ALEX BRUMMER: UK takes the open road

Data doesn’t lie, but it can mislead. Disclosure that the Euronext-owned Amsterdam stock exchange traded on average £8.1billion of shares each day in January against £7.5billion in London looks like a body blow to the City’s status as a great global financial centre.

What it doesn’t explain is that in the absence of an ‘equivalence’ deal, whereby Brussels recognises UK financial regulation, euro-denominated stocks would have to be traded elsewhere.

It is no accident that it is Amsterdam rather than Frankfurt or Paris which has come out on top. 

The Euronext-owned Amsterdam stock exchange (pictured) traded on average £8.1bn of shares each day in January against £7.5bn in London

It is where the London Stock Exchange (LSE) chose to establish a parallel Turquoise platform for the convenience of the big American and European investment banks based in the City. 

Stronger Amsterdam volumes are largely London-based trades conducted on the canals.

This may look like victory for Brussels as it engages in rearguard actions over the UK’s departure from the EU. 

But the losers are consumers in Northern Ireland or, in the case of share trading, big battalion investors such as pension funds.

They are faced with Balkanisation, less liquid markets and worse buy and sell prices. 

Bank of England governor Andrew Bailey has been in need of a distracting narrative this week as the consequences of his spat with Dame Elizabeth Gloster over the London Capital & Finance probe are digested.

There has been no disguising Bailey’s exasperation with the EU over financial regulation. 

In a sharp Mansion House speech, he was nonplussed as to why Canada, Australia, the US, Hong Kong and Brazil have been granted equivalence but more closely aligned UK denied, except for clearing and settlement. 

It is known that Europe is cool on derivatives trading and clearing because of the perceived risk.

The Bank has a history of euro-doubting dating back to the late Eddie George and through the Mervyn King era. Mark Carney’s perceived tilt in favour of Remain was an aberration. 

Bailey looks to be in the former camp with his bold advocacy of global standards of financial regulation, an open economy and open financial systems.

Fortunately, the City is not standing still. Swiss shares, barred under the previous regime, are back on the LSE platform.

Chief executive David Schwimmer is using the Refinitiv platform to expand into global trading of currencies and fixed interest, with outposts across the globe. 

It would be better if a decent relationship could be reached with the EU. The harder Brussels and Frankfurt make it, the more incentive there will be for Britain to look outwards and away from Europe. That would be an act of self-harm for our Continental pals.

Good health

No one is ever going to ask ‘who-they’ about Astrazeneca after the company’s vaccine performance. The co-operation with Oxford and the NHS is a textbook example of private-public sectors working for the greater good.

Covid-vaccine activity barely touches on AZ’s annual results and is unlikely to for the next year, given the pledge not to profit from the vaccine. 

Nevertheless, the reputational lift gained from the vaccine (except from President Macron) will hold it in good stead in a pharmaceutical industry which often has spiky relationships with government.

The significant narrative for investors is how chief executive Pascal Soriot has proven financial community doubters wrong over growth forecasts made at the time of the takeover defence against Pfizer in 2014. 

The group’s suite of oncology treatments and respiratory compounds is continuing to drive overall sales up 10 per cent at £29.4billion on the year. 

Soriot is able to use the group’s £95billion market value to bulk up with the proposed Alexion acquisition with its focus on rare diseases. Brave will be the analyst who disputes that now.

Oil change

Shell is seeking to maintain a balance between continued investment in oil and gas and a renewables drive. 

It has set itself challenging targets to lower carbon emissions and is linking progress to the pay of up to 16,500 staff, seeking to align the interests of all stakeholders to sustainability. 

The surge in oil price up above $60-a-barrel shows why the industry is not giving up on heavy capital expenditure just yet.

There is a politically incorrect case for oil to look across to tobacco. Attempts to diversify from smoking to other industries and towards more healthier vaping products never quite delivered for investors.