Business News 3rd August 2017
CPA hopes to inform, with its daily bite-size business news on Thursday 3rd August 2017, filled with stories we think will interest our members and visitors.
Markets Round up
The FTSE100 closed lower yesterday, as weakness in commodities caused the market to pull back despite the euphoria of US markets continuing to advance and the DOW setting records. Even though the Dow (30 top US stocks) surpassed the 22,000 level for the first time ever (powered by Apple’s results), the FTSE100 ended down 12 points to close at 7411 and the Euro Stoxx 50 fell 0.5% to close at 3444. Rio Tinto was among the fallers, down 2.8% after it reported on the last quarter. It said profits had almost doubled to $3.3bn for the six months to 30th June but the market responded negatively looking to the future. The FTSE250 fell 0.1% to 19,841 despite William Hill shares climbing 6% higher, after they announced an 11% drop in first-half pre-tax profit. Don’t try to make sense of it. Elsewhere across Europe energy stocks reacted badly to falling oil and France’s Societe Generale led other financials downwards. In the US, away from the Dow, the S&P500 was level at 2478 as was the Nasdaq at 6363. The Russell 2000 (the next 2000 stocks outside the S&P 500) however fell 1.1% to 1413 to show all is not good away from the bluechips. In Asia further weakness seen in was seen in the Korean Won overnight driven by weakness in the Kospi ( down 1.7% as I type), which has been largely driven by the Tech sector amid plans to raise taxes. In China PMI numbers came in roughly in line with expectations, with services a touch lower at 51.5 (vs. 51.6 prev) and the Composite PMI at 51.9 (vs. 51.1 prev). Chinese stocks fell with the CSI 300 dipping 0.9% to 3728. Overall global stocks haven’t moved with the MSCI world index flat at 1970. Oil prices dipped on Thursday as a rally that has pushed up prices by almost 10 percent since early last week lost momentum despite renewed signs of a gradually tightening U.S. market however Oil has picked up from yesterdays lows with Brent at $52.57 and WTI at $49.74. Gold prices prices also dipped with the dollar in focus ahead of US nonfarm payrolls at the end of the week, down to £1261.25. The Aussie dropped 0.5% to $1.67 after a weaker-than-estimated trade report. The pound stands at US$1.323 and €1.1173 basically level with were we were yesterday morning.
SMEs need protection from poor financial services
Regulators are being urged to do more to protect small businesses from poor service by financial services firms. In 2015 the FCA invited businesses, the self-employed and their representatives to comment on whether SMEs should benefit from greater protection, after determining that firms often struggle to obtain redress. But the watchdog has yet to publish a summary of responses, let alone proposals to improve protections. James Sherwin-Smith, former chief executive of Growth Street, said: “The lack of responsiveness exhibits an indifference on the part of the FCA to the plight of millions of small businesses”. Meanwhile, new rules have been introduced requiring lenders to be clearer about the cost of borrowing for SMEs. All providers of unsecured loans and overdrafts of up to £25,000 to small companies must now publish and “clearly display” the interest rate.
The Times, Page: 45
Funding concerns
A recent study by insurer Hiscox has revealed that 36% of business owners said a lack of choice was the most common single challenge they faced when looking for funding. What also emerged was that 20% are still unaware of the variety of funding options available to them.
Top CEO pay falls by a fifth
Top chief executives’ pay has fallen in the past year, but there is still “a huge gap” between them and the rest of their staff, a report by the High Pay Centre and the CIPD has found. The bosses of FTSE 100 companies now make on average £4.5m a year, down 17% from £5.4m in 2015, according to the research. It also shows that men at the top of the biggest public companies earn up to 77% more than their female counterparts. The 94 male chief executives of FTSE 100 companies earned £4.7m on average last year, compared with an average of £2.6m for the six women leaders. While the think tank welcomed the results, it said that the fall was ‘limited and very late’. It would take a worker in the UK on a salary of £28,000 160 years to rake in the average annual amount handed to the bosses of Britain’s biggest listed companies.
The Times, Page: 2
German Gigafactory
German executives are preparing to announce a new home for a lithium-ion battery plant designed to rival the output at Tesla Inc.’s Gigafactory. Terra E Holding GmbH will choose one of five candidate sites in Germany or a neighboring country next month to build its 34 gigawatt-hour battery factory, Frankfurt-based Chief Executive Officer Holger Gritzka said in an interview.
BOE
The focus this morning will be on the BoE meeting, where it is expected rates will remain unchanged with a 6-2 vote count – Haldane will be the swing factor here with market consensus swaying between 5-3 and 6-2. Although the Bank of England looks set to keep interest rates at a record low once again, markets will be looking for signs that, faced with Brexit, the bank is getting nearer to raising rates for the first time in a decade. Sir John Gieve, a former deputy governor of the Bank of England, has said the Bank should raise interest rates and reverse part of the emergency stimulus deployed after the Brexit vote. Sir John said there was a “very strong case” for raising rates because the economic slump predicted in the wake of the EU referendum result had not materialised.
Brexit
The U.K.’s Brexit effort is so chaotic and apparently inept that some EU diplomats fear it may be a deliberate ploy to buy time and place pressure on negotiators, Politico reported. EU27 representatives are steeling themselves for an onslaught of position papers designed to expose faults between bloc members. But others suspect London may truly be struggling. Only the Brits know if they’re ready or “trying to dance some very strange ballet that we don’t fully get,” one diplomat was quoted as saying.
Competition and Markets Authority
The Competition and Markets Authority said that the proposed £2.2bn merger between Wood Group and Amec Foster Wheeler could lead to competition concerns in the supply of engineering and construction services and operation and maintenance services on the UK continental shelf. “This is because the companies currently compete closely with each other, and are two of the main suppliers of these services; the merger will reduce the number of major players currently active in these markets from four to three; there are concerns that competition from other suppliers may not be sufficient to mitigate competition worries; and other suppliers seeking to enter the market or expand their UK presence may face significant barriers to doing so.”
Self-selectors get higher returns
Research by Hargreaves Lansdown has found that people saving into a work pension who select their own investment funds enjoy far higher returns on average. Analysis of 80,000 savers found that over five years “self-selectors” beat the average default fund by 4.9 percentage points a year.
The Daily Telegraph
Swiss Manufacturing
The Swiss manufacturing sector continued to grow at a strong pace in July, supported by robust order books, survey data from the supply management association procure.ch and Credit Suisse showed. The procure.ch Purchasing Managers’ Index rose by 0.8 points to 60.9. Economists had expected a score of 58.8. A score above 50 suggests growth in the sector. The reading remained well above its long-term average of 53.8.
US Factory Orders
U.S. factory orders probably rose 3% in June after a decline in May, powered by a surge in durable goods as non-defense aircraft orders jumped at the Paris Air Show. Still, the auto sector looks to have peaked, and output of consumer goods has waned, indicating a cooling in manufacturing. Initial jobless claims are seen at 243,000 for last week, barely changed from the previous week and pointing to a tight labor market.
Human Engineering
In March researchers made history when they used CRISPR-Cas9, a powerful gene-editing technique, to correct a disease-causing genetic mutation in human embryos. But results were mixed. Now other researchers have repeated the trick, with striking consistency, among more embryos, while avoiding or minimising the pitfalls of previous experiments. That suggests that human genetic engineering could, in the distant future, come of age. Research just published in Nature indicates it could move from the lab to the clinic fairly soon.
Driverless buses
Estonia reported ‘no major incidents’ after the first three days of a driverless bus service. Launched in the Estonian capital Tallinn on Saturday, driverless vehicles have been operating on a route through the city as part of the country’s presidency of the European Union. They have so far managed not to collide with any other road users, but there have been a couple of near misses when the buses did not give way to a police car with its lights flashing and ignored a red light at a pedestrian crossing. ‘The future is here!’ some may say, but it will only last until the end of August so hurry and get your ticket to the Baltics for some driverless fun.
UK Trade Authority
The Government has accidentally revealed plans for a new UK trade authority in a job advert. UK Trade Remedies Organization is expected be up and running from October 2018 to tackle complaints from British companies about unfair trade practices. In essence, it will give the UK Government ability to enforce its own trade rules and negotiate trade agreements with other countries, which is currently done by the EU. The online advert for a digital design lead revealed that the body will be presented to parliament in the trade bill next month and the organisation will be part of the Department for International Trade. Developing the organisation will be a great ‘challenge’ for the UK, the advert noted, and the prospective candidates will have to be prepared to deal with a ‘changing and uncertain environment.’
Accountants and lawyers pay £15.5bn in taxes
Accountants and lawyers paid £15.5bn of taxes in 2015-16, according to a report compiled by PwC for The CityUK. It found that in all, the legal and accountancy sector collectively employs 693,000 people across the UK in various roles, from partners to back-office workers. Nearly one quarter (23%) of EU employees in the sector are based in the UK, putting it ahead of Germany, which has 21% of the EU’s total sector jobs, followed by France (10%), Spain (8%) and Italy (7%). A spokesman said that when added to the total tax contribution for the financial services sector, the estimated total tax contribution for UK-based financial, legal and accountancy services is £87bn.
Financial Times, Page: 3
High street feeling low?
Josie Cox in the Independent considers the climate for the British high street, warning that the rise of e-commerce has hit a number of retailers and driven a wave of closures. Ms Cox warns that the growth of online portals has knocked estate agents, with a recent report from Moore Stephens claiming that nearly a fifth of agents are showing signs of financial insolvency.
The Independent, Page: 39
Trump
Trump’s approval rating is at 38.9%, the lowest since his inauguration, according to a Real Clear Politics poll average. The continuing controversy over White House personnel, the ongoing Russia investigation, and the failure to repeal or replace Obamacare appear to be taking a toll. A Gallup poll showed his approval rating at 36%, down from an earlier 37%.
Football continues to exist in a bubble
Neymar is set to leave Barcelona and join Qatari-owned Paris St-Germain in a record 222 million euros deal. Barcelona confirmed the Brazil striker has made a request, while teammate Lionel Messi exchanged farewell messages with Neymar. The buyout clause dwarfs the previous record of 105 million euros that Manchester United paid for Paul Pogba last year.
On This Day in History
Christopher Columbus in 1492 set off to find Asia and instead stumbled onto the New World. His fleet of three happened upon what is today the Bahamas 10 weeks after setting off. Columbus returned to Spain in triumph, bringing with him riches such as gold, pineapples and tobacco plants. His hero status didn’t last. During the course of three more trips to the Americas, he was accused of tyranny and incompetence, stripped of his titles and plagued with ill health. He died in Spain in 1506 aged about 54.
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