Chinese growth hits 6.9pc in Q2
The Chinese economy grew at a rate of 6.9 percent in the second quarter, according to the latest government data released on Monday.
This was a faster pace than expected and above the government’s growth target. The figure was the same as the first quarter of 2017, and 0.1 percent above analysts’ projections.
The official data showed strong performance across all sectors; property investment also rose by 8.5 percent in the first half, an improvement on the same period in 2016.
Industrial output for June grew by 7.6 percent, well above the forecast of 6.5 percent, and retail spending rose by 11 percent compared to June the previous year. The figures are encouraging for the Chinese government, who are currently dealing with debt levels of 277 per cent of GDP.
Royal Mail shares fall as company offers new pension plan
Royal Mail (LON:RMG) became the biggest faller on the FTSE 100 on Friday, with shares dropping more than 2 percent after the company offered workers a new pension plan.
The offer came after significant union opposition to Royal Mail’s decision to close their defined benefit pension scheme, which pays out based on workers’ final salary and length of service.
The company have struggled financially with the weight of this type of pension plan, and are now offering workers a choice between a defined-benefit and a defined-contribution scheme.
“Royal Mail is one of few companies offering to replace one defined-benefit scheme with another,” the company pointed out.
“Royal Mail believes that the risk to the company of the proposed defined benefit cash balance scheme would be materially lower than under the current plan and is a manageable risk,” it said.
Royal Mail have said the new plan is likely to cost about £400 million annually, a significant cost-saving on the £1 billion it would cost to keep the original final salary pension scheme running.
Royal Mail shares are currently trading down 2.26 percent at 401.70 (1334GMT).
JP Morgan and Citigroup kick of US banks’ earning season
The US banks’ earnings season kicked off on Friday, with JP Morgan reporting a 13 percent rise in profits in the second quarter.
Profits at the US’s biggest bank rose to $7 billion over the last three months, ahead of analysts expectations. Higher interest rates and loan growth offset a drop in trading revenue, with net income rising 13.4 percent to $7.03 billion over the period.
Chief Executive Jamie Dimon said in a statement that the bank “continued to post very solid results against a stable-to improving global economic backdrop.”
“The U.S. consumer remains healthy, as evidenced in our strong underlying performance in consumer and community banking,” he concluded.
Citigroup income falls despite higher revenues
Citigroup also reported its second quarter earnings on Friday, with the bank raking in a net income of $3.9 billion on revenues of $17.9 billion. Profits fell 3.2 percent on the back of a Brexit-related decline in trading revenue, with net income falling net income falling from $4.00 billion the previous year to $3.87 billion. Earnings per share rose to $1.28, above analysts expectations.FCA proposing rule changes to attract Aramco listing
The City’s watchdog came under fire on Thursday for its controversial plans to change stock market listing rules, in order to allow Saudi oil firm Aramco to list on the London exchange.
The Financial Conduct Authority (FCA) is proposing to change current listing rules, adding a new category that would relax the requirement for ‘premium’ companies, including the Saudi state-owned Aramco, to list on the London Stock Exchange.
Global markets are fighting over who will win the listing of Saudi Arabia’s oil firm Aramco, which is thought to be the world’s biggest flotation with a value of $2 trillion. Aramco are aiming to float a 5 percent stake on the market, a far smaller portion than the 25 percent normally requested by London listing rules.
However, critics have called the idea of bending the rules “inappropriate”. Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, told CityAM:
“It looks like the FCA is consulting on amending the existing listing rules to accommodate the peculiarities of one company, which is not a very effective strategy for regulating the market as a whole. If the proposals in this consultation document are implemented, it will be bad news for London and will reverse the progress we have made in recent years to uphold strong governance and protect minority shareholders.”
Delta Air Lines shares fall as salary increases impact profits
Shares in American airline Delta (NYSE:DAL) fell on Thursday, after announcing a 20 percent fall in profits for the 2017 financial year.
The group made a profit of $1.22 billion over the past 12 months, a fall of just over 20 percent from last year’s figure of $1.55 billion.
This came despite a 2.5 percent increase in passenger unit revenue, and a 0.4 percent larger capacity in the second quarter of 2017. The airline had to contend with a rise in operating expenses during the final quarter, as higher salaries and fuel costs dug into profits.
“The June quarter represented the peak for non-fuel cost pressures this year and we expect our CASM (cost per available seat mile) trajectory to moderate to approximately 2 percent for the September quarter,” Delta Chief Financial Officer Paul Jacobson said in a statement.
Delta Air Lines is the second largest US airline by passenger traffic, and have consistently stayed clear of competing as a budget airline. Instead, it has marketed itself “a carrier of choice”, with better service, seating, in-flight entertainment and loyalty programmes.
Shares in Delta sunk on Thursday, and are currently trading down 1.10 percent at 54.86 (1515GMT).
Oil prices sag after Aramco chief warns on lack of investment
Oil prices fell on Monday after Aramco chief Amin Nasser warned that low investment in the industry could lead to a supply shortage.
The oil industry has lacked investment of late as money is poured into the development of alternative energy sources. However, Nasser said it was ‘premature’ to assume that shale oil and alternative energy resources can be developed quickly to replace oil and gas”
“New discoveries are also on a major downward trend. The volume of conventional oil discovered around the world over the past four years has more than halved compared with the previous four,” Nasser said.
WTI Crude is currently down 0.88 percent at $43.84, with Brent Crude down 0.77 percent at $46.35 (1046GMT).
Chinese markets up as inflation data remains steady
Inflation in China remained steady in June, in line with analysts expectations and sending Asian markets up at the start of the week.
The producer price index (PPI) rose 5.5 percent in June year-on-year, according to the National Bureau of Statistics (NBS), unchanged on May’s figure.
Consumer prices rose 1.5 percent, in line with expectations, giving investors confidence that the country will meet its 6.5 percent growth rate for 2017.
However Capital Economics analyst Julian Evans-Pritchard told the BBC that the positive figures may not last:
“With slowing credit growth likely to weigh on economic activity in coming quarters we think that, volatility in food prices aside, inflation still has further to fall.
“This will disappoint those hoping for a sustained period of reflation that could help to erode corporate debt burdens.”
US non-farm payroll figure beats expectations at 220,000
The US non-farm payroll figure came in at 220,000 for the month of June, far higher than analysts were expecting.
The figures, published by the Bureau of Labor Statistics, showed the unemployment rate remained around the same at 4.4 percent. Average hourly earnings (over the year) were up 2.5%.
The statement also revised the figures to April and May upwards, with the US economy creating 207,000 new jobs during April, rather than the 174,000 originally reported. In May, companies created 152,000 new roles, higher than the initial reading of 138,000.
Kully Samra, UK managing director at Charles Schwab, told the BBC that the US employment figures have “surpassed expectations”:
He says: “With only one more rate hike expected this year, investors should turn their attention to the Fed, which will soon attempt to shrink its behemoth $4.5 trillion balance sheet. Success would be if the Fed can gracefully divert the excess liquidity it’s created from financial assets to the real economy.”
UK economic data disappoints, sends sterling down
A spate of disappointing economic data was released by the Office for National Statistics on Thursday, causing the value of sterling to sink.
Output in both the manufacturing and construction sectors fell in May, with manufacturing falling by 1.1 percent in the 3 months to May, the largest 3-month on 3-month fall since July 2015 and below market expectations.
Total real construction output also fell by 1.2 percent on both a monthly and 3-month on 3-month basis in May. The figure is now 2.9 percent below January’s recent peak and marks the second monthly decline in total real construction output.
The total trade deficit widened by £2.0 billion to £8.9 billion in the 3 months to May, driven by large increase in imports in March and then a further increase in May.
Commenting on today’s short-term indicator figures, ONS senior statistician Kate Davies said:
“Activity in the production sector was broadly unchanged in May, though the underlying position is weaker with both total output and manufacturing falling in the three months to May compared with the previous three months. Construction output also fell on a three-monthly basis, though this is after several years of growth.
“Meanwhile the total trade deficit widened by £2 billion in the most recent three months, primarily due to high imports especially from outside the European Union.”
However, reacting to the latest economic figures, Peter Dixon, an economist at Commerzbank, said: “It’s all building up a pattern here that says the economy is clearly losing momentum.
“It’s not pointing to a particularly dynamic second quarter. Under those circumstances, the timing of the hawks on the Monetary Policy Committee pushing for a rate hike doesn’t look great.”
Sterling is currently trading down 0.69 percent against the dollar and down 0.47 percent against the Euro.
Crowd2Fund’s Innovative Finance ISA Exchange booms
Crowd2Fund’s Exchange, a secondary market for trading crowdfunded investments, was first launched 18 months ago. It is benefiting from a significant increase in activity in line with the platform’s exponential growth this year.
The Exchange is attracting increasing investment to the platform due to the ease with which investors can sell their investments to others. Additionally, investors are able to diversify and manage their risk through trading existing loans, either selling their own or buying loans at prices based on market demand. The Exchange’s activity is an unmoderated, free market approach, with no intervention from Crowd2Fund.
In the quarter ending on the 31st of May 2017, the total value of all investments transacted through the Exchange increased by 452% from the previous quarter. The Crowd2Fund investor community now trades hundreds of thousands of pounds worth of investments weekly. Until now, crowdfunding had been an illiquid market where investors had been unable to access their cash; the Exchange has changed that.
Crowd2Fund’s primary market is currently trading at an estimated 9.3% APR, with the secondary market trading at an average of 6.5% APR before fees and bad debt. All returns are tax free if they are held within the Innovative Finance ISA.
How does The Exchange work?
The Exchange allows crowdfunded investments to be resold to other investors. The sale price of the investment listed is defined by the seller; this can be impacted by how quickly the seller wants to sell their investment and market demand at the time of sale. Buyers can easily browse opportunities listed on the Exchange, review the loans’ historic performance and make purchases. Buyers should be aware that the risk of investments defaulting is still a possibility and that the APR offered may not be representative of the level of risk of the opportunity they are buying. As such, we strongly suggest investors still look at each opportunity and do their usual due diligence.Investors can make profits and losses when trading
Many in the Crowd2Fund investor community are generating returns by selling investments to others at a premium. This is made possible due to the demand of opportunities currently exceeding the availability of campaigns fundraising on the main market.
Here is an example of how the Exchange pricing works:
Let’s say an investor lent £1000 to a business, which could potentially be worth £1200 once it matures, and would like access to their capital early: they can trade this investment on the Exchange. If market demand is high, they can sell it at a lower price than the full value of the loan, or a higher price, should market demand be low.
So if the investor sells the loan on the Exchange for £1,080, they would make £80 from the sale and the buyer would still make £120 after the loan matures. The price difference is shown as original APR and offered APR. If market demand is weak, then these investments can also be sold at a loss, should investors need to access their capital quickly.
Alongside diversification, another reason an investor may pay a premium on an investment is that the Exchange may give them some assurance of the credit worthiness of businesses. This is because items listed on the Exchange show their historic performance on repayments.