20 February 2019

Stuart Taylor

20 February 2019

Good morning,
One hundred billion is a pretty hefty number (until you read today’s Did you know?), particularly so when you place a pound or dollar sign in front of it. And that figure has cropped up several times already in the first two months of this year, having been deployed as a signpost for various benchmarks and achievements.
For example, Nato states responded to Donald Trump's call for non-US members to shoulder a greater financial burden by increasing their defence spending by that amount, while Wall Street’s six biggest banks reported combined profits of $100 billion in a single year for the first time in January.
Yesterday the immense integer appeared once again, this time in Germany, where the country increased its trade surplus advantage over its nearest rivals by this margin in the last year, according to the latest economic data.
The surplus measures the flow of goods, services and investments in a country and for Germany, exports outstripped its imports by $294 billion in 2018, equivalent to 7.4% of the nation’s economic output. While slightly narrower than previous years, it is by some distance the largest globally; bigger than the sum total of the countries that occupy second and third – Japan and Russia.
Sitting pretty at the top of the pile for the third year in a row is no cause for celebration for either Germany or the wider EU, though. In fact, it could not have come at a more awkward time for European officials in the midst of negotiating a new trade agreement with the US, whose attention had hitherto been focused on similar talks with China.
The scale of the surplus is bound to inflame passions in the White House and a president with a penchant for scale and tariffs. President Trump has been vocal in his criticism of the EU’s large trade surplus with the United States – which reached a record high of €139bn on Friday – and strong words are expected to translate into punitive action with a 25% levy on European car imports, interpreted as an economic attack on German manufacturing. The effects of such a levy would not be insignificant, with predictions that German car exports to the States could fall by almost 50% in the long term.
German surpluses have exceeded the European Commission's indicative threshold of six per cent since 2011, attracting disapproval from international bodies. Germany argues the surplus reflects the competitiveness of its industry, but it has shown signs of being receptive to the advice of the EC, IMF and others by agreeing to spend a bulk of its surplus to boost imports and stimulate economic growth.
Will Germany be willing to embrace a new liberal attitude towards its surplus at a time when increased tariffs cast a long shadow over its treasured industry? That’s the 100 billion dollar question.


Joan Ryan has become the eighth Labour MP in 48 hours to quit the party and join an independent breakaway group. Ryan, who represents the constituency of Enfield North, accused Jeremy Corbyn of “presiding over a culture of antisemitism and hatred of Israel” and said the Labour leader was unfit to lead the country.
The family of Shamima Begum said they will explore "all legal avenues" to contest the decision of the Home Office to strip her of her UK citizenship. Sajid Javid, the home secretary, last night ordered the move against the 19-year-old, who travelled to Syria to support the Islamic State group in 2015, with government sources suggesting she was eligible for citizenship of another country.
Theresa May will travel to Brussels today where she is expected to seek legally-binding assurances that the Irish backstop will not extend indefinitely. Speaking ahead of the talks with the prime minister, European Commission president Jean-Claude Juncker has said he does not expect a "breakthrough" in talks. Last night, Philip Hammond conceded that the government does not expect the EU to agree to replace the backstop arrangements for the Irish border with technological alternatives in time for 29 March. (£)

Business & Economy

A BBC analysis has found that four in 10 private companies to have published their latest gender pay gap are reporting wider gaps than they did last year. Only about 10% of employers have so far reported their latest figures ahead of the 4 April deadline and of those 1,146 companies, the median gender pay gap – the difference in pay between the middle-ranking woman and the middle-ranking man – is 8.4%. This is a slender improvement from the 9.7% reported in 2018.
A proposed tie-up between Asda and Sainsbury’s is in jeopardy after the UK's competition watchdog said it found “extensive competition concerns” surrounding the deal. The Competition and Markets Authority (CMA) said the merger could lead to a "poorer shopping experience” with customers facing higher prices as well as reduced quality and choice. Although the findings are provisional and both retailers will have a chance to respond, the CMA has said it was "likely to be difficult" for the chains to "address the concerns". Sainsbury’s chief executive Mike Coupe described the CMA's analysis as "fundamentally flawed".
Glencore, the world’s top coal exporter, has bowed to investor pressure and vowed to cap its global coal production. The mining and trading group said this morning it would cap its production of thermal and coking coal at about 150m tonnes per annum. The decision comes in the face of increasing investor pressure to take firmer action on climate change and reduce the production of polluting fossil fuels. (£)


What happened yesterday?

Continued Brexit uncertainty and weak productivity figures weighed heavily on investors yesterday, pushing both of London’s stock indices down.
The FTSE 100 closed 40.3 points down, a drop of 40.3 points, to 7,179.17. The day’s biggest faller was HSBC, with the bank seeing shares fall by four per cent to 637.1p after reporting lower-than-expected annual profits combined with a weak global economic outlook as a result of slowdown in the UK and China. Pre-tax profits at the bank last year were $19.9bn (£15.4bn) which represented an increase of 16% on the previous year, but fell short of analyst estimates of $21.3bn (£16.5bn).
The FTSE 250 also ended the day’s trading in negative territory. The more UK-focused index ended ended 58.4 points lower or 0.3% to 19,068.89. Top of the day’s losers was Indivior, with the British pharmaceutical company dropping 11.4% to 104.8p. The steep decline came after a US court rejected a request to block a copycat version of a drug introduced by the company to treat opioid addiction.
It was a different story for retail chain Greggs after the launch and subsequent “extensive publicity” of its vegan sausage roll helped shares surge to 1,781p, a rise of 11.1%. Greggs lifted its profit outlook for the rest of the 2019 having enjoyed a 9.6% rise in like-for-like sales for the seven weeks to 16 February and a total sales hike of 14.1%.
On the currency markets, sterling was $1.3033 when markets closed, a rise of 0.87%, while it was up 0.69% against the euro to €1.15.

Hochschild Mining
Intu Properties
Lloyds Banking Group
Temple Bar Inv Trust

Pan African Resources

Trading Announcements
Gooch & Housego

Gooch & Housego
Titon Holdings
UK Economic Announcements
(11:00) CBI Industrial Trends Surveys

Int. Economic Announcements
(07:00) Producer Price Index (GER)
(12:00) MBA Mortgage Applications (US)

Columns of Note

Could the US go from being a laggard to a leader in tackling global climate change? The FT’s Martin Wolf certainly thinks so. He says two recent announcements – the “economists’ statement on carbon dividends” and the Green New Deal – suggest that the US is coming round to the fact it can no longer stand idly by on the issue. Wolf says that both plans should be merged into a workable compromise and turned global with the support of China and the EU. (£)

Lord Mandelson has written about the risks of a no-deal Brexit in this morning’s Guardian. Mandelson says the economic drain that has seen assets and jobs move out of Britain will only continue until investors and businesses know categorically what future relationship Britain will have with Euro

Did you know?

When a deck of cards is shuffled, it will almost certainly deliver a sequence that hasn't been seen before in human history. That’s because there are fair few possible permutations. 80,658,175,170,943,878,571,660,636,856,403,766,975,289,505,440,883,277,824,000,000,000,000 to be exact.

Parliamentary highlights


House of Commons
Oral questions

Prime Minister’s Question Time

Statutory Instrument relating to the Draft Motor Vehicles (Compulsory Insurance) (Amendment etc.) (EU Exit) Regulations 2019 - Chris Grayling
House of Lords 
Oral questions
Number of bills and statutory instruments which need to be passed by Parliament before UK withdrawal from the European Union - Lord Beith
Scottish Parliament
Portfolio questions
Health and Sport

Preliminary Stage Debate
Hutchesons’ Hospital Transfer and Dissolution (Scotland) Bill


House of Commons

Oral questions
Environment, Food and Rural Affairs (including Topical Questions)
Church Commissioners, the House of Commons Commission, the Public Accounts Commission and the Speaker's Committee on the Electoral Commission
Business Statement
Business Questions to the Leader of the House of Commons - Andrea Leadsom
General debate
Potential Future Free Trade Agreements - Australia, New Zealand, US & Comprehensive and Progressive Agreement for Trans-Pacific Partnership
Northern Ireland backstop and conditional interpretative declaration - Sir Edward Leigh

House of Lords
Oral questions
Recommendations in the Joint Committee on Statutory Instruments report 'Transparency and Accountability in Subordinate Legislation' - Lord Lexden
Implementing the recommendations of the Government report 'GP Partnership Review: Final Report - Baroness Thornton
Recent changes to access to free school meals following the delay to the roll out of Universal Credit - Lord Bassam of Brighton
Healthcare (International Arrangements) Bill - Committee stage (day 2) - Baroness Blackwood of North Oxford

Scottish Parliament
General Questions

First Minister's Questions

Members' Business: Delivering Sustainable and Renewable Transportation for Scotland - Jamie Greene MSP

Stage 3 Proceedings: Budget (Scotland) (No.3) Bill