Business News 6th October 2017

CPA’s daily bite-size summary of the business news on Friday 6th October 2017, filled with stories to inform and interest business people.

Market Round up

The UK stock markets continued the run of form yesterday with the FTSE 100 index nudging past the 7500, level not seen since early August, climbing 0.5% to 7508 and the FTSE 250 rising 0.3% to 20,088.5 . The main mover was sterling down 0.75% against Dollar (1.313 at 18:30) and 0.5% against Euro (1.122 at 18:30) after Theresa May conference speech left investors with little confidence of a speedy resolution to Brexit.  Merlin was the stand out winner with news coming they are mulling a bid for part of SeaWorld with commodity stocks following closely behind. Spanish stocks rebounded from heavy losses in the previous session driven by escalating tensions over Catalonia.Spain’s main index, the IBEX 35, gained 2.5%, led by its banking stocks, as worries over Catalonia settled after a successful Spanish debt auction. The Euro Stoxx 50 rose 0.5% to 3613.5. In the US the s&P 500 was up 0.56% to 2552.07 and the Nasdaq up 0.78% to 6585.36.  Asian stocks were also up across the board with markets from China, Japan and Hong Kong climbing around 0.3%. Korea outperformed with the Kospi rising 0.9%.

Oil prices stabilized with Brent at $57.23 and WTI at $50.75, having erased last week’s gains, with rising production and exports from the U.S. knocking investor confidence over how quickly supply cuts elsewhere could reduce the global glut. Gold dipped to $1268.9 after strong U.S. economic data lifted the dollar and underlined expectations that U.S. interest rates would be hiked. Higher interest rates typically boost the dollar and aid bond yields, adding pressure on dollar-denominated, non-yielding gold. Doubts over how long Theresa May will remain in office and question marks over whether the BoE will raise rates this year sent sterling down nearly 1% against the dollar on Thursday. Weak car sales also hurt the pound. The Society of Motor Manufacturers and Traders said the 9.3% decline was cause for “considerable concern”. The pound has opened this morning weaker having dropped against the dollar to 1.3074 and 1.1178 against the Euro.

UK

Brexit

The Trump administration has joined a group of countries objecting to a deal between the UK and EU to divide valuable agricultural import quotas. The EU-UK plan calls for the existing EU quotas to be split between the EU and UK after Brexit based on historical imports and consumption patterns. The US and others, however, argue that method is unfair as it would effectively allow the EU to reduce its obligations to fellow WTO members and set a low bar for the UK as well.

UK Jobs

Permanent job placements in the U.K grew at the weakest pace in five months in September, the Report on Jobs compiled by the Recruitment and Employment Confederation and IHS Markit showed Friday. The number of people placed in permanent jobs increased again in September, but the rate of expansion was the the slowest since April. Temporary or contracts staff placements also registered a marked growth in September. The availability of both permanent and temporary workers continued to fall sharply during September. However the Brexit-driven decline in the availability of staff and surging demand for workers is pushing up starting salaries, according to Markit and the Recruitment and Employment Confederation. Net migration to the U.K. has fallen to a three-year low after an exodus of European workers following the decision to leave the European Union.

Hammond’s bloodbath

Philip Hammond is facing what officials describe as “a bloodbath” in the public finances in his Budget next month as weak economic forecasts derail the government’s plans. As much as two-thirds of the £26bn of headroom in the public finances that the chancellor created last year as a buffer for the economy through the Brexit period is likely to be wiped out after the government’s fiscal watchdog concludes its forecasts for growth have been too optimistic. The Office for Budget Responsibility will publish on Tuesday a new analysis suggesting it has persistently over-estimated Britain’s productivity over the past seven years and will give a broad hint that it will rectify the situation with a more pessimistic Budget forecast.

High street celebrates best September sales performance in five years

The UK high street recorded its best September sales performance in five years according to figures from BDO. Overall like-for-like sales were up 2.9%, reflecting the best monthly growth since April 2014. Sophie Michael, head of retail and wholesale at BDO, said: “Pulling off the best September sales growth for five years is a great result for the high street at the start of this critical trading period.”

OBR prepares to downgrade UK growth

The Office for Budget Responsibility is expected to downgrade its forecast of the UK’s productivity growth on Tuesday, a move which could wipe out as much as two-thirds of the £26bn the Chancellor had set aside last year as a buffer against Brexit uncertainties. Weak growth and a revision down of productivity are thought to be to blame for the downgrade.

 

May safe?

Theresa May is facing growing demands to quit as prime minister after a former cabinet colleague announced he is running a campaign to oust her, intensifying the battle for control of the U.K. government. Grant Shapps, who served as Conservative Party chairman, said he has a list of colleagues who want to choose a new leader of the party and prime minister, after May failed to win a majority in June’s national election. The “list” is “growing” and includes five former cabinet ministers, as well as Tories from both sides of the Brexit debate, Shapps said. Despite the anti-May campaign, it is still not clear if Shapps and others have enough support to force her out of office against her will. Estimates put the rebels at 30 when they need 48 to force a leadership election.

Energy caps

Energy companies have said that the Prime Minister’s cap on energy bills is unlikely to come into effect this winter while the process of consulting with companies takes place. The decision to cap energy bills was one of the headline announcements in Prime Minister Theresa May’s party conference speech and draft legislation, to cap prices for 12 million households on standard variable tariffs, is set to be published next week.

Farmland continues to attract the rich

Wealthy individuals are set to overtake farmers as the primary purchasers of agricultural land as stamp duty rules continue to attract investors and lifestyle buyers. Strutt and Parker said farmers were outnumbered more than two to one in the southeast. Country homes with land have stamp duty capped at 5% compared with up to 12% for a mansion without a farm.

Paul Uppal appointed small business commissioner

The secretary of state for business, Greg Clark, has announced the appointment of Paul Uppal to the newly established role of small business commissioner. Mr Uppal will lead a team providing general advice and information to small businesses regarding resolving disputes with larger businesses and help to drive a culture change in payment practices.

International

US Budget

House Republicans narrowly approved a $4.1 trillion budget resolution on Thursday, taking a key step in efforts to pass their tax reform plan. The House voted 219 to 206 to pass the budget, with all of the votes in favor of the resolution coming from the GOP side of the aisle. Eighteen Republicans joined with all of the Democrats in the chamber in voting against the resolution. The budget resolution includes major spending cuts but is largely seen as a vehicle for Republicans to enact tax reform. The bill unlocks the reconciliation process, allowing Republicans to pass tax reform with a simple 51-vote majority in the Senate.

FED

The Federal Reserve will need to raise U.S. interest rates further to keep the economy on track to full employment and the Fed’s 2-percent inflation goal, Kansas City Federal Reserve Bank President Esther George said on Thursday. “At this stage of the expansion, it is appropriate to move cautiously,” said George, who has typically supported a faster program of rate hikes than most of her colleagues.

Catalonia

Mariano Rajoy convenes his cabinet on Friday as the financial and political squeeze on the separatist government in Catalonia tightens. Jordi Sanchez, one of the architects of Catalonia’s illegal vote, faces interrogation in the National Court today, with sedition charges possible. The region’s biggest banks may depart after customers signaled they’ll pull deposits if independence is declared. Catalonia’s regional government intends to meet as planned on Monday to debate its referendum, Catalan National Assembly leader Jordi Sanchez said. Lawmakers may need to find an alternative venue as the meeting defies a suspension by Spain’s Constitutional Court.

US Payrolls

The U.S. September payrolls data may be more useful as a weather report than a gauge of underlying economic trends, Bloomberg Intelligence said. In that vein it’ll provide a decent glimpse at output impairment from the storms. Consensus expects an 80,000 job increase, about half of August’s total, with a slight uptick in the pace of wage growth to 0.3% on the month.

Nobel Peace Prize

Giving peace a chance again, the Norwegian arm of the Nobel machine will announce the winner (or winners) of the peace prize today. Of the 97 awarded over the years, two in this category have been divided between three laureates. Another factoid: three recipients have been under arrest at the time of the award, including Aung San Suu Kyi, who’s now Myanmar’s de facto leader.

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