EM turmoil
As if emerging market assets were not facing enough of a battle against rising US rates, the escalating trade war between the Chinese and US leaders acted as a further deterrent for investors this year. A 90-day truce made during the G20 summit raised hopes for a more permanent deal, but uncertainty remains over whether that will be struck. The arrest of Huawei chief financial officer Meng Wanzhou in Canada following an extradition request from the US threatened to set back progress, although China has so far directed its ire towards Canada by detaining two of its citizens on its soil.
Year of the bear
Equity sell-off
The year ended with investors wondering whether the sharp sell-off in global equities would continue into 2019. A perfect storm of trade war and Brexit-induced uncertainty, the unwinding of European and US quantitative easing and soaring equity valuations conspired to blunt global stock prices. The FTSE All-Share had fallen by 13 per cent since the start of the year, at the time of writing, with the S&P 500 faring slightly better but still recording a negative 5 per cent return.
Oil tumbles
Oversupply worries
After gaining more than 30 per cent during the first 10 months of the year, Brent Crude slid back as the year ended, as growing US shale production stoked oversupply concerns. That was despite output cuts by global producers such as Saudi Arabia and Russia, which in December agreed to curb production by 1.2m barrels a day during the first six months of 2019. However, Brent Crude had fallen to around $55.54 at the time of writing, from an October peak of $85.89. The US has surpassed Russia and Saudi Arabia as the world’s biggest oil producer, according to data from the US energy department, with overall crude production rising to a weekly record of 11.7m barrels a day.
Carillion's lesson
Who's next?
The collapse of Carillion – which had around £7bn in liabilities and just £29m in cash at the time of its liquidation – exacerbated the often-well-founded negative investor sentiment towards the outsourcing sector. Interserve (IRV) suffered the brunt of that downturn after reports of mounting debt, operational problems at its now-exited energy-from-waste division and a Financial Conduct Authority investigation into the handling of inside information and disclosures to the market about that business. The shares were down 88 per cent since the start of the year, at the time of writing.
Mighty falls
Crypto plummets
Bitcoin mania came to a halt, amid concerns over increased regulatory scrutiny and doubts over the long-term viability of cryptocurrencies as a secure means of exchange. The cryptocurrency plummeted by around 79 per cent since an all-time high of just over $17,000 in December 2017, according to Coindesk. This time last year Bitcoin – which came into being in the wake of the collapse of Lehman Brothers in 2008 – looked set to surpass $20,000 following a frantic bull run, which saw its value double in just three weeks.
Risers and fallers (%)
| OCADO GROUP | 124.9 |
| HIKMA PHARMACEUTICALS | 76.45 |
| GEM DIAMONDS (DI) | 60.14 |
| OXFORD BIOMEDICA | 57.82 |
| PLUS500 | 56.36 |
| CARPETRIGHT | -87.99 |
| DEBENHAMS | -86.69 |
| COUNTRYWIDE | -85.76 |
| INTERSERVE | -83.7 |
| MCCOLL'S RETAIL GP. | -79.63 |
Year to 18 December 2018
Ashley the grinch
Retail unravels
Hopes of a Christmas boost for retailers were dampened by warnings from Sports Direct (SPD) founder Mike Ashley that festive shopping would be so dire it would “literally smash them to pieces”. Mr Ashley’s purchase of House of Fraser out of administration symbolised the burden of large property estates and falling visits to the high street on the sector, but warnings of weaker sales from fast fashion giant Asos (ASOS) indicated that online retailers were not immune to weakening consumer confidence. That capped a torrid year for the sector – during the first quarter of 2018 alone, consultancy EY estimated that almost a fifth of FTSE general retailers issued a profit warning.
Big four break-up
Regulatory scrutiny
The role of auditors – and in particular the ‘Big Four’ accounting groups – came under renewed regulatory scrutiny, with the Competition and Markets Authority issuing a series of proposals aimed at tackling competition concerns and conflicts of interest within the industry. The CMA’s recommendations included forcing accounting firms to legally separate staff reviewing the accuracy of companies’ financial statements from the rest of their businesses. That came alongside the release of a separate government-commissioned review that called for the disbanding of the Financial Reporting Council and its replacement by a more powerful watchdog.
