Business News 26th September 2017

CPA’s daily bite-size summary of the business news on Tuesday 26th September 2017, filled with stories to inform and interest business people.

Markets Round up

The FTSE 100 fell 0.1% yesterday to 7301.3  while the 250 rose 0.3% to 19,566.4, petroleum stocks are up on firm crude oil prices and a jump in Tullow Oil after international arbitrators determined that the TEN field is located in Ghanian territorial waters and not those of the Ivory Coast. In Europe  the DAX was flat despite the poor election result which although won by Merkel on a smaller majority, saw a rise of the far right AFD and the collapse of coalition. The Euro Stoxx 50 fell 0.1% to 3537.81.  US stocks closed lower with the S&P down 0.22% to 2496.66 and the Nasdaq down 0.88% to 6370.59 as tensions with korea heated up again. Japan called a snap election and the Nikkei fell 0.33% to 20330.19. The Korean Kospi fell 0.26% on the tensions but stocks in China and Hong Kong stayed firm. The global MSCi index is down 0.3% to 1989.07. Oil prices rose to their highest in nearly nine months after major producers said at a meeting in Vienna the global market was well on its way towards rebalancing. The Brent benchmark hitting its highest in more than two years. Rising demand and geopolitical worries fuelled the increase, along with indications that production cuts by Opec members are starting to bite. Brent rose 3.8% to $59.02 a barrel, its highest since July 2015. WTI is at $52.1. Gold prices ticked higher to $1306.77, limping their way out of back-to-back weekly losses as financial market participants kept tabs on lofty U.S. stock prices, supported by safe-haven demand amid rising tensions surrounding North Korea.  Sterling has climbed against the Euro to 1.1410 but weakened against the dollar to 1.3478.

Brexit

Theresa May will hold talks with European Council president Donald Tusk as she attempts to secure a breakthrough in the Brexit process. Tusk will discuss progress with the EU’s chief Brexit negotiator Michel Barnier before heading to London for the meeting with the prime minister. The fourth round of talks on the UK’s withdrawal from the EU began in Brussels on Monday, with Brexit Secretary David Davis insisting there are “no excuses” for blocking progress. However Davis made it clear Britain will only pay up if it gets the final deal it wants. “It’s obvious that reaching a conclusion on this issue can only be done in the context of, and in accordance with, a new deep and special partnership with the EU,” Davis said, standing alongside EU chief negotiator Michel Barnier, who has made it clear the bill needs to be sorted first. Mr Barnier maintained that progress on the three so-called ‘separation issues’ – citizens’ rights, financial settlement and Ireland – are “essential to move the discussion on transition as well as on the future”.  Mr Barnier said “we are six months into the process. We are getting closer to the UK’s withdrawal. I think this moment should be a moment of clarity”.

Brexit will not prove economically beneficial, says economist

Nobel prize-winning economist Paul Krugman told a conference in London that the assertion that Britain will be economically better off after Brexit were untrue. “It’s essentially zero chance that it’ll be beneficial on the trade front,” Mr Krugman said. “I don’t think there’s any plausible case that Brexit is a good thing for the British economy as a whole.” He said the cost of Brexit could be in the order of 2% of GDP.

Japan

As predicted yesterday, the Japanese PM Shinzo Abe has called a snap General Election following the release of a stimulus package worth 2 trillion yen. Abe’s support is up due to his stance on the North Korean missile tests.

Korea

North Korea has accused the United States of “declaring war” – saying it reserves the right to shoot down US bombers even if they are not in its air space. Ri Yong Ho said a Twitter message by Trump on Saturday in which the president warned that the minister and North Korean leader Kim Jong Un “won’t be around much longer” if they acted on their threats amounted to a declaration of war. A White House spokesperson on Monday denied the United States had declared war, calling the suggestion “absurd”.

Euro Economy

Euro area economic recovery is now firm and broad-based, and the latest data suggest that the momentum is set to continue in the period ahead and policymakers are more confident that inflation will converge at the target eventually, European Central Bank President Mario Draghi sad. “The ongoing recovery is, crucially, driven by domestic forces, and the labor market has notably improved,” Draghi said at a hearing at the European Parliament in Brussels. “The domestic drivers are making the recovery more robust and resilient to adverse external influences,” he said.

Price Comparison

A competition investigation has been launched to find out if an unnamed UK price comparison website is increasing prices for home insurance, while also laying down new rules for how all sites use data and display information. The Competition and Markets Authority published its final report following a market study into the use of price comparison sites and other apps. While the probe found that these sites help consumers shop around, the CMA found sites were often not working in people’s best interests and maybe unfairly promoting their favoured insurers.

Green UK energy

More than half the UK’s electricity came from low carbon sources this summer, the National Grid says, making it the “greenest” summer on record. Between late June and September, 52% percent of electricity generation was met by low carbon sources, compared with about 35% four years ago.

Britain hosts most unicorns in Europe

Britain remains the technology capital of Europe and is home to 22 of the 57 European businesses in the sector valued at upwards of $1bn, more than any other country, according to research from GP Bullhound

City calls for regulatory alignment

A strategy group sponsored by the City of London and TheCityUK has said it does not want to see a “bonfire of regulations” post-Brexit as it unveiled plans for a new dispute resolution body. In contrast to David Davis’ recent statement that EU and UK rules on financial services could diverge after Brexit, the International Regulatory Strategy Group (IRSG) says it wants a free trade agreement based on regulatory alignment between Britain and the EU. Mark Hoban, chair of the IRSG, which is backed by foreign banks including Deutsche Bank, JP Morgan, Goldman Sachs and BNP Paribas, said: “There is no appetite in the City of London for a bonfire of regulations.” The dispute resolution body, inspired by the EFTA court, would be populated by unelected judges who would be able to terminate access to the EU market from a sector where British laws moved too far away from EU standards.

Many firms unprepared for new tax-dodging rules

UK companies may not be prepared for new tax evasion laws coming into force this Saturday, according to Blake Morgan, which fears “many” commercial and non-profit firms may be at risk of fines under the new Criminal Finances Act 2017. The law firm said companies must prove they have “reasonable” policies and procedures in place to prevent employees, agents and joint venture partners from facilitating tax evasion in the UK or abroad. Simon Stokes, a commercial partner at Blake Morgan, said: “Having proper procedures in place that identify and mitigate tax evasion facilitation risks will significantly reduce the risk of prosecution, and ought to provide a good defence if required”.

Labour pledge to bring PFI contracts in-house

Shadow chancellor John McDonnell has pledged to return PFI contracts to the government’s books, compensating shareholders with government bonds. Parliament would assess the appropriate level of compensation and those shareholders based in tax havens would receive less. Following McDonnell’s announcement, an email briefing stated that the party would in fact undertake an audit of contracts and only take them back in house “if necessary”. Business groups have expressed alarm at Labour’s plans for the forced nationalisation of large sections of British industry. The CBI’s Carolyn Fairbairn said the plans would see investors “running for the hills” just when they are dealing with concerns about Brexit.

Haddrill: Britain may to adopt different accounting standards post-Brexit

According to the Financial Reporting Council (FRC), Britain should consider deviating from global accounting standards and from EU plans to implement these standards after Brexit. FRC CEO Stephen Haddrill said that some aspects of financial bookkeeping standards may need to be adopted differently. Mr Haddrill also warned that a future agreement on equivalence of audit regulation could put the country in a “straitjacket.”

Trump bans more travellers

President Trump announced new travel restrictions on citizens from North Korea, Venezuela and Chad, expanding to eight the list of countries covered by his original travel bans that have been derided by critics and challenged in court. Iran, Libya, Syria, Yemen and Somalia were left on the list of affected countries in a new proclamation issued by the president. Restrictions on citizens from Sudan were lifted, although unlike the president’s original bans, which had time limits, this one is open-ended

Macron to press case for Eurozone reform despite Merkel setback

France’s President Emmanuel Macron will press the case for ambitious reforms of the Eurozone and EU, undeterred by German election results that herald difficult coalition talks for Chancellor Angela Merkel, his main partner. Mr Macron will insist in a speech on the EU on Tuesday that “a more integrated Europe” is the path to “real sovereignty” for its peoples, Elysée aides said, a day after Ms Merkel’s Christian Democrat-led bloc and the centre-left Social Democrats slumped to their lowest share of the German national vote in nearly seven decades. Despite reticence in Berlin, the French leader will propose a separate budget, a finance ministry and a European monetary fund for the Eurozone.

Bank of England warning

The Bank of England has warned banks have been underestimating the hit they would take from consumers defaulting on debt in a downturn. The Bank’s Financial Policy Committee urged banks to increase the capital buffers by £10 billion as a buffer.The FPC said there were “pockets of risk” in the current level of lending on loans, overdrafts and credit cards, and that these risks come in an otherwise stable environment. It is estimated that in a “severe downturn”, UK lenders could incur losses of £30 billion, or the equivalent to 20% of UK consumer credit loans.

ECB’s Draghi warns against hasty policy moves

The European Central Bank is growing increasingly confident that inflation will rise back to its target, but patience is still needed, not least to make sure the economic recovery lasts, ECB President Mario Draghi said on Monday. Draghi singled out currency volatility as a source of uncertainty that required monitoring and argued that “ample” ECB accommodation was still needed, because a premature and hasty move could unravel its work. “Overall, we are becoming more confident that inflation will eventually head to levels in line with our inflation aim, but we also know that a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialize,” Draghi said.

Worlds second Biggest Diamond sells

Diamonds are said to be a girl’s best friend, especially the biggest found in more than a century. Lucara Diamond sold the 1,109-carat Lesedi La Rona for $53 million to Graff Diamonds. “Our light,” as it’s called in the Tswana language spoken in Botswana where it was found, is just smaller than a tennis ball and second in size only to the Cullinan, a 3,106-carat gem unearthed in South Africa in 1905.

Board Diversity

More than two-thirds of investors think it’s “problematic” for corporate boards to have no women. So do a majority of respondents from companies, boards and elsewhere, according to a survey by Institutional Shareholder Services. The problem is worse in Asia, where most of the richest men run companies with few, if any, female board members. Jack Ma’s Alibaba has one woman on the board.

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