Below are our top 10 stories from the Christmas period 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.
- Financial Times are chief executives overpaid?
- The Guardian How legal aid cuts filled family courts with bewildered litigants
- CNBC Bank of America-Merrill Lynch sees stocks struggling through the first half of 2019
- BBC News When is a sale actually a sale?
- City A.M Why 2019 might be a better year for investors
1. GATWICK DRONE DRAMA
There was chaos at Gatwick Airport during the week before Christmas, as drones over the airspace caused a shutdown. Between 19th and 21st December 2018, the runway was closed, leading to the cancellation of roughly 1,000 flights, causing disruption for over 140,000 passengers. The military were quickly called in to deal with the matter. There were over 90 credible sightings of drone activity near the runway from staff & police, but no videos or photographs of a drone were received. A damaged drone on the airport boundary was however, recovered by police. The police have said whether there were more drones or any drones at all is not totally clear.
Following the incident, both Gatwick and Heathrow announced planned to spend millions on anti-drone technology. The RAF technology detects and jams communication between drones and operators.
The culprit/s and the motive behind the activity remain unknown. A couple from Crawley were arrested and interrogated for 36 hours but later released without charge. The compensation cost for the airport is likely to run into millions.
2. US GOVERNMENT SHUTDOWN
The US government saw a partial shut down over the Christmas period as a spending bill could not be approved. Budget discussions between President Trump and Democrat Senators broke down over the issue of Trump’s campaign promise of a wall on the US-Mexico border. The spending bill included $5.7 billion for the construction of a wall. Democrats assert that a concrete wall is ineffective and the money can be better used for investment in technological solutions. Democrats offered $1.3 billion to maintain current border security, including increased border fencing and technology. President Trump however, deems this insufficient so will not budge. He has even threatened to close the border entirely if the funding is not approved.
Even though the Senate is held by Republicans, legislation requires bipartisan support. 60 votes are needed to pass the bill, Republicans hold 51 seats and the Democrats hold 49.
During the shutdown, 400,000 non-essential civil servants have been forced to take leave without pay and a number of public services/facilities are closed. Nine departments including, State, Homeland Security, Transportation, Agriculture and Justice have all partially shut down. The shutdown is still ongoing and there is no end in sight. (BBC News)
3. GSK- PFIZER MERGER
GlaxoSmithKline and Pfizer announced that they will merge their healthcare businesses, creating a £10 billion pharmaceutical behemoth. The two largest players in the pharmaceutical industry will create the largest seller of over-the-counter (OTC) medicines such as Voltaren and Panadol. GSK will own 68% of the business while Pfizer will own the remaining 32%.
The merger will lead to reorganisations and potentially job cut but the full details are not yet clear. The combining business is expected to float by 2021. The business will have revenues of roughly £9.8 billion.
This merger will allow GSK to split into two businesses. One side will focus on OTC products, the other side on pharmaceutical research and vaccines. This is a bold move given the consistency in income from consumer pharmaceuticals. Drug research costs are rising and without regular develops & breakthroughs incomes can quickly dry up. Although now, more resources can be diverted to the research arm allowing for greater specialisation. The move pleased investors however, as GSK’s share price rose by 7% in response to news.
4. US MARKETS
The US stock markets saw a very mixed Christmas but ended the year on a low. Christmas Eve was the worst ever for US equities as the S&P 500 and NASDAQ entered a “bear” market. All sectors of the S&P 500 index fell into the red for December. The Dow Jones fell 653 points below 22,000. Boxing day saw more festive cheer in the market as the Dow Jones recorded its largest one-day gain ever of 1,086 points.
On New Year’s Eve markets continued to rise but despite the claw back, the Dow Jones suffered its largest annual fall since 2008. December 2018 was the worst December for US financial markets since the Great Depression.
The sell-off’s have been largely triggered by the Federal Reserve’s decisions to consistently increase US interest rates. In December the Fed increased rates for the fourth-time in the year and signalled further hikes in 2019. Increases rates increased to a range of 2.25% to 2.5%. Markets were not confident that the economy was strong enough to warrant another rate hike. The rate hike coupled with the US trade war with China and falling oil prices, have made the markets nervous. It will be interesting to see how markets will react to the inevitable challenges of 2019.
5. APPLE SALES STAGNATE
Apple lowered it’s sales forecast for the first time in nearly 20 years. It had previously predicted 4th quarter sales of $89 billion but now expects $84 billion.
This news rattled investors as Apples share price slumped 7%. After the highs in August where it hit a $1 trillion market cap, Apple has shed 28% off its share price since November. Apple has now fallen below $700 billion, falling behind Amazon, Alphabet and Microsoft in value.
The low sales have been blamed on weak demand in China due to economic deceleration in the region. Apple has relied on China to provide large influxes of new customers, but this appears to be drying up. The Greater China region accounts for 20% of sale.
The challenge for apple will be to increasing demand for its flag ship product, the iPhone. Its ancillary services such as Apple Music and the Apple Watch do not generate enough revenue to keep profits figures afloat, and to keep investors happy. Fewer than expected people upgraded to new iPhones model as a Apples technological innovative edge wanes.
6. ASOS PROFIT WARNING TRIGGERS SELL OFF
Not even ASOS is immune to the downturn in retail. After years of consistently strong growth, ASOS issued a profit warning. It claims that it is no longer on track to hit it’s previously estimated 25% year on year sales growth and would instead be 10% lower than anticipated.
ASOS has been unable to sell as many high priced but profitable products. It had to put on a number of sales and promotions which ate away at profit margins but still did little to entice customers who are becoming increasingly reluctant to part with their cash. As a result, ASOS sales worldwide fell notably short of expectations in the 3 months to November of 2018.Overall sales growth rose by 14% but average value and size both fell by 3%
This news was catastrophic for its share price. Shares in ASOS fell 37% to a 3 year low, chopping a staggering £1.2 billion off its value in a matter of hours.
Its not just ASOS feeling the pinch. Across the sector there has been unprecedented levels of discounting. Competitor Boohoo also warned of poorer than expected sales and saw double digit share price drops. In the run up to Christmas retailers warned that footfall is reaching historic lows. Christmas sales usually balance the books for many retailers but with such poor sales throughout the year and minimal sign of significant Christmas boost watch out for more store closures in 2019.
7. MALAYSIA SUES GOLDMAN
The Malaysian government has launched criminal action against Goldman Sachs in connection with the 1MDB money laundering scandal. The scandal saw over $2.7 billion stolen from the 1MDB Malaysian development fund. The thieves used over $1.7 billion of this money to purchase extravagant assets, ranging from private jets to Picasso Paintings.
The investigation will now review 3 bond offerings which the investment bank arranged and underwrote, raising $6.5 billion for the fund. The prosecutors will seek to recoup the stolen funds as well as over $600 million in fees to Goldman Sachs.
Goldman Sachs denies all wrongdoing and claims the allegations are misdirected. Two of the former Goldman bankers have been arrested and face up to 10 years in prison. The financier Jho Loo is still on the run from authorities but protests his innocence.
8. HMV FALLS INTO ADMINISTRATION
HMV fell into administration for the second time. The entertainment retailer that was rescued by Hilco in 2013 has run into trouble again due to falling sales. The firm has now appointed KPMG to oversee the administration process. The company will seek to a new buyer but this may prove challenging given the poor health of the retail sector and broader economic uncertainty.
HMV is another casualty of the battered high street. It was one of the major high street shops that fell victim to the digital era. HMV was and is a market leader in physical music and DVD sales but demand is waning. HMV accounts for 1/4 of all DVD sales but sales fell 30% from last year. This was reflected in the pre-tax loss of £8.7 million in 2016. HMVs 125 UK stores will remain open and the store will still accept gift cards.
Check out The Guardian’s report for more information on the collapse.
9. UK STOCK MARKET
2018 saw the largest one year fall in FTSE 100 since 2008. In a year riddled with crises and uncertainty the FTSE 100 saw £240 billion wiped off it’s value over the year. By December, the index lost nearly 20% of its value from it’s record highs in May.
Brexit related uncertainty in the construction industry saw house building firms lose Along with wider macro economic shocks individual companies suffered serious losses over the year due to other industry related factors. British American Tobacco dropping 48% over the year following a US crack down on menthol cigarette sales. Although somewhat bleak, the fall in the FTSE is still a far cry from the 30% plus crash in value witnessed after the 2008 financial crisis.
10. SPOTIFY SETTLEMENT
Spotify has reached a settlement with a number of artists in a $1.6 billion lawsuit. Wixen Music claimed that Spotify had failed to fully pay publishers and artists. This was in relation to over 10,000 songs made available on Spotify. Wixen represents a number of artists such as the Black Keys and Neil Young. Wixen had sought to claim damages $1.6 billion. The case was settled before reaching court for an undisclosed fee.