Week 41

10 October – 14 October

 

10 October

 

The pound remained under pressure on Monday as negative sentiment towards the UK persisted, prompting analysts to expect further falls despite the market already being heavily positioned to sell sterling.

 

Investors in Ukrainian assets have been well rewarded on the back of the country’s improved economic performance. The local currency UX equity index is up 22 per cent year to date while the Euro denominated WIG-Ukraine Index is 33 per cent higher. That compares with a 15 per cent gain in the MSCI EM Index over the same period. Debt instrument investors have also shared in the gains with, for example, the yield on Ukraine 2020 sovereign debt dropping from 9.8 per cent at the start of the year to 8.2 per cent in early October. The performance of some corporate issues has been even better with, for example, the yield in the MHP 2020 Eurobond dropping from 12.1 per cent to 9.4 per cent in the same period.

 

The State Council signed off on debt-for-equity swaps — the subject of a fierce policy debate this year — as part of a broader effort to reduce corporate indebtedness in the world’s second-largest economy. Chinese companies have accumulated about $18tn in debt, an amount equivalent to 170 per cent of gross domestic product.

 

Doosan Bobcat, the South Korean maker of earth-moving equipment, has pared back its $2.2bn public float because of low demand, marking the second big blow for the country’s equity markets this year

 

11 October

 

The euro was down about 0.56 per cent against the dollar while sterling dropped 0.62 per cent, with no sign that the pressure put on the pound last week by concerns about a “hard Brexit” and Friday’s “flash crash” was relenting. The US dollar was up about 0.7 per cent versus the Japanese yen.

 

With Ferrexpo accounting for more than 10 per cent of the global pellet market, the benefit of rising prices to its stretched balance sheet could be “very material over the next six to 12 months”, said Credit Suisse.

 

Oil rose to its highest level in a year after Russian president Vladimir Putin said that he backed efforts for a production cap in the clearest sign yet that the country would join any global supply pact.

 

Profits at UK fashion retailer Ted Baker have increased by a fifth in the first half of the year, while revenues also rose 14 per cent despite “challenging” trading conditions on Britain’s high streets.

 

12 October

 

US PC shipments rose 1.7 per cent in the third quarter from a year ago to 17.6m units, according to preliminary data on Tuesday from research firm International Data Corp. This was the second consecutive quarterly gain, with shipments rising 4.9 per cent the previous quarter.

 

The pound slumped in late trading on Tuesday, firmly establishing sterling as the worst major performing currency this year as investors grow increasingly alarmed at the prospect of a severe rupture between the UK and EU.

 

The US dollar ticked up on Tuesday as most other major world currencies slid, particularly the British pound, which was beset by Brexit concerns. The Japanese yen, however, managed to eke out gains against the greenback

 

Fujitsu is cutting up to 1,800 jobs in the UK, in what a union described as a “hammer blow” for employees. The Japanese IT equipment and services company said it needed to become more efficient, as companies moved storing their data from its big mainframes on to remote servers.

 

13 October

 

Britain faces having to pay €20bn to leave the EU. The fee, worked out by the FT, represents just a sliver of the EU’s €300bn of outstanding liabilities, covering everything from eurocrat pensions to promises of infrastructure spending in eastern Europe.

 

Consumer prices in Germany hit 0.7 per cent last month compared to September 2015, according to a final confirmed reading from Destatis, which said inflation was pushed up by a smaller falls in the price of energy.

 

Toyota is exploring technology collaboration with smaller rival Suzuki, marking the latest addition to its network of industry partners that help it cut the costs of developing next-generation cars.

 

Samsung Electronics has slashed its estimate for third-quarter operating profit by a third, as the withdrawal of the fire-prone Galaxy Note 7 smartphone burns a hole in its bottom line.

 

14 October

 

The Anglo-Dutch company said underlying sales rose 3.2 per cent in its third quarter year on year, better than analyst expectations, while underlying volumes fell 0.4 per cent in the quarter — the biggest drop in seven years. But Unilever increased prices 3.6 per cent to help offset flagging sales and to recoup higher commodity costs, especially in countries with weak currencies against the dollar, such as Argentina and the UK.

 

Snapchat will lead its generation of high-value technology start-ups into the public market after firing the starter’s gun on a US initial public offering that it hopes will put a value on the messaging start-up of between $20bn and $25bn.

 

China made a return to global investors’ radar screens as concerns about the country’s growth outlook fuelled a wave of risk aversion, driving stocks lower almost across the board and lifting demand for government bonds, the yen and gold.

 

Investors are selling out of long-dated government bonds as worries about the corrosive effect of inflation start rivalling with central bank stimulus as the driving force in capital markets.