Global stockmarkets started the new year with a bad hangover, induced by more turbulence in China’s markets. The Shanghai and Shenzhen Composite index fell heavily during the week, causing trading to be automatically suspended at least twice, after the release of more dismal data on manufacturing and other gloomy economic news. Investors were also unnerved by the looming end of a ban on share sales by big investors; the authorities quickly drafted permanent restrictions on such sales.
How low can it go?
Oil prices also weighed on market sentiment. Brent crude traded at under $35 a barrel, the lowest in more than a decade, after figures showed oil stockpiles increasing in America. Any lingering expectations that OPEC would agree to cut production in order to raise prices were dashed by the diplomatic row between Saudi Arabia and Iran.
Annual headline inflation in the euro zone remained unchanged at 0.2% in December. Markets had expected it to rise after months of stimulus policies that the European Central Bank had brought in to try to lift inflation to its 2% target.
In Sweden, which is also battling persistently low inflation, the board of the central bank gave the governor the power to intervene directly in currency markets if the krona continues to strengthen. The Riksbank has already lowered its benchmark interest rate to -0.35% and expanded its quantitative-easing programme.
Some MPs in Britain’s Parliament called for a hearing into the decision, announced on New Year’s Eve, by the Financial Conduct Authority to drop its inquiry into banking pay and culture. The regulator said that rather than pursue an industry-wide investigation, it would work with individual banks to promote “the delivery of cultural change”. The FCA’s critics claim it has bowed to pressure from the government.
Vroom! Vroom!
Carmakers sold 17.47m light vehicles in the United States in 2015, their best year ever, beating a record that had stood since 2000. This was driven mostly by surging sales of light trucks at the expense of mid-size and compact cars, in part because the lower price of petrol has reduced the cost of running larger vehicles. The car industry is confident that 2016 will be another record year, though with so many changes afoot in the business some wonder if sales will now hit a plateau.
Underlining how incumbent carmakers are having to adapt to the challenges posed by new technologies, General Motors said it was investing $500m in Lyft, a ridesharing firm and Uber’s main rival. GM and Lyft will work together on projects to develop self-driving taxis and to create hubs across America where people who want to work for Lyft as drivers can rent a car from GM.
Tesla Motors had its best quarter in the last three months of 2015, delivering 17,400 cars to customers, some of whom had placed orders three years ago. However, the electric-car company’s share price fell sharply, mainly over worries that it will not be able to ramp up production to meet the growing backlog of orders for its new Model X.
Volkswagen’s troubles deepened in America, where the Justice Department filed a civil lawsuit seeking damages for its installation of software in cars designed to cheat emissions tests. The penalties from the various complaints lodged in the suit potentially amount to $48 billion. See article.
Sainsbury’s, a British supermarket chain, revealed that it had made a takeover offer for Home Retail Group, but had been rejected. HRG owns Argos, which used to sell its wares primarily through a hefty shopping catalogue but has beefed up its online and same-day delivery business. Those operations would benefit Sainsbury’s as it and others face increased competition from Amazon’s entry into Britain’s online groceries market. It is considering whether to pursue its bid.
Marc Bolland said he would step down as chief executive of Marks & Spencer. He has spent six years in the job trying to turn around the struggling British high-street retailer, which had a bleak Christmas trading period.
Twitbook
Twitter’s share price dipped amid reports that it is contemplating extending the maximum limit of characters in tweets from 140 to 10,000. The Twittersphere lit up upon news of the possible change, with many tweeters griping that it would end the short, pithy comments for which Twitter is known and turn the service into something more akin to Facebook. That may be what Twitter’s executives are hoping for as they look for ways to boost revenue.
