The main topic du jour for most commentators has been the impending ‘Brexit’ referendum, the date of which was revealed at the weekend (23 June).
Conservative politicians were not particularly EUphoric following Mr Cameron’s trip to Brussels to renegotiate the UK’s terms with the European Union, and spent the week lining themselves up on the sides of the ‘Ins’ or the ‘Outs’.
Investors hate uncertainty and the prospect of a protracted and bruising battle caused the pound to plummet to its lowest level against the US dollar since 2009. Meanwhile, a report by HSBC claimed that the four month in/out campaign could lead to a spike in inflation and – potentially – shave 1.5% from gross domestic product.
But events in the City reminded us that whatever the UK’s political direction, the financial world continues to draw ever closer. London Stock Exchange and Germany’s Deutsche Boerse confirmed they are planning a so-called “merger of equals”. Many of the finer details have yet to be ironed out, but there was speculation the group will be based in London and be headed up by the Deutsche Boerse’s German boss Carsten Kengeter. Investors may be experiencing a sense of deja vu. The exchanges have tried to join forces three times since 2000 – each time the deal has come to nothing.
Despite the turbulence in currency markets, equity investors seemed to give a Gallic shrug of the shoulders in reaction to all the Brexit speculation. Over the week to the close on Thursday the FTSE 100 index was up 1.1%. However, this seeming indifference can be explained by the international nature of the UK stock market. With two thirds of corporate earnings coming from outside the UK and 40% of dividends declared in US dollars, global factors such as a rebound in the oil price had more of an effect on the market’s direction.
Meanwhile, a juicy £2 billion special dividend from Lloyds Banking Group boosted its shares by 13% and gave a fillip to the whole banking sector.
On the downside, recruitment firm Hays, which investors often look to as an economic bellwether, announced slowing demand for new UK staff during the past six months, as concerns grow over the economic outlook. The company said conditions have become more challenging in both the public and private sectors, and predicted that conditions would remain “uncertain”.
A man was reported to police by several motorists in Stockport on Tuesday, who suspected they had seen him carrying a “small child” along the hard shoulder of the M60. In reality, police discovered he was actually holding a garden ornament of the Big Ear-ed variety. The man was arrested, as walking along the gnome-man’s land of the hard shoulder is not only against the law, but breaches elfin safety regulations. Some might say the police were just being pixie, but others think his punishment was fairy ‘nuff. Either way, no one knows whether the chap had gone fishing for trouble, or was simply making his way back gnome, sweet gnome.