Business News 6th September 2017
CPA hopes to inform, with its daily bite-size business news on Wednesday 6th September 2017, filled with stories we think will interest Business people.
Markets Round up
European and U.K. Shares initially crept higher yesterday, brushing off geopolitical tension as attention turned to deal-making after Aveva’s tie-up with Schneider Electric, while commodities-related sectors and health stocks underpinned broader gains. But markets gave up those early gains yesterday when a pullback in US markets after the Labour day holiday gathered momentum. The FTSE 100 was also hindered by a stronger pound up 0.7% against the dollar to trade over the £1.30 level. The internationally focused FTSE 100 fell 0.5% to 7372.9, while the more domestic facing FTSE 250 climbed 0.2% to 19,726.8. The Euro Stoxx 50 also fell 0.3% to 3420.9 and the Euro Stoxx 600 fell 0.1% to 373.7 with only the German DAX climbing (0.2%) while the rest of the major European indexes fell. On the corporate front, retailers and leisure companies staged a small rally after a couple of negative weeks – Provident Financial dropped 6% after last week’s confirmation of the stock being demoted from the FTSE100.
U.S. Markets declined in early trading as investors returned from the Labor Day holiday weekend. The S&P 500 closed down 0.75% at 2457.85 and the Nasdaq fell 0.93% to 6375.57. Financial shares and technology companies were down more than the rest of the market as renewed worries about North Korea pushed investors away from equities and towards bonds and other safe investments.. Energy companies led the gainers as the price of crude oil headed higher.
Sterling strengthened against the dollar almost 1% to 1.304 and about 0.4% against the euro to 1.092. Oil prices rose over 2% and gasoline fell as the gradual restart of refineries in the Gulf of Mexico that were shut by Hurricane Harvey raised demand for crude and eased fears of a fuel supply crunch. WTI is up to $48.76 and Brent to $53.49. Gold eased as investors booked profits after the previous session’s rise to a one-year high, though prices remain underpinned at $1338.5 by safe-haven demand because of continued concern over North Korea’s nuclear tests.
China/Korea
China was said to be considering tougher sanctions against North Korea after its ally to the south claimed it had detonated a hydrogen bomb on Sunday. Frustrations between Beijing and Pyongyang had grown of late as Kim Jong-un refused to abandon his plans for nuclear armament, lending credence to claims that lines of communication between the two nations had broken down. In the past, the Hermit Kingdom had kept Chinese authorities abreast of its plans to carry out any nuclear testing but the practice allegedly stopped after the fourth test in January 2016. North Korea even failed to warn Beijing of its fifth test in September 2016 despite a North Korean senior official being in Beijing just a short time beforehand.
As Kim Jong Un’s antics in North Korea capture global attention, China is quietly moving to bolster its grip on disputed territory in the South China Sea.Last month, a Philippine lawmaker released photos he said showed Chinese fishing, coast guard and navy vessels surrounding a Philippine-occupied isle in the Spratly island chain, preventing planned repairs to a runway. Vietnam in July halted drilling in an area leased to Spain’s Repsol S.A, amid reports it did so under Chinese duress. The incidents suggest China is taking advantage of a perceived U.S. vacuum on Southeast Asia under President Donald Trump, whose administration has focused on Chinese trade tensions and North Korea’s missile and nuclear tests.
A top North Korean diplomat on Tuesday warned that his country is ready to send “more gift packages” to the United States as world powers struggled for a response to Pyongyang’s latest nuclear weapons test. Han Tae Song (pictured), ambassador to the United Nations in Geneva, confirmed that North Korea had successfully conducted its sixth and largest nuclear bomb test on Sunday. ”The recent self-defence measures by my country, DPRK, are a gift package addressed to none other than the US,” Han told a disarmament conference. “The US will receive more ‘gift packages’ as long as it relies on reckless provocations and futile attempts to put pressure on the DPRK,” he added without elaborating.
Growth slows in UK services sector
Growth in the UK services sector slowed to its lowest pace in nearly a year last month, according to the IHS Markit/CIPS purchasing managers’ index (PMI) for August, which dropped to 53.2 from 53.8 in July. Growth in new orders slowed and cost pressures picked up, IHS said. Dr Howard Archer, EY ITEM Club chief economic adviser, said the data pointed to “lacklustre” services activity: “The purchasing managers’ surveys point to an economy still struggling to get out of low gear, as activity is hampered by squeezed consumers and economic, political and Brexit uncertainties.” The services sector plays a critical role for the UK economy as it accounts for 80% of the economy. The news follows after a separate survey published this week by manufacturing trade body EEF and BDO which shows the UK manufacturing sector is booming. A weak pound sterling has led to export orders at record highs.
BBC News
Tackling the rich-poor divide
The U.K. should increase taxes on property and inheritance or risk tearing itself apart because of growing inequality, Liberal Democrat party leader Vince Cable will warn today, as Archbishop of Canterbury Justin Welby also weighs in on Britain’s “broken” economic model. In his first major policy speech since assuming the leadership in July, Cable, 74, will say that social mobility has waned in Britain during his lifetime, and that the best way to deal with growing inequality is not through raising income tax on higher earners, but by putting levies on wealth accumulation. “A serious review is needed of the set of taxes which are there to mitigate the sharp, jarring difference brought about by asset inflation and unearned income,” Cable will say in a speech in London to a social policy think-tank, the Resolution Foundation, according to a statement from his party. “We must tax wealth effectively.” Separately, the Institute for Public Policy Research published a report that found the gains from economic growth in Britain are feeding largely into increased corporate profits rather than wages, which have stagnated for the longest in 150 years. It called for “fundamental” reform of the economy, including a simpler tax system, better wealth distribution and the creation of regional banks to support local economies. The Archbishop of Canterbury, Justin Welby, says Britain’s economic model is broken, as the gap between the richest and poorest parts of the UK widens. Britain stands at a watershed and must make “fundamental choices” about the direction of the economy, he said. “We are failing those who will grow up into a world where the gap between the richest and poorest parts of the country is significant and destabilising.”
Brexit
Britain is developing a strict post-Brexit immigration policy which will mean tougher hurdles to work in the UK for all but the highest-skilled EU migrants, according to a leaked Home Office document. The 82-page paper, gives the most detailed insight into how Britain will manage its borders during any post-Brexit transition period and once the UK has permanently broken ties to the EU.Emphasising the government’s desire to prioritise domestic labour and ensure a strong skills base among the UK workforce, the document states that “to be considered valuable to the country as a whole, immigration should benefit not just the migrants themselves but also make existing residents better off”.
U.K. Prime Minister Theresa May’s Brexit planning suffered a double blow as a top European Union official doubted that trade talks will start next month and the opposition Labour Party prepared to challenge key legislation. The EU’s deputy Brexit negotiator, Sabine Weyand, told German lawmakers that she’s skeptical officials will be able to begin discussing a trade deal in October, as they had hoped, according to two people present at the briefing. Her warning emerged as Labour announced it will seek to block May’s plan for a post-Brexit legal regime in London.
British firms seek foreign deals
The Office for National Statistics has revealed that M&A reached £30bn in the second quarter, nearly double the £16.5bn for the same period last year. The rise was mainly accounted for by £18.3bn in outbound deals, which achieved their highest level since the first quarter of 2011. There were 24 outbound deals during the quarter, including Reckitt Benckiser’s acquisition of Mead Johnson. The number of overseas transactions was down year-on-year from 36 in the second quarter of 2016. The ONS said that for the first time in 15 years it had recorded net selling by foreign owners of British companies. Inward acquisitions for the period was £2.9bn, while disposals by overseas owners of UK businesses was £3.8bn. These figures reflect a tightening M&A environment here in the UK, fuelled by increasingly nervous sentiment concerning the future of the UK economy and uncertainty resulting from Brexit.
Rate burden rises for SMEs
An analysis of government data by CVS has found that new rateable values for business rates on commercial property that came into effect in April will add £909.9m in annual tax increases for offices. The figure excludes rises resulting from the staircase tax, which means multiple offices of one company that are in the same building but are separated by a corridor or staircase shared with other businesses are to be treated separately for tax purposes. The total property tax bill for offices over the next five years will be £36.8bn, CVS said. CEO Mark Rigby says the government must prevent the staircase tax worsening the situation for small businesses.
The Times, Page: 45
WhatsApp launches service to help business talk to clients
WhatsApp is launching an app to help businesses communicate with their customers. Businesses can now be given a “verified profile” and will have new tools available to manage messaging.
US & Korea
Donald Trump’s top trade negotiator appeared to back away on Tuesday from a widely criticised threat to pull out of a trade pact with South Korea, after a loud backlash from Congress, farmers and the US business community. Speaking to reporters in Mexico City, Robert Lighthizer, the US trade representative, said he still hoped that the Korea-US deal which went into effect in 2012 could be renegotiated to help reduce the US trade deficit with Seoul. But he made clear that his focus was on continuing negotiations rather than pulling out of the pact.
Calls abound for a fairer tax system
The Commission on Economic Justice has declared Britain’s economic model “broken” and called for better distribution of wealth and taxes that act as incentives for social “goods”, such as jobs. The group, backed by the Archbishop of Canterbury and senior business, academic and trade union figures, says growth since 2008 has benefitted the rich while leaving the young poorer than their parents for the first time in generations. Writing in the FT, the Most Reverend Justin Welby says: “We need a fairer tax system where those who benefit most from the economy – whether through income, wealth or investment – pay their fair share.” Meanwhile, writing in the Independent, Sir Vince Cable says inequality in Britain can be solved with “effective taxation on inherited wealth” combined with council tax reform. And finally, Iain Duncan Smith is leading 44 Tory MPs in calls for a tax and benefit system that encourages marriage. The MPs published an 18-point family manifesto which said fatherhood should be promoted and school pupils should be taught the benefits of marriage.
BBC to launch salary review
The BBC has hired PwC and Eversheds to conduct an “equal pay audit” following widespread criticism over the corporation’s gender pay gap, which revealed two thirds of its top earners were men. A source at the BBC said director general Lord Hall would take nothing off the table in his efforts to resolve the gap.
Late payment debt falls
Late payment debt for SMEs has plunged to £14.2bn for the first half of this year, down from £30.2bn in 2016, according to Bacs. However, the UK’s smaller businesses still face a total bill of £2.16bn chasing overdue payments.
Daily Mirror, Page: 37
Irma
Irma hammered the Caribbean as a Category 5 hurricane after making landfall this morning. The most powerful storm ever to form in the open Atlantic is on course to graze Puerto Rico today and come ashore in Florida on Monday. Another tropical storm, Jose, is close behind and is expected to become a hurricane by tonight.
Blackhole
A team of researchers with Keio University in Japan has found evidence of a mid-sized black hole near the center of the Milky Way galaxy. In their paper published in Nature Astronomy, the group describes their study of a gas cloud cluster near the centre of our galaxy and why they believe it offers evidence of a mid-sized black hole. Over the years, scientists have found a lot of physical evidence of large and small black holes, but very little evidence for those in the mid-size range. This has led to an intense search, which until now, has come up mostly empty as mid-size black holes are exceedingly difficult to spot. The team reports that last year, they discovered a gas cloud near the centre of the Milky Way that appeared to behave in odd ways—some of the gasses were moving faster than others, and this led them on their search.
Or see our recent previous news pages
Business News 5th September 2017
Business News 4th September 2017
Business News 1st September 2017
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