Alternative backstop reactions: emollience isn’t a salve for open wounds

Jamie Gordon
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Alternative backstop reactions: emollience isn’t a salve for open wounds
Worried about betraying the Good Friday Agreement, providing short positions to hedge fund buddies or making empty pledges on workers’ rights and trading standards? I think Boris has a cream for that. Today prime minister Boris Johnson defended his alternative backstop proposal with an approach he described as ‘glutinous emollience’, but it has thus far done little to soothe the sores of either his political opposition or the Northern Irish populace, whose livelihoods this new arrangement is trifling with. Seemingly not interested in engaging with the awkward and regularly repeated jibes offered by Jeremy Corbyn and Ian Blackford, Boris Johnson instead opted to say he was disappointed in both parties’ responses to the new deal, which Corbyn lamented as being worse than the previous offering. Without wanting to seem completely unreasonable, the EU have yet to outright reject the new proposal, but something about the EC’s Twitter activity would suggest they’re not all that keen. These updates followed a phone call between Boris Johnson and Jean-Claude Juncker, in which the EC president said he was pleased the UK was making steps toward attempting to find a compromise. Similarly, the Brexit ‘Spartans’ among the Conservative party and some members of the Northern Irish Parliament’s lower house have a positive outlook following Johnson’s latest proposal. However, Corbyn went on to echo the concerns of Northern Irish businesses, which were bolstered by the reaction of the Irish media. The Irish Times began, “The latest UK proposals on Brexit reflect either an extraordinary ignorance of Northern Ireland or a willingness to risk the Belfast Agreement – and the progress of the last 20 years – to further the Johnson government’s political interests.” “The need to minimise the inevitable problems caused by a customs border on the island of Ireland is presented as a technical issue when, of course, it is so much more. The contortions necessary to keep the [DUP] on side have created proposals which would be disastrous for the North’s economy and bring with it wider dangers to peace …” “While claiming to support the Belfast agreement, the Johnson government is showing a wilful disregard for it and for the commitments the UK made in negotiations with the EU in December 2017. The most credible conclusion is that the prime minister and those around him have anticipated that this offer will be rejected and their primary objective in framing it in such a manner is their own domestic political advantage.” The Irish Independent continued, “Mr Johnson has argued the backstop is “a bridge to nowhere”. Alas, the slight proposals set down yesterday look like a flimsy pontoon that could be washed away in the first tides of trouble.” “They require stronger foundations to either protect the legacy of the Good Friday agreement, or seal the single market. They are more an outline than a detailed plan …” “Commitments cannot be exchanged for vague possibilities. The Brexiteers fear the UK could be trapped indefinitely in limbo, but they have no problem inviting the same plight on the North. Rejection of the latest Brexit plan may lead to the no deal Mr Johnson warned of.” “But acceptance could have the same negative outcomes. The British prime minister claims his plan is reasonable. But the risks appear weighed too heavily on one side.” The latter sentiments were echoed by Leo Varadkar, who made it clear he was unwilling to undermine a legally binding agreement of such political and cultural importance, for the sake of a promise and a set of outlined proposals. Speaking on Boris Johnson’s attempt to sidestep the border-shaped elephant in the room – with designated checkpoints away from the North-Republic border itself – Irish TD Thomas Byrne stated,
“We’re very concerned about whether the proposal is serious. The objectives that I suppose, nationally, we have as a nation are that no border will exist on the island of Ireland and it’s not clear that this does that”
“[The plan] seems to us that it puts in place a border for customs.”
“It doesn’t matter where [customs checks] take place.” “The problem is that customs checks need to be built, they need support of communities. I don’t think they would have support of communities.”
“Historically they’ve needed to be protected, and those protecting them then become targets and then this leads into a cycle of chaos.” Like him or not, some degree of admiration is owed to Boris Johnson for his sheer tenacity. Not only because this new Brexit deal is a clearly ham-fisted effort that ignores the nuances of the Irish political situation, but also because – deliverable or not – the fact he has offered the EU, and potentially the opposition, an opportunity to reach an agreement, means he can say ‘I tried to deliver a deal, its their fault we haven’t’. We can hope the end is in sight and that we can leave the putrid miasma of Brexit politics in 2019 – though at the moment that remains unlikely. For now, the palaver and toxicity continues. Elsewhere in political and macro economic news, there have been updates from; Hong Kong protester shooting and China’s strategy, the Supreme Court’s ruling, the collapse of Thomas Cook (LON: TCP), ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Hilary Benn’s Brexit delay bill, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).

Ofgem: greenhouse gas progress slows, Big Six lose market share

Dina Caruso
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Ofgem: greenhouse gas progress slows, Big Six lose market share
Last year saw the smallest reduction in greenhouse gas emissions since 2012, according to a report published by Ofgem on Thursday. Ofgem said that greenhouse gas emissions have dropped by 42% since 1990 – which is more than any other large advanced economy – driven by government policies and the growth of wind and solar power. It noted, however, that progress is slowing down. Meanwhile, the report by Ofgem also shows that the market dominance of the Big Six energy companies continues to weaken. Indeed, they lost 1.3 million customers and saw market share decrease to roughly 70%, down on the approximately 75% recorded the year prior. The Big Six energy companies are those that supply most of the energy to domestic households in Britain. These are Centrica, E.ON UK, Scottish and Southern Energy, RWE npower, EDF Energy and ScottishPower. Earlier this year, Ofgem implemented a price cap on default energy tariffs to limit customers from overpaying for energy. In February, Centrica warned that the energy price cap would weaken its 2019 results. “Ofgem’s latest state of the market report shows the progress made so far to decarbonise the economy but much more needs to be done,” Joe Perkins, Chief Economist at Ofgem, commented on the report. “We want the UK to remain a global leader in bringing down greenhouse gas emissions, and our major objective is to help the country rise to the challenge of cutting emissions to net zero by 2050 at the lowest possible price to consumers,” the Chief Economist continued. “As well as protecting consumers in the future, our duty is also to protect those today.” “We will continue to enable competition and innovation which benefits consumers, whilst protecting those who need it, as we help build an energy market which works for all consumers.” Shares in Centrica plc (LON:CNA) were trading at -2.4% as of 12:30 BST Thursday. Shares in E.ON SE (ETR:EOAN) were down trading at -1.28% as of 17:35 CEST Wednesday. Shares in SSE plc (LON:SSE) were up trading at +0.57% as of 12:29 BST and Electricite de France SA shares (EPA:EDF) were down -0.15% as of 13:15 CEST.

Service sector activity contracts, risk of recession “heightened”

Dina Caruso
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Service sector activity contracts, risk of recession “heightened”
New data revealed on Thursday that UK service sector activity contracted in September, with companies the least optimistic about future growth of activity since after the Brexit referendum in 2016. The UK is facing a “heightened risk of recession,” said the Chief Business Economist at IHS Markit. The IHS Markit/CIPS UK Services PMI Business Activity Index dropped to 49.5 in September, down from 50.6 recorded in August. According to the data, jobs at service sector companies were cut for the first time in five months, occurring at the fastest rate in nine years. The survey also shows that international clients switched business to other markets following the prevailing worries surrounding a no-deal departure from the European Union. “At current levels the surveys point to GDP falling by 0.1% in the third quarter which, coming on the heels of a decline in the second quarter, would mean the UK is facing a heightened risk of recession,” Chris Williamson, Chief Business Economist at IHS Markit, said. “Brexit-related concerns dominated the September survey responses, linked by companies to falling sales, cancelled and postponed projects, a lack of investment and job losses,” Chris Williamson continued. Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said “an exhausted sector’s optimism faded away to July 2016 levels and new export orders fell at their fastest rate since March.” “Some respondents mentioned overseas customers were putting spending decisions on hold or choosing other European suppliers instead. In this last month before the Brexit deadline, there is little time or vision for a major turnaround in fortunes before the end of the year,” Duncan Brock added. Indeed, with the Brexit deadline fast approaching, uncertainty prevails over the nation’s future. Just last week the Supreme Court ruled that Boris Johnson’s prorogation of Parliament was not only unlawful but also ineffective and non-existent. The Prime Minister is now setting out his proposals for a Brexit deal in Parliament, according to the BBC.

Markets contemplate US tariffs following WTO ruling

Jamie Gordon
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Markets contemplate US tariffs following WTO ruling
Continuing his America first campaign, Donald Trump would’ve no doubt produced one of his memorable facial expressions as the WTO gave the go-ahead for the US to impose a series of tariffs on European goods. Closing in the red on Wednesday, indices would have looked to recover some ground on Thursday morning. Speaking on their efforts this morning, Spreadex Financial Analyst Connor Campbell described the market opening,

“Halloween came early on Wednesday, the WTO treating the global markets to a nasty trick as they gave the US the green light to impose tariffs on $7.5 billion in European goods.”

“After yesterday’s dizzying losses, the markets attempted to steady on Thursday, with mixed success. The CAC, which was one of the worst hit as French wine made America’s naughty list, managed to eke out a 0.2% rise after the bell, with the IBEX and FTSE MIB also in the green.”

“The FTSE, however, wasn’t so lucky. Certainly not helped by BP and Shell falling around 1% apiece, the UK index lost another 25 points, forcing it back to 7100 and leaving it at a 5-week low. This despite the pound continuing to hold at its own one-month nadir against the dollar; the currency has spent the week treading water against the greenback, almost completely ignoring Boris Johnson’s ham-fisted attempts at a border solution.”

“After the panic caused by the manufacturing PMIs earlier in the week, it’ll be interesting to see whether or not Thursday’s services figures have the same effect. The Eurozone-wide reading is expected to sit at 52.0, while the UK number is set to slip from 50.6 to 50.3; a bit later on, the US ISM PMI is then forecast to drop from 56.4 to 55.1 month-on-month.”

Continued uncertainty, isolationism and adversarial politics, investors and globalists alike will be longing for a return to cooperation and the days where the international community held hands and sang kumbaya. Going forwards, it looks likely that divisions will deepen, as old alliances are broken up and new ones are formed. Elsewhere in political and macro economic news, there have been updates from; Hong Kong protester shooting and China’s strategy, the Supreme Court’s ruling, the collapse of Thomas Cook (LON: TCP), ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Hilary Benn’s Brexit delay bill, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).

Ted Baker posts half year loss, shares crash

Dina Caruso
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Ted Baker posts half year loss, shares crash
Ted Baker posted posted a pre-tax loss on Thursday as the retailer battles against “unprecedented” trading conditions. Shares in the British luxury clothing retail business were sent crashing over 35% during trading on Thursday morning. Ted Baker said that profit before tax decreased to a loss of £23 million over the 28 week period to 10 August, down from the £24.5 million profit recorded in 2018. The company said that its results for the first half were behind its expectations. It added that trading in the second half has started slow, not helped by the warm weather in September, which it believes will have an impact on the full year. “If these trends continue, we will achieve a second half result below that of last year,” Ted Baker warned. “The Group’s performance has been impacted by very difficult trading conditions throughout the period, amplified by heightened levels of consumer uncertainty across many of Ted Baker’s global markets,” the company said in its results. “This has been exacerbated by the well-publicised challenges that continue to face some of the Group’s UK trading partners against the backdrop of the continuing shift towards an increasingly digital retail landscape.” Ted Baker warned of the “extremely difficult” trading conditions back in June, and the impacts these continue to have on its performance. “The sector in which we operate continues to face significant challenges, including weak consumer spending against a backdrop of Brexit and broader political and economic uncertainty,” the company warned. Indeed, the nation has now entered the month of the Brexit deadline and the only certainty that prevails is additional uncertainty. “As a result, the trading environment remains highly competitive and promotional with competitor discounting at unprecedented levels. We continue to proactively manage these pressures, but are not immune to the external challenges,” Ted Baker said. From discounting, the switch to online shopping and the prevailing Brexit uncertainty, UK retailers are struggling amid the gloomy trading conditions to have hit the British high street. Shares in Ted Baker plc (LON:TED) were trading at -35.82% as of 11:06 BST Thursday.

H&M’s quarterly profits increase, shares up

Dina Caruso
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H&M’s quarterly profits increase, shares up
H&M shares (STO:HM-B) were up on Thursday after the Swedish multinational fashion retailer posted a rise in profit in its results for the third quarter. The company saw its pre-tax profit grow to SEK 5.0 billion from June to August, up from the SEK 4.01 billion figure recorded the year prior. Net sales increased by 12% in the third quarter. In local currencies, net sales grew by 8% compared to the same quarter a year prior. The fashion retailer said that its summer collections had been “well-received”. “Well-received summer collections and increased market share show that we are on the right track with our transformation work to meet customers’ ever-increasing expectations,” Karl-Johan Persson, CEO, said in a company statement. “Continued increases in full-price sales and decreases in markdowns contributed to a 26 percent increase in operating profit in the third quarter, all while maintaining a high level of activity in our transformation work,” the CEO continued. “Customer focus is our highest priority. We are therefore continuing to invest in the best combination of fashion, quality, price and sustainability.” “And to make the customer experience even more inspiring and easy, we are integrating our digital and physical channels more and more – including through the continued rollout of Click & Collect and online returns in store, along with improved search functions, more flexible payment options and faster deliveries.” H&M is also in the process of developing new features such as services aimed at sustainability and reuse. The CEO added that growth was “good” in many of the retailer’s markets. In the US, sales in local currencies increased by 19%, Poland by 20%, Italy by 15%, Russia by 12% and India by 29%. As for retail in the UK, several high street names have suffered amid gloomy trading conditions. Earlier this week news emerged that JD Sports’ (LON:JD) £90 million deal to acquire struggling Footasylum will undergo additional investigation for the impacts it will have on market competitiveness. Shares in H&M Hennes & Mauritz AB (STO:HM-B) were trading at +6.57% as of 10:53 CEST.

Equity markets sink on growth concerns and Brexit worries

UK Investor Magazine
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Equity markets sink on growth concerns and Brexit worries
Equity markets sank around the world on Wednesday as a string of poor economic data combined with fears over Brexit to shake the confidence out of markets. The FTSE 100 was down over 190 point or 2.6% to 7161 in afternoon trade which culminated in the worst start to October since 2014. A series of poor global economic date raised fears companies were going to struggle through earnings season. “It’s going to be a tough season and the most important thing will be how the companies view going into Q4 and the early outlook for 2020, which is shaping up to be a tough year for markets and corporates,” said Neil Campling, analyst at Mirabaud Securities. The market has digested a broad set of manufacturing data which has pointed to to deterioration economic activity and could possibly signal wider economic strife. Compounding fears over the UK economy, PM Johnson delivered a speech that promised changes to the current Brexit deal that if were not met would lead to a No-deal Brexit 31st October. Tesco were unchanged after they announced their CEO would be stepping down next year. He had previously been seen as the person that took a struggling Tesco and turned them around but a wider slow down in the sector tarnished initial success. “Retail bosses are like football managers, a handful of names always moving around the top jobs, notching maybe a season or two of success before inevitably failure catches up with them.” wrote Markets.com analyst Neil Wilson on the departure of Tesco’s boss. The biggest fallers on the FTSE 100 were Kingfisher (-6.8%), Hargreaves Lansdown (-5.9%) and AB Foods (-5.1%) in late afternoon London trade.

Topps Tiles Q4 results hit by weak consumer confidence

Dina Caruso
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Topps Tiles Q4 results hit by weak consumer confidence
Topps Tiles (LON:TPT) said on Wednesday that like-for-like sales declined during its fourth quarter, impacted by a difficult economic climate. Shares in the UK’s largest specialist supplier of tiles were down during trading on Wednesday morning. The British retailer said that, in the fourth quarter, like-for-like sales decreased by 1.9%, blaming the “more challenging economic backdrop”, with uncertainty hitting consumer sentiment. Matthew Williams, Chief Executive Officer, said that “political uncertainty continued to weigh on consumer confidence in the final quarter and we expect this to remain a feature until there is greater clarity”. Indeed, as the nation has now entered the month of the extended Brexit deadline, the only certainty that prevails is additional uncertainty. Just last week the Supreme Court ruled that Boris Johnson’s prorogation of Parliament was not only unlawful but also ineffective and non-existent. Topps Tiles added that it expects adjusted revenues for the full year to be in the region of £214 million, and adjusted pre-tax profits for the year are expected to be within the range of current market estimates (£15.5 million to £16.0 million). “Despite continued tough market conditions it has been a year of significant strategic progress for the Topps Group,” the Chief Executive Officer commented in a company statement. “In Retail, the recent launch of our new, industry-leading website brings new levels of inspiration to our customers and further integrates our digital and in-store offer,” the Chief Executive Officer said. “In Commercial, our investments in building the salesforce, opening new design studios and improving its digital capabilities have enabled Parkside to establish significant momentum in its second year within the Group.” Topps Tiles also saw its sales dip first quarter of the financial year, amid what it described as a “challenging market backdrop”. Shares in Topps Tiles plc (LON:TPT) were trading at -6.50% as of 09:49 BST Wednesday.

Ryanair passenger volumes up 8%

Dina Caruso
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Ryanair passenger volumes up 8%
Ryanair revealed its passenger volumes for the month of September on Wednesday. Shares in Ryanair were down during Wednesday morning trading. The low budget Irish airline said that it flew 8% more passengers in September. Passenger volumes for the month increased to 14.1 million, up from the 13.1 million figure recorded in 2018. Earlier this year, Ryanair posted a 21% fall in first quarter profits. It highlighted Germany and the UK as its weakest markets – the latter as a result of the prevailing Brexit concerns on consumer spending. The airline faced baggage-policy chaos in 2018, altering its baggage policy twice in one year. It dramatically reduced the amount of free luggage that passengers are able to take on board with them. Elsewhere in the aviation industry, the British global travel group Thomas Cook recently collapsed, leaving thousands of British holidaymakers stranded abroad. Customers and employees took to Twitter to share their experiences and thoughts. Meanwhile, some Thomas Cook customers accused other airlines of capitalising on the collapse – the BBC reported that in some instances, the prices of replacement flights have tripled. The Civil Aviation Authority said this week that is launching a new process for what will be the largest ever ATOL refund programme for Thomas Cook customers who had an ATOL protected holiday booked with the collapsed airline in the future. The largest peacetime repatriation, “Operation Matterhorn”, was launched last week by the Civil Aviation Authority to bring stranded Thomas Cook customers back to the UK. Shares in Ryanair Holdings plc (LON:RYA) were trading at -1.86% as of 09:54 BST Wednesday.

Tesco CEO to leave in summer 2020

Dina Caruso
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Tesco CEO to leave in summer 2020
Tesco (LON:TSCO) said on Wednesday that its CEO, Dave Lewis, has decided to step down from his position. Shares in Tesco were up during trading on Wednesday. The Group CEO is set to depart from the business in the summer of 2020, Tesco said on Tuesday in its interim results. Chairman John Allan added that “we have appointed Ken Murphy to succeed Dave as Group CEO of Tesco next summer.” The British supermarket and general merchandise retailer also revealed that profit before tax for the half year amounted to £494 million, rising 6.7%. Tesco said that it is now well-positioned to continue to be highly competitive “in challenging markets”. “Despite challenging external conditions we have delivered a very good start to the year,” Dave Lewis said. “I’m very pleased to say that we have now delivered every element of the turnaround plan and from this position of strength, the transformation of our business continues at pace,” the Chief Executive continued. “My decision to step down as Group CEO is a personal one. I believe that the tenure of the CEO should be a finite one and that now is the right time to pass the baton,” Dave Lewis commented on his resignation. “Our turnaround is complete, we have delivered all the metrics we set for ourselves. The leadership team is very strong, our strategy is clear and it is delivering. The Tesco brand is stronger and customer satisfaction is the highest it has been for many years. Colleagues are doing an extraordinary job and their expertise shows in every store and channel every day.” Earlier this year, the British supermarket chain reported a slowdown in sales growth in the first quarter. It also revealed a 34% rise in full-year profit earlier in April. Shares in Tesco plc (LON:TSCO) were trading at +2.17% as of 09:26 BST Wednesday.
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