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Seven days: 9 August 2019

A round-up of the biggest business stories of the past week
August 8, 2019

Currency clash

Trade war continues 

Tensions between Washington and Beijing show no signs of cooling after the US officially named China a “currency manipulator”. Monday’s announcement from the US Treasury followed a shock fall in the value of the Chinese yuan. For the first time since 2008, the yuan passed the seven-per-dollar line, taking markets by surprise. Trump took to twitter to condemn what is being treated as Chinese foul-play and defend his tariff policy, saying that it is clear that “Americans are not paying for the Tariffs”. The People’s Bank of China blamed the yuan’s flop on trade protectionism.

 

Sports Direct scores 

Another acquisition 

After Jack Wills fell into administration on Monday, retail giant Sports Direct (SPD) scored a £12.75m acquisition deal. The ‘preppy’ fashion brand had been struggling for some time – for the year ended 28 January 2018 it made an operating loss of £14.2m. The purchase includes all of Jack Wills’ assets in the UK and Republic of Ireland: stock,100 stores and employees, and a distribution centre. High-street tycoon and CEO Mike Ashley is renowned for this so-called ‘pre-pack administration’ tactic, having secured a similar buyout deal with House of Fraser last year. 

 

Do or die

No deal decline 

The odds of a no-deal Brexit have been hiked since the ascension of Boris Johnson, causing the pound to drop below $1.21 this week. Meanwhile, the UK’s 10-year gilt yield fell to a historic low, below the record that followed the referendum result in August 2016. The prime minister’s hardline “do or die” policy also caused the Bank of England to warn of a one-in-three chance of recession in 2020. 

 

Disney dips 

Disappointing figures 

Tuesday evening witnessed a 5 per cent drop in Disney's (US:DIS) shares after the company released figures that failed to meet analysts’ predictions. Compared with this time last year, Disney’s third-quarter net income is down 51 per cent. This news comes in the same year that Walt Disney Studios set a box-office record with Avengers: End Game, amid a string of other blockbusters such as Toy Story 4. Overshadowing this success, however, is lower theme park attendance and the cost of creating a digital streaming service to rival Netflix – named Disney+ and set to be launched in November. 

 

Executives sliced 

Domino’s board restructuring 

Amid a franchise row and problematic European expansion, Domino’s Pizza announced the retirement of its chief executive on Tuesday. Once a successor is found, both chief executive David Wild and chairman Stephen Hemsley will step down. In the same notification, Domino’s predicted a “win-win” resolution to the dispute with franchisees but said discussions are likely to continue into 2020. While group revenue and like-for-like sales in Britain rose by 4.7 per cent and 3.9 per cent, respectively, in the first half, Domino’s international performance “remains challenging”.

 

Libra left lacking 

Data privacy concerns

Privacy has been a recurring hamartia for Facebook over recent years, and the pattern seems set to continue. The British Information Commissioner’s Office – a data privacy watchdog – has released a joint statement with equivalents in the EU, Australia, Canada, and the US expressing concerns over Facebook’s planned digital currency. Mark Zuckerberg’s hopes to expand his online empire may be threatened as the international coalition highlights the “privacy risks posed” by libra. Elizabeth Denham, the UK’s information commissioner, spoke out on Monday against the potential to match Facebook user’s social data with their financial information should the project go ahead. 

 

On the ground 

BA’s systems failure

After narrowly avoiding a pilot strike earlier in the week, British Airways was struck by an IT glitch on Wednesday morning. The airline was forced to cancel and delay flights due to a systems failure, impacting London holiday-goers. Heathrow, Gatwick, and City airports were affected, and knock-on delays were seen in airports across the UK and Europe, including Edinburgh, Glasgow, and Belfast. British Airways said that its customers had the option to move bookings, and EU law entitles travellers to claim for compensation.

 

Chart of the week

The average house price took a slight tumble for the second month running in July, falling by 0.2 per cent, according to Halifax’s House Price Index. 

This decline is in contrast to the0.4 per cent increase in the latest quarter, and 4.1 per cent rise compared with this time last year – although this annual change figure must be understood in the context of relatively low growth in the parallel period of 2018. 

Halifax managing director, Russell Galley, says that the market is stable, continuing “to tread water” despite economic uncertainty.