You say yuan, I say renminbi. Let’s call the whole thing off.
To have one Chinese currency devaluation is unfortunate, but to have a second the day after smacks of carelessness.
Enough with the tepid allusions and on with the serious business of speculating on just how bad a shape the Chinese economy is in after the People’s Republic devalued its currency again, just one day after the People’s Bank of China called Tuesday’s reset a “one off depreciation”.
It’s all relative, of course, and the Chinese economy is still enjoying the sort of growth levels that mature economies in the West would love to achieve, but it has not helped matters that China’s factory output for July also missed expectations.
“China appears to have discovered a love for active FX intervention. Once is an experiment, but twice makes it a trend,” suggested Chris Beauchamp, senior market analyst at spread betting firm IG, who is clearly much better at avoiding well-worn Oscar Wilde quotes in his commentaries.
“The spectre of currency wars was worrying enough yesterday, but today it looks real enough to touch. A single move might have passed without reaction from China’s trading partners, but now it looks like a tit-for-tat move by others in the region is certain. When such moves are on the cards, the logical reaction from investors is to seek shelter in bonds, which is exactly what is happening now,” he added.
“A weakening yuan hits US exports to China, putting the brakes on US economic growth, and thus potentially causing the Fed to stay its hand. September’s rate hike looks much less likely this morning than it did just 48 hours ago,” he opined.
Closer to home, the garage sale being held by Pearson (LON:PSON) continues, with the group selling its stake in The Economist Group for £469mln.
The sale of the iconic Penguin Random House cannot be far off, and headline writers have their “P-p-p-pick up a Penguin” headlines at the ready.
The Constriction Enquirer sounds like a publication ripe for inclusion on the BBC’s Have I Got News For You programme, but its report on the results from Interserve (LON:IRV) is currently enjoying a high search ranking.
The trade mag reports that the firm’s construction operating margins slump to 1.1% during the first half of the year from 1.9% last time as the market remained “challenging”.
Interserve’s stock market statement spoke of something called “tender pricing”, which apparently is improving, but also grumbled about the imminent rise in the minimum wage, which could hit profits next year.
The company made profit before tax of £33.7mln in the first half of the year, but with Interserve employing around 80,000 people – admittedly, not all of them in the UK – the enforced pay rise could put a noticeable dent in those profits.
Then again, a scan of Interserve’s annual report reveals that salaries for executive directors in the last financial year rose by between 7.3% and 22.6%, which even the remuneration committee’s report acknowledges has “the potential to appear high in a wider market context”.
Chief executive Adrian Ringrose, base salary £550,000 a year, said: “We expect the premium to the National Minimum Wage announced in the recent Budget to have an initial adverse impact on margins in the UK Support Services segment of £10-15 million in 2016, receding over the next few years thereafter as the change is priced in to relevant contracts.”
Among the small caps, digital marketing continues to be a hot topic, with interactive gaming company Netplay TV (LON:NPT) the latest to make a move in the sector.
It has acquired Otherside, an online marketing, product development and technology company for £3.2mln.
Among the benefits of the deal cited by Netplay are the provision of a “robust media platform” and synergies with Netplay’s existing operations.As Mr