The price Mr Javid would have had to pay to keep his job (sacking his entire team) was too steep and he decided that leaving was the only appropriate action. Or at least that’s the party line. Now we’ve got a new chancellor, Rishi Sunak, who’s 39 years old, has got an incredible CV, is married to the daughter of a billionaire and makes me question where my life went so wrong!
However, he may not get the independence that Chancellors have been used to and though we’d stop short of calling him a puppet of Number 10, his agenda is going to be their agenda and it’s down to him to engineer it in such a way that everyone gains/remains confident in UK PLC. Some have said that it’s madness to change Chancellors four weeks prior to a budget announcement, but it’s pretty obvious that Dominic Cummings has already written the budget and therefore Mr Sunak isn‘t going to have to burn the midnight oil to get something ready in time.
Rumours are that the budget will be long tax cuts and spending promises – and probably lacking the fiscal controls that Mr Javid seemed keen to offer alongside his proposals for additional spending. The market took very little time in weighing up the pros and cons of increasing the national debt Vs. boosting the economy and decided that this would be a net positive, particularly over the next few years whilst we’re going it alone. The long term effects could look a lot bleaker, but the market doesn‘t think that far ahead.
On the complete flip-side of countries with burgeoning debt piles, Norway has got a very first world problem: Their $1.2 trillion sovereign wealth fund is wondering whether the value might be affected in the coming years by taxes that governments are considering levying against US tech giants. The fund’s two largest stock holdings are in Microsoft and Apple and if government’s clamp down and these companies start paying close to their fair share of taxes, their share price could well adjust downwards. Bloomberg has the story.
Staying with tech titans; Amazon has convinced a US judge to temporarily halt Microsoft’s work on a Department of Defense cloud computing contract worth about $10bn. Amazon argued that Donald Trump showed “unmistakable bias” in awarding the contract to Microsoft – not surprising as he has a personal beef with “Jeff Bozo”, who owns the Washington Post and is highly critical of Trump.
Despite Trump’s tough talk on Huawei and how much of a risk their technology is to national security, the White House has granted US companies another 45 days to be able to do business with them. This extension has been rolling on since May last year as companies struggle to fill the gaps that Huawei would leave from alternative suppliers.
Argentina has cut interest rates by 4% (which sounds like a lot but that’s down to 44% from 48%) This came alongside them talking about a “deep debt restructuring” programme that they want to impose on creditors and are refusing to impose austerity measures on the country – if they owe you money, be afraid.
Next door, Brazil have had to jump into the FX market to prop up their currency: The central bank intervened with a billion dollars’ worth of swap trades to try and get the currency off record lows versus the US dollar. Such weak currencies make servicing foreign debt more expensive and Brazil isn’t the only country we’ll see with this problem if the Dollar’s strength persists.
Oil’s having a bit of a rally as OPEC members continue talking about turning down the taps to deal with the over-supply issues. Between this supply contraction and hopefully the coronavirus not increasing, analysts are talking about up to a 10% rally in the commodity towards $55 per barrel.
Today’s all about European GDP numbers – expected to be poor – which could compound the Euro currency’s poor performance this week. Thereafter it’s a 48 hour storm in the UK which should see Netflix‘s power consumption rise even further!
Have a great weekend