Draghi Surprises By Cutting Asset Purchases From April 2017

Thursday, 8 December: Focus turned to Mario Draghi as the ECB met for the final time in 2016. The ECB looks set to reduce its asset buying to €60bn (down from €80bn) in April, with the option to continue buying such assets till December 2017. The expectation had been for asset purchases to be maintained at €80bn, but only for another 6 months. However, Draghi has left the door open to increase the program in terms of size and/or duration should “the outlook become less favourable or financial conditions become inconsistent”. The euro instantly fell more than 1% against both sterling and the dollar. Currently GBP/EUR is at €1.18, up +0.78% on the day.

Sports Direct will be pleased to see the back of 2016. Not only has their financial performance been something to forget, their employment practices have been somewhat questionable as well. However, today the group announced their half year results, reporting a 25% drop in pre-tax profits, despite a rise in revenue. Adding salt to the wound, financial pressures look set to continue as “adverse foreign exchange rates”, i.e. a weakened pound, will continue to hurt the group’s financial performance the group claim. The shares fell nearly 10% early doors this morning, closing lower by 8.29%. It brings the stock down more than 45% year-to-date. However, no fear, Sports Direct also announced they will be taking delivery of a corporate plane in the coming weeks, which will sit alongside their corporate helicopter and fleet of corporate vehicles. The payment of dividends to shareholders remains under review but no dividend has been proposed in this latest announcement.

As speculation continues on what businesses will/may leave the UK once Article 50 is triggered and negotiations begin on leaving the EU, one business has decided to swim against the tide and move their European headquarters in the other direction. McDonald’s today announced they set to move their non-US tax base from Luxembourg to the UK, choosing the UK due to the “significant number of staff” it has in London. The group claim the move is to make its operations more efficient, but it should be noted the Luxembourg tax affairs of the company are currently under formal investigation by the European Commission. Once the move is complete, McDonald’s will pay UK tax on the royalties the firm receives outside the US.

At the close European indices were up with the FTSE 100 +0.42%, the CAC 40 +0.87%, and the DAX +1.75%. In the US, indices look relatively flat at the time of writing.