Stress Tests Warn On Economic Growth

Wednesday, 28 November: Once again, global equities reacted to global trade rhetoric with the positive sentiment from Wall Street last night reflected across much of Asia and in to European trade at the open. A White House official last night left the door open of a trade breakthrough between the US and China, leading to the Dow Jones and S&P to be on course for a third consecutive day of gains. Despite a positive open in London, the FTSE traded lower over the course of the day, weighed down by easyJet (-4.88%) and housebuilders Taylor Wimpey and Persimmon (4.20% and 4.69% respectively). Brexit woes rumbled on as May took a momentary pause in her UK roadshow to face PM’s Questions amid her efforts to push her Brexit deal through.

Despite much public objection and concerns by major shareholders, Restaurant Group’s proposed takeover of Wagamama’s was approved by shareholders this morning, leading to a >15% fall in shares. Restaurant Group are set to pay £559m for the Asian based casual diner, including £357m in a cash payment, as well as taking on £202m of debt Wagamama currently carries. The vote was carried through on a 60/40% result, despite concerns over the price paid, debt obtained and current UK uncertainty. Frankie & Benny’s parent owner will part fund the acquisition with a rights issue.

Both the Government and Bank of England (BoE) set out their “Brexit reports” today, the latter just as we go to publish the blog. The reports are a forecast of what different Brexit deals could mean for the country. This morning the Government warned that economic growth could be significantly hit, with the UK economy potentially 3.9% smaller in 15 years under May’s proposed deal. A no-deal Brexit could result in a 9.3% fall. In contrast, the BoE sets the UK economy to be falling by 8% within a year in a “worst-case scenario”, while sterling could plummet 25% against the dollar. Mark Carney is set to speak at a news conference as we write.

At the close, the FTSE 100 finished the day -0.18% with a -0.11% fall recorded on the 250. Wall Street indices continue to trade in the green while the pound makes modest gains against the dollar. Brent oil ha dropped back below $60/bbl as we speak following rising US inventory data.

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