Markets make merry
The hope that the potential trade war between the US and China is now off the agenda gave equity investors a lift at the start of this week. Markets in the US were buoyed and the UK’s blue-chip FTSE 100 index set a new all-time high, boosted by a strengthening dollar, which benefits many of the resources and exporting companies that make up the globally-oriented index. Trade talks between the US and China over the weekend concluded with news that the US has dropped its threat to impose tariffs on trade worth billions of dollars a year and that a framework is close to being agreed between the two sides to work to reduce the US trade deficit with China, while on Tuesday China announced it was cutting tariffs on imported US cars from 25 per cent to 15 per cent.
M&S closures
Push online
High-street doyenne Marks and Spencer (MKS) has expanded its “radical transformation plan” by announcing yet more store closures in an effort to improve the efficiency of its business and push more sales into the online sphere. By adding another 40 stores to the list of those to be closed, M&S will now shut more than 100 stores in the next four years with several provincial towns losing a key driver of footfall on their high streets. Meanwhile, the hitherto successful Simply Food arm will also slow down its rate of expansion this year in reaction to a cooling in the rate of sales growth. Indeed, results on Wednesday showed profits had fallen, but offered a glimmer of hope in news that management thinks margins will fall by a less-than-expected 0.5 per cent this year.
Borrowing drops
UK improvement
The current fiscal year got off to a good start for the UK government as net borrowing came in at its lowest level for 10 years. The level of public sector net borrowing in April was £7.8bn, well below the £8.6bn consensus prediction and the lowest level for that month since 2008, while the figure for borrowing in the 2017 fiscal year was revised downwards by £2.1bn to £40.5bn – the lowest in a decade. There is now hope that this year’s figure could, like in 2017, significantly undershoot that forecast by the Office for Budget Responsibility, and give the chancellor Phillip Hammond some scope to loosen the purse strings in his next Budget this autumn.
Sky clearing
Comcast boosted
The long-running Sky (SKY) takeover saga took yet another turn this week when US media giant Comcast’s (US:CMCSA) hopes of avoiding a regulatory investigation were boosted. The UK culture secretary, Matt Hancock, who must give his final verdict by the end of the month, revealed this week that he was minded not to refer Comcast’s £22bn offer for Sky to industry regulator Ofcom as it does not meet the threshold for a deeper investigation on public interest grounds. The news raised hopes at Comcast that it can prevail against a rival bid from 39 per cent owner Twenty First Century Fox (US:FOXA), which itself it currently being investigated by the Companies and Markets Authority, which will also deliver its verdict by the end of May.
Risers and fallers
| MOTHERCARE | 85 |
| OCADO GROUP | 65.37 |
| CARPETRIGHT | 37.89 |
| AO WORLD | 21.95 |
| BLOOMSBURY PBL. | 18.05 |
| THOMAS COOK GROUP | -14.8 |
| ARROW GLOBAL GROUP | -12.2 |
| ON THE BEACH GROUP | -10.81 |
| PETS AT HOME GROUP | -10.61 |
| HALFORDS GROUP | -10.6 |
Week to 22 May 2018
Pensions relief
Biggest schemes in the black
After years of potentially painful deficits, the pension schemes of the FTSE 100 constituents returned to surplus for the first time in a decade at the end of 2017. This was attributed to a combination of an aggregate injection of £13bn into pension schemes across the blue-chip index constituents, good investment performance and changes to the way discount rates and life expectancy are calculated. A report by pensions consultancy Lane Clark & Peacock estimated that FTSE 100 pension schemes were in surplus to the tune of £4bn at the end of last year, against a £31bn combined deficit a year earlier.
Merger talk
Barclays exploring options
It appears that the emergence of activist investor Sherborne on Barclays' (BARC) share register has focused minds at boardroom level on extracting more shareholder value for the business. But whether a global banking mega-merger would release enough value remains open to debate. Indeed news this week that informal talks had been held at a senior level between Barclays and Standard Chartered (STAN) over a potential merger failed to lift the former's share prices. Such a combination would make sense geographically and would reunite several former colleagues, not least of all Barclays chief executive Jes Staley and his Standard Chartered peer Bill Winters, who previously worked together at JPMorgan. Sherborne's Edward Bramson is believed to be preparing to push for a return of capital for Barclays shareholders, possibly through the shrinking of its investment banking operations.
Revolting
Shareholders react
Shareholders at two of the FTSE 100’s biggest companies have reacted angrily to the rewards being handed out to their top executives. The AGMs of both pharmaceutical giant AstraZeneca (AZN) and oil major Royal Dutch Shell (RDSB) saw significant numbers of shareholders voting against the pay awards for their respective chief executives, Pascal Soriot and Ben Ven Beurden. At AstraZeneca more than one-third of investors voted against or abstained in the vote to approve the executive remuneration report, which included Mr Soriot’s total £9.4m package, with shareholder representative groups saying it was “not suitably aligned with performance”, while more than a quarter of Shell investors rejected Mr Van Beurden’s £8.9m pay deal.
