This week: Electric cars zoom ahead, central banks keep us guessing, and headbangers have a ball.
Perhaps it’s too early to sound the death knell for the internal combustion engine. But Swedish carmaker Volvo this week moved the motor industry closer to an electric future, announcing that from 2019, it would only produce pure electric and hybrid cars.
Global sales of electric cars amounted to less than 1% of the market last year, but are expected to grow rapidly. U.S. electric car start-up Tesla confounded motor industry expectations in 2016 by taking nearly 400,000 orders for its $35,000 Model 3 car. General Motors will launch ten electric models by 2020, and Toyota announced its ambition to mass-produce them by 2020.
However, in the near term, the industry has hit some bumps in the road. Tesla spends heavily on research and development, and has yet to turn a profit. Earlier this week, its shares were hit hard by the revelation that it had undershot its sales targets in the second quarter of 2017. Tesla shares fell almost 5% on Wednesday after the California company said it sold 22,000 cars in the second quarter – some 10% short of forecasts.
The minutes of the latest U.S. Federal Reserve (Fed) meeting, released on Wednesday, provoked little reaction in global markets. The Fed was divided over the timing of balance sheet reduction – the process by which central banks get rid of all the bonds they bought during quantitative easing. There was also disagreement about the causes of the recent spike in inflation.
Thursday’s publication of the European Central Bank (ECB) meeting minutes was eagerly awaited for indications that the ECB was set to reduce its quantitative easing program. Again, though, the messages were mixed. The minutes reiterated the message that the bank would increase bond buying if needed. The ECB also said the euro area would reach its medium-term inflation target of around 2%, but only if boosted by “substantial” monetary accommodation. Nevertheless, investors continued to position themselves for the withdrawal of stimulus measures, and the yield on the 10-year German Bund – which moves inversely to its price – rose to 0.56%, its highest level since January of last year.
Massive cyber attack
Reckitt Benckiser became the first FTSE 100 group to issue a sales warning after the “Petya” cyber-attack disrupted operations at a number of businesses last week. The malware attack, which is thought to have originated in Ukraine, disrupted Reckitt’s ability to manufacture and distribute its products to customers in many countries. The household products group, which manufactures Nurofen painkillers and Durex condoms, said it expected like-for-like sales to fall by 2% in the second quarter.
Reckitt emphasized that this was not a final estimate as it had not yet recovered fully from the attack. Other companies affected by Petya include Maersk, the world’s biggest container shipping group, WPP, the advertising group, and Merck, the U.S. healthcare group.
Markets were relatively subdued. Over the week to Thursday’s close, the FTSE 100 Index of leading UK stocks was up 0.34%. In the U.S., the S&P 500 Index was down 0.56%, while the FTSE World Europe ex UK Index was up 0.50%.
The origins of headbanging – vigorously shaking one’s head in time with heavy metal music – are a matter of some dispute. Some say the term was coined during a Led Zeppelin tour in 1969 when first row audience members were banging their heads against the stage. But its most significant appearance in popular culture must be the Bohemian Rhapsody scene in the movie Wayne’s World. To celebrate the 25th anniversary of the film’s release, a thousand citizens of Aurora, Illinois – where the movie was set – gathered to break the world record for group headbanging. The assembled throng, led by Mayor Richard Irvin, wore flannel shirts, bandanas and wigs to emulate Wayne and his sidekick Garth, and headbanged along to Queen’s quasi-operatic magnum opus. Guinness World Records have yet to certify the attempt; if and when they do, expect Mayor Irvin to respond: “Party time, excellent!”
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