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What to Watch: ECB backlash, Wetherspoons, SSE sells household business

Edmund Heaphy
Finance and news reporter
European Central Bank chief Mario Draghi, who announced new stimulus measures for the eurozone on Thursday. Photo: AP Photo/Francisco Seco

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

ECB faces criticism after unveiling stimulus package

The European Central Bank on Friday came under fire from the newest member of its governing council, Robert Holzmann, who said that the bank’s new stimulus package could be a mistake.

In an interview with Bloomberg, Holzmann, the newly installed governor of the Austrian central bank, said that the idea that the easing could be a mistake “definitely crossed [his] mind.”

He said the idea had also crossed the mind of others on the governing council.

The European Central Bank (ECB) on Thursday chose to cut one of its key interest rates for the first time since early 2016, pushing it into record negative territory.

As part of a sweeping stimulus package designed to boost the eurozone’s ailing economy, the bank also announced that it plans to revive its controversial asset-purchasing programme from November, when it will begin €20bn in purchases.

Newspapers in Germany, where the asset-purchasing programme’s staunchest critics can be found, have also panned the move.

Pre-tax profits fall at Wetherspoons

JD Wetherspoon (JDW.L) on Friday said that pre-tax profits at the pub group dipped by 4.5% to £102.5m and operating profit declined by 0.3% to £131.9m in the year to July 28.

When exceptional items are included, pre-tax profits rose by 7.2% to £95.4m. Sales at the pub group rose by 6.8% and revenue rose by 7.4% to £1.8bn.

“Despite continuing political problems, stemming from the transfer of democratic power to a technocratic elite, Wetherspoon continues to perform well,” chairman Tim Martin said.

The founder of the pub group also criticised “a technocratic elite” for “frustrating” Brexit.

Martin used his company’s preliminary results on Friday to criticise rebel Tory MPs who voted against the government to avoid a no deal Brexit.

SSE sells household supply business to rival

SSE (SSE.L), one of the UK’s big-six energy providers, on Friday agreed to sell its lagging household supply business to smaller rival Ovo Group, in a deal worth £500m.

Ovo, which was founded in 2009, will pay £400m in cash and £100m in loan notes for the business.

The deal, which will see transform Ovo into one of the UK’s biggest energy companies, is expected to conclude later in 2019 or in early 2020.

Some 3.5 million customers and around 8,000 staff will transfer from SSE to Ovo as part of the deal.

SSE’s household supply business has been struggling and the company has been trying to offload it for around a year.

In its most recent financial year, which ended in March 2019, the division lost over half a million customers to other providers. Ovo had been named as a potential buyer in August.

Profits jump at Twitter UK

Twitter’s (TWTR) profits in the UK surged last year as more advertisers flocked to the platform, but the company’s tax bill fell due to an increase in share awards to employees.

Profits at Twitter UK, the US social media company’s British subsidiary, leapt by 800% to £3.6m ($4.4m) in 2018, accounts filed with Companies House this week show.

Revenue rose by 33% to £103.4m. Twitter said in its accounts that most revenues come from advertising on the platform.

Despite the rise in profits and revenues, Twitter’s UK tax bill fell from £2.4m in 2017 to just £410,000 last year.

The decline was down to the use of deferred tax credits built up in prior years and a rise in share-based payments to staff. Share-based compensation at Twitter UK rose from £7.9m to £8.4m.

Employee share award schemes can give companies tax breaks if their public share price rises above the share price set in the scheme.

European stocks mixed

European stocks were mixed on Friday, with the FTSE 100 (^FTSE) down 0.19%, Germany’s DAX (^GDAXI) up 0.16%, and France’s CAC 40 (^FCHI) up by 0.19%.

The pound climbed on Friday as fears that the UK will leave the EU without a deal eased. It was up almost 1% against the dollar (GBPUSD=X) on Friday, pushing it above $1.24 for the first time in months. The pound was also up 0.73% against the euro (GBPEUR=X), to around €1.123.

What to expect in the US

Futures are pointing to a lower open for US stocks.

S&P 500 futures (ES=F) are up by 0.19% and Dow Jones Industrial Average futures (YM=F) are up by 0.26%. Nasdaq futures (NQ=F) are up by 0.23%.