WEEKLY FAYRE – Monday 11th May 2020

May 11, 2020

“You did not come,
And marching Time drew on, and wore me numb.
Yet less for loss of your dear presence there
Than that I thus found lacking in your make
That high compassion which can overbear
Reluctance for pure lovingkindness' sake
Grieved I, when, as the hope-hour stroked its sum,
You did not come.

You love not me,
And love alone can lend you loyalty;
-I know and knew it. But, unto the store
Of human deeds divine in all but name,
Was it not worth a little hour or more
To add yet this: Once you, a woman, came
To soothe a time-torn man; even though it be
You love not me.”

 

Thomas Hardy – poet & author – 1840-1928

 

I feared as much. PM Johnson’s 10-minute update and rallying call to remain vigilant proved to be slightly ambiguous and inevitably, it will attract adverse criticism. If he was not able to make an unequivocal statement, he needed to elaborate or say nothing! Hopefully, all will be revealed in the House of Commons today. There was little immediate encouragement for some businesses but saving lives must be a pre-requisite!

Considering the country was in ‘lockdown’, the VE Day 75th anniversary celebrations more than lived up to expectations. The coverage on television was superb, starting with the presentation by BBC’S Sophie Raworth and Dan Snow from the garden of No:10, to ITV’s coverage of the Queen’s speech to Nick Ferrari’s presentation on LBC. The film footage, Sir Winston Churchill’s invigorating and inspirational speeches, Vera Lynn’s heart-rending songs and the stories from those people who were there, made it a highly charged emotional occasion - A wonderful day and broadcasting at its very best. The icing on the cake was HM, The Queen’s speech on Saturday night. How encouraging and uplifting was that?  

Not only is this pandemic playing havoc with business, but it is also having the same adverse effect on professional sport and especially the “Beautiful Game.” Coming to an agreement between the Premiership Clubs as to whether they should finish the final matches of the season behind locked doors and at neutral grounds is proving an almost insurmountable problem – a real conundrum.

Health and life are of paramount importance – say no more. However, as I understand it, the bottom six clubs do not want relegation to be an issue. I am also reliably informed that the main supporters of the Premiership – Sky and BT Sport – have already haemorrhaged to the tune of £38 million, because of inactivity. How can they be expected to continue their sponsorship if there is no competitive excitement? Few will be inclined to watch Bournemouth v Aston Villa playing in an empty neutral ground if there is nothing at stake and why should Sky/BT Sport be prepared to pay for it?

It strikes me that in some clubs, the owners, the ‘management’ and the players need to wake up and smell the coffee. If there is no attempt to finish the season, assuming of course that the players and coaches will be tested every day, some Premiership Clubs will go out of business, let alone those in lower leagues, many of whom will be facing penury. That would be a disastrous outcome for millions of people who have suffered enough already.

 

INDEX

4th May 2020

8th May 2020

% profit/Loss

FTSE 100

5897

5935

+0.64%

DAX

10543

10904

+3.43%

CAC40

4413

4549

+3.08%

DJIA

23581

24331

+3.18%

S&P 500

2815

2929

+4.05%

NASDAQ

8555

9129

+6.71

SHANGHAI

2801

2895

+3.36%

HANG SENG

23895

24230

+1.40%

NIKKEI 225

19776

20179

+2.04%

 

INDEX

23rd March 2020

8th May 2020

% profit

FTSE 100

4993

5935

+18.86%

DAX

8741

10904

+24.75%

CAC40

3914

4549

+16.22%

DJIA

18591

24331

+30.88%

S&P 500

2237

2929

+30.93%

NASDAQ

6860

9129

+33.08%

SHANGHAI

2660

2895

+8.83%

HANG SENG

21696

24230

+11.68%

NIKKEI 225

16887

20179

+19.50%

 

To coin a phrase from the ‘60s – “That was the week, that was!” To have stared down the barrel of global economic abyss, especially looking at the employment data in the US and the likelihood of a similar percentage drop in the UK and the EU. Coupled these grim facts with dire PMI and ISM data on both sides of the pond and they make the performance of global stock markets last week feel like ‘the eighth wonder of the world!’ If those who occasionally read the content of this weekly missive, rather than just the poem and take the trouble to look at the lower table, they should be shell shocked at the magnitude of the recovery of global stock markets since 23rd March 2020, when they reached their recent ‘lows’ – all were down then by between 24% and 30%, apart from China and Hong Kong, both of whom had debilitating issues to deal with in 2019 – hence their decline and rally have not been as exaggerated as the others.

Last week’s US ADP Index (20 million jobs in the private sector lost) on Wednesday, with Initial Jobless Claims on Thursday seeing another 3.1 million people claiming unemployment benefit totalling 33 million in six weeks, culminating with Non-farm payrolls on Friday announcing 20 million jobs had been lost in April provided calamitous data of eye-watering proportions – 14.7% unemployment! April’s number was the equivalent of a decade’s job’s growth in the US wiped out in one month. Add to that all the other dispiriting pieces of data referred to above, the like of which we have not seen for decades, and it became clear that the US was in its deepest recession since 1938 and probably as bad as 1929-1933.

BoE Governor Andrew Bailey’s comments that accompanied last Thursday’s meeting hardly provided the most uplifting or encouraging immediate outlook imaginable for the UK. He has warned of a severe downturn in our economy. A 14% drop in UK GDP this year was not out of the question and nor was a 15% rally in 2021 beyond the realms of possibility. Nor was 9% unemployment by the end of the year beyond comprehension. These numbers were not official estimates; They were possibilities. Inflation was likely to fall below 1% in the next few months but could reach 2% by the end of the year. Mr Bailey also pleaded against a precipitous return to work. It was his opinion that another pandemic spike could do irreparable damage to a quick recovery. The EU seems to have been at ‘sixes & sevens’ in implementing its bailout package. Germany astonished the world by rejecting the EU’S €2 trillion bail-out plan. The EU has been extremely slow getting its act together and there is no getting away from the fact that Europe has serious economic issues.

There is little doubt that the Street of Dreams drove the improved global investment sentiment, which was given momentum by a dramatic pick up in oil prices from $11 two weeks ago for WTI to $24 a barrel by last Friday. It was also helpful that the Sino/US jingoistic rhetoric was toned down. It appears that the world is going to have to adopt a pragmatic approach towards China, rather than hold them to account for the coronavirus human devastation.

There were solid earnings during the week from Viacom, Metlife, Bristol Myers Squibb and a better than expected effort from Uber, though 3,700 staff were laid off. It was also necessary for Airbnb to dispense with the services of 1900 people. Both operations have suffered a massive drop in demand, Sadly Walt Disney incurred a loss of $1 billion on their theme parks, but it might be folly to ignore the excellent prospects of this media mogul, as and when the economy improves. In passing investors’ appetite for tech and NASDAQ related stock was relentless. One can only be astonished that the year’s losses on the NASDAQ have already been wiped out. This index was down 24% by the 23rd March 2020, but investor risk-taking and strong earnings fuelled strong gains last month. Facebook, Apple, Amazon, Microsoft, and Alphabet make up 38% of NASDAQ.

Here in Old Blighty last week, it was reassuring that 100,000 ‘bounce back’ loans were completed, thanks in the main to government guarantees. However, Chancellor Sunak attempted to prepare those on the Job retention scheme, which enabled the beneficiaries to receive 80% of their salaries up to £2,500 a month, until the end of June, that they may have to consider an adjustment. There is plenty of time for a reappraisal. On the job front, the situation looked desperate for airlines with BA shedding 12,000 jobs and Ryanair 3000. Both have threatened to put their use of Gatwick on hold. It is not surprising that all UK based airlines are seeking financial assistance from the government. Rolls Royce also served notice to shed 8000 jobs. The demand for new engines and the servicing of existing ones, has plummeted. It will also come as no surprise that retail footfall in the UK dived by a record 80.1% in April, the previous worst month being March when it dropped by 41.3%, which was also a record.

On a positive note O2 and Virgin Media agreed to merge their two operations, subject to agreement from the CMA in a deal valued at £31 billion. The joint venture will cater for 34 million users, making it the UK’S largest mobile operator, usurping BT, which looks after 31 million customers. Talking of BT, it agreed to cut its dividends until 2021. In the same breath the Telegraph tell us that this telecom titan will embark on £12bn mission to bring fibre broadband to the nation. The Sunday Times has taken up Mayor Khan’s cause in seeking a £2 billion bailout for tfl

It must have been an embarrassment that the Barclay brothers had their family’s dirty linen hung out in court. It is alleged that Sir Frederic has sued Sir David’s three sons for selling the Ritz Hotel to a Qatar businessman for half what a Saudi operation may have been prepared to pay for it. The Hotel may have been sold for £650 million. Judge Ray compared the allegation as being espionage on an industrial scale.

There was an interesting, well researched article in Saturday’s FT, as to how investment operations have polarised since the financial crisis of 2008. 61% of the total assets under management are controlled by Blackrock, Fidelity, Vanguard and State Street. These 4 managers represent just 1% of the number of firms and for those who love data, this represents 243 times that of the bottom 50%.

In closing there was an excellent article in Saturday’s Times by Panmure Gordon’s Chief Economist Simon French. He believes Chancellor Sunak has a golden opportunity to make growth work for everyone by levelling up the economy into the heart of the recovery. In other words, London, alone must not be the only hub of recovery. A regional approach is a pre-requisite.

UK companies posting earnings this week – Monday – GW Pharma, Diploma, Tuesday – Wm Morrison, Land Securities, Numis, Vodafone, Wednesday – Ferguson, Aston Martin, Brewin Dolphin, Tui Travel, Sage Group, Stobart Group, Thursday – 3iii, Prudential, Invidior, Burberry, Mitchell & Butler, Marston’s

US companies posting interim results this week – Monday – Marriott, Coty, Tuesday – Duke Energy, Eastman Kodak, Wednesday – Cisco Systems, Thursday – Applied Materials, Denny’s

Economic data to be posted this coming week – Tuesday – US CPI, Wednesday – UK GDP for March, UK Industrial Production, Manufacturing Output and Construction, US PPI, US MBA Mortgage applications, US FED Testimony, Thursday – US Initial Jobless Claims, US Imports/Exports, Friday – US Retail Sales, US Industrial production, Michigan Consumer Confidence