Major International Business Headlines Brief::: 23 July 2019

Tue Jul 23 03:56:53 CAT 2019

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Major International Business Headlines Brief::: 23 July 2019

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*  Amplats H1 earnings jump but warns against unsustainable wage hikes

*  Nigeria, Siemens agree roadmap to increase power: President Buhari

*  South Africa allocates extra $4.2 bln for cash-strapped Eskom

*  South African rand firmer as carry trade trumps political wrangling

*  South African rand slightly weaker in early trade

*  Petra Diamonds misses revenue expectations on weak demand

*  Kenya's Consolidated Bank extends its bond maturity by 3 months

*  Sub-Saharan Africa to stay on recovery path, rate cuts on the horizon

*  Nigeria's central bank tries to force banks to lend, not buy bills

*  Huawei: Government decision on 5G rollout delayed

*  Greg Clark: Business Brexit fears must be resolved

*  Could Iran tensions push up petrol prices?

*  BA pilots vote in favour of strike action over key summer period

*  Shares soar at 'China's Nasdaq' market debut

*  Brexit harming UK industrial strategy, warns top economist

*  Equifax to pay up to $700m to settle data breach

*  Aid budget to be used by International Trade Department

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PepsiCo to buy South Africa's Pioneer Food for $1.7 bln

JOHANNESBURG (Reuters) - PepsiCo has struck a deal to buy South Africa’s Pioneer Food Group for $1.7 billion, the companies said on Friday, lifting Pioneer’s shares and boosting a sector that has been hit by drought and tough trading conditions.

The U.S. drinks and snack group said on Friday that Pioneer’s product portfolio was complementary to its own and would help PepsiCo to expand in sub-Saharan Africa by adding manufacturing and distribution capabilities.

“Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well,” PepsiCo Chairman and CEO Ramon Laguarta said in a statement.

PepsiCo has offered 110 rand ($7.94) per Pioneer ordinary share in what would be its second largest deal since 2010, the companies said, with the news lifting the South African company’s shares by 29.32% to more than 100 rand.

Shares in agribusiness investment company Zeder Investments, which holds Pioneer as part of its portfolio, also rose more than 22%.

“It’s a vote of confidence in South Africa at a time when we really need it,” Pioneer CEO Tertius Carstens told Reuters.

Food producers have struggled amid a slump in retail sales as consumers cut back and dry weather hit maize and other produce.

Pioneer, which uses maize in many of its products, reported a decline in half-year earnings in May, weighed down by shortages in the staple food.

“It’s almost a signal to other overseas companies that we are open for business. If PepsiCo is willing to put money down it may lift sentiment of other foreign investors that might come looking at South Africa for bargains,” said Greg Davies, equities trader at Cratos Capital.

Pioneer, whose brands include Weet-Bix cereal, Liqui Fruit juice and Sasko bread, is the latest consumer goods firm to be the target of a buyout after South Africa’s Clover Industries, which processes products including yoghurt, beverages, and olive oil, began takeover talks with a consortium of companies called Milco SA last year.

Pioneer was in talks over a potential deal with “a multinational organisation” in 2017, but that fell apart after South Africa’s credit rating was cut to junk status.

Pioneer and PepsiCo declined to comment whether those talks referred to them.

Pioneer exports to more than 80 countries. Its deal with PepsiCo is conditional on regulatory approvals.

($1 = 13.8613 rand)

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Amplats H1 earnings jump but warns against unsustainable wage hikes

JOHANNESBURG (Reuters) - Anglo American Platinum (Amplats) on Monday reported half-year earnings more than doubling, boosted by higher metals prices, but warned it could not give unsustainable increases as sector wage talks continued.

Higher prices for precious metals and a weaker rand currency have improved operating conditions for South African producers but the industry is still reeling from a 2014 strike that cost billions and forced firms to cut jobs and shed mines after a supply glut weighed on platinum prices.

“Having just come out of a very difficult environment over the last couple of years. ...the industry has to be really careful about embedding unsustainable increases in the base wages,” CEO Chris Griffith said.

The price of platinum has risen 7.1% in 2019 setting the metal on course for its biggest gain in seven years.

The majority union in the platinum sector, the Association of Mineworkers and Construction Union (AMCU), has demanded a hike of 17,000 rand ($1,145) per month, or around 48%.

“We would really have to look at what inflation is and around inflation is what we would still seek the wage settlement to be,” said Griffith, declined to give a number.

Amplats, which has not yet presented its offer to the unions, said if the costs were too high it could hit jobs and production.

“If we would have to agree to increases like that then basically you would kill the production at Amandelbult and thousands of people would be without work,” Griffith said.

For the half year to June 30 Amplats reported a 120% rise in headline earnings per share, South Africa’s main profit measure, to 28.15 rand ($2.02) per share from 12.82 rand a year earlier.

It benefited from higher metals prices and a stock gain of 1 billion rand.

“We’ve seen steady production from our operations, though certain headwinds, including Eskom power shortages and strike action at Mototolo, have impacted our first half performance but we expect to see a stronger performance in H2 2019,” Griffith said.

Eskom cut power across the country in February and March as low coal supplies, a cash crunch, and multiple failures at its ageing power stations curbed supply.

The precious metals producer, which only resumed dividend payments in February 2018 after a seven-year absence, hiked its interim dividend to 11 rand per share compared with 3.74 rand for the same period a year earlier.

($1 = 13.9313 rand)

Nigeria, Siemens agree roadmap to increase power: President Buhari

ABUJA (Reuters) - Nigeria and German company Siemens have agreed a roadmap to increase Nigeria’s “reliable” power supply to 11,000 megawatts by 2023, President Muhammadu Buhari said on Monday.

The president of the West African country said that at present, “only an average of 4,000 megawatts reliably reaches consumers”. He said Nigeria would work with Siemens to achieve “7,000 megawatts of reliable power supply by 2021 and 11,000 megawatts by 2023”.

South Africa allocates extra $4.2 bln for cash-strapped Eskom

CAPE TOWN (Reuters) - The South African government has allocated an extra 59 billion rand ($4.24 billion) to struggling state-owned power utility Eskom over the next two years so it can service its debt, a special appropriation bill seen by Reuters on Monday showed.

Eskom, which supplies more than 90% of the country’s electricity but was forced to implement power cuts this year, fails to generate sufficient profit to meet its debt servicing costs and has required state cash injections to stay afloat.

The latest allocation, sourced from the government’s National Revenue Fund, provides 26 billion rand for the 2019/20 financial year and 33 billion for 2020/21.

“For the purpose of promoting transparency and the effective management of the amount ... the Minister of Finance, in writing, may impose conditions to be met by Eskom before any part of the amount is transferred,” the bill read.

Finance Minister Tito Mboweni is expected to discuss the bill in parliament on Tuesday.

In April, Mboweni authorised more than 17 billion rand for Eskom following a delay in the utility accessing funding from the China Development Bank.

Beyond the cash injections, South Africa is also weighing other support options for Eskom including swapping the firm’s debt for government bonds or ring-fencing it in a special account, a senior treasury official said earlier this month.

($1 = 13.9097 rand)

South African rand firmer as carry trade trumps political wrangling

JOHANNESBURG (Reuters) - South Africa’s rand rallied on Monday, brushing aside local political ructions as investors increased bets on further monetary easing by the European and U.S. central banks.

At 1500 GMT the rand was 0.75% firmer at 13.8500 per dollar after closing at 13.9500 on Friday. Most of those gains came in the latter part of the session, with offshore investors in particular lured by the rand’s healthy carry return.

The European Central Bank is expected to lower its key deposit rate on Thursday while the U.S. Federal Reserve is expected to cut rates on July 31, prompting investors to look to high-yielding emerging markets assets.[nL8N24N3LU]

South Africa’s central bank (SARB) cut its own key rate last Thursday, but looks unlikely to ease further this year, and with inflation trending lower, the rand and local bonds have continued to draw buyers despite a political storm brewing around President Cyril Ramaphosa.[nL8N24J55U]

“Consumer prices, like the SARB said last week, will remain subdued so the rand remains an attractive carry trade,” said trader at IG Markets Shaun Murison.

On Friday the head of the government’s anti-graft ombudsman said Ramaphosa had violated the executive ethics code over a donation to his 2017 campaign for the leadership of the African National Congress (ANC) party.[nL8N24K2J3]

On Sunday Ramaphosa said he would go to court to overturn the finding.[nL8N24M0O4]

“We know that anything that has to go through the judicial system takes a long time so the rand hasn’t been affected much. So far it’s been about how much the U.S. will cut rates,” said Murison.

Bonds were weaker, with the yield on the benchmark 2026 government paper up 1 basis point to 8.03%.

On the stock market, shares fell alongside emerging market equities, with companies earning in foreign currencies hit by the rand’s rally, while the introduction in China of a Nasdaq-styled index hurt existing indices. [nL8N24N1OA]

The benchmark JSE Top 40 Index closed 0.4% down at 51,891 points while the broader All-Share Index also fell 0.4% to 58,015 points.

“The Chinese market’s relatively weak. And the rand’s a little bit stronger today as well, so that’s putting a little bit of pressure on the rand hedges at the moment,” said portfolio manager at Independent Securities Michele Santangelo.

Tobacco producers British American Tobacco (BATS) and Remgro were at the bottom of the blue-chip index, with BATS down 2.3% and Remgro slipping 1.7%.

South African rand slightly weaker in early trade

JOHANNESBURG (Reuters) - South Africa’s rand slipped slightly early on Monday, as investors scaled back their expectations for deep U.S. interest rate cuts.

At 0653 GMT, the rand traded at 13.9575 versus the dollar, less than 0.1 percent weaker than its previous close.

Government bonds also dipped slightly, with the yield on the benchmark 2026 government bond 3 basis points higher at 8.050 percent.

In the absence of major local data releases, South African assets tend to take their cue from global factors.

Expectations that U.S. monetary policy will ease tapered off after a spokesman for the Federal Reserve clarified comments by a senior central banker last week.

Priced-in forecasts for a 50 basis point cut have tumbled from as high as 71% last week to 18.5% on Monday.

South Africa-focused investors will look to local consumer and producer inflation data later in the week for clues about price pressures in Africa’s most advanced economy.

On Tuesday, the finance ministry is expected to introduce an appropriation bill to parliament which will say how much financial support struggling state power firm Eskom will get this financial year and next.

Petra Diamonds misses revenue expectations on weak demand

(Reuters) - Petra Diamonds Ltd reported full-year revenue below analysts’ estimates on Monday and said it expects next year’s production to be slightly lower, as it struggles with a diamond market hit by weak demand and lack of easy credit.

The South Africa-focussed company’s shares were down 4.4% at 17.2 pence in morning trading.

Petra, which has been trying to reduce debt while delivering free cash flow, said it is targeting $150 million to $200 million of free cash flow over the next three years.

The company’s net free cash was $17 million in the second half of the year, after adjusting for debt repayments.

“This was a key catalyst that investors had been waiting for, but it could be overshadowed by guidance which is lower than expected, albeit in response to challenging market conditions,” BMO Capital analyst Edward Sterck said.

The precious gems miner said it expects full year 2020 diamond output of about 3.8 million carats compared with 3.9 million carats for the year ended June 30, and cut its capital expenditure target for next year to $43 million.

“Polished diamond demand and prices were weaker as the market was challenged by higher than normal polished inventories and tightening cutting-centre bank credit,” Petra said as it posted a 5% per carat fall in annual realised diamond prices.

Revenue for the year ended June 30 fell 6% to $463.6 million, below analysts' estimates of $483.2 million, provided by Petra. (bit.ly/2Z4vOXZ)

Kenya's Consolidated Bank extends its bond maturity by 3 months

NAIROBI (Reuters) - The Consolidated Bank of Kenya has extended the maturity of its 2 billion shilling ($19.39 million) medium-term note by three months to allow its biggest shareholder, the government, to inject more capital, the lender said on Monday.

The seven-year bond, which was issued to shore up the bank’s capital, allowing it to lend more to its customers, was due to mature on July 22. It will now mature on October 22 under the same terms with additional interest payments for the extension, Consolidated said.

“The extension is necessary to allow the National Treasury (finance ministry) to finalise the process of capital injection into the bank,” the lender said in a statement.

Consolidated, which is 85.8% owned by the government, was formed in 1989 when the state merged nine troubled financial firms.

Efforts to privatise it, along with a host of other government-owned enterprises, have been delayed for more than a decade due to red tape and the state of its books.

($1 = 103.1500 Kenyan shillings)

Sub-Saharan Africa to stay on recovery path, rate cuts on the horizon

JOHANNESBURG (Reuters) - Sub-Saharan Africa will stay on its recovery path next year provided heavyweight economies punch better, a Reuters poll found, but it will still grow below potential for a part of the world with a growing population.

A poll of 15 analysts and economists taken this week showed Nigeria, Africa’s biggest economy, would grow 2.6% next year and Kenya would grow 5.8%. In both cases this is 0.2 percentage points slower than thought in April.

“Growth should gain slightly more traction next year, supported by a tendency towards looser monetary policy which will support consumption,” said Cobus De Hart, chief economist for north and west African countries at NKC African Economics.

Nigerian economic growth accelerated but Kenya’s slowed in the first quarter of the year compared to the same time last year.

However, even if Ghana’s growth slows as expected to 6.1% in 2020 from 6.5% this year, next year’s performance would still be faster than the 6.0% predicted in the last survey.

Interest rates - in Ghana at 16%, Nigeria at 13.5% and Kenya at 9% - are expected to be left unchanged next week, although Nigeria will probably ease in September and the other two next year. Other major global central banks look set to ease policy soon.

Economists largely agreed Sub-Saharan Africa’s growth - which the International Monetary Fund forecast in April would grow at 3.5% this year - would stay on the recovery path next year.

South Africa’s Reserve Bank joined other emerging market banks in cutting interest rates on Thursday and De Hart said South Africa would perform slightly better and act as less of a drag on regional growth.

He included Angola, the third biggest economy in Africa when excluding northern countries such as Egypt and Algeria, as another heavyweight if Nigeria disappoints.

South Africa - where growth is expected to accelerate to 1.4% next year from 0.7% in 2019 - has been, alongside Nigeria, a drag on the continent as combined they make up about 50% of Africa’s economy.

“West Africa is picking up pace nicely, not so much Nigeria though where the rebound is now again looking more fragile. East African growth is seen slowing slightly but will remain very robust from a regional perspective,” said De Hart.

Zambia has also not been performing well due to a huge debt problem that has weighed on growth prospects. Zambia is expected to grow 3.3% next year, 0.3 percentage points higher than this year but slower than the almost 4.0% it grew last year.

African leaders launched a continental free-trade zone on Sunday after Nigeria finally signed up. If successful, it will unite 1.3 billion people and create a $3.4 trillion economic bloc, ushering in a new era of development.

But infrastructure bottlenecks have often frustrated efforts to develop an African manufacturing base similar to the Asian tigers.

“The meaningful impact would take at least 10 years of deliberate implementation,” said Rafiq Raji, chief economist at Macroafricaintel in Lagos.

There will need to be a greater political will to make the trade pact work and avoid past failures, analysts said.

“Hurdles remain, with burgeoning youth populations, high unemployment, shrinking global value chains, and increasing deglobalisation. African governments have little choice but to make the AfCTA work,” said Raji.

Nigeria's central bank tries to force banks to lend, not buy bills

LAGOS (Reuters) - Nigeria’s central bank barred banks from buying bills for their own accounts at an open market auction held on Thursday, a move intended to force them to lend rather than invest in government debt, traders said on Friday.

The bank is stepping up a campaign to get credit flowing. Last week, it limited the size of interest-bearing deposits it would hold for banks, the latest in a series of measures aimed at reviving an sluggish economy

The central bank, which had not issued market stabilisation bills for about a week before Thursday’s auction, told banks bids must be backed by customer demand. In the past, banks have bought government debt rather than assume risk by lending.

It was unclear if the order applied to Thursday’s auction only. Banks can still purchase bills on the secondary market, traders said.

At Thursday’s open market auction, the central bank offered 75 billion naira ($245.14 million) of bills, drawing demand totalling 475 billion naira for the various maturities. The bank sold one-year bills at a yield of 12.25%.

A trader said Thursday’s auction was aimed at non-bank investors, adding that the central bank has considered offering bills directly to foreign investors to support the currency.

STRUCTURAL REFORMS NEEDED

The central bank had been issuing securities at high yields to mop up naira, a policy it maintained for more than two years to attract foreign inflows into bonds and support the naira.

It was unclear which option the central bank wants to pursue: boosting credit flow locally or maintaining a stable currency in the face of high inflation and dollar shortages.

At its last rate meeting in March, the bank cut rates by 50 basis points for the first time since November 2015, saying it wanted to signal a new direction. Analysts expect another 50-bp rate cut on Tuesday.

Bankers doubt the measure will do much to boost lending unless credit risk is addressed through reforms.

“I’m not quite sure this is an effective way of getting banks to put their balance sheet on the line to areas where they clearly perceive risk,” one banker told Reuters. “The central bank wants to drive growth in the economy without structural reforms, which is counter-productive.”

Nigerian President Muhammadu Buhari won re-election in February and has pledged to get the economy growing again. But he has failed to set up a cabinet months after gaining a second term.

Analysts said recent policies aimed at boosting loans to revive the economy could have a knock-on effect by lowering yields to unattractive levels for foreign investors, which could weaken the naira.

($1 = 305.9500 naira)

Huawei: Government decision on 5G rollout delayed

A decision on whether controversial Chinese firm Huawei should be excluded from the rollout of 5G mobile phone networks in the UK has been postponed.

Culture secretary Jeremy Wright said the government is "not yet in a position" to decide what involvement Huawei should have in the 5G network.

Mr Wright said the implication of the recent US ban on its companies from dealing with Huawei was not clear.

Until it was, he said the government would be "wrong" to make a decision.

"We will do so as soon as possible," he told the House of Commons.

The US banned companies from selling components and technology to Huawei and 68 related companies on 15 May, citing national security concerns.

It later issued a temporary licence that enabled some companies to continue supporting existing Huawei networks and devices.

Mr Wright said the US decision "could have a potential impact on the future availability and reliability of Huawei's products, together with other market impacts, and so are relevant considerations in determining Huawei's involvement in the network".

Huawei: US ban will harm billions of users

UK warned over sending 'bad signal' to China

Last week, MPs said the government needed to make a decision on Huawei as "a matter of urgency", warning continued delays were damaging international relations.

Huawei has repeatedly denied claims the use of its products presents security risks, and has said it is independent from the Chinese government.

Huawei, vice president Victor Zhang said it was confident "that we can continue to work with network operators to rollout 5G across the UK."

"After 18 years of operating in the UK, we remain committed to supporting BT, EE, Vodafone and other partners build secure, reliable networks."

"The evidence shows excluding Huawei would cost the UK economy £7bn and result in more expensive 5G networks, raising prices for anyone with a mobile device," he added.

So yet again the key question about the UK's 5G future has been delayed.

The government says it is still not clear what the Trump administration's blacklisting of Huawei really means. If there is going to be an all-out ban on US firms working with the Chinese company then that could make its products - which use some American components - unreliable in the longer term.

Meanwhile UK mobile operators are getting on with the rollout of 5G - all of them using Huawei equipment.

In doing so they are taking a risk because a government ban would mean they had to rip out equipment and start again at great cost.

So the operators are increasingly impatient for some certainty - although it looks as though that could be some time coming unless the new Prime Minister decides that it is right at the top of his in-tray.

Britain's National Security Council, chaired by outgoing Prime Minister Theresa May, met to discuss Huawei in April and a decision was made to block the firm from all critical parts of the 5G network over security concerns, but still allow it restricted access to less sensitive parts.

The final decision on Huawei was then supposed to have been made public in the review of the telecoms supply chain led by the Department for Digital, Culture, Media and Sport, which was published on Monday.

The decision on 5G equipment vendors will now be made by the next prime minister.

Shadow secretary of state for digital, culture, media and sport Tom Watson said the government's handling of Huawei's involvement in the future of the UK's 5G network had been defined by "confusion".

"Whether the government needs to ban Huawei for security reasons or not, the government has a rollout target to meet, 5G for the majority of the country by 2027. So we need clarity one way or another and government should have a plan B for meeting this target if necessary," he added.

Mark Newman, analyst at tech research firm ConnectivityX, said so far only Vodafone and EE had switched on their 5G networks and both had used Huawei to supply their radio access networks.

"Huawei is the world's biggest supplier of telecoms equipment and leads the race in the development of 5G networks. 5G services could be impacted with the continued uncertainty over the future of Huawei in the UK," he said.

Last month, China's ambassador to the UK warned that excluding Huawei from Britain's 5G network "sends a very bad signal".

Speaking to BBC's Newsnight, Liu Xiaoming said Chinese businesses planning to invest in Britain may be put off dealing with the UK if Huawei's equipment is not used for the network.--BBC

Greg Clark: Business Brexit fears must be resolved

Business confidence has seen a sharp fall since March according to the business secretary Greg Clark.

He said that while companies had largely kept faith in Britain in the three years since the referendum, that faith is beginning to vanish.

"In the last few months, I think since the since the 29th of March, there are there are more doubts being expressed in boardrooms as to whether this is ever going to be resolved, we need to prove them wrong.

"And whatever happens in this leadership election, I hope whoever is prime minister will recognise the imperative to give that confidence."

In their attempts to woo the grass roots Tory members who will decide who is our next prime minister, both Jeremy Hunt and Boris Johnson have alarmed business. Most business owners and leaders think the no-deal Brexit they are prepared to contemplate is the very last thing to encourage investment in the UK.

Constitutional Outrage

Mr Clark knows that and last week defied Conservative party orders to vote in favour of a motion in the House of Commons that could have paved the way for parliament to be shut down at the end of October, thus preventing MPs a chance to stop a no-deal Brexit.

"I couldn't support the idea that we would allow the doors of Parliament to be locked against MPs at this crucially important time. I think that would be a constitutional outrage."

Mr Clark, however, said he would not be following the example of Philip Hammond by resigning before the next Prime Minister takes office.

"I have always been a loyal Conservative MP, I was elected as a conservative Member of Parliament. And I will always support a Conservative government that I've been elected to. The ballot paper had my name on it but it also had the name of the Conservative Party. That is very important."

Mr Clark's time in office has been overshadowed by Brexit uncertainty but he celebrated an early success when he persuaded Nissan to invest in its Sunderland plant shortly after the referendum.

He told the BBC that he had inherited the trip to Japan from his predecessor Sajid Javid and was disturbed to find that Nissan was thinking of scaling back its Sunderland plant.

"When I went there, it became apparent to me that Nissan was about to make an investment decision around Sunderland, that was set to go the wrong way, and could have resulted in thousands of jobs going because Brexit was a particular concern.

"So right from the outset - on Brexit - it became a big part of my job to try and give confidence to investors in this country and around the world to keep faith."

'Huge job'

That is becoming a much harder job according to Mr Clark with both candidates to be new leader - Jeremy Hunt and Boris Johnson - declaring themselves prepared to leave the EU without a deal.

Mr Clark said there was a "huge gulf" in the minds of business between leaving with or without a deal and that promising to leave at the end of October, come what may, was a mistake.

"You have to do everything you can to have a deal. And so I think that the setting a hard deadline - even if a deal was tantalisingly within reach - I think would be the wrong thing to do."

Mr Clark admits privately he knows that his career as business secretary will be over very shortly. He still has several pots boiling on the hob. He has put in thousands of air miles trying to find a saviour for Scunthorpe-based British Steel. That mission has taken him to China, India and Turkey in the last few weeks. He seems optimistic that a buyer can be found but knows he won't be the one announcing it.

Mr Clark is popular among business leaders. They recognise someone who understands how they operate and what they need. That has been important at a time when business chiefs felt the current prime minister and the favourite to succeed her have not had the same relationship with industry as previous conservative governments.

Mr Clark likes being business secretary. He still talks with genuine excitement at the massive technological changes that are changing the ways we live and work and you can sense genuine passion that the UK gets its share of investment.

He points out that many of the industries experiencing the most fundamental change - automotive, aerospace, life sciences, green technology - are things the UK is very good at.

Mr Clark has never been a politician to set the pulse racing but he's hard working, principled and detail orientated.

It is impossible to instill confidence while Brexit continues to hang over the UK. Once that is settled, what business will need most of all from the next prime minister is the sense that the government is on its side.

Most industry leaders believed Mr Clark was rooting for them by railing against the possibility of leaving with no deal. A position which which made him few friends on the right of the party.

Mr Clark's own assessment of his time in office would probably be something like "I did OK - under the circumstances."--BBC

Could Iran tensions push up petrol prices?

With tensions rising after Iran seized a British-flagged tanker in the Persian Gulf, oil prices have been volatile, sparking fears a jump in petrol prices could lie ahead.

The AA warned that prolonged uncertainty over the safety of international ships carrying oil through the Strait of Hormuz could keep UK petrol prices at already high levels this summer.

And the UK has warned Iran there could be "serious" diplomatic consequences if it does not release the Stena Impero tanker, suggesting there could be more disruption ahead.

Petrol is made from oil and threats to supply can push up costs for consumers.

How does the Iran situation affect oil prices?

Iran apparently seized the Stena Impero in retaliation for the detention of one of its own tankers by British forces off Gibraltar, but it followed months of tension between the US and Iran who have accused each other of aggressive behaviour in the region.

In that time Tehran has been implicated in attacks on six other oil tankers in the Strait of Hormuz, resulting in a build up of US and UK naval forces in the area.

Iran, tankers and the Gulf crisis explained

Iran releases images of tanker captives

There are now fears that Iran might try to block the strait, a strategically important shipping route that lies off its south coast, effectively choking off access to the oil-rich Persian Gulf.

That would cut off access to about a fifth of the world's oil and a quarter of its natural gas.

Most believe a diplomatic solution is still the most likely outcome. However if Iran did close the strait (which it has not so far threatened to do) it would "drive up oil prices significantly", says David Balston, head of the UK Chamber of Shipping.

"There are oil terminals outside of the Gulf but they are limited so you would have to find markets elsewhere.

"It would significantly push up petrol and gas prices in the UK," he adds, because 5% of the country's oil and 13% of its natural gas passes through the Strait of Hormuz.

And without a diplomatic solution, it would be likely to spark a "military response" from Western allies, he says.

What's going on with oil prices now?

Global oil prices have been volatile in recent weeks because of the tensions, but it's "not been too dramatic", says John Hall, chairman of the Alpha Energy Group consultancy.

A barrel of Brent Crude - considered the international benchmark - stood at about $63.5 on Monday, more than $10 below its 2019 highs.

Mr Hall thinks this is partly because the market - which dictates the price of oil - has tired of "threats and bluster" from US President Donald Trump against Iran that never go any further.

"Until recently, every time Trump tweeted the market moved but investors are becoming immune," Mr Hall says.

Instead investors are looking at the "fundamentals" in the oil market, which aren't very healthy. The Chinese economy is slowing down so demand from the world's second largest consumer of oil could slip.

And attempts by the Organization of the Petroleum Exporting Countries (Opec) such as Saudi Arabia, along with Russia, to prop up prices by cutting output have largely failed because of a vast increase in US production.

"There is a view is there will be too much oil in the market through the rest of this year, which will restrain prices," says Mr Hall.

What does this all mean for petrol prices?

The AA says UK petrol prices this month are at their highest level since 2014, at 128.5p a litre of unleaded and 131.7p for diesel.

Luke Bodstadt, the AA's fuel price spokesman, says the tensions with Iran have played a role and that prices are not likely to fall for the next few months.

He is not expecting a big spike unless the dispute seriously escalates, but says a "bigger risk to drivers" would be a further fall in the pound against the dollar.

Oil is sold on international markets in dollars, while sterling has been trading near two-year lows amid heightened chances of a no-deal Brexit.

Alpha Energy Group's Mr Hall says Iran is unlikely to shut the Strait of Hormuz, but if it does we could see a "massive shortage" of oil pushing prices up to perhaps $100 a barrel.

"If it was really serious I think you could expect petrol to go up 20p a litre, that's a conservative estimate," he says.

The more immediate issue is how the UK will respond to the seizure of the Stena tanker, he says. "At the moment there is a serious diplomatic game running between Iran, the US and the UK with Iran deliberately being provocative."--BBC

BA pilots vote in favour of strike action over key summer period

British Airways pilots have voted in favour of strike action in a dispute over pay, threatening a walkout over the key summer holiday period.

The British Airline Pilots' Association (Balpa) said 93% of its members had voted in favour of industrial action.

A strike would be likely to cause severe disruption, as Balpa represents about 90% of the airline's pilots.

BA said it was "very disappointed" that the union was threatening "the travel plans of thousands of our customers".

The union said it did not yet have any dates for a potential strike, adding it still hoped that the dispute could be resolved.

British Airways said it remained open to working with the union to reach an agreement and continued to "pursue every avenue to find a solution to protect our customers' travel plans and avoid industrial action".

Pilots have rejected a pay increase worth 11.5% over three years, which the airline says is "fair and generous".

However, Balpa argues that its members deserve a better offer, as BA has been making healthy profits.

The vote in favour of action comes after three days of negotiations between the airline and pilots' union with conciliation service Acas.

Balpa general secretary Brian Strutton said the strong result in favour of action showed "the resolve of BA pilots" and said BA "must table a sensible improved offer if a strike is to be averted".

"We do not wish to inconvenience our customers, which is why we have tried to resolve this matter through negotiation starting last November. It is BA who has regrettably chosen to drag this out into the summer months," he added.

High Court injunction

British Airways is seeking an injunction on Tuesday in the High Court to halt any potential strike action.

The union would have to give British Airways a minimum of two weeks' notice of any action, meaning the earliest any action could could take place is 6 August.

Balpa said the High Court hearing meant any further negotiations "are on hold while we prepare to defend our right to take this action".

The union argues that the the cost to BA to settle the dispute in full is "significantly less than the cost would be of even a single day's strike action".

"We currently do not have dates for any potential strike action and will issue an update on this in due course. We remain hopeful that this dispute can be resolved before strike action, but we remain committed to action if necessary," added Mr Strutton.

Rising profits

British Airways is part of International Airlines Group (IAG), which also owns Spanish carrier Iberia. Last year, it reported a pre-tax profit of €3bn, up almost 9.8% on the previous year.

British Airways contributed £1.96bn to that, up 8.7% on 2017.

It also rewarded investors with a total dividend payout of €1.3bn.--BBC

Shares soar at 'China's Nasdaq' market debut

Trading in China's Nasdaq-style technology board got off to a solid start.

Shares surged in the so-called Star market with one top performer shooting above 400%.

China said last year it would launch the technology-focused trading board as it sought to cement Shanghai's role as a global financial hub.

China, embroiled in a trade war with the US, is trying to assert itself as a global technology leader.

Some 25 companies began trading on the new tech board, which is operated by the Shanghai Stock Exchange.

"It's good for the depth of China's capital markets and the growth of its financial system if regulators can encourage firms to list domestically rather than overseas," said Julian Evans-Pritchard, China economist at Capital Economist.

"Making it easier to raise funds through equity issuance helps to reduce the reliance on debt in the Chinese financial system. This is still a small step in that direction, but a positive step nonetheless."

Semiconductor firm Anji Microelectronics Technology was among the best performers, with its shares last trading a mammoth 400% higher.

Zhangjiang Hangke Technology, which manufactures battery testing equipment, jumped more than 120% earlier. It was last traded up 99%.

The Shanghai Stock Exchange has said an index tracking the Star Market will be launched in the coming weeks.

UK to launch 'groundbreaking' China stock link

The board was unveiled by President Xi Jinping in November and is seen as part of China's push to grow its technology sector.

China is battling a trade war with the US, which Washington recently widened to target technology companies.

While the US imposed trade restrictions on Chinese telecoms giant Huawei on the basis that it poses a national security risk, some argue the US moves are an attempt to counter China's ambitions to become a global technology leader.--BBC

Brexit harming UK industrial strategy, warns top economist

The Brexit deadlock has undermined efforts to boost the UK economy, the chairman of the government's Industrial Strategy Council has told Newsnight.

The council holds the government to account over its industrial strategy.

Andy Haldane, who is also chief economist of the Bank of England, said it was "plausible" that one of the "costs of Brexit is that not as much other stuff has happened as might."

But he added that the strategy could still lift the UK's prosperity.

The industrial strategy, launched by Business Secretary Greg Clark in 2017, aims to create a more balanced economy by investing in certain sectors to create good jobs.

"In the absence of Brexit, might more have been done? Perhaps," Mr Haldane told the BBC.

But he stressed that the strategy was a long-term project and that skills, infrastructure and investment problems are not solved overnight.

"In the grand scheme of things, six months missed here, a year missed there, is less important than sticking to a tried and tested plan," he said.

Asked how worried he was about a potential no-deal Brexit on 31 October - a prospect that Conservative Party leadership contender Boris Johnson has said he would countenance - Mr Haldane pointed to the Bank's analysis from last year which suggested that, in a worst case scenario, such a rupture could trigger a deep recession.

"That was the conclusion we reached then. We've done no updating of that since. That's our best guess - my best guess - as an economist," he said.

Government offers 'inflation-busting' pay rises

Wanted: New Bank of England boss

Brexit stalemate scars prosperity, says Bank

The Bank of England's former governor, Lord King, has criticised the Bank of England's no-deal analysis, rejecting its assumptions on how long transport disruption would last and saying the central bank had been "unnecessarily drawn in" to commenting on the subject.

Mr Haldane responded: "We are in a situation of quite considerable uncertainty right now and therefore reasonable people can reasonably disagree on the future course of the economy and what's right and what's not.

"Our role - when asked by Parliament - is to put our best analysis in play."

The current governor of the Bank of England, Mark Carney, is due to step down in January 2020 and the Treasury deadline for applications to succeed him closed last week.

Mr Haldane, who joined the Bank in 1989, has been spoken of in some quarters as a potential candidate.

Asked whether he was interested in the top job, and had put his hat in the ring, Mr Haldane said: "I've got a job currently. It's a job I love. It's a job it's a privilege to carry out. I'm very happy focusing on just that job right now."

The final choice of candidate is likely to be made by Theresa May's successor.

Some analysts have suggested Mr Haldane's chances - who has been unusually outspoken in highlighting the negative economic impact of inequality, the dwindling power of unions and the need for more long-termism in businesses in recent years - would be higher under a future Labour administration.

Asked by Newsnight about Labour's plans to re-nationalize utilities such as water and rail services, Mr Haldane said that it was not the job of the council to comment in advance on the merits of individual policies - from either the government or the opposition - but to evaluate them once implemented.

But he added: "This is about forming a view on what works and as importantly what doesn't work. There's no shame, by the way, in policies not working provided you are candid about reaching that judgment and you act in response to it."--BBC

Equifax to pay up to $700m to settle data breach

Credit score agency Equifax has agreed to pay up to $700m (£561m) as part of a settlement with a US regulator following a data breach in 2017.

The Federal Trade Commission had alleged the Atlanta-based firm failed to take reasonable steps to secure its network.

The records of at least 147 million people were exposed in the incident.

At least $300m will go towards paying for identity theft services and other related expenses run up by the victims.

This sum will expand to a maximum of $425m, if required to cover the consumers' losses.

The rest of the money will be divided between 50 US states and territories and a penalty paid to the Consumer Financial Protection Bureau.

It represents the FTC's largest data-breach settlement to date, topping a $148m penalty Uber agreed to last year.

"Equifax failed to take basic steps that may have prevented the breach," said the FTC's chairman Joe Simons.

"This settlement requires that the company take steps to improve its data security going forward, and will ensure that consumers harmed by this breach can receive help protecting themselves from identity theft and fraud."

The agency added that among the stolen information, the hackers copied:

at least 147 million names and dates of birth

about 145.5 million Social Security numbers

a total of 209,000 payment card numbers and expiration dates

The UK's Information Commissioner's Office has already issued the company with a £500,000 fine for failing to protect the personal information of up to 15 million UK citizens during the same attack.

Unpatched system

Equifax had been warned in March that one of its databases - the Equifax Automated Consumer Interview System (ACIS) - suffered from a critical vulnerability, the FTC said.

The ACIS was used by members of the public to check their own credit reports. But because of the way that Equifax's IT systems had evolved, it also provided a means for hackers to access other unrelated records stored by the firm.

The FTC alleged that Equifax's security team ordered that the vulnerable systems be patched within 48 hours after being informed of the discovery in March 2017.

But the watchdog added that the firm failed to check that this was done, and that as a consequence multiple hackers were able to exploit the flaw and steal consumers' personal details over a period of several months.

To make matters worse, it said, much of the sensitive information had been stored unencrypted in plain text.

As part of the settlement the FTC said that Equifax had also agreed to:

carry out its own annual audit of security risks

submit to an external assessment of its security efforts once every two years

ensure that third-parties given access to personal data stored by the firm also have adequate data protection measures in place--BBC

Aid budget to be used by International Trade Department

The Department for International Trade is to be given part of the official £14bn aid budget.

It will spend the funds on helping developing countries learn from UK expertise on trade deals and attracting foreign investment.

The move will see Liam Fox's department spending funds earmarked as Official Development Assistance.

The funds will still count towards the government's target of spending 0.7% of national income on overseas aid.

The measure was confirmed by Trade Secretary Liam Fox in an interview with BBC News.

"We want to bring development and trade closer together," he said.

"Rather than having developing countries dependent on the largesse of rich countries, we want them able to get sustainable development and trade their way out of poverty, and one of the ways in which we can do that is to give them the skills that will attract the investment into their country... to develop some of those attributes that helped us get investment into the UK and helps them get investment on a stable basis."

Shift overseas aid 'away from humans'

Labour accused the government of "pinching aid money from the world's poorest to prop up rich investors".

"As the government desperately chase post-Brexit trade deals, they must rule out raiding the aid budget for anything other than fighting global poverty," said Dan Carden, Labour's Shadow Secretary of State for International Development.

Moving the existing spread of aid spending away from the primary responsibility of the Department for International Development is already controversial.

More than a quarter of the budget is now spent by other departments, including the Foreign and Commonwealth Office, Home Office, Business Department, Heath Department and Revenue & Customs, up from a tenth just five years ago.

A National Audit Office report last month concluded: "Widening ODA expenditure to other departments has increased risks to effectiveness and it is not clear whether the intended benefits of drawing in wider skills have been realised."

'Tied aid'

Development charities have also been critical of a possible conflict of interest in tying aid spending on global poverty to the UK's post-Brexit trade agenda.

Last year, the Commons International Development Committee criticised existing programmes with such "dual objectives" for "being used as a slush fund to pay for developing the UK's diplomatic, trade or national security interests".

It criticised the Foreign Office's Prosperity Fund for giving aid money to projects to develop China's film industry, libraries and bond markets, and warned about steps "towards the return of tied aid".

The practice of channelling aid money at projects that also had to benefit British companies was banned by the Labour government in 2001.

Liam Fox told the BBC: "It is not tied aid in the sense it benefits the UK, it has to benefit the country itself. We know why countries invest in the UK - those reasons will hold for other countries as well.

"You have to remember that trade, free trade is the way we have taken a billion people out of abject poverty in a generation globally, one of the greatest achievements in our history. We need to make sure that carries on."

Countries targeted for this form of aid funding include Nigeria, South Africa, Kenya, Ethiopia, Colombia, Peru, Indonesia and Bangladesh, according to the Department for International Trade.

Many of these countries are not in the very poorest category of "Least Developed Country", but many are potential candidates for post-Brexit free trade agreements.

Reacting to the announcement, Dan Carden, Labour's shadow secretary of state for international development, said: "Pinching aid money from the world's poorest to prop up rich investors is a new low, even for the Tories.

"As the government desperately chase post-Brexit trade deals, they must rule out raiding the aid budget for anything other than fighting global poverty."--BBC

INVESTORS DIARY 2019

Company

Event

Venue

Date & Time

Companies under Cautionary

Bindura Nickel Corporation

Padenga Holdings

Delta Corporation

Meikles Limited

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