9th January 2020

Written by Javier Maquieira, Associate

Edited by Adam Shaw, Associate Partner

Good morning,

If hostilities between the United States and Iran weren’t enough of a bad omen for the new year, Australia’s continuing wildfires aren’t improving the picture. Ironically, both developments are perfect examples of what’s wrong with the world today and how the situation could get even worse. Increasing levels of distrust and short-termism on the one hand, and the lack of coordinated, global action against the climate crisis on the other, point towards a common denominator: a more than dubious type of leadership. Since fires began in September 2019, Australia has lost almost 2,000 homes, 25 people, and hundreds of millions of animals to the blazes. According to the latest news, thousands of feral camels and horses in South Australia are to be shot dead following reports by Aboriginal communities of ongoing damages caused by these animals as they search for water amid dry conditions. What’s more, NASA satellite images captured two days ago show one third of the country’s Kangaroo Island burned by bushfires. The island is a haven for unique and already endangered wildlife, such as koalas, sea lions and the beloved duck-billed platypus. On top of the ecological disaster, the risk of economic damage is, unsurprisingly, high. With summer not yet over and extreme weather patterns worsened by global warming and atmospheric disturbance, the country’s lengthy drought is expected to cripple consumer confidence and hit visitor numbers as local industries feel the direct effect of devastation. As Australia burns and the state of Victoria declares yet another state of disaster, Scott Morrison, the prime minister, has been the focus of much fury. To begin with, Morrison was already warned of the possibility of fires back in April, when he refused to attend a meeting with former fire and safety chiefs concerned about the great risk posed by the climate emergency. Since then, he has continued to deny a direct link between greenhouse gas emissions and the severity of fires ravaging the country. We can’t control the weather (yet), but we can hold leaders accountable when their actions or inaction endanger our freedom and life on earth, from sending troops to fight unnecessary wars, to disregarding every warning of a changing climate and its pernicious consequences.

News

The Duke and Duchess of Sussex have announced their decision to step back as senior members of the royal family as they plan to become “financially independent”. In a statement posted on Instagram, the couple said they intend to split their time between the UK and North America, with the aim of “providing our family with the space to focus on the next chapter”. Buckingham Palace was reportedly not consulted about the decision and senior royals are said to be deeply disappointed and hurt as a result of the announcement. President Trump, has backed away from military action against Iran in a bid to de-escalate the hostilities sparked by the killing of General Qasem Soleimani by a US drone strike last week. Instead, the White House will move ahead with economic sanctions and is “ready for serious negotiations” as Tehran appears to be standing down. In related news, Boris Johnson has condemned Iran’s missile attack on Iraqi air bases, using his first Prime Minister’s Questions of 2020 to tell the Commons that General Soleimani had been responsible for attacking innocent civilians as well as British troops. He called for “urgent de-escalation”. The president of the European Commission, Ursula von der Leyen, has questioned Boris Johnson’s timeframe for a full Brexit deal, saying it would be “impossible” for the UK to negotiate such a comprehensive agreement with the European Union by 31 December 2020. In a speech at the London School of Economics, von der Leyen said the EU would seek to avert a cliff edge with the UK, and is ready to negotiate a trade deal with no barriers to manufacturers and a partnership “well beyond” trade.

Business and economy

Greggs has announced a £7m bonus for employees after “a strong finish to an exceptional year”. The bakery chain will pay £300 to every worker at the end of January after seeing its sales boosted by new vegan ranges. Although its trading update was largely positive, the company also warned it is likely to face “headwinds” in the year ahead, including national living wage increases and the rising cost of pork. Former Nissan boss Carlos Ghosn said at a news conference yesterday that he had to flee Japan, where he was facing charges of financial misconduct, in order to protect himself and his family. Ghosn added that his treatment in prison was “brutal” and went against international standards of justice. However, he did not give details of the escape, which he insists he organised “alone”. The World Bank has warned about the risk of a global debt crisis as a result of the largest, fastest, and most broad-based build-up in borrowing in the past five decades. Although low interest rates have been making debts more manageable, there could still be a financial crisis, according to the Washington-based organisation. The World Bank also said in its half-yearly Global Economic Prospects that a modest pick-up in activity would depend on a better performance of the large emerging economies.

Columns of note

In the Financial Times, Katie Martin explains the muted market reaction to US-Iran skirmishes. She argues that investors are still hoping that the conflict is nothing but a show of strength on both sides as they continue to ride the upward trend in risky assets. The notion that the Middle East is no longer the huge source of funding for the rest of the world that it once was is generating complacency among fund managers, which is keeping them from hitting the panic button marked “buy treasuries”. (£) In City A.M., Stuart Phillips makes the case for financial education in the UK, which should be the bedrock of a thriving economy for Britain by improving people’s confidence, mental health, and life chances. To achieve this, Phillips maintains that financial literacy needs to be integrated from nursery to retirement, teaching students how to make bold financial decisions and save smart. The author concludes that guidance in the workplace can also have important benefits for both employees and employers if viewed as a core element of any employee wellbeing package.

Markets

What happened yesterday?

London stocks finished on a mixed note on Wednesday as Iran's retaliation left no American or Iraqi deaths. The FTSE 100 was little changed by the end of trading, up by 0.01% at 7,574.93, while the pound was 0.15% weaker against the dollar at $1.3106. Brent crude was down 4.02% at $65.63 after hitting the $71.75 mark earlier, while gold prices slipped 0.72% to $1,562.90/oz. Miners like Rio Tinto, BHP Group, and Antofagasta were all higher. Elsewhere, Smiths Group was the best performer following an upgrade at Bank of America and BT rallied after Ofcom outlined plans to make fibre available to all. On the downside, supermarket retailer Sainsbury's lost ground after it said total retail sales in the third quarter fell 0.7%, with like-for-like sales also down 0.7%. In the US, stocks were higher despite tensions with Iran. The Dow Jones Industrial Average was up 0.56% at 28,745.09, the S&P 500 climbed 0.49% to 3,253.05, and the Nasdaq Composite achieving a new record high after finishing 0.67% stronger at 9,129.24.

What's happening today?

Trading Announcements

Card Factory Dunelm Nichols

AGMs

Cambria Auto

UK Economic Announcements

(00:01) RICS Housing Market Survey

Int. Economic Announcements (07:00) Industrial Production (GER) (07:00) Balance of Trade (GER) (07:00) Current Account (GER) (07:00) Import Price Index (GER) (10:00) Unemployment Rate (EU) (13:30) Initial Jobless Claims (US) (13:30) Continuing Claims (US)

Did you know?

You scroll about five miles a year.

Parliamentary highlights

TODAY House of Commons Oral questions Exiting the European Union (including Topical Questions) Business Statement Business Questions to the Leader of the House of Commons - Mr Jacob Rees-Mogg Legislation European Union (Withdrawal Agreement) Bill: conclusion of proceedings (remaining stages) Adjournment Effect of VAT rules on hospital improvement plans - Karin Smyth House of Lords Oral questions Consequences for patient safety of the backlog of maintenance and repairs to NHS infrastructure - Baroness Thornton When the moratorium on fracking will become a ban - Baroness Jones of Moulsecoomb Government plans to promote children’s rights and well-being across government departments in this Parliament. - Baroness Massey of Darwen Treatment of British victims of alleged sexual violence in foreign countries, following the recent case in Cyprus - The Lord Bishop of St Albans Debate on the Address Economic affairs, business and public services Scottish Parliament General Questions First Minister’s Questions Members’ Business S5M-19234 Maurice Corry: Commonwealth War Graves Commission Ministerial Statement Enhancing Scotland’s Digital Connectivity Stage 1 Debate Scottish Biometrics Commissioner Bill TOMORROW House of Commons No business scheduled. House of Lords No business scheduled. Scottish Parliament No business scheduled.