17 October 2018

Iain Gibson

17 October 2018

Good morning,

“And that’s your car at pump number 2? That will be £155 please.”

Not a conversation that any of us expect to be having any time soon at our local fuel station, but one that is perhaps more likely than it was before October 2. It is now two weeks since Saudi Arabian dissident journalist Jamal Khashoggi went missing after a seemingly routine trip to the Saudi consulate in Instanbul, so he could collect some paperwork relating to his forthcoming marriage. Amid reports that the country is preparing to admit that Khashoggi died in an ‘interrogation gone wrong’, The New York Times claims it has fresh evidence that at least one of the fifteen Saudis seen flying into Turkey on private jets on the same day has been previously photographed in the company of the Crown Prince. 

Diplomatic sovereign territory is akin to holy ground in the modern world. You might get plenty of protests outside an embassy but very little drama beyond the security gates. Incidents such as the Iranian hostage crisis or Benghazi consulate occupation stand out to us precisely because this understanding was violated. This unsettling reality is probably the main reason why the incident is hitting home with the international community more so than any other since the Saudi Crown Prince assumed his position just over a year ago.

Another key factor of course is that Khashoggi was a popular figure in Washington circles and had become a relatively well known columnist for the Washington Post. Ironically, he actually had close royal ties before the current King assumed position and was viewed for many years as part of the establishment. He certainly saw himself as a “friendly critic” or “critical ally” of the current regime, although it’s clear that view was not reciprocated.

The US and Turkish Presidents have attempted to navigate a tricky middle ground, but there is no such equivocation from the international business community, upon which so much of Saudi Arabia’s economic transformation plans depend. The Second Future Investment Initiative, the so-called “Davos in Desert” is due to kick off next week although it is now minus a host of star names.

The CEOs of Uber, Blackstone, BlackRock, JP Morgan and Google Cloud are amongst a number of corporate leaders now busy washing their hair, although they will still send less senior executives. The leaders of the World Bank and IMF have also pulled out, alongside prominent journalists such as Ariana Huffington, Andrew Ross Sorkin and Zanny Minton Beddoes. Even sometime Hollywood A-lister Gerard Butler has cancelled a visit to promote his new film. At the time of writing, US Treasury Secretary Steve Mnuchin is still pressing ahead.   

So how does any of this influence the price of fuel? Saudi Arabia has let it be known that it is preparing a number of counter-measures against any potential sanctions coming their way, which include slowing down oil production to significantly spike the global cost. You can’t deny that is a pretty impressive weapon to have in the arsenal, although even those floating the idea admit it would be a desperate last resort. It’s also possible that the reverse becomes true, as the US offers to reduce pressure on this issue if the Saudis can work to ensure a lower price.

Still, it serves as a reminder that the most powerful and important economy in the Middle East, which is a strategic ally of the west in the fight against extremism, will not take any punishment lightly. It will also not forget those executives who switched their attendance plans for its showpiece event when the heat was on. The country that plays host to one of the earliest civilisations on record has a very long memory indeed.

News

The EU’s Brexit negotiator Michel Barnier has briefed that he is open to extending the Brexit transition period by a year to the end of 2021, if the UK Government accepts a “two-tier backstop”. The offer was made informally at talks last week.

Canada’s legalisation of the possession and use of recreational cannabis has now come into effect. It is the second country to take this controversial step, after Uruguay, and follows a campaign pledge from Prime Minister Justin Trudeau at the 2015 election.

Anna Burns has become the first author from Northern Ireland to win the prestigious Man Booker prize. Her book, Milkman, is set during the Troubles and details a young girl’s affair with a married man. She will receive £50,000 in prize money.

Business & Economy

Online streaming company Netflix has posted quarterly earnings that surpassed analyst and investor expectations. Revenue rose 34% year-on-year to $4bn and net income more than trebled over the same period, to $403m. Netflix added nearly seven million new subsribers during the quarter, comfortably above analyst predictions of around 5.3m, and projected a further 9.4m new subscribers globally in Q4 2018. 

Social media group LADbible has bought the firm that owns viral news site Unilad, which has 39m followers on its Facebook account, for an undisclosed amount. Bentley Harrington had collapsed with debts of £6.5m and this move now protects over 200 jobs. In a statement LADbible said that the combination of these two brands creates “the largest social video publisher ever, and a youth media brand to be reckoned with”.

Official data has shown that UK wages rose 3.1% in the three months to August 2018 at their fastest pace for almost a decade. Unemployment fell by 47,000 to 1.36m, with the number of people in work remaining at 32.39m. At least one economist has warned however that these figures were driven in part by the loosening of the public sector pay cap in July of this year and are thus unlikely to be maintained. 

Markets

What happened yesterday?

In the US, the S&P 500 (2.2%), Nasdaq Composite (2.2%) and Dow Jones Industrial Average (2.9%) all registered their biggest one day gains for over six months, driven mainly by good earnings figures from global investment banks such as Goldman Sachs and Morgan Stanley. There were also signs of recovery from some of the technology stocks which had registered sharp falls in recent days.

In Europe, Italian stocks and bonds performed better after the government surprised some by meeting the deadline to submit its draft budget to the European Commission. This was a contributory factor in the pan-European Stoxx 600 rising 1.6%.

The FTSE 100 ended the day 0.4% higher, thus underperforming some of its global peers. The main drag on the index was British American Tobacco, which fell by 4.6% after cutting its full-year revenue target for cigarette alternatives by £100m.

Finals 
ASOS
CAP-XX Limited
Softcat
 
Trading Announcements
Barratt Developments
Rathbone Brothers
SEGRO

AGMs
Barratt Developments
BHP Billiton
Tlou Energy Limited (DI) 

UK Economic Announcements
(09:30) Consumer Price Index
(09:30) Producer Price Index
(09:30) Retail Price Index
 
International Economic Announcements
(10:00) Consumer Price Index (EU)
(12:00) MBA Mortgage Applications (US)
(13:30) Building Permits (US)
(13:30) Housing Starts (US)
(15:30) Crude Oil Inventories (US)

Columns of Note

Writing in The Times, the paper’s Diplomatic Editor, Roger Boyes, looks at the opportunity for Turkish President Recep Erdogan to use the Jamal Khashoggi controversy as a way of weakening the alliance between the US and Saudi Arabia.  Turkey is in need of a bargaining chip to boost its own relationship with the Saudis, one that has deteriorated in recent years, and it seems as if Erdogan is looking to play ball with them, as he invited Saudi to be part of the investigative team looking at what happened in the consulate. However, on the flip side, Turkey is also co-operating with the US in this matter and it is speculated that Erdogan believes, if Saudi Arabia was ever to become so unstable that it posed a risk to the US, that Turkey could supplant it as the US’s most valuable ally in the region.

In The Guardian, the paper’s editorial board looks at the implications from Dame Laura Cox’s damning report into bullying and sexual harassment at Westminster, which was published earlier this week. The conclusion is that, whilst Speaker John Bercow has underseen many reforms in parliament and has been a force for good in boosting the legislature’s status at the expense of an over-mighty executive, he is the man at the top and “the buck stops” with him. The editorial board recommends that he stays on for the important Brexit votes and then looks to stand down at the end of this parliamentary session in summer 2019.

Did you know?

Despite the widely held belief that Napoleon was short, he was in fact of average height for his time (around 5 feet 6 inches). It has been speculated that his battle strategies, where he surrounded himself with very tall soldiers, may have inadvertently contributed to this myth. 

Parliamentary highlights

TODAY 

House of Commons

Oral Questions (Scotland)

Prime Minister’s Question Time

Ten Minute Rule Motion - Collective Defined Contribution Pension Schemes

House of Lords

Oral Questions – Number of pupils taking GCSE Music in the last academic year

Oral Questions – Plans to increase the number of GPs in England

Oral Questions – Whether treatments for gender dysphoria offered to children by the NHS are evidence-based and do no long-term harm if the diagnosis turns out to be mistaken 

Oral Questions – “One Yorkshire” proposals for devolution to a Combined Yorkshire Authority  

Debate – Report from the EU Committee ' Dispute resolution and enforcement after Brexit'

Debate – Religious intolerance and prejudice in the UK

 Scottish Parliament

On recess until 21 October

 TOMORROW

House of Commons

Oral questions

Environment, Food and Rural Affairs

Church Commissioners, House of Commons Commission, Public Accounts Commission and Speaker’s Committee on the Electoral Commission

Business Statement

Business Questions to the Leader of the House – Andrea Leadsom

Backbench Business

Debate on a Motion on Ending Exploitation in Supermarket Supply Chains – Kerry McCarthy

Debate on a Motion on World Menopause Day 2018 – Martin Whitfield

Adjournment

Rail services to Redhill, Reigate and District – Crispin Blunt

House of Lords 

Oral questions 

Economic effect of Brexit on (1) the North East of England, (2) other regions of the UK, and (3) Scotland, Wales and Northern Ireland – Baroness Quin

Assessment of the case of Sarah, who was held captive by a grooming gang for 12 years, according to a report in the Daily Mail – Baroness Cox

UK visas and immigration charges for applications made from outside the UK by telephone and email – Lord Harris of Haringey

The “One Yorkshire” proposals for devolution to a Combined Yorkshire Authority – Lord Wallace of Saltire

Debate

Scale and complexity of cyber threats facing the UK and the case for innovative approaches across HM Government and beyond – Viscount Waverly

State of music education in schools – Lord Black of Brentwood