Fed offers Trump a bone
The United States has gone through a whole interest rate cycle in a period when British rates have done very little.
after ultra-low interest rates following the financial crisis, US central bank the Federal Reserve began moving them up in 2016 until they reached a target of 2.25pc to 2.5pc.
With last night’s quarter point rates cut to the 2pc to 2.25pc range, borrowing costs are now heading down again for the first time in a decade.
What, one might ask, is the urgency? The most recent international Monetary Fund forecast actually upgraded US output forecast for this year by 0.3pc to 2.6pc.
The Fed itself reports a sturdy labour market. The iMF expressed concern that weakening global growth, from China to the eurozone and Brexit disruption, could lead to a slowdown later in the year. The Fed has joined in by citing global conditions.
ever since President Trump arrived in the White house the Fed has been under intense pressure to lower rates and underpin growth. Trump displaced former chairman Janet yellen with what he thought would be a more compliant chairman in Jay Powell. The noisier Trump became, the less
Retail therapy
willing Powell became. Last night’s quarter point cut will be seen as a rejection of Trump hopes of something more bold.
historically, where the Fed went the Bank of england would follow. Brexit uncertainty and the present weakness of the pound makes it highly unlikely that the Bank will make any change when it sets rates at today’s session SiMOn Wolfson’s next has demonstrated that it is still possible to defy the pain on the high street. next reported a 4pc rise in full price sales over the last quarter (when the weather was unhelpful) but has shown the confidence to lift full-year profits guidance to £725m. The myth that the consumer isn’t spending needs to be challenged. The latest consumer confidence survey from GfK shows widespread improvements across the board in a poll conducted before Boris Johnson’s boosterism.
it also shows the personal finances of consumers strengthened in July as did the willingness to make a big purchase.
One would be hard put to divine any of this from the results of Trafford Park owner intu. The company posted a loss of £856m in the last six months, sagging rental incomes of 7.7pc and the shares tanked 32pc.
Fellow shopping centre operator hammerson also is having a hard time. it can be thankful that the hairbrained scheme to merge with intu was shown a red card.
Can the shopping centre concept be revived? Of course it can with a more modern approach to rents, entertainment and tenants. no shopping centre today makes any sense unless arrangements for online purchases are part of the architecture.
Pain for intu is far from over as successful retailers – such as Primark – demand the same kind of breaks on rent as Topshop.
it is poor management, unsuitable rents and failure to invest – not just business rates and wrong weather – which has stymied the high Street.
Patient rights
aT the time it looked like a brilliant wheeze.
aware that he was breaching rules about holdings of unlisted stocks, neil Woodford turned to the international Stock exchange in Guernsey for help.
he arranged that four unlisted companies held in his troubled Woodford equity income Fund be quoted in Guernsey. never mind that the Guernsey exchange is virtually moribund.
On inspection Guernsey decided that first two of the firms – Benevolent ai and industrial heat – and then a third, Ombu, failed to meet listing criteria and has returned them to Woodford’s flagship fund.
a forth, Sabina estates, looks as if it does conform. The return of the unlisted shares is a new problem because it once again means that the equity income fund holds more than 10pc of its portfolio in unlisted stocks, breaching eU’s rules.
it is as if one of Woodford’s eventing horses has failed to clear the biggest fence.
imagine how much worse it could be if investors in Woodford Patient Capital Trust decided to retrospectively challenge the terms under which five unlisted outfits held in equity income were dumped into its portfolio in March this year.
Stand well back and wait for the bang.