11 September 2018

Stuart Taylor

11 September 2018

Good morning,

In the end football might not have come home, but it appears that the World Cup helped deliver some much-needed cheer to the country’s high street. 

Yesterday’s figures by the Office for National Statistics showed that the UK’s economy had expanded by 0.6% over the three months to July - its fastest pace in over a year - with the retail sector showing particularly positive signs of recovery, growing 2.1% from the previous quarter.

The summer heatwave that we enjoyed (now a distant memory) also seemed to be a major factor that drove shoppers to the high street. Delving deeper into the detail, it was a strong period chiefly for food and drink retailers and supermarkets, as people watched the football and even celebrated the royal wedding in the sun.

The figures will be music to the ears of policymakers at the Bank of England, who now appear to be of the opinion that the slowdown seen at the start of the year was caused by the unseasonably cold weather and was not a symptom of a more structural economic problem. The safe money is now on the bank holding interest rates at the current level when they meet on Thursday. 

Coming on the back of a spate of difficulties for the high street - the ongoing troubles of Debenhams another worrying example - the sector will now hope that this recovery can be sustained and the figures don’t mask a terminal problem that will see more familiar names go out of business.

It’s of little surprise that uncertainty caused by Brexit will be a principal factor when it comes to whether or not this momentum can be maintained and the purses and wallets of Britons stay open throughout autumn. It’s therefore for everyone’s sake, not least our retailers, that Michel Barnier is on the money when he says that a deal can be struck between the UK and Brussels in a matter of weeks.

News

Donald Trump and North Korean leader Kim Jong-un are preparing to hold a second summit following their historic June meeting in Singapore. The White House confirmed that plans were underway after the US president received a “very warm, positive letter” from Kim. (£)

More than a million people living along the coastlines of South Carolina and Virginia have been ordered to evacuate their homes as Hurricane Florence prepares to reach the east coast. Florence is at present a Category Four storm, with sustained winds of about 140mph, and is expected to reach the Carolinas on Thursday.

More than 30,000 people have fled the rebel-held Syrian province of Idlib as the UN warns that the area could see “the worst humanitarian catastrophe with the biggest loss of life in the 21st century”. Two opposition-run hospitals have already been destroyed as regime and Russian planes have begun bombing the province and neighbouring areas. (£)

Business & Economy 

Network Rail is selling its commercial property portfolio in a deal that will raise £1.46bn, with the proceeds to go towards funding railway upgrades. The sale to Blackstone Group and Telereal Trillium encompasses 5,200 properties, predominantly converted railway arches.
 
Jack Ma has stepped down as chairman of Alibaba, China’s most valuable company. The billionaire co-founded the company in 1999 and saw its flotation on the New York Stock Exchange in 2014, with Wall Street now valuing the business at $400 billion. He will hand the reins to Daniel Zhang, who took over as chief executive from Ma in 2013. (£)
 
Global tax authorities are examining an estimated $75bn of capital held by the largest US companies, as international regulators aim to get tough on corporate tax avoidance and evasion. A poll of 150 members of the Fortune 500 index of the largest US companies found that $23bn of revenue is subject to tax disputes with international authorities, and nine in 10 of the companies surveyed currently have tax under dispute. (£)

Markets

What happened yesterday?

It was a flat day for the FTSE 100 yesterday, ending the day marginally higher. London’s blue chip index closed at 7,279.30 points, a 0.02% increase, with a stronger pound a major factor for this shallow incline. 
 
Sterling rose sharply yesterday upon news that the EU’s top Brexit negotiator said it would be “realistic” for a deal to be forged by early November. Michel Barnier’s report caused the currency to jump as much as 0.73%, leaving it up 0.9% on the day at $1.3035 against the US dollar. It also rose 0.38% against the euro to €1.1225. The stronger pound has a sizeable effect on the large firms on the index, as their foreign earnings will be worth less when converted back into sterling.
 
Rather predictably, shares in Debenhams tumbled yesterday after the retailer confirmed that it had appointed KPMG to help improve its ailing performance. The company sought to reassure investors following the announcement, saying that KPMG would help maximise shareholder value, but this did little to stem the downward trend in shares, which closed 10.16% lower.

Finals              
Alumasc Group
CPL Resources
K3 Capital Group
Murgitroyd Group
 
Interims
Cairn Energy, DP Eurasia N.V. (DI), ECSC Group, EU Supply. Hilton Food Group, Harworth Group, JD Sports Fashion, Midwich Group, Nucleus Financial Group, PureTech Health, The Simplybiz Group, Silence Therapeutics, Sanne Group, STM Group, Surgical Innovations Group, Team17 Group, TP Group, Vectura Group

UK Economic Announcements
(09:30) Claimant Count Rate

International Economic Announcements
(10:00) ZEW Survey (EU) - Economic Sentiment
(10:00) ZEW Survey (GER) - Current Situation
(10:00) ZEW Survey (GER) - Economic Sentiment
(15:00) Wholesales Inventories (US)

Columns of Note

It’s a question that has dominated British politics for some time now: will we see the emergence of a new centrist party? The FT’s Robert Shrimsley doesn’t seem to think so and has outlined four reasons why not. The fact that there is no obvious leader waiting in the wings and any attempt to form a breakaway party will distract from the battle over Brexit are just two of the arguments he presents. (£)

Looking ahead to the party conference season later this month, Owen Bennett writes in City AM that the challenges facing Labour and the Conservatives have a familiar feel to them. Bennett says Brexit, leadership woes – and not forgetting Boris Johnson – will once again dominate proceedings when each host their party faithful.

Did you know?

In Japan in the 1990s there was a pet King penguin called Lala who would walk every day into town by himself with a backpack on and collect fish from the local market.

Parliamentary Highlights

TODAY

House of Commons

Oral questions

HM Treasury (including Topical Questions) 

Legislation

Counter-Terrorism and Border Security Bill - remaining stages 

House of Lords

Oral questions

Extent to which the financial settlement agreed with the EU will be justiciable, in EU, national or international legal systems, in the event of the UK renouncing the agreement - Lord Balfe 

Plans to commemorate the 75th anniversaries of D Day and the Battle of Arnhem in 2019. - Lord Black of Brentwood 

To ask HM Government whether their policy towards withdrawal from the EU remains that no deal is better than a bad deal - Lord Robathan

UK's contribution to Europol after 29 March 2019 and during any subsequent transition period - Lord Cormack

Scottish Parliament

Ministerial Statement

Preparations for EU Exit

Scottish Government Debate

The Social Enterprise World Forum 2018

 

TOMORROW

House of Commons

Oral questions

Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office (including Topical Questions)

Prime Minister's Question Time

General debate

The Salisbury Incident

House of Lords

Oral questions

Plan to make representations to the General Medical Council on conducting a review of the training on eating disorders provided to medical students and junior doctors - Baroness Parminter

Reducing the incidence of Spina Bifida and related conditions resulting from neural tube defects - Lord Rooker 

The increasing prevalence of gambling advertising, as reported in the Gambling Commission’s 'Review of online gambling' - The Lord Bishop of St Albans

Scottish Parliament

Portfolio questions

Environment, Climate Change and Land Reform

Scottish Government Debate: Suicide Prevention Action Plan: Every Life Matters