Last Week in the City: Trump signs order for tariffs
This week US President Donald Trump signed off on new tariffs on steel and aluminium imports, Trinity Mirror revealed plans to rebrand, and the European Central Bank took a further step towards ending stimulus measures. The FTSE 100 rose 1.9 per cent over the week by mid-session on Friday.
Economics
China will pursue annual growth of 6.5 per cent this year, unchanged from last year. There will be a policy focus on financial risk management and issues pertaining to quality of life. China’s fiscal deficit target has been lowered to 2.6 per cent of GDP from 3 per cent last year, the first reduction since 2012.
UK consumer spending is expected to grow 1.3 per cent this year, down further from the six-year low of 1.4 per cent recorded for 2017, EY Item Club said in a report on Monday. Pay increases are also set to remain modest.
Britain’s services sector grew at its fastest rate for four months in February, following the weakest January in a decade. The IHS Markit/CIPS purchasing managers’ index for services rose to 54.5 in February from 53.0 in January. Anything above 50 indicates an expansion.
Geopolitics
US President Donald Trump took to Twitter to deny reports of chaos in the White House, following the departure of his top economic adviser Gary Cohen. Cohen’s departure coincided with Trump’s announcement that the US would impose steep tariffs on steel and aluminium imports. The import duties – 25 per cent on steel and 10 per cent on aluminium – will go into effect in 15 days but the White House has signalled that military partners of the US could be exempted. China’s foreign minister Wang Yi has already promised “a justified and necessary response” in any trade war.
The European Central Bank kept interest rates unchanged but appeared to drop wording from its statement suggesting it would take action if growth was lower than expected. ECB president Mario Draghi also took aim at Trump’s decision to impose tariffs on US imports of steel and aluminium.
Donald Tusk called on the UK to provide “specific and realistic” plans to avoid a hard border in Ireland. Tusk has previously warned the UK risks creating a sea border between Ireland and Britain if the government cannot come up with a better way to solve the Northern Irish border question.
Energy
The oil price came under pressure from rising US inventories this week and the looming threat of a global trade war. Brent crude futures slipped 0.3 per cent over the week by mid-session on Friday to trade at around $64.16 a barrel.
Premier Oil reported its strongest ever production rate in its full-year results. Output for the twelve months to December 2017 amounted to 75,000 barrels of oil equivalent per day, compared with 71,400 the year before. Chief executive Tony Durrant said 2018 will see further production growth.
Financials
Insurer Aviva reported a 2 per cent increase in operating profit and pledged to return £500m to shareholders, after announcing that its disposal programme was complete. Aviva also announced plans to spend around £600m on businesses in markets which may include Poland, Canada and Turkey.
Legal and General had their results on Wednesday which revealed a 32 per cent increase in operating profit to £2.1bn in 2017, helped by changing longevity expectations. L&G said it would pay a total dividend of 15.35p per share, up 7 per cent on last year.
Royal Bank of Scotland on Tuesday agreed to pay $500m to settle charges of misleading investors while marketing and selling mortgage-backed securities. New York Attorney General Eric Schneiderman confirmed on Tuesday that the settlement includes $100 million in cash to New York State and $400 million worth of consumer relief for New York homeowners and communities.
Retail
Pre-tax profits at the John Lewis Partnership fell 77 per cent in its latest financial year, after taking into account staff bonuses. Chief executive Sir Charlie Mayfield acknowledged subdued consumer demand during a “challenging year” in 2017. Bonuses for 84,000 staff have been cut for the fifth year in a row.
Clothing group New Look announced a proposal to reduce its UK store estate and rental costs amid challenged trading performance and a difficult retail environment. The company is instigating a Company Voluntary Arrangement (CVA) and seeking approval from creditors. New Look has identified 60 out of its total 593 stores in the UK for potential closure, alongside a further 6 sites which are sub-let to third parties. Up to 980 jobs are under threat as a consequence.
The administrator of electronics chain Maplin confirmed plans to make more than 60 head office staff redundant as hopes of finding a buyer fade.
There was better news for the UK’s online-only retailers this week as sales at the 20 largest were found to have risen by 23 per cent last year. Research conducted by professional services company RPC found that Sales for the top 20 e-tailers jumped to £8.4bn in 2016/17 compared with £6.8bn the year before.
Supermarkets
The Co-operative Group is under investigation over complaints that it dropped suppliers without fair notice and levied unfair fees on them. The regulator said it had formed a “reasonable suspicion” that the retailer may have broken the Groceries Supply Code. The Co-op admitted it had “fallen short” and that 110 suppliers have been refunded a total of approximately £500,000.
Media
UK newspaper publisher Trinity Mirror announced plans to rebrand as ‘Reach’ after it agreed to buy Express Newspapers from Northern & Shell last month. Chief executive Simon Fox said the new name was a better reflection of the reach its newspaper titles had with readers in print and digital.
Irish publisher Independent News & Media reported a 32 per cent fall in profits for 2017. Results for year ended December 2017 show that pre-tax profit fell from €41.8m in 2016 to €28.5m last year. Sales were down 9.4 per cent at €293m.
Channel 4 announced plans to relocate 300 staff out of London and create a new “national HQ” in another city. Channel 4 chief executive Alex Mahon described the move as “the biggest change in the structure of Channel 4 in its 35-year history.”
Property
UK estate agency group Countrywide reported a full year loss of £212m and issued its second profit warning since Christmas. The group also said it was axing around a third of its 450-strong central office team. Countrywide also confirmed it would be scrapping its dividend, which sent its shares to record lows.
New buyer enquiries were in negative territory for the eleventh consecutive month in February, according to a survey by the Royal Institution of Chartered Surveyors (Rics). The decline was focused in London, the South East and the East Midlands.
Engineering
Melrose Industries’ £7bn bid for engineering group GKN received the backing of shareholders and the European Union. At a general meeting, 98.5 per cent of investors voted to approve the acquisition of GKN, which was first announced in January.
Airlines
Airbus has said it may cut as many as 3,700 jobs in France, Germany, the UK and Spain after it confirmed it is cutting production rates for its A380 superjumbo and A400M military aircraft. Airbus said deliveries would fall to six a year from 2020, down from an anticipated 12 deliveries this year. Airbus has presented the adjustments to its European Works Council and will now enter formal negotiations with staff representatives
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