September 2017

It is hard to start this commentary anywhere other than North Korea – or maybe crouching in Japan as a North Korean missile passes overhead. At the beginning of the month, Kim Jong-un threatened to bomb Guam, the US territory in the Western Pacific, and by the end of the month air raid sirens were sounding in Japan’s Hokkaido Island. Prime Minister Shinzo Abe described North Korea firing the missile as an “unprecedented” threat to his country. Wall Street’s ‘fear index’ unsurprisingly jumped during the month as President Trump intimated that talking to Kim Jong-un wasn’t his first option.

Donald Trump’s month had begun by imposing new trade sanctions on Russia – described as a “full scale trade war” by Russian Prime Minister Dmitry Medvedev – and it ended with him visiting Houston after it had been hit by Hurricane Harvey, with estimates putting the cost of the clean-up operation at $100bn.

These worries were nothing though, compared to the trials and tribulations of new French leader Emmanuel Macron – barely three months after being elected, he was facing widespread criticism for his planned labour reforms and… his make-up bill. More of that later…


The month didn’t get off to the best of starts in the UK. The Financial Conduct Authority voiced its concerns about the increasing levels of unsecured consumer debt, especially on car loans, and figures for July showed that car sales had slumped by 9.3% – a figure which will presumably worsen if there is a clampdown on loans.

Meanwhile, the construction sector slowed to its weakest rate of expansion since August of last year and the pound fell as the Bank of England opted to keep interest rates on hold. By the end of the month, it was trading at $1.2923, down 2% for the month as a whole.

While our glass is half-empty, house prices were down for the fourth quarter in a row – the first time that has happened since November 2012 – and figures for June showed that the UK trade gap had widened. The difference between the goods and series we import and those we export widened by £2bn to £4.6bn according to figures from the Office for National Statistics – the biggest gap since September last year.

…And let us now look at the glass from a different perspective. Despite the construction sector slowing down, it was still taking on new people and this – combined with an increase in transport jobs – saw UK unemployment down by 64,000 to 1.49m for the three months to May – the lowest level for 42 years.

There was also good news for the beleaguered UK high street as UK retail growth continued, helped by stronger spending on food. The figures for July showed a 0.3% increase on June’s figures. Clearly plenty of the food was being bought at Lidl, which overtook Waitrose to become the UK’s 7th largest supermarket group.

The government had its first budget surplus in July for 15 years as more money came in from self-employed tax receipts. Maybe Chancellor Philip Hammond ordered a fleet of Aston Martins for his cabinet colleagues – the company increased its profit forecasts for the second time this year after a record six months. And UK car production was up as a whole, despite the falling sales numbers: 136,000 vehicles were made in British factories in July – up 8% on July 2016.

So how did the stock market view the glass? Half-full or half-empty? The former – but only just. The FTSE 100 index of leading shares was up 1% in August, closing the month at 7,431.


We have just had another month of Brexit negotiations. Or have we? David Davis – our man in charge of exiting the EU – has claimed that ‘good progress has been made.’ His EU counterpart, Michel Barnier, has taken a rather different tack saying that the UK was “demanding the impossible.”

Meanwhile, Jean-Claude Juncker, the President of the European Commission, said that none of the UK’s position papers were “satisfactory” and warned that there would be no discussions of a free trade deal until progress was made on the so-called Brexit bill, the border with Ireland and the rights of EU citizens. David Davis responded that the EU needed to show ‘imagination and flexibility’ – two words which have not previously been associated with the Commission.

Back in the UK, the war of words continued: a group of pro-Brexit economists argued that removing all trade tariffs and barriers would generate an annual £135bn boost to the UK economy. Those in favour of a ‘soft’ Brexit continued to push for membership of the single market as a transitional arrangement after Brexit, which (in case you have forgotten in all the excitement) is scheduled for March 29th 2019.

Meanwhile, Prime Minister, Theresa May, declared that she wanted to fight the next election (a move greeted with equal measures of scepticism and horror within the Conservative party) and jetted off to Japan to begin talks on a post-EU trade deal. Back in Brussels, the boys continued bickering, as International Trade Secretary, Liam Fox, said the UK would not be ‘blackmailed.’ Across the table, Michel Barnier complained that so far the talks had made “no decisive progress.”

You can only hope that more progress will be made after the German elections in the middle of this month: unfortunately, we then have the UK political conference season and its attendant machinations and posturing. Meanwhile, the steady flow of businesses contacting Frankfurt estate agents will continue…


August – the month when Europe traditionally goes on holiday. That certainly seemed to be the case this year with some of the more interesting stories coming from countries we do not usually cover in the Bulletin.

Readers may remember the WannaCry ransomware attack in May, which hit the British NHS among companies and organisations worldwide. This was followed by a similar attack called Petya, which originated in the Ukraine. Subsequently modified, renamed NotPetya and targeted globally, the attack did millions of pounds worth of damage.

It was reported in August that the Danish shipping line Maersk, had suffered estimated losses of $300m thanks to the NotPetya virus – and that there had been a subsequent knock-on effect on the worldwide shipping industry.

August also brought the news that Kolos – a Norwegian/US company – plans to build the world’s largest data storage centre at Ballangen, inside the Arctic Circle. The reason? The cold air and abundant local hydro-power will keep costs down. Meanwhile, Estonia announced plans to issue the first government-backed cryptocurrency, with the launch of the Estcoin intend to compete with the soaring popularity of other cryptocurrencies like Bitcoin.

Cyber-attacks, huge investment inside the Arctic Circle and a country with its own cryptocurrency – three indications of the way the world is moving in 2017…

Back in the more traditional world, the euro hit an 18 month high against the dollar (at the time of writing it is worth $1.19) and French voters were expressing fierce opposition to new President Emmanuel Macron’s proposed reform of the labour laws. But as you will see below, M. Macron had more pressing problems…

Meanwhile, on Europe’s stock markets both the German and French indices were in holiday mood, doing more or less nothing in the month. The German index drifted down 1% to close at 12,056: the French CAC 40 index was even more laid back, falling just eight points to 5,086.


So did anything happen in the US that didn’t concern the President? Quite a lot…

The month got off to a positive start with the economy creating 209,000 jobs in July – ahead of expectations and helped by a wave of hiring in the hospitality industry. There was also good news for the US motor industry as Toyota and Mazda announced plans to team up and invest £1.6bn in a new car plant which will produce 300,000 vehicles a year and create 4,000 jobs. Electric car maker Tesla also said it was aiming to raise $1.5bn to fund its Model 3 car.

Staying with the ‘old economy’, Walmart announced a link-up with Google as Amazon bought Whole Foods and immediately embarked on an aggressive raft of price cuts – some prices were cut by as much as 43% – which sent shockwaves through grocery shares around the world.

Apple’s profits for its third quarter were up 12% to $8.7bn, with the company boosted by Apple Pay, the App Store and Apple Music. Not to be left out, Facebook made a move into dedicated video, which will see it competing with YouTube and, ultimately, TV networks.

The world’s central bankers gathered for their annual get-together at Jackson Hole, Wyoming, possibly to hear Janet Yellen speak as Chair of the Federal Reserve for the final time as the President is rumoured to want to replace her.

…But everything was overshadowed at the end of August as Hurricane Harvey struck Houston, causing catastrophic floods. The situation may yet worsen: at the time of writing the storm was heading towards Western Louisiana.

Like many of the world’s leading markets the Dow Jones index had a quiet month, finishing up just 57 points at 21,948.

Far East

China had to take some action in response to North Korea’s continued missile tests and in the middle of the month it announced it would stop importing coal, iron and seafood from the country, as it implemented UN sanctions. In theory this should have a dramatic effect on North Korea’s economy, which has grown significantly of late on the back of exports to China. We shall see…

China had other problems as the International Monetary Fund warned (again) about the country’s credit boom, saying that China’s credit growth was on “a dangerous trajectory.” Chinese consumers certainly seem to be spending with online retail giant Alibaba, which posted a 56% rise in quarterly revenue (in sharp contrast to the traditional US retailer Walmart, which saw a 23% fall in net income).

It is a difficult balancing act for the Chinese central bank: there were further worries as the rate of growth for China’s industrial companies slowed down. If that continues there will surely be pressure to allow further credit in order to maintain demand.

There were worries of a more personal kind in South Korea for Samsung’s billionaire heir-apparent Lee Jae-yong who was jailed for five years, convicted of bribery in a scandal which also saw the impeachment of South Korea’s former president.

Despite worries about credit growth, it was a good month for China’s Shanghai Composite share index, which was up 3% in August to 3,361. The Hong Kong market was also up, closing the month at 27,970 for a rise of 2%: it is now up 27% for the year as a whole. August was less good, though, for the South Korean market – down 2% at 2,363 – and for Japan, where the ‘dangerous trajectory’ they were worrying about was not Chinese credit but North Korean rockets. The Japanese index closed the month down 1% at 19,646.

Emerging Markets

It was a remarkably quiet month for the three major emerging markets on which we report. These days ‘quiet’ means good news for Brazil’s politicians as it was a month in which none of them were impeached or arrested. Maybe the Brazilian stock market took heart as it shot up 7% in August to end the month at 70,835. It was a good month for the Russian stock market as well – up by 5% to 2,022 – although it remains nearly 10% down for the year as a whole. Finally, a rather less successful month for the Indian market, which fell back 2% to end August at 31,730 – but still 19% up for the whole of 2017.

And finally…

It appears chocolate bars are definitely getting smaller these days, compared with a time when it took three people to even attempt to lift a Wagon Wheel…

That unfortunate trend reached its nadir in August with the news that Nestle are to introduce three new versions of the Walnut Whip… without a walnut. The new ‘Whips’ – sadly without the Walnut prefix – will be “available in Caramel, vanilla and mint” said the proverbial spokesman.

Equally new is French President Emmanuel Macron, who has certainly ‘whipped’ up a storm with the revelation that despite being in office for only three months he has managed to spend €26,000 on make-up – but the beautiful Monsieur Macron is not alone…

So far, the French leader has settled two bills for €16,000 and €10,000 from the public purse, but these pale into insignificance compared to his predecessor Francois Hollande’s €10,000 a month on a personal hairdresser. Bill Clinton was famous for keeping Air Force One waiting on the tarmac while he received a haircut from a Beverly Hills stylist know as Christophe – but what about British politicians? According to a Telegraph report from 2005, quoting a parliamentary written answer, Tony Blair spent £1,800 of taxpayers’ money on make-up and grooming. That’s a national disgrace: just £300 a year. It’s barely the cost of a Walnut-less Whip a day…

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