Britain has finally left the European Union – well, sort of. We are now in a transition period until the end of the year, as Brussels and London hammer out a trade agreement. Despite big news events such as Donald Trump’s impeachment trial and the unveiling of a US plan for peace in the Middle East, the market was more concerned about the spread of a novel coronavirus, which the World Health Organisation finally decided was a global health emergency on Friday.
The US reporting season continued apace, with an impressive set of figures from Amazon and a poor response to Facebook’s outlook statement. A fall in the shares of the social-media giant wiped $5bn from chief executive Mark Zuckerberg’s stake in the group in just one day.
The FTSE 100 fell 4.8% over the week by mid-session on Friday, hit by coronavirus concerns and a rally in the pound after the Bank of England held interest rates steady. The FTSE 250 lost 1.7%.
Britain’s membership of the European Union ended at 11pm on 31 January. There now follows a transition period until the end of 2020 during which London and Brussels will aim to strike a trade deal.
EU chief negotiator Michel Barnier warned that the UK still faced a potential Brexit "cliff edge" if trade talks did not result in a deal, but pledged to work “night and day” to get a deal with the UK.
Irish Prime Minister Leo Varadkar said he thought that the EU will have the upper hand in the upcoming trade negotiations. "We have a population and a market of 450 million people, the UK it's about 60, so if these were two teams up against each other playing football, who do you think has the stronger team?" Mr Varadkar said.
US Agriculture Secretary Sonny Perdue lashed out at Environment and Food Secretary Theresa Villiers for her defence of Britain’s ban on “chlorinated” chicken. Ms Villiers had said: “We will defend our national interests and our values, including our high standards of animal welfare.” US Secretary of State Mike Pompeo said US chicken must be included in a post-Brexit trade deal.
Donald Trump will put the interests of corporate America first and demand that the NHS pays higher prices for US drugs in a free-trade deal with the UK, the outgoing British ambassador to Washington said in an interview.
US Secretary of State Mike Pompeo urged the UK to reconsider allowing Huawei to have a role in its 5G system. Earlier in the week, the UK government decided to let Huawei continue to be used in its 5G networks but with restrictions. The Chinese company will be banned from supplying components to "sensitive parts" of the network, known as the core. Additionally, it will only be allowed to account for 35% of the kit in a network's periphery, which includes radio masts. And it will be excluded from areas near military bases and nuclear sites. But this is not enough for the US and has led to some transatlantic tensions. However, Mr Pompeo played down the issue, noting that the "special relationship" remained in good health and that he wanted to prioritise a post-Brexit trade deal with Britain.
Huawei denied a report that alleged the German government had evidence that the company had cooperated with Chinese intelligence. “Huawei Technologies has never, and will never, do anything to compromise the security of networks and data of its customers,” the Chinese company said in response to the report in the Handelsblatt business daily.
Members of the Bank of England's Monetary Policy Committee (MPC) voted 7-2 to keep the interest rate on hold at 0.75%. Governor Mark Carney voted with the majority in his last meeting as head of the Bank of England. He will be succeeded by Andrew Bailey, currently head of the Financial Conduct Authority. MPC members Jonathan Haskel and Michael Saunders had voted for a quarter point cut. The central bank forecast UK growth of just 0.8% in 2020, down from 1.3% in 2019 but rising to around 1.5% in 2021. The news caused a rally in sterling that hit blue chips, which are big earners of foreign currency.
The US economy grew 2.1% in the fourth quarter, bringing full-year growth in the world’s largest economy to 2.3% – its lowest in three years.
Orders for long-lasting or durable US goods surged 2.4% in December, but the boost was down to military spending. The orders for goods excluding defence figure fell 2.5%. New orders for non-defence capital goods excluding aircraft – which is usually taken as a proxy for business investment – fell 0.9% from 0.1% growth in November.
Business confidence in Germany unexpectedly worsened this month, after the economy narrowly avoided slipping into recession last year. The closely watched business climate index from the Ifo Institute fell to 95.9 in January from 96.1 in December. Business confidence in the service sector slumped while the struggling manufacturing sector showed signs of recovery.
France’s strike-ridden economy unexpectedly shrank for the first time in Emmanuel Macron’s presidency in the fourth quarter of last year. GDP fell 0.1% amid a decline in exports.
The jobless rate in the Eurozone fell to 7.4% in December from 7.5% the month before. Unemployment in the bloc is now at its lowest rate since May 2008 and only 0.1 percentage point above its lowest-ever reading.
Donald Trump may be acquitted in his Senate impeachment trial on Friday. Key Republican swing votes that could have allowed witnesses to be called appeared to be falling away in overnight proceedings. Democrats have decried the situation as paving the way for a “lawless presidency” unable to be reined in by checks and balances. The Democrats have pushed for the president’s former national security adviser John Bolton to testify with what could be a damaging account of Trump’s “quid pro quo” strategy with Ukraine.
Donald Trump unveiled his peace plan for the Middle East, promised to keep Jerusalem as Israel's undivided capital. Both Israel and the Palestinians hold competing claims to the holy city. The Palestinians insist that East Jerusalem, which Israel occupied in the 1967 Middle East war, be the capital of their future state. Palestinian President Mahmoud Abbas dismissed the plans as a conspiracy. "I say to Trump and Netanyahu: Jerusalem is not for sale; all our rights are not for sale and are not for bargain. And your deal, the conspiracy, will not pass," Mr Abbas said. The plan was drafted under the stewardship of President Trump's son-in-law Jared Kushner.
The new coronavirus has been declared a global emergency by the World Health Organisation (WHO), as the outbreak continues to spread outside China. "The main reason for this declaration is not what is happening in China but what is happening in other countries," said WHO chief Tedros Adhanom Ghebreyesus. The WHO said there had been 98 cases in 18 other countries, but no deaths. The WHO said restrictions on commerce were not necessary and that it had confidence in China’s ability to control the outbreak. However, that was undermined by the US and Japanese governments telling Americans not to travel to China.
Infection from a coronavirus has spread to almost 10,000 people globally, surpassing the total seen in the 2002-2003 SARS epidemic. The official figure for deaths from the virus on Friday morning stood at 213.
The offshore renminbi, which trades in major hubs outside mainland China, weakened, falling below 7 to the US dollar, as concern about the virus’s spread mounted.
Copper prices plunged by almost 10% in ten days – its worst losing streak in six years – on concerns about the economic consequences of the outbreak, but the price has since bounced back.
Global stock markets could fall by as much as 10% if the situation around the virus worsens further, Société Générale market strategists said on Wednesday.
A number of airlines suspended flights to and from mainland China as the outbreak of coronavirus disrupts travel across the region. These included IAG-owned British Airways and United Airways, with Cathay Pacific and Hong Kong Airlines amongst those saying they will reduce the number of flights. White House officials told US airlines the Trump administration had considered suspending China flights amid an escalating death toll from the new coronavirus, but it has not decided to take that step. Other travel companies such as Tui and cruise operator Carnival fell, as did hotels operator InterContinental Hotels Group.
According to Royal Bank of Canada, Swatch, Richemont and Burberry are the shares most exposed to the impact of the virus in the luxury goods sector, while the least exposed are EssilorLuxottica, Puma, Pandora and Hugo Boss.
Shares in conference and event organiser Informa also fell, as did oil companies such as Royal Dutch Shell and BP on the demand outlook should the situation get worse.
Starbucks temporarily closed all its shores in Hubei province and suspended delivery services, amid health concerns for customers and employees. Toyota said that it would keep its plants in China closed until at least 9 February in reaction to the spread of the virus.
Thailand’s stock market fell on the prospect of economic turbulence after China banned outbound group tours.
BT Group warned the government’s decision to cap Huawei’s involvement in the UK’s 5G network will cost the telecoms giant £500m over the next five years. The bulk of BT’s costs will come from replacing Huawei 4G boxes from its 5G network to meet the 35% government cap.
Engineering group Senior, which supplies parts for Boeing's grounded 737 Max, said full-year aerospace revenue would be about 20% lower this year as production of the troubled aircraft remains halted.
Shares in car dealer Pendragon moved lower after it warned that 2019 profits were set to come in around the bottom end of City expectations. The group said its franchised UK motor division was hit the hardest by the "challenging consumer environment".
Increased regulatory burdens and listing requirements are hitting private companies’ appetite to list in the UK. Last year marked the London Stock Exchange’s quietest year since 2009, with just 36 companies listing on the exchange, while the number on the alternative AIM exchange slumped to a 15-year low. In a survey of companies by Peel Hunt and the Quoted Company Alliance. Some 60% of companies surveyed said burdensome listing requirements were helping to shrink capital markets in the UK, while 57% of fund managers blamed the availability of cheap capital from private equity and venture capital for the decline.
Broker Investec said it intended to float its asset management business, now called Ninety One. The move will be put to a shareholder vote in February.
Property and infrastructure company that targets alternative assets such as schools and care homes revealed plans for a £200m London listing. Cabot Square Alternatives said that it intended to float on the main market of the London Stock Exchange. Owned by London-based private equity group Cabot Square Capital, the group is looking to build a portfolio with a focus on environmental, social and corporate governance (ESG), ranging from solar panel farms in Spain to affordable housing in the UK.
US mattress group Casper Sleep said it expects its IPO valuation to be well below the $1.1bn valuation it got in a private funding round in March 2019. Casper said it expects its offering of 9.6 million shares to be priced between $17 and $19 a share. At the top end of this range, this would mean the IPO raises $182.4m, giving the company a valuation of $768m.
Beam Therapeutics set terms for its planned initial public offering on Monday, saying in a regulatory filing that it plans to offer 6.25 million shares priced at $15 to $17 each. The developer of gene-editing technology would raise $106.25m at the top of that range when it lists in New York.
Apple credited a surge in demand for its iPhone 11 for record sales and profits over the Christmas period. Apple boss Tim Cook also said it was "closely monitoring" the coronavirus outbreak, which has made forecasting for the next quarter difficult. The company has limited travel and reduced store hours in China, while its suppliers' factories remain closed longer than expected. "The situation is emerging and we're still gathering data," Mr Cook said. Apple is now valued higher than the combined market cap of the Germany’s 30 largest companies Dax index.
Amazon sales soared over the Christmas season, rising 21% year-on-year, in sharp contrast to weakness reported by other retailers. The e-commerce titan posted $87bn in sales in the last three months of 2019, well ahead of analysts’ expectations. The news sent its valuation above $1 trillion once more.
Facebook recorded its first annual fall in profits in at least five years, as its efforts to respond to privacy and content concerns took a toll on the company’s bottom line. The tech giant, which owns Instagram and WhatsApp, said profits sank 16% in 2019 to $18.4bn. The fall came despite the continued health of its advertising business, which saw revenue rise 27% last year. The one-day tumble in Facebook shares after the figures wiped $5bn from chief executive Mark Zuckerberg’s stake in the group.
Microsoft beat quarterly revenue and profit estimates, buoyed by strength in its cloud computing platform. The news sent its shares to a record high.
Semiconductor company AMD dropped after the company reported strong fourth-quarter earnings but offered weak first-quarter revenue guidance.
Boeing reported its first annual loss since 1997 as the cost of the 737 Max crisis continued to climb. The company reported a net loss of $636m last year, compared to a $10.5bn profit it made in 2018. Its core commercial aircraft operation lost $6.7bn in 2019, almost entirely because of Boeing's continued problems with the 737 Max.
United Technologies Corp beat Wall Street expectations in the fourth quarter but warned that 2020 operating profit at its aircraft parts maker's Collins Aerospace, its biggest unit, will be hurt due to the grounding of Boeing’s 737 Max aircraft.
McDonalds store revamps are paying off. Globally, sales at stores open at least a year jumped 5.9% in the fourth quarter, the biggest increase in more than a decade.
Starbucks fourth-quarter figures were slightly ahead of Wall Street estimates. However, the coffee chain also warned that the coronavirus outbreak in China would have a negative impact on its full-year results.
Shares in electric carmaker Tesla surged after it reported fourth-quarter earnings beat – and actually eked out a small profit.
Brent crude futures fell 2.8% to trade at about $59 a barrel over the week by mid-session on Friday amid fears that China’s coronavirus will erode fuel demand just as markets struggle with a fragile world economy and adequate supplies.
Royal Dutch Shell saw its final quarter income halve as the continued slump in global oil prices knocked the company’s full-year profits. Management launched the next tranche of its $25bn share buyback programme, having already bought back almost $15bn so far.
Mid-cap Petra Diamonds said sales for the first half of its financial year fell 6% to $193.9m due, in part, to lower diamond prices. But Petra said the drop was partially offset by the sale of a 20.08-carat blue diamond found at its Cullinan mine in South Africa for $14.9m.
However, there was a bright spot in the gemstone industry, De Beers the diamond mining arm of Anglo American, recorded its highest sales of the gems since April last year in signs that the global market is beginning to recover from a tumultuous 2019. De Beers sold $545m in rough diamonds in its first cycle of 2020, its third consecutive cycle of growth. This represented a 10% year-on-year increase.
Almost 10,000 retail jobs have been lost in the first three weeks of 2020, following a string of store closures and restructurings. The research by the Centre for Retail Research and Altus Group showed that 9,940 jobs have been cut following store closures at high street chains. Recently, the British Retail Consortium released figures that showed that the UK retail sector shed 57,000 jobs in the fourth quarter of last year, following what has been described as the “worst year on record” for the sector.
Shares in Swedish fashion retailer H&M jumped more than 9% in Stockholm after the group posted its first annual profit rise since 2015 and announced a management reshuffle.
Restaurant Brands International’s Tim Hortons chain removed all Beyond Meat products from its coffee and donut shops in the Canadian provinces of Ontario and British Columbia. This comes after the coffee and breakfast chain cut Beyond Meat’s burgers and sandwiches from its menu in September from all of Canada except the two provinces. A spokesman said that “the product was not embraced by our guests as we thought it would be”. Shares in the producer of the meat-free meat product are up almost 60% in the year to date.
Is trouble brewing at Unilever? Fewer people are enjoying a nice cuppa – which has led PG Tips owner Unilever to launch a strategic review of its tea business, which also includes the Liptons brand. The consumer-goods giant missed its underlying sales target in 2019, with the company citing “challenging” developed markets.
Diageo said annual sales growth would be at the low end of its guidance as the drinks company reported a 2% increase in interim underlying operating profit.
Luxury goods group LVMH, which own a number of brands including Christian Dior, Louis Vuitton, and Hennessy, saw good growth in full-year sales and profits, despite a fall in Hong Kong revenue following the pro-democracy protests. Profit rose 15% to €11.5bn on sales also up 15% at €53.6bn.
Comcast-owned Sky is said to be close to signing a deal with The Walt Disney Co to bring the US giant’s new streaming service to its pay-tv platform. The two companies are finalising a multi-year tie-up that could shut out rivals Virgin Media and BT Group, reports suggested.
The Saudi Telecom Co agreed to buy a 55% stake in the Egyptian holdings of telecoms behemoth Vodafone. The kingdom's largely state-owned communication group offered $2.39bn in cash for the stake, as part of its continued efforts to carve out more market share in the Middle East.
Health and safety producer maker Halma said it had made two acquisitions in the US and Australia for a combined £83.4m.
Airlines & transport
Shares in engine maker Rolls Royce fell after the European regulator issued a de-pairing order on its Trent 100 engines following further operational issues. De-pairing refers to using two different engines on an aircraft so the plane is not powered by identical turbines. Trent 1000s, which are fitted to Boeing 787s, have already been the subject of several regulatory interventions, particularly as a result of problems with blade durability. However, it is now looking at surge occurrences which appear to be a separate issue.
Boeing completed a successful maiden voyage of its 777-X jet over the weekend, a respite for the aircraft maker amid the ongoing grounding of its 737 Max jet.
Airbus said it had agreed a settlement with UK, US and French authorities over investigations into allegations of bribery and corruption. Reports suggested Airbus could be forced to pay out up to £2.5bn in fines. The company allegedly failed to notify authorities about the use of consultants in aircraft deals it was asking the UK government to cover with financing guarantees.
Wizz Air raised its full-year guidance after the Eastern-European focused carrier revealed that it had swung to a net profit from a net loss in the final three months of 2019. Revenues in the quarter were up by 25%.
The Indian government said it will sell its entire stake in its national carrier, Air India, in an attempt to make it a more exciting proposition for potential buyers. A document, inviting expressions of interest, was released on Monday. It says that any bidder would have to take on around $3.2bn of debt along with other liabilities. The announcement came more than a year after a bid to sell a controlling stake in the airline did not attract any buyers.
Struggling luxury carmaker Aston Martin Lagonda announced plans to raise emergency funding worth £500m. A consortium led by billionaire Lawrence Stroll will put in £182m, with the rest coming from issuing fresh shares to existing investors. Mr Stroll partly owns the Racing Point Formula 1 team, which will be branded Aston Martin under the agreement.
British banks approved the most mortgages in four years in December, data from banking body UK Finance has shown. However, mortgage lending in the UK fell in 2019 overall as Britain’s housing market struggled under the weight of Brexit uncertainty.
Annual house price growth jumped to a 14-month high in January, according to building society Nationwide. Across the UK, property prices were 1.9% higher than a year earlier, marking the strongest annual growth since November 2018.
Goldman Sachs held its first-ever investor day in which it unveiled higher financial targets. You can see the full 263-page presentation here, which contains slides entitled “Leveraging Adjacencies to Expand Our Addressable Market” and “Global Markets Opportunities Arising from Secular Change”.
Deutsche Bank posted a full-year net loss of €5.3bn, amid a huge transformation project. Shares in Germany’s largest lender climbed on signs of progress in its restructuring plan.
Amigo founder James Benamor put the British subprime lender up for sale, as he wants to find a new owner for his 60.6% stake. Amigo lends to people with poor credit ratings provided they have someone who can guarantee the loan and step in for them if they can't keep up repayments. The business is being challenged by a regulatory crackdown after the UK's Financial Conduct Authority issued warnings last year on the guarantor-lending industry, saying guarantors do not always understand the risk they are taking on.
Swiss pharma Novartis reported strong sales of new drugs, including gene therapy Zolgensma, which was interpreted as a sign the company’s focus on cutting-edge medicines is starting to pay off. Revenues rose 8% year-on-year in the final three months of 2019.
Sakes at Swiss peer Roche missed fourth-quarter estimates slightly, but annual sales still rose 9%.
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