Friday Focus
Asian shares firm, but US budget impasse has investors on edge. Asian shares ticked up on Friday after US jobless claims data pointed to an improving labour market, but the lack of progress in budget and debt negotiations in Washington kept investors on edge. The solid jobs data revived expectations of a reduction in US monetary stimulus, but not without reservation, after the Federal Reserve’s surprise decision not to do so last week and conflicting messages from various top Fed officials since then.UK growth confirmed as Q1 estimates hikedThe third estimate of the UK’s GDP in the second quarter of this year was announced yesterday, with robust growth of 0.7% confirmed. The Office for National Statistics (ONS) also changed its view of the first quarter’s growth, suggesting a 0.4% expansion, upgraded from the 0.3% previously estimated. Recent surveys of purchasing managers in the UK’s major sectors point to some of the most buoyant business conditions ever, suggesting strong growth in the third quarter.However, Barclays’ chief UK economist Simon Hayes said that the underlying details of the announcement “take the gloss off growth” for chancellor George Osborne, with a low saving ratio, weak investment and a large current account deficit.UK retail sales grow at fastest pace since June 2012UK retail sales are now growing at their fastest pace in 15 months in the year to September, according to the CBI. That’s their third consecutive months of gains. The headline CBI distributive trades survey number has risen from 27 to 34. Analysts had been expecting a fall to 24. Now retail sales are expected to grow again in October,while growth in the motor trades continues but at a slower pace than in the previous two months. Barry Williams, Asda chief merchandising officer for food, and chair of the CBI Distributive Trades Survey Panel, said “It’s encouraging to see the high street on the road to recovery, with particularly strong growth from furniture & carpet retailers, department stores and recreational goods retailers. But the retail sector is not out of the woods yet with consumer confidence still fragile despite the rise in spending”.USA could run out of money by 17th OctoberThe US Congress, already struggling to avert a government shutdown next week, turned its attention on Wednesday to the other fiscal bullet it had to dodge: a federal debt default. Republican leaders in the House of Representatives notified members that a vote on raising the debt limit could come as early as Friday. Treasury Secretary Jack Lew pleaded for quick action in the deeply divided Congress on raising the $16.7 trillion statutory limit on government borrowing, as he projected a 17 October date when borrowing capacity would be nearly exhausted and only $30bn would be left in his agency’s bank account. The non-partisan Congressional Budget Office estimated that after 22 October Treasury might not be able to pay all its bills. Biggest banks close capital hole by €83bnThe world’s biggest banks took another giant leap towards hitting regulators’ capital targets, according to numbers out this week from the Basel Committee on Banking Supervision. The international group of finance authorities said the 100 so-called Group 1 banks – the largest in the world – were €115bn short of the 7% capital target at the end of 2012. That is around €82.9bn, or 41.9%, closer than they were six months earlier. The €115bn shortfall is less than one-third of the €419.4bn profits those banks made in 2012, meaning the target is well within reach by the 2019 deadline.French 2014 budget taxes households more but firms lessFrance sought to appease anger over tax hikes and EU concerns over its finances on Wednesday with a 2014 budget bill that focuses efforts largely on savings. But while businesses will face a smaller tax burden to help boost competitiveness, households will be hit by higher taxes to help cut the deficit, a move that will hurt purchasing power. The socialist government unveiled its draft 2014 bill under close scrutiny from the EC in Brussels and EU powerhouse Germany, which have given Paris two extra years to bring the deficit in line with EU rules but want to see more reforms and a credible plan to cut spending in return. The budget “has two objectives: stimulate growth and boost jobs,” finance minister Pierre Moscovici said as he announced a public deficit target of 3.6% of economic output in 2014, better than this year’s 4.1% but worse than initially forecast. Italy consumers confident after two-year gapConsumer confidence in Italy has finally rebounded this month, responding to the Eurozone’s fragile recovery from an 18-month recession. According to official statistics released this week, Italian consumer confidence is in positive territory for the first time since August 2011, just after the European Central Bank’s last attempt to hike interest rates. The headline index for confidence now stands at 101.1, above the crucial 100 mark that signals confidence among a majority of consumers. The index for expected performance stands at 100.4. Holger Schmieding of Berenberg said: “Given the new political uncertainties and the looming risk of a one point VAT increase shortly, the further brightening of the mood of consumers in September is remarkable.”
Gold declines on surprise drop in US jobless claimsGold futures fell for the fourth time in five sessions after a report showed US jobless claims dropped unexpectedly, boosting speculation that the Federal Reserve will scale back stimulus soon.Yen falls on speculation Abe will cut taxesThe yen weakened for the first time in five days against the dollar as speculation Japan’s government will cut corporate taxes spurred stock gains and damped demand for the relative safety of the currency. Japan’s currency dropped against all of its 16 major counterparts as shares rallied on bets the tax cut proposed by Prime Minister Shinzo Abe will make companies more profitable.WTI crude gains for the first time in 6 days on ThursdayWest Texas Intermediate crude advanced for the first time in six days after claims for US unemployment benefits unexpectedly dropped while the economy expanded at a faster pace last quarter. “The economic data today is positive and should improve perceptions for energy demand,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The Iranian president’s visit to the UN hasn’t panned out as well as anticipated or hoped.”Football Finance FocusJuventas continues financial upturnJuventus has again recorded a substantial decrease in its year-on-year financial losses as its revenues for the year ending June 30, 2013 were boosted by its run to the quarter-finals of the UEFA Champions League. The Serie A champion’s 2012-13 financial year closed with a loss of €15.9m compared to the figure of €48.6m from the previous year. Juventus had lost €95.4m in the 2010-11 year. The Turin giant said that its improved financial position was primarily due to its participation in the Champions League. Juventus earned €65.3m from Champions League media payments last season, more than finalists Bayern Munchen and Borussia Dortmund along with any other European club. This saw revenues jump by €70m to €283.8m for the financial year. The club also benefited from the first year of its new shirt sponsorship deal with Jeep. Signed in April 2012, Jeep replaced Betclic as the Serie A giant’s lead sponsor under a three-year deal worth a fixed sum of €35m. However, Juventus said its net debt increased by €32.6M to €160.3m over the year – with the club citing its activity in the transfer market as the main cause of this development. Looking ahead to 2013-14, Juventus said it expected to continue its improvement but still register a loss for the current season.Arsenal’s profits drop despite increased revenuesEnglish Premier League club Arsenal has announced a near £30m reduction in its group profit before tax for the year ending May 31, 2013, as its football-related revenues increased by over £7m. The North London giant said that its group profit before tax was £6.7m versus 2012’s figure of £36.6m. This compares to the 2011 figure of £14.8m and 2010’s £56m profit. Arsenal said the downturn was due in part to a lower surplus on player transfers of £47 million, despite the sale of Robin van Persie to Manchester United, as compared to £65.5m in the prior year.Friday FocusOver half of UK company shares are owned by foreign investorsBy Michael Bird, City A.M.More than half of shares in listed UK firms owned by foreign investors for the first time.UK capital markets are more global than ever, it was revealed yesterday, as official statistics showed that for the first time more than half of shares in British companies are now owned outside the UK.
In just a few years, the balance of power in Britain’s boardrooms has shifted dramatically, with 53.2% of the UK’s quoted shares now under beneficial ownership outside of the country, mirroring the global business interests common to many FTSE 100 firms.The proportion of foreign owners has surged, up from only 30.7% in 1998. And the value of UK shares held by foreigners has risen even more rapidly, more than doubling from £460.9bn to £935.1bn.Nick Baird, the chief executive for UK Trade & Investment said: “These figures show that the UK remains a world-leading business destination as well as the growing confidence and trust that foreign investors have in UK businesses.”While North America and Europe are still home to the largest overseas investors, with 25.7% and 13.7% of the overall market respectively, shareholders in other markets are becoming a larger fixture.As recently as 2010, the proportion of UK shares held in Africa rounded to zero, shooting up to 3.8% last year, as the continent’s budding financial services sector expands.A Confederation of British Industry spokesperson commented: “These figures show that the UK has been successful in attracting foreign investment, which is critical to our economic success.”Shares owned by the public sector have risen up from next to nothing in 1998, to 2.5% of the market last year. This is attributed to interventions in the Royal Bank of Scotland and Lloyds during the financial crisis. The government held shares worth £42.6bn at the end of last year.However, other UK investors are now holding a much smaller chunk of the UK’s shares. In the 14 years to 2012, the proportion held by UK insurance companies fell from 21.6% to only 6.2%. Similarly, UK pension funds now only hold 4.7%, in comparison to 21.7% held in 1998.There has been a long-term decline in the segment of UK shares owned directly by individuals: 50 years ago, single owners made up over 50% of shareholders, but a long-term decline has reduced the proportion to a much lower level. Only 10.7% of the UK’s shares are still held by individual investors.
