Top 10 Stories of Last Week! 02/12/2019

The week’s news included; Saudi Aramco boasts largest IPO in history, US threatens $2.4 billion tariffs on French goods, Clintons card shop rescued, Peloton loses $1.5 billion in value after Xmas advert

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: 

  • Sky News – Euro bank chief’s climate mission ‘taking things too far’
  • Open Democracy – Why the UK needs a Financial Transaction Tax
  • Bloomberg – How Deutsche Bank Drifted Into Its Whirlpool of Woes

1. SAUDI ARAMCO IPO

Saudi Aramco cemented its place in history with the world’s largest ever IPO, raising $25.6 billion. The state-owned oil giant sold 3 billion shares at 32 riyals. Aramco shares we’re listed only on te Saudi Stock exchange as New York and other bidders we’re snubbed. Fundamentally, the legal complications with listing abroad proved too substantial to make it commercially viable.

The listed shares only account for 1.5% of the company’s total shares but there is still an option to sell more shares. With this huge feat, it also secures the trophy of most valuable public company. Saudi Aramco is now valued at $1.7 trillion, a cool $685 billion ahead of its nearest competitor, Apple. The figure, however, also falls short of Saudi Arabia’s envisaged $2 trillion valuation. The funding raised from the IPO is to help the Kingdom diversify its economic income and reduce its reliance on oil. Saudi Aramco is also the world’s most profitable company posting $111 billion in profit.

2. US THREATENS TAX ON FRENCH GOODS

Donald Trump has threatened to impose tariffs on $2.4 billion of French goods in response to France’s new digital service taxes. France recently approved a new tax aimed at tech giants such as Google, Amazon and Facebook to prevent tax avoidance. The tax will see a 3% tax on companies with revenue over €750m, where over €25m of this is generated within France. In practice, around 30 companies will be subject to this tax, predominantly US tech firms. This was announced in July and sparked outrage from US lawmakers who felt US firms were unfairly targeted.

Now, the US administration has published a list of French-made goods that could be subject to tax. Some of these goods could be subject to tariffs equal to 100% of the import price. There will be a public hearing next month before the US retaliatory tax is confirmed. BBC News explores whether the UK could also introduce its own tax.

We explore the merits of a digital services tax in our insight article.

3. HUAWEI TAKES US TO COURT OVER BAN

Huawei has taken legal action against the US over its decision to class it as a threat. The Chinese tech giant asserts there is no threat to security and has gone to the US court of Appeal to overturn the decision. Huawei demand the US show substantive evidence that it poses a threat to national security.  Huawei is one of the world’s leading 5G technology companies and has been vying for contracts to build infrastructure across the world. The US has been pressuring allies not to grant Huawei contracts. Huawei has also legally challenged the US decision to ban US agencies from buying its equipment. This case is still in the courts.

4. ITALY’S LARGEST BANK SLASHES JOBS

Unicredit has announced plans to cut 8000 jobs in a move to improve profitability. Italy’s largest bank has been struggling with a weak global economy and negative interest rates. Shareholder return has also been weak for Unicredit investors and the bank is determined to change this. These cuts will see 10% of its workforce go in a bid to make €1 billion in savings. Most of these cuts will be due to the 500 planned branch closures across Italy. Branch closures have been endemic across Europe as footfall declines and banks are forced to shift towards digitalization.  Unicredit boasts 28 million customers in Europe.

5. UK’S LARGEST PROPERTY FUND SUSPENDED

The UK’s largest property fund run has been temporarily suspended due to Brexit uncertainty and severe downturn in the retail sector. M&G’s £2.5 billion property portfolio fund has declined by £1.1 billion this year alone. The portfolio has investments in 91 large UK commercial properties which include shopping centres and retail property. Last week, the investment firm suspended withdrawals from the fund, but it also waived the annual charge for investors. Fundamentally, M&G could not liquidate properties fast enough for the numerous investors looking to withdraw. The suspension will be reviewed every 28 days to allow for time for assets to be sold off. The fund was also suspended in 2016, following a flurry of withdrawal requests after the Brexit referendum.

6. GERMAN INDUSTRY TAKES HIT

Germany’s industrial output dipped in October, signalling warning signs for the Germany economy. Output fell by 1.7% despite analyst’s prediction of a 0.1% rise. Manufacturing goods orders were also down by 0/4% in October.  Fortunately, however, there are some signs that this trend is due to subside, and Germany’s industry will stability. Manufacturing is the core of the German economy and accounts for over 20% of the Germany economy. Germany is the powerhouse of the Eurozone economy so weak growth figures could spell trouble for the bloc.

7. CLINTONS RESCUED

Greetings cards store Clintons has been rescued from collapse, saving 2500 jobs. The deal will see the firm sold fully to back to a company owned by Clinton’s ultimate owners, the Weiss Family. This forms part of a prepack administration process, allowing all 334 stores to remain open and the company to trade through the crucial Christmas period.  This rescue deal was a final resort as Clintons was unable to secure a CVA. The CVA would have required a restructuring, including store closures and the firm would request rent reductions from landlords. Clintons did not receive the backing to follow through with to strike a deal with the CVA. Clintons has suffered heavily due to increased availability of online competitors and lower footfall on the high street. Whether this deal will be sufficient to sustain Clintons in the long run remains to be seen.

8. MOTORISTS GO TO COURT OVER DIESELGATE

Motorists have launched legal action against car manufacturers in the UK over the “dieselgate” scandal. The High Court is hearing submissions against Volkswagen. VW admitted to installing devices in 11 million diesel cars allowing them to register lower emissions in test conditions but on the roads, emissions were exponentially higher than in tests. 1.2 million of the affected models were in the UK. The devices were fitted in numerous vehicles in the Volkswagen group including Audi, Skoda and SEAT. VW claim that the devices optimised performance in test conditions but contends it was not the legal definition of a “cheat device”. VW also contends that the claimants did not suffer any loss due to the devices. The case is still ongoing.

Volkswagen has faced unprecedent legal action over the scandal and has paid out €30bn in fines and settlements with regulators across the world. Criminal trials against VW senior managers are also still ongoing in Germany.

9. PELOTON LOSES $1.5 BILLION AFTER XMAS ADVERT

Exercise bike maker, Peloton, has seen its market value plummet by $1.5 billion following backlash over its controversial Christmas advert. The advert has been branded as sexist by many after it was released in early December. Many claim the man giving the wife an exercise bike as a gift suggests he is pressuring the wife to exercise. Numerous people took to social media to express their displeasure. The value of the company sank from $10.3 billion down to around $8.8 billion. Its share price level however, is above October levels so the dip was not too substantial in context.

See the video for your yourself;

10. ELECTION POLLS SEND POUND SOARING

Election polls are suggesting that Boris Johnson will win a healthy majority, sending the pound soaring. The pound reached a 2 year high against the Euro and a 7-month high against the dollar. The pound hit $1.30 and €1.181. Polls have been inaccurate in the past, but the overwhelming consensus is that a Conservative majority is most likely. The fear of another hung parliament and the risk of further stalemate and uncertainty rattled markets prior to this. The pound is still well below the pre-Brexit referendum level of nearly $1.50.

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