Happy New Year! This week’s news includes; MiFID II shakes up finance sector, Apple tangled in device vulnerability bug & slow down scandal and Spotify to launch IPO.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week;
- City A.M looks at The Institute for Fiscal Studies warning that the rise in minimum wage puts more jobs at risk of being taken by robots.
- Lawyer 2B asks what can the law do about fake news?
- Business Insider provides your Bitcoin 101: An essential guide to cryptocurrency.
- Bloomberg asks what’s the future of banking in Britain after it leaves the EU?
- BBC News explains why new regulations threaten the survival of traditional banks.
1. MiFID II SHAKES UP FINANCE SECTOR
Major reform has swept the financial sector in the EU in the form of MiFID II. The second Markets in Financial Instruments Directive (MiFID II) came into force on January 3rd 2018. It aims to bring greater transparency into the industry and protect investors. The new regime affects almost everyone in the financial industry from brokers to investment banks. Across the financial sector, over £2 billion has been spent on advisory services to prepare for these regulations.
Here are some of the main changes brought in:
· Introduces new pre and post trade reporting obligations of prices for traders. This is to improve the transparency of trading, allowing investors to clearly see market prices.
· Fund managers required to separate investment research costs from fees they pay to their brokers
· New limit on the amount of trading that can occur in “dark pools”.
The Financial News explores the changes in more detail.
Apple have revealed that a chip flaw in many Apple products make them highly susceptible to hacking. Two bugs named Meltdown and Spectre are in iPhone, iPad and Mac computer chips and left devices highly vulnerable to hackers. The bugs stem from microchips made by Intel AMD and ARM who collectively hold the vast majority of the global industry market share.
There are no known data breaches resulting from the bug but tech companies are desperately rushing to fix the bugs. Google and Microsoft claim all users with latest security updates are protected. Apple has released some patches as “mitigations” but is still working to resolve the bug. BBC News analyses the product flaws in more detail.
This comes in the wake of the iPhone performance scandal. Apple announced in December 2017 that they intentionally slow down older models when new models are released. The tech giant argues that this is to prolong the life of devices when new operating systems are introduced. This however, can be overcome by replacing the batteries of old models. Apple is now offering battery replacements at all Apple stores for $29. Analysts have however, predicted that this could cost the company $10 billion in sales. It is predicted that many consumers will now opt to replace batteries in old models rather than buy new handsets. (Business Insider)
Check out our insight article Apple v Samsung: The Business Behind the Battle for an insight into the smartphone sector.
3. ICELAND TACKLES GENDER PAY GAP
Iceland has become the first country in the world to make gender pay gaps illegal. New rules came into force last week, obligating employers to prove that they pay men and women equally. This applies to companies with 24 employees or more and fines will be imposed on those who fail to prove this. Globally, women currently earn $9,000 less than men on average. (City A.M)
This comes in the same week as Google was sued in the US by former female employees who allege they were paid less than their male counterparts (see Number 9 below).
4. DEUTSCHE BANK
Deutsche Bank is about to take a 1.5 billion euro hit due to Donald Trump’s tax reforms. Despite the reforms introducing tax cuts, it will require revaluations of tax assets & liabilities. The German bank announced that this would see it suffer a small full-year loss. The tax reform will see corporation tax cut from 35% down to 21%. The reforms will have no notable long term effects. The bank has also issued a profit warning due to an expected 22% decline in its fixed income, equity and finance businesses. (City A.M)
Deutsche Bank has also been forced by the European Central Bank to raise its capital holdings. Banks must hold 4.5% of their assets as common equity but “systematically important” banks may be required to hold more. Deutsche Bank now must hold 10.65% up from 9.52% in 2017. (City A.M)
5. INVESTMENT BANKS BREAK RECORD M&A ACTIVITY
Investment banks had a record breaking year in M&A. Banks collected a whopping $104 billion in fees. The total value of deals amounted to $3.5 trillion. Some of the most notable acquisitions through the year were; Disney’s $66 billion acquisition of 21 Century Fox assets, Amazon’s acquisition of Wholefoods and the completion of Verizon’s acquisition of Yahoo. (The Guardian)
Morgan Stanley advised on the largest share over takeovers in the past year. They advised on roughly $136 billion worth of deals. Morgan Stanley dethroned Goldman Sachs who advised on deals totalling $133 billion. (City A.M)
6. OIL PRICES HIT 2 YEAR HIGH
Oil is back on the rise. Brent crude prices hit $67 a barrel last week, the highest price since May 2015. The current political crisis in Iran is likely to have an impact on oil prices if it continues. Iran is one of OPEC’s largest members. Sky News looks closer at what Iran’s unrest means for oil prices.
While most analysts are optimistic, some analysts are concerned that if the US raises shale production this could serious disrupt this rise. City A.M explores the oil sector in more detail.
Spotfiy has officially filed for an IPO. It hopes to launch its flotation by June and was valued at $19 billion. Spotify is the most popular streaming service in the world with over 140 million users. Financially however, despite its $3.3 billion turnover in 2016, it has never made a profit since its founding in 2008. (City A.M)
Spotify was also sued for £1.1 billion by Wixen Music Publishing for failing to pay out royalties to its artists. As a result, they argue Spotify does not have the rights to host these songs. Wixen also claim that over 20% of songs available on the music streaming platform are not properly licensed. (Sky News)
8. GOLDMAN TO SET UP CRYPTO DESK
Goldman Sachs has announced that it will be setting up a Crytocurrency trading desk this year. This is a serious vote of confidence in a market that has been largely criticised by the industry. Goldman is setting up its team in new year and is the first Wall Street firm to make markets in cryptocurrencies.
This signifies the beginning of cryptocurrencies shift into the mainstream. In December 2017, CME Group and CBOE launched Bitcoin futures on their exchanges. Bloomberg looks closer at Goldman’s plans.
9. GOOGLE FACES GENDER PAY GAP LAWSUIT
Google has been sued for allegedly paying female employees less than male counterparts. The case has been brought forward by four former female employees who take aim at Google’s methods when setting starting salaries. They claim Google unlawfully requests disclosure of previous salaries when hiring and base starting salaries on this. It is argued that as result of this, men tend to receive higher starting. The practice has been banned in California for this very reason. Google claims that no such pay gap exists. (Sky News)
10. ALDI POSTS RECORD SALES
Thanks to a strong Christmas performance Aldi made record sales of £10 billion. Sales in December 2017 were 15% than in December 2016. This was largely due to increased sales in its premium range product over the Christmas period. Budget supermarkets such as Lidl and Aldi have been slowly eating at the market share of larger competitors. Aldi now has a market share of 6.9% and it is growing. The price wars we have seen in recent years seem set to only continue. (The Independent)