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Week in Review: the end is nigh for Libor

The notorious benchmark lending rate is set to be dropped in 2021, according to FCA boss Andrew Bailey. Regulators will aim for a more reliable marker now the scandal-hit Libor days are numbered. Elsewhere, the International Monetary Fund cut its growth forecasts for both the US and UK, despite the latter seeing GDP growth edge up over the second quarter. In company news, drugs maker AstraZeneca saw its shares tumble 15% in Thursday trading, while shares in online estate agent Purplebricks continue to soar.

The London interbank offered rate, introduced in 1986, used to be one of the most important components in the financial world. But the so-called risk-free rate has come under scrutiny over the years, with unscrupulous traders becoming embroiled in a rigging scandal that led to hefty fines and criminal charges. This week’s landmark announcement was widely welcomed by both the City and Westminster, as both parties look towards a more steadfast, transaction-based benchmark that removes the subjectivity of Libor.

Fed signals wind up

The US Federal Reserve (Fed) left rates on hold as it stated that it’s ready to begin wrapping up its crisis-era stimulus programme as early as September. Committee members remain confident in the US outlook with supportive financial market conditions helping counterbalance weak inflation readings. Treasuries rallied while the dollar fell to its lowest level against the euro in two years. A weak dollar is no bad thing, however, and it gives the Fed some wiggle room by keeping financial conditions loose. The market is now reflecting a 39.7% chance of a rate rise in December, down from 45.4% before the Fed statement.

Purplebricks sailing high

Solihull-based Purplebricks has seen its share price rise over 400% since December. The online estate agency has seen revenues rise 150%, building a commanding 72% market share of online agents in the process. Investors are clearly excited about the international expansion to the US, with California the next target after already setting up shop in Australia. The company’s success is at odds with current trends among the more traditional estate agencies; both Foxtons and Countrywide reported slumping profits this week as transaction levels plummeted thanks to Brexit-related uncertainty.

In other company news, Nissan received a boost from its home market of Japan. Improving sales helped the car manufacturer grow revenues, although profits took a hit as a result of rising raw materials and currency fluctuations. Pharmaceutical giant Astra Zeneca saw its share price plummet 15% on Thursday after trials of a lung cancer treatment had not met expectations. Amazon also surprised markets by delivering a huge miss on its second quarter earnings. Shares in the US tech giant were down 2% in after-hours trading following the news.

And finally…

There’s not a week that goes by without Donald J Trump making the headlines. This time the outspoken Republican was lambasted for attempting to ban transgender people from serving in the military. Trump argued that the Pentagon cannot be burdened with the ‘tremendous medical costs’ of covering trans military members. But the cost is far from ‘tremendous’. In fact, according to a study by the Rand Corporation last year, the Pentagon spends nearly 5 times as much on Viagra than it does on military care for transgender troops. Go figure.

Image credit: Jurgen Schadeberg / Contributor / Getty Images





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