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Global equities have lacked clear direction since the weekend after reacting badly to poor economic data last week. The US ISM manufacturing index fell in September against expectations of a positive rebound, leaving it hovering near 2009 lows. The non-manufacturing index also disappointed and the S&P 500 retreated on the news.
The FTSE 100 fared worse following an unexpected deterioration in services data that suggests the economy may have slipped into contraction in September. The index fell 3.54% last week, while news flow around Brexit continues to downplay the chances of a breakthrough in negotiations. Reports have emerged that Downing Street is preparing for a collapse in talks and ready to blame Ireland and the EU for the stalemate.
UK retail sales figures added to the gloomy economic atmosphere, hitting a record low last month as total sales fell by 1.3%. Brexit uncertainty was blamed for the worst September since records began in 1995; the British Retail Consortium said that it was “weighing increasingly on consumer purchasing decisions.”
In Europe, German industrial production data beat expectations by rising 0.3% in August, against expectations of a 0.1% fall. It offers some hope that the German economy is in better shape than recently feared, but it is unlikely to change the overall perception. Factory orders data released yesterday was negative and forward-looking purchasing managers' indices are also weak.
Investor focus is on high level US-China trade talks that are scheduled this week. China wants to exclude structural reforms but President Trump wants negotiations to have wider scope. In the background, Washington has blacklisted eight Chinese firms over the country's high-tech surveillance of its minority Muslim population. In the other direction, China's state television has shelved plans to show US basketball games after someone connected with the game tweeted in support of the Hong Kong protestors. China Central Television said: “We believe that any comments that challenge national sovereignty and social stability are not within the scope of freedom of speech”.
EasyJet has revealed that it received a financial boost from recent strikes at its rivals, Ryanair and British Airways. The airline expects pre-tax profits for the year to the end of September to be between £420m and £430m, which is ahead of City forecasts but below last year's performance. Increased demand following the strikes helped EasyJet's per seat revenue increase 0.8%.
Hong Kong Exchanges and Clearing (HNEX) has abandoned its £32bn approach to buy the London Stock Exchange Group. HNEX said that it remained convinced that a merger would be an attractive solution but that it had not been able to engage with the LSE's management. The LSE said last month that the bid was flawed and unattractive.
Pizza Express has reportedly hired financial advisers to review its £1.1bn debt pile. Over the last two years, operating profits have been overwhelmed by interest payments, which cost £93m a year. The popular restaurant has suffered falling sales recently, in keeping with other UK high street brands, but is not thought to be in any immediate danger of collapsing.
HSBC is planning to cut up to 10,000 staff during a fresh cost reduction initiative, which is in addition to a round of 4,700 redundancies announced in August. The latest announcement is the first major action of the interim boss, Noel Quinn, who took over in August. It is thought that European operations could be the worst hit, given their low returns compared to Asia.
Sports Direct has denied that it is preparing to close the majority of House of Fraser stores after the Christmas spending season is over. Mike Ashley's company bought House of Fraser out of administration last year for £90m. Despite Ashley previously describing the business as “nothing short of terminal”, Sports Direct yesterday emphasised its commitment to its investment programme.
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