Brazil’s Markets Take a Beating
The nation’s markets tumbled after leading newspapers alleged that President Michel Temer was taped approving bribes to silence rivals.
Editor’s Remarks: The scandal threatens to topple Temer’s government, which only came to power last August after his predecessor, Dilma Rousseff, was impeached. Temer is supposedly heard telling Eduardo Cunha, who was critical to Rousseff’s impeachment, to keep silent about something, the precise nature of which is unknown. In response to the news, Brazil’s benchmark Ibovespa stock index tanked 10.47%. The nation’s currency, the real, fell 7.69% against the dollar. The reaction is a severe blow to a government that had so far been welcomed by the market due to its plans to reform Brazil’s struggling public finances and unsustainable pension system.
Ex-FBI Director Heads Trump-Russia Inquiry
The US Justice Department has appointed Robert Mueller to lead the investigation into connections between Trump’s election campaign and the Russian government.
Editor’s Remarks: Mueller is hugely respected in the US and is the only former FBI director, besides J. Edgar Hoover, to have held the job for more than ten years. Mueller’s appointment comes after Trump fired FBI director James Comey allegedly over his handling of the same investigation. It has since been alleged that prior to his sacking, Comey was asked by Trump if he could drop the probe into Michael Flynn, the disgraced former national security adviser. It has indeed been an unforgettable week in Washington DC so far – one which began with rumours that Trump had divulged classified information to the Russians and has even seen talk of his impeachment in various media outlets. The president will certainly be hoping for some respite next week when he embarks on his first overseas visit to Europe.
Theresa May Unveils Tory Manifesto
Theresa May has finally unveiled the Conservative Party manifesto, which suggests she is pushing a “hard Brexit” and wants to snag as many Labour voters as possible.
Editor’s Remarks: The Tory manifesto commits to its “hard Brexit” line and reiterates that no deal with Brussels is preferable to a bad one. Additionally, May announced that she will scrap her predecessor’s plan to cap social care costs at £72,000. Instead, pensioners will have £100,000 of their assets (home included) protected but will be charged on anything above this. Consequently, poorer pensioners will pay nothing towards their care, while wealthier families could pay extraordinary sums, especially if they suffer from long-term ailments like dementia. May is also sticking to her immigration promises by imposing a £2,000 annual “Skills Charge” on companies for every skilled non-EU employee they hire. The revenues will, it is said, go towards addressing the nation’s desperate skills shortage. These policies are likely to appeal to the UK’s traditional Labour supporters.
India Clears Major GST Hurdle
Indian ministers have decided upon rates for “substantial items” as the government prepares to launch the new goods and services tax on July 1st.
Editor’s Remarks: The GST is the largest tax reform in India’s modern history, and its implementation will create a common market of 1.3bn people – almost double the population of the EU. Finance Minister Arun Jaitley insists the GST’s “impact is not inflationary”. Details seem to support this; there have been no tax increases on any commodity, numerous reductions, and the removal of the “tax on tax”. Presently, the government has decided on rates for 1211 categories of item and is yet to make a decision on six types of branded food. The GST will simplify India’s draconian tax laws, which currently vary enormously from state to state. Downing Street will be watching intently as the UK continues to publicly announce its ambitions for a trade deal with Modi’s India.
Burberry Reports Mixed Performance
The British fashion house has suffered a fall in annual profits, but its ability to generate cash and make cost savings remains strong.
Editor’s Remarks: The weaker pound boosted Burberry’s domestic stores due to an increase in tourism and also caused positive foreign exchange effects on overseas earnings that amounted to £128m. However, exchange rates are expected to cost the company £30m next year. Furthermore, despite much improved operational cash flow, pre-tax profits fell 5% to £394.8m due to poor sales in the US. Overall, same-store sales across the globe increased by a paltry 2% in the last three months of the financial year, compared to 15% in LVMH’s fashion and leather goods division. It is hoped that incoming CEO Marco Gobbetti will revitalise the British brand’s fortunes, but many feel that unless Christopher Bailey steps down as creative director, little will change.