Brexit, Eurozone growth, Coffee: Business news in brief, Tuesday 1 November

US Treasury Secretary urges 'smooth Brexit'; Eurozone growth stable while inflation spikes; Coffee deamnd hits new peak

US Treasury Secretary, Jack Lew (Reuters)

US Treasury's Lew urges UK and EU to ensure smooth Brexit

US Treasury Secretary Jack Lew said Britain and the European Union need to ensure their economies remain “highly integrated” when Britain leaves the bloc, after he met financial industry representatives in London on Monday.

“The secretary reiterated that a transparent, smooth and cooperative process that results in a highly integrated economic relationship is in the best interests of Europe, the United States, and the global economy,” a spokeswoman for Mr Lew said. "Secretary Lew added that the United States remains committed to maintaining its special relationship with the UK and its strong partnership with the EU.”

Prime Minister Theresa May will start two years of formal exit talks early next year, but many businesses are concerned that she has not stated detailed goals for Britain's future trading relationship with the EU. In particular, they fear Ms May's commitment to curb EU migration into Britain will jeopardise easy access to the EU markets that are the destination for most British exports.

Last week Britain's Government reassured Japanese carmaker Nissan that it would not lose out from Brexit before Nissan committed to building new models in north east England, prompting demands for similar promises from other companies. Mr Lew met senior executives from Barclays, Standard Chartered, the London Stock Exchange, Citigroup, JP Morgan and a trade body in London.

Reuters

Eurozone growth stable as inflation picks up

A Lithuanian one euro coin (AFP/Getty)

Economic growth in the eurozone remained low but stable in the third quarter as inflation rose to a 27-month high amid fears over Brexit and major elections in France and Germany. The Eurostat statistics agency said growth in the eurozone remained stable in July to September, to 0.3 per cent, which was on par with analysts surveyed by Factset, a data company. Analysts said the expansion remained low, however, and came on the back of France that shook off a contraction earlier in the year to expand by 0.2 per cent in third quarter. The growth figure will feed worries that the European economy will fail to bring new jobs or significantly boost inflation.

“The upside for Eurozone growth continues to be constrained by a number of fundamental factors, including structural impediments in a number of countries (notably Italy and France) and significant banking sector problems,” said IHS Global Insight's Howard Archer. He added that the perspective for next year remained a particular concern with key elections looming, as well as the launch of tricky negotiations between Britain and the EU after the British vote to leave the bloc. “The UK's Brexit vote could impact on eurozone activity in 2017 ... (as) its likely difficult exit negotiations with the EU get underway and are in the foreground,” Mr Archer said.

AFP

Record coffee demand spurred by millennials

(Getty Images/iStockphoto)

Millennials’ seemingly unquenchable thirst for coffee is helping to push global demand to a record just as supplies are tightening. Americans are becoming java junkies at an earlier age, and young adults are increasing their daily consumption at a fast enough pace to make up for decline by older folks. The result: Demand in the US, the world’s top user, is set for an all-time high, and the trend among younger drinkers is also playing out in other big consumers including Brazil and even tea-loving China.

Consumption is climbing as drought crimps supplies from Brazil, the world’s biggest producer and exporter. Prices for the arabica variety surged to the highest since February 2015 last week in New York. Hedge funds are positioning for more gains, increasing their bets on a rally to the highest in eight years. Demand “has been running well above expectations, thereby tightening coffee markets significantly,” said Harish Sundaresh, a portfolio manager and commodities analyst in Boston for the Loomis Sayles Alpha Strategies team, which oversees $5bn (£4.11bn).

The coffee net-long holding jumped by 18 per cent to 50,651 futures and options in the week ended 25 October, according to US Commodity Futures Trading Commission data published three days later. That’s the highest since March 2008. Arabica coffee surged 6 per cent to $1.655 (£1.37) a pound last week on ICE Futures in New York, the biggest gain since July. Prices have averaged about $1.344 (£1.10) this year.

Bloomberg

British trade body calls on companies to disclose pay ratios

(iStock)

The Investment Association stepped up a campaign on Monday to persuade Britain's top companies to address concerns on boardroom pay by publishing a new set of principles it hopes will shape the way businesses remunerate bosses. In an open letter addressed to constituents of the FTSE 350 index, the trade body called on companies to disclose pay ratios between the chief executive and the median employee salary and to provide investors with greater context to understand the scale of pay and bonuses.

The IA, members of which manage more than £5.7trn of assets, hopes its new principles will pave the way for simpler, more flexible remuneration structures and “clear justification” around chief executive pay. The renewed push follows recommendations from the industry-led independent Executive Remuneration Working Group and a pledge by Prime Minister Theresa May to crack down on excessive executive pay as part of a plan to tackle growing social inequality in Britain.

“Issues surrounding executive pay are a growing concern for investors, politicians and society as a whole,” Andrew Ninian, the IA's director of corporate governance and engagement, said in a statement. “It is vital that companies have the opportunity to choose the right structure for their business and this must be done in close partnership with their shareholders.” The IA has also called for improved shareholder consultation on remuneration issues and demanded that businesses focus on demonstrating to investors how their pay plans fit with company strategy.

Reuters

Majestic Wine unveils next-day delivery to boost Christmas trade

(Getty Images/iStockphoto (Getty Images/iStockphoto)

Majestic Wine is hoping its new next-day delivery service will help bolster Christmas trading after the firm was forced to issue a warning over profits in September. Wine lovers will be able to utilise “flexible delivery options” through click and collect and next-day delivery services, and a six-bottle minimum online order has been removed, Majestic said.

Managing director John Colley described the introduction of the service as a “big step in our transformation plan”. “This ... will help support Christmas trading,” he said. “We are putting the customer back at the heart of Majestic and can now offer a complete multi-channel experience which will deliver real benefits to our customers, people and therefore our shareholders.” A full range of more than 1,250 wines, including almost 400 fine wines, will be available.

PA

Interest in latest UK oil exploration tender lowest in 14 years

(Rex)

Britain's latest tender for offshore exploration permits attracted the lowest interest in 14 years, underlining how the mature North Sea is struggling to entice explorers to extract the 20bn barrels of oil equivalent left untapped. The 29th round for offshore licences, which included unexplored areas around the Shetlands, received only 29 applications for 113 blocks, compared with 1,261 blocks on offer, Britain's Oil and Gas Authority (OGA) said on Monday.

“Longstanding investors continue to seek new acreage and we also welcome the arrival of new entrants,” OGA chief executive Andy Samuel said in a statement. A total of 24 companies submitted applications, including multinationals and first-time applicants, the OGA said. The total of applications received was the lowest since 2002, however, when just 289 blocks were on offer.

Reuters

Sony surprises with profit warning on sale of battery business

Customers wait in line to buy the Sony PlayStation virtual reality (PSVR) headset at the entrance of an electronics shop in Tokyo (Getty)

Sony cut its annual profit outlook due to losses related to the sale of its battery business, disappointing a market that had been hoping for an upward revision on buoyant sales momentum for PlayStation 4 and the launch of its virtual reality headset. Emerging from years of restructuring, the consumer electronics giant is refocusing its business to concentrate on videogames, entertainment and camera sensors and the sale of its battery business was part of that effort.

But while the sale to Murata Manufacturing had been flagged in July, its impact on earnings appeared to be greater than expected. Sony now expects to post 270bn yen (£2.11bn) in operating profit for the year ending in March, down 30bn yen (£230m) from its previous forecast made in July and an 8 per cent decline from the previous year.

Reuters

EU says Barroso banking job does not violate ethics rules

(Getty Images)

Former European Commission head Jose Manuel Barroso did not breach EU ethics rules when he took a controversial top job at US investment bank Goldman Sachs after leaving office, an EU panel said on Monday. “On the basis of the information provided ... there are not sufficient grounds to establish a violation of the duty of integrity and discretion” in Barroso working for Goldman Sachs, the EU's Ad Hoc Ethical Committee said in a statement.

Barroso however had also “not shown the considerate judgement one may expect from someone having held the high office he occupied for so many years,” it said.

AFP