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High labor costs eat into JD Wetherspoon’s profit

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British pubs group JD Wetherspoon Plc posted an 18.9 percent fall in first-half pretax profit on Friday, hit by high labor costs.

The company, like most restaurant chains in the country, has been battling high staff costs, property prices and power bills as well as a move away from pub drinking by younger Britons.

The FTSE 250, which relies heavily on alcohol sales at its restaurants, said on Friday labour costs increased by about 33 million pounds, accounting for the biggest chunk of overall costs.

It expects results for the current financial year to remain unchanged.

The company said like-for-like sales rose 9.6 percent in the six weeks to March 10, helped by good weather this year, while total sales increased 10.9 percent.

The owner and operator of more than 900 pubs in UK and Ireland said like-for-like sales rose 6.3 percent in the 26 weeks to January 27.

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China would see ‘blue skies ahead’ if it accepts US demands

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James Bullard

David Orrell | CNBC

St. Louis Federal Reserve President James Bullard expressed optimism that the United States and China will reach a deal to end their trade war, despite recent negotiating setbacks.

“My base case continues to be that we’ll get an agreement on trade,” Bullard, a voting member on the central bank’s policymaking Federal Open Market Committee this year, said Wednesday in an address at the Foreign Correspondents’ Club in Hong Kong.

“I think it’s good for both China and the U.S.,” he added.

Bullard also said that China should accept U.S. demands in the trade talks in order to attract more foreign capital, saying the country would stand to reap enormous benefits.

“They will establish credibility on trade inside China and will reassure foreign investors that they can invest in China and be treated appropriately,” he said in response to questions from the audience.

“And really good things would probably happen for the Chinese economy going forward,” he said.

He added that on a macroeconomic level, China should agree to everything that’s being asked of it by the U.S. “If that occurs I would see blue skies ahead for the Chinese economy,” he stated.

Risk of tariffs lingering

However, he cautioned that there is a risk of tariffs lingering, which could eventually be something the Fed would need to address.

“I would say If we’re going to see major trade barriers stay in place, they would have to at least be in place for six months before you’d start really worrying about it from a monetary policy perspective,” he said.

“It’s natural in a negotiating framework that you would see a lot of maneuvering right before an agreement is reached and I’m hopeful that that’s what we’re observing right now,” he added.

“But if it did deteriorate into permanent trade barriers that would be something that the committee would have to consider and adjust to,” he said, referring to the FOMC. “But that would be down the road if that occurred.”

The inability of the United States and China to conclude their trade conflict — now more than a year old — has stoked fresh worries about the global economy. President Donald Trump earlier this month increased tariffs from 10% to 25% on $200 billion worth of Chinese goods, with Beijing retaliating. Trump has threatened further action, which Morgan Stanley said could cause a global recession.

‘Patient’ approach

Chinese authorities have been stimulating their economy through steps such as increasing lending to the private sector to combat the negative effects on growth from the trade war. China’s economy expanded 6.4% in the first quarter, a better-than-expected result. Chinese GDP (gross domestic product) grew 6.6% in 2018, the worst result since 1990.

The U.S. economy, meanwhile, expanded 3.2% in the first quarter of this year, beating expectations and recording the best start to a year since 2015. The closely-watched nonfarm payrolls came in at 263,000 new hires in April, while the unemployment rate fell to 3.6% in the same month, the lowest figure since December 1969.

The Fed is currently taking what officials call a “patient” approach to monetary policy after halting a series of interest rate increases after financial market turmoil late last year.

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Saudi Arabia’s largest IPO since 2014, Arabian Centres, begins trading

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DUBAI — Saudi Arabia’s largest initial public offering (IPO) in five years has edged above expectations as it debuted on the Tadawul, the country’s stock exchange, Wednesday morning.

Shares of Saudi shopping mall operator Arabian Centres were trading at 26.1 riyals ($6.96) just after 10 a.m. in Riyadh.

The price is just a hair above the retail giant’s initial pricing at 26 riyals per share, at the bottom of its indicative range, compared with a price range of 26 to 33 riyals per share for 95 million shares being sold.

The company had been aiming to raise 2.8 billion riyals ($747) million.

Arabian Centres Company — which operates, develops and owns 19 malls across 10 cities in Saudi Arabia — is owned by Fawaz Alhokair Group, whose majority shareholder is Saudi billionaire Fawaz Alhokair.

The 17-year-old shopping mall operator had a revenue of $576 million in 2018, up from $511 million in 2016. Its future plans include the opening of four more malls and one extension in the coming 12 months, according to the company.

Omar Al Mohammedy, CEO of Fawaz Alhokair Group, spoke to CNBC about the IPO the week prior and emphasized the importance of Saudi Arabia’s social and economic liberalization plans to the expansion of his business.

“Vision 2030 presents a tremendous opportunity for us,” he told CNBC’s Dan Murphy in Abu Dhabi, referencing the economic diversification plan spearheaded by Crown Prince Mohammed bin Salman to reduce Saudi Arabia’s reliance on oil revenue.

“One of the vision policy objectives is to improve the quality of life for Saudi citizens and Saudi residents. This includes many entertainment initiatives. One example that directly helps our business is cinemas.”

Saudi Arabia legalized movie theaters in late 2017 for the first time in more than 35 years as part of a drive to open up notoriously conservative social norms in the Islamic monarchy.

“We’re launching 15 cinemas across our existing 19 assets and we’ll have more cinemas in our growth assets,” the CEO continued. “Many of these policy objectives allow us to add concepts that in the past we could not add, whether it’s across entertainment, or fine dining, so we’re excited that there is significant room for us to give a hungry Saudi consumer the product that they demand.”

—Reuters contributed to this story

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The US ‘changes its mind so often’

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Chinese Ambassador to the United States Cui Tiankai speaks at a reception celebrating the 90th anniversary of the founding of the Chinese People’s Liberation Army (PLA) at the Chinese embassy in Washington D.C., the United States, on July 27, 2017.

Ting Shen | Xinhua | Getty Images

Cui Tiankai, the Chinese ambassador to the United States, said on Tuesday that U.S. negotiators have “often” backed out on partial trade deals at the last minute.

“If we review the process of trade talks between us over the last year or so, it is quite clear it is the U.S. side that, more than once, changed its mind overnight, and broke the tentative deal already reached,” Cui told Fox News.

“It is the U.S. side who changes its mind so often,” Cui added.

Cui said, as a result, China has a “no rush” attitude to restarting trade negotiations with the U.S.

Talks between the world’s two largest economies have stalled after each nation lobbied higher tariffs on the other’s imports, and China is reportedly considering canceling the next round of meetings in Beijing — even before the U.S. officially accepted the invitation. Treasury Secretary Steven Mnuchin has appeared open to accepting China’s invitation to bring a U.S. delegation.

“China remains ready to continue our talks with our American colleagues to reach a conclusion. Our door is still open,” Cui said. 

Chinese President Xi Jinping said earlier on Tuesday that his country is beginning on a “new Long March,” hinting that China does not expect the trade war to end soon.

After talks broke down earlier this month, President Donald Trump increased U.S. levies to 25% from 10% on $200 billion worth of Chinese goods. China quickly retaliated, raising tariffs on $60 billion of U.S. goods to 25%.

Trump is considering another tariff hike on another set of Chinese goods worth about $300 billion. 

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