08/04/2016
Morning Round-Up: Bonmarche shares plunge, oil up, UK productivity down
Value retailer Bonmarche sees shares plunge
Shares in clothing retailer fell over 15 percent this morning, after its CEO Beth Butterwick confirmed that trading conditions had been “challenging” since Christmas.
Bonmarche saw like-for-like sales rise by 0.4 percent in the 13 weeks to March 25th, up just 0.7 percent on the year.
Butterwick said in a statement this morning: “The continued colder weather has been unhelpful in kick-starting real demand for spring products. Overall, consumer confidence does not appear buoyant.”
Bonmarche (LON:BON) is currently trading down 9.57 percent at 170.00 (0924GMT).
Oil up on Fed comments
Brent crude oil is up 2 percent this morning at $40.22 a barrel, perhaps helped by upbeat comments from Fed chair Janet Yellen. She confirmed that the world’s largest economy was on a solid course, and on track to justify more interest rate hikes.
Commodities shares have also risen this morning, led by the mining sector; Anglo American (LON:AAL), Glencore (LON:GLEN) and BHP Billiton (LON:BLT) were all up around 3 percent.
UK productivity falls for last quarter
British productivity fell by 1.2 percent in the last quarter, according to official figures, adding to doubts about the near-future of the UK economy.
Measured by output per hour, labour productivity saw the biggest fall since the 2008 financial crisis – and 14 percent where it should be, according to analysts.
Flybe shares fall 10 percent
Shares in regional airline Flybe have fallen over 10 percent this morning after the release of a trading update.
The company saw load factor fall 2 percent on last year to 68 percent, but passenger volumes maintained at 1.8 million. The company temporarily reduced seat capacity by 2.4 percent in response to weaker demand after the Paris attacks in November, as well as taking ownership of three of their Q400 aircraft – two strategies designed to have long term positive effects.
Saad Hammad, Chief Executive, said in a statement: “This last year has seen enormous progress at Flybe. We completed the resolution of the key legacy issues while significantly improving our service and customer offering. We are carrying more passengers across a growing route network and doing so at a lower unit cost.”
Flybe (LON:FLYB) is currently trading down 10.16 percent at 57.50 (1034GMT).
07/04/2016
Morning Round-Up: Samsung hit strong profit, M&S sales fall again, house prices rising
Samsung hit profit high for last quarter
Samsung, the world’s largest smartphone producer, is set to see operating profit soar after the success of its Galaxy S7 model.
The company is expected to announce that its operating profit has reached 6.6 trillion Korean won for the January – March period, up from 6 trillion won in the same period last year.
Competition from cheaper Chinese rivals such as Xiaomi and Huawei have put premium retailers such as Samsung and Apple under pressure of late, but these figures are a sign that Samsung are fighting back.
Marks and Spencer see further decline for clothing arm
Marks & Spencer have released their first trading statement with their new CEO Steve Rowe at the helm, showing that he has his work cut out to turn the struggling retailer around.
Clothing sales fell again in the fourth quarter, adding to the past five years of almost constant falling figures. Sales were down 1.9 percent for clothing and home – however, saw an increase of 8.2 percent from products bought online.
Rowe commented: “Turning around our Clothing and Home business by improving our customer offer is our number one priority.”
“Although the sales decline in Clothing and Home was lower than last quarter, our performance remains unsatisfactory and there is still more we need to do.”
Sales from its food division remained strong, growing market share to 4.3 percent and continuing to outperform the market.
House prices rising fast, says Halifax
British house prices rose at their fastest pace for seven months in March, according to mortgage lender Halifax.
Price growth on an annual basis has been hauled back into double figures for the first time since mid-2014, with house prices rising 2.6 percent in March after a 1.5 percent drop in February.
07/04/2016
Are peer-to-peer lending returns worth the risk?
Today’s start of the 2016/17 tax year sees the Government’s introduction of the Innovative Finance ISA, a new tax wrapper which sits alongside the traditional Cash ISA and Stocks & Shares ISA and which will allow individuals lending money through the Peer-to-Peer (P2P) sector to receive loan interest tax free.
[youtube http://www.youtube.com/watch?v=pYVu4TG7TWQ&w=560&h=315]
Source: www.innovativefinanceisa.org.uk
The P2P lending sector has matched thousands of individual borrowers with individual lenders over the past decade and, in recent years, the sector has enjoyed unprecedented growth in uptake – over £5 billion in P2P loans have originated in the UK so far. Many individual lenders have enjoyed a level of return not seen since the days of the 6 percent Cash ISA – by now a distant memory for many cash-rich, yield-poor investors. Meanwhile, borrowers continue to sing the praises of the various P2P platforms, whose streamlined loan application processes make applying for a loan quick and stress free. Yet the key questions are these: will the introduction of the new Innovative Finance ISA shift Peer-to-Peer lending away from being an interesting, but largely obscure, form of ‘alternative’ investment, and into the mainstream? And, more pressingly for potential lenders, are the returns worth the risk?
First things first – the Financial Conduct Authority (FCA) has made it clear that prospective lenders must be made aware that Peer-to-Peer lending has very different risk characteristics to straightforward deposit-style saving, such as bank or Cash ISA saving.
One of the major differences in risk that any would-be Peer-to-Peer lender must consider is that of loan liquidity, and its impact on how readily cash can be accessed. Whilst it is the case that, as with many bank savings accounts, the platforms generally offer a choice between short and long term options, having ‘instant access’ to funds deployed through a P2P platform is almost entirely reliant on there being an established secondary market – within the platform itself – in which willing sellers can be matched with willing buyers. Further, assuming a willing seller and a willing buyer can be successfully ‘paired’ within the platform, the process of reaching a satisfactory buy/sell price means that – in reality – ‘instant access’ could very well mean having to sell the loan on at a discount to its original face value.
Another important difference that would-be lenders must consider is that – unlike most Cash ISA and other savings products – the Innovative Finance ISA (and Peer-to-Peer lending itself) are not covered by the Financial Services Compensation Scheme (FSCS).
The FSCS is the UK’s statebacked statutory compensation scheme for the banking sector, protecting savers who use FCA-authorised bank and building society savings accounts by as much as £75,000 in the event of that bank or building society collapsing. In the event of a Peer-to-Peer loan (or loans) becoming unpaid for any reason, the individual lenders would have no basis on which to seek compensation from the FSCS.
As a result and in an effort to provide assurance to both current and would-be lenders, a number of platforms have introduced their own internal ‘reserve’ funds, which have been designed to protect lenders in the event of either individual borrower default or – in some cases – total platform failure. A platform might for example contribute a portion of its fee and margin income to an internal reserve fund, the idea being that – where a borrower defaults on their loan repayment obligation – the platform then has the ability to make an internal claim against the fund for any remaining principal and interest due.
It is very important that lenders understand however that these reserve funds are not statutory. Where they are in place, they are operated on a purely discretional basis – meaning that there are very likely no guarantees that any individual claim would be approved, or even that sufficient cash will have been reserved to make good any shortfall that the lender may be experiencing. There is additionally an ongoing risk to the lender that any given platform may, at any time, choose to change its reserve fund policy – this may sound unlikely, but it could happen for all manner of reasons.
Borrower credit risk also represents a key consideration and one that many ISA savers may not have previously had reason to consider. Whether the platform operates an individual (manual) loan bidding process or whether it uses automated bidding to pool lenders’ capital across a range of riskbanded loans, each underlying loan carries its own risk profile and if Peer-to-Peer lending platforms are to provide consistently strong returns over the long term they must ensure that they deploy adequate credit underwriting processes,as Lord Turner’s comments highlighted back in February:
“You cannot lend money to small and mediumsized enterprises (SMEs) without someone doing good credit underwriting. This idea that you can automate that on to a platform, it has a role to play, but it will end up producing big losses.”
Successful credit risk underwriting for SME loan applications is far from straightforward, and relies very heavily on the successful deployment of comprehensive legal and financial due diligence processes, which are expensive and which require specialist skills and experience.
Once this risk underwriting process has been completed and the loan application approved, most platforms then grade applicant borrowers according to their own internal risk benchmarks or ‘bandings’. Unfortunately, it can be very difficult, if not impossible, to compare credit risk bandings across multiple platforms on a truly likeforlike basis. What makes comparing credit risk across multiple platforms particularly difficult for lenders is that, in effect, Platform A’s risk bandings do not necessarily correlate to those of Platform B. Or do they? It is very difficult to say.
All things considered however, the sector has for the most part delivered returns which have been broadly in line with both the platforms’ and lenders’ expectations – though not without exception. Prospective lenders and those considering opening an Innovative Finance ISA should bear in mind that the UK has not yet seen a full economic cycle of boom-and-bust during the relatively short timeframe in which the Peer-to-Peer lending sector has operated at its current levels. Ultimately, time will tell how this form of investing performs during a period of economic difficulty but – as with any form of investing – it is important to understand that regardless of the prevailing economic climate, past returns are no guarantee of future performance.
For more information, visit www.innovativefinanceisa.org.uk
Crowd2Fund launches new Innovative Finance ISA for tax-free crowdfunding investment
Crowd2Fund, one of the UK’s most progressive crowdfunding sites, have today announced the launch of the UK’s first Innovative Finance ISA, enabling investors to take advantage of higher interest rates and maximise tax-free capital returns.
At 8.42%* APR, Crowd2Fund’s IF ISA offers one of the highest interest rates since ISAs were introduced in 2011, thus putting more money in investors’ pockets. Crowd2Fund’s ISA offers the potential to earn far higher returns than other ISA products on the market by allowing consumers to lend directly to handpicked growing businesses seeking loans, cutting out the banks and sending money direct from lender to borrower.
Crowd2Fund’s peer-to-peer model makes it easier for investors to manage risk and build a more balanced portfolio, all the while gaining access to higher, more competitive interest rates.Investors can activate their IF ISA simply and directly via the Crowd2Fund platform; this can be invested as part of their £15,240 tax-free ISA allowance, with interest earned not eligible to be taxed. With the higher returns achievable through crowdfunding investments, £15,240 invested in a Crowd2Fund IF ISA would earn approximately £1,283.21 per year, tax free.
The IF ISA not only gives investors access to higher returns but also the ability to support the UK economy by investing in credit worthy, growing British businesses; Crowd2Fund works hard to find the country’s fastest growing and most innovative businesses for platform investors. To help improve the experience of investing and make the process even easier for investors, they can access their capital at any stage via Crowd2Fund’s unique Exchange, which facilitates the reselling of loans to other investors – meaning funds invested are not necessarily frozen for long periods.
Chris Hancock, Crowd2Fund’s CEO, added:
“The introduction of the IF ISA is a huge step forward for savers and investors. The UK is the only market globally who has implemented a specific government savings scheme for innovation. London is clearly leading the global upgrade of financial services and alternative methods of finance, like peer-to-peer lending, are helping to bring the sector – and the UK economy more broadly – up to date with the needs of people today.”
Crowd2Fund’s Innovative Finance ISA also enables investors to access the benefits of receiving exclusive perks. Crowd2Fund has worked tirelessly to make the application process as simple as possible for investors wishing to invest in this new and rewarding way. To make their new IF ISA as simple, user friendly and easily accessible as possible, Crowd2Fund is launching an iOS app. This will allow investors to manage and grow their IF ISA portfolios easily whilst on the go, simply from the touch of their mobile screen. The native application offers savers and investors a frictionless and pain-free way to create their IF ISA, whilst offering a new and unique experience.
For more information, visit crowd2fund.com.
*8.42%APR is an estimated return before fees and bad debts and actual return may be higher or lower depending on market demand.
Morning Round-Up: Germany industrial output stronger, Pfizer-Allergen merger breakdown, Euro shares up
Germany industry output better than expected
German industrial output fell just 0.5 percent in February, well above the 1.8 percent drop expected by analysts, proving a welcome boost for the German economy.
The German Economy Ministry said in a statement:
“Overall, the industrial sector got off to a relatively good start in 2016 although seasonal factors led to shifts in production and the construction sector benefited from the mild winter.”
The manufacturing and construction sectors are expected to post solid gains in the first quarter, the ministry added.
Pfizer-Allergen merger stopped by Obama
The major merger between US drug company Pfizer and Irish-based Allergen will no longer be going ahead, after a drive by President Obama to prevent tax-dodging corporate mergers.
The $160 billion merger would have seen Pfizer redomicile to Ireland, where Allergan is registered, to cut down its tax obligation in the US. Obama has called on congress to prevent deals such as these happening, and the breakdown of the merger will be a great victory for his campaign.
Obama said, “while the Treasury Department’s actions will make it more difficult… to exploit this particular corporate inversions loophole, only Congress can close it for good.”
According to Reuters, Pfizer and Allergan will announce the termination of their deal later today.
European stocks up on stronger oil
European markets rose in early trading on Wednesday after a bad session on Tuesday, wth energy firms pushing higher on stronger oil prices.
The STOXX Europe Oil and Gas index is the day’s biggest riser so far, with shares in Royal Dutch Shell rising 1 percent.
The FTSE is currently up 0.49 percent, with the CAC40 up 0.53 percent and the DAX up 0.15 percent (0909GMT).
WIT and Brent Crude are up 0.53 percent and 0.48 percent respectively.
06/04/2016
Markit PMI points to weaker economic growth for UK
The UK’s Purchasing Manager’s Index for services edged up slightly in March, after hitting its lowest figure in three years in February.
According to the latest figures released by financial data company Markit, March’s PMI recovered slightly from a weak start to 2016, rising to 53.7. February’s figure was a weaker 52.7, showing a slight increase in positivity for the services sector, which makes up around 40 percent of Britain’s economy.
However, a slowdown in the global economy and the upcoming EU referendum have led Markit to point towards a fall in economic growth for the first three months of 2016. Growth fell to 0.4 percent up to March, down from 0.6 percent in the last three months of 2015.
Markit’s chief economist, Chris Williamson, commented:
“Business confidence remains in the doldrums as concerns about the global economy continue to be exacerbated by … issues such as Brexit and the prospect of further government spending cuts announced in the Budget.”
05/04/2016
Strong quarter for British supermarkets as early Easter boosts sales
2016’s early Easter gave a much-needed boost to British supermarkets, according to the latest grocery share figures from Kantar Worldpanel.
The three months to 27th March showed the fastest growth the sector has seen all year, with supermarket sales growing by 1.1 percent compared with the same period last year. British customers bought early in preparation for Easter Sunday, with very traditional shopping habits; over half of the population bought hot cross buns, and 15 percent buying a leg of lamb. Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, continues: “An early Easter gave the market a sales boost of £152 million compared to last year, adding 0.6% to the overall growth rate. Britain’s love of all things sweet was in evidence, with 63% of households buying at least one chocolate egg during March, spending an average of £12 over the month.”
Sainsbury’s was one again leading the figures, showing that the end of its multi-buy promotions has had little effect on sales; it led the Big Four with a sales increase of 1.2 percent. The Co-operative also had a strong quarter, reaping the benefits of opening its stores on Easter Sunday, as well as Aldi and Lidl, who saw their premium ranges grow exponentially.
Tesco also had a better quarter, with their decline in sales slowing for the fourth month in a row, suggesting that it might be getting back on top of the market. Chief Executive Dave Lewis, who joined in September 2014, has been trying to revive Tesco with a focus on lower prices, improvements to product availability and customer service.
According to Kantar Worldpanel data, shoppers have continued to benefit from falling grocery prices, with like-for-like prices 1.5 percent lower than this time last year.
05/03/2016
Morning Round-Up: India drops rates, oil and Asia down, Lagarde warns on economy
India revises repo rate down as expected
India’s central bank has cut its key interest rate for the first time this year, moving it downwards by 0.25 basis points to 6.5 percent.
The move came after the first bi-monthly monetary policy review for the 2016-17 fiscal, which began on April 1st, in which Royal Bank of India’s governor Raghuram Rajan said that “a reduction in the policy rate by 0.25 percent will help strengthen growth.”
He also added that, “retail inflation measured by the consumer price index (CPI) dropped sharply in February after rising for six consecutive months.”
Interest rates in the country are now at their lowest for five years. The RBI also retained its GDP growth forecast at 7.6 per cent. Oil lower, bringing down Asia US Crude fell 3 percent in trading on Monday, after hopes of an output curb at a meeting in Qatar later this month begin to fade. Japan’s Nikkei 225 closed down 2.4 percent, marking the sixth negative session in a row, with South Korea’s Kospi also down 0.8 percent. Oil prices also forced down US stocks yesterday. Supply has outstripped demand for months, causing oil prices to plummet 70 percent to record lows. A meeting between OPEC and non-OPEC producers on April 17th had hoped to reach an output agreement, but investors are seeming to be losing hope of a productive outcome. Lagard warns of loss of growth in advanced economies International Monetary Fund director Christine Lagarde has urged governments to prepare for increasing threats to the global economy in a speech at Goethe University in Frankfurt. Lagarde said, “the good news is that the recovery continues. We have growth. We are not in a crisis. The not-so-good news is that the recovery remains too slow, too fragile, and risks to its durability are increasing.” “We are on alert, not alarm. There has been a loss of growth momentum. However, if policymakers can confront the challenges and act together, the positive effects on global confidence, and the global economy, will be substantial.” Lagarde also called for governments to take their own actions to encourage economic growth, rather than relying on central banks to keep interest rates low and print electronic money. Several factors have caused a weak start to the economic year, including a slowdown in China and the continuing rock bottom oil prices. UK Chancellor George Osborne has also given similar warnings, citing January’s turbulence in the markets to encourage investors not to be complacent.05/04/2016
National Living Wage: what you need to know
The new National Living Wage comes into force today – but what does it mean for workers and employers?
What is it?
The National Living Wage is the new mandatory national minimum wage set at £7.20 per hour for everyone 25 and over – 50p higher than the previous minimum wage of £6.70, which will still apply for those aged between 21 and 25.
However, it still differs from the voluntary living wage, which stands at £8.25 – or £9.40 an hour within London. Employers can choose to pay this higher level to their employees, but are not required to.
What are the benefits?
According to research by The Resolution Foundation thinktank, 4.5 million employees will benefit in 2016, rising to 6 million in 2020. It is thought that the positive impact will be most keenly felt in the hospitality and retail industries, which traditionally rely on cheap labour.
And the downsides?
The new Living Wage excludes those under 25, meaning that anyone between the ages of 21 and 25 will potentially be worse off than their peers in the same job. According to government Minister, Matthew Hancock MP, this was an active choice:
“This was an active policy choice… Anybody who has employed people knows that younger people, especially in their first jobs, are not as productive, on average. Now there are some who are very productive under the age of 25 but you have to set policy for the average. It was an active choice not to cover the under 25s.”
There is also the likelihood of a decrease in employment in the long run. The Office for Budget Responsibility has estimated that by 2020 there will be 60,000 fewer jobs as a result of the National Living Wage, due to businesses being unable to pay the higher rate to their staff and being forced to cut jobs as a result.
01/04/2016