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| Friday December 2 2016 |
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By Richard Fletcher
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Markets: The Nikkei closed down 0.47 per cent this morning at 18,426.08. The spread-betting group IG expects the FTSE 100, which closed at 6,752.93 yesterday, to open 40 points lower when trading begins shortly. At 6.52am Brent crude was trading at $53.69 a barrel and the pound was at $1.261 against the dollar and €1.181 against the euro. For more markets coverage see the snap below and follow me on Twitter for regular market updates: @fletcherr.
Good morning: Shares in Berkeley Group were trading at almost £33 a share before the vote in June to leave the European Union. They closed at £25.45 yesterday, 22 per cent off that June high amid growing fears about the strength of the central London housing market. Berkeley, which was ejected from the FTSE 100 earlier this year, has posted interim results this morning. Pre-tax profits are up 22.9 per cent at £392.7 million but reservations are down 20 per cent, in line with September’s trading update. “Berkeley's business model is unchanged with its focus on complex, long-term regeneration sites where we can use our expertise to add value over time. With a sound financial position we are well placed to deliver our current plan,” Tony Pidgley, its chairman, said.
Alongside the interim results the upmarket London-focused housebuilder has announced plans for a share buyback arguing that the “board is of the opinion that the company is materially undervalued”. The catch for embattled Berkeley shareholders is that the company plans to abandon its dividend plan, which effectively guaranteed a £2-a-year payment until 2021, to pay for the buyback. Our Tempus editor Martin Waller tipped the company at £29.54 in September on the strength the guaranteed dividend. He will update his recommendation in tomorrow’s paper.
Laird, whose shares tumbled in October when the supplier of parts to stop Apple’s smartphones overheating slashed its full-year profit forecast by more than a third owing to slow smartphone sales, wants to raise £185 million via a rights issue. It has also scrapped its final dividend and is seeking talks with its banks over its debt covenants. Tony Quinlan, the new chief executive, seems relatively sanguine about it. He says trading is in line with its October update and "Laird remains fundamentally well positioned in its key growth markets, notably in rapidly evolving ones such as connected vehicles".
We get the closely watched US jobs numbers, which provide a snapshot of the strength of the US economy, at 12.30pm (UK time). Non-farm payrolls are expected to have risen by 175,000 in November, up from 161,000 in October, according to a survey of economists by Reuters. Markets appear to believe that a US rate rise later this month is a certainty but a bullish jobs report could raise expectations of further increases in early 2017.
Before the jobs numbers we get UK construction PMI data. City economists expect a reading of 52.2, down a fraction from October’s 52.6.
Finally, you may have noticed that we have tweaked the design of the morning email. As ever please do send me your thoughts and observations.
Have a great weekend. If you have a moment, listen to our our latest Business podcast on how “Trumponomics” might benefit Britain and the latest row between Downing Street and the Bank of England.
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 One of the world’s biggest cruise operators has been handed a record fine after dumping more than 4,000 gallons of oil waste off the coast of England using a secret pipe. Princess Cruises, part of the giant Carnival Corporation, has agreed to plead guilty to seven charges in the US of polluting the seas and attempting to cover it up.
2 The financial regulator has been seeking a rescuer for Manchester Building Society but has been turned down by Nationwide. The Prudential Regulation Authority has been trying to find ways to save the Manchester, which has 18,000 savers including a few with deposits of more than the £75,000 guaranteed by the government. It also has 3,000 borrowers.
3 The price of oil rallied a further 5 per cent last night, hitting its highest level in more than a year as traders continued to bet that Opec’s first production cut in eight years will start to clear a global supply glut.
4 Asos became the victim of the latest investor revolt over pay yesterday as a third of voting shareholders moved to veto the online fashion retailer’s annual remuneration report.
5 Glencore signalled to investors that it had returned to health by drawing its asset sale to a close and announcing a billion-dollar return to shareholders with a reinstated dividend.
6 Manufacturers began to pass on the higher costs of materials and raw commodities in November, according to the latest purchasing managers’ index. Factory prices rose at the second fastest pace in more than five years in a sign of creeping inflation.
7 The Competition and Markets Authority has for the first time imposed a five-year ban from holding any directorship on a businessman. The watchdog found that Daniel Aston, managing director of Trod, had agreed with rivals selling through Amazon not to undercut their prices.
8 The number of jobs axed at Rolls-Royce in the past two years sailed through the 5,000 mark after the engine maker told 800 of its marine workers to find another berth. The loss of one in six jobs in its maritime division will take the workforce to below 50,000.
9 One of the most prominent Icelandic victims of the financial crisis is due to return to the stock market within months after preparing for a flotation that could value it at €1.5 billion. Kaupthing has asked investment bankers to pitch for roles on the listing of Arion, its Icelandic banking business.
10 The boss of DMGT refused to rule out a sale of any of its businesses yesterday as the owner of the Daily Mail reported a rise in annual revenues to £1.9 billion despite a double-digit decline in print advertising.
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Read the full update
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Editor’s picks
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“Every so often the perfect metaphor steams into town," writes Ed Conway. "So it was this week with the news that China has just begun constructing a life-size replica of the Titanic. The ship, which will be moored in a Mediterranean-themed attraction in Sichuan Province, will apparently simulate crashing into an iceberg multiple times every day. The project is yet another reminder that China’s titanic debt bubble is growing every week.”
Ivan Glasenberg is rivalling Lazarus in the comeback stakes, Alistair Osborne says. “In 12 months the Glencore share price has trebled to 283.55p, up 1.5 per cent and gone are the days when Investec analysts could suggest the shares might go to zero, even after Glencore’s investors had dragged Ivan the Fallible into a $2.5 billion cash-call at 125p to cut debt."
“People were forever having nervous breakdowns in Wolverhampton in the 1980s,” Sathnam Sanghera remembers. “I never really understood what it meant but now I suspect something similar is happening in business with the phrase ‘burnout’. If you are suffering from a genuine medical condition then go and see a doctor for God’s sake. Also: consider giving up reading any articles that bang on about burnout or emotional intelligence.”
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| Market Snap |
The FTSE 100 closed down 30.86 points, or 0.45 per cent, to 6,752.93 as a stronger pound weakened international earners on the index and a number of companies turned ex-dividend. The FTSE 250 fell 48.41 points, or 0.28 per cent, to 17,497.34. More on yesterday’s market action here.
On Wall Street, it was the Dow Jones industrial average that came to the rescue, led by energy and financial stocks, with a rise of 0.4 per cent, or 68.35 points, to 19,191.93 to record its seventeenth all-time high so far this year. It was a different story for the S&P 500, which was dragged down by technology companies to finish 0.4 per cent, or 7.73 points lower at 2,191.08. About 9.1 billion shares changed hands, well above the recent daily average of 8 billion.
Sterling started December in strong style yesterday, passing multi-month highs against the euro — up 0.1 per cent to €1.182 — after David Davis, the Brexit minister, said that the government would consider paying into the European Union budget for market access. Against the US dollar, the pound rose 0.6 per cent to $1.257.
Oil prices hit their highest level in more than a year yesterday as traders continued to bet that Opec’s first production cut in eight years would start to clear a global supply glut. Despite paring some of its earlier gains Brent crude for February settlement was 3.6 per cent higher in New York at $53.70 a barrel.
Grainger is one of those niche property plays that seems resilient even in any downturn in the market, Tempus finds, while its ambitious investment plans suggest rising income for investors in years to come. Rupert Soames’s turnaround at Serco, the once troubled outsourcing specialist, seems to be gathering pace, with the company looking to resume growth in 2018. The decision by the Co-op to sell 298 convenience stores in the summer should provide a boost to their purchaser, McColl’s Retail Group. 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 financial regulator has been seeking a rescuer for Manchester Building Society but has been turned down by Nationwide, Britain’s largest society. The Prudential Regulation Authority has been trying to find ways in recent weeks to save the Manchester, which has 18,000 savers including a few with deposits of more than the £75,000 guaranteed by the government. The society also has 3,000 borrowers.
The price of oil hit its highest level in more than a year as traders continued to bet that Opec’s first production cut in eight years would start to clear a global supply glut. The price rise came as BP said it had approved a $9 billion project in the Gulf of Mexico six years after its disaster at the Deepwater Horizon rig in a move that will be interpreted as fresh evidence of a recovery in the industry.
Glencore signalled to investors that it had returned to health by drawing its asset sale to a close and announcing a billion-dollar return to shareholders with a reinstated dividend. At an investor update yesterday, the FTSE 100 mining and commodity trading group said that it would move towards a new dividend policy from 2018, whereby the relatively stable trading division would pay a "base" distribution of $1 billion and the more volatile mining division would pay out at least a quarter of the cash it has left over after investing in the business.
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Read the full update
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THE WALL STREET JOURNAL
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According to bankers and officials familiar with the situation, China’s foreign-exchange regulator has instructed banks to sharply limit how much companies move out of the country and into their other operations around the world. Until this week it was possible for big companies to “sweep” $50 million of yuan or dollars in or out of China with minimal documentation. Now, these people say, the cap is the equivalent of $5 million, a pittance for the largest corporations.
Airbnb has agreed for the first time to restrict, in London and Amsterdam, the number of nights a year a host can rent out a home, in a significant concession to regulators in the US and Europe. City officials in tourist capitals from New York to Berlin have said that homesharing can squeeze out locals by making it more lucrative for owners to cater to tourists than rent their homes to long-term residents. In its biggest effort to quell concerns, Airbnb said Thursday that, starting in January, it would block hosts in London
The EU accused the US of breaching the Open Skies pact for trans-Atlantic air travel in a dispute involving Norwegian Air.
India’s stocks and currency plunged in November as Donald Trump’s election and Narendra Modi’s currency crackdown unleased a wave of selling.
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Read the full update
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FINANCIAL TIMES
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Surging oil prices and a commitment by the incoming Trump administration to turbocharge economic growth intensified a sovereign bond rout yesterday that last month left investors nursing their worst losses since 1990. Treasuries led a global sell-off as investors grew increasingly anxious that Donald Trump’s ambition to return the US to growth of 3-4 per cent would mark the end of declining interest rates.
Net migration stood at a near-record level of 335,000 in the year to June, according to official figures. The number of immigrants soared to 650,000, the highest ever calculated, boosted by a historic high in numbers coming from the EU. Romania was the most common country of previous residence, but there were also increased numbers of migrants from southern Europe, including Spain and Italy, before the Brexit vote.
The government has acknowledged that it is willing to pay Brussels for maintaining access to Europe’s single market, opening the door for the first time to British contributions to the EU budget for years after Brexit.
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Read the full update
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THE DAILY TELEGRAPH
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The Bank of Italy's liabilities to the rest of the eurozone hit a record in October as capital continued to leak out of the country, a sign that the currency bloc remains deeply fragmented despite the efforts of the European Central Bank. Italy's imbalances within the ECB's Target2 payments nexus rose to €355 billion (£300 billion). The tally is now higher than it was during the white heat of the eurozone debt crisis and is approaching 20 per cent of Italian GDP.
Sterling surged toward a three-month high against the euro yesterday after the Brexit minister David Davis said the UK may consider making payments to the EU budget in return for access to EU markets. Coming off its best month since 2009, the pound climbed by as much as 1.33 per cent against the euro to €1.1948.
The Swiss bank UBS has merged most of its wealth management operations into a new business in Frankfurt, in a significant boost to the German city as it seeks to establish itself as a rival financial hub to London after Brexit. The new subsidiary, called UBS Europe SE, combines the bank's German, Italian, Luxembourg, Austrian, Danish, Swedish, Dutch and Spanish wealth management businesses into one legal entity in Frankfurt.
Britain's vote to leave the European Union has had no effect on the majority of shoppers' Christmas spending plans, according to fresh figures. The average UK adult expects to spend £280 on Christmas gifts this year, according to a survey of 2,000 shoppers by PwC.
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Read the full update
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THE SUN
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Ryanair launched a bargain package holiday business yesterday that it says will transform the industry. The budget airline already offered hotels and car hire deals but will now sell whole, one-price trips. At the new venture’s launch yesterday, Ryanair said that its packages would be at least ten per cent cheaper than those of rivals.
The engine maker Rolls-Royce is cutting 800 more jobs as it looks to save £50 million a year. The losses will come in its marine division, whose workforce has already dropped from 6,000 last year to 4,800 now.
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Read the full update
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richard.fletcher@thetimes.co.uk
@fletcherr
