This week’s new includes; Capita Crisis, Amazon get into healthcare, Why the cryptocurrency market crashed and Apple’s latest sales figures
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:
- Business Insider claims that the US could be on its way to a cash free economy.
- Lawcareers.net and Shoosmith’s question what will the regulations on gender pay gap reporting mean for employers in 2018?
- Business Insider looks at how artificial intelligence can help retailers deliver the highly personalized experiences shoppers desire.
1. CAPITA CRISIS
Another large government contractor, Capita, issued a profit warning last week. Capita hold a number of government contracts such as congestion charge and BBC license fee collection. Many fear that Capita may suffer the same fate as Carillion and plunge more suppliers into trouble.
Capita’s struggles derive from its presence in too many markets where it fails to “maintain a competitive advantage”. It had also been struggling to obtain new contracts. The firm’s share price fell by 47.5%, losing over £1 billion of stock market value following the news. Had this warning not happened so close to Carillion’s demise, the reaction may not have been as severe.
There have been assurances from the government that Capita is not in a similar position to Carillion. Financially, Capita is much stronger than Carillion and analysts are still confident that Capita could recover if it restructures successfully. The firm has revealed that it will cut jobs from its 67,000 strong workforce and suspend dividend payments. Carillion was criticised for continuing to pay dividends despite being in severe financial trouble.
BBC News explores the financial trouble of Capita in more detail.
2. AMAZON, BERKSHIRE HATHWAY & JP MORGAN ENTER HEALTHCARE
Amazon, Berkshire Hathaway and JP Morgan have revealed plans to launch a joint healthcare company. The company would provide a simplified healthcare system for their combined 500,000 US employees. Healthcare costs in the US are the most expensive in the world and accounts for 18% of the US economy. Companies in the US provide healthcare cover packages for their employees but spiralling costs eat at company profit margins.
The trio aim to develop strategies and technologies to massively cut costs. They also aim to cut out the “middle men” such as health insurers to provide greater efficiency. No official strategy has been announced but this could be a major disruptor in the US healthcare and insurance industry. Shares in healthcare companies fell in response to this news.
Reuters looks at this development in more detail.
3. VW DIESEL TEST SCANDAL
VW is investigating claims that it carried out diesel fume tests on monkeys and humans. According to the New York Times, EUGT (European Research Group on Environment and Health in the Transport Sector) ,a body funded by VW, Daimler and BMW carried out research in a US lab to defend the environmental impact of diesel.
Monkeys were locked in airtight chambers and exposed to diesel exhaust fumes. Some were exposed to fumes from older car models, others to newer models. The fate of the monkeys is unknown. All three car manufacturers expressed shock and have denied any involvement in the research. VW has launched an investigation into the allegations.
VW is still reeling from its diesel emissions scandal in 2015. It has taken a $30 billion hit since it was revealed they fitted software to cheat on emissions tests. (Sky News)
4. WHY DID THE CRYPTOCURRENCY MARKET CRASH?
The volatility of the Cryptocurrency market is both a blessing and a curse for investors. Investors can see exponential gains in the 10,000’s percent but as we saw last week, market corrections of 50% or more can occur within short timeframe (The Guardian). The increased publicity of Cryptocurrency has introduced unprecedented hysteria and immaturity into the market. The market has now become exceptionally sensitive to news. Here are some of the key market moving stories from last week;
- A huge driving factor was a misleading report from India that the government is looking to ban all cryptocurrency. India will not ban crypto trading completely. The government stated they do not consider it legal tender and laid out their intention to take a hard-line approach on illegal activity financing through cryptocurrency. This ambiguous comment sent prices plummeting. (The Independent)
- Facebook announced that it would ban all adverts promoting cryptocurrencies and ICO‘s due to the high number of scams emerging. (BBC News)
- Some positive news did come from South Korea. The Korean government revealed that they would not ban cryptocurrencies as was feared. Even this news however, could not buoy prices as expected. (The Independent)
- Cryptocurrency exchange Coincheck suffered a hack in which $533 million of currency was stolen. Despite, the company agreeing to refund customers over $423 million from their own funds, this news led to a slump in the prices of all cryptocurrencies. (BBC News)
All of these factors in the week hammered the market. Further regulation and. The meteoric gains seen in December 2017 were opportunistic speculation but did not represent sustainable growth. Following this market correction, we may now see steadier growth and a more stable market. Bitcoin is currently worth, $8,950 which is still nearly a 900% increase from the same time last year.
5. US RETAILERS PHASING OUT CD SALES
U.S retailers Best Buy and Target have issued huge blows to the waning CD market. Best Buy informed suppliers that all CD’s will be taking down all CD’s from its shelves from July 1st. Best Buy have an annual revenue of nearly $40 billion yet CD sales are only bringing in $40 million of this. It will continue to sell vinyls for at least 2 years, partly due to growing demand. Target has taken a less aggressive stance and will now only take supplies a consignment basis. This means music suppliers will take on an inventory but ship back any unsold CD’s for credits. (Billboard)
Streaming services are beginning to take over as younger generations move from physical copies. It the US last year, CD sales fell by 18.5% and show no signs of recovery. Some good news for the music industry came from the regulators. The Copyright Royalty Board have now increased the royalty payments that music streaming companies must pay to artists and publishers. (Reuters)
6. BIG BANKS SETTLE $46 MILLION LAWSUIT OVER MARKET SPOOFING
HSBC, Deutsche Bank and UBS have settled with US regulators over alleged market manipulation. The Commodity Futures Trading Commission alleges that these 3 banks and 8 individuals were involved in an unlawful practice called “spoofing” in relation to metals and equities futures. Spoofing is where an order is placed to buy or sell assets without the intention to execute the trade. By placing the orders , entities can manipulate the market price of futures contracts.
The banks paid a total of $46.6 million to settle the cases. They all provided assistance in the CTFC’s investigation and so their penalties were lowered. Deutsche Bank paid the lion share of $30 million, while UBS and HSBC paid $15 million and $1.6million respectively. (Sky News)
7. SHELL PROFITS
Royal Dutch Shell has been reaping the benefits of increased oil prices. The oil and gas giant posted a 242% increase in annual profits. When oil prices hit lows of $30 a barrel in 2016, Shell, and the whole industry suffered. Many jobs and business lines were cut as a result. Since then, OPEC has decided to cut production and oil prices have soared to $70 a barrel. This recovery led to Shell posting £8.5 billion and deemed 2018 as a “year of transformation”.
Sky News looks closer at the gains.
8. APPLE SALES
Despite seeing a fall in iPhone unit sales, Apple’s profits rose. The number of iPhone’s sold in the last quarter of 2017 fell to 77.3 million, 1% lower than 2016. With iPhone X starting at $1,000 and other new iPhone prices increasing by $100, Apple now makes more money from each handset. This allowed the tech giant to offset this marginal decline in sales. Quarterly profits hit a record $20 billion, showing a 13% year on year increase.
Despite this minor dip, there are over 1.3 billion active Apple device users worldwide. The constant use of services such as Apple pay ensures constant revenue with huge growth potential. Shares jumped by 3% in response to the news.
It will be interesting to see how responsive sales will be the battery slow-down saga. In December, Apple revealed that they intentionally slow-down older models, to “prolong the life” of the phone. Apple will now offer this as an optional feature on older handsets and offered. They are also offering heavily discounted battery replacement services at Apple stores. Analysts believe this could significantly affect revenue as consumers may simply replace batteries rather than upgrade.
9. KFC TRAINING CONTRACT
Kentucky Fried Chicken (KFC) has teamed up with Eversheds Sutherland to launch its own training contact scheme. The trainee will begin as a paralegal and the training contract will soon follow. The fast-food chain identified the opportunity for growth for a trainee within KFC, given the current legal framework . Corporate/paralegal experience is preferred but a 2:1 degree is not required. According to LinkedIn, since the job vacancy was posted over 150 candidates have applied. (Legal Cheek)
10. MORRISSONS TO CUT 1,500 JOBS
Morrison’s is feeling the pinch of the supermarket price wars and will now cut up to 1,500 jobs. The jobs will be cut in managerial positions in favour of increased customer facing roles. Over 1,700 customer assistants will now be hired and 800 managerial vacancies are open for application. This marks a shift towards better customer service with more feet on ground rather than management.
Aldi and Lidl are putting increasing pressure on the major supermarkets. The pressure has only been exacerbated by the fall in the value of the pound following the Brexit vote. Fortunately, sterling has been picking up against the dollar and currently stands at $1.41. Both Tesco and Sainsbury’s have recently announced restructuring plans as greater efficiency will be crucial for them to stay dominant. (Sky News)