Italy’s budget: shares suffer as EU clash prevails
Italy’s budget has prompted EU backlash because its three year deficit plans breach rules on government borrowing. As a result, Italian shares and bonds have experienced a sharp sell-off. This has been caused by the concerns of investors regarding the deepening tensions between the Italian government and the European Union.
At the end of September, the Italian government set a budget deficit next year equaling 2.4% of Italian GDP.
Despite this figure being below the EU’s deficit limit of 3% of GDP, the news was not well received. This is because Italy is the third-largest economy in the Euro zone, and yet has a debt second to Greece. Equally, under the current budget plan the structural deficit would rise which goes against EU regulations.
But, the Italian government’s initial response was to not back down. They refused to revise Italy’s budget despite growing pressure from Brussels and Italy’s Euro zone partners. Italy’s economy minister, Giovanni Tria, attempted to ease tensions by claiming the country will try to cut its deficit in 2020 and 2021.
Uber drivers to take part in strike action
Uber drivers will strike from 1 pm across UK cities today.
Protesting over pay and working conditions, hundreds of drivers will turn off their apps this afternoon.
Organised by The United Private Hire Drivers (UPHD) branch of the Independent Workers Union of Great Britain (IWGB), there will also be protests outside the offices in London, Nottingham and Birmingham.
James Farrar, who is the head of the UPHD branch, said “hundreds” are expected to join the strikes on Tuesday.
“If you look at social media feeds its viral at the moment. In the history of our union, I’ve never seen anything quite like it,” he said.
The unions are demanding an end to what it describes as the unfair deactivation of drivers. There is also a push for the increase in fares from £1.25 per mile to £2 per mile and a 10% reduction in commissions paid by drivers.
Labour deputy leader John McDonnell has supported the strike. He retweeted the UPHD’s announcement of the strike and protests and wrote: “I support this strike for better employment rights and urge others to respect the app picket line.”
Uber said: “We are always looking to make improvements to ensure drivers have the best possible experience and can make the most of their time driving on the app.”
“That’s why over the last few months we’ve introduced dozens of new features, including sickness, injury, maternity and paternity protections. An academic study last month found that drivers in London make an average of £11 an hour, after accounting for all of their costs and Uber’s service fee.”
“We continue to look at ways to help drivers increase their earnings and our door is always open if anyone wants to speak to us about any issues they’re having.”
This is the latest action taken by employees in the gig economy. Last week, employees from McDonald’s (NYSE: MCD), Wetherspoons (LON: JDW) and TGI Fridays (CNSX: TGIF) took part in a joint national strike.
Norwegian Air Shuttle becomes biggest non-U.S. airline to New York
Norwegian Air Shuttle has surpassed British Airways as the biggest non-U.S. airline on transatlantic flights to and from New York, Reuters reports.
It has been reported that Norwegian Air Shuttle took 1.67 million flyers to or from airports around New York. This figure is just above that of British Airways, which comes in at 1.63 million passengers. Indeed, Norwegian Air Shuttle has surpassed British Airways in the year long period from July 2017 to July 2018.
Over the last five years, Norwegian Air Shuttle has rapidly expanded in the transatlantic market.
In fact, the owner of British Airways was prompted to buy the company earlier this year. The data has emerged from the Port Authority of New York and New Jersey. Additionally, four U.S airlines are the largest to fly international passengers out of New York. The New York airports include John F. Kennedy International, Newark Liberty International and LaGuardia. But, the biggest non-U.S. flyer of international passengers is Air Canada. The majority of these flights are, however, between the US and Canada. As for Europe’s long haul flight market, new contenders have disrupted the market. Norwegian Air Shuttle and Wow Air are just a few companies revolutionising low-cost long haul travel. A British Airways spokeswoman commented: “Our commitment to New York is as strong as ever,” “We fly up to 70 times a week from all three of our London airports,” “We recently announced a $55 million (£49.7 million) investment on new lounges, improved food, seating and shops at JFK Terminal 7”. Moreover, a spokesman from Norwegian Air Shuttle said: “Transatlantic routes have been long dominated by carriers with outdated legacies running on fumes,” “Norwegian will continue to spread its wings to the Big Apple with a third-daily service between London and New York JFK”. Last month, British Airways reported that its customer data had been stolen. At 12:26 GMT +1 today, shares in British Airways Owner IAG (LON:IAG) were trading at +0.23%. At 16:00 GMT -4 yesterday, shares in Norwegian Air Shuttle (OTCMKTS:NWARF) were trading at -4.24%Wealthsimple: Investing on AutoPilot
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Dutch King shares Brexit concerns before UK trip
The Dutch King has disapproved the UK’s departure for the EU on Monday.
Speaking from the Hague, King Willem-Alexander of the Netherlands said that whilst the Dutch/UK trading relationship would survive Brexit, it would have been better for the UK to remain in the EU.
Speaking ahead of his state visit to the UK, the Dutch King said he had not seen any evidence of success by the UK government in its attempts to seek a better deal from member states.
However, he said the trading partnership between the countries would remain strong, with agreements becoming more bi-lateral following Brexit.
Trade between the UK and the Netherlands is worth over €60 billion.
During the state trip, King Willem-Alexander will meet the Lord Mayor of the City of London. They will discuss Dutch-British co-operation on sustainable production.
The Dutch King and Queen will also meet Dutch citizens in the UK, who are concerned about their business prospects in the UK.
A Dutch palace official said: “They will talk with Dutch entrepreneurs, academics and creatives, volunteers from the Dutch community, and Dutch nationals who are concerned about the consequences of Brexit.”
Whilst the Netherlands have said trading remaining positive post-Brexit, earlier this year the chief executive of the Port of Rotterdam, Allard Castelein, said the trading hub was “preparing for the worst” in regards to a no-deal scenario.
Until recently, the Dutch king co-piloted commercial KLM flights twice a month, many of these flying to the UK.
Greggs sales increase over summer, shares jump
The heatwave failed to dampen our appetite for Greggs, where total sales increased by 7.3%.
Sales were not as high as the same period a year earlier, where they increased by 8.6%, however, due to the “particularly hot weather”, sales patterns were more difficult to predict.
In the year to date, total sales soared by 5.9% year-on-year. Like-for-likes increased by 2.1%.
Despite the difficult trading conditions, which has led to the closure of many retailers, Greggs expects around 100 net openings by the end of the year.
Tuesday’s trading update read:
“We were pleased with our trading performance during a period that included a long spell of hot weather, which made sales patterns more difficult to predict.”
“This, and the resulting mix of sales led to a lower-than-normal trading margin in the first part of the quarter, offset by improved trading as we came into September. Overall our expectations for the full year outturn remain unchanged.”
Shares jumped 5.1% on Tuesday morning.
Emma-Lou Montgomery, from Fidelity Personal Investing, said: “Just 10 years ago if someone had suggested bakery chain Greggs would one day win an award for the ‘Best vegan sandwich’ for its Mexican Bean Wrap at the PETA 2018 Vegan Food Awards you’d have choked on your sausage roll. But today Greggs has shown how businesses have to adapt or die.”
Paul Hickman, an analyst at Edison Investment Research, said: “Gross margin came under some pressure during the hot weather because cold drinks and products such as pasta salads are bought-in, and therefore earn lower margins, and also because there was more wastage on traditional products.”
“However, we anticipate that the strong volumes will have supported the contribution to operating profit, leaving the company on course for full-year pre-tax profit consensus of around £81 million.”
Shares in the group (LON: GRG) are currently trading +7.11% at 1.077,48 (0913GMT).
Google drops out of bidding for $10 billion cloud computing contract
Google has said it will drop out of bidding for a $10 billion cloud computing contract with the U.S. Defence Department. This is as a result of Google’s new ethical guidelines not aligning with the project. But, Google has not elaborated further on the conflict with corporate values.
The project is known as the Joint Enterprise Defence Infrastructure cloud, or JEDI. It involves transitioning a large amount of Defence Department data to a commercially operated cloud system. On 12 October companies are due to submit their bids for the contract that could last up to 10 years.
The announcement has come just months following the company’s decision not to renew an agreement with an artificial intelligence program. This was caused by protests from the company’s employees over collaborating with the military. As a result, a set of ethical principles were released to assist the company in deciding what projects to pursue in the future.
In a statement, a spokesman from Google said:
“We are not bidding on the JEDI contract because first, we couldn’t be assured that it would align with our AI principles.”
“And second, we determined that there were portions of the contract that were out of scope with our current government certifications.”
According to the Tech Workers Coalition, Google employees “have significant power, and are willing to use it”.
It is the extensive pressure from its employees that caused the decision to withdraw from the bidding competition. Moreover, a spokesman continued in a statement: “Had the JEDI contract been open to multiple vendors, we would have submitted a compelling solution for portions of it”. “Google Cloud believes that a multi-cloud approach is in the best interest of government agencies. It allows them to choose the right cloud for the right workload”. At 19:58 GMT-4 yesterday, shares in Google (NASDAQ:GOOGL) were trading at -1.02%.IMF: US/China trade war will hit global growth
The International Monetary Fund has warned that the US/China trade war will hit global growth.
In the IMF’s latest health check on the global economy, there are warnings that Donald Trump’s new policies are dragging down growth forecast, which will affect countries including the US, France, Germany and China.
“Trade policy reflects politics and politics remain unsettled in several countries, posing further risks,” said Maurice Obstfeld, the IMF chief economist.
Obstfeld went on to say that the world would become a “poorer and more dangerous place” unless world leaders worked together to increase living standards, improve education and reduce inequality.
The latest round of tariffs in the trade war between China and the US were $60 billion worth of tariffs on US goods.
Last month, US tariffs on $200 billion of Chinese imports came into effect.
The IMF said: “Escalating trade tensions and the potential shift away from a multilateral, rules-based trading system are key threats to the global outlook. Since the April 2018 forecast, protectionist rhetoric has increasingly turned into action, with the United States imposing tariffs on a variety of imports, including on $200 billion of imports from China, and trading partners undertaking or promising retaliatory and other protective measures.
“An intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade.”
In terms of the UK and Brexit, the IMF said that a “no-deal” Brexit remains a risk to the UK economy.
The IMF has said that the government needs to do more to retrain or relocate workers in those industries that are “likely to be more affected by higher trade barriers after Brexit”.
The UK economy is expected to expand by 1.4 percent this year and 1.5 percent next year.
Spending habits decrease after British summer
Two surveys have shown that the UK’s summer spending habits have dropped. After a sharp increase over the summer, it is evident that habits dwindled in September. This demonstrates that the overall economy cannot rely on British consumers to soften the economic impacts of Brexit.
It has been reported that total spending increased by an annual 0.7% in September. But, this is the slowest rise since October 2017. This is excluding the Easter decline in April.
September’s 0.7% annual spending increase is significantly lower than the 2.3% growth during the same month last year.
A wider measurement of consumer spending, conducted by Barclaycard, demonstrates an increase by the smallest amount in five months. Indeed, it rose by an annual 3.9%. Esme Harwood, a director of Barclaycard, commented: “We’ve seen spending return to a more modest level as consumers balance their budgets after a longer than usual summer of spend. Rising prices are having an impact on shoppers’ spending priorities, with more of their household budget devoted to everyday essentials such as petrol.” Moreover, almost half of all Barclaycard consumers surveyed had plans to spend less on Christmas 2018 than they did the previous year. Household consumption is responsible for roughly 60% of the UK’s economy. In fact, the Bank of England, among other forecasters, have been impressed by its strength since the Brexit referendum. However, after a British summer of World Cup success and scorching weather, UK households have reigned in their spending habits. Often around September, retail spending experiences a back-to-school sales push. But, this was not the case this year and has proved less reliable in pushing sales. The UK’s head of retail at KPMG, Paul Martin, has said: “The final golden quarter of the year marks the ultimate test for many players, but retailers must also successfully navigate the upcoming government budget, Black Friday, Christmas, and of course Brexit.” Retailers such as John Lewis and Partners are experiencing tough economic times.Aviva’s chief steps down, shares rise 2pc
In a surprise move, the Aviva chief executive has stepped down.
Mark Wilson left Britain’s biggest insurance company saying it was “time for new leadership to take the group to the next phase of its development”.
Sir Adrian Montague is the group’s non-executive chairman and will replace Wilson until a new chief executive is found. The insurance group has said it will hope to replace Wilson in the next four months.
Montague said: “The board would like to thank Mark for what he has achieved in his six years at Aviva. He leaves the group in a far stronger state than when he joined.”
“There is much further to go in accelerating our strategic development and enhancing shareholder value. We have agreed with Mark this is the right time for a new leader to ensure Aviva delivers to its full potential.”
Wilson joined the group in 2013 and the group has significantly improved, although he came under fire when he took a board seat at rival asset manager BlackRock.
Wilson replaced by Andrew Moss, who was ousted by shareholders.
Wilson said: “When I joined Aviva, the company was in poor health. It is very different today. I have achieved what I wanted to achieve and now it’s time for me to move on to new things.”
All in all, Wilson’s contribution to the insurance group was seen as a positive one. Ashik Musaddi, who is a European insurance analyst at JP Morgan Cazenove, said:
“In the past Aviva used to struggle on capital with high balance sheet risk and limited growth prospects, however now Aviva is in a much better shape.”
“In line with the share price performance of UK life peers, shares have been under pressure as well, which in our view is partly driven by Brexit-related concerns and partly related to lack of growth visibility. Aviva has market leading positions in businesses like pensions, annuities, non life business and we believe Aviva should be able to capture growth in near future.”
Shares (LON: AV) in the group rose by 2% following the news and are currently trading at 473,95 (0831GMT).