What to Watch: Markets cautious on trade deal, Bitcoin slides, British Airways-owner cuts growth forecast

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
A British Airways Embraer ERJ-190SR airplane taxis at City Airport in London, Britain, September 3, 2018. REUTERS/Hannah McKay
A British Airways Embraer ERJ-190SR airplane taxis at City Airport in London, Britain, September 3, 2018. REUTERS/Hannah McKay

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Markets cautious on trade deal

The recent rally for European markets paused on Friday, as the outlook for a phase one deal between the US and China became less clear.

Both sides have agreed to roll-back tariffs as part of a phase one agreement, Bloomberg reported. However, Peter Navarro, the Assistant to the President and Director of the National Trade Council, told Fox Business on Thursday night that there was “no agreement.”

The FTSE 100 (^FTSE) was down 0.4%, with commodity stocks dragging the index lower. Russian steel giant Evraz (EVR.L) was down 3.75%, platinum and copper giant Anglo American (AAL.L) was down 2.8%, and Glencore (GLEN.L) was off 2%.

Germany’s DAX (^GDAXI) was down 0.3%, France’s CAC 40 (^FCHI) was down 0.4%, and the Euronext 100 (^N100) was down by 0.4%.

Overnight in Asia, Japan’s Nikkei (^N225) closed up by 0.2%, the Hong Kong Hang Seng Index (^HSI) was down 0.7%, and China’s Shanghai Composite (000001.SS) was down by 0.4%.

Bitcoin slides

The price of cryptocurrency bitcoin (BTC-USD) fell to a two-week low on Friday.

Bitcoin was down 2% against the dollar to $9,070.14 at 9.27am UK time. The decline means bitcoin is trading near its lowest point since an incredible 25% run-up in late October, provoked by China’s declaration that it would embrace blockchain technology.

Charles Hayter, the CEO of CryptoCompare, said there was “no clear catalyst” for Friday’s price drop.

“The price is running its usual testing of supports and resistances,” Hayter said. “Trade volumes are neither here nor there with c.1.8m trades per hour.”

British Airways-owner cuts growth forecasts

International Consolidated Airlines Group (IAG.L), the owner of British Airways, has reaffirmed its long-term profit margin forecasts despite recent strike action, but slashed expectations for customer growth.

The airline giant said on Friday it still expects to deliver an operating profit margin of between 12% and 15% for the next three years.

However, IAG slashed passenger growth forecasts from 6% per year for the next three years to just 3.4%.

At the same time, IAG said passenger numbers rose by 3.4% in October against the same period last year. IAG carried 10.3 million passengers in October, up from 10 million in the same month for 2018.

British Airways saw passenger numbers rose by a more modest 1.1% to 4.2 million. The airline has seen passenger numbers increase by 1.2% over the year-to-date, IAG said.

Standard Chartered CEO takes pay cut

Two senior executives at Asian-focused bank Standard Chartered (STAN.L) have been forced to take pay cuts after a revolt by investors.

Bill Winters, the chief executive officer of Standard Chartered, and Andy Halford, the bank’s chief finance officer, have both accepted an 8% reduction in their fixed pay.

The cut amounts to £237,000 less per year for Winters and £147,000 less per year for Halford.

Winters will still earn £2.6m in fixed pay after the cut, with the opportunity to make up to £7.8m if all bonus conditions are met.

Halford will make £1.6m in base pay and be eligible for up to £4.8m including bonus.

The reductions in fixed pay follow investor anger at the amount and method of payment for the two executives. Almost 40% of investors voted against the bank’s remuneration policy at its annual general meeting in in May.

Tony Blair attacks ‘extraordinary’ spending pledges

Former British prime minister Tony Blair has criticised the lavish spending plans of both the Conservative and Labour Party.

“Even if you leave aside Brexit, you’re now in this extraordinary situation on public spending where the Conservatives are now just saying we’re going to spend lots of money,” Blair told Yahoo Finance UK. “The Labour party says, whatever you spend, we’re going to spend even more.

“This is just politics. No one is saying: how do we reform the healthcare system, the education system, law and order, or anything. People are just saying: I’m going to spend more, I’m going to spend even more.

“It’s going to be a problem for the next generation.”

Royal Mail sues to stop Christmas strike

Royal Mail (RMG.L) has announced a legal battle to stop its workers going on strike in the run-up to Christmas, urging the High Court to rule the industrial action is “unlawful.”

The company said it had submitted evidence that union officials had “planned and orchestrated breaches of their legal obligations” in how they balloted for the first nationwide postal strike in a decade.

But the Communication Workers’ Union (CWU) said they “clearly refute” the claims, after its members voted for a national strike last month in a row over pensions. No date had yet been set for action.

$100bn Saudi Aramco dividend dangled

Bankers assisting Saudi Aramco with its long-awaited IPO have reportedly told investors that they could receive an annual dividend of more than $100bn if they invest in the company.

According to the Financial Times, Bank of America informed investors that payouts to shareholders could go “above and beyond the minimum dividend pledge” of $75bn over the course of the next five years.

The report is reflective of the messaging by Saudi officials, who are hoping that the company can garner a massive $2tn valuation.

What to expect in the US

US stocks futures are pointing to a quiet open. S&P500 futures (ES=F) were down 0.1%, Dow Jones futures (YM=F) were down 0.1%, and Nasdaq futures (NQ=F) were down 0.2%.

88 companies are reporting in the US later today.