There may be trouble ahead...
The business news that matters
A scheduling note: There will be no Off to Lunch tomorrow, Friday October 6, or on Monday, October 9. The Sunday press review will be sent out as normal and Off to Lunch will be back in full on Tuesday…
Financial markets are unsettled, to put it mildly. A global sell-off in the government debt market has pushed bond yields up sharply. The yield on 30-year gilts in the UK hit the highest level since 1998 earlier this week, while the yield on 30-year treasuries in the US is at the highest level since the financial crisis.
“It feels like something is about to break,” Chris Turner, the global head of markets at ING, says in an analysis piece by The Times, which you can read here. John Authers writes in his latest column for Bloomberg:
For 15 months now, the yield curve has been inverted. In English, that means 10-year Treasury bonds have been yielding less than two-year bonds, even though investors normally require an extra yield for the extra risk of investing over long periods. As is now widely known, an inverted curve is one of the strongest recession indicators there is. An inversion so protracted implies serious problems afoot.
You can find that piece here. On the movement in markets this week he adds:
The speed with which the curve is now steepening suggests, all else equal, that the downturn is close. But nothing is certain.
A concoction of factors are coming together to move markets - a realisation that interest rates will stay at higher levels for longer than previously thought, political uncertainty in the US and other countries, and concern about the outlook for the global economy.
The Financial Times has done a handy piece on who is likely to be hurt by the recent movement in markets, notably banks, pension funds and asset managers who hold national or corporate bonds. You can read that piece here
The price of oil fell more than 5 per cent yesterday but markets are calmer today in general, with the FTSE 100 up 0.5 per cent in morning trading.
However, that is not the case for Metro Bank. Shares in the high-street bank are down nearly a quarter today after the Financial Times reported that it is looking to raise up to £600 million in equity and debt to shore up its balance sheet. The FT is now reporting that the chairman and chief executive of Metro Bank have been called for talks with the Financial Conduct Authority, the City regulator. You can read that story here.
Metro Bank is valued at less than £70 million after the fall in its share price today and over recent weeks. The graph below shows the company’s share price over the last year…
Other stories that matter…
1. The Competition and Markets Authority is to investigate the cloud computing industry because of concerns that Amazon and Microsoft are too dominant. The CMA is concerned that businesses and consumers are paying too much and finding it difficult to switch providers for services like data storage and internal HR systems. Guardian story here
2. A fascinating piece from Simon Kuper in the Financial Times on why the government’s decision to shrink HS2 is the right move. Kuper lives in France and talks about the issues that high-speed rail projects have faced there, but also why France, Spain and other European countries need these trains more than the UK, which is smaller and more densely populated. “A popular cliché this week is that infrastructure is often contested before it’s built, then instantly becomes essential and beloved,” he writes. “Well, sometimes. The high-speed plane Concorde began commercial flights in 1976. It was canned in 2003. Some new infrastructure just isn’t that helpful.” You can read the column here.
3. The cost of customers returning unwanted items is a big challenge for online consumer businesses. Uber thinks it can offer a solution. Its drivers will now return unwanted items to the local post office for $5. The service has just launched in the US. It will be interesting to see if it comes to the UK. Announcement here
4. Making your meetings 15 minutes long instead of 30 minutes has become one of the most effective productivity hacks for executives and businesses, according to an analysis by The Wall Street Journal. Piece here
5. Daniel Roth, the editor-in-chief of LinkedIn, has given an interview to Press Gazette on why the business-focused social-media site is more influential than ever, 20 years after it launched. News has been a key source of its growth as Google, Facebook and Twitter have deprioritised it. “News is essential to us,” says Roth. “You cannot get ahead in your business or your career without knowing what’s going on in the world.” Piece here
6. Times columnist Matthew Syed has compared the video referee blunder in the Tottenham-Liverpool match in the Premier League last Saturday with Chesley Sullenberger successfully landing a plane in the Hudson River to show the importance of clear communication and processes when making a decision. You can read that piece here
And finally…
As I noted above, there will be no Off to Lunch tomorrow or next Monday. That’s because I am working on some exciting plans following our announcement earlier this week.
In case you missed the news, Off to Lunch and Business Studies have been acquired by Business Leader magazine. Off to Lunch, Business Studies and Business Leader will come together to build a new agenda-setting powerhouse in UK business media. I will be editor-in-chief of the enlarged Business Leader group and oversee all content.
There will be more news on our plans very soon. In the meantime, you can find the announcement and more details here. As I said yesterday, thank you to everyone who has been in touch. I am gradually replying to all messages!
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Best
Graham