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| Friday January 6 2017 |
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By Richard Fletcher
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Markets snap: The Nikkei closed down 0.34 per cent this morning at 19,454.33. The FTSE 100, which closed at 7,211.96 yesterday, is forecast to open 9.5 points higher when trading begins shortly. At 6.51am Brent crude was trading at $56.75 a barrel and the pound was trading at $1.237 against the dollar and at €1.169 against the euro. For the latest on the markets follow me on Twitter: @fletcherr.
Good morning: How has the US economy fared since the election of Donald Trump? We get the closely watched US jobs numbers, which provide a snapshot of the strength of the US economy, for December at 12.30pm (UK time). This will be the first full month of data since the US election. According to a survey of Wall Street economists by Reuters non-farm payrolls are forecast to have increased by 178,000 jobs after a similar rise in November. The unemployment rate is forecast to tick up to 4.7 per cent from a nine-year low of 4.6 per cent in November.
Before that we get the latest labour productivity estimates for the UK from the Office for National Statistics at 9.30am.
On the corporate front we will have passenger numbers for December from easyJet and an upbeat trading update from the interdealer broker TP Icap. “The business has delivered revenue growth across all product lines in the fourth quarter,” a spokesman said.
Finally, open your lugholes and download this week’s Times Business podcast. Deirdre Hipwell, Martin Waller and James Dean discuss high street sales, taking a gamble on housebuilders and Elon Musk's imminent return to space.
Please do keep sending me any thoughts or observations about Times business coverage: richard.fletcher@thetimes.co.uk.
Have a great weekend. I’ll be back in your inbox on Monday.
Richard
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| Richard Fletcher |
| Business Editor |
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Ten things you need to know
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1 Britain ended last year the strongest advanced economy after growth accelerated in the six months after the Brexit vote. Business activity confounded predictions of a slowdown and hit a 17-month high last month. The economy grew by 2.2 per cent last year.
2 Trade unions at Royal Mail are threatening the first national strike in eight years after plans to ditch its final-salary pension scheme were revealed. Royal Mail said it would close the defined benefit retirement scheme for 90,000 workers in 2018 and move them to a defined contribution plan.
3 Bitcoin suffered the heaviest fall in its 23-year history. The cryptocurrency dropped by as much as 23 per cent yesterday after it had hit a three-year high on Wednesday, as its value in dollars collapsed, with some experts pointing to the rise in the Chinese renminbi as the likely culprit for the sell-off.
4 Jamie Oliver will announce plans to close six Jamie’s Italian restaurantsafter tough trading since the Brexit vote. The closure, which will cut his British holdings to 36 outlets, will affect 120 employees. He hopes to find alternative jobs for them.
5 Mike Ashley said that he felt “bitterly let down” by the latest investor revolt at Sports Direct and hinted that an independent review of corporate governance at the sportswear retailer may no longer go ahead.
6 Britain’s retail sector weathered its fourth poor December in a row with negative like-for-like sales growth on the high street amid volatile consumer sentiment. The latest figures from the accountancy network BDO showed that comparable sales growth fell by 0.1 per cent last month.
7 Andy Haldane, the Bank of England’s chief economist, has conceded that the economic establishment is “in some degree of crisis” after recent forecasting failures. He argued, however, that errors in Brexit predictions were about timing rather than a fundamental mistake.
8 Britain’s second largest housebuilder increased revenues by 8 per cent to £3.14 billion for 2016 after demand for its homes went up in the autumn, but its overseas suppliers are raising prices after the pound’s fall. Persimmon had a 4 per cent increase in the completion of new homes and the average selling price rose to £206,700.
9 American investors in Volkswagen have won the right to sue the German carmaker and its former chief executive in the US, in a ruling that is likely to deepen the cost of the emissions scandal.
10 Donald Trump has privately reiterated his opposition to the merger between AT&T and Time Warner since being elected president. He promised while campaigning to block it, saying deals of its size “destroy democracy”.
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Read the full update
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Editor’s picks
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“Many householders might be rather surprised that their postman or woman is still clocking up benefits in a defined benefit pension plan,” says Patrick Hosking. As he points out, Royal Mail joined the private sector, where DB pensions are as rare as Penny Blacks, in 2013 but has so far kept its scheme open for 90,000 employees. But not for much longer if it gets its way. Staff understandably will object, but the plan might just work.
For Paul Johnson the start of 2017 was marred by the death of one of Britain’s greatest economists, Sir Anthony Atkinson. For decades he worked on how to measure, and tackle, inequality. To continue his good work the director of the Institute for Fiscal Studies suggests that we should do what we can to make the tax system fairer and doing still more to promote social mobility through education and skills policy. That would be a fitting legacy.
Going to Copenhagen to escape New Year’s Eve is like going to Lapland to escape Christmas, as Sathnam Sanghera discovered. He thought everyone would be tucked in bed by 10pm but the Danes kept him awake as they partied hard until the early hours. Still, it got him thinking about self-improvement for 2017. Having dismissed tips like joining a gym or unicycling to work he concluded that outsourcing and automating as many parts of your job as possible was the way forward. Or maybe not.
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| Market Snap |
In London the FTSE 100 rose to a fresh record high of 7,211.96 in early trade boosted by a positive update from the housebuilder Persimmon, which reported a rise in sales despite the referendum vote to leave the European Union. Later, the blue-chip index pared some of the gains to close up 0.1 per cent, or 5.57 points, at 7,195.31. The broader FTSE 250 rose 0.9 per cent, or 156.94 points, to 18,308.23 led higher by energy and mining companies. More on yesterday’s market action here.
On Wall Street it was a mixed day for US markets in a well-traded session where a strong showing from Amazon helped the tech-heavy Nasdaq index to squeeze out a record close after rising 0.2 per cent, or 10.9 points, to 5,487.93. The Dow Jones industrial average slipped further from the 20,000 level with a fall of 42.87 points, or 0.2 per cent, to 19,899. 29 while the S&P 500 dropped 0.1 per cent, or 1.75 points, to 2,269.00. About 7.2 billion shares changed hands compared with the recent daily average of 6.8 billion.
Sterling rose against the US dollar for a second consecutive day — up 0.8 per cent to $1.241 — as more upbeat data underlined the UK economy’s post-Brexit resilience. Against the euro, however, the pound slipped 0.2 per cent to €1.171.
Oil prices endured an up-and-down session yesterday but moved into positive territory after Saudi Arabia said it had cut its output in line with the Opec agreement. In New York, Brent crude for March settlement was 0.6 per cent higher at $56.90 a barrel.
Costain has been concentrating more on big infrastructure projects that must go ahead rather than on the building work that made its name. But Tempus wonders whether the market is taking this on board. The situation at PureCircle, which makes the sweetener Stevia, is an odd one, with the US authorities apparently determined to stop imports. The return of some earlier legal issues over asbestosis is the only downside for Cape, the contractor supplying the energy and natural resources sector, but how big a negative is it? Read on here for the Tempus share tips of the day in full.
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The day’s front pages
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The Times
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Trade unions at Royal Mail are threatening the first national strike in eight years after plans to ditch its final-salary pension scheme were revealed. The company said that it intended to close the defined benefit retirement scheme for 90,000 workers in 2018 and move them to a defined contribution plan. Union leaders said that if Royal Mail imposed its proposals they would ballot for industrial action.
The value of bitcoins, the cryptocurrency created by technologists to circumvent state-backed paper money, suffered the heaviest fall in its 23-year history. Bitcoins fell by as much as 23 per cent yesterday, having hit a three-year high on Wednesday, as the digital currency’s value in dollars collapsed. Market watchers pointed to the rise in the Chinese renminbi as the likely culprit for the sell-off.
Jamie Oliver will announce plans to close six of his Jamie’s Italian restaurants today on the back of tough trading since the Brexit vote. The closures will affect 120 employees. The outlets are in Aberdeen, Exeter, Cheltenham, Richmond, Tunbridge Wells and Ludgate Hill, near St Paul’s Cathedral.
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Read the full update
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The Wall Street Journal
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The makers of precision-guided missiles and bombs are running to keep up with demand as the US military bombards Islamic State from the air. Companies such as Boeing, Lockheed Martin and BAE Systems, which make the precision-guidance kits that carry US missiles and bombs to their targets, are benefiting from the US military’s increased reliance on air power in the Middle East.
The Belgian police had numerous chances to unmask the Islamic State terrorist cell that later carried out the Paris and Brussels attacks, according to a confidential report prepared for Belgium’s Parliament. They bungled every one. A series of incidents are outlined in a report compiled by a security watchdog in September but not yet made public.
President Hollande of France met James Dimon, chief executive of JP Morgan Chase, in late October and asked how France could lure finance jobs away from London after Brexit. Mr. Dimon’s message was blunt: the chances that banks would move more employees to France were slim unless the country softened its strict employment laws.
The debts of Donald Trump and his businesses are scattered across Wall Street banks, mutual funds and other financial institutions, broadening the tangle of interests that pose potential conflicts for the incoming president’s administration. Hundreds of millions of dollars of debt attached to Mr Trump’s properties, some of them backed by Mr Trump’s personal guarantee, were packaged into securities and sold to investors over the past five years, according to a Wall Street Journal analysis of legal and property documents.
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Read the full update
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Financial Times
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The appointment of Sir Tim Barrow as Britain’s ambassador to the EU was “vigorously opposed” by the top official at the Brexit ministry, who wanted to take control of negotiations with Brussels, according to several officials close to the process. Olly Robbins, the permanent secretary at the Department for Exiting the EU, attempted a land grab after the resignation of Sir Ivan Rogers from the Brussels post this week, the officials said. They said that Mr Robbins suggested downgrading the job of UK ambassador to a director-general, with a reporting line to Mr Robbins.
Leaders of the US intelligence community forcefully rejected Donald Trump’s dismissal of their findings that Russia interfered in the presidential election, putting the country’s top spies on a collision course with the president-elect two weeks before his inauguration. James Clapper, director of national intelligence, told a Senate committee hearing yesterday that US intelligence agencies were more “resolute” in their conclusion that President Putin had ordered pre-election hacks of Democratic party servers than they had been in October when they first indicated Russian involvement.
Pokémon Go and Super Mario Run, last year’s runaway success stories in mobile gaming, helped to fuel surging revenues at Apple’s App store in 2016. The much-needed boost to services revenues at the world’s most valuable tech group comes as its iPhone growth remains sluggish.
Bank of Cyprus, one of the biggest casualties of the eurozone financial crisis, can once again offer investors a dividend after repaying its “monstrous” emergency funding almost a year ahead of schedule. The Cypriot bank rose to prominence in 2013 when it used deposits of above €100,000 to help to fund its rescue deal, the first example of the “bail in” that the EU hoped to use so taxpayers would no longer carry the can for failed banks.
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Read the full update
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The Daily Telegraph
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Households have been borrowing enthusiastically to fund a spending spree, but that is a cause for optimism as consumers have supported economic growth, rather than a reason to be alarmed, according to the Bank of England's chief economist Andy Haldane. The top official also praised the government's plans for an industrial strategy, which he sees as a potentially powerful way to boost productivity and improve living standards, although he did warn that rising inflation could dent economic growth in the coming year.
The FTSE 100 index of leading shares enjoyed its longest run of record closes in 20 years, after the benchmark set another all-time peak. After a stellar run in the final days of 2016, the blue-chip index extended its end-of-year rally, which began on December 28, into the new year.
The head of Barclays' Japanese business has been questioned by British fraud investigators as part of its investigation into Libor rigging, it has emerged, as a US judge called on the authorities to prosecute individuals for foreign exchange market manipulation. Mark Dearlove is understood to have been interviewed last month by the Serious Fraud Office, which is investigating whether Barclays lowballed the submissions it made to the Libor setting process in 2008, at the height of the financial crisis.
Economic growth accelerated in the final month of 2016, as companies across Britain's powerful services sector reported rising demand. Growth in the sector rose to its highest level in 17 months, according to IHS Markit's purchasing managers' index (PMI), as companies recovered from the blow to confidence inflicted by the Brexit vote.
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Read the full update
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The Sun
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The Sports Direct chairman Keith Hellawell was under growing pressure to quit last night as the number of independent shareholders backing his dismissal increased. A crunch vote on the future of the ex-police chief constable resulted in 54 per cent of indie investors calling for him to go yesterday.
Amazon emerged yesterday as a potential bidder for the bankrupt clothing chain American Apparel. Buying the company, which has 4,500 US workers, could help Amazon's relationship with Donald Trump, who has blasted Amazon’s tax avoidance and pledged to keep jobs in the US.
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Read the full update
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richard.fletcher@thetimes.co.uk
@fletcherr
