Join our community of smart investors

Seven days: 16 February 2018

A round-up of the most important business stories of the past week
February 15, 2018

Trump the builder

The White House unveiled plans for $200bn in federal infrastructure spending over the next decade, to spur investment at state and local level, as well as from the private sector. Presented as part of Donald Trump’s 2019 budget to Congress, around $100bn of the funds will be used to match local and state investment, while the remainder will include spending on extending loan programmes and bonds. The president is hoping new spending will total $1.5 trillion. However, some have cast doubt on how realistic Mr Trump’s targets are, given However, some have cast doubt on how realistic Mr Trump’s targets are, given that most infrastructure spending already comes at state-level, which often has restrictive balanced budget rules.

Apple blow

Expectations frustrated

Investors in Apple (US: APPL) may have hopes of a special dividend dashed, after chief executive Tim Cook said he was “really not a fan” of such payments at the tech giant’s annual meeting. Some analysts had forecast an increase in the annual dividend of between 10 and 15 per cent, plus special payments of up to $15bn (£11bn), after management said it planned to reduce its $163bn net cash pile to almost zero. That followed the passage of US tax reforms aimed at encouraging multinationals to repatriate US profits accumulated in lower-tax countries.

Broadcasters score

Premier rights secured

BT (BT.A) and Sky (SKY) have secured the rights to another three seasons of Premier League Football. The deals are the outcome of a five-day auction process for seven ‘packages’ of matches in the 2020, 2021 and 2022 seasons. Sky has won four of the packages and BT one, with both groups paying less than they did last time around. The lack of competition between the two bidders – now that they are sharing their sports broadcasting rights – seems to have led to a more tepid auction process.

Japan rising

On growth streak

Japanese economic expansion may have missed market expectations during the last quarter, but the country is still enjoying its longest growth streak in more than 25 years. GDP was up 0.5 per cent on an annualised basis during the final three months of 2017, according to Cabinet Office figures, falling short of expectations of a 0.9 per cent increase. However, it represented the eighth consecutive quarter of expansion – the longest in 28 years. The Bank of Japan and President Abe will no doubt take succour from the relative strength in domestic demand, given the economy’s overreliance on exports to support growth.

Empty threat?

Against tech giants 

Unilever (ULVR) has sent a warning to digital platforms such as Google and Facebook that it will pull its online advertising if they “create division” or fail to stop the spread of online hate. The consumer goods giant’s chief marketing officer, Keith Weed, said the company “cannot have an environment where our customers don’t’ trust what they see online”. Unilever – the world’s second-largest marketing spender – shelled out €7.7bn (£6.8bn) on advertising last year. 

Sport’s Direct game

Collaboration announced

Sport’s Direct (SPD) founder Mike Ashley is making his presence felt at Game Digital (GMD), after buying a 26 per cent stake in the latter last year. As part of a collaboration, concessions of Game’s retail stores, and its Belong gaming and e-sports experiences, will be launched in some Sports Direct outlets. Under this agreement, Sports Direct has acquired a 50 per cent interest in the rights of Belong’s intellectual property for £3.2m and a 50 per cent share of future profits of Belong and its associated venues. Game Digital’s Spanish subsidiary also entered a loan agreement with Sports Direct for loan facilities up to £55m on an unsecured basis and bought a 26 per cent stake in the group.

Oil imbalance

US surges ahead

A surge in US oil production means supply is likely to outstrip demand this year, the International Energy Agency (IEA) has warned. The Paris-based agency raised its forecast for oil demand growth this year to 1.4m barrels per day (bpd), from 1.3m bpd. However, rising output from the US in particular could outweigh any increase in demand and push up global inventories. “In just three months to November, [US] crude output increased by a colossal 846,000 bpd and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader,” the IEA said.

 

The yield on 10-year US treasuries climbed further, after US inflation surpassed expectations for the second month running. The yield on government debt rose four basis points to 2.87 per cent (see chart), after the release of January’s 1.2 per cent headline inflation figure. 

That was against a consensus forecast of 1.9 per cent and was in line with December’s figure. Yields are at their highest point since 2014. Investors expect the Federal Reserve to increase interest rates at least three times this year, with the next quarter-point rise increasingly likely set for March.