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16/02/2017

Weekly News Bites: Facing the music

Our top picks from this week's Morning Chat

Facing the music: The 59th Grammy awards – named after the gramophone – were held Sunday night. In that time, the way we consume music, now dominated by virtual online libraries, has moved light years. In a major milestone, the world's leading streaming platform, Spotify, plans to go public – though it keeps being delayed as the company searches for a profitable business model. But it can't wait forever. The firm raised $1 billion last year at an annual rate of 5%; it also offered a discount of 20% on any floated shares to its lenders. The interest rate goes up by 1%, and the discount on shares down by 2.5%, every six months until the IPO happens. (Think Beethoven's 5th right now.) (13/02)

Hopefully it works itself out: The UK’s unemployment rate remained at an 11-year low of 4.8%. That is smashing. However, wage growth is moderating, up 2.6% year-on-year year; the prior reading was 2.8%. At the same time, the UK’s annual inflation rate is increasing, up 1.8% in January from 1.6% in December. This leaves just a sliver of real prosperity (i.e. 2.6% - 1.8% = 0.8%) being assaulted from both ends. Still, with employment essentially “full”, wages should remain buoyant. In theory anyway. (16/02)

Not so louse’y: The overall volume of Scottish farmed salmon fell 4% in the fourth quarter of 2016. Experts believe it’s due to sea lice; the little critters led to fish being harvested at a younger age than ideal. Nonetheless, it was still a bumper year for salmon fisheries. Sinking supply combined with a rising tide in demand to push prices up by 81%. Oil producers will wish the same for their industry, but with “production cuts” in lieu of the marine ectoparasites. (16/02)

Did we go public? In a time of great uncertainty for Mexico, its biggest tequila maker, José Cuervo, went ahead with a long awaited initial public offering. It was slated to float last year, but chose not to in the aftermath of the US election. Given that it serves 25% of the US tequila market – from which it derives 60% of its sales – a wall could be ruinous for business. Nonetheless, investors slurped it up: the firm raised about $1 billion for 15% of its equity. They realise tequila, like many American imports, has no easy, high-quality, local substitute. (15/02)

Not a Le Pen pal: Francois Villeroy de Galhau, the head of France’s central bank, believes Marine Le Pen's proposals to leave the eurozone and embark on a fiscal spending spree would unleash ruinously high inflation. Furthermore, he estimates the far-right leader’s policies would cost more than €30 billion per year just in extra debt interest. This equates to increasing the current budget deficit by another 1.5%, to a total of about 5%. With the national debt already burdensome at 97% of GDP, France has limited room for experimentation. (14/02)

 

 

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