22 Aug 2018

Iain Gibson

22 Aug 2018

Good morning, 

A Labour Party leader elected by a landslide on a tide of optimism, only to be forced out of office by his onetime friend. A successor right-of-centre government that is now limping along, following the loss of its majority less than a year after it changed prime minister. An ongoing and particularly nasty debate about immigration, spearheaded by a relatively new party and widespread discontent with a governing elite that is perceived to understand far too little about the wider country it runs.
Welcome to Australia, where the Liberal (ie. the conservative) Party prime minister Malcolm Turnbull has just survived a vote of no confidence from his parliamentary colleages, by the not-exactly-tub-thumping result of 48 votes to 35. Had he fallen, and he still might in the days to come as a fresh leadership challenge looks imminent, Turnbull’s replacement would have been the seventh different prime minister in just eleven years.
Labor’s “Kevin 07” Rudd blitzed into office with the support of younger voters. His brutal removal in 2010 by his deputy Julia Gillard ushered in an incredibly unstable three-year premiership before Gillard was ousted, at the third attempt no less, by one Kevin Rudd. Twelve weeks later, Rudd was gone again, having lost the federal election to Tony Abbott. Abbott then lasted two years before being challenged and beaten by Turnbull, whose first spell as leader had ended in 2009 when he lost out in a confidence vote to Tony Abbott. Keeping up?
Australian politics has calmed down a bit, but the roots of its instability still permeate. The issue of immigration is dominant, with a majority of Australians now saying that the number of migrants coming to the country each year is too high, which in turn has fed into a rise in support for the populist (a very polite term) One Nation party. All of the above has surely played its part in the latest consumer confidence index pointing decidedly downwards.
Things, however, are really not that bad. Australia has avoided recession for almost 27 years and economists have forecast GDP growth of between 2.7-2.9% from now to 2020. A key reason for this? Immigration, which is a big contributor to the country’s projected population growth of 1.6% per year, a number its vast terrain and plentiful natural resources are more than able to support.
Ultimately, like most developed nations, life down under is not as good for many as it was a decade ago, which probably explains why the overarching mindset of Australians towards its Canberra parliament seems to mirror that of Brits towards Westminster and, to a lesser extent in Scotland, Holyrood. This is before we even begin to contemplate the horror-show taking place right now across the Atlantic.
Perhaps we have hit the inflection point we reach early in every century, where technological and intellectual advances, coupled with the expectations these bring, clash with governments and elites still following the playbook from a previous era. I’m going with this option, because the alternative is that all of us really are being governed by incompetents.


In what might be a pivotal moment for his presidency, Donald Trump saw two former associates snared by the law yesterday – Paul Manafort was convicted of eight of the 18 charges against him (such as bank fraud, tax fraud and failure to disclose foreign bank accounts) and Michael Cohen pled guilty in federal court to eight charges, including tax evasion and campaign finance violations. He also pled guilty to arranging payments “at the direction” of Mr Trump to silence women who were alleging affairs with the then presidential candidate.
Ride-hailing app Uber is close to reaching final settlements in relation to several sexual harassment and discrimination claims. The company has confirmed that it will pay $1.9m to 56 current and former workers, and 485 other people will receive an average of nearly $11,000 as part of a class action case of discrimination relating to gender and race. In a statement, Uber has said that the amounts it was paying out are “fair, reasonable and adequate”.
In a significant move, Afghanistan’s Taliban looks set to participate in its first public regional forum since it was ousted from power in 2001. Reports from inside the Russian government suggest that the group plans to send representatives to other countries in the region, with the stated aim of trying to find peace. The Taliban was invited to previous rounds of talks in Russia, but did not attend.

Business & Economy 

Tech start-up Slack, which provides team collaboration tools and services, closed a $427m funding round which now values the company at $7.1bn, around 40% more than a year ago. The newest funding round was led by Dragoneer and General Atlantic, and included participation from T. Rowe Price, Wellington Management, Baillie Gifford and Sands Capital.
The world’s largest sovereign wealth fund, the Government Pension Fund of Norway, has reported its latest quarterly results. Its return was 1.8%, which underperformed the benchmark by 0.2 percentage points. The fund said its returns in the latter half of the second quarter were hurt by the prospect of trade barriers and a weaker global economic outlook. The best-performing asset class was equities, at a return of 2.7%, with Amazon, Apple and Royal Dutch Shell contributing the most.
The UK government recorded a surplus of £2bn in July, its biggest surplus for 18 years and up £1bn from last year. Borrowing for Q2 2018 fell to its lowest level since 2002, at £12.8bn, and public sector net debt was equivalent to 84.3% of GDP, down from 86% a year ago.


What happened yesterday?

The S&P 500 hit a record high to equal the longest postwar bull market in US history. The index was up more than 0.5%, beating its previous high set at the end of January this year. The Nasdaq Composite ended 0.5% higher and the Dow Industrials rose 0.3%.
Elsewhere, the FTSE 100 closed 0.3% down, with some commodities stocks – such as Chilean copper miner Antofagasta – falling as a result of a strengthening dollar.
Forex-wise, the dollar index was down 0.7% at 95.26, the lowest since August 9th, and down from a 13-month high of 96.98 hit last week. The euro was up 0.8% at $1.1573, while the pound added 0.9% to $1.2904.

Costain Group
Empresaria Group
Foresight Solar Fund Limited
Grafton Group Units
Headlam Group
Hansteen Holdings

Trading Announcements
Proactis Holdings
Venture Life Group
Collagen Solutions
Downing One VCT
Latham (James)
Paragon Entertainment Limited
Puma VCT 10
International Economic Announcements
(12:00) MBA Mortgage Applications (US)
(15:00) Existing Home Sales (US)
(15:30) Crude Oil Inventories (US)

Columns of Note 

In The Times, Danny Finkelstein looks at the impending 200th anniversary of the Peterloo massacre (next August), an event which will receive greater attention with a new feature film set to be released. He takes umbrage with the suggestion from some people that the massacre, where at least 15 people died when authorities stepped in to quell a protest about living standards, was a turning point in British history. Instead, he calls it “a tragedy, an outrage and an emblem of the repressive conservative obstinacy of a privileged elite” but “not the beginning of anything much”, especially when compared to the industrial revolution that was the main driver of significant change.
Writing in The Financial Times, a board member of Volvo suggests several ways that Tesla can mitigate the fall-out from Elon Musk’s tweet about taking the company private, a move which has prompted the Securities and Exchange Commission to investigate the legality of the announcement. She suggests the separation of his chairman and CEO roles, the introduction of a senior compliance role to review all tweets of a financial nature and bringing in a chief operating officer, preferably someone with significant experience in the manufacturing and automotive industry.

Did you know?

The inventor of the frisbee, Walter Frederick Morrison – who first perfected his iconic product 70 years ago in 1948 – was turned into a frisbee after his death. When he passed away aged 90 in 2010, his family cremated him and turned his ashes into his most famous invention.

Parliamentary highlights 

House of Commons
In recess until 4 September 2018
House of Lords
In recess until 4 September 2018
Scottish Parliament
In recess until 3 September 2018