WEEKLY FAYRE – Monday, 11th October 2021

October 11, 2021

“Is not this a true autumn day? Just the still melancholy that I love - that makes life and nature harmonise. The birds are consulting about their migrations, the trees are putting on the hectic or the pallid hues of decay, and begin to strew the ground, that one's very footsteps may not disturb the repose of earth and air, while they give us a scent that is a perfect anodyne to the restless spirit. Delicious autumn! My very soul is wedded to it, and if I were a bird I would fly about the earth”

 

George Eliot – Novelist & Poet – 1819-1880

 

"The PM's speech was the barnstorming effort for the Conservative party faithful you would expect from Boris Johnson in Manchester last week. Sadly, as far as business was concerned it was rather vacuous in content, leaving  the business community frustrated. There was plenty of 'Kite-flying' and aspirations for the future on 'levelling up', but there was little planning detail and timing as to how the UK was going to arrive at the 'Valhalla' of business excellence triggering growth expansion.

The business community feels slightly jilted at present - rather unloved - as it battles with inflation, spiralling energy costs, the supply chain and debt.

The PM needed to be more compassionate until January. The government is not wholly responsible for labour and driver shortages, but consideration in circumnavigating this tortuous period, would have sent out a message of long-term support." 

US Ladies Open Tennis Champion Emma Raducanu lost her first match since her incredible Flushing Meadows victory, in round two against Aliaksandra Sasnovich, 6-2, 6-4 at Indian Wells last Friday.

 

INDEX

4th October 2021

8th October 2021

% Loss/Gain

FTSE

7027

7095

+0.97%

DAX

15061

15206

+0.96%

CAC40

6484

6599

+1.16%

DJIA

34312

34746

+1.26%

S&P 500

4348

4391

+0.98%

NASDAQ

14493

14579

+0.60%

SHANGHAI +

3625

3592

-0.93%

HANG SENG

24478

24837

+1.47%

NIKKEI 225

29044

28048

-3.43%

 

+Closed on Friday 1st October 2021 – Golden Week

 

Last week investors had every right to believe that most global indices looked rather frothy and over-cooked against a background of rampant inflation (including wages), supply chain constipation, gargantuan levels of debt, especially in the US, gas prices that have risen all but three-fold since the beginning of the year (40% in the past month until Thursday) and crude oil at $83 a barrel. A shortage of drivers in every commercial sector and especially petrol, has of course exacerbated the UK’S problems. In passing our thanks to the armed forces for stepping into the breach in helping to alleviate the petrol shortage last week. In the early part of week, sentiment turned very negative and global bourses were showing considerable signs of anxiety as investors started to take risk off the table, with growth inevitably likely to contract across the spectrum. In the early part of the week equity markets went sharply into reverse

However, on Thursday, two major statements changed the mood of investors dramatically. Mitch McConnell, the GOP Senate minority leader, suddenly offered, right out of the blue, a short-term suspension to the US debt ceiling. Then President Putin indicated that Russia could consider exporting record volumes of gas, on a day of high drama in Europe’s energy market, where gas prices surged 40% in a few minutes. This changed sentiment and markets made bold efforts to taper losses and by Friday evening, only Shanghai remained in negative territory having spent four days on holiday (Golden Week). Since 14th September 2021 the Nikkei 225 has fallen 8.5%. This contraction has near enough coincided with the election of Japan's new PM Yoshide Suga. The last two days has seen some improvement, as on Wednesday, 6th October, from mid-September, Japan’s leading index was down 10.2%!

There was an improvement in Thursday’s US Initial Jobless Claims, with only 326,000 claiming benefits. However, Friday’s Non-farm payrolls were disappointing, but equity markets seem to take the rather parsimonious job creation number in their stride. Only 194,000 jobs were created last month - A BIG MISS, far less than the 500,000 jobs expected by Wall Street analysts. The Unemployment rate fell to 4.8% from 5.2% in August, average hourly earnings rose by a more-than-expected 0.6%.

High levels of UK inflation could persist for longer than expected, according to the Bank of England’s new chief economist Huw Pill, an alumni member of Goldman Sachs with several years’ experience at the ECB.  Mr Pill appears to agree with the more hawkish elements of the Monetary Policy Committee. “In my view, that balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long-lasting than originally anticipated,” said Huw Pill, in his first public remarks at a meeting with the Treasury Select Committee, since taking office last month. The EU and especially Germany’s economy is not exactly a bed of roses. German Industrial orders fell sharply -7.7% in August (EST: -2.1%) against -3.4% in July. So, for UK 'bashers' it’s not only the UK that is suffering the 'slings and arrows of outrageous fortune!' The supply chain and inflation are massive global issues! UK car registrations in September fell by 27%. Much of the decline was down to a shortage of chips. It was interesting to note that electric car sales were buoyant 32,000 out of 214,000, but the total registration number was worst figure for nearly 30 years. A shortage of labour also saw the UK’S construction sector take a hit last month. HIS Markit’s survey posted a drop from 55.2 to 52.6.

Just weeks before the UK hosts the COP26 climate summit, around 90 climate groups have written to UN Special Envoy Mark Carney, urging him “to stop greenwashing financial institutions that continue to invest in expanding fossil fuel infrastructure.” These people need to understand that it takes time to dispense with fossil fuels in favour of green alternatives. Sadly, it cannot be done overnight. I was not a great fan of Mr Carney’s stewardship as Governor of the Bank of England, but I think he is giving it his best shot at the unenviable task has been charged with.

Intel CEO Pat Gelsinger has told the BBC that the company is no longer considering building a chipmaking factory in the UK, following its exit from the EU. The company, one of the world's largest semiconductor manufacturers, is currently pushing to boost its own chipmaking output amid a global shortage. It is disappointing news. 20 years ago, it would have been considered catastrophic, as Intel, as a chip manufacturer, was in a league of its own. However, today the Far East, especially Taiwan and Korea are equally effective, together with our own ARM holdings in Cambridge, Lam Research, Nvidia and Texas Instruments from the US and many others. I could mention ST Micro, the Franco/Italian operator, but their sympathies towards the UK are likely to be very limited.  Boeing seems to be awakening from its recent setbacks in the race for green aviation supremacy, giving Airbus a decent run for its money. In a troubled week for investors, it was reassuring to see Levi Strauss, Constellation Brands and PepsiCo post good earnings.

CDR completed the purchase of Wm Morrison for £7 billion, with Sir Terry Leahy, no doubt playing an influential role in the deal. His relationship with Dave Potts, a protégé of his at Tesco, will have helped. This deal has led to much speculation over the future of Tesco and Sainsbury’s. Could they come under the hammer of private equity? Tesco’s market capital is £19.5 billion, which suggests it might just be too large even for a joint effort from the US.  Year to date Sainsbury’s share price is up 30% and Tesco’s by 12%.

Greggs posted decent earnings with sales for the past quarter up by 3.5%. Greggs has opened 68 new outlets this year and hope to reach 100 for the year. The short order food titan has 2100 outlets and has set a goal of 3000 in the next 5 years. Shares are up 68% since the start of the year. French Connection’s Simon Marks has sold his emporiums to Apinder Singh Ghura for £29 million – a 30% premium on the current share price. Tui Travel put up a green light for its operations in 2022. Sales are currently more than 50% above pre-covid levels. Tui recently asked its shareholders for a €1.1 billion rights issue.

80-year-old singing supremo Tina Turner has sold the rights to her catalogue of music to BMG for £225 million. UK tech firm Blue Prism has defended its £1.1 billion takeover by US Private equity Coast Capital against accusations of conflict of interest by some members of the board. Imperial Brands, the owners of Rizla and Davidoff, under Stefan Bomhard’s guidance, has improved its outlook for earnings, after a few torrid years. The development and sale of NGP (Vapour) products is going well. Lord Wolfson, the enormously successful  CEO of NEXT, felt obliged to step into the breach and tell the government that overseas-workers were essential at this time to see the retail and entertainment sectors through the next few troubled months.

NatWest has incurred the wrath and indignation over a money laundering failing of one of its clients in Bradford. Fowler Oldfield are alleged to have laundered £365m through its account, when only £15 million was meant to cross the account at any one given time. Of the £365 million, £264 million was CASH. How that got through the bank’s audit and regulators is beyond comprehension. This fraud took place between 2012 and 2016. The last UK bank to be charged with an offense of this nature was HSBC in 2012 in the US. A fine of $1.9 billion was paid. NatWest’s fine is thought to be about £300 million.

Comcast announced the arrival of its new 4k UltraHD smart TV set, which will replace all satellite dishes and encompass services from Netflix, Disney, Amazon, Spotify, ITV Hub and Peloton. Burger King UK is heading for a £600 million IPO in the weeks to come. It has 530 sites, 400 of which are operated under franchise. Like other food emporiums it was adversely affected by Covid 19, but the recovery of this and other similar operations look very promising.

An investment group led by the Public Investment Fund, and further parties, comprising of PCP Capital Partners and RB Sports & Media, has completed the acquisition of 100% of Newcastle United Limited and Newcastle United Football Club Limited from St. James Holdings Limited for a consideration of circa £300 million. This deal is highly controversial in the wake of adverse political issues such as human rights issues in Saudi Arabia.

Next week promises to be equally captivating as last week, as the 3rd quarter earnings season in the US, ‘gets under a wet sail.’

UK Companies posting earnings this week – Tuesday – YouGov, French Connection, Entain, Wednesday – Marston’s, Go-Ahead, Thursday – Dunelm, ASOS, Hays, Norcross, Petrofac, Domino Pizza, Friday - Rio

US companies posting interim results this week – Wednesday – Delta Airlines, Blackrock, JP Morgan Chase, Charles Schwab, Thursday – Alcoa, Walgreen, Boots Alliance, Bank of America Merrill Lynch, US Bancorp, Citigroup, Wells Fargo, UnitedHealth, Morgan Stanley, Friday – Goldman Sachs, Honeywell

Economic data to be posted this week – Tuesday – UK Retail Sales, UK Employment Data, Germany ZEW, Wednesday – UK Manufacturing and Industrial Production, UK GDP, UK Balance of Trade, US MBA Mortgage Applications, Thursday – US Initial Jobless Claims, US PPI, Friday – UK RICS Housing Index, EU Balance of Trade, US Retail Sales, US Import & Export indices, US Business Inventories, US University of Michigan Consumer Confidence.

Sources – FT, Times, Sunday Times, Telegraph, Sunday Telegraph, Daily Mail, Mail on Sunday, Guardian, Observer, Bloomberg, CNBC, BBC, Yahoo Finance, Reuters