UK investors had reason to cheer this week, with the FTSE 100 up by 2.6% as at Thursday’s close. Highlighting the international nature of our “domestic” index, the move up was driven by strong performance of mining and commodity companies following the release of robust Chinese trade figures.
It wasn’t good news for all UK blue chips, however. Despite Tesco returning to profit, shares in the supermarket giant fell 6% following a warning from its chief executive that it faced a “challenging, deflationary and uncertain environment”. “Challenging” is also how the management of luxury brand, Burberry, described the outlook for the year ahead following a 5% fall in sales in the fourth quarter of 2015.
Anglo-Dutch consumer conglomerate Unilever blamed currency movements for a fall in its quarterly sales. While demand for the company’s products in emerging markets remains robust, the weakness of local currencies against the euro led to a fall in overall sales. Unilever also warned of heightened market volatility and “fragile” consumer demand.
Meanwhile, shareholders of BP rejected a £14m pay package for its chief executive, Bob Dudley at the company’s annual general meeting. The vote comes at a time of falling profits and job cuts at the oil and gas giant.
Rousseff fights; Macri delights
It’s been a week of diverging fortunes for the leaders of South America’s two largest economies. Brazil’s President Dilma Rousseff faces impeachment proceedings this Sunday for alleged manipulation of government accounts. Rousseff denies accusations that she used funds from state banks to cover budget shortfalls. Brazil’s Supreme Court rejected a last-minute appeal to avert the impeachment and Brazilians across the country have held mass demonstrations for her resignation. Rousseff has promised to fight “to the last minute”.
Further south, Argentina looks set to return to international capital markets for the first time since its €95 billion default in 2001. A US appeals court has allowed Argentina to raise up to €15 billion to pay creditors who were holding out for better terms following the 2001 default. The ruling is seen as a victory for President Mauricio Macri, who initiated negotiations with creditors following his election last year.
Italy’s debt fix
The Italian government moved this week in a bid to salvage its finance industry, which is suffering under the yoke of €360 billion of bad debts. The government, in collaboration with financial institutions, has set up a €5-6 billion emergency rescue fund to prop up the worst affected banks. The action helped to support bank share prices, which were hammered earlier this year amid fears of a banking crisis. That sell-off included Italy’s larger banks, even though the problems are largely centred on Italy’s smaller, weaker banks.
While the rescue fund is a short-term fix, a sustainable solution to the country’s bad debt problem is likely to involve reforming archaic laws that mean bankruptcy in Italy can take anything from seven to 15 years, rather than two to three years in other European countries.
And finally…
Burger King’s drive-thru option was taken to an entirely new dimension in the US this week after the manager of a BK branch in California drove his car straight through its front windows. In another incident, staff at a Burger King in Oklahoma caused $10,000 of damage by smashing all of the restaurant’s windows.
Had they succumbed to some kind of bovine-based insanity? No, the reason for both cases was a prank call supposedly from the local fire department telling staff a gas leak would cause an explosion if all the building’s windows were not smashed immediately. Apparently, staff are finding it hard to come to terms with the fact they fell for such a Whopper.
Image credit: © Todd Davidson/Illustration Works/Corbis
