15 February 2019

Adam Shaw

15 February 2019

Good morning,

A prime minister leading a minority government requiring the support of regional parties in a confidence and supply arrangement. The country divided by regional independence movements and the identity it has wrestled with since 1975. Government defeat. The spectre of yet another, probably inconclusive, general election.
Sound familiar? Well, on this occasion, it’s not actually the UK of which I speak, if that’s any consolation.
Spanish prime minister Pedro Sánchez is expected to announce a date for a snap general election – the country’s third in four years – later this morning after the Spanish Congress rejected the PSOE’s (Spanish Socialist Party) 2019 budget last week.
Sánchez seized power in June last year after securing opposition backing for a no-confidence vote in Mariano Rajoy and his Partido Popular (Spanish Conservative Party) government. However, with just 84 seats in the Congreso de los Diputados, Spain’s lower house, his party’s governing position was always precarious, requiring the support of a rainbow coalition of left-wing and separatist parties. The Catalan separatists withdrew their support for the budget after a failure to reach an agreement on a dialogue over independence.
The Spanish government continues to cite the constitution in opposition to Catalan independence, referencing the “indissoluble unity” of the Spanish nation.
However, Spain remains divided, not only with regards to independence movements, but also the legacy of Francisco Franco’s dictatorship since his death in 1975. This is set against an increasingly fragmented political landscape with polls inconclusive about who will form the next government in the event of another election.
Uncertain times in the Eurozone’s fourth largest economy. 


Theresa May has suffered another Commons defeat – the 17th since she became prime minister – after MPs voted 303 to 259 against a motion reiterating support for the approach to Brexit backed by MPs in votes last month, one of which ruled out a no-deal Brexit. This came after the pro-Brexit European Research Group stated that it had taken a "collective decision" to abstain, saying the government's motion implied a no-deal Brexit would be ruled out. May was not present for the largely symbolic vote but it will be viewed as a yet another blow to her authority. Downing Street has said she will continue with her Brexit strategy.
President Trump will sign a spending bill to avert a further government shut down but will also declare a national emergency in an attempt to bypass Congress and secure funding for his proposed border wall. Mitch McConnell, the Senate majority leader, told the chamber that he had spoken to the president who is “prepared to sign the bill” but that “he will also be issuing a national emergency declaration at the same time”. This was confirmed in a White House statement shortly after. The move is expected to spark a court challenge from Democrats on constitutional grounds.
Relatives of Shamima Begum, the 19-year-old who ran away to join Islamic State in 2015, have appealed for her to be shown mercy and allowed to return home, suggesting she may be suffering from Stockholm Syndrome. Security sources cited in The Times said she would be treated as a “national security threat” rather than an intelligence asset and Sajid Javid, the home secretary, has taken a hard line, saying: “My message is clear: if you have supported terrorist organisations abroad I will not hesitate to prevent your return.” 

Business & Economy

Royal Bank of Scotland made a profit of £1.62 billion in 2018 – more than double the £752 million it made the year before. The bank also said it would pay a special dividend to shareholders, of which £977 million would be paid to the government, which still owns a 62% stake. Chief executive Ross McEwan described the results as “a good performance in the face of economic and political uncertainty”. However, he highlighted that 2018 was a year of benign economic conditions, adding that the impact of political uncertainty and geopolitical tensions on the real economy means impairments are expected to increase in 2019.
Total is set to move its trading operations from London to Geneva in September, a move which will affect 200 jobs, according to Sky News. The French oil and gas giant declined to comment on the numbers but acknowledged that it is planning to consolidate trading and marketing activities which are currently spread across London, Paris and Geneva. The company, which employs 2,000 people in the UK, denied Brexit was the cause, saying it was “not at all” a factor in the decision.
Amazon has cancelled plans to build a new headquarters in New York due to opposition from unions and state and local politicians. The ecommerce giant selected New York City alongside Washington DC for major expansion just three months ago, and said that it planned to invest $2.5 billion and create 25,000 jobs at each site. City and state leaders in New York had agreed to provide approximately $3 billion in incentives to secure the investment, prompting opposition from unions, City Council members and recently elected congresswoman Alexandria Ocasio-Cortez.


What happened yesterday?

Weak US retail sales figures and the news that Germany only narrowly avoided returning to recession in the fourth quarter put a dampener on recent stock market gains during trading yesterday.
The S&P 500 lost as much as 0.8% in early trading but recovered to end the day down 0.27% at 2,745.73, whilst the Dow Jones Industrial Average closed 0.41% lower at 25,439.39. Losses may have been mitigated by suggestions that a new funding bill was close to being signed after President Trump tweeted: “Reviewing the funding bill with my team at the @WhiteHouse!”
Here in the UK, the FTSE 100 gained 0.09%, finishing at 7,197.01, with Micro Focus International the biggest riser. The IT software provider gained 12.26% after reporting full-year earnings which bolstered turnaround hopes.
At the other end of the spectrum, Coca-Cola shed 8.57%, making it the biggest faller on the main index, after fourth quarter earnings and 2019 guidance came in below expectations due to finance charges.
On the currency markets, the pound was down 0.4% against the dollar at $1.2792 and dropped 0.69% against the euro to €1.1326.

Georgia Healthcare Group, Millennium & Copthorne Hotels, Royal Bank of Scotland Group, SEGRO, Societatea Nationala De Gaze Naturale Romgaz S.A. GDR (Reg S)

Q4 Results
Georgia Healthcare Group

Trading Announcements
Ocean Outdoor Limited NPV (DI)

UK Economic Announcements 
(09:30) Retail Sales

International Economic Announcements
(10:00) Balance of Trade (EU)
(13:30) Import and Export Price Indices (US)
(14:15) Capacity Utilisation (US)
(14:15) Industrial Production (US)
(15:00) University of Michigan Confidence (Prelim) (US)

Columns of Note

The UK should be strong enough to bring Shamima Begum home. That is the view of Richard Barrett, former director of global counter-terrorism at MI6, writing in The Guardian. He argues that this is the most viable option, as it would not be acceptable to hand her over to Syrian or Iraqi authorities where summary execution would be the most likely outcome, whilst if she is set free or sent to a third country she becomes a bigger risk. Barrett concludes that, despite the probable right-wing backlash, it would make sense to understand why people like Begum turned their back on the UK and “a strong society is one that can take the right course whatever the prevailing wind”.
In The Times, Iain Martin calls for the Tories to get their act together in order to avoid losing power. Martin bemoans the litany of government failures – Chris Grayling’s deficiencies as a cabinet minister, Gavin Williamson’s talk of sending an aircraft carrier into disputed waters in the South China Sea, and the Brexit navel gazing – asserting that the current poll lead could easily be lost, with Labour could be elected on a far-left agenda made to look palatable.

Did you know?

McDonald’s caters for weddings in Hong Kong. The cheapest advertised package costs HK$2,999 (approx. £300) and is suitable for up to 20 guests.

Parliamentary highlights

House of Commons
No business scheduled

House of Lords
No business scheduled

Scottish Parliament
No business scheduled