20 May 2019

Tom Gillingham

20 May 2019

Good morning,
Today’s one-year anniversary of Nicolas Maduro’s controversial re-election as Venezuelan President adds fuel to what is set to be a turbulent week for US foreign policy. Last week, the Venezuelan opposition leader - Juan Guaido - appeared to be opening the door for potential US military intervention as demonstrations against Maduro continue.
Tensions are at breaking point, but Venezuela is only one of a list of countries on the receiving end of increasingly hawkish noises from the US government. President Trump’s national security adviser, John R. Bolton, is spoiling for a fight, and it seems he’s not too picky about the opposition.
We would perhaps do well to remember that the President has previously said of Bolton: “I actually temper John, which is pretty amazing.”   
As well as the ongoing Venezuelan crisis, tensions with Iran are ramping up. The US is moving forces to the region, has warned that commercial airliners could be ‘misidentified’ in airspace around the Gulf, and there are reports that the country is reducing its non-essential diplomatic personnel in neighbouring Iraq.
This aggressive US approach has already caused a rift with the UK, which believes the show of an Iranian military build-up is in reaction to the perceived US threat, rather than an unprovoked show of force. 
Tehran could perhaps be forgiven for having some concerns about the sabre-rattling of a man who wrote a 2015 commentary titled ‘To Stop Iran’s Bomb, Bomb Iran.’ The rest of Mr Bolton’s back catalogue is of a similar calibre. World peace fans might want to avoid his other two works: ‘Surrender is Not an Option’ and the pithily titled ‘How Barack Obama Is Endangering Our National Sovereignty’.
However, Iran’s foreign minister said yesterday he does not want a war to break out, so Mr Bolton has time to inspect his other irons in the fire. Given some of his previous comments (and written works), we shouldn’t forget the ‘Little Rocket Man’ and the still unresolved issue of President Trump’s failed talks with North Korea. Or indeed what happens next in the recent confrontation with China over Huawei and the tit-for-tat trade tariffs.
President Trump may yet prove to be an unlikely peacemaker in all of this, despite his hawkish adviser’s interventionalist tendencies, but the unpredictable nature of the current Commander in Chief means we are in for a tense week.


Ahead of the European Elections on Thursday, former Prime Minister Gordon Brown has written to the Electoral Commission, requesting an investigation into the funding of Nigel Farage’s Brexit Party. The letter expresses his concern that its funding structure could open the door to foreign interference in British democracy. Mr Farage has claimed his new party is attracting donations of £100,000 each day.
The UK government has been accused of agreeing to actions that could facilitate torture (£). A freedom of information request has revealed Ministry of Defence documents that could allow ministers to approve passing information to allies, even if there is a risk of torture, if they judge that the end benefits could justify it.
A WWF report released to coincide with World Bee Day has found that dozens of bee species have come extinct or are on the verge of disappearing across UK. 17 species of bee are now regionally extinct, and the warning comes alongside a calculation that the bee’s services - primarily the pollination of plants - are worth £690m a year to the UK economy.

Business & Economy

Google has dealt a blow to Huawei after it barred the Chinese phone maker Huawei from some updates to the Android operating system. New designs are set to lose access to some Google apps, potentially including popular downloads like YouTube and Maps.
Ryanair published its results this morning, and the airline’s profits are down 29% to €1bn. It said short-haul capacity growth and the fact Easter fell in the fourth quarter led to a 6% fare decline, but it still posted a 7% rise in traffic growth to over 139m.
A PWC report has found that UK consumers feel more positive about their lives than they did a year ago (£). Young people are more positive than they have ever been, but people aged between 45 and 64 are more negative about their outlook than the over-65s. The study also found people were not as optimistic as they were before the EU referendum, but that they still felt upbeat due to growth in real wages, low unemployment and low interest rates.


The week ahead
 As it has been for some time now, it’s expected the US-China trade dispute will continue to loom large over the markets this week. This, along with the longstanding slowdown in the tech sector, is likely to negatively impact Japan’s first-quarter gross domestic product figure when it is reported today.
The EU elections will take centre stage in Europe, with Eurosceptic parties, greens and pro-EU reformists set to make gains at the expense of more traditional centrist parties. There is also the slightly bizarre spectacle of the UK electing MEPs, when Brexit dictates that they may never actually have to take their seats.
As well as the EU ballot, the result of the Indian general election is scheduled for Thursday, with Narendra Modi hoping he can return to power. Indian stocks rallied as early exit polls suggested his Bharatiya Janata Party (BJP) is on course to win.
Key UK financial results for the week ahead include M&S, which is expected to post lower sales; Royal Mail, which is also expected to report a fall in profit; and SSE, which has recently announced job cuts in its retail business.

LXI Reit
Mckay Securities

Cloudcall Group
The City Pub Group
Foxtons Group
Keywords Studios
Volga Gas

Int. Economic Announcements
(07:00) Producer Price Index (GER)
(10:00) Current Account (EU)

Columns of Note

Prime Minister Theresa May wrote in The Sunday Times, suggesting that her deal is still the only way to guarantee Brexit. In her piece she suggests there could be some concessions around workers’ rights and environmental protections, ahead of her once again trying to get approval for the deal in the Commons.
Writing in the Guardian, John Harris says the Conservatives have forgotten their pro-EU voters, and that this will ultimately result in a shift to the right, and - in the short term - the party performing poorly in Thursday’s elections. He concludes that the party is “sliding into an elemental crisis from which it may never recover.”

Did you know?

Bananas are curved because they grow towards the sun.

Parliamentary highlights

House of Commons

Oral questions
Public Accounts - Oral Evidence Session
Consumer protection

House of Lords
Oral questions 
Establishing a Royal Commission or equivalent inquiry to examine any lessons to be learnt from the 2016 European Union referendum and subsequent events - Lord Dobbs
Oral questions
Preventing fraud perpetrated on bank customers - Baroness Ludford
Scottish Parliament

No business scheduled.

House of Commons

Oral questions
HM Treasury (including Topical Questions)
Business, Energy and Industrial Strategy - Oral Evidence Session
Post Office Network

House of Lords

Oral questions
Government plans to address increases in homelessness - Lord McNicol of West Kilbride
Report from the International Relations Committee 'UK foreign policy in a shifting world order' - Lord Howell of Guildford

Scottish Parliament

Portfolio Questions
Government Business and Constitutional Relations
Business Motions