two million fewer than expected, but 36% higher than the same period last year. The news sent shares tumbling more than 20% in after-hours trading in New York. Snap’s adjusted loss of $188.2m was about $10m higher than analysts had expected, while the net loss soared to $2.2bn from $104.6m due to costs associated with the IPO earlier this year. Revenue rose 286% for the quarter to almost $150m, but was also short of forecasts by about $9m.

Beaufort named as one of this year’s ‘1,000 Companies to Inspire Britain’ by the London Stock Exchange

1,000 Companies to Inspire Britain is an annual celebration of some of the fastest-growing and most dynamic small and medium-sized enterprises (SMEs) in the UK. As well as identifying 1,000 companies, the annual report examines in detail the opportunities and challenges facing SMEs and looks at the sectors and trends that will shape the future of the UK economy.

Investors ‘need bigger say in exec pay’

Investors should be given a bigger say over executive pay to help rebuild trust in business, the Institute of Directors (IoD) has said. The IoD is calling for pay strategies to be rethought, if they are rejected by 30% of shareholders. Remuneration should then be put to a fresh vote, it said. Despite some high profile rebellions in recent months, executive pay is usually approved at annual general meetings, the IoD added. “There is still a pressing need to rebuild public trust in big business, to work in the long-term interests of investors and employees, rather than the short-term interests of managers,” said Oliver Parry, head of corporate governance at the IoD. “Now is the time for sensible reforms which increase transparency and draw more engagement from shareholders.” At present, shareholders have a binding vote on future remuneration policy once every three years. If the policy is rejected by 51% of shareholders, it must be revisited. The IoD is arguing that threshold should be lowered to 30%.

UK house prices in first quarterly fall since 2012

UK house prices are “stagnating” and have actually fallen in the last three months, according to the Halifax. In the three months to April, prices fell by 0.2% – the first quarterly fall since November 2012. Over the past month alone, prices fell by 0.1%, the Halifax said. However, for the year to April, prices rose by 3.8%, the same figure as in March. It leaves the average cost of a house or flat at £219,649. Martin Ellis, Halifax housing economist, said one reason why prices were slowing was that property had become too expensive for many people. “Housing demand appears to have been curbed in recent months due to the deterioration in housing affordability caused by a sustained period of rapid house price growth during 2014-16,” he said. Last week rival lender Nationwide said house prices were growing at 2.6% annually – their lowest rate for four years.

Euro strengthens as ‘pro-business’ Macron wins French presidency

The euro has risen after pro-EU Emmanuel Macron won France’s presidential vote by a large margin. The single currency strengthened 0.2% against the dollar as investors were reassured over the future stability of the European project. The reaction was muted, however, as investors were expecting Mr Macron, a former investment banker and an economic liberal, to prevail. He has proposed cutting corporation tax and changes to the labour market. “Voters elected for Emmanuel Macron’s pro-business policy proposals, which have the potential to unlock long-held-back investment and stimulate French markets,” said Stephen Mitchell at London-based fund manager, Jupiter Asset Management. His opponent in the race for the presidency, Marine Le Pen, is a critic of globalisation and had proposed withdrawing France from the single currency.

Goldman Sachs boss: City ‘will stall’ over Brexit risk

The chief executive of the world’s second largest investment bank has warned that London “will stall” because of the risks from the Brexit process. Lloyd Blankfein said that his firm, Goldman Sachs, which employs 6,500 people in the UK, had “contingency plans” to move people depending on the outcome of the negotiations. Mr Blankfein said he hoped the bank would not have to trigger the plans. He wants to keep as much of its activities in the UK as possible.

Forward Diary: 8th – 12th May 2017

Company and economic announcements planned for the week commencing 8th May 2017

HSBC profits fall as bank bids to restore flagging revenues

Bank giant HSBC has reported a 19% fall in profits for the first three months of 2017 as it bids to restore flagging revenues after a restructuring. But the fall in profits to $5bn (£3.9bn) beat analysts’ forecasts, and HSBC’s shares rose 1.5% in Hong Kong. The lower profits were due mainly to accounting changes, while the results last year included proceeds from the sale of its Brazilian business. Chief executive Stuart Gulliver called the figures a “good set of results”. Revenues for quarter rose to $12.84bn from $12.57bn, while adjusted pre-tax profit – which excludes one-off items – rose to $5.94bn from $5.3bn a year earlier. The figures are the first since Europe’s largest bank announced the appointment of a new chairman in March. The move was part of a management overhaul that will also see HSBC choose a new chief executive. Following a big drop in profits in 2015, HSBC embarked on a restructuring that led to thousands of job cuts, branch closures, asset sales, and a bigger focus on Asia.

Apple sees surprise fall in iPhone sales

Apple sold fewer iPhones than a year ago in the first three months of 2017, the company said in its latest results. The California firm, which is due to release a new phone later this year, said it sold 50.8 million iPhones in the period, down 1% year-on-year. Apple boss Tim Cook blamed a “pause” as customers wait for the next iPhone. Shares in the firm fell nearly 2% in after-hours trading after earlier hitting a record high on expectations of better results. Apple reported a 4.6% rise in revenue across the whole company to $52.9bn (£41bn), slightly below analysts’ forecasts. The dip in iPhone sales was offset by services, including Apple Pay, iCloud and the App store, which recorded an 18% increase in sales to $7bn. Mr Cook also pointed to growth in sales of Apple Watch, as well as its AirPods and Beats earphones. Despite falling unit sales, revenue from iPhones still climbed 1% to $33.2bn due to “robust” sales of its bigger, more expensive iPhone 7 Plus.