Commodity crunch
Prices crumble
The continued strength of the dollar and ongoing concerns about growth in some emerging markets, including China, one of Asia’s most voracious consumers of raw commodities, have continued to cause havoc on commodity markets. Bellwether metal copper hit a six-year low earlier this week before supply disruption gave it some support, while Brent crude oil has dipped back below the $55 a barrel level. Even gold, which often sees support in times of uncertainty, has had few friends of late as it continues to languish after falling around 8 per cent this year.
Universal pain?
Royal Mail hit
Royal Mail has landed itself in hot water with regulators over the prices it charged competitors for handling their bulk mail. The company, which disputes the charges, could be faced with fines of up to 10 per cent of global revenues when Ofcom delivers its final verdict. In an interim statement the regulator said that Royal Mail’s charges for bulk mail were unlawful and prevented rivals from being able to properly compete. The issue illustrates Royal Mail’s issue with being held to its universal UK postal coverage service while being at risk of rivals cherry picking the most lucrative ‘final mile’ postcodes.
China crisis
Unpredictable
The Chinese authorities may have made a rod for their own back with their high-profile intervention in the equity markets three weeks ago. After restoring some calm, Chinese equities resumed their rollercoaster ride this week, plunging more than 8 per cent on Monday before reclaiming some of the deficit on Wednesday with a 3 per cent gain. Confidence was boosted by another intervention in the market by the authorities as they pledged to buy stocks to shore up market confidence and also launched a probe into dumping of large amounts of shares. The problem now, having become intrinsically interwoven into the market, how will the government extract itself?
Sainsbury surge
Reclaims second spot
The supermarket price wars continue to dog the entire sector. But it hasn’t stopped some players grabbing market share at the expense of their biggest rivals. Indeed, in the latest data from Kantar Worldpanel, Sainsbury was installed as the second biggest supermarket operator in the UK after usurping Walmart-owned Asda in the 12 weeks to 19 July. Sainsbury’s sales still shrank, by 0.3 per cent, while its rival saw sales slump by 2.7 per cent, a performance which ranked worse than its ‘big four’ rivals as well as smaller players such as Co-op and Iceland.
Banking better
RBS relief
Considering it once had a balance sheet bigger than many countries it is little wonder it is taking some time to shrink RBS’ assets. But further progress was made this week when it confirmed plans to offload more than $2bn worth of shares in US bank Citizens, taking its stake down to around 23 per cent. The sale of Citizens, which began with its IPO last year has, thus far, proved to be a success with the shares trading well above their IPO price. Meanwhile, at Barclays’ results this week executive chairman John McFarlane made a point of praising the return to form of its investment bank just two weeks after chief executive Anthony Jenkins, who was shrinking the investment banking business, was unceremoniously dumped.
Hot property
Boom time
A series of results this week helped investors gain a perspective on the property market from several different angles. From the housebuilding perspective, Taylor Wimpey results detailed a solid increase in the number of homes sold, with prices rising by a healthy 9.2 per cent. Meanwhile its forward order book stands at a record £1.8bn-plus. From Rightmove came details of record numbers of visitors to its website, where it fielded 110m visitors during the first half. Estate agent Foxtons’ London focus did not help it in the pre-election weeks but management now expects a second half bounce as confidence returns to the capital’s property market.
Chart of the week
Retail investors have fallen back in love with the UK in recent weeks. Figures from The Investment Association showed UK funds topped retail sales in June, the first time they have topped the table since last October, while European funds slipped out of favour, registering their lowest sales since January at £171m and Asian funds were unceremoniously dumped – notching up their largest net retail outflow on record. Also of note in June was the fact that institutional investors reversed out of the markets, registering net institutional sales of -£508m, compared with retail investor net sales of £1.5bn.
