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Business - Need to Know

Morning Edition

Good morning. Shares in Tesco closed 3 per cent higher yesterday ahead of this morning’s interim results. Did City traders know something?

Dave Lewis, who was parachuted in as chief executive of the troubled supermarket chain just over a year ago, strikes an upbeat tone this morning. “We have delivered an unprecedented level of change in our business over the last 12 months and it is working. The first-half results show sustained improvement across a broad range of key indicators,” he says.

At first glance the numbers look bleak, with a 55 per cent slump in first half profits. But it is all about expectations and a 1.1 per cent fall in like-for-like sales is at the top end of those. We’ll have a full story on Tesco shortly on www.thetimes.co.uk.

Having failed to gain traction with the SABMiller board, AB InBev has turned up the heat on its rival, going public with a £42.15 a share offer after its first two proposals failed.

All very good, but the offer includes equity in an unlisted vehicle - great for SABMiller’s two largest shareholders (and no doubt very tax efficient) but effectively worthless for many other shareholders. Let's hope the Takeover Panel takes a close look at the structure.

For the latest on the SAB Miller bid log on to our Business Now live blog and follow Dominic Walsh, on twitter - @walshdominc.

Meanwhile, Diageo has announced that it has sold its interest in the owner of Red Stripe to Heineken and struck a deal to simplify the brewing and distribution of Guinness in Malaysia and Singapore.

Elsewhere discount retailer Sports Direct, which increasingly looks like a retail-focussed hedge fund, has taken a stake in an Irish retailer via a “put and call option”.

In his first conference speech as leader of a Tory majority government, David Cameron will announce measures to boost the supply of low-cost housing in a national crusade to extend ownership to younger buyers, reports our political editor Francis Elliott.

The Volkswagen supervisory board meets later today to formally appoint Hans Dieter Pötsch, a board member and the company’s finance chief, as chairman. Ahead of the meeting Matthias Müller, the carmaker’s new chief executive, told thousands of staff at the company’s Wolfsburg headquarters yesterday that changes would “not happen without pain”, suggesting that job cuts were in the pipeline. Graeme Paton, our transport editor has more.

On the economics front we get manufacturing and industrial output data at 9.30am. Both are forecast to have risen 0.3 per cent month-on-month, according to a poll of economists by Reuters.

Please do keep sending me any thoughts or observations about The Times business coverage - richard.fletcher@thetimes.co.uk and don’t forget to follow me for on twitter for regular updates throughout the day - @fletcherr.

Have a great day.

Richard Fletcher
Business editor
The Times
richard.fletcher@thetimes.co.uk

Shares in KFC and Pizza Hut owner Yum! Brands fell 17 per cent in after hours trading after the company cut its full-year profit late last night on the back of a slower-than-expected recovery in its key market of China. Sales at China KFC and Pizza Hut restaurants open for at least one year rose 2 per cent in the latest quarter, less than the 9.6 per cent jump analysts expected. The increase in same-restaurant sales ended four straight quarters of declines following a scandal in July 2014 involving expired meat from a minor Yum! supplier.

Global economic growth this year will be the weakest since the 2009 recession as the slowdown in emerging markets takes its toll, the International Monetary Fund has warned in a gloomy assessment of the immediate prospects for world business and trade. The fund cut its forecasts for world growth for the second time this year, to just 3.1 per cent, and warned that “downside risks have risen” due to trouble in China and other developing nations as well as the impact of commodity price falls on resource-rich economies.

Shareholders see some management sins as much less serious than others. Chief executives are still allowed to take mountainous dollops of pay with comically undemanding performance hurdles. They can spray company money at vanity projects. They can be forgiven the occasional botched deal. What they emphatically cannot do is cut the dividend.” If economic headwinds worsen, chief executives will need to learn the near-impossible art of slashing the dividend without getting sacked, says Patrick Hosking.

“The Tories today are paying little more than lip service to Margaret Thatcher’s vision of a Britain ‘where three out of four families own their home, where owning shares is as common as having a car’.” A homes shortage and falling share ownership blur George Osborne’s vision, argues Philip Aldrick.

The Nikkei has closed up 0.75 per cent this morning at 18,322.98. The FTSE 100 is expected to open 29 points lower when trading begins shortly.

Supermarkets and oil stocks helped the FTSE 100 recover from losses earlier in the session to close 27.24 points higher, or 0.43 per cent, to 6,326.16, albeit trailing other leading European markets. The FTSE 250 gained 22.54 points, or 0.13 per cent, to 17,132.82. Read here for Alex Ralph’s full market report.

Wall Street, however, could not entirely maintain the positive mood for equities. Investors were nervous ahead of the forthcoming quarterly earnings season and the S&P 500 closed down 0.4 per cent or 7.1 points at 1979.9 while the tech-heavy Nasdaq surrendered 0.7 per cent or 32.9 points to 4748.4. At least the Dow Jones Industrial Average clung on to positive territory with a small rise of 0.1 per cent or 13.8 points to 16,790.2. Around 7.6 billion shares changed hands compared with the recent daily average of 7.4 billion.

Sterling climbed against a struggling US dollar yesterday - up 0.5 per cent to $1.521 - as traders worried about when the Federal Reserve will raise interest rates against a backdrop of slowing global economic growth. Against the euro, the pound dipped 0.2 per cent to €1.351 as soft economic data pushed back market expectations of monetary tightening by the Bank of England.

Oil prices jumped yesterday after an unexpected drop in US stockpiles and a belief that the global supply glut is easing. In New York, Brent crude was almost 6 per cent higher at $52.15 a barrel.

When two significant Betfair stakeholders sold a big chunk of their holdings fellow shareholders must have wondered whether they too should head for the exit, especially as the company is in the throes of a £6 billion merger with Paddy Power, the Irish bookmaker. Tempus looks at the options for smaller investors. EasyJet seems to have the knack of keeping air fares attractive, aircraft nearly full and City analysts happy. Can it last though? Robert Walters must be doing something right. The headhunter has survived three recessions, grown its staff headcount from 100 to nearly 3,000 and operates in 24 countries. Read on for more about the Tempus tips of the day.

1 Simon Walker, director-general of the Institute of Directors, has criticised Theresa May for vowing to reduce immigration in her speech to the Conservative Party conference. “It is yet another example of the home secretary turning away the world’s best and brightest, putting internal party politics ahead of the country and helping our competitor economies instead of our own,” he said.

2 Global economic growth this year will be the weakest since the 2009 recession as the slowdown in emerging markets takes its toll, the International Monetary Fund has warned in a gloomy assessment of the immediate prospects for world business and trade.

3 The Qatar Investment Authority, one of the world’s most important sovereign wealth funds, is reconsidering its investments in a move that could have far-reaching ramifications in the City.

4 Tesco is promising to pay its suppliers more quickly as it attempts to move on from a row with smaller companies that sell goods to Britain’s biggest supermarket group. The retailer was branded a “bully” over claims that it delays payments to suppliers and routinely breaches industry rules on payments.

5 Ben van Beurden, the chief executive of Royal Dutch Shell, has accused Mark Carney of a “lack of realism” in his comments about climate change as the oil giant hit back at an attack on the fossil fuel industry by the governor of the Bank of England.

6 Investors have agreed for the first time to lend money to the US Treasury at 0 per cent interest amid falling expectations that the Federal Reserve will raise short-term rates before the end of the year. The Treasury’s auction of $21 billion of three-month bills at the discount rate illustrates the degree to which some investors are seeking highly liquid places to park their money.

7 House prices fell by nearly 1 per cent in September from a month earlier, representing the biggest drop in more than a year, according to the latest Halifax survey. However, Halifax said that strengthening demand in housing suggested that the dip was temporary.

8 Six former City brokers, including one nicknamed “Lord Libor”, allegedly helped to rig the borrowing rate that allowed a trader to “cheat” as part of a “dishonest scheme”, a court heard as their trial began.

9 Jonathan Portes, the Oxford and Princeton-educated economist, who is a critic of austerity, has resigned as director of the National Institute of Economic and Social Research, after recently being involved in a public spat with Niall Ferguson, the prominent historian.

10 Volkswagen is preparing sweeping cutbacks as it tries to deal with the multibillion-pound fallout from the diesel emissions scandal.

The Times
Global economic growth this year will be the weakest since the recession of 2009 as the slowdown in emerging markets takes its toll, the International Monetary Fund has warned. In a gloomy assessment of the immediate prospects for world business and trade, it cut its forecasts for world growth for the second time this year to only 3.1 per cent.
read full update
Daily Telegraph
Britain is among a handful of shining lights in the global economy this year as the world sees the slowest period of growth since the depths of the financial crisis, according to the International Monetary Fund. The IMF edged up its forecast for UK growth in 2015 amid downgrades "across the board" for advanced and emerging economies.
read full update
Financial Times
America's technology giants were scrambling yesterday to overhaul their transatlantic operations after the EU's top court scrapped a deal that allowed tech companies to ship personal information wholesale to the US.
read full update
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