30 May 2018


30 May 2018

Good morning,

“If you want the pasta al dente,” today’s Telegraph cartoon instructs us, “you should only cook it for as long as an Italian government lasts.”

Well, indeed. But rather than endorse the howls of “Here we go again”, I suggest the developing crisis in Italy requires a closer look, not least for its potential impact on this side of the Channel.

Yesterday the prospect of snap elections in the autumn resurfaced after a governing agreement between the populist Five Star movement and anti-migrant Lega collapsed following the decision by President Sergio Mattarella to veto their choice of finance minister in the eurosceptic Paolo Savona. Citing the potential impact to investment, President Mattarella has instead appointed an ex-IMF economist, Carlo Cottarelli, as Italy’s Prime Minister-designate, a selection which looks almost certain to fail a vote of confidence later this week.

The last 24 hours have done nothing to counter clichés of Italy’s flair for dramatic politics. President Mattarella faces calls for his impeachment while Five Star look desperately to salvage the coalition. Some now suggest the whole crisis has been engineered by La Lega in order to secure a much bigger mandate should new elections take place, given a recent surge in their popularity.

But the economic damage may already be done. The governor of the Bank of Italy, Ignacio Visco, warned that - elections or no - the crisis has fatally undermined investor confidence in the country. Borrowing costs on two-year Italian gilt yields, once seen as a proxy for short-term political risk, posted their biggest one-day jump since 1992 yesterday. The spread between German and Italian ten-year bonds, a measure of confidence in the eurozone, also hit its widest gap since June 2013 as investors switched their money into the comparably safer havens of the US and UK markets. The FT View yesterday summed up the mood: “There can be no good outcomes from this turmoil”

President Mattarella’s decision means new elections are all but a given, with any future contest only likely to boost euroscepticism. Suddenly Italy’s membership of the eurozone may be in back in question, which tells me, we’re all in for a bumpy ride.


A campaign to secure a second Brexit referendum within a year is to be launched with the backing of philanthropist and financier George Soros. Speaking in Paris yesterday, the billionaire founder of the Open Society Foundation lent his support to the Best for Britain campaign, which is due to publish its manifesto on 8 June. Soros suggested the EU would need to change in order to change the minds of the British, adding that a “convicing margin” could be persuaded in “revolutionary times”.

Caroline Lucas is to step down as co-leader of the Green Party in September. In an article for the Guardian, Lucas said that a leadership contest would provide new ideas for the party, allowing her to focus on her parliamentary and constituency roles. She currently shares the role of leader with councilor Jonathan Bartley who it is thought will stand.

The former leader of the English Defence League Tommy Robinson has been jailed for disrupting a long-running trial by live-streaming an hour-long diatribe on Facebook outside a court. A judge told Robinson, who appeared in court under his real name, Stephen Yaxley-Lennon, that his actions may lead to the trial being abandoned, with a retrial costing the state “hundreds and hundreds of thousands of pounds”. Robinson was arrested on Friday after naming defendants in a case, and the charges and details of the allegations they face.

Business & Economy

Sir Martin Sorrell is set to make a return to the London stock market by setting up a firm to rival his advertising empire, WPP Group. Sir Martin is expected to be appointed as executive chairman of Derriston Capital today, with the intention of using the listed cash shell as a vehicle to create a new marketing services group for the “next generation”. Sir Martin left WPP as the FTSE-100’s longest-serving chief executive six weeks ago following allegations of financial impropriety.

Pret A Manger is to award its 12,000 employees a £1,000 bonus after its private equity owner agreed a £1.5 billion sale of the coffee and sandwich shop chain. Bridgepoint yesterday agreed with JAB Holdings, which owns Kenco coffee and Krispy Kreme doughnuts and has undergone significant expansion in the coffee market supply chain recently. Under Bridgepoint’s ownership, Pret’s store numbers have doubled to more than 500 shops, and was last year considered as a possible stock market listing. (£)

President Trump has reiterated his intention to impose $50 billion of tariffs on Chinese imports within weeks. Speaking at the White House yesterday, a representative of the Trump administration spoke out against recent progress in trade discussions between the USA and China, confirming that a list of industries affected by the 25% tariff would be published on June 15. The administration suggested the tariff would apply to “industrially significant technology” and would come into force by June 30. (£)


What happened yesterday?
Political uncertainty in Italy and Spain rocked continental markets yesterday, hitting the markets in London with their biggest fall in two months. The FTSE 100 finished down 1.26% at 7,632.64 points, with investor sentiment shaky ahead of fresh elections in Italy and as Spanish Prime Minister Mariano Rajoy faces a vote of confidence in his leadership on Friday.

Anxiety on the continent was felt most acutely on the currency markets, where sterling was down 0.4% against the dollar at $1.33, alongside a surge in longer-term gilt prices as investors sought alternative asset markets to Italy. Meanwhile, the pound was up by 0.35% against the euro at $1.15.

In corporate news, RBS (down 3.35%) paced declines following reports that the government is lining up to sell a large part of its 70% stake in the bank this week. Dixons Carphone (down 20.74%) was the day’s biggest faller after the company reported a 24% drop in annual profits, and a further expected fall of 21% in the company year. Vedanta (down 0.58%) was also in the red – but well off earlier lows – as it was ordered to permanently close its South Indian copper smelting plant, where anti-expansion protestors were killed by police last week.

Serviced office provider IWG (up 2.56%) was among the day’s gainers on news that Prime Opportunities Investment had made a cash offer for the company that was rejected, prompting AlphaValue to upgrade IWG to a ‘buy’ rating. It was joined by precious metals miner Fresnillo (up 3.12%), who topped the day’s gainers through risk-averse trading.

De La Rue
LondonMetric Property
Telford Homes
Trans-Siberian Gold

Barr (A.G.)
BlackRock Latin American Inv Trust
Crusader Resources Limited (DI)
Circassia Pharmaceuticals
EU Supply
Frenkel Topping Group
Judges Scientific
K3 Business Technology Group
PJSC PhosAgro GDR (Regs)
Royal Bank of Scotland Group
Safestyle UK
Old Mutual

Nexus Infrastructure
Oxford Metrics

Int. Economic Announcements
(07.00) Import Price Index (GER)
(07.00) Retail Sales (GER)
(09.00) Unemployment Rate (GER)
(10.00) Business Climate Indicator (EU)
(10.00) Consumer Confidence (EU)
(10.00) Economic Sentiment Indicator (EU)
(10.00) Industrial Confidence (EU)
(10.00) Services Confidence (EU)
(12.00) MBA Mortgage Applications (US)
(13.30) GDP (Preliminary) (US)

Columns of Note

Bill Emmott comments in the FT that if another election takes place in Italy, debate should focus on the country’s wider economic malaise, rather than membership of the eurozone. Emmott points out that neither party previously campaigned on the issue, with such a move risking much more toxic fall-out next time round. (£)

Writing in The Times, Katherine Griffiths suggests that refurbs of banks’ physical presences on the high street are back in fashion. Griffiths concludes that although the trend is a logical way to reconnect with communities following recent branch closures, companies need to think bigger by supporting not-for-profit organisations in the community and offering small loans not backed by collateral. (£)

Did you know?

Founded in 1978, ice cream company Ben & Jerry’s was originally intended to sell bagels but the duo found the bagel-making equipment to be too pricey. Instead, the pair moved to Vermont, completing a $5 correspondence in ice cream-making from Penn State University. Jerry was the first CEO of the company, so it was decided that Ben’s name would be put at the first in “Ben & Jerry’s” to make it up to him.

Today, each employee is entitled to take 3 pints of ice cream home a day. Also, Dastardly Mash (1979-1991) was the only flavour ever to contain raisins.

Parliamentary highlights


House of Commons
In recess until Monday 4 June 2018.

House of Lords
In recess until Monday 4 June 2018.

Scottish Parliament
Stage 3 Proceedings
Islands (Scotland) Bill

Members’ Business
Appropriate Housing for People with Learning Disabilities – Joan McAlpine


Scottish Parliament
General Questions

First Minister’s Questions

Members’ Business
Improving Edinburgh’s City Bypass – Miles Briggs

Portfolio Questions
Rural Economy and Connectivity
Environment, Climate Change and Land Reform

Stage 3 Proceedings
Housing (Amendment) (Scotland) Bill