Friday 20/12/19

  1. In MACRO & ENERGY NEWS, BoJo gives a broad outline of policies, the Bank of England leaves interest rates unchanged and gets a new governor while renewables make up more of the UK’s energy mix
  2. In CONSUMER NEWS, UK house price growth may be more modest than expectations, UK retail sales hit new lows but consumer confidence may have turned a corner
  3. In INDIVIDUAL COMPANY NEWS, Airbnb gets an important judgement and Just Eat’s takeover nears
  4. In OTHER NEWS, I bring you a one-woman Bohemian Rhapsody…



So BoJo outlines new policies, the Bank of England leaves interest rates untouched (and gets a new governor) while renewables increase as a proportion of the energy mix…

The Queen’s Speech: a guide to the main measures (Financial Times) takes a look at BoJo’s new policies as set out in yesterday’s Queen’s Speech, billed (by him) as the most radical in a generation. It covered the seven bills to implement Brexit, an NHS funding bill and social care reform bill, promises to publish its National Infrastructure Strategy which will outline a £100bn investment in transport etc., new legislation on law and order (to include tougher sentencing for terrorists), the repeal of the Fixed-Term Parliaments Act (which will restore the PM’s right to call a general election whenever they want to) and the creation of a Constitution, Democracy and Rights Commission that will look at the relationship between government, parliament and the courts. Two cheers from business for Queen’s Speech low on detail (The Times, Louisa Clarence-Smith and Callum Jones) looks at the 29 bills announced in the Queen’s Speech from a business point of view on things like superfast broadband (nice, but there was a lack of deadline), regional growth and skills funding (including the promise to increase tax credits for R&D), pension reform (including tougher powers for the Pensions Regulator), audit and corporate reporting (including the enhancement of regulator powers to enforce reform) and insolvency and restructuring (to ensure we

don’t get a repeat of Thomas Cook’s collapse, for instance). * SO WHAT? * OK, so it’s not super-detailed, but I guess it is at least a framework! The Devil, as they say, is always in the detail!

Meanwhile, Bank of England keeps interest rates on hold despite weak economy (The Guardian, Richard Partington) shows that the Bank’s Monetary Policy Committee (MPC) voted 7-2 in favour of keeping the official interest rate on hold at 0.75%. The two that didn’t thought that the weakness of the economy justified a reduction of 0.25% to 0.5%, but were outvoted by the others, including the governor of the Bank of England, Mark Carney. This was widely expected.

Talking of governors, Andrew Bailey selected to be the next Bank of England governor (Financial Times, Chris Giles and George Parker) shows that the current head of the Financial Conduct Authority has been selected to replace Mark Carney. He was former deputy governor, so has form. Although he has suffered a series of scandals this year that put into question the effectiveness of the FCA, he is expected to take over at the start of February.

And now for something else. In energy. Fossil fuels fall to record low proportion of UK energy mix (The Guardian, Jillian Ambrose) cites the latest government figures which show that renewables, such as wind and solar, made up 38.9% of the UK’s electricity in the third quarter of this year, up from around 33% in the same quarter last year. This moved it slightly ahead of gas-fired power, which made up 38.8%, making it the UK’s biggest source of power! How amazing is that?! If you combine renewables with nuclear-generated power, fossil fuels now make up their lowest share of the UK’s energy mix on record!



UK house price growth may be below expectations, UK retail sales fall but consumer confidence may have turned around…

UK house price growth to remain low despite talk of ‘Boris Bounce’ (The Guardian, Patrick Collinson) sounds a more cautious note than some recent excited commentary which talks of a revival of the UK housing market. Halifax is predicting that house price growth will be in the 1-3% range next year and Rightmove is forecasting a 2% rise. The main reason for this is that young buyers are continuing to struggle to scrape together deposits. Additionally, the Royal Institution of Chartered Surveyors (Rics) expects that rents will rise more steeply than house prices because the supply of rental properties has fallen over the last few years. * SO WHAT? * Are estate agents hedging their bets and calming expectations whilst secretly thinking that the house market is going to leap out of the rut it is currently in? Maybe. But it seems like the sensible course of action. I’m not so sure about a big “Boris Bounce” in residential property because of potential affordability concerns, but I do wonder whether commercial property prices will rise more strongly due to the perception of less uncertainty with a majority government. It’s early days yet, though.

Sales at 19-month low as Christmas shoppers leave it late (The Guardian, Richard Partington) cites the latest figures

from the Office for National Statistics which show that high street sales in November fell to their lowest level for over a year. Analysts blamed the weather (retail always does!), Brexit uncertainty and consumers waiting until the last minute to shop in order to bag bigger discounts. Having said that, Confident households prepare to spend again (The Times, Gurpreet Narwan) cites a GfK confidence index which shows that households were getting more confident about their finances leading into the election and are more positive about the prospects for the economy due to rising wages and record employment levels. Interestingly, GfK client strategy director Joe Staton commented that “We haven’t seen such a robust increase in confidence about our economic future since the summer of 2016”. In other interesting data releases, the Lloyds Bank Commercial Banking Business Barometer, which surveyed 1,200 in the fortnight leading into the general election, showed rising confidence among employers who expected hiring to increase next year by more than they had done previously. However, what is perhaps most surprising is that the manufacturing sector saw a big jump in optimism to the extent that it is now the most confident sector of the economy! * SO WHAT? * This seems to run contrary to most other stats that we’re seeing at the moment! It must be said that this is a SURVEY and, as such, there can be a bit of a gap between what people say and what they actually do! Still, this does sound like an interesting potential turn in sentiment – especially in manufacturing! Let’s hope that this is a portent of things to come!



Airbnb gets an important win and Just Eat nears the end of its takeover saga…

EU court rules Airbnb does not require estate agent licence (The Guardian, Daniel Boffey) highlights an important victory for the company as the European Court of Justice ruled that it acted as an “information society service” rather than a real estate agency, which is what France’s Association for Professional Tourism and Accommodation (AHTOP) was trying to argue. Airbnb was described by the court as “a tool to facilitate the conclusion of contracts”. * SO WHAT? * This is an important win for the company as it is currently fighting all sorts of claims from city authorities in places like Barcelona and

Amsterdam (in addition to Paris) who are saying that they are changing the faces of neighbourhoods and putting pressure on hotels who are losing out because they have higher costs related to a heavier regulatory burden. Airbnb is looking to float on the stock market next year, so this is a positive development in that the judgement takes away some of the threat of extra costs.

Just Eat set to go Dutch (Daily Telegraph, Oliver Gill) shows that Just Eat looks highly likely to proceed as planned with its takeover by Dutch delivery company despite an increased offer yesterday afternoon from Prosus. Takeaway also upped its original offer to tip the balance in their favour – and it looks like this will work. Shareholders will now have until January 10th to decide which one to go for, but it looks like Prosus will have an uphill battle to convince shareholders to vote for its rival bid.



And finally, in other news…

And so we come to the final “…and finally” of 2019! What better way to mark it than with the song in Woman perfectly covers every part of Bohemian Rhapsody using folding mirror (The Mirror, Luke Matthews Thunderbolt and lightening, very very frightening…

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Some of today’s market, commodity & currency moves (as at 0909hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq**DAX *CAC-40 *Nikkei **Shanghai **
7,574 (+0.25%)28,360 (+0.27%)3,203 (+0.30%)8,88713,203 (-0.21%)5,964 (-0.08%)23,817 (-0.20%)3,005 (-0.40%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)