WEEKLY FAYRE – Monday, 11th January 2021

January 11, 2021

Glory be to God for dappled things –

For skies of couple-colour as a brinded cow;

For rose-moles all I;n stipple upon trout that swim;

Fresh-firecoal chestnut-falls; finches’ wings;

Landscape plotted and pieced – fold, fallow, and plough;

And áll trádes, their gear and tackle and trim.

All things counter, original, spare, strange;

Whatever is fickle, freckled (who knows how?)

With swift, slow; sweet, sour; adazzle, dim;

He fathers-forth whose beauty is past change:

Praise him.

Gerard Manley Hopkins – Poet - 1844-1889
 

Watching Australia play India at the SCG on television in the early hours has been a real fillip for me. Sunshine, green grass, leather to willow and some crowd reaction; could that mean there may be some normality to life by May? Will the vaccine have been sufficiently rolled out for thousands of sports-starved fans to be able to watch football, especially the UEFA Euro 2021, British Lions rugby, horse racing at Royal Ascot in June and test matches against New Zealand and India? Here’s hoping!

 

INDEX

4th January 2021

8th January 2021

% Loss/Gain

FTSE

6460

6873

+6.00%

DAX

13890

14049

+1.14%

CAC40

5614

5706

+1.64%

DJIA

30627

31097

+1.53%

S&P 500

3764

3824

+1.59%

NASDAQ

12958

13201

+1.88%

SHANGHAI

3474

3570

+2.76%

HANG SENG

27087

27878

+2.92%

NIKKEI 225

27575

28139

+2.05%

 

 

What a start to 2021! Joe Biden confirmed as the 46th President of the United States. The Capitol ransacked by thousands of Trump Supporters. Speaker Pelosi’s chair and lectern desecrated by a mindless hooligan. 4 people killed in the siege of Capitol Hill. President Trump unrepentant as to the validity of the outcome of the election, nor was he particularly critical of the outrageous behaviour of his staunch followers. I fear that the salvaging of US democracy may only have just begun. This land of the free is currently hopelessly divided politically, with Trump acolytes very unlikely to return home permanently with their tails between their legs. Good luck Joe! Good luck Kamala!

Despite these astonishing histrionics, Wall Street marched on and during last week record levels were breached by the DJIA, the S&P 500 and the NASDAQ. The deaths from Covid-19 continued to reach a horrendous level, with 372.000 deaths recorded, with 4000 reported last Thursday. Vaccines are on their way from Pfizer, Moderna and in the UK from Oxford/Astra Zeneca. Investors who tend to think three to six months ahead, think the ‘economic cavalry’ is on its way in terms of a sharp recovery in the spring. Post the stimulus package having been agreed by Congress, Initial jobless Claims showed mild signs of improving, though a total of 922,000 workers filed for state benefits during the final week of 2020. Friday’s Non-Farm payrolls were disappointing. 140,000 jobs were lost in December and the unemployment rate remained at 6.7%, ending seven months of job growth and suggesting the economy is weakening. Investors are counting on more fiscal stimulus from the incoming president Joe Biden, as both chambers of US Congress are now controlled by Democrats.

Here in the UK, the vaccine driven FTSE 100 posted a record first week of the year gain in living memory – 6% - way above any other global index. Why? Oil was buoyant, so the likes of BP (+16% and Shell +10% last week), which had been trashed in the spring losing 50% of its capital value, rallied to the cause. Also banks such as HSBC and Barclays both made double digit gains. Even though the UK government seemed to be ahead of the curve in terms of rolling out a vaccination, leaving both France and Germany in its wake, it was not plain sailing for the Johnson administration. The third lockdown was creating further waves of anxiety, particularly in the retail and hospitality sectors. So, the Chancellor felt obliged to offer a £4.6 billion package, with up to £9000 for any small business that had a reasonable rateable value. Much as there was some gratitude, these measures were leaving those self-employed, without alternative incomes, numbering about 2 million, ‘high and dry.’ Few would be surprised if unemployment in the UK reached 2.5 million by March circa 7.5%. There is no doubt that smaller companies are short of cash, with many hospitality operations, circa 30% likely to run out of cash in less than three months.

In the eurozone, the unemployment rate fell unexpectedly to 8.3% in November but youth unemployment rose, to 18.4%. German industrial production was strong, keeping alive hopes that Europe’s biggest economy avoided a double dip recession. New UK car sales were also unsurprisingly very disappointing, having dropped 29% from a year ago.

Though the gains made on the Street of Dreams last week were not as tumultuous as the FTSE, they were solid with Chevron, Exxon Mobil and the likes of JP Morgan putting their best foot forward. Even Walgreen Boots posted great numbers, triggering a 5% gain in value. Briefly it was thought that the NASDAQ might see some significant profit taking with investors turning their affections towards cyclical and recovery stocks. Then many focused on the fact that the pandemic is far from ‘dead in the water’ and there is a belief that there may well be some juice to be squeezed out of the tech sector; hence that NASDAQ flirted with record levels last week, with Apple, Alphabet, Microsoft, and Amazon shining out like the beacons they have been in the last year. However, no one showed such a clean pair of heals as TESLA did. Even though Tesla makes only about 400,000 cars a year, Tesla’s value at $700 billion, is greater than those of Ford, GM, Toyota, and Hyundai all put together. Tesla astonishing advancement has also made Elon Musk the richest man in the world at $185 billion, eclipsing the mercurial Jeff Bezos of Amazon, who has held that accolade since 2017.

It is interesting to note that Apple is in talks with South Korea’s Hyundai about developing an electric self-driving car. Talks are at a preliminary stage and if they come to fruition, it is unlikely that these new-fangled cars will become available until 2024/5. Netflix incurred the wrath and indignation of subscribers by increasing fees by a £/$ a month. Productions have been prolific during the lockdown and subsequently costs have gone up such as fees being paid to the Duke & Duchess of Sussex’s documentaries and podcasts. Walt Disney are expected to ‘come up on the rails under a wet sail’ later this year as serious competition. Boeing has agreed to pay $2.5 billion to settle US criminal charges that it withheld information from safety officials over the two ‘737 MAX’ crashes which cost the lives of 346 people, whose families have already received $500 million in compensation from Boeing.

Here in ‘Old Blighty’ there was a plethora of corporate news, though the earning season does not get under way in earnest until Friday. Sainsbury posted an 8.3% increase in like for like sales over the Christmas period, with Morrison eclipsing that number with a 9.3% increase. Marks & Spencer’s trading statement was frankly disappointing with group sales down 8.4% to £2.77bn over the 13 weeks to Boxing Day. Food like-for-like sales were up 2.6% (better than expected), but against its peers’ performance, it was average. However, clothing like-for-like sales were down 24.1%. CEO Steve Rowe calls it “robust” given store closures and distortion in demand. (Online clothing up 47.5%). Conversely NEXT pleased its followers, with like-for-like sales only down 1.1% in the last quarter. Retail shop sales were down 43%, but on-line sales were up 38%. Shares bounced 8% last Tuesday. It is remarkable to think NEXT’S share price is up 16% in the last year! B&M will be distributing bonuses to staff for brilliant sales, up over 26% during the Christmas trading period. CEO Simon Aurora and family will receive £30 million in emoluments. John Lewis will be focusing on its domestic market and therefore will not be delivering abroad through its enhanced website.

Amongst the compendium of announcements this week came news that Grant Thornton is likely to be sued for £200 million for its handling of Patisserie Valerie’s financial affairs over the past 12 years. Fraudulent behaviour by some of chairman Like Johnson’s executives to the tune of £40 million has been revealed. Explanations are required. It is further thought that Nvidia’s purchase of ARM Holdings from Japan’s Softbank for £0 billion is being challenged by the CMA on competition grounds. Sky’s CEO Jeremy Darroch has served notice to hand over the reins to 40-year-old Danna Strong of Comcast, SKY’s owners. Mr Darroch has been CEO since 2007 and is purported to have made £38 million over the £30 billion sale of Sky to Comcast. LVMH competed its long-drawn-out-tortuous takeover of Tiffany’s for $15.8 billion. Bernard Arnault’s fabulous luxury operation, which includes such amazing brands such as Givenchy, Dior, Luis Vuitton, Fendi, Moet et Chandon, Celine, and Loewe’s, has seen its shares add 22% in value in the last year; no mean achievement in such a tough economic cycle.

Fiat Chrysler consummated its $52 billion merger with Peugeot, Citroen, and Vauxhall. The company is to be called Stellantis. 3000 Vauxhall workers in the UK will be fearful of their job security. In the middle of last week Entain, formerly known as GVC Holdings – owners of Ladbrokes, Coral, PartyPoker and Sporting Bet rejected an £8.1 billion bid from MGM Resorts, as wholly inadequate. CEO Shay Segev must expect MGM to up the anti to secure this operation.

London would appear to have lost out on the trading of Euro based securities to EU trading centres in a dramatic fashion. Aquis Exchange’s CEO Alasdair Haynes believes this loss is a ‘spectacular own goal’ by the government. Aquis had the foresight to see that this might be the case and sensibly made contingency plans to open in Paris, as have other specialised exchanges. Despite the despondency, the City expects a bumper IPO market in 2021, with as many as 136 potential unicorns and 80 unicorns up for grabs. There are also many fintech operations coming to market including companies such as Deliveroo, Checkout.com, Darktrace and Transferwise coming to the fore. Despite the vagaries of Covid-19, the City could well see a massive upturn in business as companies seek fresh capital and new partners. What an opportunity for UK based financial investment advisors to clean up rather than just be left with the ‘scraps from Lazurus’s table’ that the likes of Goldman, JP Morgan, UBS, and Deutsche Bank feel indisposed to deal with. Many UK medium sized operators, to my certain knowledge have never been busier.

UK companies posting interim results this week – Monday – Abcam, SIG, Tuesday – Ferrexpo, The Hut Group, Rathbone, Wednesday – Shoe Zone, Kromek, PageGroup, Persimmon, Just Eat Takeaway, Thursday - Safe Store, Ashmore, Dunelm, Hays, Tesco, Whitbread, Wood Group, Network International

US Companies posting interim results this week – Monday – Carnival Corpn, Tuesday – Albertsons, KB Homes, Wednesday – IHS Markit, Thursday – Delta Airlines, Blackrock, Charles Schwab, Friday – JP Morgan Chase, Citigroup, Wells Fargo, PNC Financial Services

Economic data to be posted this coming week – Monday – ECB Lagarde speech, Wednesday – US MBA mortgage Applications, US Inflation (EST: 1.2%), US Beige Book, Thursday – Germany GDP 2020 (EST: 0.6%), EBC Meeting, US Initial Jobless Claims, US Imports & Exports, Friday – UK Balance of Trade, UK GDP (3 month average November EST: 10.2%), UK manufacturing Output, Industrial Production and Construction, UK GDP Y/O/Y November EST: -8.2%, UK Goods Trade Balance, US Retail Sales, US PPI, US Industrial Production & Manufacturing output for December, US Michigan Consumer Confidence