City

Caution over major purchases as uncertainty dents UK economy

Consumer appetite for major purchases fell at the second-fastest rate in almost two years during August, as Brexit uncertainty and fears of an economic slowdown held back spending.

IHS Markit’s monthly household finance index dipped to a three-month low after reporting the second-sharpest drop in demand for major purchases since September 2017.

Read more: Retailers ramp up challenges to business rates

The headline index from the survey – which measures households’ overall perceptions of financial wellbeing – recorded 43.7 in August, falling from July’s 44.3 and “signalling a stronger degree of pessimism towards current finances by UK households”, the report said.

Having been in positive territory during June and July, UK households signalled a negative outlook towards their financial health for the year ahead in August.

Pessimism towards job security remained, with UK households posting the strongest degree of negativity since March.

Income from employment continued to rise. However, the expansion slowed to a modest pace which was the weakest in five months.

“Latest survey data continued to highlight a fragile state among UK households towards their financial wellbeing,” according to Joe Hayes, an economist at IHS Markit.

Read more: Asian markets buoyant despite rising trade tensions

Hayes said: “The Brexit haze, uncertainty over the political environment and the increased possibility of the UK entering recession appear to have dented expectations, which dipped into negative territory following positive readings in both June and July.”

He added: “A sharp decline in appetite for major purchases was also signalled, while pessimism towards job security also intensified during August, explaining why UK households have withdrawn into a more risk-averse approach and subsequently tapered their expectations for the coming year.”

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Categories: City, London

What do “lower for longer” interest rates mean for value investors?

“Lower for longer” has been one of the rallying cries of this bull market cycle. Indeed, interest rates are not simply staying low; they have recently been cut again by the US Federal Reserve.

Why do low rates matter? If interest rates remain low, economic growth is stimulated, defaults are scarce, financing is easy and risk-taking is encouraged.

Signs of this can be seen today in many areas, from rising leverage in private equity buyouts, to rising overall debt levels and the growing popularity of so-called “covenant-lite” loans (i.e. loans issued with fewer restrictions on a borrower and fewer protections for the lender than is usual).

The chart below shows that the share of private equity deals with debt multiples of greater than seven times profits has risen to almost 40% of the total. Leveraged buyers expect the profits from their acquisition to be greater than the interest paid on the debt used to fund it. Clearly, when interest rates are low it is easier to afford debt repayments, but if rates were to rise then highly leveraged buyers could find they need higher profits to afford the repayments.

“Lower for longer” is even being overtaken by “lower forever”. Today, bond investors are prepared to give Austria money for the next 100 years for a nominal yield of 1%.

What very low interest rates have done is elongate this cycle. They have enabled businesses to stay afloat when they should have exited an industry. They have allowed start-ups to obtain funding at rates that enable the company to be economic, when higher rates would have revealed the business model to be unsustainable. So low rates have slowed the impact of the feedback mechanism of capitalism, but they have not negated the economic cycle entirely.

Read more:
– What is value investing?
– Value investing will survive Fortnite – and other tech disruptors
– A lesson in the realities of ESG – from reality TV

GET A WEEKLY ROUND UP OF THE BEST VALUE PERSPECTIVE POSTS

Unless you believe that the economic cycle no longer exists, that we are in a post-capitalist society and that the financial gravity of mean reversion has somehow been altered, value investing will remain a feature of the investing landscape.

Do rates need to rise for value to recover?

Value’s recovery is not based on interest rates rising or falling. The experience of value’s outperformance in Japan during a long period of low interest rates highlights this, as the chart below shows.

If not rates, then what else? We don’t claim to be able to predict when value might recover, or what might be the cause. But we can offer some possible scenarios.

Today, corporate earnings are not actually falling, but if forecasts for future earnings are falling then that might be the catalyst for the market to start focusing on corporate debt levels. At that point, those over-leveraged companies will quickly look like very risky investments. Of course, highly leveraged companies with the highest earnings-per-share (EPS) growth forecasts have the furthest to fall.

Nine years into a bull market, equity investors have to be aware of where valuations are in comparison to their historic average. Within this, the dislocation between value and growth is at an extreme. Just as stocks priced for perfection eventually disappoint, stocks trading at a discount to the fundamental value of their underlying businesses are unlikely to maintain that discount forever.

Nick Kirrage is an author on The Value Perspective, a blog about value investing. It is a long-term investing approach which focuses on exploiting swings in stock market sentiment, targeting companies which are valued at less than their true worth and waiting for a correction.

Important Information: The views and opinions contained herein are of those named in the article and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The sectors and securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. This communication is marketing material.

This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. The opinions in this document include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. Issued by Schroder Investment Management Limited, 1 London Wall Place, London, EC2Y 5AU. Registration No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.

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Categories: City, London

Eurozone inflation falls to well below ECB target in July

Prices in the Eurozone rose by just one per cent in July, official figures showed today, which is far below the European Central Bank’s (ECB) inflation target and lower than an initial estimate.

The weak inflation rate will boost the chances that the ECB will inject more stimulus into the economy when it meets next month by either cutting interest rates or relaunching its bond-buying programme, known as quantitative easing (QE).

The one per cent annual rate of inflation for July was down from 1.3 per cent in June, and comes despite the ECB’s record-low interest rates and years of QE that have aimed to boost prices to around two per cent.

Inflation was just 0.3 per cent in Italy, which narrowly avoided recession in the second quarter, and fell by 0.7 per cent in Portugal.

In Germany, Europe’s biggest economy, inflation fell to 1.1 per cent in July from 1.5 per cent in June.

The highest contribution to inflation in the euro area in July came from services, a sign that household spending is propping up the zone’s economy while its manufacturing sector struggles.

“The report paints a picture of falling demand in the region, and that is likely to increase chatter for a stimulus package from the European Central Bank,” said David Madden, market analyst at CMC Markets.

(Image credit: Getty)

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Categories: City, London

Wales show resilience to bounce back and beat England in physical affair

For those who say World Cup warm-up matches should not count as Tests, this was anything but a friendly. 

More than 73,000 came to watch Wales beat England 13-6 on Saturday in a hugely physical battle at the Principality Stadium that saw tempers flare and the hosts become the world’s No1 side.

Warren Gatland warned his Welsh players that if they started this Test in the same vein as last weekend’s defeat at Twickenham, their position in the team would be in jeopardy. 

Read more: Ruaridh McConnochie’s selection shows Eddie Jones’s methodology with England

As they kept England scoreless in the first half for the first time since the 2011 World Cup, his words had clearly been heeded. 

There was a typically hostile reception for Eddie Jones’s men as they arrived in the dragons’ den, and this time England were not able to score early on as Wales matched their opponents’ physicality and intensity from the off. 

It took Wales 26 minutes to put points on the board themselves when Dan Biggar opted for the posts after failing to capitalise on some try-scoring opportunities. 

Wales celebrate after holding out a final England push

With half-time approaching and the match in the balance, Anthony Watson, who was brought in just hours before kick-off to replace the injured Ruaridh McConnochie, was sent to the sin-bin for preventing a scoring opportunity with a knock-on.

From the resulting penalty, Biggar kicked it out wide before Watson had even left the field, catching England unaware, before sending it the opposite way to George North for what turned out to be the game’s only try.

George Ford, England captain for the day, would convert two penalties early in the second half to bring the visitors back into the match at 10-6, but Wales, led by Alun Wyn Jones, defended resolutely to keep the visitors at bay.

Tensions were high in both camps following England’s 33-19 win a week before and there were a number of melees throughout the match as emotions boiled over.

George Ford captained England and converted both penalties during a testing match

Away from those antics, up in the stands, the game will have given both head coaches plenty to think about, with Jones proclaiming that each warm-up game would serve a different purpose. 

As he was forced to bring on key personnel like Owen Farrell, Manu Tuilagi, George Kruis and Jamie George, it was a sign Saturday’s game plan had not gone as hoped, with Wales matching, or besting, England at every scrum and breakdown.

Read more: Jones is being decisive with England World Cup squad but intensity could backfire

For Gatland the match demonstrated Wales’s quality in depth, with man of the match Biggar filling in seamlessly for injured Gareth Anscombe, but there will be concerns at the number of injuries occurring. 

Liam Williams was replaced during the warm-up with a hamstring issue, James Davis was removed following a head injury, and Jake Ball and Biggar hobbled off late on, with Anscombe and Taulupe Faletau already ruled out of the World Cup.

The result leaves England and Wales one apiece from these matches, and a third and decisive encounter could occur in Japan, with the teams set to meet in either the quarter-final or final.

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Categories: City, London

Markets rise after Germany hints at stimulus

European stock markets have risen sharply after opening and bond yields have fallen as investors react to the news that Germany could inject some stimulus into its stalling economy.

Germany’s Dax was the biggest riser, climbing 1.2 per cent in early trading. Meanwhile the FTSE 100 rose one per cent, France’s CAC 40 climbed 0.9 per cent and the pan-European Euronext 100 was one per cent higher.

Germany is strong enough to tackle any future economic crisis “with full force,” the country’s finance minister, Olaf Scholz, said yesterday.

The German economy, the biggest in Europe, shrank by 0.1 per cent in the second quarter, official figures showed last week.

Global Investors were buoyed on Friday by the news that China, whose economy is also slowing, is planning to inject some stimulus into its economy. Its state planning office said it would act to increase disposable income.

More to follow.

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Categories: City, London

London office vacancies drop to lowest level since 2007

A supply starved market and weakened investment has led to vacancy rates in London offices falling to their lowest level since 2007, a new report has found. 

The amount of available office space in London has fallen 19 per cent over the past year, with vacancies in the City dropping 27 per cent, according to research by Knight Frank. 

The current vacancy rate of 5.6 per cent is the lowest level since the autumn of 2007, with a “dearth of supply” driving up rents as occupiers compete over fewer properties. 

Average prime rents in the West End – the capital’s most expensive area – rose 7 per cent to £107 per square foot, while rents in the City climbed 3.6 per cent in the City to £72.50.  

Takeup of office space for the second quarter of 2019 was five per cent lower than the same period in 2019, but still increased ten per cent on the first quarter, as ongoing political uncertainty failed to deter occupiers. Faisal Durrani, a Knight Frank researcher, told City A.M. the occupier market had held up “remarkably well”. 

“The message that we’re getting is that occupiers are keen to crack on with life, almost irrespective of the outcome of Brexit,” he said. 

The picture is very different on the investment side, Darrani said, with activity “thin on the ground” with the exception of a few large deals as investors wait for “a conclusion” to ongoing Brexit uncertainty. 

One of these large deals, Citibank’s purchase of its new Canary Wharf building, helped make the US London’s top overseas investor – accounting for £1.1bn of the £1.9bn the country invested in the second quarter.

A high proportion of the 5.4 million square feet under construction and due to be completed in the City over the next year is already spoken for – 42 per cent. The proportion in the West End was slightly higher, at 45 per cent. 

Durrani said the current supply shortage is a “direct result” of developers “pressing the pause button on developments in the run up to the referendum three years ago”, and that there’s no indication the supply shortage will ease up any time soon. “We need to see more development,” he said.

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Categories: City, London

European funds back to modest inflows amid tough conditions

The European fund industry has weathered volatile conditions to enjoy estimated net inflows for the first half of 2019, after seeing estimated net outflows for the first time since 2011 last year.

Mutual funds in Europe saw estimated net inflows of €41.3bn (£38.1bn) for the first half of the year, according to Refinitiv’s review of the industry. 

Total assets under management have increased from €9.9 trillion to €11.4 trillion, driven by the performance of underlying markets, which added €1.5 trillion. Net sales were less successful however, contributing outflows of €41.3bn.

Exchange traded funds (ETFs) have continued to grow more popular in Europe, with net sales of €36.1bn during the first half of the year and assets under management growing from  €633.1bn at the end of last year to €746.8bn. 

Detlef Glow, head of EMEA research at Lipper and author of the report, said that ETFs appeal to investors because of their “transparency and liquidity”. 

“In a market environment with increased volatility, you really want to know what you’re invested in,” he added. 

Continuing a trend that has been seen across the investment sector, bonds received a boost. Bond funds were by far the best selling asset type during the first half, with €130.7bn of inflows. 

Glow said it was unsurprising that bond funds were performing well. “At the end of the day, they are a kind of safe haven,” he told City A.M.

Mixed-asset funds were the second best-selling asset type, but came in quite far behind bond funds with €16bn of sales. Real estate funds came in third with €4bn of sales, followed by commodity funds with €0.6bn. 

Equity funds performed less well during the first half of 2019, experiencing the highest net outflows of any asset type at €53.7bn.  

Current geopolitical volatility makes it harder to predict how European funds will fare during the rest of 2019, Glow said, adding: “As long as we don’t head into a major market crisis, I think that 2019 will be a good year for the fund industry.”

Main image credit: Getty

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Categories: City, London

Mitie sells food unit to the Queen’s caterers

Outsourcer Mitie will sell its catering and hospitality business for up to £85m to the Queen’s caterers, CH&CO it said today.

The decision comes as the company tries to turn around in an environment where outsourcers are finding it increasingly difficult to operate.

After a review of the business, Mitie decided that its catering wing would be “better served by being part of a larger specialist catering group, rather than being self-delivered by Mitie,” it said in a statement today.

Chief executive Phil Bentley said the company is investing in areas such as security, clearing and engineering services where it thinks it leads the market.

“By teaming up with CH&CO at this time, we believe this ensures the best choice and competitive pricing for our clients, whilst releasing funds for reinvestment and strengthening our balance sheet,” he said.

Staff and senior management will stay on with the business as is transfers to CH&CO, which has a contract to cater the Queen.

The two firms will form a partnership so that Mitie can still offer catering services but now delivered by CH&CO, it said.

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Categories: City, London

Food for thought: Restaurant closures mount

Chinese, Indian and Italian cuisine might be the staple of many Saturday night takeaways, but new evidence suggests that the beloved British favourites are bearing the brunt of a slowdown in the casual dining sector.

Read more: Revealed: These 10 London restaurants have the best mobile reception

An average of 18 restaurants have shut per week in the 12 months to June, with smaller independent Asian and Italian outlets recording the most net closures out of any in the sector.

Yet while the supply of licensed restaurant premises dropped 3.4 per cent over the year, according to today’s findings from CGA and AlixPartners, there are bright spots in the dining sector – including a boom in vegetarian outlets and more demand for Middle Eastern, Turkish and Caribbean foods.

Troubles in the restaurant sector have claimed a number of high profile groups in recent months, such as Jamie’s Italian, the group belonging to TV chef Jamie Oliver which collapsed into administration in May.

Higher costs, a slowdown in consumer spending and fierce competition has weighed on physical retailers in the dining sector, many of which have struggled to stay open amid rising costs and weaker sales.

“These are turbulent times for the restaurant, pub and bar sectors. As our new research shows, conditions are especially tough for independents, leased pubs and Italian restaurant operators,” said Karl Chessell, business unit director for food and retail at CGA.

Read more: A food chain to get your teeth into

He added: “But while licensed sites are clearly in overall decline, things may not be quite as bleak as recent media commentary has suggested….The emergence of dynamic young restaurant brands, the soaring popularity of certain cuisines and the revival of managed pubs in many parts of the country all provide grounds for optimism, and operators that can respond nimbly to shifting consumer tastes have a lot to look forward to.”

Across the licensed sector as a whole, Britain’s number of premises dropped 2.4 per cent in the 12 months to June to just under 117,000, with the rate of closures of pubs and bars lower than the market average at two per cent.

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Categories: City, London

Sales tick up as pre-Brexit buying spree gives boost to housing market

City of London News Stream by Cityam - 12 hours 10 min ago

Househunters hoping to lock in a deal ahead of the government’s Brexit deadline have driven a surprise buying spree this summer, giving life to the property market’s quietest season of the year.

Agreed house sales in August rose 6.1 per cent from the same month in 2018, rising to the highest level at this time of the year since 2015.

Read more: Hong Kong protests continue as property developers urge calm

Improved affordability and the opportunity of securing a deal ahead of Britain’s departure from the EU led to the higher-than-usual summer appetite, according to the report released today by Rightmove.

The price of property coming to the market edged down one per cent month-on-month to £305,500, but in London values fell 0.1 per cent to £617,941, marking the smallest monthly decrease at this time of year since 2006 in a sign of an improving market.

All regions across the UK reported a year-on-year rise in sales, with activity particularly busy in Yorkshire & the Humber, the north east and the east of England.

“For some reason more buyers have cottoned on to the fact that it can be a good time of year to buy, with less competition from other buyers, and sellers typically more willing to accept a lower price,” said Miles Shipside, Rightmove director and housing market analyst.”

Read more: Property investment plummets in first half as Brext uncertainty bites

He added: “Whilst another approaching Brexit deadline is now nothing new for prospective buyers, this one may seem more definite, and therefore one to beat, with the government regarding this one as ‘do or die’.”

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Categories: City, London

Dividends break record but uncertainty fuels slowdown

City of London News Stream by Cityam - 12 hours 11 min ago

Global dividends rose to a new record in the last three months, but investors held back their celebrations as growth cooled in the wake of rising global economic uncertainty.

Shareholders were paid out $513.8bn (£422.8bn) in the second quarter of 2019, hitting an all-time high but rising at the slowest pace for more than two years.

Read more: Softbank suffers writedown

Tech and consumer basics stocks lagged over the three-month period, while financial and energy stocks enjoyed the fastest increases of any sector.

Growth in dividends rose 4.6 per cent on an underlying basis, which strips out special dividends, currency effects, and timing effects.

Emerging markets witnessed the fastest growth, propelled higher by Russia and Colombia, while Japan registered the best performance among the developed regions.

However, the rest of Asia Pacific, along with many parts of Europe, underperformed the global average, according to the research released today by active asset manager Janus Henderson.

“Over the last 40 years, dividend growth has averaged out at about six per cent per annum, so 4.6 is a bit slower than we’ve seen in the last few years,” said Andy Jones, director of global equity at Janus Henderson.

He added: “As economic conditions are more uncertain and GDP expectations have come down, this is what you’d expect to see but companies are still paying out.”

Read more: Danske Bank thinks US Fed will slash rates

There were record dividends in Japan, which rose 6.8 per cent on an underlying basis, reflecteing rising profitability and expanding payout ratios. Japanese dividend growth has been outperforming the rest of the world for four years, reversing a long period of relative stagnation.

US dividends rose at their slowest pace in two years, climbing 5.3 per cent on an underlying basis to $121.7bn. The pace of dividend growth in the US slowed across a range of sectors with most seeing single-digit increases.

More than four fifths of companies raised their payouts, however, keeping the US near the top of the international rankings. The banking sector continued to show strong dividend growth, but auto manufacturers all held their payouts flat, reflecting growing global structural challenges for the sector.

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Categories: City, London

City Moves for 19 August – Who’s switching jobs at 11:FS, Severfield and Sedgwick?

City of London News Stream by Cityam - 12 hours 23 min ago

Today’s City Moves includes 11:FS, Severfield and Sedgwick.

11:FS

11:FS, the challenger firm that builds digitally-native financial services through technology, product and design expertise, has announced that Michael Curds has joined the firm as head of talent. He brings a wealth of experience in scaling digtally-native business, having most recently led the talent team at BCG Digital Ventures. Michael was employee number two at the firm and helped to establish a highly successful business, building and leading a function that attracted and hired the industry’s top talent. Prior to BCG, he held a number of talent leadership roles, including at digital media company Perform, audio start-up Music Qubed and Apple, where he ran recruiting for its Europe, Middle East and Asia operations.

Severfield

Louise Hardy has been appointed non-executive director at structural steel group Severfield, effective 4 September. Louise is currently a non-executive dire­ct­or at Polypipe Group, Crest Nicholson and Sirius Minerals. She is also a non-executive director at Ebbsfleet Development Corporation, set up by the gov­er­nment to deliver a new Garden City in north Kent. As an executive director, Louise was the European project excellence director at Aecom, responsible for project management across a portfolio of 10,000 projects. Between 2006 and 2013, Louise was a director at Laing O’Rourke, the largest privately-owned construction company in the UK, where she worked as the delivery partner to the Olympic Delivery Authority for the Lon­don 2012 Olympics. Prior to this Louise was at Bechtel as a project director and manager and worked for Lon­don Underground on the Jubilee Line Exten­sion Project. Louise is a Fellow of the Institution of Civil Eng­in­eers, the Chartered Management Institute and the Women’s Engineering Society. She is the win­ner of the 2019 European Women in Construction and Engin­eering, Lifetime Achievement in Construction award.

Sedgwick

Global provider of technology-enabled risk, benefits and integrated business solutions Sedgwick has appointed Patrick Peters as its head of business dev­elopment for Africa and the Middle East. Patrick brings a wealth of international experience and a high level of expertise specific to Africa and the Middle East markets working with large insurance companies. Most recently, he was managing accounts across many territories ,including Egypt and South Africa as the head of international partnerships. He led the facilitat­ion of business placement in states such as the Ivory Coast, Kenya and Morocco. He has also been an oper­at­ions manager for the Foreign and Common­wealth Office in Algeria, Lebanon, Liberia, Syria and Zimbabwe.

Main image credit: Getty

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Categories: City, London

Australia still lead but Archer has redressed the balance of the Ashes

City of London News Stream by Cityam - Sun, 08/18/2019 - 21:39

They may not have levelled the series, but England’s performance at Lord’s has gone a long way to redressing the balance of the Ashes. 

Ultimately they were undone by the weather, which denied them the time to wrap up a win at the end of another enthralling Test. Considering the nature of their previous failings, rain is a nice problem to have.

It was a dramatic final day, with Ben Stokes hitting an unbeaten 115 to allow England to declare on 258-5 and give their bowlers 48 overs in which to try and dismiss Australia.

Read more: Why England can’t rely on the Dukes ball to swing them to Ashes win

Jofra Archer and Jack Leach both claimed three wickets, but the visitors held firm to prompt handshakes with the score on 154-6 and leave Australia with a 1-0 lead after two Tests. If England are to reclaim the Ashes they will have to win at least two of the final three games.

It looks like a big ask. And yet after the events of the last five days there is now hope. There were some wobbles, particularly at 71-4 in the second innings, but importantly it feels like the positives now outweigh the negatives.

England’s middle order scored important runs at Lord’s (Getty Images)

Stokes’s hundred was vital in the context of the game, but also more broadly in the series. England’s middle order, which has the potential to be a powerhouse, has been crumbling too often.

With Stokes top-scoring in style, Jonny Bairstow making 82 across both innings and Jos Buttler showing signs of his form returning in a patient 31, there are reasons for England fans to be cheerful.

However, as good as Stokes’s contribution was, it was the performance of one man who has tipped the scales in England’s favour. 

At home already

Over the long history of Test cricket other players may have had better debuts in pure statistical terms – runs scored or wickets taken – but not many will have managed a more memorable one. 

Having lit up the World Cup with 20 wickets and a nerve-shredding Super Over, Archer was already a national hero. After his Test debut he’s now ascended to new levels of adulation.

To say he was impressive doesn’t begin to cover it. Most cricket insiders were convinced Archer had what it takes to make the step up to Test level. They were right. 

He looks at home already, ambling in and seaming the ball both ways on a testing length, or winging down vicious 95mph bouncers which have world-class batsmen worried and spectators on the edge of their seats.

Archer hit Smith’s concussion replacement, Marnus Labuschagne, with a quick bouncer (Getty Images)

With no Archer in the side for the first Test at Edgbaston, Steve Smith looked practically infallible. It turns out everybody is fallible when facing someone with the natural ability and searing speed of Archer. 

Smith is hopeful he can recover from the concussion he sustained from a nasty blow on the neck, but even if he gets past safety protocols, the incident is sure to have had a psychological impact as well as a physical one.

Smith or no Smith, one thing is certain: if Archer is still fit and firing by Thursday – the 24-year-old joked on Twitter that he’d struggle to get out of bed tomorrow morning – then England have their X-factor bowler who provides a genuine point of difference.

With the third Test at Headingley, on a wicket which analytics platform CricViz rates as the fastest pitch in England since 2005, Australia’s batsmen can expect to deal with plenty more balls whizzing past their heads.

Main image credit: Getty Images

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Categories: City, London

Chelsea need to show patience while Lampard irons out his team's kinks

City of London News Stream by Cityam - Sun, 08/18/2019 - 20:10

It was always going to take time for the Frank Lampard era to get going and, on this evidence, all parties will need to show the patience promised to the new Chelsea manager.

Much like in their first two games of the season, Chelsea showed promise, offered excitement and displayed evidence of taking on board their coach’s ideas. But again there was little control, no crowning glory and, crucially, no victory.

Chelsea were much the better side in the first half at Stamford Bridge against Leicester and deservedly took the lead through Mason Mount’s first goal for the club. But the away side flew out of the blocks after the break, got James Maddison onto the ball, cut the Blues to ribbons and equalised with Wilfried Ndidi’s unmarked header from a corner to draw 1-1.

Read more: Clear and obvious misplaced rage over new rules

There was no sign of a late rally – it was Leicester who fashioned much the better chances on the counter-attack to leave Chelsea hanging on – and Lampard was ultimately left grateful for a point at the end of his first home game in charge.

Mount was exceptional in the first half for Chelsea (Getty Images)

It’s been a tough start to the season for Lampard, who has faced daunting trips to Old Trafford and Istanbul before hosting Brendan Rodgers’ Foxes and the coming matches against newly-promoted Norwich and Sheffield United will be welcomed with open arms.

The disappointment – not yet frustration – stems from the fact that all the ingredients appear to be there. In Mount Chelsea have a young, dynamic all-rounder to be excited about, in N’Golo Kante they have an indefatigable ball-winner, and in Kepa Arrizabalaga, Kurt Zouma and Andreas Christensen they appear to have the basis of a solid, youthful core.

But at the moment the components are not coming together for an entire 90 minutes. Against Manchester United, Chelsea pushed hard in the first half, didn’t make their spell count and were hammered on the counter-attack. Against Liverpool in the European Super Cup they faded similarly, if not as dramatically.

The theme was the same against Leicester. The first half was all about Mount, who ran the show with enthusiastic drive from the centre of midfield and got his just reward for pressing high up the pitch, robbing Ndidi and keeping his feet to find the net.

In truth the 20-year-old could have had a hat-trick, with Kasper Schmeichel keeping one effort out and Mount heading another straight at the Danish goalkeeper.

Maddison was Leicester’s brightest player in the second half (Getty Images)

Yet the second period was defined by Leicester’s young English playmaker. Maddison grew into the game and, as Chelsea pushed forward more and more erratically, he frequently found himself in acres of space on the counter-attack – conditions that suit him down to the ground.

It was he who sent in a corner for Ndidi to make amends for the opening goal and it was he who was at the centre of all the Foxes’ creativity.

Maddison fired a great chance over, Vardy flashed a shot wide from a through-ball and Kepa had to palm away from Youri Tielemans after yet another counter-attack. It made for a nervy finish, something previous incarnations of Chelsea would rarely allow.

Lampard has his first Premier League point as a manager, but he also has plenty of teething problems to mull over. 

Main image credit: Getty Images

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Categories: City, London

Downing Street rejects leaked no-deal Brexit chaos claims

City of London News Stream by Cityam - Sun, 08/18/2019 - 19:01

Downing Street has insisted that Whitehall reports predicting chaos and disruption in the event of a no-deal Brexit were outdated, as Boris Johnson dashes to meet EU leaders for last-minute talks next week.

Claims made within the leaked dossier, codenamed Operation Yellowhammer, predicted food, fuel and medicine shortages in a no-deal exit.

Read more: Food, fuel and drug shortages: Leaked paper reveals no-deal Brexit fears

The document, leaked to the Sunday Times, also said there would be a return of a hard border in Ireland – the main sticking point in the Brexit negotiations – leading to the possibility of civil unrest.

But a Number 10 source said the document pre-dated Boris Johnson’s premiership, when ministers were not seriously preparing for a no-deal Brexit. 

“This document is from when ministers were blocking what needed to be done to get ready to leave and the funds were not available,” the source said. “It has been deliberately leaked by a former minister in an attempt to influence discussions with EU leaders.

“Those obstructing preparation are no longer in government, £2bn of extra funding has already been made available and Whitehall has been stood up to actually do the work through the daily ministerial meetings. The entire posture of government has changed.”

The claims were also played down by Michael Gove, who is now the minister in charge of the government’s no-deal preparations. 

He said the UK would experience “bumps in the road” if it leaves the EU without an agreement at the end of October but that government was “far more prepared now than it was in the past”.

The revelations come ahead of the Prime Minister’s visit to the continent next week, in a last-dash hope of securing a deal. He will meet German Chancellor Angela Merkel in Berlin on Wednesday and French President Emmanuel Macron on Thursday in Paris.

Merkel said Germany was prepared for a disorderly Brexit but that she would “make an effort to find solutions – up until the last day of negotiations”. 

Both meetings precede the G7 summit in Biarritz on Saturday, in which Johnson will make his first international appearance as Prime Minister. 

Read more: Boris Johnson urged to recall parliament amid no-deal Brexit ’emergency’

Meanwhile, 100 MPs from across the political divide, including the leader of the Liberal Democrats Jo Swinson and Tory rebel Guto Bebb, urged Johnson to recall parliament from summer recess in light of the leaked no-deal Brexit claims. 

MPs are due to come back from summer recess on 3 September.

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US watchdogs receive allegations of manipulation over trading in Burford

City of London News Stream by Cityam - Sun, 08/18/2019 - 18:41

Allegations of market manipulation surrounding the collapse of litigation funder Burford Capital’s share price have been handed to US watchdogs, according to reports.

Claims of “spoofing activity”, in which a dealer makes a trading order before cancelling it to affect the share price, have been passed on to the Department of Justice and the US Securities and Exchange Commission, the Sunday Times reported today.

The development comes days after the City’s watchdog, the Financial Conduct Authority, said it had started undertaking wide-ranging inquiries following the sharp drop in Burford’s share price, which plunged after short-seller Muddy Waters criticised its accounting methods.

The activist shortseller criticised its use of fair value accounting, where unrealised gains are included in its books, and also attacked its governance structure and its listing on London’s junior Aim market.

Burford declined to comment today, but the under-fire firm has previously said that its shares have been “illegally” manipulated” and that traders had cancelled orders in order to deliberately depress the share price.

Last week Burford said that it was replacing its chairman and finance chief in its latest bid to appease shareholders.

Burford said its chief finance officer Elizabeth O’Connell will be replaced by Jim Kilman, formerly vice chairman of Morgan Stanley Investment Banking, with immediate effect.

Muddy Waters boss Carson Block said: “The notion that appointing Mr Kilman as CFO will substantively improve governance is a farce. It is clear from this that Burford is more interested in imposing fig leaves than real guard rails.

“We note Mr Kilman was Burford’s principal investment banker at Morgan Stanley. Burford investors would be much better served by a CFO from the outside who is untainted by Burford’s conduct to date.”

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Bank of England boss Mark Carney pulls out of UK-China dinner

City of London News Stream by Cityam - Sun, 08/18/2019 - 18:16

Bank of England governor Mark Carney has pulled out of a dinner in the Square Mile designed to foster relations between London and China.

The City of London Corporation is holding the event at Guildhall on 3 September. It will be attended by China’s ambassador to the UK, Liu Xiaoming, the Corporation’s policy chief Catherine McGuinness and lord mayor Peter Estlin.

Read more: US vice president Mike Pence to speak at City trade banquet

Some City councillors are unhappy at the timing of the event, as police in Hong Kong continue to clash with pro-democracy protesters. The protests were originally sparked by a proposed bill that would have allowed extraditions to mainland China.

Councillor Richard Crossan said: “The City must use this event to remind China of its responsibilities on human rights, democracy and free speech in Hong Kong. As the situation in Hong Kong develops, the City must also remember that it is not just a financial services lobbying group. It has moral responsibilities, whether it wants them or not.”

Another councillor told City A.M: “There’s a question of whether we should even hold a knees-up on the date of 70 years of the founding of the communist dictatorship that has cost millions of lives. If the red army rolls into Hong Kong, it would be unthinkable to hold this event.”

Carney was originally due to speak at the event but a source said he had since pulled out, citing a “diary issue”.

The Chinese military has so far stayed out of the conflict, but in the last few days tanks have amassed on Hong Kong’s border. Ambassador Liu also warned earlier this week that Beijing would “not sit on its hands and watch” if the situation became “uncontrollable”.  

China has become a central plank of the Corporation’s lobbying since the 2016 EU referendum. The City has placed itself as the “natural western hub” of China’s Belt and Road initiative, which the corporation estimates could add up to £1.8bn annually to UK GDP.

Read more: City of London Corporation slammed for decision to ban Taiwan float at lord mayor’s show

“The Corporation is very committed to developing that money funnel to make up for what it will lose to Paris, Frankfurt, Dublin and Luxembourg,” one councillor said.  

A City of London Corporation spokesperson said: “We host a number of events throughout the year designed to support the government’s efforts to strengthen relationships with key trading partners around the globe for the benefit of the City, London and the UK.”

The Bank of England did not respond to requests for comment.

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British Steel buyout: Questions linger as Turks swoop in

City of London News Stream by Cityam - Sun, 08/18/2019 - 17:37

Government officials will this week start exclusive talks with their preferred buyer for stricken industrial firm British Steel.

Ataer Holdings, a subsidiary of the Turkish military’s pension fund which is known as Oyak, reached a provisional deal to buy the firm out of insolvency at the end of last week.

Read more: British Steel’s collapse under former owner Greybull turns up the heat on Whitehall

After former private equity owner Greybull Capital let the firm slide into insolvency in May, the news has given hope to British Steel’s 5,000 workers, despite concerns over Oyak’s suitability as a buyer. Ataer expects the talks to last around two months, and hopes to take control of the company before the year is out.

Details of the deal are yet to be thrashed out, but the fundamentals centre around Ataer’s pledge to keep the business together.

Meanwhile, the business select committee can now get on with a public inquiry into the steel industry, which was prompted by British Steel’s collapse. Committee chair Rachel Reeves said she would ask Ataer to explain its “plans for the workforce” as part of the probe.

What is Ataer Holdings?

Ataer is the investment vehicle of Oyak, which provides Tukey’s armed forces with their pensions. Founded in 1961, Oyak is one of the country’s largest conglomerates, with revenues hitting $9.8bn last year.

It has interests in cement, mining and energy, and holds a joint venture factory with French car maker Renault.

The company is chaired by former Turkish army two-star general Mehmet Tas.

Andrea Leadsom said: ‘I said that no stone would be left unturned in our efforts to find a suitable buyer for the whole company and we have worked tirelessly to support the official receiver to do that.’ (Getty Images) What are the terms?

Ataer intends to inject £900m into British Steel’s Scunthorpe steelworks, which employs 4,000 people, to double its output. The government, meanwhile, has committed to a financial support package worth as much as £300m which will include grants, indemnities and loans.

Ataer’s intention to keep the business together was crucial, according to sources. Other prospective buyers had wished to cherry-pick parts of British Steel, such as its operations in France or the Netherlands.

Why are there concerns?

Oyak has close ties with the Turkish government regime, led by President Recep Erdogan, who has been accused of being autocratic and having little tolerance for dissent. Oyak’s Renault plant has also faced claims of mistreating employees, raising concerns for workers in Scunthorpe who will soon count Oyak as their bosses.

Labour’s shadow business secretary Rebecca Long-Bailey said: “Given the company’s track record, Labour will hold the government to account if there are any moves to undermine the unions and workers’ terms and conditions.”

Read more: British Steel collapse: Aftermath could have ‘tsunami-like’ effect on industry

How did we get here?

Britain’s steel industry has been under threat for years, with EU steel making dogged with overcapacity and Chinese competitors undercutting the market with cheaper products.

The UK produced 7.3m tonnes of steel last year, a low not seen since the Second World War. Scunthorpe is one of only two blast furnaces remaining in the UK alongside Tata Steel’s works at Port Talbot.

Main image: Getty

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Categories: City, London

Lidl's suppliers warned of EU tariff import costs

City of London News Stream by Cityam - Sun, 08/18/2019 - 17:29

Supermarket giant Lidl has reportedly indicated that its suppliers will have to foot the potential bill for EU import tariffs in the event of a no-deal Brexit.

For goods delivered to Ireland, the German discounter has told British suppliers to be “delivery duty paid-ready” as the government’s October deadline for leaving the EU with or without a deal draws near, the Sunday Times first reported.

Read more: Retailers ramp up challenges to business rates

A supplier told the newspaper: “Lidl obviously believes we will reach that situation, and what it is saying is it wants us to pay the duty”.

In a statement the grocer said: “We held a number of workshops with our suppliers to ensure they have all necessary information, certification and documentation to avoid any disruption to their respective supply chains.”

It added: “All existing Lidl contracts contain a DDP (Delivered Duty Paid) clause. In an effort to understand the level of preparedness of key UK suppliers we are communicating proactively with them and working together to resolve any potential barriers to supply.”

The discussions are the latest sign of concerns within the retail industry around the possibility of a no-deal Brexit, coming months after many of Britain’s leading retail bosses urged the government of significant short-term disruption to supply chains.

Prime Minister Boris Johnson has pledged to take Britain out of the EU with or without a deal by the end of October.

Read more: Retailers eat into retailers’ high street share

Lidl’s share of the grocery market has been rising in recent years, putting pressure on Britain’s “Big Four” grocers that have all been ceding market share to Lidl and fellow German discounter Aldi.

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Categories: City, London

Wealth managers Tilney and Smith & Williamson in tie-up talks

City of London News Stream by Cityam - Sun, 08/18/2019 - 17:07

Wealth manager Tilney is in merger talks with fellow-wealth manager Smith & Williamson.

A deal would create a firm with revenue of nearly £500m and assets under management of in excess of £45bn.

The pair have been in talks for a couple of months, according to people familiar with the situation.

Read more: Why times are tough for UK asset managers

Both firms have strong discretionary investment management businesses, while Tilney has a large financial planning arm.

Smith & Williamson is also a top ten UK accountancy firm which offers services such as tax planning to its clients. 

In 2017 Smith & Williamson held an unsuccessful round of merger talks with wealth manager Rathbones. 

Tilney launched an alternative bid, but Smith & Williamson chose instead to pursue a deal with Rathbones that ultimately collapsed.

Following the failed tie-up talks with Rathbones, Smith & Williamson publicly committed itself to a stock market listing by 2020.

Sources with knowledge of the talks, which were first reported by the Sunday Times, said it was too early to say if a combined firm would pursue a flotation.

Tilney was acquired by private equity firm Permira from Deutsche Bank in 2014.

Mergers and acquisitions in the asset management and wealth management space is being driven by tightening regulation which has forced firms to seek economies of scale.

Tilney declined to comment. Smith & Williamson was contacted for comment.

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