This week: good news for the euro, bad news for UK corporate profits.
Not quite an eclipse of the charts, as it turns out, but a strong week for the euro nonetheless: sterling fell to an eight-year low against the single currency. The movement came on the back of encouraging preliminary data from the Eurozone manufacturing purchasing managers’ index (PMI), as measured by Markit. The “flash” measurement for August came in above expectations at 57.4; any reading above 50 indicates expansion in the sector. While the services PMI fell to 54.9, the gain made by the composite index (an average of the two measures) outshone expectations.
The strength in manufacturing (and thus exports) counteracts views that the strength of the euro might affect economic growth by making Eurozone exports less competitive. Meanwhile, the weakness in the pound helped to lift the FTSE 100 Index 1.13% for the week to close on Thursday. The S&P 500 Index and the FTSE World Europe ex UK indices also made gains, rising 0.55% and 0.26%, respectively.
Meanwhile, economists have been waiting eagerly for news from the Jackson Hole Symposium – an annual gathering of the world’s central-banking luminaries – which began on Thursday. U.S. Federal Reserve (Fed) Chair Janet Yellen will speak on Friday, addressing the topic of financial stability, but questions over who will head the Fed once her current term expires in February hang in the air.
Dark days for UK corporate profits
Profit warnings have been rife this week, with British public relations and advertising giant WPP, seen as a guiding star for the global economy, cutting forecasts for the second time this year. WPP now expects sales growth to be between 0% and 1%, having previously forecast a 2% increase. Growing economic uncertainty was blamed, along with “digital disruption,” as companies try to reach their customers in less traditional ways.
Sub-prime lender Provident Financial as well as electrical and telecommunications retailer and services company Dixons Carphone also issued cautionary statements on profits, casting shadows over their share prices, which fell by around 65% and 30%, respectively, on the days of the announcements.
Brazil tries to change trajectory
In an attempt to haul Latin America’s largest economy out of a deep recession, President Michel Temer announced that the Brazilian government is planning to sell off everything from the country’s mint to its state lottery in an extensive privatization initiative. Temer hopes this R$44 billion (US$14 billion) plan will raise revenue and boost infrastructure investment. On Wednesday, a total of 57 assets were put up for sale – among them were Sao Paulo airport and various highways and oilfields. Earlier in the week, officials signaled an intention to sell a controlling stake in electricity company Electrobas. The announcement, which was well received by investors, led to the company’s share price soaring by almost 50%.
A Brooklyn-based rapper who goes by the Twitter name of BADMON made a spectacle of himself this week. He used the social media platform to ask his followers whether he was crazy for watching the solar eclipse with no glasses, claiming he had sun gazed before and not been left in the dark. His reasoning was that our ancestors wouldn’t have had any “fancy eyewear” and it didn’t damage their eyes. Nevertheless, on Tuesday he announced the cancellation of his Cleveland, Chicago and Toronto performances due to “unforeseen circumstances.” Sounds a little shady, if you ask us.