Nuclear option
In a not wholly unsurprising move this week, Donald Trump unilaterally pulled the US out of a nuclear non-proliferation deal with Iran and threatened to reimpose sanctions within six months. Despite strong urgings from allies across Europe, Mr Trump stuck to his 2016 election campaign pledge to withdraw the US from the Joint Comprehensive Plan of Action agreed under the Obama administration. That was designed to see Iran roll back its nuclear programme in return for the lifting of certain sanctions, including on the sale of oil. Iran responded by saying it was considering resuming uranium enrichment, but would talk to the other signatories first. The oil price spiked in response, with Brent Crude passing through the $77 (£56.83) level on Wednesday morning.
Housing halt?
UK data weak
The UK’s property market has been in a growth phase for the majority of this decade and what goes up must come down at some point, surely? Well the latest house price data suggests the foundations could be subsiding. The Halifax’s house price index for April showed average UK house prices falling by 3.1 per cent – their biggest monthly reversal since as long ago as September 2010. On a longer-term view, prices are still up by 2.2 per cent on a 12-monthly basis, but are down 0.1 per cent in the past quarter and look set for a period of more muted growth, if at all.
Dominant dollar
Emerging markets under pressure
Continued strengthening of the US economy, coupled with the rate tightening path the Federal Reserve has embarked upon, has pushed the US dollar higher in global foreign exchange markets. In particular, emerging market currencies such as the Russian rouble, Turkish lira and Brazilian real have fallen sharply against the greenback since the start of the second quarter, while sterling and the euro have also weakened significantly. The sharp re-rating has echoes of the ‘taper tantrum’ of 2015 when emerging market currencies and equities reacted dramatically to even the expectation of US monetary tightening.
Upping the ante
Comcast explores cash option
US telecoms and media consolidation is in full swing. Fresh on the heels of T-Mobile and Sprint announcing their agreement to merge and form the second-biggest telecoms operator States-side, Comcast is believed to have sought the financial backing of its banks to further disrupt the mooted 21st Century Fox/Disney/Sky (SKY) tie-up. After launching a potential bid for Sky two weeks ago, bettering the tabled offer from Fox, Comcast is now said to have sounded out its banks for support for a $60bn (£44.2bn)all-cash offer for 21st Century Fox itself, trumping Disney’s $52bn offer for the business – although it may hold fire on making a formal offer until it sees the outcome of the US Department of Justice’s attempt to block the $100bn-plus takeover of Time Warner by AT&T.
Funds spat
Standard Life Aberdeen objects
A major spat is brewing in the UK asset management industry. Standard Life Aberdeen (SLA) is objecting to plans for one of its biggest customers to pull its mandate. Lloyds Banking subsidiary Scottish Widows caused consternation earlier this year when it said it was scouring the market for an alternative asset manager for its £109bn-worth of funds business, after the merger of Standard Life and Aberdeen Asset Management had created a situation where the two businesses were now in “material competition” in the UK. It now appears that Standard Life Aberdeen rejects that assertion that Lloyds has the right to pull its mandate on such grounds. However, the latter said the suggestion that SLA was not a material competitor was "not credible".
Cooling demand
Customers stay away
Shares in Greggs (GRG) plunged 15 per cent on the day the baked goods specialist blamed recent turbulent weather – specifically the 'beast from the east' – for weaker growth. Severe weather not only meant lower footfall, but some shops couldn’t open at all. Over the first 18 weeks of the financial year, sales rose 4.7 per cent, compared with a 7.4 per cent growth rate this time last year. On a like-for-like basis, sales rose 1.3 per cent, compared with last year’s rate of 3.5 per cent. Given the trading conditions to date, Greggs bosses say underlying profits for the year should be flat on 2017, behind analyst expectations.
Competition concerns
SSE/Npower referred
Energy pricing has long been a political football in the UK and any hint of the ‘Big Six’ energy providers doing anything that may hinder competition is usually jumped on rather rapidly. Hence the relative lack of surprise at the decision by the Competition and Markets Authority this week to open a full investigation into the proposed merger between SSE and Npower. A combination of the second-biggest and sixth-biggest energy providers by customer numbers has been in the works since late last year and the opening of a full investigation is unlikely to come as a surprise to either party, but it does mean any such deal between the two is now likely to be delayed until the final months of this year or early 2019.
