Crude rally
Brent crude futures recorded their biggest one-day spike on record, after a weekend drone strike on a Saudi Aramco refinery took out half of the crude oil supplies for the world’s largest oil exporter, equivalent to 5 per cent of the global daily total. Responsibility for the attack was claimed by Houthi rebels in Yemen, while the White House blamed Iran for the strikes, something the Iranian foreign ministry has denied. US secretary of state Mike Pompeo tweeted: “Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen.”
Cobham's get defensive
Takeover in balance
Advent International’s takeover of defence group Cobham (COB) was thrown into doubt after the government issued an intervention notice on the grounds of national security. The US private equity group made a £4bn offer for Cobham in July, which was approved by shareholders but faced criticism from the group’s founding family. Business secretary Andrea Leadsom has ordered the Competition and Markets Authority to investigate the national security implications of the deal and report its results by 29 October.
Ocado rebounds
Sales buoyant
Ocado (OCDO) bounced back strongly after the fire at its Andover customer fulfilment centre earlier this year, reporting an 11.4 per cent climb in retail sales in the 13 weeks to the beginning of September, while average weekly orders were up 12.1 per cent, due to the increased availability of delivery slots. However, the average order size declined by 0.8 per cent, although management said this reflected an increased frequency of purchasing.
CPI dips
Retailers discount
UK inflation dropped sharply to 1.7 per cent in August due to a fall in computer game prices and the failure of clothes prices to rebound from summer discounts. The consumer price index fell to its lowest level since December 2016, according to the Office for National Statistics, and was down on the 2.1 per cent rise in prices recorded in July. That figure is also below the Bank of England’s 2 per cent inflation target, which could strengthen the case for a cut to the base rate if prices continue to fall.
Cash injection
Funding squeeze
The Federal Reserve offered two $75bn (£60bn) injections into a vital part of the US money market this week in order to alleviate a lack of funding in overnight lending markets. The cost of borrowing cash overnight via repurchasing agreements – which allow companies to borrow money in the short term in exchange for US treasuries as collateral – rose to as high as 10 per cent. The second injection was met with high demand, with traders submitting requests for $80bn in funds, topping the $53bn requested in the first round.
Risers and fallers (%)
| CAPITAL & REGIONAL | +21.21 |
| FOXTONS GROUP | +17.66 |
| LSL PROPERTY SERVICES | +15 |
| LUCECO | +14.25 |
| AA | +13.92 |
| SIRIUS MINERALS | -56.06 |
| NOSTRUM OIL & GAS | -20.76 |
| OXFORD BIOMEDICA | -18.61 |
| THOMAS COOK GROUP | -13.51 |
| INDIVIOR | -13.07 |
Week to 17 September 2019
SSE offloads
Debt reduction planned
SSE (SSE) agreed to sell its energy services business to rival OVO at an enterprise value of £500m, with the net proceeds to be used to cut net debt. Subject to regulatory approval, the deal is expected to complete in late 2019 or early next year, with a long-stop date of 31 May 2020. RBC Capital Markets analyst John Musk said that despite the price being below the brokerage’s recently lowered valuation of £840m, “it leaves SSE with a cleaner structure allowing it to focus on two core segments of networks and renewables”.
Strike off
Pay talks continue
British Airways pilots have called off their planned strike on 27 September after the British Airlines Pilot Association called for a period of reflection before the dispute "escalates further and irreparable damage is done to the brand". Last week pilots for British Airways, owned by International Consolidated Airlines (IAG), went on a two-day strike that forced the cancellation of around 1,700 flights. The 4,000 pilots involved in the strike believe that profits have not been shared fairly with employees, claiming that managers have received all the benefits, and in turn are demanding higher pay and better conditions.
