Business News 27th September 2017

CPA’s daily bite-size summary of the business news on Wednesday 27th September 2017, filled with stories to inform and interest business people.

Markets Round up

The FTSE100 traded in a narrow range on Tuesday between 7311.8 and 7280.3 closing towards the bottom of this range, down 0.2% at 7285.7. This followed on from Asian markets which were down modestly. This continued the trend of the markets moving between risk on and off since August,mostly due to the simmering tensions with North Korea and the latest statement from the country’s Foreign Minister stating that the nation can shoot down U.S. warplanes. The FTSE 250 fell 0.3% to 19,503.2. In Europe, the Euro Stoxx 50 was flat at 3536.38. in the US of A, the S&P500 was flat at 2496.84 while the nasdaq crept up 0.15% to 6380.16. In Asia, analysts digested Janet Yellens overnight speech, putting North Korea to the side for once, the Japanese Nikkei fell 0.3% to 20267, The chinese CSI 300 was flat at 3821.2, the hang seng rose 0.5% to 27656 and the Korean Kospi was flat at 2372.58. Oil prices fell from 26 month highs after investors took profit following a rally to 26-month highs spurred largely by threats from Turkey to cut crude exports from Iraq’s Kurdistan region with WTI at $52.1 and Brent down to £58.4. Gold prices eased under pressure from the dollar to $1292.5, with investors booking profits after rising tensions between North Korea and the United States pushed the metal to a one-week high. The US dollar strengthened on Yellens comments with sterling falling to 1.339 US dollars. Meanwhile the pound also fell against the euro to 1.139.

Brexit Bill

As U.K. and EU officials haggle over the size of the Brexit divorce bill, documents show that the EU’s liabilities grew by almost 4 percent in 2016, with the cost of pensions for EU officials and lawmakers rising more than 5 percent. Britain agreed last week to cover its financial commitments and to keep paying into the EU’s budget until 2020 as part of an offer aimed at unblocking talks, but increasing costs show the calculations are far from straightforward and the U.K.’s obligations may be growing.

Mortgages

UK mortgage lending remained largely unchanged but consumer credit eased lower last month, according to the latest figures from the banking industry, while businesses began to hold onto more cash in the face of political and economic uncertainty. Approvals for house purchase mortgages from the main high street banks increased to a six-month high of 41,807 in August from 41,644 in July and a nine-month low of 40,424 in June. The consensus forecast was for no change and August’s level was 5.5% below January’s 44.3k, above the post-referendum average of 40.7k and below the previous 10 years’ average of 51.7k.

Equifax

Equifax has announced that its chairman and chief executive, Richard Smith, is stepping down with immediate effect. The move comes as Equifax struggles to rebuild its reputation after it emerged earlier this month that the firm had suffered a massive data breach. Data on up to 143 million Americans may have been stolen by hackers between mid-May and July.

Dyson Car

Expensive vacuums and high-powered hand driers are now old news, Dyson is moving on to the next big thing, electric cars. The company’s investing one billion pounds to develop an electric vehicle, plus the same sum to create solid-state batteries to power it, founder James Dyson said. And since his company’s joining a rather crowded field, Dyson said his vehicle will be “radically different,” and use batteries that are smaller, more efficient and easier to charge.

Janet Yellen

The head of the FED, Janet Yellen speaking at the National Association for Business Economics,, argued against waiting until inflation had returned to its 2% target before tightening policy and the they should be careful not to proceed too slowly. Federal Reserve chair Janet Yellen said: “It would be imprudent to keep monetary policy on hold until inflation is back to 2%”. Nevertheless, she admitted there was uncertainty on various fronts, including the strength of the jobs market, what was implied by the current level of inflation expectations and even the fundamental forces behind inflation.

Trump’s Tax Overhaul

President Donald Trump and Republican leaders reportedly will announce their long-awaited tax overhaul plan later today, cutting rates for corporations and pass-through businesses. They’ll also propose a top individual rate of 35 percent but leave to Congress the decision of whether to create a higher bracket for top earners. The rate on corporations would be set at 20 percent, down from the current 35 percent rate, and businesses would be allowed to immediately write off their capital spending for at least five years.

Korea

Donald Trump said yesterday that the US would be willing to take the military option against North Korea “if we have to” as he urged global leaders to unite in a bid to cut off Pyongyang’s economic lifelines. “We’re totally prepared for the second option. [It’s] not a preferred option, but if we take that option it will be devastating – I can tell you that – devastating for North Korea. That’s called the military option. If we have to take it we will,” the US president warned. “He’s saying things that should never ever be said,” he added, referring to Kim Jong Un, the North Korean leader. “And we are replying to those things.”

China’s third-quarter growth slips

China’s economic growth likely slipped in the third quarter but was still in far better shape than last year, a private survey showed on Wednesday, while adding that major risks are looming for 2018. Profits at Chinese firms are much healthier and hiring remains robust, but a five-quarter boom in commodities which has stoked growth has begun to reverse, according to the quarterly survey of thousands of Chinese firms by China Beige Book International (CBB). “While growth eased almost across the board quarter-on-quarter, the economy boasts a number of success stories,” CBB said in its report.

Saudi Arabia

Saudi King Salman on Tuesday ordered that women be allowed to drive cars, ending a conservative tradition seen by rights activists as an emblem of the Islamic kingdom’s repression of women. The kingdom has been widely criticised for being the only country in the world that bans women from driving, despite gradual improvement on some women’s issues in recent years and ambitious government targets to increase their public role, especially in the workforce. The royal decree ordered the formation of a ministerial body to give advice within 30 days and then implement the order by June 24, 2018.

Corbyn’s robot tax

Jeremy Corbyn has said those companies which profit from the use of robots will face extra taxes under a Labour government. In his conference speech, the Labour leader will say that advances in robotics and technology need to be managed “for the benefit of society as a whole”. He will say: “We need urgently to face the challenge of automation; robotics that could make so much of contemporary work redundant. That is a threat in the hands of the greedy.” Charlie Elphicke, a Conservative MP, said: “We all want to see companies like Google, Amazon and Facebook pay a fair share of tax but taxing innovation and new ideas is economics of the mad house.” Elsewhere, London mayor Sadiq Khan said he will stand up to Mr Corbyn and the shadow chancellor if they threaten the London economy with tax rises or other detrimental policies.

UK’s tax system too complex for simple assessment

HMRC is rolling out new forms which will be pre-filled using its own data in a move experts say will create chaos for millions of taxpayers. The so-called “simple assessment” system is designed to show taxpayers how much they owe, but experts say one in ten calculations will contain errors. Nimesh Shah at Blick Rothenberg said the complexity of the UK’s personal tax code makes the idea of simple assessments “largely unworkable.” An HMRC spokesperson said the system was being rolled out in “baby steps”.

Macron: Britain may want to re-join reformed EU

French President Emmanuel Macron has said he hoped the UK may “one day find its place again” in a multi-speed Europe during an hour-and-a-half long speech at the Sorbonne on reforming the EU. Macron revived the idea of a pan-European financial transaction tax and a joint European defence budget and policy, along with a common budget funded by corporate tax receipts and supervised by a finance minister. Europe needed to be strengthened by its leaders making it more “sovereign, united and democratic” Macron said.

Bombardier

The US Department of Commerce has ruled in favour of Boeing in its row against Canada’s Bombardier, deciding to impose an interim tariff of around 220% on the import of the latter’s sales to the US. The move could threaten thousands of jobs in the UK. Boeing accused Bombardier of the ability to sell its C-Series jets at below cost into the US thanks to state subsidies from the UK and Canada. Bombardier manufactures its C-Series aircraft in its Belfast factory, which employs 4,500 people

Brexit & House prices

Savills predicts that the lacklustre high-end property market in the capital will boom once Brexit is decided, with values rising 20% between 2018 and 2022. The firm’s Yolande Barnes says risks to the City related to Brexit have been overplayed and that it will remain a key global financial centre and hub for technology. “Its prime markets will therefore benefit from new domestic wealth generation as well as attracting wealthy international buyers” she adds. In the meantime, however, the number of £1m-plus homes that have had to drop their price his year has nearly doubled because of uncertainty over Brexit and higher stamp duty charges.

Former MPC member says no basis for rate rise

David Blanchflower has said there is no basis for an increase in the BoE interest rate given the tougher economic outlook. The former monetary policy committee member said: “The enhanced uncertainty over the form Brexit will take will constrain growth even further […] Britain is the sick man of Europe.” His views were echoed by Goldman Sachs and Credit Suisse, whose economists said a rate hike “against the backdrop of weak growth, high-currency-generated inflation but weak wage pressures and uncertainty is likely to be a policy mistake.” Separately, the World Economic Forum has said that the UK’s overall “competitiveness” score has reached its highest level since the Swiss think tank began running the global index in 2007.