Powell takes charge
It was far from an easy start in the new job for Jerome Powell, after he was sworn in as Federal Reserve chairman this week. While some overenthusiastic commentators drew parallels between the sell-off in global equities and the market crash that greeted former Fed boss Alan Greenspan in 1987 – otherwise known as ‘Black Monday’ – the former was much smaller. In the UK, the FTSE 100 fell 2.6 per cent, before rebounding 0.8 per cent at the time of writing. The focus for many investors has turned to the Vix volatility index – which shot to its highest level since the 2015 Chinese currency devaluation – and whether the era of unusual calm is over for good.
Smartphone saturation
Annual sales decline
Could the Chinese smartphone market be reaching saturation point? Sales of the devices declined last year for the first time since 2009, down 4.9 per cent year on year, according to data from research consultancy IDC. The country is the largest market for smartphones, but consumers may be becoming more reluctant to replace their old mobiles with the latest version. Apple (US:APPL) suffered the worst decline last year, with unit sales down 8.3 per cent, IDC said.
Bitcoin plunges
Down two-thirds on peak
In what should be further evidence of the risks of speculating in Bitcoin, the crypto-currency plunged to its lowest level since its sell-off began in November. The price fell to $5,947 (£4,256) on 6 February, according to a price index run by news website Coindesk. The latest fall followed a ban from several US and UK banks, including Virgin Money (VM.), on customers using credit cards to purchase the currency. Chinese state media has reported that the government plans to introduce measures to prevent investors accessing foreign virtual currency exchanges.
Gender pay dispute
Legal battle ahead?
Tesco (TSCO) may be in the legislative firing line yet again – and it could burn quite a hole in the grocery chain’s pockets. Law firm Leigh Day said it had been approached by more than 1,000 female employees of the supermarket giant over equal pay claims, which could result in a £4bn bill in back payments of wages. Lawyers said female workers in Tesco’s distribution centres were being paid more than £100 a week less than their male counterparts. In 2012, Leigh Day helped secure a high court award of at least £1bn for female catering staff at Birmingham City Council.
UK property falters
Prices dip
UK house prices fell for the second consecutive month in January, the first two-month decline since the summer of 2016. Prices fell 0.6 per cent last month, following a 0.8 per cent decline in December, according to Halifax housing data. Higher inflation coupled with Brexit-related uncertainty is thought to be putting a lid on prices. However, the Halifax data did show prices were up 2.2 per cent on an annual basis.
Chairman’s admission
Carillion inquiry continues
In a rare case of management of a listed company holding their hands up, former Carillion (CLLN) chairman Philip Green (not the Arcadia boss) said he takes the entire blame for the collapse of the support services group last month. Speaking at a Work and Pensions Select Committee hearing, Mr Green said his responsibility was “full and complete, total – no question in my mind about that. Not necessarily culpability, but full responsibility”. Earlier in the hearing, former finance chief Zafar Khan said he had “spooked the board” when he reviewed the group’s contracts. However, former chief executive Keith Cochrane said that, while Mr Khan’s findings were correct, the board’s concern was over whether he was on top of all the cash flow arrangements.
IQE on thedefensive
Short-seller attack
Following news that Marshall Wace had increased its short position, Cardiff-based semiconductor manufacturer IQE (IQE) was forced to defend itself against allegations by short-seller ShadowFall. In a 35-page report issued to clients, ShadowFall said that IQE appeared to rely on two lossmaking joint ventures for a chunk of its earnings and that there were serious concerns about its reported profitability and cash. However, IQE management said the allegations were “without merit and provide a misleading analysis of the company’s financial position” and reiterated that the company expects full-year revenue to be ahead of market expectations.
Following the sharp fall in global stock markets, levels of trading on the Chicago Board Options Exchange’s Volatility Index or ‘Vix’ jumped to its highest level since August 2015 (see chart).
The index acts as a gauge of 30-day volatility expectations in the S&P 500. The Vix closed trading at 37.32 on Monday, up from November’s record low of 9.14, as the cost of hedging against fluctuations in asset prices spiked.
The Vix had been trending downwards for more than two years as equity market valuations steadily rose.
