Tata to Port Talbot
As many feared, Indian conglomerate Tata has taken the decision to sell its loss-making UK steel business, putting the jobs of thousands of workers at risk. Over the past two years, global industrial markets have been swamped by low-cost excess capacity from China, while demand for finished steel products has been steadily declining after peaking in 2013. Tata said that it had suffered asset impairments amounting to £2bn in the past five years, but the decision will surely take on a political dimension given that it comes on the heels of the closure of Redcar steel plant on Teesside by its Thai owner, SSI.
Toyota crash
Just-in-time backfires
Japan's industrial output dipped alarmingly in February, weighed down in part by a five-day shutdown of Toyota Motor Corp's production facilities in Japan, following an explosion at a key supplier's plant. Output dropped 6.2 per cent from the previous month, according to statistics from the Ministry of Economy, Trade and Industry. The data suggest output is eroding growth rates in the first quarter, adding to symptoms of weakness in the economy in early 2016, following a 1.1 per cent contraction in real GDP in the final quarter of 2015.
Peronists left on the shelf
Oil on troubled waters
Some troubling news from the South Atlantic: a decision by the UN Commission on the Limits of the Continental Shelf (UNCLCS) will increase Argentina's maritime territory in the region by 35 per cent. Argentina's foreign minister said the UNCLCS decision had unanimously ratified the country's claim to expand the official area of its shelf in the South Atlantic. Although not binding under international treaty, the move raises the stakes in the competing claims by the UK and Argentina to the Falkland Islands region, whose waters are being actively explored by a handful of UK oil & gas companies.
No saving grace
NS&I trims rates
Potential returns for UK savers deteriorated after National Savings & Investments (NS&I) cut the interest rates on many of its accounts. NS&I also cut the number of premium bond prizes, thereby reducing people's chances of winning. The rate on the investment account will fall from 0.75 per cent to 0.45 per cent, while holders of the Direct Isa will see their rate drop from 1.25 per cent to 1 per cent. The direct saver rate will fall to 0.8 per cent from its current 1.1 per cent, while income bonds will now generate 1 per cent - a fall of 25 basis points.
Stream becomes a torrent
Get back catalogues
New media investors take note: the US music industry made more money from streaming than with CDs or digital downloads in 2015, according to the Recording Industry Association of America (RIAA). It's the first time streaming has trumped the other two formats, the trade body revealed earlier this week. The RIAA linked the findings to the launch of Apple Music and Tidal and the trend is likely to accelerate following the addition of the Beatles' back catalogue to nine music streaming services at the tail-end of 2015. One such operator - Spotify - recently raised $1bn in financing and indicated that it plans to go public in the next two years.
Barclays cold on commodities
Fundamentally no support
Commodities have rebounded strongly in the early part of 2016, but natural resources such as oil and copper are at risk of dramatic near-term losses short of any real improvement in market fundamentals, according to a research note published by Barclays earlier this week. The bank's analysis points to an average 25 per cent fall-away from current levels, with crude oil poised to pull back below $30 a barrel and copper nestling just above $4,000 a tonne.
Landlords under stress
Buy-to-frets
In a blow to prospective private landlords, the Bank of England announced a crackdown on buy-to-let mortgages as the central bank looks to cool the property market. A consultation paper on buy-to-let underwriting states that the market is driven by short-term interest-only mortgages that leave borrowers vulnerable to a rise in the base rate. In future, lenders will be required to beef up the "stress test" on borrowers to determine whether landlords can afford possible interest rate rises of at least 2 per cent - and up to 5.5 per cent - for at least the first five years.
Alternative routes to financing and the effects of shifting monetary policy have resulted in a sharp decline in new blue-chip retail bonds since 2012. But two new issues in the last fortnight may indicate the type of issue investors can now expect.
On March 24, Alpha Plus – the owner and operator of independent schools, nurseries and sixth form colleges – issued a 5 per cent retail bond, due 2024. The Charities Aid Foundation followed suit, raising £20m in an oversubscribed offering for its 5 per cent coupon maturing in 2026. The latter is the third issue through the Retail Charity Bond platform, which was created as a vehicle to enable UK charities to raise medium-term debt finance.
