This week’s news includes; US Supreme Court allows sports betting, UK government cracks down on fixed odd betting, YouTube launches streaming service, JP Morgan gets into crypto
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:
- The Independent asks whether Does the Royal Family really make financial sense for the UK economy?
- Investopedia explains how Will Meghan Markle’s Finances Change After Saturday’s Royal Wedding
- City A.M looks at the secret bailout system the EU doesn’t want you to know about.
- The Independent Could the big four accountancy firms be broken up and what would happen if they were?
- The Independent explains Why we need to protect our income from robot automation.
1. US SPORTS BETTING
The US Supreme Court has opened the door to sports betting. Federal Law has explicitly prohibited sports betting in most US States since 1992. The Supreme Court struck down the law and upheld a decision in Neveda which allowed sports betting a race tracks and casinos. The court deemed legislation on sports betting a decision for state, not federal level. This opens the door for states to legalise or ban sports betting to whatever extent they see fit.
Critics in the sporting world claim it may undermine the integrity of competition. This development will however, come as relief for gambling companies and websites. In the UK, the government has been clamping down. Access to a new, bigger market of sports will certainly boost the books of the bookies.
Investors also backed this logic and share prices of gambling companies soared. Paddy Power Betfair’s share price rose 10.5%, 888 Holdings jumped 14%, William Hill’s stock gained 9.4
In spite of legislation, billions of dollars of illegal sports bets are placed every year in the US. (BBC News)
This will come as welcome news for many of the global gambling firms. The UK has taken a more hostile approach to them recently (see Number 3 below). This move will help them balance the books.
2. WTO RULES ON AIRBUS SUBSIDIES
The World Trade Organisation has ruled that the EU has granted unlawful subsidies to Airbus and failed to comply with requests to end the Subsidisation. This decision is significant as it enables the US to issues tariffs on EU goods and services. The WTO will determine what rate of tariffs can be issued.
The USTR argued that European countries had given $22bn in state aid to Airbus to help launch its A380 and A350 jets, causing losses to US rival Boeing.
The EU however claims that most points of contention were addressed in 2011. The EU is only non-compliant in a few minor areas, not warranting such a ruling. Airbus is also awaiting verdict on a case against the US. Airbus claims that similarity, the US grants unlawful subsidies to Boeing. (BBC News)
3. UK FIXED ODDS TERMINAL BETS
The government has slashed the legal maximum bets that can be placed on fixed odd betting terminals. The maximum bet has been cut from £100 every 20 seconds to just £2. The measure is introduced to tackle problem gambling, which is heavily exacerbated by fixed odd betting terminals. This will see changes will impact slot machines and digital roulette wheels. The government called fixed odd betting terminals the “crack cocaine of gambling” due to their exceptionally addictive nature.
Under current limits, users can spend as much as £1,800 every hour. There have been horror stories where people have lost over £40,000 in one day. The new limit was based on research showing that multiple stakes as low as £5 often lead to thousands of pounds in losses. Average stakes £2 or under did not result in such huge losses.
This decision has faced significant criticism from those in the industry. The association of British Bookmakers believe that 21,000 jobs could be lost due to this measure. William Hill said it may have to close 900 stores due to this. 70% of revenue is currently from stakes above the £2 limit. They believe it is unlikely that they will bring in anywhere near this amount from £2 stakes. It shares crashed 6.5% in response to this announcement.(Sky New)
4. YOUTUBE STREAMING
YouTube has announced it will launch its own music streaming service. YouTube music will go live on May 22. There will be a version with ads and a paid version. The paid version will cost $9.99 a month, the same price as Apple Music and Spotify.
This announcement sent jitters across the industry. Spotify shares fell by 2.5% while Pandora shares also fell by 2%. Spotify dominates the music streaming industry. It currently has over 71 million subscribers worldwide. Despite this however, it has not made a profit. It has also faced significant criticism for failing to adequately pay artists. YouTube will prove a worthy adversary given the scale of its user base. YouTube has over 1.5 billion monthly users.
5. FTSE HITS RECORD HIGHS
The FTSE 100 hit 7,787.97 last week, less than 5 points short of its all time high. The climb was largely due a good week for oil companies. Oil prices broke $80 a barrel after Trump abandoned the Iran nuclear deal and issued further sanctions. BP and Royal Dutch Shell shares rose 1.4% and 2.4% respectively. Overall the FTSE Rose 0.7% with travel site Experian the highest earner. Share in the travel comparison website rose 5.6% after strong annual results.
These companies are multi-national companies and have all benefitted from the slight dip in the value of the pound recently. In the past month sterling has fallen to $1.35. Analysts however, do often warn that the FTSE 100 is not indicative of national economic health. The Guardian analyses this further.
6. APPLE EU TAX BATTLE
Apple will have to fight the EU in its back taxes dispute without US support. The US has requested to intervene in the case but have been struck down. They claimed that if Apple paid more taxes in Ireland, they would claim more tax credits, affecting the US economy. The ECJ ruled that this was not sufficient and the US government did not have a direct interest in the result.
In 2016 Apple was ordered by the EU commission to pay back $13 billion in taxes to Ireland. Apple’s tax arrangements in Ireland constituted an unfair advantage. Read Bloomberg’s report for more.
7. JP MORGAN GETS INTO CRYPTO
JP Morgan has begun exploring a cryptocurrency strategy. It has instructed its In Residence FinTech program head, Oliver Harris. to develop this plan. He will take on a new role as head of Crypto assets strategy. The purpose of this is to get involved with Crypto projects rather than directly trade Assets.
JPMorgan’s In Residence programme, partners with innovative fintech start-ups. Harris has been running this for two years.
This is a complete u-turn from CEO Jamie Dimon’s previous rhetoric. In September 2017 he called Bitcoin a fraud and said people trading it stupid.
Crypto currency appears to be breaking it way into Wall Street. In December 2017 CME launched Bitcoin futures contracts. Earlier this month, Goldman Sachs announced that it will start offering cryptocurrency derivatives and will trade Bitcoin futures. (Business Insider)
8. MOTHER CARE JOBS CUTS
Mothercare has announced that it will be cutting 50 stores putting 800 jobs at risk. This forms part of its company voluntary agreement (CVA) designed to restructure the business which was agreed by creditors last month.
This will leave only 78 Mothercare stores in the UK. As part of its company voluntary agreement it will seek rent reductions for 21 of these outlets. The company will also reinstate its former chief executive, Mark Newton-Jones, despite firing him only last month.
The retailer has been losing its allure with young parents and its struggling financially because of this. Consumers are turning to supermarkets for basic needs and specialists for more specific baby goods. Mothercare posted a loss of over £72 million for the year ending March 2018.
9. CARLUCCIO’S CLOSURES
Carluccio’s will close a third of its restaurants. The Italian restaurant chain has been struggling like many in the casual dining sector. This move forms part of its CVA and creditors will vote on whether the proposals are sufficient on May 31. If approved 34 underperforming sites will be closed and the remaining sites will pay reduced rents. In 2018 Prezzo, Jamie’s Italian and Byron have all entered CVA’s.
10. EASYJET REVENUE SOARS
EasyJet revenue rose by 15% to £2.2 billion in its half year results. This is the first time its revenue has exceeded the £2 billion mark.
EasyJet has been consistently making a loss in recent years but it is steadily cutting away at it. The airline made a loss of £68m compared to a £236m loss over the same period last year. The only reason for the loss this period was due to its acquisition of failed airline Air Berlin and associated costs.
The airline benefited from reduction in capacity from other airlines the collapse of Monarch last September as its 10 million customers became up for grabs. Check out City A.M’s report for more information.