Scotland’s budget deficit drops to £13bn
Scotland’s budget deficit has dropped over the past year, falling to £13.3 billion from a revised figure of £14.5 billion the previous year.
According to the figures from the Government Expenditure and Revenue Scotland (Gers), the figure represents an 8.3 percent share of Scotland’s GDP.
The Gers figures put Scottish public sector revenue a £58 billion, 8 percent of total UK revenue. As whole, the UK has a budget deficit of £46.2 billion, or 2.4 percent of GDP.
Just £208 million of Scotland’s revenue over the year came from its oil and gas industry in the North Sea, showing the industry is continuing to recover slowly from the oil price crash. In 2012, the North Sea brought in revenues of £8 billion.
However, Scotland’s non-North Sea revenue increased by 6.1 percent, to £57.8 billion from £54.5 billion the year previously.
Are UK banks too innovative for consumer tastes?
Banks have been plunging money and time into developing innovative new products and online offerings, but are they falling short on customer service?
According to the results of the latest survey from FleishmanHillard Fishburn, the answer is yes. It seems whilst banks are good at offering new products and keeping up with changing technology, they are falling far short on customer care and basic value.
Using a specially selected sample of 1064 ‘engaged consumers’ – UK adults 18-55+ who are politically engaged, actively share news about businesses on social networks, buy shares or already engage with a brand or company – the survey found a wide fap between consumers’ expectations and their experience.
Expectations of innovation for the banking industry were almost five times lower than those of customer care, suggesting that, though banking is increasingly done online, people still have high expectations of their banks in this area. Customer care was actually the highest expectation for the industry, comprising over one-third of expectations.
But banks are not meeting these expectations. In fact, Banking has the largest gap of any industry studied; no company exceeds customer expectations. People feel that banks are paying too little attention to caring for their customers while they’re seen to be delivering far more on innovation than expected, an area for which most people had lower expectation of the industry.
As banks continue to innovate, customers move increasingly to digital platforms, and disrupting start-ups like online-only banks Monzo and Atom put pressure on the industry, this issue is only likely to get more critical. Businesses must start to think about a strategy to effectively communicate why their programmes of innovation are necessary to keep up with the competition, but which clearly explain why they’ll also lead to better experiences for customers.
Three reasons stock markets could be about to crash
Equities are overvalued
Stocks are expensive using the most rudimentary of metrics; price.
Global stocks have posted significant gains in recent years and the bull run has been characterised by a severe lack of meaningful corrections and prices have drifted to record reach record highs on numerous occasions.
Major developed world indices currently reside mere percent away from all-time highs whilst the velocity of the gains is subsiding.
Now while bull markets do not die of old age, the longer stocks remain elevated, the closer we get to the next major sell-off.
Pulling up the bonnet of stock prices reveals further cause for caution. Stock index earnings multiples are well above historical averages and in some cases valuations are approaching the most expensive on record.
Historical 12-month trailing price-to-earnings in developed market equities are approaching the highest levels on record with ratios well above 20.
The last time valuations were this stretched was in the Dotcom bubble which ended in a global stock market crash.
Robert Shiller’s Cyclically Adjusted Price-to-Earnings Ratio (CAPE) of the S&P 500 is currently at 29, the same level as 1929’s Black Tuesday.
Central Banks are tightening monetary policy
The fact the central banks are tightening policy pays testament to the strength of the global economy and the process is not a historically a direct cause of a market selloff.
However, the chances of a policy mistake leading to a market crash is much higher now than any time in recent history given the unprecedented period of low rates and huge bond purchase programs distorting equity prices.
Global stocks market have enjoyed the liquidity provided by central banks and some attribute the higher than average valuations of equities to easy monetary policy perverting traditional equity risk discounting.
As this punch bowl is withdrawn it is conceivable that markets experience multiple compression as shares correct back to longer terms averages mentioned previously.
Volatility is at record lows
2017 has experienced the lowest levels of volatility for the longest periods on record.
Depending on who you ask, low volatility in markets is result of a combination of factors including low interest rates, a robust economy, the rise of passive ETFs and even Donald Trump.
Despite the apparent calm in markets many are worried the market is being complacent and this period of low volatility is the quiet before the storm of a sharp rise in volatility.
Broad-based selling
Low interest rates have forced investors into increasingly risky assets such as stocks in search of a yield.
This of course pushes up prices but many of these investors have opted for broad-based equity vehicles like ETFs which has lowered dispersion between individual stocks and added to the sense of tranquillity.
This however could prove to be a double edged sword as when investors start to leave the market through ETFs the selling could be indiscriminate and lead to liquidity issues and magnified volatility.
Antofagasta shares jump 4pc as copper prices rise
Shares in miner Antofagasta (LON:ANTO) jumped nearly four percent in mid morning trading on Tuesday, after strong copper prices boosted interim sales and profits.
Revenue rose by 41.9 percent to $2bn for the six months June, with pre-tax profit rose hitting £689.1 million, up from £276.5 million last year.
Copper prices increased by 25.3 percent and sales volumes rose by 14.3 percent over the period, propping up the miner’s figures.
Antofagasta’s CEO Iván Arriagada said of the results: “The Company is well positioned for future growth, generating strong cash flows and improving returns against a background of a recovery in copper demand.
“The outlook for Antofagasta is positive – we have the assets, capabilities and strategy to continue to create long-term value for all of our stakeholders.”
Public sector borrowing slips into surplus for first time since 2002
Public sector net borrowing was in surplus for the first time since 2002 in July, driven by higher self-assessment tax receipts.
The figure was in surplus by £200 million last month, with VAT also helping to boost the figure.
According to the Office for National Statistics, for the year to date public sector borrowing is up by £1.9 billion to £22.8 billion. The Office for Budget Responsibility is forecasting that public sector net borrowing will increase to £58.3 billion during the financial year to March 2018.
Ruth Gregory, UK economist at Capital Economics, says that July’s public sector finance figures “will probably prove to be just a temporary blip”.
“As such, despite July’s strength the Chancellor may still find that he has little scope for any easing back on the planned fiscal squeeze in his November Budget,” she added.
S&P reaffirms South Korea’s AA/A-1+ credit rating
Ratings agency S&P has confirmed South Korea’s ‘AA/A-1+’ credit rating, saying it doesn’t believe a conflict with North Korea is on the cards in the near future.
The group said that although “geopolitical tensions have risen of late in the Korean peninsula, we believe a direct armed conflict is unlikely.”
It confirmed that it views the likelihood of the North Korean regime provoking a major armed conflict on the peninsula to be low, based on their opinion that such an event would very likely destabilise North Korea politically and “bring no benefit to the country.”
However, it did warn that the risk of an unintended military conflict has risen from a low level:
“After ratcheting up tensions with little to show for it, the regime could underestimate the risks of a more dramatic provocation in the hope of winning some concessions. On the other side, the U.S. may be less patient in responding to North Korean provocations than before, now that it views the country as being close to achieving inter-continental nuclear strike capability. In this situation, a miscalculation by either side of this standoff could spark a direct military conflict.”
S&P continued to say that it was “affirming our ‘AA’ long-term and ‘A-1+’ short-term sovereign credit ratings on Korea.”
“The stable outlook reflects our expectations that geopolitical risks in the Korean peninsula will not escalate over the next two years beyond what we observed since the last leadership transition in [North Korea] in 2011.”
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Weaker pound boosts UK holiday spending
UK residents spent 15 percent more on their visits abroad in June 2017 than the same month the previous year, as the impact of a weaker pound weighs on the cost of holidays.
However, the added expense didn’t seem to put UK residents off going abroad, with trips abroad rising by 4 percent to 7.2 million visits abroad in June 2017. UK residents spent £4.6 billion on their travels during the month, according to the Office for National Statistics.
Conversely, overseas residents made 3.5 million visits to the UK in June 2017, a 7 percent increase from June 2016. £2.2 billion was spent by overseas residents on visits to the UK in June 17, a 2 percent increase when compared with June 16.
Hikma Pharmaceuticals shares plunge as US market stalls
Shares in Hikma Pharmaceuticals (LON:HIK) fell over 10 percent in early trading on Thursday, after issuing a warning that annual revenue was likely to be at the lower end of guidance.
The FTSE 250 pharmaceutical company said annual revenue was likely to be about $100 million lower at $2 billion. It also lowered its guidance for the sales of generic products, blaming it on an “increasingly challenging environment”.
The Jordan-based company, which makes and sells branded and non-branded generic and injectable drugs, said it had also been affected by stiffer competition in the US. Its revenue estimate for the region was cut back to $620 million for the year, down from an initial estimate of $800 million in April.
Shares in Hikma are currently trading down 13.75 percent at 1,141.01 (1045GMT).
B&Q performance hit by poor weather, Kingfisher shares fall
B&Q owner Kingfisher (LON:KGF) reported a £50 million loss on Thursday, after consumers turned their back on the DIY sector in the second quarter of the year.
B&Q’s seasonal performance fell 11 percent after poor weather impacted sales, with sales at the home improvement chain down 8 percent in the second quarter.
Problems at its French business continued, with “continued weaker” performance in the country leading to a 3.8 percent sales plunge to £1.2 billion.
Véronique Laury, Chief Executive Officer, admitted that” B&Q’s performance was impacted by seasonal swings across Q1 and Q2″, adding that the group had “continued to experience some disruption across the businesses, although on an improving trend.”
“Availability of this year’s unified and unique product is now approaching normal levels. We continue to adapt new processes as our transformation progresses, which will support the significant amount of change planned for H2”, Laury said.
“Having been very aware that this year would be challenging given the step up in transformation activity, we already have self-help plans in place to support our overall Year 2 performance, though we remain cautious on the H2 outlook for the UK and France as previously guided. We remain on track to deliver our Year 2 strategic milestones, and look forward to updating you on our wider progress in more detail at our H1 results.”
Other firms in the sector also experienced a downturn during the quarter, Homebase owner Bunnings reporting a £54 million annual loss in its first full year of ownership of the DIY chain.
Shares in Kingfisher are currently trading down 5.79 percent on the news at 291.20 (1019GMT).