Monday 26/11/18

  1. In MACRO, MARKETS AND BITCOIN NEWS, we take a look at what could happen if the UK parliament rejects Brexit, markets continue to wobble and Bitcoin investors have their worst week for five years
  2. In BLACK FRIDAY NEWS, we compare and contrast US and UK performance
  3. In INDIVIDUAL COMPANY NEWS, BDO and Moore Stephens look to combine and Loungers considers an IPO
  4. In OTHER NEWS, we see whether Gary Lineker has “still got it”. For more details, read on…



So we take a look at what COULD happen if parliament rejects May’s Brexit deal, markets stay in a rut and Bitcoin investors have a painful week…

The next part of the Brexit process is getting the deal that May has negotiated through Parliament, which means that the British PM will now embark on a two-week campaign to persuade MPs to vote for it. What will the EU do if UK parliament rejects Brexit deal (Financial Times, Jim Brunsden, Alex Barker and Mehreen Khan) outlines what is theoretically negotiable and what could happen if it gets thrown out. In terms of flexibility of the current deal as it stands, EU officials are unlikely to alter anything in the legally-binding 585-page withdrawal document given the hassle it took to craft it plus the fact any renegotiation would mean that there may not be enough time left before the March deadline. Germany’s chancellor Merkel implied that the UK would not be able to get better terms without conceding in other areas. The other part of our exit deal is the political declaration on future relations which, unlike the withdrawal document, would be easier to change because this is a non-binding statement rather than a legal treaty. This statement is a set of guidelines for trade talks during the transition period after Brexit occurs and could have wiggle room as long as the UK accepted EU rules. As for what would happen in the case of a “no-deal”, Brussels and national governments have been drawing up contingency plans for the financial markets and practical things like keeping the Channel tunnel open as interim measures until a more permanent arrangement can be made. It is also possible that we could get a deadline extension as long as the 27 EU member states agree, but this will largely depend on what Britain is asking for – if it’s just more time to hammer out a better deal then it will probably be a no-goer, whereas if it is asking for time for the UK to hold elections or even a second referendum, then it may possible. I suspect that many will be suffering from Brexit fatigue over the next few weeks, but we must follow it given its profound current and future impact.

No refuge for investors as 2018 rout sends stocks, bonds, oil lower (Wall Street Journal, Akane Otani and Michael Wursthorn) shows that the decline of stocks, bonds and commodities is putting global markets on course for one of their worst years ever – data from

BlackRock Inc shows that both global stocks and bonds could end the year lower than they started for the first time in at least 25 years. Major indexes in the US, China, Europe and South Korea have all fallen by at least 10% from recent highs, the crude oil price is well within bear market territory (i.e, off more than 20% from recent highs), emerging currencies have fallen versus the dollar and bitcoin fell to below $5,000 last week for the first time since October 2017. * SO WHAT? * This sell-off is clearly concerning – especially given its breadth. However, although some of the shine of US growth is likely to dull going into next year, it is still expected to be robust. I think that the interesting thing here would be to see how this could ultimately affect the rise and rise of tracker funds, although we’d need a proper bear market to see that. It seems to me that there is a rare confluence of unpredictable factors at work – US-China trade tensions, unusually negative pressure/focus on big sectors (tech in particular), Brexit, the uncertainty of Europe (given troubles with both Germany and Italy’s respective leadership), growing concerns about a China slowdown and a weakening oil price. The “good” news is that I would have thought that many of these issues will become clearer over the course of next year, but in the meantime uncertainty looks like prevailing.

Bitcoin investors endure their worst week in five years (The Times, James Dean and Harry Wilson) looks at the Bitcoin aspect of what I was talking about above and observes that, after several months of Bitcoin seeming to stabilise above the $6,000/dollar mark, it has fallen by over 33% in the last seven days. Bitcoin traders and analysts attributed last week’s decline to a “hard fork” in Bitcoin cash where the splitting-into-two of offshoot of bitcoin caused liquidity problems which then led to a sell-off in the wider market. There was also a major upswing in the demand for bitcoin futures, which let traders profit from a price fall, but perhaps the biggest negative of all is the imminent prospect of regulatory intervention. The US Department of Justice is currently investigating allegations of an artificial inflation of last year’s bitcoin price and the US Securities and Exchange Commission is continuing to investigate and fine companies that tried to benefit from last year’s boom without filling in the requisite paperwork. * SO WHAT? * It seems that whenever regulators take an interest in things to do with bitcoin, investors fear the worst and run! At the end of the day, I’m sure that many early investors will have made a ton of money, but “gurus” who jumped on the bandwagon and espoused the benefits of easy money are looking less clever now. Having said that, bitcoin is now reaching such low levels that I am sure traders will be monitoring the situation to either average down or find another entry point.



We take a look at initial indications of how Black Friday went on both sides of the Atlantic…

Store traffic falls again on Black Friday but not all news is bad (Wall Street Journal, Sarah Nassauer and Khadeeja Safdar) portrays a bit of a mixed bag as, on the one hand, footfall at US stores on Thanksgiving and Black Friday fell by between 5% and 9% versus the same days last year according to RetailNext as consumers continued to migrate online, but on the other, it seems that sales to lower-income consumers were on the rise as Mark Zandi, a Moody’s Analytics economist, observed that “it should be a banner Christmas for lower-income households, and the increase in their spending this holiday season should

outpace the growth in spending by middle and higher income households”.

Meanwhile, back home, Black Friday hurts UK retailers as footfall declines (Financial Times, Chris Giles) shows early data which suggests that the Black Friday weekend was not great as the rise in online business was not enough to offset poor sales in physical shops that saw a sharp drop in footfall. * SO WHAT? * This is only going to add to the pressure on UK retailers’ Christmas prospects. Shopping centres saw the worst decline in visitors and Barclaycard stated that, on Friday, the number of transactions went up by 10% versus the same day a year ago, but the transaction value actually went down by 12%. It’s not looking good for UK retailers at the moment, although now EVERYONE is expecting them to have a shocker. If ANY retailer manages to buck the consensus, their share prices will get a major boost as a result.



Accountants BDO and Moore Stephens look at getting together to take on the big boys and Loungers is a rare light on the high street…

BDO and Moore Stephens in plan to challenge top auditors (The Guardian) heralds merger talks between the two accountancy firms which, if successful, would create a fifth firm capable of advising FTSE 100 companies outside the usual “Big Four” (PwC, EY, Deloitte and KPMG), leapfrogging current #5 Grant Thornton in the process. Talks are believed to be at an advanced stage and Accountants merger ‘to be first of many’ (The Times, Deirdre Hipwell) contends that this is move is likely to result in further consolidation in the industry as everyone jockeys for position in taking on the giants. * SO WHAT? * The Big Four will probably be loving this as they are currently under a lot of pressure – even to the extent that their business should be broken up. They will no doubt point to this move as “proof” that the market is getting 

more competitive. However, Rachel Reeves, who is the chairwoman of the Commons business committee that is currently investigating the state of auditing said that “A shake-up of the Big Four market domination is long overdue, but there is a vast gulf between the size of the Big Four and the challenger firms, so while increasing competition is urgently necessary, it can only be one part of the solution. Wider reform will be needed to deliver improvements to audit quality”.

No lounging around amid flotation talk (The Times, Dominic Walsh) highlights a bright spot on the UK high street as café-bar operator Loungers (which owns the Lounge and Cosy Club brands) is due to unveil a strong trading update today, showing a 31.9% jump in revenues due to new store openings. Its robust performance in tricky market conditions is attracting the interest of several brokers looking for a fat flotation fee. * SO WHAT? * This is a very impressive performance for a sector that has seen the likes of Byron, Prezzo, Carluccio’s, Gourmet Burger Kitchen and Jamie’s Italian fall by the wayside and chief exec Nick Collins attributes the group’s success to the broad appeal of its all-day menu. Let’s hope it continues!



And finally, in other news…

I thought I’d leave you today with a bit of Gary Lineker. Not a sentence I’d ever thought I’d say, but if you fancy seeing whether your favourite footy pundit and Walkers’ crisps ambassador has “still got it”, then have a look at the “outtakes” of a recent BT Sport advert:

Some of today’s market, commodity & currency moves (as at 0824rs 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 **
6,953 (-0.11%)24,286 (-0.73%)2,633 (-0.66%)6,939 (-0.48%)11,193 (+0.49%)4.947 (+0.18%)21,828 (+0.87)2,576 (-0.15%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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