Poor Rupert Murdoch. His first attempt to buy the majority stake in Sky that he does not already own was scuppered by the phone hacking scandal – now Comcast have come late to the party and made a counteroffer which means his long-held ambition to buy 100% may not happen after all. Fashion retailer Boohoo also proved that it’s not all tears on the high street, as it posted a near-doubling of sales. The FTSE 100 rose 1.3% over the week by mid-session on Friday.
The “Beast from the East” weather phenomenon helped UK GDP slip to 0.1% in the first quarter of 2018, down from 0.4% in the fourth quarter of last year and the slowest level since the final three months of 2012.
UK consumer confidence is “stuck in the doldrums”, according to a widely watched survey from GfK. Its main index fell back to -9 in April, from -7 in March.
Government borrowing has fallen to its lowest annual level in 11 years, according to the latest official figures. Borrowing fell by £3.5bn to £42.6bn in the 2017-18 financial year, the Office for National Statistics said. That was below the estimate of £45.2bn by the independent Office for Budget Responsibility last month.
The euro weakened against major currencies after the European Central Bank struck a dovish tone. The bank did not adjust interest rates but kept its promise to buy bonds under its quantitative easing programme until the end of September and keep interest rates at their current record lows “well past” the end of their asset purchases.
German business sentiment, as measured by the Ifo survey, slipped further in April. Ifo’s business climate index, which now also includes the service sector, fell to 102.1 points from 103.3 points in March, below economists' forecasts of 102.6 points. This was the fifth consecutive decline in the monthly indicator.
The Bank of Japan did not change interest rates, but ditched a timeframe it had set for hitting an inflation target.
The yield on US ten-year Treasury bonds broke through 3% this week. Whilst this level has psychological significance to market participants in terms of the broader economy and wider financial market landscape, it does not represent a meaningful tightening of financial conditions.
Dollar bulls were cheering after the US currency strengthened over the week following a period of weakness.
North and South Korean leader held a “peace summit” raising hopes of a new era of trust on the peninsula. Kim Jong-Un broke with decades of hostility and distrust to become the first North Korean leader to cross into South Korean territory since 1953.
There was much debate over whether the UK should stay in or out of a customs union following Brexit. Ten pro-European Conservative MPs had already signed an amendment that called on Britain to stay in a customs union, a move intended to maintain frictionless trade with the EU and to help ensure there is no return to a hard border in Ireland.
Reports suggested that telecom group O2 is once again considering a potential IPO. The operation is currently owned by Spain’s Telefonica.
Smart speaker and audio company Sonos has filed paperwork with the US Securities and Exchange Commission indicating its plans to hold an IPO as soon as this summer. Estimates of its market valuation were between $2.5bn and $3bn.
Results from Facebook were strong. Net income rose by more than 60% and earnings came in 25% higher than Wall Street expected. Results are from the period prior to the Cambridge Analytica data scandal. Chief technology officer Mike Schroepfer answered questions from MPs where he was grilled on the issue of political advertising.
Google-owner Alphabet reported an 84% increase in first-quarter profits, beating analysts’ expectations.
Amazon profits came in at $9.4bn compared with a consensus estimate of $6.56bn. Amazonshares hit all-time high after the statement.
Apple posts its second-quarter results on Tuesday next week. With smartphone sales appearing to have slowed, what lies in store for the iPhone maker? Click here for more.
Twitter shares rose sharply then fell after its first-quarter results statement. To find out why click here.
Korea’s Samsung posted a fourth consecutive quarter of record profits. However, management warned that the appetite for smartphones was on the decline, as more consumers are choosing to keep their phones for longer instead of opting for an annual upgrade.
John Redwood, Charles Stanley’s Chief Global Economist, looks at the importance of US technology majors for the performance of global stock markets here.
Oil prices hit new highs above $75 a barrel earlier in the week, but Brent futures were trading at around $74.40 a barrel by mid-session on Friday, up 0.5% over the week.
First-quarter profits from Royal Dutch Shell rose sharply due to a rising oil price, but the market was disappointed by its cash generation, sending the shares lower.
Mining and commodities
Billionaire Anil Agarwal hired AngloGold Ashanti’s Srinivasan Venkatakrishnan to run his mining vehicle Vedanta Resources. Mr Agarwal owns a 21% stake in Anglo American. This prompted some speculation over Mr Agarwal’s intentions, with some suggesting that Vedanta could eventually make an offer for the FTSE 100 mining group.
Russian oligarch Oleg Deripaska plans to keep control of his aluminium group Rusal even though it is fighting for survival in the face of harsh US sanctions, reports suggested. Turmoil in the global aluminium market has eased this week after US authorities made it clear that companies could continue to deal with Rusal under existing contracts until October. Three-month aluminium futures traded on the London Metals Exchange fell 7.8% over the week, easing from the previous week’s multi-year highs.
Sky withdrew its support for Rupert Murdoch’s takeover of the European pay-TV group after US media giant Comcast made a £22bn bid for Sky that may spark a bidding war. The media mogul’s 21st Century Fox agreed to buy the 61% of Sky that it does not already own in December 2016, but the deal has been delayed by regulatory issues. The issue is complicated by The Walt Disney Company’s talks to buy Fox’s TV and movies assets, which may also involve an offer for Sky.
After five attempts at securing a deal, Japan’s Takeda has secured a recommended takeover offer from the board of Shire. However, a deal is not certain. To discover more click here.
Income giant GlaxoSmithKline saw its first quarter sales hit by strength in the pound. Sales fell by 2% in the first quarter to £7.2 billion, but were up by 4% with currency movements stripped out. Management also noted that competitive pressures in the respiratory drug market meant sales of its asthma treatment Advair would fall by 30% in 2018.
Things appear better at Swiss pharma giant Roche, which slightly upped its growth guidance for the year after first-quarter sales beat expectations.
It’s not all tears on the high street. Online fashion retailer Boohoo saw its shares surge after the group saw a 97% leap in revenue to £579.8m in the year to March, as pre-tax profit rose 40% to £43.3m. Growth was helped by the recently acquired Pretty Little Thing, which experienced a 228% rise in sales to £181.3m.
Australia’s Wesfarmer, which appeared to have made some management mis-steps following the acquisition of UK chain Homebase, blamed recent snow for a sales slump. Like-for-like sales at the UK and Ireland business fell by 13.9% year on year.
Reports suggested that Poundworld, which is owned by American private equity firm TPG Capital, is set to reveal plans to launch a company voluntary agreement (CVA) in the coming weeks threatening hundreds of jobs and swathes of stores. Carpetright also won the approval of its creditors and landlords to push ahead with its proposed CVA, which will see the closure of 81 stores.
Whitbread announced plans to spin off Costa, the UK's biggest coffee chain, as a separate entity following pressure from activist investors. The owner of demerger will be “pursued as fast as practical and appropriate” to optimise value for shareholders.
Shares in bookmakers such as William Hill and Ladbrokes fell sharply following reports that Chancellor Philip Hammond had accepted the need for a £2 maximum stake on fixed-odds betting terminals (FOBTs).
Merlin Entertainments, the owner of Alton Towers and Legoland parks, said visitor numbers for its London attractions remained down year on year as the 2017 terror attacks continued to affect trading. However, the shares rallied as investors bet the worst was now over.
Domino’s Pizza had an encouraging start to the year, with like-for-like sales rising 6.7%, helping lift its shares to a 12-month high.
The Bank of England said that it may ask lenders to set aside more money to cover bad loans at its next financial stability meeting in June, prompted by concerns over rising corporate debt. The simulation exercises will check how the investment sector could deal with a big increase in margin or collateral, and whether they hold enough “liquid” assets to meet it.
Lloyds Banking Group said it has made a "strong start" to 2018, with profits for the first three months of the year jumping by nearly a quarter. However, the bank had to put aside another £90m in costs for payment protection insurance (PPI).
Profits at Royal Bank of Scotland trebled, partly thanks to a fall in restructuring costs, and a drop in conduct and litigation costs.
Barclays slipped back into the red in the first quarter following a hefty £400m PPI provision and a £1.4bn settlement with the US Department of Justice dragged the bank into the red.
Shares in challenger Metro Bank fell sharply on concerns that it may have to raise more capital. This was despite the bank posting pre-tax profits of £6.4m for the first three months of this year, up six-fold year-on-year.
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