The Monetary Policy Committee maintains Bank Rate at 0.75%, Brexit uncertainty prevails
The Bank of England’s Monetary Policy Committee (MPC) has voted to maintain Bank Rate at 0.75%. This decision was unanimous. The majority of analysts now believe that the rate will not rise until after Brexit leaves the EU in March 2019.
The Committee also voted to maintain the stock of sterling non-financial investment-grade corporate bond purchases at £10 billion.
Additionally, the Committee voted to maintain the stock of UK government bond purchases at £435 billion.
In the August Inflation Report, the MPC predicted that GDP would grow by 1.75% per year on average. This is conditioned on the steady rising path of Bank Rate implied by market yields at the time. The predicted pace of GDP growth was slightly faster than the rate of supply growth. Moreover, CPI Inflation remained just above 2% through most of the forecast period.
Fundamentally, the MPC’s August predictions appear on track. UK GDP grew by 0.4% in 2018 Q2 and by 0.6% in the three months to July. Unemployment rate decreased to 4.0% and regular pay growth has risen to roughly 3% on a year earlier. In July, CPI inflation was 2.5%.
Britain’s economy has slowed since Britain’s vote to leave the EU in 2016. In fact, the BoE Governor predicted that in the event of a no-deal Brexit, household incomes could face economic difficulty.
In the minutes of the meeting, the MPC said:
“Economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to [Brexit].”
According to the minutes, the sterling has continued to be influenced by the uncertainty of Britain’s EU withdrawal.
The MPC have found it challenging to assess the economic implications of Brexit. Moreover, since the last MPC meeting there has been greater financial uncertainty about future developments of Brexit.
Legal & General completes largest ever buy-in for British Airways’ pension scheme
Legal & General Group PLC (LON:LGEN) has announced the completion of a £4.4 billion buy-in for BA’s pension scheme. Currently, BA’s pension scheme covers almost 22,000 pensions. This is the largest ever bulk annuity buy-in arranged with a UK pension scheme.
The UK pension risk transfer (PRT) market continues to demonstrate a high level of activity. Legal & General actively quote on over £20 billion. Over £7 billion of this figure was in exclusive negotiations at the time.
“Since then, Legal & General has completed £4.8 billion of UK PRT transactions, including the APS buy-in”, the company said. Additionally, it is now actively quoting on £27 billion of UK PRT deals.
On an international scale, Legal & General has completed £191 million of transactions since the end of June.
CEO of Legal & General Retirement Institutional, Laura Mason, said:
“This transaction also included the conversion of existing longevity insurance to a bulk annuity, demonstrating Legal & General’s ability to deal with a complex situation”
Moreover, Chief Executive of the Legal & General Group, Nigel Wilson, commented:
“As we indicated at the half year results, the second half of 2018 is likely to be a record six months for our PRT business”
“we expect to announce further transactions in the next few months.”
At 11:35 BST, shares in Legal & General were trading at +0.66%.
Free-to-use ATMs closing at a record rate, Link reports
Cash machine operator, Link, has reported that free-to-use ATMs are closing at a rate of over 250 per month. Over the five months ending in July, 1,300 ATMs were shut down.
Link has reported that this is the first decline of free-to-use ATMs in over 20 years.
As a result, the Payment Systems Regulator (PSR) is demanding the protection of free cash machines in remote areas.
PSR has requested 2,365 ATMS be kept open. This is because they are over half a mile from the nearest alternative free ATM. But, 76 of those have already closed.
The Independent reports that David Clarke, head of Policy at Positive Money, finds the closure rate “deeply concerning”.
“These closures risk leaving whole communities without access to cash, harming the over two million people who are wholly reliant on cash for their day-to-day shopping.
“Banks have pressured Link to reduce the fees they pay towards the cash network,
“The result has been to make hundreds of machines unprofitable.
“The PSR must urgently step in to prevent any further cuts to the interchange fee, and ensure that a widespread network of free machines is preserved.”
JD Wetherspoon announces it will stop selling EU spirits ahead of Brexit
Pub company JD Wetherspoon (LON:JDW) has said it will increase its range of beverages from the UK and non-EU producers. Infact, European drinks are set to be removed from the 880 pubs as of September 26, ahead of Brexit.
Currently, Wetherspoon pubs will stop serving the German Jägermeister and French brandies Courvoisier VS and Hennessy Fine de Cognac.
The two brandies will be replaced with E&J Brandy, the second top selling US brandy, and Black Bottle, the top selling Australian label. Additionally, the herbal liqueur, Jägermeister, will be replaced by English Strika.
Moreover, the pub company has already replaced Champagne with British and Australian sparkling wine alternatives. Likewise, British labels have replaced German wheat beers.
Tim Martin, founder and chairman of the pub chain, commented: “The three new products will be offered at a lower price than those they are replacing.
“This is a significant move by us and highlights our commitment to offering an excellent range of UK and world products, with the emphasis on quality and value for the two million customers who visit our pubs each week.
“In blind tastings conducted by Wetherspoon, the new products were more popular than those they are replacing.
“We will continue to review all products over the next 24 months, with the object of making the business more competitive and offering the best choice and value for customers.
“Many commentators talk of a “cliff-edge” if the UK “crashes out” of the EU without a deal.
“In reality, there is no cliff-edge, only sunlit uplands beyond the EU’s protectionist system of quotas and tariffs.
“All EU products have UK or non-EU replacements, often at equal or better quality and price.
“It’s important to remember that 93 per cent of the world is outside the EU.”
London no longer world’s top financial centre, says survey
A new survey suggests that New York has overtaken London as the world’s most attractive financial centre.
The Z/Yen global financial centres index, which ranks 100 centres depending on factors including infrastructure, showed a knock in confidence for London amid an uncertain Brexit.
“Zurich, Frankfurt, Amsterdam, Vienna, and Milan moved up the rankings significantly,” the report said.
“These centres may be the main beneficiaries of the uncertainty caused by Brexit.”
“Surprisingly, despite some evident success in attracting new business, Dublin, Munich, Hamburg, Copenhagen, and Stockholm fell in the rankings, reflecting respondents’ views of their future prospects,” the study said.
The UK capital faced the biggest decline in the survey, falling by eight points.
Mark Yeandle, co-creator of the index, said: “We are getting closer and closer to exit day and we still don’t know whether London will be able to trade with all the other European financial centres.”
“The fear of losing business to other centres is driving the slight decline and people are concerned about London’s competitiveness.”
The results of the survey have highlighted the need for a Brexit deal to be agreed before the March deadline.
“London and New York have long vied for the top spot of this index and the uncertainty around the future shape of Brexit is likely to be factor in their latest switch in positions,” said Mikes Celic, the chief executive of industry group TheCityUK.
“Hong Kong is now just three points behind London for the first time. Singapore, Shanghai and Tokyo are close behind.
“Given the fall in a number of North American centres as well, it is Asia, not Europe, where the challenge to London and the UK will come from in the years ahead,” he added.
John Lewis reports 99pc fall in profits
The John Lewis Partnership (LON: JLH) has announced a 99 percent fall in profits.
The group reported that profits for the six months to 28 July have fallen to £1.2 million. This is compared to the £95 million in profits for the same period last year.
“These are challenging times in retail,” said Sir Charlie Mayfield, chairman of the group, who added that the department stores are being squeezed by the “most promotional market we have seen for almost a decade.”
The John Lewis Partnership warned that profits for the first half of the year would be almost wiped.
“With the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, forecasting is particularly difficult but we continue to expect full-year profits to be substantially lower than last year for the partnership as a whole,” the retailer said.
Mayfield said: “We’re continuing to improve our offer for customers while ensuring we have the financial strength to continue developing our business going forward.”
“This is reflected in both brands continuing to grow sales and customer numbers, and our total net debts reducing.”
“The pressure on gross margin has predominantly been from our commitment to maintain price competitiveness.”
“This reflects our decision not to pass on to our customers all cost price inflation from a weaker exchange rate and from our Never Knowingly Undersold promise, where we have seen an unprecedented level of price matching as other retailers have discounted heavily,” he added.
Due to a fall in profits over the past year, staff bonuses have been cut for the fifth year in a row.
“This was why we chose to reduce the proportion of profits paid as partnership bonus last year so as to absorb these impacts while continuing to invest in the future and in strengthening our balance sheet,” said Mayfield.
Watchdog intervenes on Bentley’s Debenhams comment
A Sports Direct (LON: SPD) director caused confusion on Wednesday after suggestions that the group would buy Debenhams – before insisting he did not intend to make the comment.
The Takeover Panel had no choice to intervene following the made by comments Simon Bentley and led Sports Direct to issue a formal statement confirming it had no plans to buy the department store.
“If there are opportunities in the future we would be in a position to take advantage,” Bentley said.
Following the comment, shares in Debenhams (LON: DEB) climbed nine percent.
Soon after, the Sports Direct director said in a statement that his comments referred to “a general question about whether or not we discuss our strategic investments, and in particular Debenhams, to which I replied in the positive.”
“I made no mention of any merger between House of Fraser and Debenhams, nor did I intend my answer to infer that,” he added.
Bentley has resigned from the retailer, along with chairman Keith Hellawell after they had not been listed for re-election.
Sports Direct said in a statement: “Dr Keith Hellawell has today informed the board of his decision to step down as chairman and as a director of the company, having served since November 2009.
“Dr Hellawell will retire with effect from the conclusion of today’s AGM, and will therefore not be seeking re-election.
“David Daly, non-executive director, will take up the role of chairman at the conclusion of the AGM.”
Hellawell said: “Having overseen significant improvements in the working practices and corporate governance of the company, which includes a refresh of the board, now is the right time for me to step aside.
“I have every confidence that the group will continue to go from strength to strength. I have enjoyed the challenges of Sports Direct and the support of Mike Ashley; many major investors; members of the board and senior staff, and wish them much success for the future,” he added.
PM’s Questions: May dances around the issues
This week’s Prime Minister’s Questions was the first since MPs returned from their summer break. We take a look at some of the topics discussed.
It is no surprise that Brexit themed questions dominated the discussion. Conservative MP David Duguid, askes about support for fisheries during the Brexit transition. Likewise, both Conservative MPs Allan Mak and Chris Philp, asked about the final Brexit deal with the EU. Moreover, Plaid Cymru MP Liz Saville Roberts, asked about job losses following Brexit.
Other noteworthy questions included:
Labour MP Melanie Onn, asked about in work poverty in her constituency.
Labour MP Paul Blomfield, asked about investments in renewable technologies.
Conservative MP John Lamont, posed questions regarding Russia.
Plaid Cymru MP Ben Lake, asked about funding for schools in Wales.
Furthermore, Theresa May tried to exploit the Labour party’s anti-Semitism row. The PM used a planted question from a Conservative MP to make Corbyn apologise to the Jewish community, BBC reports.
Notably, Corbyn used all six of his questions to address Cabinet split over the PM’s Brexit proposals. But, Theresa May insisted she was working to “get a good deal with the European Union”.
Several puns were made regarding the viral video of the Prime Minister dancing on her recent trip to Africa.
Corbyn said that May “can not keep dancing around all the issues”. Additionally, when discussing Panasonic’s move out of the UK, Corbyn stated that the company “had decided to dance off altogether”. Earlier, we questioned Theresa May’s ability to lead the nation through Brexit. The PM’s most recent awkward dancing video has gone viral on social media. It only undermines her efforts to lead Britain during its departure from the EU. With less than a year until the March 2019 EU withdrawal, will May be able to secure the UK the best exit deal?Q&A session with Daniel Carnio of OenoFuture
Oenofuture is a leading fine wine investment company based in London with offices on mainland Europe. Below is a Q&A session with their founder, Daniel Carnio.
Q: Daniel, why don’t you start by telling what the fine wine investment market looked like a few years ago?
If we go back to the beginnings of the fine wine investment market centuries ago, Bordeaux has been a dominant player from those early years right up until 2012. At that point, in 2012, Bordeaux still constituted around 90 to 95% of the fine wine investment market.
Q: And how has the character of the fine wine market changed since 2012?
In 2012 there was a major shift in the market as Chinese investors began to turn away from acquiring expensive Bordeaux. As a result, Bordeaux’s share of the market has declined steeply as Chinese investors look for alternatives. Around two weeks ago Liv-ex, the London-based fine wine exchange, published an update showing that Bordeaux now accounts for around 60% of the market.
This means Bordeaux has lost a substantial share of the market which has been taken up by other regions like Burgundy and Champagne as well as Italian and New World regions.
Q: So why is this change so important for those looking to invest in fine wine?
As for any other type of investment, a fine wine investor needs to create a diversified portfolio. This is crucial to both spread the risk of their investment and to optimise their investment strategy. To create a diversified portfolio, investors will be acquiring wines from distinct wine regions, different vintages and wines which have differing ageing capabilities. Due to Bordeaux’s dramatic drop in market share, it is even more pressing for investors to seek out wines from these alternative regions.
Q: You mention that Bordeaux’s share of the fine wine investment market has declined significantly over the past decade or so. Which regions should investors be prioritising these days?
Well, thanks to improvements in wine production techniques and vineyard management, the overall quality of fine wine has improved tremendously. It is now possible to find fine wine from almost any corner of the world. For instance, China is now starting to produce investment-grade wines. This diversification is giving us investors the opportunity to find great investment opportunities in new and atypical regions.
We are recommending very strongly investment in Italian and Spanish wines, but an interesting insight to come from Liv-ex is that they have created a fine wine index for Californian wines. This demonstrates a significant shift and sends a strong signal to investors that we need to look beyond Bordeaux for covetable investment-grade wines.
Q: How has this development influenced your work with OenoFuture?
In terms of fine wine investment, I would say that this is a very exciting time since there are so many opportunities in other parts of the world. This is a key tenet of our philosophy here at OenoFuture. We focus on finding great investment opportunities from any region in the world which make sense in terms of return and performance. For our investors’ peace of mind, we do a thoroughly detailed analysis looking at previous performance and future projections before suggesting any wine to our clients.
Unlike many fine wine investment companies who are now starting to diversify and look to alternative regions, at OenoFuture we took the leap of deciding not to trade in Bordeaux wines from the beginning. Of course, we can acquire Bordeaux at our clients’ request, but our real strength is our insider knowledge of these alternative regions and their fine wine investment potential which puts us at the cutting edge of a fast-paced market.
Q: Is this focus on alternative regions set to continue?
I believe so as we are seeing more and more countries now producing top quality fine wines. For example, today China is making investment grade wines like the Ao Yun by the LVMH group which is produced from high altitude vineyards in Yunnan province. This wine has already proved to be very strong in terms of return on investment.
We are also seeing producers like Catena Zapata from Argentina starting to sell their fine wines from La Place de Bordeaux through 10 negociants. This is another marker of the evolution of the fine wine investment market which is rapidly expanding into new wine regions. Moving forward, alternative regions like Italy, Spain and the New World will remain the cornerstone OenoFuture’s diverse portfolio.
To requisition further information on how to make your own investment in fine wine, please click here
Sports Direct’s Keith Hellawell steps down following AGM
The Sports Direct’s chairman is to step down from the group following pressure from a major shareholder advisory group.
Keith Hellawell, who has been in the role for almost a decade, will be replaced by David Daly, the former Nike executive.
Glass Lewis, the investor advisory group, urged investors last month against Hellawell’s re-election and accused him of providing “poor governance”.
The group also advised against the re-election of Simon Bentley, a senior independent director who is always leaving the retailer.
Sports Direct said in a statement: “Dr Keith Hellawell has today informed the board of his decision to step down as chairman and as a director of the company, having served since November 2009.
“Dr Hellawell will retire with effect from the conclusion of today’s AGM, and will therefore not be seeking re-election.
“David Daly, non-executive director, will take up the role of chairman at the conclusion of the AGM.”
Hellawell said: “Having overseen significant improvements in the working practices and corporate governance of the company, which includes a refresh of the board, now is the right time for me to step aside.
“I have every confidence that the group will continue to go from strength to strength. I have enjoyed the challenges of Sports Direct and the support of Mike Ashley; many major investors; members of the board and senior staff, and wish them much success for the future,” he added.
Ashley said: “I would like to thank Keith and Simon for their valuable service and significant contributions to the company over the years.”
The group has also appointed its first female member to the board after pressure from targets for public companies.
Nicola Frampton, from William Hill, will begin work as a non-executive director from October 1.
Shares in the group (LON: SPD) are trading up 3.26 percent at 352,00 (1322GMT).