26 July 2018

Iain Gibson

26 July 2018

Good morning, 

When we say we are going to focus on Korea for our main summary, the first thing you probably think of is the recent high-profile summit between the angry, rotund guy with the funny haircut – and Kim Jong-un. Not today. For once it isn’t developments on the northern side of the DMZ, but rather a fascinating bit of news from South Korea, announced by the government this week, that caught our attention.
 
In the opening six months of 2018, more than 8,000 men in South Korea went on paternity leave. This is interesting for sure, but two other snippets of information should make us sit up and take notice. First, this number is an impressive 66% increase from the first half of 2017 and a staggering tenfold rise from 2010. Second, men in South Korea are now entitled to 52 weeks of paid paternity leave, which can be taken any time before their child turns eight years old.
 
Given that this is so incredibly generous, why haven’t more men been taking it up before? Even in 2018, which appears to be something of a breakthrough,men only accounted for 17% of the 50,000 people who took family leave. So-called traditional values clearly play a role in this dynamic, but so does fear. The South Korean ministry of welfare has released a report finding 60% of Korean working parents worried that asking for parental leave from their workplace would result in career reprisals later. Pleasingly, some employers, including big conglomerates and smaller companies, are embracing the new government plans. Some are even making parental leave mandatory, so over time this fear should hopefully be dispelled.
 
Why is this happening now? East Asian countries are not generally known for such social liberalism. Well, there is a clear objective behind the government’s recent drive: South Korea needs more South Koreans. In 2017, the country’s fertility rate, trending in the wrong direction for a number of years, hit an all-time low. Authorities had been monitoring the problem for a long time and, conscious that increasing numbers of South Koreans said financial instability or an aversion to traditional gender roles were putting them off having children, decided to pursue these radical measures.
 
Will the move be successful? It is unclear. After all, no one cites the attractiveness of the parental leave package on offer as their main reason for having children. However, if people are happier, feel more secure and are quite simply spending more time together then…well, you know.

News

President Trump and European Commission President Jean-Claude Juncker used a joint news conference at the White House to agree to a suspension of new tariffs between the US and the EU. Discussions will also begin on eliminating tariffs and subsidies that currently exist, including the steel and aluminium tariffs imposed by the Trump administration this year, as well as the retaliatory EU measures.
 
The President of Iran, Hassan Rouhani, has sacked the country’s central bank governor, as the economic situation worsens following the reimposition of US sanctions. The move was partly in preparation for those sanctions taking effect later this year, including trading in cars, gold, oil exports and transactions with the central bank.
 
Cricket legend Imran Khan looks set to be the next Prime Minister of Pakistan. Early results in one of the most controversial, and violent, elections of recent times puts his PTI party ahead of the PML-N, which is currently led by Shebaz Sharif, brother of disgraced former Prime Minister Nawaz Sharif. This election is only the second time that a civilian government has handed power to another after serving a full term, although there have been concerns that Pakistan’s powerful military has been trying to influence the outcome. Mr. Sharif has already said he will challenge the results, citing vote-rigging as a major concern.

 

Business & Economy 

Facebook’s latest quarterly results saw the company post revenue of $13.2bn and $5.1bn of profit. Whilst both of these numbers were up on Q2 2017, with revenue climbing more than 40% from a year ago, shares in the company fell by as much as a quarter of their value following the announcement. This has been attributed to the company’s admission that operating margins will be hit over the next few years as it seeks to implement new privacy safeguards and slow usage in its biggest advertising markets. 
 
Leading chipmaker Qualcomm has pulled out of a planned $44bn takeover of Dutch rival NXP. Qualcomm has failed to win approval from Chinese regulators for what would have been the semiconductor industry’s largest ever takeover and the agreement between the two companies expired late last night. The CEO of Qualcomm conceded defeat yesterday afternoon on a results conference call with analysts, instead announcing a $30bn share buyback programme.
 
In a surprise move, leading Australian media companies Nine Entertainment and Fairfax have announced a $3bn merger. The new entity will be called Nine and will see a 51.1% to 48.9% split in terms of control. Nine’s television network, one of the biggest in Australia, will now join with Fairfax’s newspaper business, which includes The Sydney Morning Herald, Melbourne's The Age and The Australian Financial Review.
 
Earlier this morning, Airbus has posted its Q2 earnings, where revenues rose 8% year-on-year to €14.8bn euros and earnings doubled over the same period to €1.14bn. The performance of the long-haul A350 aircraft was cited by CEO Tom Enders as a key factor in the positive results, although he noted that challenges remain in terms of meeting the company’s full-year A320neo delivery target.

Markets 

What happened yesterday? 
Indexes in Europe saw slight falls yesterday, with the FTSE 100 down 0.7% and the Dax in Frankfurt decreasing 0.9%. There was better news in the United States, where the news regarding the agreement with the EU saw the S&P 500 close 0.9% up, the Dow Jones Industrial Average climb 0.7% and the Nasdaq Composite equity index adding 1.2% to close at a record high. General Motors latest results, which saw the company cut its full-year earnings forecasts because of higher aluminium and steel costs, were followed by a sharp fall in its share price value.
 
In China, the CSI 300 index of major Shanghai and Shenzhen-listed stocks ended 0.1% lower, as the week’s stimulus-driven rally looked to be slowing down. There was better news in Hong Kong, where the Hang Seng rose 0.9%.
 
Forex-wise, the dollar index was down 0.4% as the euro climbed by the exact same margin, to $1.1730. Sterling was up 0.4% at $1.3193.

 

Finals
Diageo
Renishaw
Sky
 
Interims
AstraZeneca  
British American Tobacco     
Bodycote
Countrywide
Franchise Brands
GKN   
Howden Joinery Group
Inchcape
Intu Properties
Impellam Group        
Jardine Lloyd Thompson Group       
Lancashire Holdings Limited
Law Debenture Corp.
Mail.ru Group Ltd GDR (Reg S)         
Morgan Advanced Materials
National Express Group       
Royal Dutch Shell 'A'
Royal Dutch Shell 'B'
Relx plc
Robert Walters
Schroders
SEGRO
Smith & Nephew       
Telefonica SA
Tarsus Group
UBM
Virgin Money Holdings (UK)
Vesuvius
 
Q1 Results
Sophos Group

Q2 Results    
AstraZeneca
Lancashire Holdings Limited
Royal Dutch Shell 'A'
Royal Dutch Shell 'B'
Smith & Nephew

Trading Announcements
Aveva Group
CMC Markets
Compass Group
Countryside Properties
Daily Mail and General Trust A (Non.V)
Discoverie Group
Evraz
Intermediate Capital Group
PayPoint
Sage Group
 
AGMs
Avocet Mining
Bonmarche Holdings
CMC Markets
De La Rue
Discoverie Group
EIH Plc
Evgen Pharma
Findel
Intermediate Capital Group
Immunodiagnostic Systems Holdings
Johnson Matthey
Paypoint
Record
Tate & Lyle
Telecom Plus
Triple Point Income VCT
Two Shields Investments
Weiss Korea Opportunity Fund Ltd
 
International Economic Announcements
(07:00) GFK Consumer Confidence (GER)
(12:45) ECB Interest Rate (EU)
(13:30) Continuing Claims (US)
(13:30) Gross Domestic Product (US)
(13:30) Initial Jobless Claims (US)

 

Columns of Note 

Philip Stephens, writing in The Financial Times, laments the political shift which has seen leaders who sold visions of the future – such as Harold Wilson, Ronald Reagan and Tony Blair – replaced by the likes of Donald Trump, the Brexiteers and Europe’s new nationalists, all of whom “inhabit a rose-tinted past”. He argues that this nostalgia, whilst hugely powerful, omits the obvious issues such as the widespread prejudice and poorer living standards which existed back then. Blaming the baby-boomer generation for driving this trend, Stephens calls for leaders to adopt “a message about the future powerful enough to reclaim the voters’ collective gaze” and in particular a plan to explain how our children are better off than their parents.
 
In The Times, Jenni Russell explores the current challenges facing South Africa and notes that, whilst the ousting of President Jacob Zuma earlier this year was a welcome first step, his removal has only served to highlight the huge problems his successor, Cyril Ramaphosa, must now deal with. Most notably, the corruption which has sent state electricity company Eskom to the verge of collapse and seen the head of the country’s tax ministry suspended for giving preferential tax treatment to his friends, are highlighted as the first issues to be tackled. She argues that “the culture of payoffs, theft and cronyism has filtered down to every level of government because under Zuma it was apparent that the rewards were great and the chances of retribution minute”. With public anger rising at each new revelation, and youth unemployment now at 52%, Ms. Russell suggests that Mr. Ramaphosa is the right man for the job, although he has a hugely difficult task of balancing different factions whilst trying to sort out the mess.

Did you know?

350 million years ago, the largest living thing on dry land was a 20 foot tall mushroom. Known as Prototaxites, a fossil of the giant fungus was first discovered in the nineteenth century, in present-day Saudi Arabia. 

Parliamentary highlights 

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