The Bank of England has blamed, not without reason, Vladimir Putin’s murderous invasion of Ukraine and the attendant energy price shock for much of the current spike in prices. Yet any chief executive worthy of the job should be preparing against the risk of another shock, that brought on from Western disengagement from China. The price stability of the last 30 years was in large measure the result of the disinflation resulting from technology and globalisation. The West in effect traded its economic resilience for cheap prices and the supposed efficiencies of ‘just-in-time’ global supply chains. – The Sunday Telegraph
What has changed in the British economy, aside from Putin’s gas escalation, which acts as a deflationary tax on the economy, that might justify the Bank of England tossing its forward guidance out the window and pursuing a punishing monetary policy? Nothing. Wages are quiescent, global commodity prices retreating, money supply growth has collapsed, 10-year Gilt yields are down by 45 basis points, the yield curve has inverted and the International Monetary Fund has slashed its global forecasts. What Bank should be doing is to let inflation drift down in the least disruptive fashion. “The wisest path, Governor, is to speak little and do even less.” – Sunday Telegraph
Fashion retailer Next is studying taking out a stake in clothing and lifestyle outfit Joules. Against the backdrop of a 76% drop in the latter’s share price year-to-date, Next has been engaging in talks for several weeks to buy a 25% stake in its smaller rival. Sky News reported however that a final deal was some time away and might not even materialise. The structure of any deal was unclear although, at Joules’s current valuation, Next would likely pay approximately £10m. – Financial Mail on Sunday
BP is on track to pay a lower tax rate during the current year than before Covid-19 hit, notwithstanding the government’s windfall tax on energy companies’ profits. Its tax rate is set to fall to 35%, down from 36% in 2019 and 38% in 2017 and 2018, thanks to a much stronger refining market and exceptional trading results. However, the company said that this year’s rate would be consistent with the average of 36% since 2017. – The Sunday Telegraph
Fraser, owned by Sports Direct founder Mike Ashley, is pursuing a claim against investment bank Morgan Stanley, alleging that it acted in ‘bad faith’ over trades he made to build up his stake in fashion giant Hugo Boss which now has a value of £770m. Morgan Stanley, it is claimed, tried to harm Frasers by indirectly forcing the company to transfer Hugo Boss stock options. Imposition of the margin call might have led to “significant commercial and reputational damage” for Frasers, as well as “unwarranted speculation” regarding its financial health. – Financial Mail on Sunday
