Archive forAugust, 2017

Forward Diary: 4th – 8th September

Company and economic announcements planned for the week commencing 4th September 2017

Royal Mail leaves the FTSE-100 in quarterly shake-up

The FTSE-100 closed higher on Wednesday, but Royal Mail (RMG.L) is set to leave the ranks of the blue chip index. The blue chip index finished up 27.83 points at 7,365.26. In FTSE Russell’s quarterly review of its constituents, Royal Mail will be relegated to the FTSE-250 alongside troubled doorstep lender Provident Financial. The postal service has been a FTSE-100 company since shortly after being privatised in 2013. On Wednesday, Royal Mail’s shares closed at 390.5p, giving the postal service a market capitalisation of £4bn. A company’s place in the FTSE 100 or FTSE-250 is determined by its market capitalisation at the close of trading on the day of the review.

Citizens Advice wants ban on unsolicited credit limit rises

One in five people struggling with debts has seen their credit card limit automatically increased – a higher proportion than for cardholders in general, a charity has claimed. Citizens Advice said 18% of those struggling financially had seen the limit increased without request, compared with 12% overall. It wants a ban on increases without a cardholder’s explicit consent. The regulator has estimated that 3.3 million people are in persistent debt. In a report published earlier this year, the Financial Conduct Authority (FCA) said that “customers in persistent debt are profitable for credit card firms, who do not routinely intervene to help them”.

UK companies must publish pay ratios under new law

Companies will have to reveal how much more their chief executives are paid compared with the average employee, under a package of government reforms. Measures aimed at increasing boardroom transparency in publicly listed companies will be unveiled later. Firms who face significant shareholder opposition to executive pay deals will be named and shamed on a new register. Business Secretary Greg Clark says the plans will make a difference, but unions attacked them as “watered down”. Mr Clark, who will unveil the measures later, said the changes would make companies “more accountable to their employees and shareholders.” The new corporate governance laws, which are due to come into effect by June 2018, will force some 900 publicly listed companies to reveal the pay ratio between bosses and workers. The Conservatives had promised in their manifesto that executive pay should be approved by an annual vote of shareholders. However, the new measures instead propose that those public companies who face a shareholder revolt on pay, where 20% or more of investors vote against executives’ remuneration, will be named on a register overseen by the Investment Association.

Provident Financial appoints new boss to home credit arm

Troubled doorstep lender Provident Financial (PFG.L) has made a management change at its consumer credit division. The firm lost two-thirds of its share value on Tuesday after it issued its second profit warning in three months. Chris Gillespie has been appointed managing director of the home credit business, replacing Andy Parkinson. His task is to re-establish relationships with customers, bring collections back to a normal level and stabilise the operation of the company. The FTSE-100 company expects to make losses of £80m to £120m after its debt collection rates fell to 57%, compared with a 90% rate in 2016. Bradford-based Provident recently changed the way it collected its loans, replacing self-employed agents with “customer experience managers”. Chief executive Peter Crook resigned earlier this week. Manjit Wolstenholme, Provident Financial executive chair, said she was seeking to “turn the home credit business around and to putting a plan in place to deliver good results for the company”. The company has some 2.5 million customers, many of whom would not qualify for a standard bank loan and are therefore categorised as “sub-prime”.

Forward Diary: 28th August – 1st September

Company and economic announcements planned for the week commencing 28th August 2017

Food industry warns of Brexit workforce shortage

The UK food industry has warned that a Brexit workforce shortage could leave a third of its businesses unviable. The Food and Drink Federation said: “Our sector faces a rapidly approaching workforce shortage and skills gap.” In its survey of the “farm-to-fork” supply chain, almost half of all businesses surveyed said EU nationals working in the UK were considering leaving. It said that 31% of them have already seen EU workers leave the country. The federation is calling on the UK government to guarantee the rights of nationals from across the European Economic Area. Ian Wright, its director-general, said: “It is only a matter of time before the uncertainty reported by businesses results in an irreversible exit of EU workers from these shores. “Without our dedicated and valued workforce we would be unable to feed the nation.” In April a report by the Commons Environment Food and Rural Affairs Committee said: “Evidence… suggests the current problem is in danger of becoming a crisis if urgent measures are not taken to fill the gaps in labour supply.”

Feeling squeezed? You may be imagining it

Household bills are rising more slowly than the rate of inflation, new research has found. The figures suggested that the “cost of living squeeze” may be less severe than previously thought. Research by MoneySavingExpert, based on official data, revealed the rise in the total cost of household bills was less than the inflation rate. It found costs including rent, energy bills, council tax and insurance have risen by 2.1% in the past year. That rise is in line with average earnings growth and lower than the 2.6% rise in the Consumer Prices Index (CPI) in July. CPIH, a measure of inflation that includes housing costs and council tax, also rose by 2.6% over the period. Although the numbers show only a small increase across household running costs as whole, they also revealed large price hikes for electricity and insurance in particular. The cost of insurance rose by 7.6% over the year, including a 12% jump in car insurance premiums. Energy bills went up 5.1%, including a 9% increase for electricity. The data was compiled before British Gas announced a 12.5% price hike on 1 August. Council tax rose by an average of 3.8%, the data showed, while rents went up by 1%. However, some other bills may have fallen over the last year, with a modest 1.2% fall for mobile phone bills and a 1% decline for other financial services. MoneySavingExpert managing director Guy Anker said consumers could save considerable amounts by switching providers. Household bills inflation over the last 12 months peaked in February at 3.2%, but has been falling since then.

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.