Lagarde for ECB
European government bonds rallied on the news of International Monetary Fund (IMF) managing director Christine Lagarde’s nomination to become the next president of the European Central Bank (ECB), stoked by expectations of a continuation of an ultra-loose monetary policy. In June debt prices rose after current ECB president Mario Draghi – who is due to leave the bank at the end of October – hinted that he was preparing to unveil fresh stimulus measures, including an expansion of its €2.6 trillion quantitative easing programme. Ms Lagarde has relinquished her responsibilities at the IMF while the nomination process is ongoing.
Serco fined
Line drawn
Serco (SRP) agreed to pay a £19.2m fine and £3.7m in costs after reaching a deferred prosecution agreement (DPA) with the Serious Fraud Office (SFO) relating to its historic electronic tagging scandal. The outsourcer overcharged the Ministry of Justice (MoJ) between 2010 and 2013 under prisoner tagging contracts. Having paid a £70m settlement to the MoJ in 2013, the department is considered to have been fully compensated. No criminal charges have been brought against the group and if the DPA is confirmed in court on 4 July, this would conclude the SFO's investigation into Serco, initially announced in November 2013.
Dialight warns
Orders weak
Dialight (DIA) shares tumbled almost a third in one day after the LED lighting manufacturer warned underlying operating profits for 2019 would be between £10m and £13m, down on the £15.1m previously forecast by house broker Investec. Management reported a weakening order intake during the second quarter for its signals and components business and high levels of inventory in the distribution channel, associated with the exit from its Sanmina facility. Chief executive Martin Rapp will also step down to resume his retirement, replaced in the interim by chief financial officer Fariyal Khanbabi.
House grows weakens
London drags
UK house price growth slowed to its lowest level in four months in June, according to the Nationwide house price index, rising just 0.5 per cent. That marked the seventh month in a row that prices had grown by below 1 per cent. Prices in London fell for the eighth consecutive quarter during the three months to June, although the pace of that decline moderated to 0.7 per cent, compared with the 3.8 per cent reduction over the previous quarter. Northern Ireland was the strongest performing region, with prices rising 5.2 per cent on the same time last year.
Crypto ban
Complex contracts
The Financial Conduct Authority (FCA) proposed a ban on cryptocurrency derivatives after the regulator’s executive director of strategy and competition, Christopher Woolard, called the market a “complex set of contracts built on top of complex contracts”. Under the proposals, trading platforms would be banned from selling, marketing or distributing all derivatives linked to unregulated transferable crypto-assets, such as bitcoin, to retail investors. The FCA said a ban could save retail customers between £75m and £234m a year.
Tesla rebounds
Market relief
Tesla (US:TSLA) delivered a record 95,200 cars during the second quarter, up more than half on the prior three months. However, the US car manufacturer did not disclose profit figures, but previously said it expected to remain in lossmaking territory, after reporting a $702m loss for the first quarter. The rebound in orders went some way to alleviating investor concerns about a slump in demand. The shares rallied in early US trading, but are still down more than a third on 2017's all-time high.
Mega IPO
Acquisitions on cards
Anheuser-Busch InBev announced it was preparing to list a majority stake in its Asian business in Hong Kong, in what could be the largest initial public offering (IPO) so far this year. The owner of Budweiser and Stella Artois is seeking to raise as much as $9.8bn (£7.80bn), with part of the proceeds used to pay down its hefty debt pile and make acquisitions in the Asia Pacific region. Depending on investor demand, the Asian operations could be valued at between $54.2bn and $63.7bn. China is expected to be the main source of growth for the business over the coming years.
UK construction activity fell to its lowest level in more than a decade in June, as building clients delayed project decisions.
The IHS Markit constructionpurchasing managers’ index dropped to 43.1 last month, the lowest level since April 2009. Any reading below 50 represents contraction in output.
The decline in activity was spread across all areas of the construction sector – housebuilding, commercial and civil engineering. Housebuilding – which up until June had been more active than other sectors – reported its biggest fall in activity in three years.
