Last week in the City
This week, China warned the US that it is not afraid of engaging in a trade war, the Federal Reserve hiked interest rates again, and Facebook shares plummeted after allegations that millions of users' profile data had been harvested. The FTSE 100 was down 3.5% over the course of the week by mid-session on Friday.
Economics
The Federal Reserve upgraded its economic outlook and increased interest rates by 25 basis points on Wednesday. The Committee decided to raise the target range for the federal funds rate to a range of 1.50% to 1.75% in response to a stronger economic outlook. This is the first rate hike under new Chair Jerome Powell.
In the UK, wages grew at the fastest rate in more than two years in the three months to January. The Office for National Statistics (ONS) reported that total average weekly earnings in the three months to January were up 2.6% year-on-year. However, once inflation is factored in, average pay was 0.2% lower than a year earlier.
The FTSE 100 fell to a 15-month low on Monday after a post-Brexit transition agreement sent sterling higher. The index dropped 1.7% to 7,042, the lowest level since December 2016.
UK inflation fell from 3% to 2.7% in February. Consumer price inflation hit a six-year high of 3.1% in November and has been in decline since then.
Geopolitics
The UK reached a joint legal agreement with the European Union on the legal terms of a Brexit transition deal. Brexit Secretary David Davis said the transition agreement would smooth the path to a future permanent relationship.
President Donald Trump appointed former UN envoy John Bolton as national security adviser. Bolton will replace General H.R. McMaster on 9 April. Trump tweeted that he was “thankful for the service of General HR McMaster who has done an outstanding job & will remain my friend”.
Prime Minister Theresa May has said that she and other EU leaders would discuss how to secure a “permanent exemption” for Europe from US tariffs on steel and aluminium. John Redwood, Charles Stanley’s chief global strategist, takes a closer look at the ongoing situation here.
China responded to news that the US is planning tariffs on up to $60bn of Chinese products by claiming that, while the country did not want a trade war, it was not afraid of one.
Retail
UK retail sales grew by 0.8% in February, according to the ONS. Analyst expectations were for a 0.4% rise. The monthly increase followed two monthly declines in December and January, resulting in an overall decrease of 0.4% in the three months to February.
Shares in Moss Bros slumped by around a third after it issued a profit warning and cut its dividend. The retailer said the bottom line for the current financial year would be "materially lower" than expected.
Carpetright said it needed to raise emergency cash as it considered a rescue plan to restructure its debts and close dozens of loss-making stores. Management said it was looking at launching a company voluntary arrangement, an insolvency deal that would allow it to continue trading while negotiating with landlords to reduce rents. The firm, which has 409 UK shops, has also agreed a £12.5m emergency loan to relieve "short-term funding pressure".
Clothing retailer New Look has sought approval from creditors to cut 980 staff and close more than 60 stores after performing poorly and struggling to pay back the money it owes.
Kingfisher, which owns B&Q and Screwfix, reported a 10% drop in pre-tax profits for the year to the end of January. Like-for-like sales were down 0.7%. The company was bought by Australian group Westfarmer, which recently admitted the takeover had been “botched”.
Ted Baker reported an 11.4% increase in annual sales, to £591.7m. Pre-tax profits were up 12.3% over the course of the year. Retail sales including e-commerce rose 10.4%.
Fashion chain Next reported an 8% fall in pre-tax profits in what the retailer has described as the “most challenging year we have faced for twenty-five years”.
At a time when the high street is seen as struggling, shares in shopping centre operators are booming. Chief Investment Commentator Garry White has the full story here.
Technology
Shares in social media behemoth Facebook slumped following allegations that the data of some 50 million users had been harvested. Cambridge Analytica is alleged to have used data harvested through a personality quiz app in 2013 in order to psychologically profile people. Cambridge Analytica claims that it received data from a contractor, which was then deleted after Facebook informed the company that the contractor had breached their terms of service. Chief executive Alexander Nix has been suspended pending a full investigation.
Shares in Facebook are down 10% over the course of the week. Founder Mark Zuckerberg has been called to testify before Congress while MPs in the UK have summoned him to appear before a select committee investigating fake news.
Energy
The oil price rallied over the course of the week, helped by a slump in US stockpiles. Brent crude futures were up more than 4% over the course of the week to trade above $69 by mid-session on Friday. Data released by the US Energy Information Administration showed US crude stockpiles dropped by more than analysts were expecting in the week ending March 16. Stockpiles fell by 2.6 million barrels compared with the 2.5 million anticipated.
Supermarkets
Online grocer Ocado reported an 11.7% rise in retail revenues to £363.4m in the 13 weeks to March 4 but said that snow in the UK hurt sales growth. The impact of the snow was worth around 1% of sales of the quarter.
Financials
Standard Life Aberdeen has agreed to buy a 50% stake in Virgin Money’s investment business as part of a new joint venture. As part of the joint venture, Standard Life will provide fund management services and access to digital technology. Completion of the transaction is expected to take place by the end of 2018.
Lloyd’s of London reported its first loss in six years, given the frequency and scale of the natural catastrophes that struck the world in the second half of 2017. Major claims cost the Lloyd’s market €5.1bn, more than double the previous year.
Aviva reversed a controversial decision to cancel its preference shares. The insurer previously said it had the ability to cancel preference shares at par value, but the proposal was met with anger by institutional and retail shareholders.
Telecoms
BT announced the closure of its defined benefit pension scheme, having reached an agreement with the Communication Workers Union (CWU) on the future pension arrangements for 20,000 non-management employees. Both parties are working together to establish a new ‘hybrid’ pension arrangement over the coming year.
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