Business News 22nd September 2017
CPA hopes to inform, with its daily bite-size business news on Friday 22nd September 2017, filled with stories we think will interest Business people.
Markets Round up
Market reactions to Janet Yellen’s comments were mixed. Banking stocks were boosted though by the prospect of a US interest rate rise. However the FTSE100 fell 0.11% to 7263.90 In Europe meanwhile the Euro stoxx 50 climbed 0.4% to 3539.59 and the 600 climbed 0.24% to 382.88. Whilst Yellen did signal a winding down of QE there was enough of a dovish tone to keep markets quiet. The UK attention appears to have moved quickly to May’s speech in Florence. In the U.S. stocks closed lower with the S&P 500 down 0.3% to 2500.6 and the Nasdaq dropped 0.52% to 6422.69, with market heavyweight Apple dropping on concerns about its latest iPhones, while financials rose as investors reacted to rising expectations for a third interest rate hike this year. Equity markets across the Asia-Pacific region were down, with stocks in Japan reversing early gains following fresh threats from North Korea, while China-related stocks declined on a credit-rating downgrade. Japanese markets were down 0.25% but the Hong Kong Hang Seng dropped 0.7% and the Korean Kospi fell 0.74%.
Oil prices edged higher with WTI up to $50.68 and Brent at $56.56 as the market waited to see whether major oil producers would extend supply cuts beyond March at a meeting in Vienna later today. Gold edged up from a four-week low to $1297 as the latest twist in tensions between the United States and North Korea prompted investors to seek out the safe-haven asset. Sterling remains at 1.13 euros but is edging up against the dollar and is threatening to hit $1.36.
Brexit
Theresa May chaired a special cabinet meeting yesterday to discuss her much-anticipated speech on Brexit this week, as critics said divisions in the government could make any new pledges largely symbolic. May’s government made no immediate comment following the meeting at Downing Street, her London residence, which took place amid a reported split in the cabinet over how to proceed with Brexit. Ahead of the UK Prime Minister’s major Brexit speech, chief European Union Brexit negotiator Michel Barnier has warned Theresa May against trying to have her cake and eat it and stressing that if a transition period is requested it will first require a withdrawal agreement. The fourth round of Brexit talks was pushed back by a week in order for May to deliver her address in Florence, where she is expected to make several key offers or requests to get stalled Brexit talks back on track, including offering €20bn to help plug the post-Brexit hole in the bloc’s finances and pushing for a ‘status quo transition’ of up to two years, where the UK remains in the single market and the customs union for the duration of the transition phase. Theresa May will tell European counterparts their shared political legacies depend on agreeing a good Brexit deal as she seeks to break the deadlock in negotiations over the UK’s withdrawal from the European Union. The prime minister will set out her plans for a transitional period from the formal date of Brexit in March 2019, expected to last two years, before moving to a permanent trade deal. May is thought to be considering an offer of paying around EUR20bn over the transition period in order to secure favourable trading arrangements, which would also help address Brussels’ concerns about the potential hole in its current budget caused by the UK’s exit. And she is also reported to be ready to give ground on the issue of citizens’ rights for EU nationals in the UK, enshrining the terms of any deal in a formal treaty.
Korea
Kim Jong Un on Friday described Donald Trump as “deranged” and Pyongyang’s foreign minister said North Korea may test a hydrogen bomb in the Pacific as the recalcitrant nation hit back at the US president after the latest attempt to curb its nuclear programme. Trump signed an executive order on Thursday boosting the United States’ ability to sanction foreign banks, individuals and companies that facilitate trade with North Korea. The move “will cut off sources of revenue that fund [North Korea’s] efforts to develop the deadliest weapons known to humankind,” Trump said on the sidelines of the UN General Assembly in New York.
US Unemployment
First-time claims for US unemployment benefits unexpectedly decreased in the week ended September 16th, according to a report released by the Labor Department on Thursday. The report said initial jobless claims fell to 259,000, a decrease of 23,000 from the previous week’s revised level of 282,000. The continued decrease surprised economists, who had expected jobless claims to climb to 300,000 from the 284,000 originally reported for the previous week.
China downgraded
China’s credit rating has been downgraded by Standard & Poor’s (S&P) because of worries over the rapid build up of debt in the country. S&P cut China’s rating by one notch from AA- to A+, saying its debts had raised “economic and financial risks”. The International Monetary Fund warned in August that China’s credit growth was on a “dangerous trajectory”. S&P’s move puts its rating for China on a par with the two other major credit rating agencies, Moody’s and Fitch.
VAT & the defecit
Bumper VAT receipts have helped government borrowing to fall to its lowest August level since 2007, according to official figures. The government’s deficit narrowed to £5.7bn last month, compared with £7bn a year earlier, the Office for National Statistics (ONS) said. VAT receipts rose by 5.6% from last year to £11.6bn, a record for August. For the financial year to date, the government has borrowed £28.3bn, down £0.2bn from the same point last year. The monthly deficit for August was lower than analysts had forecast and followed a £0.2bn surplus in July, which was the first such surplus for that month since 2002.
FCA says LPAs should be available online
The Financial Conduct Authority has suggested that Lasting Power of Attorney should be possible to obtain online to make it easier to apply. In a paper on improving financial services for the UK’s ageing population, the FCA said the Office for Public Guardian could let people fill in online forms. But the suggestion has concerned lawyers who say the move could put elderly people at an increased risk of financial abuse.
UK to diverge from EU on financial services rules after Brexit
Britain will seek to find competitive advantage for the financial services industry once a transitional period is over by ensuring the UK was not tied to regulatory structures it could not amend, David Davis reportedly said last week.
City jobs increase since Brexit vote
Financial services companies have created a total of 3,000 more jobs in the second quarter of 2017 compared to the time of the Brexit vote, official statistics show. John Longworth, a former head of the BCC, said: “The City is in rude health.”
EU plans tax clampdown on tech giants
The European Commission has said it is prepared to introduce new rules to ensure digital multinationals pay a fair amount of tax if the OECD fails to draw up internationally agreed laws. Unilateral action would anger the US, Japan and other countries, the Times notes, and the EC has admitted questions remain over how the move would be compatible with double-taxation treaties, WTO rules and free trade agreements. However, the Commission said a digital business with international operations typically pays a 10% tax rate in the EU, compared with a 23% rate for traditional companies. “Companies must pay their taxes where they make their profits. Digital companies that don’t have a physical base or sales outlets but still make huge profits in the EU, should not be an exception to this rule,” Pierre Moscovici, the commissioner for taxation, said. Progress on the issue is predicted to be will be slow, with the OECD not expected to report until next year. However the EC has mooted a possible suspension of national vetoes on taxation in order to push changes through.
SRA warns solicitors over tax planning advice
The Solicitors Regulation Authority has warned lawyers that they will view the facilitation of tax avoidance schemes as an act of misconduct and stands prepared to take action “if it sees evidence of a lack of integrity in a solicitor’s dealings with HMRC, either directly or on behalf of clients.” The statement comes amid concerns that some solicitors are facilitating schemes in ways that go beyond the intentions of parliament. However, officials at the regulator also expressed frustration that “HMRC was constantly moving the goalposts.” Lawyers welcomed the warning though, but called on the government to crack down on the sponsors of illegal schemes.
SMEs need to cultivate succession
Anna Isaac talks to Institute for Family Business policy director Fiona Graham about succession problems for family firms. Ms Graham suggests plans for succession should be started as early as possible. She said: “Engaging the next generation, developing younger family members into responsible owners, and finding the right talent to pass on the reins of the business are all challenges.” The Telegraph notes a PwC study last year showing 43% of family firms do not have succession plans. The danger is there will be no one willing to buy the business when it comes to retirement, experts say.
The Daily Telegraph, Business, Page: 8
Property market lull continues
On a seasonally adjusted basis, property transactions fell 0.5% between July and August to 103,490, according to data from HMRC, providing further evidence of a stagnating property market. Although the figure is 6.6% above last year, HMRC noted it was flat on 2015. “Caution should be used making comparisons of transactions between August 2017 and August 2016 as some taxpayers may have changed their behaviour as they considered the result of the June 2017 General Election, and the EU referendum in June 2016,” it said.
Draghi: still too many non-performing loans across eurozone banking system
ECB president Mario Draghi has warned that there are too many non-performing loans in the eurozone’s banking system. However, he said that new accounting standard, IFRS 9, would help solve problems with NPLs more quickly during future financial crises.
Rise of accountants and City culture blamed for Britain’s industrial decline
Anthony Hilton reviews Tom Brown’s book “Tragedy and Challenge: An inside view of the UK Engineering Industry’s decline and the challenge of the Brexit Economy” in the Standard. In it Brown says the brightest people were channelled into the professions at the expense of the engineering industry. The result was businesses run by accountants, with management subsequently measuring success by short-term prosperity instead of long-term competitiveness.
Evening Standard, Page: 48
Electric Cars Can Create the Biggest Disruption Since iPhone
see this interesting read on Bloomberg.
Philippines
Thousands of Filipinos rallied on Thursday to denounce Philippines President Rodrigo Duterte and warn of what they called an emerging dictatorship, in a major show of dissent against the controversial but hugely popular leader. Politicians, indigenous people, priests, businessmen, and left-wing activists held marches and church masses accusing Duterte of authoritarianism and protesting at policies including a ferocious war on drugs that has killed thousands. Signs saying “Stop The Killings” and “No To Martial Rule” reflected fears that Duterte would one day deliver on his threat to declare nationwide military rule like that imposed by late dictator Ferdinand Marcos.
Mexico
Rescuers toiled on Thursday to extract survivors from collapsed buildings after Mexico’s deadliest earthquake in 32 years, but the Navy said no children were now trapped at a school at the heart of rescue efforts. More than 50 survivors have been plucked from disaster sites in Mexico City since Tuesday’s 7.1-magnitude quake, and first responders, volunteers and spectators joined in chants of “Yes we can!” The death toll was at least 233, according to Mexico’s head of civil protection Luis Felipe Puente. In Mexico City 1,900 were injured
Catalan Independence
The Catalan regional leader on Thursday said he would press on with the referendum on a split from Spain, flouting a court ban, as tens of thousands gathered for a second day on the streets of Barcelona demanding the right to vote. Catalan leader Carles Puigdemont said he had contingency plans in place to ensure the vote would go ahead, directly defying Madrid and pushing the country closer to political crisis. “All the power of the Spanish state is set up to prevent Catalans voting,” Puigdemont said in a televised address. “We will do it because we have contingency plans in place to ensure it happens, but above all because it has the support of the immense majority of the population, who are sick of the arrogance and abuse of the People’s Party government.”
Or see our recent previous news pages
Business News 21st September 2017
Business News 20th September 2017
Business News 19th September 2017
Business News 18th September 2017
Business News 15th September 2017
Business News 14th September 2017
Business News 13th September 2017
Business News 12th September 2017
Business News 11th September 2017
Business News 8th September 2017
Business News 7th September 2017
Business News 6th September 2017
Business News 5th September 2017
Business News 4th September 2017
Business News 1st September 2017
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