Looking exceptional
Com-pound growth
Fashion group Burberry acknowledged it was benefiting from “exceptional” retailing factors that helped it secure a 4 per cent rise in underlying sales in its third trading quarter. The current foreign exchange climate is working in its favour, encouraging a higher number of visits to its UK stores from tourist shoppers. At reported exchange rates, sales actually rose a whopping 22 per cent. But the focus is now turning to its Asian and wholesale operation to make sure growth is sustainable. This will be top of the agenda for incoming chief executive Marco Gobbetti, who joins the group in a transitionary role at the end of the month.
Project Juno
DMGT jumps
DMG Media – a subsidiary of Daily Mail & General Trust and publishers of the Daily Mail – has dealt a blow to the British newspaper industry by backing out of talks to create a new joint advertising coalition. The initiative, known as Project Juno, was launched last summer by media groups to try to combat the threat of competition from online news sources such as Google and Facebook and stymie the steep fall in print advertising which has beset the industry.
Rate speculation
Inflation bulge
Rises in air fares and food prices powered the UK’s inflation figure for December to 1.6 per cent, the highest level since July 2014. The rise in the consumer prices index meant inflation surpassed November’s 1.2 per cent level and was also above the 1.4 per cent level that had been forecast. The biggest components of the rise were higher prices for flights and rising food prices. A smaller fall in fuel prices than previous months also helped the overall figure. Economists still reckon interest rates will be held, though, as the elements driving inflation presently are volatile.
Fitch takes aim
May’s speech
The speech this week from prime minister Theresa May has cleared a few things up for lots of people and institutions – including Fitch Ratings. The ratings and research giant said the PM’s aim of having a divorce deal which includes a free trade agreement with the EU by 2019 was “ambitious” and suggested there was continued pressure on its AA rating with a negative outlook. Alex Muscatelli, director of sovereign ratings at Fitch, said: “The uncertainty for economic policy, external trade and regulatory frameworks created by June’s Brexit vote are a sovereign rating weakness for the UK.”
Brexit blushes
IMF ups UK
It’s now the second time the International Monetary Fund (IMF) has upgraded its growth forecasts for the UK economy since the Brexit vote. The Washington-based think-tank expects the British economy to expand by 1.5 per cent this year from an earlier projection of 1.1 per cent – the biggest single upgrade of any major economy in its January 2017 release. Growth in 2016 was moved to 2 per cent from an October projection of 1.8 per cent – the fastest-growing advanced economy in the world. But 2018 isn’t looking so rosy, with growth now expected to be 1.4 per cent instead of the 1.8 per cent predicted in October.
Emerging problem
Outflows hit Ashmore
President-elect Donald Trump is already having an impact on markets and emerging markets-focused fund manager Ashmore knows all about that. The group suffered a $700m (£569m) outflow in its final quarter as investors sold down exposure to developing markets due to fears about how the economies will fare with Mr Trump in the White House. The fund manager’s assets under management fell by $2.4bn in the three months to 31 December as market losses of $1.7bn also weighed on the company. Ashmore has suffered redemptions from investors for nine out of the 10 last quarters. Assets rose in 2016 as a whole.
EU’re barred
Wetherspoon cautious
Even though it was only a quarterly trading update, JD Wetherspoon chairman Tim Martin still had time to express his disdain for economists and the EU. He’s a lot to say about it but there’s also a lot to say about his company’s performance. With wages set to rise 4 per cent, business rates up £7m, £2m for the apprenticeship levy and higher capital expenditure, like-for-like sales are expected to be lower in the next six months, making Mr Martin “cautious”. But robust sales at the start of this half mean a slightly better outcome for the year as a whole is now expected alongside better margins, too.
With talks of a potential trade war starting once President-elect Donald Trump assumes office, investors need to be aware which countries could be most impacted.
Fund manager Ashmore said of the 19 countries that export more than $20bn to the US, eight are developed and 11 are emerging. But within this group, the top 10 exporters account for a “whopping” 71 per cent of all US imports. These 10 countries have the largest trade imbalances with America (when applying Ashmore’s $20bn export rule), meaning they sell more goods to the US than America buys from them.
Their vulnerability depends partly on “the degree of imbalance in their trade with the US as well as their capacity to retaliate” through their US imports, Ashmore said.
