Business News 1st August 2017
CPA hopes to inform, with its daily bite-size business news on Tuesday 1st August 2017, filled with stories we think will interest our members and visitors.
Markets Round up
Eurropean and U.K. Shares were mixed as U.K. equities climbed aided by gains among mining stocks and a HSBC-led rally in banks, putting the region’s equities on track to end the month unchanged on the final trading day of July. The FTSE 100 was up 0.1% to 7372 while the FTSE 250 climbed to 0.3% to 19,781. The Euro Stoxx 50 fell 0.5% to 3449 led by German and French shares as healthcare and real estate tumbled. UK cigarette stocks continued their decline on concerns the US Food & Drug Administration’s approach to regulating nicotine levels could be followed in other countries. Both BATs and Imperial Brands have significant exposure to regulatory pressures in the US market, though Imperial Brands’ US market share at c. 10% is below BATs. Mining and oil companies meanwhile continued their rebound on the back of strong commodity prices. In the US, after seeing initial strength, stocks turned mixed over the course of the trading session on Monday. Despite the choppy trading, the Dow reached another new record closing high. The major averages ended the day on opposite sides of the unchanged line. While the Dow climbed 60.81 points or 0.3% to 21,891.12, the Nasdaq fell 26.55 points or 0.4% to 6,348.12 and the S&P 500 edged down 1.80 points or 0.1% to 2,470.30. The choppy trading on Wall Street came as traders seemed reluctant to make significant moves ahead of the release of the monthly jobs report on Friday.The report is expected to show employment climbed by 180,000 jobs in July, while the unemployment rate is expected to dip to 4.3%. Reports on personal income and spending, manufacturing and service sector activity, and international trade are also likely to attract attention in the coming days. Asian stocks rose too with the major indexes across China, Japan and Korea all in the green. The Topix was up 0.6%, The Hang Seng 0.8% and the Kospi up 0.8%. Gold hit its highest in almost seven weeks, boosted by a struggling dollar and U.S. economic data that has cast doubt on whether the Federal Reserve will raise rates again this year. There was some profit taking on oil as it edged lower before resuming their climb with WTI up to $50.34 and Brent at $52.85. The pound strengthened against the dollar to $1.3215 as the dollar also slipped to its lowest in about two years versus the euro at $1.1832, extending a recent downtrend amid mixed economic data.
House Prices
UK house prices increased at a slower pace in July, survey data from the Nationwide Building Society showed. House prices increased 2.9% year-on-year in July, weaker than June’s 3.1% increase. Nonetheless, the annual rate was bigger than the expected 2.7%. On a monthly basis, UK house prices advanced unexpectedly by 0.3% following a 1.1% rise in June. Economists had forecast a 0.1% fall.
Companies in distress
New research from Begbies Traynor shows that 329,834 UK companies were experiencing ‘significant’ financial distress at the end of Q2 2017, a 25% increase from Q2 2016. The group said this was the largest annual increase since Q2 2014 and was the largest number of corporates experiencing significant distress in at least 5 years. The Red Flag Alert research for Q2 2017, which monitors the financial health of UK companies, showed that SMEs made up the majority of this increase, with ‘significant’ distress rising 26% to 308,423 businesses, while large companies saw distress rise by just 12% year-on-year to 21,411 businesses at the end of Q2 2017. The report highlights concern that a cooling housing market is proving particularly challenging for property and construction companies, with smaller firms bearing the brunt. Fears that Brexit and the rising cost of imported goods may add to the strain.The Credit Protection Association would therefore take the opportunity to remind you of the importance of monitoring the financial health of your customers and key suppliers using its Status report and monitoring service which are included in our credit management subscription.
Centrica
Centrica reported a dive in its operating profit for the six months to 30th June to £252m, from £1.77bn in the same period in 2016. Centrica said the fall was due to higher exceptional charges of £268m. Centrica are in the news after announcing this morning that they are raising their electricity prices by 12.5%. British Gas is the last of the “Big Six” energy firms to increase prices. Expectations of a price rise were fuelled by a website blunder by British Gas staff yesterday. An incomplete statement briefly appeared on the website at noon promising to explain why it has had to raise electricity prices. It was titled ‘Why we’ve had to raise electricity prices – our first increase since November 2013.’ However, the body of the text read only ‘blah blah’, suggesting the upload was an error.
Unarranged overdrafts
The UK financial watchdog plans a crack-down on unarranged overdrafts, following a nine-month review of the high-cost credit market. The Financial Conduct Authority has proposed several changes to the way banks and other lenders operate in this area. Banks could be forced to undertake more due diligence on vulnerable customers before lending them money, the FCA said. FCA chief executive Andrew Bailey said the “nature and extent of the problems that we have found with unarranged overdrafts mean that maintaining the status quo is not an option”.
UK outlook negative as consumers borrow £200bn
Moody’s has changed its outlook on the UK economy, citing weakening economic data and rising consumer debt, and is forecasting declining performance over the next 12-18 month period. According to new figures from the Bank of England, consumers borrowed £100.9bn in June prompting further fears over the burden of debt on British households. Separately, a survey by Lloyds Bank has found business confidence in the economy is at a six-month low, with the poll pointing towards moderate growth. However, the survey showed increased optimism among some sectors, including manufacturing and construction.
Financial Times, Page: 2 The Times, Page: 39 The Daily Telegraph, Business, Page: 27-28 The Independent
Brexit
The Prime-minister’s spokesman confirmed yesterday that freedom of movement will end after Brexit, after Chancellor Philip Hammond clouded the issue with his suggestion last week that many arrangements would ‘remain very similar to how they were the day before we exited the European Union.’ International Trade Secretary Liam Fox stated yesterday that this would ‘not keep faith’ with the EU referendum result. ‘It would be wrong to suggest it… will continue as it is now,’ said Downing Street, ‘Free movement will end in March 2019. We’ve published proposals on citizen’s rights. Last week the home secretary set out a registration system for EU nationals arriving post March 2019.’ Mrs May also rejected the possibility suggested by Mr Hammond of a ready-to-go trade deal, such as the one currently adopted by Norway, which grants the country access to the single market.
Government proposes new fund for start-ups
The government is planning to set up a national investment fund to help fledgling UK businesses compete with their US counterparts. The Treasury said a consultation had identified a £4bn funding gap between US and British firms, as well as highlighting that British businesses currently rely on financial backing from the European Investment Fund. “Britain is an innovation powerhouse and it’s vital that we make sure our cutting-edge firms have the funding they need to meet their potential and conquer new markets,” said Philip Hammond.
The Independent, Page: 4
Firms fail to invest in cyber protection
SMEs are failing to set aside enough cash to bolster their cyber security defences, according to data compiled by Zurich. The insurer found 875,000 SMEs across the UK have been affected by a cyber-attack over the last 12 months, and of the companies hit, just over a fifth reported that it cost them more than £10,000. But in spite of the potential losses, a survey of over 1,000 UK SMEs also showed almost half (49%) plan to spend £1,000 or less on their cyber defences in the next 12 months.
The Independent, Page: 62
China
The manufacturing sector in China picked up steam in July, the latest survey from Caixin revealed on Tuesday with a Manufacturing OMI score of 51.1. That beat forecasts for 50.4, which would have been unchanged from the previous month. It also moves farther above the boom-or-bust line of 50 that separates expansion from contraction. Individually, both output and new orders rose at the fastest rates for five months, helped by a solid upturn in new export sales.
Japan
The manufacturing sector in Japan continued to expand in July, albeit at a slower pace, the latest survey from Nikkei showed on Tuesday with a manufacturing PMI score of 52.1. That’s down from 52.4 in June, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.
The Trump Show
The Trump soap opera continues as its writer continue to try and up the anti. Anthony Scaramucci has been sacked as President Donald Trump’s media chief after less than 10 days in post. Actually he wasn’t supposed to official start until mid August so he actually is in negative territory. The move follows Mr Scaramucci calling a reporter to give a profanity-laced tirade against his colleagues. A rant in which he threatened to ‘eliminate everyone’ in his communications team and called his senior colleague a ‘paranoid schizophrenic.’ Mr Trump’s spokeswoman, Sarah Sanders, said the president thought Mr Scaramucci’s comments to the reporter “were inappropriate for a person in that position”. This follows John Kelly replacing Reince Priebus as chief of staff. The former spokeman Sean Spicer also quit in response to Scaramucci’s appointment.
Britain could benefit from low-tax option
Several papers present further reaction to Philip Hammond’s pledge that the UK will not slash taxes and regulations after Brexit. The Telegraph’s leader argues that leaving the EU offers an opportunity for Britain to break with “the high-tax, dirigiste European approach,” and says the chancellor should be making the case for a low tax economy. Elsewhere, the Sun suggests Mr Hammond has surrendered “a potent bargaining chip” when it comes to striking a trade deal with Brussels. Meanwhile, the FT argues that while low tax rates and efficient regulation “are thoroughly desirable, the UK will not benefit from trying to undercut its neighbours on either front.”
The Daily Telegraph, Page: 15 The Sun, Page: 10 Financial Times, Page: 10
Public finances ‘may not be balanced before 2027’
The Times reports that Philip Hammond will use the autumn Budget to acknowledge that the public finances may not be balanced before 2027. The Tories have publicly committed to ensuring that the balance sheet is in surplus by 2025. But the chancellor is understood to be “flexible” about the year the target is achieved, amid speculation that significant tax rises will be hard to push through parliament.
The Times, Page: 2
Previous News pages
Business News 31st July 2017
Business News 28th July 2017
Business News 27th July 2017
Business News 26th July 2017
Business News 25th July 2017
Business News 24th July 2017
Business News 21st July 2017
Business News 20th July 2017
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