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The Times
Thursday January 19 2017
Business – Need to know – Afternoon Edition
Martin Waller
By Martin Waller
 
Good afternoon: Jes Staley, chief executive of Barclays, has pledged that the bank will keep the bulk of its activities in the UK. Speaking to Radio 4 this morning from Davos — where else? — he said that “certain activities” may have to be moved after Brexit and that there might be a change to the legal structure but that any changes would be at the margin and manageable.

It is probably no surprise that a British bank might accept that, whatever the future holds, Britain will be its base but it is reassuring after yesterday’s news from HSBC and UBS that as many as 2,000 jobs in the UK could be lost.

The dollar has taken heart from remarks last night from Janet Yellen, chairwoman of the US Federal Reserve, that future interest rates would be measured, rather than delaying them and risking a sudden shock. The currency was up marginally in early trading in Europe after gains overnight on world markets.

The European Central Bank will hold its 1,000th board meeting later today. This may be an eye-catching number but few expect anything too startling to emerge. Best bets are for a continuation of earlier policy after December’s decision to extend asset purchases through to the end of this year.

Chemring is one of those defence groups that has had a difficult time of it in recent years, along with Cobham. The company makes flares and chaff that help aircraft to defend themselves from missiles. Chemring has announced a decent 26.5 per cent rise in revenues for the full year and analysts tend to the view that the recovery, for it at least, is underway. The weak pound has been a blessing, too.

Halfords, another business well on the recovery track, had a good Christmas, with sales up 11 per cent and like-for-likes at its cycle retail business ahead by 7 per cent. Halfords has suffered from the lower pound, which raised the cost of imported goods.It is also paying £8 million for a stake in a mobile tyre-fitting service, TyresOnTheDrive, which will come to you to mend punctures.

Finally, are we seeing a revival of the British mining industry, albeit on a small scale? Sirius Minerals, which plans to produce potash from under the North Yorkshire moors, has produced an update this morning on its progress. Meanwhile, a group of investors have got together to develop deposits of lithium in Cornwall. The light metal is there and is in increasing demand for batteries for electric cars but currently we have to import it. A domestic supply would be highly profitable, even if the project is at an early stage. One of the participants, Toronto-quoted Strongbow, recently bought another Cornish asset, the historic South Crofty tin mine. There have been attempts for years to reopen South Crofty but the revival in world commodity prices make it a more attractive prospect today.

Martin
Martin Waller
 
Market Snap
Royal Mail shares have hit an 11-month low following a decline in its letters business.

The share price was down 5 per cent to below 427p in late morning dealings, the biggest faller on the FTSE 100, as investors focused on a fall in revenue from delivering letters rather than an increase in its parcel business in the nine months to December 25.

Royal Mail, led by Moya Greene, said: “We are seeing the impact of overall business uncertainty in the UK on letter volumes, in particular advertising and business letters.”

Mike van Dulken, head of research at Accendo Markets, said that the results might have been in line with expectations but that they did “little to appease concerns about both the long-term decline in UK letter volumes, something worsening via Brexit-inspired business uncertainty, and tough competition within parcels”.

The FTSE 100 fell to its lowest in the fortnight amid weaker global equity markets. The index, which hit a series of record highs in the past two weeks, was down 42.01 points, or 0.6 per cent, to 7,205.60.

British Land was also in the red after it posted a small decline in occupancy rate in its third quarter but analysts at UBS said that the trading update was “broadly in line with expectations”. The property developer fell 2.5 per cent to 602½p and Hammerson fell 2.5 per cent to 549p following a downgrade from Jefferies to “underperform”.

Stemming the FTSE 100’s falls was Pearson, which firmed after yesterday’s sell-off. The education publisher, which has lost almost a third of its value following a profit warning, rose 2.8 per cent to 589p.

Shares in Rolls-Royce
, which reached a settlement with a number of crime-busting agencies over corruption allegations this week, increased by 1.7 per cent to 705½p.

The FTSE 250 index also fell back, 71.87 points to 18,240.93, amid mixed trading updates on the high street. Investors welcomed post-Christmas statements from Halfords, up 9.5 per cent to 386¾p, and N Brown, the fashion retailer, 7.7 per cent higher to 218¾p, which capped off a broadly positive festive period for the retail sector. Pets at Home was the biggest mid-cap faller, down 8.9 per cent to 217p.

Among the smaller caps, St Ives, the marketing services company, became the latest company this week to be punished for a profit warning, slumping 37.4 per cent to 79¼p.

Alex Ralph
Market Reporter
 
FTSE risers and fallers*
Up
Smurfit Kappa Group +3.398%
Pearson +2.182%
Rolls-Royce Holdings +1.802%
Burberry Group +1.152%
British American Tobacco +1.003%
 
Down
Royal Mail -5.363%
SSE -2.762%
British Land Company -2.751%
Hammerson -2.664%
Fresnillo -2.626%
 
 
Markets
FTSE100 7211.93 -0.49%
FTSE250 18222.15 -0.5%
Cac 4848.84 -0.09%
Dax 11597.71 -0.01%
BrentCrude 54.30 +0.7%
Gold 1203.27 -0.02%
GBP/$ 1.2325 +0.55%
GBP/€ 1.1555 +0.22%
10Y Gilt 100.988 -0.44%
*As at noon
 
US day ahead
Wall Street’s big banks have got earnings season off to a roaring start, with five of the top six posting forecast-beating profits since Friday last week. The banks stand to gain more than most from Donald Trump’s economic policies (should they come to pass), with corporate tax cuts, a reduction in banking regulation and lots of private debt funding for infrastructure. Now, as results from other companies begin to trickle in, we’ll find out what sort of effect Mr Trump’s promises are having on other sectors of the US economy. IBM, one of the world’s biggest technology companies, reports its fourth quarter results after the closing bell. The company’s cloud computing and artificial intelligence divisions will be watched closely. Also after the close, American Express announces its fourth-quarter results.

Janet Yellen, chairwoman of the Federal Reserve, warned last night of a “nasty surprise down the road” if the central bank waits too long to raise interest rates. “In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession,” she said in a speech at the Commonwealth Club of California in San Francisco. She returns to the lectern in California at 8pm (1am GMT) to discuss the economic outlook and monetary policy at the Stanford Institute for Economic Policy Research.

US homebuilding figures will arrive shortly with the publication of December’s housing starts. Economists are looking for an annual rate of 1.2 million, up from 1.09 million in November. The weekly jobless claims report also lands soon, with 255,000 new claims expected, up slightly from last week’s 247,000. The Philadelphia Fed will publish its business outlook survey at 8.30am, with a decline from a very strong 21.5 last month to 16 .0 this month expected. Earlier this week a corresponding report from the New York Fed disappointed with a larger-than-expected fall to 6.5 from 9.0.

James Dean
US Business Editor
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