Stalwart falls
Downbeat high street
The demise of the long-standing high street chain BHS has provoked outcry this week. The group, now in administration, employs 11,000 people whose jobs are at risk, but arguably even more controversial is the £571m black hole where workers' pensions should be. Owners Retail Acquisition, which bought the group for £1 last year from entrepreneur Philip Green, blame him for the collapse and MPs want the former owner to appear before them to answer their questions. Some have called for the return of his knighthood. Mr Green has reportedly offered to pay £80m towards the pension deficit.
Oil drop
Rating cut
Exxon Mobil, the largest listed oil company in the world, has lost what was one of the only three corporate AAA-credit ratings in the world. It was first awarded the rating by Standard & Poor's in the 1930s. The Texas-headquartered group, which we feel is the best-positioned major to ride out the oil slump, had its credit rating downgraded due to "high reinvestment requirements, large dividend payments" and low commodity prices. This comes as Goldman Sachs suggested oil prices may stay down long enough to force Exxon and other oil majors to cut their dividends.
Giants stumble
Soft updates
Apple saw the first drop in year-on-year revenue in 13 years, to $50.6 billion, or 13 per cent - a little higher than the 10 per cent widely expected. Sales of the iPhone were off by 10m handsets and 26 per cent lower in China. The shares fell 8 per cent. This hit some of the companies which rely heavily on the US giant, particularly Imagination Technologies whose shares fell 7 per cent in early trading. Meanwhile, in after-hours trading, Twitter shares saw 13 per cent wiped off their value after a drop in revenues and revised forecasts.
GDP cools
Brexit effect
Economic growth in the UK slowed to 0.4 per cent in the first quarter, down from 0.6 per cent in the final quarter of last year. Recent business surveys suggest there is some nervousness about the forthcoming June referendum on whether the UK should remain in the European Union. Schroders' UK economist Azad Zangana said this uncertainty was evident in business investment figures which were down in the back half of last year and the most recent labour market statistics, which show a "severe slowdown" in employment growth. Sterling has had a strong week though after several high-profile bodies warning about a Brexit.
Low-fat bonds
Skinny returns
Consumer goods behemoth Unilever sold a zero-coupon bond this week providing investors with exceptionally meagre returns. The four-year tranche (there were also eight and 12 years) comes with a zero per cent coupon (or regular interest payment), but will be priced slightly below its face value, meaning the yield will be about 0.06 per cent. French pharma group Sanofi recently sold a three-and-a-half year bond with a 0.05 per cent coupon. The deals are seen as a response to the European Central Bank's pledge to start buying corporate debt.
Boardwalk bar
Drinks on the pier
Entrepreneur Luke Johnson, whose involvement in Pizza Express brought the chain retail ubiquity, has set himself a new challenge, it seems. His Eclectic Bar Group managed to raise its hoped-for £8.5m to buy The Brighton Marine Palace and Pier Company, and the enlarged group - to be known as The Brighton Pier Group - will be on the alternative investment market (Aim) under the PIER ticker. Reuben Harley will be stepping down as chief executive of Eclectic, but will remain an employee of the group until the end of May to help hand over to Leigh Nicolson, who will become managing director of bars.
Levy bonus
Compensation curtailed
The Financial Services Compensation Scheme says it will levy £26m less for the coming financial year than previously forecast, and will recover £337m in interest for Treasury loans made during the crisis to Bradford and Bingley and Icelandic bank, Kaupthing Singer & Friedlander. The FSCS, which was set up in 2001 to compensate people if a financial services firm is "unable or unlikely to be unable to pay claims against it", will levy £337m in the coming financial year, up from £319m last year, but still down from its earlier forecasts. Only the life and pensions intermediaries sector will see a rise in fees relating to higher claims about the Sipp (self-invested personal pension) advice.
US shale has suffered amid the oil price rout. The technological progress that paved the way for the country’s energy revolution cannot be destroyed, but the last two years have been devastating for the young industry.
The enormous drop-off in onshore rig counts for the major shale basins, based on data from oil services firm Baker Hughes, demonstrates this. The number of rigs has cratered by more than three-quarters since the end of 2014, with many unconventional producers already in bankruptcy courts, and others locked out of capital markets.
The Energy Information Association (EIA) is forecasting for non-Opec production (predominantly US-based) to decline by 400,000 barrels a day this year and by a further 500,000 barrels in 2017 – a swift reversal from the 1.5m barrel increase in 2015.
