Taking a pounding
Increasingly belligerent talk of a ‘no-deal’ Brexit has contributed to a slump in the value of the pound, particularly against the dollar. Sterling has suffered its worst monthly reversal against the dollar since the post-EU referendum days of October 2016, with a fall of 4 per cent-plus in July as currency traders began to bet heavily on a ‘no-deal’ outcome in October after prime minister Boris Johnson repeated his ‘no ifs, no buts’ vow to get the UK out of the EU by Halloween. The weak pound gave a significant boost to the blue-chip FTSE 100, many of the constituents of which report revenues in dollars.
Woodford woe
Gates remain shut
Investors in Neil Woodford’s ‘gated’ LF Woodford Equity Income Fund (GB00BLRZQB71) face the prospect of being unable to get their money back for months as he seeks to sell off enough investments to meet redemption requests. This week, Link Asset Services, the fund’s corporate director, gave another update on the suspension of trading in the fund – as it is expected to do every 28 days – and indicated that the suspension is likely to last until early December to allow Mr Woodford to complete a “measured and orderly repositioning of the fund’s portfolio”. Meanwhile, Mr Woodford’s eponymous fund management company could also lose its contract to manage the Patient Capital investment trust after its board admitted it has held talks with potential replacements in recent weeks.
M&A mania?
Deals keep coming
Summer is normally a quiet time on equity markets, especially in Europe, which is why a flurry of corporate activity in the final week of July has surprised many. On the same day London Stock Exchange (LSE) and Just Eat (JE.) confirmed major merger deals, Liontrust Asset Management (LIO) revealed it was in talks to acquire West London-based wealth management group Neptune Investment Management. The purchase, which will cost up to £40m satisfied by the issue of £35m new shares, will increase Liontrust’s assets under management by £2.8bn to £17bn, and add 19 funds – 13 of which were in the first quartile of their respective Investment Association sectors over the last three years.
Next beats
Shares rally
In a rare piece of good news for the UK's ailing retail sector, Next (NXT) increased its sales and profit guidance for the full year, prompting the shares to rise to their highest point in nearly three years. Trading was better than expected for the group in the six months to 27 July, leading management to increase profit guidance for the full year 10 per cent to £725m. However, this figure represented an increase of just 0.3 per cent on last year’s profits.
Euroslow
Growth weakens
The eurozone’s economic growth is weakening, adding to expectations of further monetary easing in September. Second-quarter figures showed eurozone economic growth halved from the first quarter to 0.2 per cent. Meanwhile, inflation in the eurozone also dipped to 1.1 per cent in July, down from 1.3 per cent in June, while unemployment rates fell marginally from 7.6 per cent in May to 7.5 per cent in June. The weakening growth rate, coupled with a lack of inflation, has bolstered expectations that European Central Bank head Mario Draghi is likely to introduce more stimulus into the economy in September after heavy hints to this effect last week.
GVC fined
Systematic failures
Ladbrokes Coral owner GVC (GVC) was fined one of the largest amounts to date by the UK Gambling Commission for failing to monitor money laundering and prevent problem gambling. The group will pay £5.9m, around £4.8m of which will contribute towards initiatives aimed at preventing harmful gambling, while the remaining £1.1m will be paid to affected customers. GVC chief executive Kenneth Alexander said he had "overseen a systematic review of the enlarged group's player protection procedures and the individuals responsible for these problems have exited the business".
Red flags abound
Insolvencies rise
Fresh from last week’s £8.3m equity placing, insolvency practitioner Begbies Traynor (BEG) came out with research that suggested its own activity should remain busy in the coming months. Its second quarter red flag report found that 14 per cent of all economically active UK businesses are now in “significant distress”, with average insolvency company debt up 122 per cent in three years to £66,000, and a 5 per cent increase in businesses in “critical” financial distress.
