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In this week’s Commercial Awareness update, we discuss the ongoing US/China trade war, Qatar pulling out of OPEC, an investigation at Ted Baker, Unilever's new CEO and Shell's carbon emission targets.
Is it the end of the US/China trade war?
Last week, there was fresh hope that China and America’s relationship could be on the mend after the annual G20 summit in Argentina. Over dinner, President Trump and his Chinese counterpart, Xi Jinping, agreed over dinner that there would be a delay in the planned tariff increases - the hope is that a lasting deal could be negotiated before the taxes are implemented. There is also talk that Trump convinced China to reduce their tariffs on US car imports. Tariff hikes on each other's goods have been going on for the last year, with Trump set on doing something about what he believed were unfair trading policies, which disadvantaged American businesses.
However, the agreement between America and China could be more tricky to negotiate, especially after the arrest of Meng Wanzhou, Chief Finance Officer (CFO) of China’s biggest company Huawei. She was arrested in Vancouver, Canada, from where she faces possible extradition due to what is believed to be allegations of violations against US sanctions on Iran. The markets across Asia sank, with the Shanghai Composite index losing 1.7% as a result. China has demanded her immediate release, but even if does this happen, it’s likely to impact relations between China and America.
Questions to ask yourself... Does imposing tariffs really help internal business? What is more significant to the global economy - the US/China trade war or Brexit?
Qatar pulling out of OPEC
Qatar has announced it will pull out of the Organisation of the Petroleum Exporting Countries (OPEC), just before the group meets in Vienna. The state has said they will leave in January and focus on their gas production. Qatar is a relatively small oil producer (around 2% of the group’s output), which should impact on the oil price - however, there could wider geopolitical implications of this move. In recent times some Arab nations have boycotted Qatar over allegations that they are funding terrorism. In the oil market this won’t have much of an impact, but Qatar is the largest exporter of liquefied natural gas.
OPEC shouldn’t lose much influence over global oil supply due to Qatar - they represent almost all the big oil producing nations, other than Russia. However, there are greater worries for the group as oil prices have declined the last three months. They are expected to reach an agreement in Vienna to cut supply to inflate the price of oil.
Question to ask yourself... Should OPEC manipulate supply to inflate the price?
Companies to Watch
High street retailer, Ted Baker, has set up an independent committee to investigate claims of forced hugging and repeated sexual innuendo by the company’s founder and chief executive Ray Kelvin. Shares in the firm fell by 13.9% after a petition was launched by the staff at Ted Baker which gained over 2,500 signatures. The FTSE 250 group, which has 544 stores worldwide, fell to their lowest price since 2013.
This news comes after the clothing brands profits fell by 3.2% to £24.5 million in the six months leading to 11st August. The company was also forced to write off £600,000 owed by House of Fraser. Mr Kelvin, who was worth £522 million according to the Sunday Times Rich list, lost £43 million overnight, as his 35% stake in the company fell.
The CEO of consumer goods giant, Unilever, is set to retire at the end of this year. Paul Polman, who has been leading the firm for the past decade, will stay to help with the transition to newly appointed Alan Jope who currently leads the beauty and personal care division. The appointment comes less than two months after Polman’s plan to change Unilever’s structure was scraped over criticism from shareholders. Currently, the company has two headquarters in London and Rotterdam, however Polman wanted to relocate entirely to Rotterdam. Consequently, it would have been unlikely that Unilever would have continued to qualify as a FTSE 100 company, risking deflating of its share price. The company behind marmite and Ben and Jerry’s is currently one of biggest firms in the UK’s FTSE 100 share index and is valued at £124 billion.
Energy giant, Shell, is set to link carbon emission targets to executive pay subject to a shareholder vote in 2020. Although talks with investors are still ongoing, it is estimated that up to 1,300 high level employees could be affected by this. Shell has stated that it will set carbon reduction targets for 3-5 years every year until 2050. This news comes as a response to industry wide pressure over a need to tackle climate change. The UN intergovernmental panel on Climate Change stated in October that the planet will reach the crucial threshold of 1.5 degrees Celsius by 2030. It is a bold move from the world’s second largest oil company and it is likely that other firms will be forced to follow suit. However, despite environmental concerns, the company is expecting strong expansion of 8% per year.
Question to ask yourself... How will other major energy companies respond to this? Should companies move their head offices from London?
This week's Commercial Awareness update is proudly sponsored by Deutsche Bank. At Deutsche Bank, your ideas have impact. As Germany’s leading bank, with a strong position in Europe and a significant presence in the Americas and Asia Pacific, they’re proud to drive change and innovation in the industry. That’s why they're looking for creative, curious and strategic thinkers who are ready to make a difference from day one. View their roles.