1 October 2018

Stuart Taylor

1 October 2018

Good morning,

If, like me, you spent most of the weekend in front of the television watching every drive, chip and putt in golf’s Ryder Cup, it will come as no surprise that European jubilation adorns many of this morning’s front pages.

However, Rory McIlroy and co. are nowhere to be seen on the front of the Financial Times, which covers a different kind of European victory on Parisian soil and one that gives us less cause for celebration. 

The paper reports that the French capital is emerging as the favoured financial trading hub for some of the biggest and most recognisable names in banking and asset management as they seek a new home away from London in the wake of Brexit. BlackRock and JPMorgan Chase look set to join HSBC, Bank of America and Citigroup in moving operations across the Channel, establishing Paris as the industry’s choice in a battle that was also hotly contested by Dublin and Frankfurt. It will be a triumphant outcome for Emmanuel Macron and his government, who have sought to woo business with generous tax and labour policies.

The extent to which companies will uproot their business from one city to another remains unclear but according to Daniel Pinto, JPMorgan’s investment bank chief, it could eventually be a wholesale expansion similar to that which saw London become the financial capital of the continent.

John Glen, the UK’s City minister responded by saying that Britain would do “whatever it takes” to defend the position of London as a global financial centre, using all the levers it has at its disposal to continue to attract businesses and maintain the city as the jewel in Europe’s financial crown.

However, the continual difficulty for Glen and his government colleagues is that, for all their pro-business rhetoric, the legal and regulatory realities that will follow the country’s exit from the EU remains unclear and they will shortly be hamstrung by the loss of several key controls, most notably that of ‘financial passporting’. Businesses are doing what is natural and safeguarding their EU operations to ensure the cogs keep turning when Brexit is enacted.

This morning’s news should concern Theresa May. However, she may actually find solace in Birmingham for the next three days, surrounded as she is by party members, many of whom would happily ignore such complexities in favour of delivering a swift and unequivocal break from the European Union.

News

At least 832 people are confirmed to have died following an earthquake and tsunami in and around the Indonesian city of Palu on Friday. The numbers of casualties from the 7.5-magnitude quake is expected to rise as the search extends to more rural areas of the city.

Macedonia’s vote to change its country’s name to North Macedonia appears to have failed due to a lack of turnout. Preliminary results show that just 36% of eligible people voted, less than the 50% required to enact change. Of those who did vote, 90% voted in favour of the name change.

The body responsible for administering MBA entrance exams has reported a fall in global demand for business masters degrees for the first time since the financial crisis. Applications for places on courses fell slightly year-on-year by 0.02%, but dropped nearly seven per cent in America, the birthplace of the Master of Business Administration degree. (£) 

Europe regained golf’s Ryder Cup yesterday after a resounding 17½-10½ victory over the United States. Although the US team briefly threatened a comeback yesterday afternoon, the Europeans, led by team captain Thomas Bjorn, secured a convincing win having dominated much of the weekend’s play at Le Golf National resort in France.

Business & Economy

The US and Canada have come to an agreement over a new trade deal to replace the current North American Free Trade Agreement (Nafta). Although the joint statement did not disclose any details, it is speculated that the new deal – which also involves Mexico – involves an increase in US access to Canada's dairy market and a cap on its car exports to the US. (£)

Shares in Tesla are expected to rebound today after chief executive Elon Musk resigned the role of chairman over the weekend. The company’s controversial co-founder stepped down on Saturday following pressure from America’s financial markets watchdog and will be replaced by an independent chairman and two non-executive directors. (£)

Greg Clark, the UK’s business secretary, has told a fringe event at Conservative party conference that business rates in England could be changed to help High Street retailers. Clark said that the significant role played by local high streets should be recognised and that adjusting business rates "will be one way of doing that". A consultation on business rates is currently undertaken by the Treasury.

Markets

The week ahead

The people of Quebec will go to the polls today, where it is expected to be a close race between Justin Trudeau’s Liberals and their centre-right competitors. Controversial proposals on immigration are likely to play a major part in the Canadian province vote, where the Liberals took 70 of the 125 seats on offer back in 2014.
 
The European Parliament will vote on whether to introduce a new law that would set a 45% target for reducing carbon dioxide emissions for new cars by 2030, with an intermediate target of 20% by 2025. The debate will take place on Tuesday before lawmakers vote on the plans proposed by the environment committee on Wednesday. Tuesday will also see Pepsi post its third-quarter results.
 
On Wednesday, Tesco will post its second-quarter results, with the announcement coming hot on the heels of the introduction of its new budget brand, Jack’s.
 
The world’s carmakers roll into France on Thursday for the Paris Motor Show. The event comes amid an uncertain time for the global automobile industry as fears over a US trade war threaten global production of many manufacturers. Also, Costco is expected to post an increase in revenue and sales when it posts its results.
 
Finally, the US Labour department reports the latest employment data on Friday, with job numbers forecast to have fallen ever so slightly since last month.

AGMs
Kromek Group
Vedanta Resources

UK Economic Announcements
(09:30) Consumer Credit
(09:30) M4 Money Supply
(09:30) Mortgage Approvals
(09:30) PMI Manufacturing

International Economic Announcements
(07:00) Retail Sales (GER)
(08:55) PMI Manufacturing (GER)
(09:00) PMI Manufacturing (EU)
(10:00) Unemployment Rate (EU)
(14:45) PMI Manufacturing (US)
(15:00) Construction Spending (US)
(15:00) ISM Manufacturing (US)
(15:00) ISM Prices Paid (US)

Columns of Note

Ahead of Philip Hammond’s speech at Conservative party conference later today, Adam Boulton wrote in The Sunday Times that the chancellor will use his time on stage to shun talk of Brexit and instead talk up his party’s record on the economy. Boulton says this approach is unlikely to be well received from colleagues “drunk on Brexit”, and not least from a prime minister he has failed to see eye-to-eye with on a number of issues during their time as neighours in Downing Street. (£)

The FT’s Big Read examines the diversification process being undertaken by Sberbank, the Kremlin’s largest lender, as it looks to undertake reforms to shape Russia’s future in the shadow of future US sanctions. (£)

Did you know?

The Eiffel Tower once served as the largest billboard in the world, displaying a lit advertisement for French car manufacturer Citroën from 1924 to 1935.

Parliamentary Highlights

TODAY  

House of Commons

In recess until Tuesday 9 October

House of Lords

In recess until Tuesday 9 October

Scottish Parliament

No business scheduled

 

TOMORROW

Scottish Parliament

Scottish Government Debate: Building a Social Security System Together: Co-designing the Social Security Charter