The week’s news included; Conservatives GE landslide victory: Brexit plan & pledges summarised, US-China phase one trade deal agreed, CMA investigates StubHub-Viagago merger, FCA fines soar 500%
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Opinion articles of the week:
- Bloomberg – Why Brexit is Rattling Europe’s Market for Pollution Allowances
- City AM – Opec production cuts compliance could push oil price to $70
- Sky News – Why Saudi Aramco’s record flotation was never going to flop
1. UK ELECTION
Boris Johnson and the Conservative Party have won the UK general election with a landslide victory. This provides the Conservative Party with a huge majority of 80 seats, the largest Conservative majority since 1987. The election completely redrew the electoral map with supposed Labour heartlands, traditionally safe seats, voting Conservative for the first time. For Labour, this was the worst general election result since 1931. Leader, Jeremy Corbyn, has announced that he will resign. Liberal Democrat leader, Jo Swinson, also lost her seat in Scotland to the SNP and has stepped down. This substantial victory crucially gives the Conservative Party the ability to push through their Brexit deal through Parliament. We summarise their plans;
The hallmark of the Conservative campaign was to get Brexit done. But what is their plan?
Leave the EU on January 31. With the majority in Parliament, it should be relatively straightforward to ensure his previously negotiated withdrawal agreement and associated legislation is passed before this date. This marks the UK’s formal exit from the EU.
Negotiation of an EU trade deal. After the withdrawal agreement has passed, the UK will enter an 11 month transition period where we remain aligned to the EU on our current basis. Crucially, Johnson must secure and ratify a deal before 31 December 2020 when this transition period ends. Johnson pledged no further extension to the transaction, which does create the risk of the UK leaving the EU entirely without a trade deal. There are still some big challenges ahead for Johnson but at least they won’t be from his own Parliament.
- NHS cash boost – 50,000 more NHS nurses by 2024 and 50 million more GP appointments
- Police – 20,000 more police officers
- “Triple tax lock”, no increases in income tax, National Insurance and VAT, for five years
- National Insurance threshold rising to £9,500 in 2020
2. US CHINA TRADE DEAL
The US and China have struck a preliminary accord for a trade deal, which will see an easing of the trade tensions. The deal reduces some US tariffs in return for China importing an additional $200 billion of US goods over the next two years. Most of these goods would largely be US farm goods such as soybeans. The US will slash tariffs by 50% on roughly $350 billion worth of goods. This has been dubbed as a “Phase One” deal, potential beginning of the end of the trade deal but certainly not definitive. Donald Trump There has not been anything formally signed off yet so an agreement may still fall through. The US’ proposed tariffs on $150 billion of goods, came into effect on 15 December so the issue is far from resolved. Despite this, stock markets rose marginally, particularly in Asia. Euronews looks at the deal in more detail.
3. JUST EAT REJECTS TAKOEVER BID
Just Eat has rejected Prosus’ improved £5.1 billion takeover offer. The company believed Prosus’ offer significantly undervalued the company. They had already rejected Prosus’ £4.9 billion offer last month. Just Eat is set to approve this £4.3 billion from Takeaway.com. This is largely because Takeaway.com is better strategically aligned with Just Eat and will allow for better growth and shareholder returns. Although Prosus’ bid on face value is higher, its only a 16% premium on JustEat’s pre-offer share price. Company share prices typically soar upon receipt of a takeover offer. Prosus already boasts large stakes in food delivery services across the globe and argue that they will provide what it deems necessary investment in JustEat to help it realise it’s potential.
4. CMA INVESTIGATES VIAGOGO-STUBHUB MERGER
The Competition and Markets Authority (CMA), is to launch an investigation into Viagogo’s planned acquisition of rival StubHub. The $4 billion deal was agreed last month and eBay agreed to offload ticket sale site StubHub. The CMA has expressed concerns over the lessening of competition in the sector with this deal. This investigation will involve consultations with competitors and other interested parties. The CMA will then publish it’s findings which could allow or block the deal or alternatively lead to an escalation in it’s investigation. Viagogo has been in hot water with authorities in recent times. The CMA only dropped it’s lawsuit against Viagogo over poor and misleading practices in September.
5. FOREX RIGGIN LAWSUIT
US litigation firm Hausfeld has launched a class action lawsuit against major banks over foreign exchange rigging. The claimant alleges they operated an unlawful trading cartel between 2007 and 2013 and filed a claim in Competition Appeal Tribunal. Barclays, Citibank, JP Morgan, MUFG Bank and RBS are all in the firing line over the case. This derives from European Commission’s €1 billion fine issued to the banks over the cartels. Scott & Scott have also led a class action lawsuit against the banks so Hausfeld’s action is in competition. All affected parties will, however, automatically be included in whichever action takes precedence. Hausfeld has already been in successful in the US where struck settlement deals totalling $2.3 billion with 15 banks for forex rigging.
6. POST OFFICE AGREES £58M SETTLEMENT
The post office has settled a huge £57.5 million class action lawsuit over an IT systems that severely harmed subpostmasters. The Post Office introduced the ” Horizon” system in 1999 but it was riddled with technical issues. This led to shortfalls in their accounts.
This settlement has been dubbed a successful outcome as legal costs escalated. The subpostmasters claimed they were not trained properly on how to use the new system. Three class actions were issued against the Post Office over this dispute. The first one concluded in March but in light of rising legal fees both parties agreed to settle the remaining cases.
7. MORGAN STANLEY JOB CUTS
Morgan Stanley has announced that it will shed roughly 1,500 jobs due to global economic challenges. This is part of a cost cutting drive due to save as much as $200 million. The global banking environment is challenging, largely due to low interest rates and sluggish economic growth. Artificial intelligence and other technologies are forcing banks to adapt how they operate and shift towards greater automation. Earlier this year, Deutsche Bank also slashed 20% of its global work force due to global trends although Deutsche is facing a host of internal issues too. With these cuts, Morgan Stanley will bring its headcount under 60,000.
8. UK REGULATOR FINES SKYROCKET
The value of fines issued by the UK Financial Conduct Authority has skyrocketed by over 550%. The financial watchdog issued £391.8 million in fines this year, largest due to a concerted effort to crackdown on financial product misselling. Fines for misselling products hit a staggering £163 million. Standard Life bore the lion share of this sum, as it was fined £30 million for misselling pension products. The introduction of MiFID II last January imposed additonal transaction reporting requirements to allow the regulator and firms to spot market abuse more easily. After a grace period in 2018, The FCA cracked down this year issuing £62 million in fines. Goldman Sachs was fined £34 million of this for reporting failures over a decade.
The total fine figures for this year dwarfed last year’s total of £60 million and the regulator is keen to shift the culture within the financial services sector.
9. AMAZON MOVES FURTHER INTO SPORTS
Amazon has encroached further into sports broadcasting and bought the rights to show Champions League games in Germany. Amazon has already made it’s mark in English football, exclusively showing 10 Premier League games two weeks ago. Amazon secured a £90m deal to show 20 games per year. This offering lead to a spike in Amazon Prime sign ups. It now hopes to replicate that success in Germany. It has now secured exclusive rights to show Tuesday night Champions League games in Germany for the season 2021-2022. Amazon is intent on disrupting the duopoly of BT and Sky in the football broadcasting market. While it is still some way off dethroning the giants it is certainly shaking up the field
10. MCDONALD’S VEGAN MEAL
McDonald’s has stepped into the vegan food market with its
own fully vegan offering. McDonald’s will now sell a Veggie Dippers meal which will
include vegan nuggets served with chips and a soft drink. The nuggets consist
of rice, red peppers, tomato, and splits peas, fried in breadcrumbs. They will be
fried separately from meat products. Failure to do this has seen Burger King face
a class action lawsuit as its meat free products are cooked on the same grills as
meat products. McDonald’s has seen sales of vegetarian foods spike by 80% this
year alone. The veggie food will launch in the UK on 2 January.
Restaurants and fast food retailers are becoming
increasingly keen to cash in on an expanding vegan market. Gourmet Burger King,
Frankie and Benny’s and even Nando’s have introduced vegan options on its menus.
Gregg’s made the headlines with its vegan sausage roll earlier this year and
has enjoyed great success.