Britain woke up on Friday to the news that the UK has voted to leave the European Union. Prime Minister David Cameron has resigned, and Bank of England Governor Mark Carney did not hesitate in attempting to reassure twitchy investors.
Unsurprisingly it has been a volatile week for markets. Global stocks have tumbled today as investors have fled to the traditional safe havens of UK gilts, German bunds (back in negative territory), US treasuries and gold. Having risen by more than 5% over the week to Thursday (as investors incorrectly predicted a Remain vote), the FTSE 100 index gave back all of these gains when the market opened this morning.
Sterling, which having reached records highs, has plummeted to its lowest level since 1985. Further afield, Asian markets have fallen sharply – the Nikkei initially lost 8% and the Hang Seng fell 5% following the announcement.
Continued caution in the US
Speaking at the hearing on Capitol Hill before the Senate Banking Committee, Federal Reserve (Fed) chair Janet Yellen brushed aside the recent slowdown in jobs growth and emphasised the increase in GDP growth during the second quarter, but nevertheless painted a cautious picture of the US economy’s prospects. Productivity growth, or rather the lack of, is hampering the longer-term prospects for the US. Given this, a slowdown in domestic growth, as well as worries over China and the oil price, it appears the Fed is in no hurry to raise interest rates. The International Monetary Fund (IMF) also expressed similar concerns this week.
Food back in fashion?
This week has seen further woes for struggling high street retailers, with Debenhams the most recent chain to report a drop in sales, causing further pressure on its share price and prompting takeover speculation. In response, Debenhams aims to generate 10% of its revenues from food and rely less on clothing, as it has signed up the much-loved Italian pizzeria, Franco Manca, to open in Debenhams’ Westfield store. Meanwhile, Tesco’s turnaround appears to be gaining momentum, as it reported a second consecutive quarter of growth for the first time in more than five years.
Rajan resigns
Last weekend brought the shock announcement that Raghuram Rajan, the respected Reserve Bank of India (RBI) governor, will step down in September. While the Indian market has taken the news in its stride, it has understandably left investors disappointed. Rajan, famous for restoring India’s macroeconomic stability and credibility in recent years, was a bold character whose head-on approach to tacking India’s largest issues was refreshing. India clearly has some important decisions to make but there is no reason why the RBI can’t remain a credible intuition without Rajan.
Financial crisis on Fleet Street?
Digital newspaper revenues are failing to meet the gap left by the decline of print media. A recent profits warning from The Daily Mail and General Trust, and the death of Trinity Mirror’s latest venture, New Day just 50 days after it was launched, suggests the industry is nearing breaking point. According to multiple senior news executives, Fleet Street rivals may be uniting in an attempt to combat the slowdown by creating a new single advertising sales operation. Some groups are reluctant to give up their autonomy, but the industry as a whole is thought to have little choice. With revenues from display adverts down 15% last year, a single advertising sales team would mitigate each newspaper having to negotiate multiple deals with publishers.
And finally…
This week a Devonian couple got a nasty surprise when their three year-old boy decided to take his step dad’s Peugeot for a little spin – he’ll no doubt regret not buying a Toy-ota. Having been given the car keys to play with he took it upon himself to clamber into the driving seat and reverse away. Luckily he only managed to travel 15 metres before the next door neighbours spat out their dummies as their car brought the toddler’s joyride to an end. No-one was hurt, but the boy has reportedly got a few Awwdis, nothing a few Kia-Oras couldn’t sort out.
Relations between the neighbours are intact and police were informed merely to ensure that the insurance company didn’t think they were gaga. The whole episode certainly takes the phrase ‘boy racer’ to new heights, and if this is a sign of things to come he’ll certainly end up driving his parents around the Benz.
