Business News 2nd August 2017
CPA hopes to inform, with its daily bite-size business news on Wednesday 2nd August 2017, filled with stories we think will interest our members and visitors.
Markets Round up
Growth in China’s manufacturing quickened in July, British manufacturing growth accelerated more than expected in the month and the annual growth in UK house prices topped forecasts, helping fuel optimism about global growth. The FTSE 100 had a strong session yesterday, led by the majority of reporting companies as the index climbed 0.7% to 7423.66. Rolls-Royce led the index higher, jumping over 10% after its profits beat expectations. The company reported a 12% rise in revenues, helped by a 27% increase in large engine deliveries. Intertek Group was another big riser, up 9.2%, after the product testing company said its half-year profits rose more than 20% to £210.3m. Direct Line lifted the bluechip insurers after rebasing the dividend policy and lifting the interim 38% to 6.8p and reporting a 9.5% increase in operating profits. Shares closed 5.4% higher. The FTSE 250 also climbed 0.4% to 19,864. The Euro stoxx 50 climbed 0.8% to 3,477 driven by corporate results with 44 shares up and just 6 down with Moet Hennessy, Allianz & Siemens all playing a major role in the uplift. The US markets picked up the baton, driven by US financials such as Goldman Sachs and JP Morgan Chase and all the indexes climbed too, with the S&P and Nasdaq both up a quarter of a percent to 2476 and 6363 respectively. The Dow was up a third of a percent and is very close to the symbolically significant 22,000 barrier at 21,963, a record high in itself. On the S&P 317 stocks were up and 179 were down with Amazon & Autozone contributing most to the rise with 0.9% and 1.5% respective rises. In Asia, stocks were bouyed by strong results from Apple announced after the US market closed and falling commodity prices as the Japanese Topix and Nikkei were up 0.4% and 0.5%, The Hong Kong Hang Seng was up 0.6%, the chinese CSI 300 fell a quarter of a percent, the Korean Kospi was up 0.2% and the Australian ASX 200 fell 0.5%. The MSCI world index of stocks has moved up 0.5% in the last 24 hours to 1970.
The pound was flat against the Euro and Dollar at €1.1173 and $1.3223 but rose against the yen 0.6% to ¥146.48. The Aussie Dollar also fell 0.6% to 1.6615. Oil currencies fell with the ruble down 1.4%, the Norwegian Krone down 0.5% and Canadian dollar down 0.9%. This was driven by a fall in oil as WTI fell 3% to $48.8 and Brent fell 2.6% to $51.5 as a report showed OPEC production rose in June (with Libyan & Iraqi rises offsetting Saudi cuts) and despite promises to control supply. Gold fell 0.5% too, to $1267.
SMEs power UK growth
Small businesses account for almost three-quarters of private sector employment growth since 2011, and employ 15.7m people nationally, according to research from npower and Capital Economics. The sectors that are fuelling the growth of small businesses include film and TV production, machinery repair, healthcare, mobile food services and education support.
Surge in exports boosts manufacturing
A surge in export orders helped to lift manufacturing activity last month, according to a closely-watched survey. The Markit/CIPS manufacturing PMI rose to 55.1 in July, up from 54.2 the month before. A figure above 50 indicates expansion. Meanwhile, a survey by the CBI suggests SME manufacturers are enjoying the fastest production growth for seven years. The business group said its poll of 364 SMEs also found growth in orders “remained solid” in the three months to July.
HMRC launches online forum for SMEs
HMRC has launched an online tax forum and webchat service for small businesses and the self-employed. The Small Business Online Forum will offer assistance for businesses taking on employees, buying and selling abroad, or enquiring about tax credits. A pilot of the service was launched in March and more than 1,000 users have registered since.
FT Adviser
Apple
Apple was the focus of overnight markets as it reported a 7% year on year rise in quarterly revenues to $45.4bn (£34.4bn) after the US market closed. The news sent its stock futures up more than 5% in after-hours trade. Apple put the rise down to services such as Apple Pay, the App Store and Apple Music helping to drive growth in its third quarter. The services unit was what one analyst described as a “shining light” during a period along with robust sales across Apple’s different product lines, including iPhones and iPads. Apple, which also forecast strong sales, is expected to release new and updated iPhones next month. Apple chief executive Tim Cook was tight-lipped when it came to details on the new launch and said reports about the new phones may have caused some people to “pause” their purchases of the existing phones. But “while that affects us in the short-term, it probably bodes well”, he added.
NIESR: Raise interest rates
The National Institute of Economic and Social Research has said the Bank of England should consider removing some of the stimulus it unleashed in the aftermath of the European Union referendum last year. The think-tank said that the economy was doing better than most forecasters, including the Bank of England and the Treasury, had anticipated. It is forecasting an acceleration in growth next year to 1.9%, from an estimate of 1.7% this year.
North Korea
US Secretary of State Tillerson used his lengthiest enunciation of US foreign policy yet to reassure Kim Jong Un that the US is not seeking to topple North Korea’s supreme leader or his regime, and adopting a more conciliatory tone around opening communication channels. The move will no doubt ease tensions. Washington would like to “sit down” for talks. Mr Tillerson made the remarks on Tuesday in an unexpected and rare visit to reporters at the state department after months of uncertainty over the direction of US foreign policy, rampant apparent contradictions with President Donald Trump and a holiday that had stoked rumours he was considering resigning.
Hard Brexiters
Most Leave voters say that “significant damage” to the economy is a “price worth paying” for Brexit, underlining the sharp political divides in the UK and the difficulty facing pro-EU advocates. Polling by YouGov found that a large proportion of the public did not prioritise economic considerations in the referendum to leave the EU. It comes as members of Theresa May’s government appear to have embraced a softer Brexit transition, partly to avoid disruption to businesses. Nearly 40 per cent of Leave voters said that the loss of their own or a family member’s job would be “a price worth paying” for Brexit.
Low-tax economy not in UK’s nature
The Telegraph’s Jeremy Warner says Philip Hammond’s pledge that the UK will not engage in a race to the bottom on tax and regulation after Brexit reflects an underlying economic reality. He says the UK economy is “temperamentally incapable” of supporting a tax burden of anything above 40%, but hardly ever does it fall below 35%. Any move towards low tax status would be “a profoundly difficult passage,” he adds.
The Daily Telegraph, Business, Page: 28
Sanctions Bill
The British government published plans on Wednesday for a bill that would give it the legal power to impose sanctions after it leaves the European Union, including making it easier to cut off terrorism funding and freeze assets. Britain now negotiates and imposes non-UN sanctions against specific countries through EU laws. Without the new legislation, it would not have the legal authority to enforce those sanctions. More than 30 sanctions regimes are currently in place, including against Russia, North Korea and Iran.
China
U.S. President Donald Trump is close to a decision on how to respond to what he considers China’s unfair trade practices, a senior Trump administration official said on Tuesday. Trump is considering encouraging U.S. Trade Representative Robert Lighthizer to initiate an investigation of Chinese trade practices under the 1974 Trade Act. The Trade Act of 1974 allows the president to unilaterally impose tariffs or other trade restrictions to protect U.S. interests. The top Democrat in the U.S. Senate, Chuck Schumer called on President Donald Trump on Tuesday to block some Chinese investments in the United States to pressure China “to help rein in North Korea’s threatening and destabilizing behavior
London Stock Exchange
The UK’s stock market listing rules should not be watered down for companies owned by sovereign wealth funds, warned Institute of Directors. The intervention comes after Financial Conduct Authority (FCA) stated it would allow Saudi Aramco, oil giant and one of the biggest companies in the world, to be listed on the London Stock Exchange at a value of £1.5 trillion. The key issue would be the fact that Saudi Aramco, a sovereign controlled company, would be allowed to float in Britain despite meeting the rule that 25% of a premium-listed company’s shares should be freely available. While efforts should be made to ensure that UK’s equity markets remain competitive post-Brexit, any changes to listing rules must enhance, not diminish, the UK’s reputation for world-class corporate governance, the IoD commented.
German Autos
After nearly two years of constant crisis, the German car industry is looking to salvage its beleaguered diesel technology and draw a line under an emissions scandal that shows no signs of abating. At an emergency summit in Berlin called by the government, the chief executives of Volkswagen AG, Daimler AG and BMW AG will face off with ministers and state leaders to convince them that, despite the steady drumbeat of negative news, diesel has a future. “The manufacturers will play their part to improve air quality in cities and make diesel fit for the future,” said Matthias Wissmann, head of German auto lobby VDA. Dealing with the crisis is a difficult balancing act in Germany, where every fifth job depends on the industry and the sector accounts for more than half of the country’s trade surplus. Last year, some 46 percent of the cars sold in the country had a diesel engine. “The political system, the parties, the government in Germany has part of the responsibility for the current situation,” Ferdinand Dudenhoeffer, director of the University of Duisburg-Essen’s Center for Automotive Research, said in an interview with Bloomberg TV. “Our politicians and our car industry want to save the past,” but “diesel is a mess, and they need to find a solution for the future.”
The AA skid
The AA has fired its executive chairman, Bob Mackenzie, for “gross misconduct”, with immediate effect. An AA spokeswoman said it was “a personal conduct matter”. But Mr Mackenzie’s son said his father had “tendered his resignation this morning… due to acute ill health”. Peter Mackenzie said: “This is an extremely distressing mental health issue.” Shares in the AA closed 14% lower after the roadside recovery firm also said trading had been affected by “erratic workload patterns”.
Previous News pages
Business News 1st August 2017
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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