Week in review: Kicking the can down the road
The value of the UK currency is a good gauge of the mood of the nation, and the pound slumped to an 18-month low against the US dollar on Monday evening. Prime Minister Theresa May’s spirits might well have been in a similar place.
Having negotiated a withdrawal agreement outlining how the UK would leave the European Union, Mrs May’s ‘meaningful vote’ on the document was scheduled for Tuesday. But with critics of the agreement from all sides of the house lining up to denounce the agreement, it became apparent Mrs May would lose. Her solution? Scrap the vote, and kick the Brexit can further down the road.
On Wednesday, the walls began closing in, with Conservative parliamentarians triggering a vote of no confidence. In the event, the prime minister survived the motion. But any improvement to the withdrawal agreement could be a forlorn hope in the face of repeated EU assertions that this is the only deal on offer. In its present form, however, it stands little chance of receiving a Parliamentary rubber stamp. The Business of the House for the coming week does not include a vote on the Brexit deal. Given that the Christmas recess begins next Thursday, that means no vote will take place until January. The saga rumbles on…
In spite of the uncertainties surrounding Brexit, the UK equity market was relatively resilient. In the week to Thursday’s close, the FTSE 100 was 1.47% ahead. US markets have been buffeted by trade tensions with China. While Chinese importers resumed buying US soybeans, Trump administration officials warned that Beijing will have to take further action to resolve the trade war. Over the week, the S&P 500 was 0.66% ahead. The European Central Bank finally called a halt to its €2.6 trillion bond buying programme. The announcement was accompanied by gloomy remarks on Eurozone growth prospects from ECB president Mario Draghi, who said: “The balance of risks is moving to the downside.” The FTSE Europe (ex UK) was 1.24% higher at Thursday’s close.
Unhappy new year
Outsourcers have been under pressure - and no small measure of scrutiny - since the collapse earlier this year of Carillion, which cost the UK government around £150 million. Profits and share prices in the sector have tumbled in recent months. Interserve is the latest outsourcer to face difficulties. The heavily indebted company – which derives three-quarters of its £3.2 billion turnover from government contracts – confirmed that it was in rescue talks for the second time this year. That was bad news for shareholders, with 70% wiped off the share price as the news broke. But it could get worse. The company aims to arrange a debt-for-equity swap that would mean a “material dilution for current Interserve shareholders”. How much of a dilution remains to be seen; final details will be released early next year.
Engines of growth
Rolls-Royce, the FTSE-100 listed multinational, said its annual profits would be at the high end of expectations, topping £450 million. It wasn’t all good news, though. The world’s second-largest maker of aircraft engines, said the number of aircraft grounded for repairs to its Trent 1000 engine remained high, and remedial measures will cost more than £1 billion, as well as adversely affecting relations with airline customers. Rolls-Royce also said it was continuing to stockpile parts in the event of a no-deal Brexit. Investors were able to shrug off any bad news, focusing instead on the positive financial guidance, and share rose 4.8% to 819p on Wednesday.
Amid the global economic and political turmoil, it’s good to see that politicians in the US state of Oklahoma are taking the bull by the horns and getting their teeth into meatier matters. A state senator is offering a rare opportunity to decide on a new state symbol. Casey Murdock has introduced a bill to name the rib eye as the official State Steak. He pointed out that the state had 5.2 million head of cattle, and called for Oklahoma’s positive accomplishments to be recognised. “We get beat up on different issues; we’re last in education, we’re last in this and that, and we need to promote what is good in this state.” A job well done, we’d say.
If the bill passes, it will be the latest in a long line of offbeat US state symbols. These include the Official State Exercise of Maryland (Walking); the Official State Muffin of Minnesota (Blueberry); The Official State Question of New Mexico (Red or Green?) and the Official State Fish of Hawaii (Humuhumunukuapua’a).
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