29 April 2019

Stuart Taylor

29 April 2019

Good morning,
One of the most interesting books I’ve read this year is titled Post-Truth. Written by Evan Davis, the face of Dragon’s Den and voice of BBC Radio 4’s PM, it tries to make sense of the world in an era of fake news and myriad other forms of waffle that are designed to impress, obfuscate or attract attention.
A particular section of the book that has stuck with me covers the idea that when it comes to building and protecting reputation, organisations either choose the high road or the low road. Those lucky enough to be on the high road will have worked hard to build their reputations by delivering high quality, reliable products or services and will do all they can to avoid throwing that away, appreciating that one lapse could destroy it all. Davis borrows the Warren Buffet line that “it takes twenty years to build a reputation and five minutes to ruin it” to hammer the point home.
For so long Boeing enjoyed cruising on the high road, watching as its share price soared as high as the planes it produced; the company trails only Microsoft in share gains on the Dow Jones index since CEO Dennis Muilenburg took over in July 2015.
However, it has lost its way in recent months, all stemming from the safety crisis that has engulfed its best-selling jet and caused two fatal crashes in five months. Challenging the leadership on whether they can navigate their return to the right path will be the objective of investors today as the troubled aerospace giant holds its annual general meeting in Chicago. Once Muilenburg has been grilled by shareholders, he will face the media in his first press conference since the crash.
The uncertainty over whether the 737 Max 8 jet will ever take to the skies again has already led to a $1bn drop in revenues for Boeing, while other airlines including Airlines Norwegian and Southwest are counting the cost of the plane’s grounding. Indeed, the latter cranked up the pressure on Muilenburg over the weekend by saying that Boeing failed to disclose that certain safety features on the troubled 737 Max aircraft were not in fact “operable”.
And to make things more difficult for the company’s top brass ahead of today’s gathering, it was reported on Saturday that back at the start of April, a day after the release of a preliminary crash report on Ethiopian Airlines flight 302, four members of Boeing staff phoned a Federal Aviation Administration whistleblower hotline to report issues with the plane’s technology.
For Boeing, where risk aversion is the name of the game, AGMs are normally straightforward affairs. However, today will be anything but as they attempt to salvage the company’s reputation and public confidence, before turning their attention to convincing regulators around the world that their biggest profit generator is safe to fly.

Expect more bumps in this road to redemption.


Spain’s governing Socialists have won the country’s general election, but have fallen short of gaining a majority. PM Pedro Sánchez, whose party polled 29% and gained 37 seats on the previous election in 2016, will now look to either left-wing Podemos and regional parties, or the centre right, to form a government. Although it expected to do even better, Vox became the first far-right party to enter parliament. (£)
Sri Lanka’s president has introduced an emergency law that will see the banning of face coverings in public. Maithruipala Sisirsena said the ban, which will come into force from today, comes after a spate of suicide attacks on Easter Sunday that killed at least 250 people and injured hundreds. Although the niqab and burka - worn by Muslim women - were not specifically named, critics of the ban perceive it as a move to target the garments.
The chairman of the Conservatives has said that it is the aim of the party to not have to fight the European Parliament elections on May 23, after refusing to say when the party will launch its campaign. Lewis said there was "still time" for Parliament to approve the withdrawal agreement and the focus was on next week’s local elections in England. The Conservatives are expected to suffer heavy losses at the EU elections.

Business & Economy

Deutsche Bank’s investment bank does not need a fundamental strategic overhaul in the wake of the collapse of merger talks with rival Commerzbank, the bank’s chairman has said. Paul Achleitner has also defended the current turnaround efforts at the investment bank, which has been lossmaking for two consecutive quarters. (£)
Investment in UK shopping centres in the first quarter of this year was the weakest since at least 2003 as buyers find difficulty in assigning values to properties affected by troubled retailers restructuring their leases. Mark Stansfield, head of UK analytics at CoStar, said the £20m that changed hands last quarter was perhaps even the weakest “this century” when compared to a 10-year quarterly average of £783m. (£)
Fewer Britons are choosing to holiday in the EU this year as Brexit uncertainty continues. Thomas Cook said 48% of the holidays it sold up until the end of February were to non-EU destinations, up 10% on last year. Despite this, Spain continues to be the most popular destination for holidaymakers.


The week ahead

It’s a busy week on the economic data front as first-quarter GDP data are due for France, Italy and Spain, as well as the wider eurozone. Italian GDP will be of particular interest, with negative growth in the final quarter of last year consigning the country to a technical recession. Forecasts suggest the country will just about climb out of recession when results are announced, with economists predicting that GDP will reach 0.1%.
Economists predict it has the potential to fall in the medium term, but on Tuesday don’t expect eurozone unemployment to change much from the 7.8% it was in February, when the latest data is released. February’s rate was the lowest level since September 2008.
Tech giants Apple and Alphabet are the two big names announcing corporate results this week. Google parent Alphabet is expected to post a rise in first-quarter revenue, driven by soaring ad sales, while a continuation of the slump in iPhone sales is likely when Apple announce on Thursday.
Other earnings this week include BP, Lloyds Banking Group, Bank of Scotland, Royal Dutch Shell, Sainsbury’s, HSBC and Adidas.

Horizon Discovery Group
Lok'n Store Group
Proactis Holdings
Up Global Sourcing Holdings
Holders Technology

Int. Economic Announcements
(09:00) M3 Money Supply (EU)
(10:00) Business Climate Indicator (EU)
(10:00) Economic Sentiment Indicator (EU)
(10:00) Industrial Confidence (EU)
(10:00) Services Confidence (EU)
(11:00) Consumer Confidence (EU)
(13:30) Personal Consumption Expenditures (US)
(13:30) Personal Income (US)
(13:30) Personal Spending (US)

Columns of Note

The FT’s banking editor David Crow profiles Edward Bramson, the activist investor trying to force his way on to Barclays' board. Bramson will find out this week whether his radical plan to shrink the bank’s trading unit, which could trigger the demise of Britain’s last remaining global investment bank, is successful when the bank holds its annual general meeting later this week. (£)

Writing in The Times, Clare Foges says that the Conservatives continue to be obsessed with Brexit and are neglecting the issues that people are concerned about. Foges notes that Jeremy Corbyn is out meeting people across the country and talking about what matters to them and their daily lives, and calls on Theresa May to “wake up and recover some ambition beyond Brexit”. (£)

Did you know?

Saudi Arabia is the largest country in the world without a river.

Parliamentary highlights

House of Commons

Oral questions
Education (including Topical Questions)
The Membership of the Intelligence and Security Committee - Mrs Theresa May
Government funding for the removal of cladding from privately owned high-rise blocks - Rushanara Ali
House of Lords

Oral questions
Raising public confidence in, and support for, business and industry through better corporate governance - Lord Haskel
Representations from the Chief Minister of Gibraltar regarding the UK’s departure from the EU - Lord Foulkes of Cumnock
Whether Government development policies, particularly in relation to Africa, aim to restrain population growth - Lord Anderson of Swansea
Impact of religious schools’ admission policies on those schools - Baroness Bakewell
Reports from the Economic Affairs Committee Making Tax Digital for VAT: Treating Small Businesses Fairly; The Powers of HMRC: Treating Taxpayers Fairly - Lord Forsyth of Drumlean
Short debate
Reviewing the role of Police and Crime Commissioners - Lord Lexden
Scottish Parliament
No business scheduled
House of Commons

Oral questions
Business, Energy and Industrial Strategy (including Topical Questions)
Ten Minute Rule Motion
Climate Change (Net Zero UK Carbon Account) - Alex Chalk
National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill: 2nd reading
National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill: Ways and Means - Mel Stride
House of Lords

Oral questions
Use of more British steel in defence contracts - Lord Hoyle
Cross-departmental action plan to address the conclusions and recommendations of the United Nations Committee on the Rights of the Child’s assessment of the UK in 2016 - Baroness Massey of Darwen
Benefits of the introduction of identity cards - Lord Campbell-Savours
Recent developments in Sudan - Baroness Cox
Scottish Parliament

Topical Questions
Education and Skills Committee Debate: Instrumental Music Tuition