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| Friday December 9 2016 |
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By Richard Fletcher
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Markets snap: The Nikkei closed up 1.23 per cent this morning at 18,996.37 having briefly topped the 19,000 level earlier in the session for the first time in a year. The FTSE 100, which closed at 6,931.55 yesterday, is forecast to open 4 points higher when trading begins shortly. At 6.52am Brent crude was trading at $54.08 a barrel and the pound was trading at $1.258 against the dollar and at €1.185 against the euro. For the latest on the markets follow me on on Twitter: @fletcherr.
Good morning: It has been a busy week for the mandarins at the Financial Conduct Authority. Having started the week wiping hundreds of millions of pounds off the value of spread-betting firms with the announcement of a (long-overdue) crackdown, they have ended it by bursting the crowdfunding bubble. After a public consultation the regulator has announced this morning that it believes that the rules for regulating the fast-growing crowdfunding sector need updating because it is hard for investors to compare services. “The FCA believes it is appropriate to modify a number of rules for the market,” the watchdog said in a statement. We will have a story shortly at thetimes.co.uk/business.
Has the fall in the pound boosted exports? On the economics front we get trade deficit data for October from the Office for National Statistics at 9.30am today.
In September Britain’s trade deficit with the rest of the world widened unexpectedly to £12.7 billion over the month. According to a poll by Reuters economists expect the headline trade balance to have narrowed to £11.8 billion in October.
Before that we have had the latest economic forecasts from the Institute of Chartered Accountants in England and Wales published overnight. Despite an upgrade in the group’s quarterly forecast for growth to 2 per cent this year and 1.2 per cent next year, the ICAEW strikes a downbeat tone claiming that businesses plan to cut back on investment and wages next year to protect profits after Brexit. Philip Aldrick, our economics editor, has a full report.
Marshalls, the nation’s favourite producer of pavements, has reported a 10 per cent jump in business from households and says that its commercial division is trading broadly in line with last year. In an update covering 11 months of the year it says it is confident of meeting its 2016 expectations and looking ahead expects modest growth.
Please do keep sending me any thoughts or observations about Times business coverage.
Have a great weekend. I’ll be back in your inbox on Monday morning.
Richard
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| Richard Fletcher |
| Business Editor |
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Ten things you need to know
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1 McDonald’s is to move its international headquarters from Luxembourg to Britain, providing a boost to the country’s status as a centre for trading after Brexit. The American fast food chain will use its new base to collect royalties from restaurants outside the United States, and will pay UK tax on profits.
2 Areva, the nuclear group that has designed an £18 billion plant in Somerset, is facing a criminal investigation in Paris on suspicion of endangering life. It is alleged that a factory owned by the group has been falsifying safety tests for decades.
3 The European Central Bank warned of continued political uncertainty as it pledged a further €540 billion of stimulus for the eurozone. Mari Draghi, its president, extended a €1.74 trillion quantitative easing programme to December of next year.
4 A rout in spread-betting firms continued as Germany became the third country within a week to crack down on risky financial products. Shares in CMC Markets, the market leader in Germany for contracts for difference, fell by 9.6 per cent on the London Stock Exchange, extending losses to 43 per cent since Monday.
5 Half a billion pounds was wiped off the value of Capita after the outsourcer issued a second profit warning in less than three months and announced it was selling one of its most profitable divisions.
6 China’s foreign trade figures have confounded expectations as exports from the country grew for the first time in nine months. Imports rose at the fastest pace in more than two years, fuelled by demand for iron ore and coking coal.
7 Sports Direct announced that it had bought a $51.1 million corporate jet on the same day that figures showed profits at the retailer had more than halved. The steep fall in the pound and the corporate governance scandal engulfing the retailer were blamed for the fall in earnings.
8 National Grid has agreed to sell a controlling stake in its 82,000-mile-long gas pipeline network to a group of investors, including China’s sovereign wealth fund. The deal with Mira will net the operator £3.6 billion in cash and a further £1.8 billion in debt financing.
9 The European and US authorities are examining Glencore’s deal with Rosneft for a possible violation of sanctions against Russia, a US official has said. Glencore and Qatar are in advanced talks to buy a €10.2 billion stake in the state-controlled oil producer.
10 Britain’s new Intercity train will roll off the production line at Hitachi rail’s plant in the northeast today, more than a decade after the project was announced. All 122 trains are expected to be in service by 2020, with each one eventually reaching a top speed of 140mph.
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Read the full update
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Editor’s picks
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In recent months the London bubble has started to deflate, Ed Conway writes. Although estate agents are loath to use the word, one can only describe this as a small, contained crash. If the upshot is that thousands of flats suddenly come on to the market at a discount, well, isn’t that just what the property market needs?
It is just odd that Britain is so relaxed about seeing foreign pensioners retire on the healthy proceeds of UK infrastructure investments, while the best our lot can offer is starvation rations from some negative yielding bond, Alistair Osborne argues. The latest case in point? The National Grid’s sale of a controlling stake in its 82,000-mile gas pipeline network to China’s CIC Capital Corporation, Australia’s Macquarie and the Qatar Investment Authority.
Black tie is most commonly associated in 21st-century popular culture with the arch English sophisticate James Bond, Sathnam Sanghera notes. The reality, however, is rather different.
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| Market Snap |
The FTSE 100 added 29.32 points, or 0.42 per cent, to 6,931.55, albeit outpaced by major European indices, which were boosted by the European Central Bank extending its bond-buying stimulus programme. The broader FTSE 250 rose 56.46 points, or 0.32 per cent, to 17,681.99. More on yesterday’s market action here.
On Wall Street, data indicating strength in the US labour market gave the New York indices the impetus to maintain the progress seen since Donald Trump’s election, albeit at a slower rate. The Dow Jones industrial average rose 65.19 points to 19,614.81 and the S&P 500 closed up 4.84 points to 2,246.19.
Sterling was broadly flat last night. Against the US dollar, it was down 0.02 per cent to $1.258. Against the euro, it was down 0.03 per cent to €1.185.
Brent crude rose 1.7 per cent, or 89 cents, to $53.89 per barrel last night, amid growing speculation that a deal might be reached among non-Opec producers to reduce output.
Many of the new generation of Brobdingnagian warehouses next to the motorways of Britain are owned by Tritax Big Box, Tempus notes. This FTSE 250 company is the only property investment trust specialising purely in owning and renting out these unbelievably vast structures, known, aptly, as big boxes. It looks relatively low risk for investors wanting solid inflation-protected ballast. Read on here for more about the Tempus share tips of the day.
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Read the full story
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The day’s front pages
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THE TIMES
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The European Central Bank warned of continued political uncertainty as it pledged a further €540 billion of stimulus for the eurozone yesterday. Markets were expecting action and Mario Draghi, the ECB president, delivered by extending its €1.74 trillion quantitative easing programme from March to December 2017. In a nod to hawks in Germany who object to super-loose monetary policy, however, the monthly rate of bond purchases will be cut from €80 billion to €60 billion from April.
A rout in spread-betting firms continued as Germany became the third country within a week to crack down on risky financial products. The Federal Financial Supervisory Authority followed its regulatory counterparts in Britain and Cyprus by announcing tougher rules on contracts for difference, or CFDs — risky bets on equity and currency markets — for retail customers. Germany, a big market for CFDs, said that it planned to ban the sale, marketing and distribution of them to retail customers exposed to losing more than the value of their account.
Elon Musk has lost a launch order from Britain’s biggest satellite company after a rocket built by SpaceX, his space exploration company, exploded on the launchpad. In a blow to the technology billionaire, Inmarsat said that it would launch its new S-band satellite, which will provide broadband connectivity to air passengers, with France’s Arianespace.
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Read the full update
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THE WALL STREET JOURNAL
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Donald Trump, the US president-elect, owns a helicopter in Scotland. To be more precise, he has a revocable trust that owns 99 per cent of a Delaware limited liability company that owns 99 per cent of another Delaware LLC that owns a Scottish limited company that owns another Scottish company that owns the 26-year-old Sikorsky S-76B helicopter, emblazoned with a red “TRUMP” on the side of its fuselage. Across Mr. Trump’s business, he uses a similar web of privately held LLCs and other entities to house his assets: everything from real estate to a vintage carousel in Manhattan’s Central Park, according to a Wall Street Journal analysis of hundreds of pages of his corporate filings and personal financial disclosures.
Mariano Rajoy, the Spanish prime minister, said European leaders needed to deliver growth and make a better case for the merits of the European Union if they wanted to reverse a tide of populism roiling the continent’s politics. “The most important objective across Europe is to achieve economic growth and employment,” Mr. Rajoy said in an interview, adding that this required the kind of structural overhauls he undertook to pull Spain’s economy out of recession, as well as flexibility over the timing of deficit reduction.
German companies are quietly boosting investments in Russia even as Western leaders are warning Moscow about possible new sanctions for its actions in Syria. In the past two years, plunging oil prices and US and European Union sanctions on Russia for its intervention in Ukraine sent foreign investors fleeing. Now Western firms are placing new bets that Russia, which has been battered by economic turmoil, is on the verge of an upswing.
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Read the full update
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FINANCIAL TIMES
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The European Central Bank is to scale back the amount of bonds it buys every month from €80 billion to €60 billion but insisted that the move did not mark the beginning of the end of its landmark quantitative easing programme. The bank confirmed that it would buy €80 billion a month of bonds until March but added that it would prolong its asset purchases until the end of 2017 at a lower rate of €60 billion.
UK regulators have summoned Citigroup executives for fresh discussions over the bank’s role in October’s “flash crash” in sterling, seeking more information about the supervision and controls that were in place. The decision to recall Citigroup as part of the UK inquiry comes after the Financial Times reported that the US bank’s Tokyo operations were under scrutiny for playing a central role in sending the pound to its lowest levels during the early-morning collapse in thin Asian trading on October 7. The meeting is expected to be held in coming days.
McDonald’s, the world’s biggest fast-food restaurant chain, is moving its non-US tax base to Britain, away from Luxembourg, where its tax arrangements have come under sustained attack. It is setting up a UK-based holding company responsible for the majority of the royalties from licensing its intellectual property rights outside the US. Heather Self, a partner at the law firm Pinsent Masons, said that the move was likely to generate tens of millions, possibly hundreds of millions, of pounds of extra tax revenue for the UK.
The UK government’s approach to foreign investment in critical infrastructure is to be tested after National Grid agreed to sell a controlling stake in its gas-distribution unit that serves nearly 11 million British households and businesses. In one of the biggest British infrastructure deals in recent history, the FTSE 100 company said that it had struck a deal to sell a 61 per cent stake in the gas-distribution business to a consortium backed by Macquarie, the Australian investment bank, and China Investment Corporation, China’s sovereign wealth fund.
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Read the full update
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THE DAILY TELEGRAPH
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Glencore's shock move to take a stake in the state-owned Russian oil giant Rosneft could add $80 million a year to profits in its trading arm, analysts have said, in what has been hailed a "win-win" deal. The FTSE 100 mining giant led by chief executive Ivan Glasenberg confirmed yesterday morning that it was in the final stages of striking a deal to buy a 19.5 per cent slice of Rosneft for €10.2 billion, as part of a consortium with the Qatar Investment Authority, also Glencore's biggest shareholder. Glencore itself will be the junior partner, investing just €300 million for a 0.54 per cent stake.
Profits at Sports Direct have tumbled after the fall in the value of the pound and negative publicity, hampering its founder Mike Ashley's attempt to transform the battered company's reputation. The company, under fire for the poor treatment of its warehouse staff and a disregard for corporate governance norms, revealed another deal with a member of Mr Ashley's family yesterday and said it was spending $51.1 million on a new corporate jet. Despite an underwhelming financial performance, the scandal-hit retailer said it would take delivery of a new jet, to add to its company helicopter and hotel, in the coming weeks.
Britain’s biggest bookmakers face a multimillion-pound losing streak after a group of MPs called for a tougher stance on fixed-odds betting terminals. The high-street gambling machines, dubbed the “crack cocaine” of gambling by their critics, are already under the glare of a government triennial review of the sector that will be finalised early next year. An influential group of MPs has called for the review to take the toughest possible action against the game’s operators.
Shares in the outsourcer Capita plunged to a ten-year low after it said it would sell its asset services division in an attempt to shore up the business as it announced a further cut to its expected profit this year. The company, which has faced a string of problems this year, will sell the arm and a number of other smaller parts of the business to allow it to focus on its core business, which handles large multi-year process management contracts in the public and private sectors.
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Read the full update
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THE SUN
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The holiday company that owns Thomson and First Choice revealed booming results after its “most successful year ever”. Profits at the Anglo-German group TUI soared 13 per cent to £754 million in the 12 months to April 2016. That was despite a slump in bookings to terrorism troublespots such as Tunisia and Egypt.
Tata Steel’s UK operations got another boost yesterday: an £8 million gift to cut energy costs. The Welsh government pledged the cash as part of an £18 million investment aimed at slashing its bills. It came the day after Tata bosses and unions struck a deal to safeguard at least 4,000 jobs in Port Talbot and other UK sites.
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Read the full update
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richard.fletcher@thetimes.co.uk
@fletcherr
