WEEKLY FAYRE – Monday, 12th July 2021

July 12, 2021

“Once more unto the breach, dear friends, once more;

Or close the wall up with our English dead.

In peace there's nothing so becomes a man

As modest stillness and humility:

But when the blast of war blows in our ears,

Then imitate the action of the tiger;

Stiffen the sinews, summon up the blood,

Disguise fair nature with hard-favour'd rage;

Then lend the eye a terrible aspect;

Let pry through the portage of the head

Like the brass cannon; let the brow o'erwhelm it

As fearfully as doth a galled rock

O'erhang and jutty his confounded base,

Swill'd with the wild and wasteful ocean.

Now set the teeth and stretch the nostril wide,

Hold hard the breath and bend up every spirit

To his full height. On, on, you noblest English.

Whose blood is fet from fathers of war-proof!

Fathers that, like so many Alexanders,

Have in these parts from morn till even fought

And sheathed their swords for lack of argument:

Dishonour not your mothers; now attest

That those whom you call'd fathers did beget you.

Be copy now to men of grosser blood,

And teach them how to war. And you, good yeoman,

Whose limbs were made in England, show us here

The mettle of your pasture; let us swear

That you are worth your breeding; which I doubt not;

For there is none of you so mean and base,

That hath not noble lustre in your eyes.

I see you stand like greyhounds in the slips,

Straining upon the start. The game's afoot:

Follow your spirit, and upon this charge

Cry 'God for Harry, England, and Saint George!'

 

 

William Shakespeare – poet & playwright – 1564-1616

 

It always was going to threaten to be a brilliant week’s sport and I wish I could have started my comments with great news on Euro2020. However, it was not to be! Italy beat England in Euro2020 at Wembley last night, thanks to a disastrous outcome to the penalty shoot-out. The game finished 1-1 at full and extra time. It is wrong to criticise, but 3 players with no or little game time last night were given the responsibility of taking penalties. That was a real gamble! That is life, I am afraid. Congratulations Italy! Very well played England - a privilege to watch them in this tournament! However, oh dear, the hurt remains!

England went two up in the ODI series against Pakistan to win the three-match series in an all but full Lord’s last Saturday. This depleted England side, captained by Ben Stokes was no second X1 and they competed in every aspect of the game. They played some great cricket, and it was wonderful to be back at Headquarters.

Novak Djokovic won his 6th Wimbledon Championship, beating Matteo Berrettini in four tightly fought sets, taking his Grand Slam total to 20, equalling the achievements of Federer and Nadal. Ashleigh Barty proved to be a worthy Ladies Wimbledon champion. The Lions beat the Sharks 71-31 in their fourth warm up game ahead of the test series, which will start in Capetown on the 24th of July 2021.

 

INDEX

5th July 2021

9th July 2021

% Loss/Gain

FTSE

7123

7121

-0.003

DAX

15628

15674

+0.29%

CAC40

6545

6521

-0.39%

DJIA

34642

34870

+0.66%

S&P 500

4326

4369

+0.99%

NASDAQ

14582

14701

+0.82%

SHANGHAI

3516

3524

+0.23%

HANG SENG

28098

27344

-2.68%

NIKKEI 225

28709

27940

-2.68%

 

By the middle of last week equity market protagonists seemed determined in their quest to take some cream off the top of the major global indices. Why? The two buzz words for the week were inflation and Covid-19 and there appeared to be plenty of evidence that both were starting to become rampant – the former across the spectrum and the latter in the far-east. Japan has consummately failed to get on top of its vaccination programme, which has meant its government has been forced to host the Olympic games, which have cost an Emperor’s ransom, ‘behind locked-doors.’ This is a major, if temporary, blow to its economy. The Hang Seng’s major tech stocks have also been adversely affected by China’s regulatory intervention, which has seen stocks tumble in Hong Kong for eight consecutive sessions. Tech stocks in the region are now at a nine month ‘low,’  Signs of potential monetary easing have failed to lift market sentiment for now.

As for the Street of Dreams, apart from a few hiccups along the way, investors were having ‘none of it’, as the S&P 500 and the NASDAQ continued to post new records. The FOMC minutes from their most recent meeting talked about tapering asset purchases (circa $120 billion), but also expressed the need for patience. Some members noted the faster progress of the economic recovery, though the committee overall felt conditions have not met the “substantial further progress ” benchmark to start tightening policy. Initial jobless claims for unemployment insurance unexpectedly rose last week, a possible hint that the rapid job growth seen in the first half of 2021 could face hurdles. First-time jobless claims totalled 373,000 for the week ended July 3, compared with general estimates of 350,000.

Here in Old Blighty house prices, according to the Halifax Building Society,were 8.8% higher in June 2021, than the same month a year earlier. However, it is thought that now that the stamp duty holiday has ended, prices could start to dip. UK GDP numbers for May 2021 were significant to market watchers. They were slightly disappointing. GDP was up 0.8% in May, against expectations of +1.5%, but was still 3.1% below pre-pandemic levels. According to the celebrated economist, Andrew Sentence, ‘the economy attempted to rebound following easing of restrictions to the hospitality sector in mid-May. It is thought that the country should start to see the full benefit from that easing in June’s figures. Manufacturing output slipped back due to chip shortages.’ Though the Euro 2020 experience will have done wonders for the morale of the people of this country, the value to its economy, will only become momentous if all the Covid-19 restrictions are removed in July and August. If that transpires, the economy could receive a real fillip, with an inevitable spending spree. The substantive figure for me was the year-on-year services sector number - +23.4%, when the estimates was +4.2%.

On the UK industrial front there was good news from Nissan and from Stellantis. Nissan, with government assistance, will be committing £1 billion in building a Gigafactory to complement the manufacture of electric cars in Sunderland, which could create 5,000 jobs. Subsequently, news from Ellesmere port that Stellantis’s factory will make electric vans, which guarantees the workforce’s continued employment and possibly creating 1,000 new jobs. This is part of Stellantis’s €30 billion investment programme for electric cars for all its models including Peugeot, Audi, Fiat and Vauxhall. It was also interesting to note that the ‘Tesla 3’ was the most popular model sold in the UK in June, according to the SMMT. Overall sales in June were 27% lower than normal at 186,128, thanks in the main to a global chip shortage and not BREXIT, as some would have us believe. Sir Jim Ratcliffe’s INEOS factory in Marseille is due to start production of the Grenadier in 2022. Models will cost between £30k and £45k.

Markets in the US kept their poise last week with the S&P 500 and NASDAQ hitting fresh heights. However, concern was expressed over fears that regulatory scrutiny on Chinese tech companies is growing again. The Chinese authorities ordered app stores to remove its Didi app for download — days after the Chinese company launched its IPO in the U.S. Didi is China’s answer to Uber and its shares fell 14% on its first week of trading. This coming week 3rd quarter earnings start in earnest with the banking sector taking pride of place.

On the earnings front in the UK, J Sainsbury posted a trading update for Q1. Like for like sales were up 1.6% and 11.8% over the past two years. Clothing was up and Argos, after a cost cutting exercise, has continued to contribute measurably. Sainsbury expects to make a profit of £660m to March 2022. Ocado saw half year revenues up by 21.4% to £1.32 billion. Its fresh association with M&S progresses well and deals with Kroger and Casino are proving constructive. Spain’s Alcampo will shortly be added to the portfolio. Still no sign of profits as Ocado continues to invest in technology. The loss has been paired down from £40.6 million to £23.6 million. Active customers are up 22% to 777,000. CEO Tim Steiner must not try his shareholders’ patience for much longer. Deliveroo, after a poor IPO, which saw its shares collapse from 390p to 234p, posted an upbeat trading statement, Gross transaction value grew 76% in the 2nd quarter to £921m with overseas growth up 65% to £818m. Deliveroo’s share price has recovered some poise in recent weeks to 307.5p. Entain, better known as Corals, Ladbrokes and PartyPoker saw total revenues up 11%, with on-line revenues up 37%. Much of this increase is due to a joint venture with MGM in the US. Entain/MGM have 21% of the US betting market turnover. Entain had rejected an $11 billion bid from MGM, but the relationship remains strong. Entain shares have rallied by 125% in the last year. Persimmon, the UK’s largest housebuilder continues to make good progress with revenues for the last quarter increasing from £1.19 billion in 2020 to £1.82 billion in 2022. Shares are up 26% in that period.

Wise, formerly known as TransferWise, enjoyed a highly successful £8 billion IPO in London last week – UK’s largest IPO this year. Wise allows people to exchange currency using a peer-to-peer model, significantly cheaper than banks. This IPO was a direct float with no new shares being issue. Shares were floated at 800p and closed up 25p on the first day of trading. The operation is profitable with £21.3 million being made last year. JP Morgan and HSBC were the financial advisers.

WH Smith has bought Dixons 35 travel shops for about £20 million, which provides employment for about 400 staff. These shops with be in many of the 18 UK airports. Turnover was down 90% in 2020. Reservations have been expressed over Fortress and associates £6.3 billion takeover of Wm Morrison plus debt of £3.2 billion. Ministers and politicians want reassurances that the business has not been bought for asset stripping purposes. Morrison is supplied by 2,700 farms. It has 450 stores, 3 abattoirs, 3 fish factories, a bakery, and an egg factory. There are requirements that this operation will remain intact. If this deal is consummated, three directors are likely to take £35 million out of the ring, including Dave Potts who stands to make £19.6 million.

News that Philip Morris had trumped Carlyle’s 150p a share bid for Vectura, the maker of inhalers for respiratory diseases valued at £923 million, has triggered outcries of hypocrisy. With smoking declining in popularity companies such as Philip Morris have been looking to diversify.

UK companies posting interim results this week – Monday – Photo-Me, Dechra Pharmaceuticals, Tuesday – Kier Group, Wednesday – PageGroup, Dunelm, Ashmore, Barratt Development, Thursday – Costain, Experian, Galliford Try, Hays, Johnson Services, Friday – Burberry, Rio Tinto

US companies posting interim results this week – Tuesday – Conagra, JP Morgan Chase, Goldman Sachs, PepsiCo, Wednesday – Bank of America, Delta Airlines, Charles Schwab, Wells Fargo, PNC Financial, Thursday – Alcoa, Bank of New York Mellon, US Bancorp, UnitedHealth, Morgan Stanley, Friday – State Street

Economic data to be posted this coming week – Tuesday - US Consumer Confidence, US Retail sales, UK Retail sales, Wednesday – UK Inflation (PPI, CPI, RPI), EU Industrial Production, US MBA Mortgage Applications, US Crude Oil Inventories, Thursday – UK Unemployment, US Imports & Exports, US Phili-Fed Index, US Industrial Production, US PPI, Friday – EU Balance of Trade, US University of Michigan Consumer Confidence