Traditional safe haven investments such as gold, US Treasuries and the Japanese yen were all boosted by growing worries about the global geopolitical climate this week. The yield on the 10–year Treasury fell to 2.3% and gold jumped to a five-month high of $1,272 an ounce. The yen gained 1.1% against the US dollar and 1% against the euro. The Chicago Board Options Exchange (CBOE) Volatility Index – closely watched by participants as a gauge of stock market stress – hit its highest level since Donald Trump’s election victory last November, up 7.3%.
With the looming threat of further US missile strikes on Syria causing growing tensions between Washington and Moscow, and with President Trump taking an increasingly aggressive posture over North Korea, investor nervousness is all too understandable.
In Europe, a slightly calmer attitude prevailed. London’s FTSE 100 index was flat over the three days to close on Wednesday, while the FTSE World Europe (ex-UK) index was down by 0.2%. There is the possibility that the current tranquil mood could be interrupted by the impending French presidential elections, however. A Marine Le Pen victory would be widely perceived as a key geopolitical risk for the Eurozone.
United we sit?
United Airlines came under fire on Monday after a video showing a passenger being forcibly removed from his seat and dragged off an overbooked flight spread rapidly across social media. United’s chief executive Oscar Munoz was castigated after issuing what appeared to be a less-than-fulsome apology for the incident. United’s public image has taken a hammering. Ironically, the carrier’s slogan is ‘Fly the friendly skies’…
A battle of mines
BHP Billiton, the world’s largest mining group, came under pressure this week from an activist hedge fund. Elliott Advisors, which holds an economic interest in 4.1% of BHPs shares, called for BHP to scrap its dual British/Australian corporate structure. The proposal would see the group changing into a single UK-incorporated entity, allowing investors to take greater advantages of certain tax breaks. However, Elliott’s proposal has already come up against a number of legal obstacles and opposition from the Australian government, which argues that any major changes to the corporate structure would need to be consistent with the national interest.
Every little helps
On Wednesday, Tesco reported its first growth in like-for-like sales in seven years. Yet the news did little to inspire investors and shares slipped 1.3%, making it the FTSE 100’s worst weekly performer. The company’s profits were down 39%, largely due to £235 million of exceptional charges. Chief Executive Dave Lewis hailed the company’s progress since their infamous loss in 2015 and stated they were “ahead of where we expected to be at this stage”.
A bickering Russian couple have had their marriage rocked to its foundations this week. The as-yet un-named husband was filmed using a truck to dump wet cement through the open window of a parked car in St Petersburg, which he claimed belonged to his wife. The spurned spouse said he was taking revenge for the fact that the woman in question had changed her surname to Veniy, the name of a well-known Russian supermarket, as part of a promotion that nets participants $1,200 a month. While the stunt could be a hard act to follow, no one seems to have recorded his wife’s reaction. Stony silence, perhaps?