Business News 21st September 2017
CPA hopes to inform, with its daily bite-size business news on Thursday 21st September 2017, filled with stories we think will interest Business people.
Markets Round up
UK Markets were very quiet yesterday with the FTSE 250 flat at 19,540.8 and the FTSE 100 down 3.3 points to 7272.0 as investors waited for results of the FOMC. UK retail sales were a beat coming in 1.0% higher than last month beating City forecasts. This suggesting that consumers are still hitting the high street and pour more fuel on the fire for a November rate hike. Sterling jumped on the news and the UK leading index dropped to day lows as investors reacted before recovering. The Euro Stoxx 50 fell 0.16% to 3525.55 as investors buckled under the heightened geopolitical pressures on the Korean peninsula and nervously awaited US monetary policy. U.S. stock markets closed flat following the FED announcement that, for the first time in nine years, it would start reducing the size of its $4.5 trillion asset portfolio commencing in October. The S&P500 closed up 1.6 points at 2508.24, a move of just 0.06% while the NASDAQ fell 0.08% or 5.28 points to 6456.04. Asian stocks reacted mostly negatively to the announcement as the dollar strengthened. The Japanese Nikkei was up 0.2% to 20347, Hing Kong was down just 0.06% to 28,110, the Chinese CSI 300 fell 0.12% to 3837.82, The Korean Kospi fell 0.24% to 2406.5 and the indian Nifty is currently down 0.3% to 10,108.
Oil prices continued to climb with WTI at $50.55 and Brent at $56.22 despite downward pressure from rising crude inventories and production in the United States as well as a stronger dollar, which potentially hampers fuel consumption in countries that use other currencies at home. Gold dropped to its lowest level in over three weeks at $1295 as a stronger dollar and increasing prospects of a December rate hike by the Federal Reserve curbed appetite for the metal. The pound sits flat against the Euro at 1.1329 but has fallen against a strong US dollar to 1.3491.
OECD
Forecasts for growth of the eurozone and China have been upgraded by the OECD, as global growth increases this year and next. The OECD upped its forecasts for the eurozone to 2.1% for this year, up three basis points from its previous 1.8% estimate, and increased its 2018 forecast by one point to 1.9%. China is now predicted to grow 6.8% in 2017 and 6.6% in 2018, both up two basis points from prior estimates, as the OECD’s world growth forecast was kept at 3.5% for this year but hiked to 3.7% from 3.6% for 2018. Japan’s expected growth was a contributing factor, with the forecast for this year and next upped by two points to 1.6% and 1.2%. The OECD’s UK forecasts were left unchanged at 1.6% for 2017 and 1.0% for 2018, as were those for the US at 2.1% and 2.4% respectively.
London’s SMEs need relief
In light of the slump in SME confidence across the UK, London FSB policy Chair Sue Terpilowski has called for the Chancellor to “speed up a review of the Business Rates system that is causing severe hardship for tens of thousands of small firms in London.” A higher proportion of businesses in the capital expect to contract their business in the next twelve months, but despite a rise in employment intentions, the cost of doing business in London is causing problems for the ecosystem of micro and small businesses, said Ms Terpilowski.
Brexit fears weaken investment
A report by the BoE reveals that large companies are investing overseas rather than in the domestic UK market due to uncertainty over Brexit and improved conditions abroad. The bank also found investment intentions among British services firms weakened further in the last quarter. The survey indicated that pay settlements at British companies were generally stuck between 2% and 3%.
FED
The Fed have left the door open for another rate hike in 2017 and will start paring down its balance sheet in October ‘gradually and predictably’. The Federal Reserve will throw its crisis-era stimulus programme into reverse from next month and stick with plans for further rate rises, in a mark of confidence that stagnant inflation is set to bounce back. The US central bank, chaired by Janet Yellen, held rates on Wednesday but said it would consider a further interest rate rise this year. It starts paring back its multitrillion-dollar balance sheet in October. While acknowledging the damage inflicted by recent hurricanes, most policymakers stuck with forecasts for another rate rise in 2017 — most likely in December — as well as three further increases in 2018.
UN
Theresa May has urged the United Nations to reform or the UK would withhold up to 30% of its £90m funding each year. Speaking at the UN General Assembly in New York yesterday, Mrs May singled out North Korea, Russia, Myanmar and Syria for criticism. She sent strongly-worded messages to various states she accused of breaching UN rules. The Prime Minister explicitly said that the UN needed to “win our trust”, as she warned of a “crisis of multilateralism” if the UN is no longer able to meet the challenges of the age. The calls for reform mirrored US President Donald Trump, who also threatened to withdraw funding from the UN on Monday. He urged the organisation to “focus more on people, less on bureaucracy.”
Victory for workplace pension savers over hidden charges
The Financial Conduct Authority has ruled that asset managers will have to disclose their transaction costs to workplace pension schemes if they are asked to. The move should help pension trustees and others figure out if they are getting value for money.
Japan
Japan’s central bank decided to maintain its ultra-loose monetary policy to overcome stubborn deflation and prop up the world’s third-largest economy. The Bank of Japan kept its level of monetary stimulus unchanged as widely expected. Governor Haruhiko Kuroda and his board members decided by an 8-1 majority vote to hold its target of raising the amount of outstanding JGB holdings at an annual pace of about JPY80 trillion. The bank will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.
May Looking to Unlock Talks
Prime Minister Theresa May is reported to be considering whether to accept for the first time the need to discuss the European Union’s demand for a Brexit bill of tens of billions of pounds, in a move designed to kick-start stalled negotiations in Brussels. May will hold talks with her cabinet ministers before deciding how far she can go in promising money to the EU when she makes a landmark speech on Brexit in Florence, Italy, on Friday, a person familiar with the matter said. The primeminister has also signaled she’ll try to bypass EU negotiator Michel Barnier in an appeal to heads of the other 27 EU governments.
German economy to grow robustly
The German economy weakened at the start of the third quarter after a strong performance in the first half of the year, but indicators suggest its solid growth will continue, the Finance Ministry said on Thursday. Europe’s biggest economy is enjoying a consumer-led upswing, propelled by record-high employment, rising real wages and low borrowing costs – conditions that are likely to help Chancellor Angela Merkel win a fourth term in a federal election on Sunday. The Finance Ministry, controlled by Merkel’s conservatives and their veteran lawmaker Wolfgang Schaeuble, said in its monthly report that the economy lost some momentum at the beginning of the third quarter.
When good algorithms go bad
Amazon is reviewing its site in response to a British TV report that a popular feature suggests bomb-making ingredients that go together. Shopping for a remote detonator? Amazon might tell you that “customers who bought this item” also got ignition systems and chemicals to make explosive powder, Channel 4 News said. The items are legal on their own, but the timing of the report — three days after a crude explosive planted on a London tune train — can’t be good.
Government mulling EIS crackdown
Ahead of the next Budget on November 22, the Treasury is considering a crackdown on Enterprise Investment Schemes (EIS), which allow tax breaks for people to invest in start-ups, either directly or through funds. Alex Davies, chief executive of Wealth Club, said: “Such restrictions will force investors into riskier EIS ventures and ones that do not offer the safety-net of company assets, should ventures go bust”. Currently someone investing in an EIS will receive 30% income tax relief, alongside potential capital gains tax savings if the investments are profitable.
HMRC updates on Growth Support Service
HMRC has confirmed further details of its Growth Support Service, whereby businesses turning over £10m or more, or with 20 or more employees, will have access to help with tax queries, help supplying accurate information and exposure to relevant incentives or reliefs. As many as 170,000 mid-sized companies could benefit.
Iran
Iran’s President Hassan Rouhani rejected any US-led effort to alter the 2015 nuclear agreement that President Donald Trump has labeled “the worst deal ever” and signaled he may walk away from, a move the Islamic Republic’s leader said would only damage US credibility. Iran “will not be the first country to violate the agreement, but it will respond decisively and resolutely to its violation by any party,” Rouhani told world leaders at the United Nations General Assembly in New York on Wednesday. The deal “belongs to the international community in its entirety, and not to only one or two countries.”
North Korea Sanctions hitting China
Along China’s border with North Korea, residents are more worried about feeding their families than the possibility of nuclear war.In Hunchun, a city of about 230,000 people near China’s shared frontier with North Korea and Russia, protests briefly broke out last month after the United Nations Security Council approved sanctions banning exports of seafood and other goods from Kim Jong Un’s regime. Dozens of wholesale stores were shuttered, dealing a blow to the packagers, distributors, drivers and restaurateurs who depend on the trade.“Many people are unemployed now,” said Liu Guanghua, 41, who owns one of the few businesses still open on what’s known as Seafood Street. “Sanctions should be against the North Korean government, but this impacts regular people in China and North Korea.”
How to tax the robot workforce?
George Bull, a senior tax partner at RSM, has spoken out regarding greater taxation of firms benefiting from lower employee headcounts amid their increasing use of artificial intelligence and robots. “Job losses will be followed by declines in income tax, social security contributions and other payroll taxes,” he says, suggesting that increasing the rate of corporation tax to compensate, or reducing available tax incentives for research and development could help. Broadening the tax base in other ways, he adds, through the implementation of a land value tax or higher business rates for companies using robotics or AI, could also help.
Investment forecast
Vanguard is surprised by the global economy’s strength this year, but investors should still brace for a decade of “muted returns,” said Hong Kong-based strategist Nathan Zahm, reiterating the money manager’s view that equity returns will drop to 5% to 8% per year. The S&P 500 trades at 19.2 times estimated earnings, the most expensive since 2002, he said.
Hurricane Maria
Hurricane Maria rampaged across Puerto Rico on Wednesday as the strongest storm to hit the island in nearly 90 years, bringing widespread flooding and knocking out power after killing at least nine people in the Caribbean. Maria, the second major hurricane to roar through the region this month, was carrying winds of up to 155mph, when it landed near Yabucoa, on the southeast of the island of 3.4 million people. It ripped the roofs off some buildings and turned low-lying streets into rushing debris-laden rivers. The streets of historic Old Town in the capital, San Juan, were strewn with broken balconies, air conditioning units, shattered lamp posts, downed power lines and dead birds.
Catalan Raid
Spanish police raided Catalan government offices and arrested officials on Wednesday to halt a banned referendum on independence, an action the regional president said meant Madrid had effectively taken over his administration. Tens of thousands of protesters gathered outside the regional government offices in the centre of Barcelona as well as in several other Catalan cities, waving the red-and-yellow Catalan flag and chanting “Occupying forces out” and “Where is Europe?”. “The Spanish state has by all rights intervened in Catalonia’s government and has established emergency rule,” Catalan President Carles Puigdemont said in a televised address.
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