Trade war fears
Concerns about the growing threat of a global trade war derailing the improving economic environment worldwide have been a significant factor in the recent decline in investor sentiment. Following on from President Trump’s recent move to apply tariffs on steel imports to the US, last week he threatened further action, citing the mountainous $375bn (£265bn) trade deficit between the US and China last year as a reason to attempt to slow the seeming one-way flow of Sino-US trade. Earlier this week China was said to be scrambling to put together a concerted reaction to avert the risk of further tariffs, including accelerating proposals to allow overseas companies to take controlling stakes in Chinese financial services companies and reducing tariffs on cars imported to China.
Off the menu
Restaurants struggle
Has the UK consumer fallen out of love with eating out? The restaurant sector has held its own over recent years as its acolytes have cited the durability of consumer spending on experiences even when demand elsewhere in the consumer sector has wobbled. But research by accountants UHY Hacker Young suggests that the top 100 UK restaurant groups saw profits slump by almost two-thirds last year to £125m, with more than one-third of the top 100 incurring losses over the past year. Indeed, of late, privately owned chains such as Prezzo and Byron have had to seek agreement with their creditors to continue operating, while Restaurant Group (RTN) has reported tough trading conditions and been forced to streamline operations in reaction to changing consumer demand patterns.
Trading clarity
Spread-betting clampdown
After more than a year of uncertainty for UK-listed spread-betting specialists CMC Markets (CMCX), Plus500 (PLUS) and IG Group (IGG), the European Securities and Markets Authority (ESMA) has announced its final restrictions on the marketing and sale of contracts for difference (CFDs) to retail investors. Leverage limits on an opening position will be 30:1 for major currency pairs, falling to 2:1 for crypto-currencies. The regulator also mandated a margin close-out rule on an individual account basis, which will standardise the percentage of margin (at 50 per cent of minimum required margin) at which providers are required to close out one or more retail clients' open CFDs. As expected, the marketing and sale of binary options to retail investors has also been banned.
Economic union
Rainy day fund
International Monetary Fund head Christine Lagarde has reiterated her belief that the eurozone should establish a ‘rainy day’ fund while its economy is enjoying an upswing, to help buffer against future crises. Eurozone finance ministers are thought to be broadly in favour of establishing such a fund, but have been awaiting the conclusion of coalition talks in Germany, which would naturally be one of the lead sponsors of such a project. Wrapped up in longer-term plans for further banking and capital markets union, any such fund would be topped up in good times and could be accessed by weaker states during tougher periods.
| Risers and fallers | |
| Interserve | 36.96 |
| Fenner | 24.34 |
| Xaar | 16.81 |
| Mothercare | 15.8 |
| Petrofac | 8.83 |
| Moss Bros | -20.76 |
| De La Rue | -19.44 |
| Ted Baker | -16.6 |
| Ferrexpo | -15.09 |
| Carpetright | -14.77 |
Week to 27 March 2018
Pay vs productivity
UK lags
After spending many years worrying about the anaemic productivity growth in the UK economy, we have finally seen signs of a pick-up in recent months. However, this has raised a fresh concern. Productivity growth in the UK is expected to tick up to 0.8 per cent in 2018, up from 0.6 per cent last year, although still well below the 2 per cent-plus recorded a decade ago and lagging Europe’s recent showing. Meanwhile, data shows that regions enjoying the strongest productivity growth, in particular areas of the north and Midlands, are not seeing commensurate rises in wages, which suggests workers are striving harder and smarter but not yet being rewarded for doing so.
Drug clone
Generic threat
It was a case of another patent disappointment, another share price fall for Indivior (INDV) this week. This time, patent offices in the US found that generic drug maker Alvogen had not breached the group’s patent with the unbranded version of its major opioid addiction treatment Suboxone. Indivior says it will appeal the decision and, although it can’t quantify the financial repercussions yet, management said launch of the rival product would be damaging to Suboxone’s sales. Indivior has asserted two more patents against Alvogen, which have yet to go to court.
Facebook feels heat
US authorities act
Investor sentiment towards Facebook (US:FB) took a further knock after the US Federal Trade Commission (FTC) announced it had opened an investigation into the social network’s privacy practices. It follows the Cambridge Analytica scandal, which resulted in the data of around 50m users being misused. Facebook signed a consent order with the FTC in 2011 that required it to be upfront with users about how their data was being shared with third-parties. If the tech group has broken the agreement it could face fines of up to $40,000 per violation per day.
