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Political turmoil in the UK saw sterling fall to a 20-month low yesterday, dipping below $1.26 after Prime Minister Theresa May scrapped a parliamentary vote on the Brexit deal at the eleventh hour. The government admitted that it would have almost certainly been defeated in the vote, had it taken place today, due to concerns over the existing Irish backstop arrangement. May instead is heading to Brussels to plead for better terms, but the European Union have so far explained that there is no room for negotiation. Not for the first time in May’s tenure, a UK leadership contest seems likely.
Last week, the FTSE 100 had already sunk to its lowest level in two years after domestic issues were compounded by a further deterioration of Sino-American tensions. Global markets fell sharply after the arrest of the finance chief of a major Chinese tech firm, Huawei. The arrest was made in Canada but requested by America and sent major equity indices down more than 2% on Thursday.
The S&P 500 dropped to an eight-month low yesterday but then recovered, while China’s markets finished strongly overnight. Stocks in Tokyo, however, have hit an eighteen-month low. European bourses are experiencing some relief today, despite Brexit, the Italian budget stand-off and unrest in France, where President Macron was forced to give minimum wage rises and tax concessions in response to weeks of violent protests.
Some positive news for British people otherwise consumed by Brexit came in the form of wage growth. Basic pay and total pay (including bonuses) both rose by 3.3% per year in the three months to October, marking the strongest nominal rate of wage growth since the financial crisis. The economy, however, stalled during the same period. GDP growth in the three months slowed to 0.4%, amid a slowdown in manufacturing and construction.
Finally, the Indian rupee has slumped following the resignation of the country’s central bank governor, Urjit Patel. There have been reports of poor relations between the Reserve Bank of India and the government, linked to concerns over the government’s interference.
|Share||Closing Values at 10/12/18||Year high||Year low|
|DJ Industrial Average||24,423||26,952||23,345|
|UK Gifts||% Yield||Price|
|FOREX versus US Dollar||Last||% Change**|
|Commodities||Price (USD)||Change**||% Change**|
|Brent Crude Oil||59.97||-0.07||-0.12|
Interserve saw its shares open nearly 75% down yesterday morning after it warned investors that an emergency rescue plan would inflict significant pain. Plans to deleverage by converting a significant portion of debt into new shares “could result in material dilution for current Interserve shareholders”. One of Britain’s leading outsourcing companies, Interserve is now valued at just £18m.
WPP has revealed its long-awaited plan to reboot the advertising company under new chief executive Mark Read. It plans to cut overhead costs by £275m a year, whilst £300m needs to be spent on simplifying the structure. WPP has maintained its dividend, however, helping shares up over 6% this morning.
Following strong performance from its US business, Ashtead has raised its forecast for its full-year results. Interim figures revealed that the equipment rental company’s profits rose by 25% in the six months to November, alongside a 19% increase in revenue.
An intensifying battle between Domino’s Pizza Group and its franchises has seen its share price fall around 4% this week. 11 of the firm’s 70 UK franchises have demanded a bigger slice of the company’s profits, saying they need more support in the face of rising costs. They have threatened to stop opening more stores in protest.
Carpetright has revealed deepening losses in the first half of its year, with a 12.7% drop in like-for-like sales contributing to an £11.7m pre-tax loss. The troubled retailer blamed a combination of weaker demand and exceptional costs relating to store closures and restructuring.
Associated British Foods said last week that it was experiencing a slow start to the festive season, citing ‘challenging’ November sales. Concerning data for ABF, which owns Primark, one of the high-street’s best performers in recent years, is a potential worry for the rest of the UK’s retailers.
DS Smith released positive first half figures last week, saying it was “bonkers busy” providing packaging for parcels in the run-up to Christmas. Its pre-tax profits rose by 27% in the six months to November, partly due to its ability to pass rising costs onto its customers. The company also revealed it was looking to sell its plastics division as part of an ongoing sustainability drive.
|Date||Category||Country||Event||Reuters poll||Prior estimate|
|11/12/18||Labour Market||United Kingdom||UK pay growth seen holding at 10-year high - ONS reports labour data - Avg Earnings (Ex-Bonus)||3.20%||3.20%|
|11/12/18||Surveys & Cyclical||Germany||German investor morale - ZEW Current Conditions||55.8||58.2|
|11/12/18||Prices||United States||United States-PPI demand - PPI Final Demand YY||2.50%||2.90%|
|11/12/18||Prices||Japan||Japan-Corporate goods price - Corp Goods Price YY||2.40%||2.90%|
|12/12/18||Industry Sector||Eurozone||Euro Zone-Industrial production - Industrial Production YY||0.70%||0.90%|
|12/12/18||Prices||United States||United States-CPI - CPI YY, NSA||2.20%||2.50%|
|13/12/18||Prices||Germany||Germany-Inflation Final - CPI Final YY||2.3||2.5|
|13/12/18||Labour Market||United States||United States-Jobless - Initial Jobless Claims||225k||231k|
|13/12/18||Consumer Sector||China (Mainland)||China (Mainland)-Activity indicators - Retail Sales YY||8.80%||8.60%|
|14/12/18||Surveys & Cyclical||France||France-PMI Flash - Markit Comp Flash PMI||54||54|
|14//12/18||Industry Sector||United States||United States-Industrial production - Manuf Output MM||0.30%||0.30%|
Source: Thomson Reuters
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