Across the Atlantic, the Federal Reserve announced last night that it would raise interest rates to a range of between 0.75 per cent and one per cent. Janet Yellen’s announcement is the second time the Fed has increased rates in three months, following a lengthy period of historically low rates. The Bank of England meets today to decide if it will follow suit.
The most important indicator of sentiment was reaction on the markets, where the Fed was widely considered to have been more dovish than expected. The dollar slipped against key currencies, including the pound and the euro, as Yellen confirmed rate increases would be gradual and refused to upgrade US growth forecasts.
President Trump is poised to unveil his budget proposals later today. The statement is expected to be a broad budget outline rather than a detailed policy prospectus, but it will provide some headline indications as to Trump’s intentions. As expected, more money will be reserved for homeland security and $54 billion will be funnelled into defence.
Steve Bannon, Trump’s chief strategist, has said that the “deconstruction of the administrative state” will fall on budget cuts to the Environmental Protection Agency and the State Department, which will see their respective budgets cut by almost a third. Trump is undoubtedly attempting to follow through on his campaign pledges, for better or worse.
An area in which this agenda is certainly causing him unwelcome headaches is the implementation of his travel ban. The second incarnation of the policy, after the botched first attempt, hit similar roadblocks last night. Hours before the ban was to take force, a Federal judge in Hawaii once again blocked the ban, citing “questionable evidence” in the government’s argument.
“Questionable” might be considered a reasonable adjective to describe Trump’s record during his first couple of months in office.
The Conservative Party has been fined £70,000 over a breach of election expense rules at the last General Election. The Electoral Commission confirmed the fine this morning and it represents the largest sum handed out in the commission’s history. The allegations were that the Conservative Party had used national money to fund local campaigns, and this news follows yesterday’s news that 12 police forces have asked the Crown Prosecution Service to consider charges in constituencies in England.
Geert Wilders, the leader of the anti-muslim, anti-EU Freedom Party (PVV) has been soundly defeated in the Dutch elections. The governing party VVD, led by Prime Minister Mark Rutte, was once again returned as the largest party. It gained 33 seats to Wilders’ 20. Rutte hailed the evening as a defeat for the “wrong kind of populism”. However, the most important result confirms the very real trend of the decline of the left across Europe. The Dutch Labour Party lost 29 of the 38 seats it had won at the previous election.
Philip Hammond was forced into a demoralising retreat from his headline budget proposal yesterday. Just before Prime Minister’s Questions, the chancellor suffered the ignominy of issuing a humiliating statement confirming that the government would not raise class 4 NICS in this parliament. The move was apparently forced onto Hammond by Theresa May, bowing to pressure from many ‘Brexiteer’ backbench Conservative MPs and weakening considerably the position of Hammond, who is viewed by many party colleagues as the final ‘Remainer’ at the height of government.
Business & Economy
Canary Wharf Group is considering selling a 50 per cent share in the Walkie Talkie building in London, in a deal which could raise £600 million. The Group owns 15 per cent itself, but is selling the remaining 35 per cent on behalf of other owners, including Morgan Stanley. The building is well known for its “Sky Garden”, a public viewing gallery on the top floor. Land Securities owns the other half of the building and is not expected to sell.
Anil Agarwal, an Indian mining billionaire, yesterday launched a bid to buy up to 12 per cent of Anglo American. The company is a larger rival to Agarwal’s own firm, Vedanta Resources. Agarwal is planning the purchase through his family trust and hopes to fund the attempt using a convertible bond worth up to £2 billion.
If Google and Facebook do not do more to clamp down on advertising fraud, then they risk a boycott from the world’s largest advertisers. Johnny Hornby, founder of The&Partnership, argued that advertising fraud was costing the industry $16.4 billion a year and that Facebook and Google (which together control an estimated 60 per cent of all digital advertising) must come together to combat the issue.
Mining firms were the biggest winners on the FTSE 100 yesterday, as the index edged higher in advance of the Federal Reserve’s decision to raise interest rates across the Atlantic.
Neil Wilson, senior market analyst at ETX Capital, commented that the move was widely expected, but “the key question is how far and how fast the US central bank will tighten monetary policy this year” following the rate increase.
However, it was the pharmaceutical firm Hikma that was the biggest winner on the index, rising 8 per cent after it reported better than expected annual results.
Persimmon was down 1 per cent and Taylor Wimpey fell 0.7 per cent as house builders lost out throughout the day.
On the currency markets, the pound performed strongly, rising against the dollar by 0.52% to $1.2219, and 0.3% against the euro to €1.1491.
EMIS Group, PJSC Megafon GDR (Reg S), Miton Group, OneSavings Bank, Oxford Biomedica, Parity Group, M&C Saatchi
Banco Bilbao Vizcaya Argentaria SA, Henderson Opportunities Trust
UK Economic Announcements
(12:00) BoE Interest Rate Decision
Int. Economic Announcements
(10:00) Consumer Price Index (EU)
(12:30) Building Permits (US)
(12:30) Continuing Claims (US)
(12:30) Housing Starts (US)
(12:30) Initial Jobless Claims (US)
Source: FTSE100, The Financial Times
Columns of Note
Iain Martin, writing in The Times, argues that the Bank of England needs a radical rethink if we are to reshape Britain’s economy for the better after Brexit. Whilst Charlotte Hogg’s promotion only shortly preceded her resignation, it will open discussions about who should follow Mark Carney as governor. Martin argues that whoever it is, they must approach Brexit with the right attitude.
Ivan Krastev, writing in the Financial Times, argues that the real battle over the EU’s influence is taking place in the Balkans. Turkey and Russia are uniting in the region in an attempt to curtail the bloc’s influence. Krastev argues that this “back to the future” predicament must be countered by Europe, or its influence in the region will “soon fade”.
Cartoon Source: The Telegraph
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House of Commons
Culture, Media and Sport, including Topical Questions. Attorney General
Publication of the Tenth Report of the Public Administration and Constitutional Affairs Committee, Lessons Still to be Learned from the Chilcot Inquiry. HC 656 — Mr Bernard Jenkin
House of Lords
Introduction of legislation to give effect to the judgments of the European Court of Human Rights on prisoners’ voting — Lord Lester of Herne Hill
Strengthening the UK’s relationship with the Commonwealth, ahead of the UK hosting the Commonwealth Heads of Government Meeting in 2018 — Baroness Anelay of St Johns
First Minister’s Questions
Members’ Business — S5M-03651 Ross Thomson: Impact on North East Businesses of the Hike in Non-domestic Rates
Environment, Climate Change and Land Reform Committee Debate: Reports on Draft Climate Change Plan, the Draft Third Report on Policies and Proposals 2017–2032
House of Commons
No business scheduled.
House of Lords
No business scheduled.
No business scheduled.