London fights for its future
Still got the back-to-work blues? What’s wrong with you? It might only be January 4, but the City’s finest have already successfully implemented – or partly waived – 1.7m paragraphs of new Mifid II regulations, and earned as much as the average employee does all year, writes Matthew Vincent. And it’s almost the weekend again!
A couple of weeks ago we chatted to Michael Gastauer about his fintech startup WB21, a “digital bank” that has claimed one million customers and a $2.2bn valuation after less than a year in operation. It’s a remarkable trajectory for a company with a relatively unknown management team, no outside investors and what appear to be thousands of fake Twitter followers. WB21 has recently won mainstream attention by announcing a move from London to Berlin following the UK’s vote to leave the European Union. The WSJ said it was “one of the first startups” to quit the UK for Germany as a result of Brexit and the city of Berlin has welcomed WB21 and Gastauer with open arms.
Everybody knows much of the City of London was vehemently opposed to Brexit because of fears of what might happen to banks’ interests if so-called “passporting” rights into and out of the European system were lost. What is less talked about, however, is Brexit’s impact on the European payments clearing system, Target2 — and how the passporting issue connects by way of Target2 to the realm of sovereign monetary policy. At the absolute heart of the matter is the status and treatment of payment systems worldwide, and whether or not they can really be treated as something independent and thus distinct from national monetary policy (and hence open to commercial competition) — or as integral to sovereign interests.
Shareholders in the London Stock Exchange will vote today on a merger with Deutsche Boerse to create a pan-European exchanges champion. The deal has been cast into doubt by the Brexit referendum, according to some commentators. LSE investors can be expected to vote Yes, not least because the drop in the value of sterling has increased the value of the 46 per cent stake they will take in the merged entity.
Anglo American shareholders are expected to censure the CEO’s pay deal today, Ladbrokes was paying out nonstop at Cheltenham, Sky has raised operating profits 12 per cent. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.
Cast your mind back for a moment to 1984. Not the dystopian tale of what might have been that year according to George Orwell, mind you, but the year as it actually transpired. Have a feel for the music of the era. (For example, Alphaville were Big in Japan, Madonna’s big hit was Like a Virgin, Michael Jackson was Thrilling the world, Bruce Springsteen was Born in the USA and Queen was using shots of Fritz Lang’s Metropolis in their music video for Radio Gaga). Think back too to the big movie hits of the year, Ghostbusters, Gremlins, Indiana Jones, Terminator and the lesser known films like War Games, Protocol and Red Dawn.
Back in the late 90s, during one of the first attempts to forge a merger or some sort of alliance between the London and Frankfurt stock exchanges, an internal competition was launched to find a name for the new entity. The prize was a weekend for two, all expenses paid, in either London or Frankfurt, depending on the winner’s abode. In the event, all the entries came from the Deutsche Boerse side; none at all came from the LSE. But in any case, a winning entry was never chosen because the whole plan fell foul of board level egos. And every merger plan since has fallen on similar grounds.
The Greek government submitted its highly anticipated plan for an economic overhaul to bailout authorities on Thursday night. The submission is part of a request for a new three-year bailout that Prime Minister Alexis Tsipras must agree by the weekend, in order to avoid a collapse of the Greek banking sector that would probably see the country crash out of the eurozone. The submission opens a razor-thin 48-hour window in which Greek bailout monitoring institutions must evaluate the plan before it is turned over to eurozone finance ministers on Saturday. (FT) In the news
This is a Google Map of the City of London: It’s a “square mile” because back in the day — before phones, fax machines or the internet was invented — representatives from the key settlement banks had to gather in person to net and settle outstanding debts and claims against each other (a mile essentially being about as far as messengers could be asked to travel in a day).
ENOC is paying £1.7bn for the bit of Dragon Oil it doesn’t own, Thomas Cook is making moves on China with Fosun and the Paris Air Show and E3 video game convention take off. FT Opening Quote is your early City briefing with commentary by City Editor Jonathan Guthrie. You can Asian marketsNikkei 225 down -19.29 (-0.09%) at 20,388Topix up +0.44 (+0.03%) at 1,652Hang Seng down -378.74 (-1.39%) at 26,902
The Brexit bill will be the highlight of this morning’s Queen’s Speech, Fifa officials have been arrested in dawn raids in Europe and what will Ryanair do with its Aer Lingus stake now IAG has published its offer? FT Opening Quote with commentary by City Editor Jonathan Guthrie is your early City briefing. You can sign up for the email here. Asian marketsNikkei 225 up +35.10 (+0.17%) at 20,473Topix up +1.76 (+0.11%) at 1,661Hang Seng down -209.26 (-0.74%) at 28,041
It’s not bottling it, but Coca-Cola HBC is certainly cautious on Greece, SABMiller is downing Greenwich’s Meantime craft beer business and South Africa’s Brait has a New Look. FT Opening Quote with commentary by City Editor Jonathan Guthrie is your early City briefing. You can sign up for the email here.
Nuclear outage heightens UK energy supply fears || Eurozone repo market grows in first half || Economic optimism buoys China’s renminbi || Bloomberg to take helm at data group || Lloyd’s head backs No camp as Scottish poll gap narrows || France halts delivery of warship to Russia || Tesla Motors is expected to announce batter plant || Markets
Janet Yellen to see Jackson Hole return to wonky roots || StanChart’s NY anti-money laundering settlement draws UAE ire || Activist Edward Bramson steps up pressure to join Electra board || Co-op Bank slashes first-half losses || Markets
Markets: “Asian stocks dropped, extending the biggest global rout in six months that saw the Dow Jones Industrial Average wipe out this year’s gains in one session amid weaker earnings and credit-market concerns.” (Bloomberg)
Markets: The influential head of the US House Financial Services Committee has called on US Treasury secretary Jack Lew to investigate whether sweeping financial reform has impaired the $10tn market for US corporate debt and risks amplifying an interest rate shock for large companies.In a letter sent this week to Mr Lew, Congressman Jeb Hensarling argued that it was the responsibility of regulators to ensure that the Volcker rule, a core element of the Dodd-Frank financial reforms that bans banks from proprietary trading, does not harm US capital markets. (Financial Times) UK ministers, led by business secretary Vince Cable, have ordered a review into the sell-off of state assets, just days before MPs publish a report that is expected to criticise last year’s privatisation of Royal Mail. Lord Myners, former City minister, will lead a panel of experts to examine alternatives to initial public offerings for privatising state assets, as well as whether the process of gauging what investors are willing to pay for shares can be improved. (Financial Times)
Markets: Asia-Pacific equities were on a downward path after a sell-off on Wall Street, where the S&P 500 notched its sharpest fall in nearly a month. Regional data were no help in Asia, with Chinese inflation more subdued than anticipated and Australian consumer confidence failing to rebound much. (FT’s Global Markets Overview) Citigroup is set to pay more than $7bn to resolve a long-running US government investigation into the bank’s sale of mortgage-backed securities, people familiar with the matter said on Tuesday night. The bank will pay roughly $4bn in cash to the Department of Justice and $3bn will be paid in mortgage relief to homeowners – such as principle reduction – as well as other payments to nearly half a dozen state attorneys-general, one person familiar with the matter said. Negotiations are continuing but if they stay on track a deal could be announced as early as next week, the people said. (Financial Times) (WSJ)
Camp Alphaville reminder: It’s on Wednesday (Details here) Markets: “Asian share markets edged cautiously higher on Monday while the dollar stayed under pressure ahead of packed week of economic data that will test investor hopes for a pick-up in the U.S. and global economies… Bulls are hoping to see evidence of an economic rebound in the United States in this week’s busy calendar of data that includes the June payrolls report on Thursday, a day early due to the July 4 holiday.” (Reuters)