Weak front?
Is the UK economy weakening? The latest factory order book data coming from the Confederation of British Industry’s industrial trends survey suggested that factory order growth is slowing, although it remains in positive territory. The recent mini-spike in sterling may not have helped, with export orders in particular falling faster than the wider sector. There are concerns that uncertainty over the government’s Brexit plans is hitting sentiment even though UK ministers were this week trying to add more meat to the bones of the government’s plan, with varying levels of success. Meanwhile, it may not only be the UK economy that is coming off the boil as Germany’s well-followed ZEW survey of economic confidence showed a dip this week, too, as did flash Purchasing Managers' Index readings for France and Germany.
Peak oil
BP warning
Peak oil has been a concern for the extractive oil and gas industry for many years and now one of the industry’s global heavyweights, BP, has predicted that global oil demand will have peaked by the late 2030s. BP’s latest annual energy outlook pointed to the expected surge in electric vehicles to around 300m worldwide by 2040, up from 3m today. But use of oil for car journeys is only expected to plateau around this time as overall global car travel is predicted to double in the next 20 years and to remain dominated by petrol vehicles even by 2040. BP expects renewable power to grow to 14 per cent of global energy consumption by 2040 but still expects a 10 per cent rise in global carbon emissions by 2040.
RBS rattled
Report published
A report commissioned by the Financial Conduct Authority (FCA) into the practices of RBS’s Global Restructuring Group (GRG) subsidiary in the wake of the financial crisis has proved to be predictably damning. The Treasury select committee finally published the report this week after the FCA itself had previously missed a deadline to do so. The report found that in 16 per cent of the sample cases studied that went through the GRG customers were caused material financial distress through inappropriate treatment, with select committee chair Nicky Morgan citing "made-up fees, high interest rates and the acquisition of equity and property" among the dubious practices.
Melrose makes eyes
Corbyn threat
Fresh from rubbishing GKN’s announcement of its Project Boost plan to improve investor returns last week, Melrose Industries this week used its financial results presentation to repeat why it thinks GKN's shareholders should back its bid, saying it would "gain significantly from becoming part of an enlarged £10bn UK industrial powerhouse". But Melrose did have to weather a second successive year of losses from the business it is currently turning around after taking a hefty write-down in value on power generation equipment specialist Brush. Meanwhile, Labour leader Jeremy Corbyn warned that if he were to become prime minister he would widen the public interest test and intervene in situations such as Melrose’s bid for GKN.
Petro plan
New crypto
Embattled Venezuela is attempting to dig itself out of an economic black hole with the launch of its own cryptocurrency, the Petro, which is backed by the South American country’s vast oil reserves. The first presale stage was launched this week, with more than 38m petro coins for sale at a headline price of $60 each, based on the cost of a barrel of oil. In total, Venezuela plans to ‘mine’ 100m coins worth $6bn and will accept the tokens as payment for taxes and public services.
Risers/Fallers
| FIDESSA GROUP | 42.51 |
| EVRAZ | 19.99 |
| HIKMA PHARMACEUTICALS | 15.19 |
| CONVATEC GROUP | 14.62 |
| INMARSAT | 12.34 |
| LANCASHIRE HOLDINGS | -14.6 |
| GALLIFORD TRY | -11.8 |
| MCCARTHY AND STONE | -9.06 |
| DIALIGHT | -7.69 |
| RECKITT BENCKISER GROUP | -7.14 |
Week to 20 February 2018
Commodity comeback
Results soar
The effect of the recovery in commodity prices in 2017 on top of years of cutting back costs of operations has been seen coming through in the results of commodity giants this week. Trading has been buoyant at Glencore and the company says it will generate free cash flow of $10bn this year, enough to allow it to pursue further deals following recent acquisitions in oil, zinc and coal. Strong performance allowed Glencore to bump up its dividend payout. Meanwhile, Aussie giant BHP Billiton posted its strongest half-year profit since 2014, also allowing it to boost its payout and giving management confidence to kick back against activist investor Elliott Advisors’ call for it to revoke its dual-listed status.
Flat wages
Rate rise hit
Wages in the UK economy appear to be flatlining. Total earnings including bonuses came in at 2.5 per cent for the three months to December, the third consecutive time the wage reading came in at that level. With inflation also seemingly stalled at 3 per cent, the fact that wage growth continues to lag behind the growth in prices could put pressure on the Bank of England’s Monetary Policy Committee if it seeks to raise interest rates in May, as many have predicted. Meanwhile, the UK’s employment figures remain solid, although the three months to December saw the first quarterly increase in unemployment for almost two years as the jobless rate rose to 4.4 per cent.
