WEEKLY FAYRE – Monday, 13th July 2020

July 13, 2020

A thing of beauty is a joy for ever:

Its loveliness increases; it will never

Pass into nothingness; but still will keep

A bower quiet for us, and a sleep

Full of sweet dreams, and health, and quiet breathing.

Therefore, on every morrow, are we wreathing

A flowery band to bind us to the earth,

Spite of despondence, of the inhuman dearth

Of noble natures, of the gloomy days,

Of all the unhealthy and o'er-darkened ways

Made for our searching: yes, in spite of all,

Some shape of beauty moves away the pall

From our dark spirits. Such the sun, the moon,

Trees old and young, sprouting a shady boon

For simple sheep; and such are daffodils

With the green world they live in; and clear rills

That for themselves a cooling covert make

'Gainst the hot season; the mid forest brake,

Rich with a sprinkling of fair musk-rose blooms:

And such too is the grandeur of the dooms

We have imagined for the mighty dead;

All lovely tales that we have heard or read:

An endless fountain of immortal drink,

Pouring unto us from the heaven's brink.”


John Keats – poet – 1795-1821


So many cricket enthusiasts were delighted to see a test match back on television last week. However, few expected a deserved West Indies win by 4 wickets at the Rose Bowl in Southampton behind locked doors. Stand-in-Captain and talisman Ben Stokes surprised many by choosing to bat in ‘bowler friendly’ conditions and nor did England followers expect Stuart Broad to be left out of the bowling line-up in those conditions. West Indies were worthy winners of this tightly fought contest but let us hope Broad is picked next week. The return of Root in favour of the luckless Denly will help bolster the batting. Buttler must surely be in the ‘last chance saloon’ at Old Trafford. He must make some runs!



6th July 2020

10th July 2020

% Profit/Loss

















S&P 500




















Looking at the table above gives the reader little information, as to the complex machinations of last week’s activity. Dealing with China in isolation, one could be forgiven for thinking that investors in Chinese equities are in a position to feel that the extensive and venal damage done to the world’s economy is over for the second largest economy in the world. From here on in for China, it was onwards and upwards. Since Monday 29th June to Thursday 9th July 2020 the Shanghai Composite had gained 16%, before surrendering 2% last Friday. China, politically and economically, has always been a law unto itself. Over the past 20 years the Shanghai Composite has been exceptionally volatile and if, as an investor, you are caught at the wrong end of a cycle, it can be extremely costly, as Fidelity’s greatly respected Anthony Bolton proved to his cost, between 2007/10. Many international investors may have been watching this recent staggering rally from the side lines, but rest assured Chinese investors seemed very committed. Evidence of investment frenzy was endorsed last Thursday, when shares in a Chinese tech company soared 924% during the trading debut of Quantum CTek. Its stock price rose more than tenfold, boosting its market capitalization to $4.2 billion.

The rest of the world was rather more circumspect. Europe felt there was little for its stock market luminaries to crow about. There were signs that the German economy was coming back to life, but there appeared to be a lack of super confidence anywhere. When are planes going to fly in earnest? When are people going to head for the bars and restaurants and go on holiday? Is confidence in short supply? 

Last Wednesday, UK Chancellor Sunak presented his summer economic statement, with further adjustments being made to ‘open up’ the economy. Impressive though his presentation was, who knows if it is enough and questions as to how the UK is going to pay for it were largely unanswered, This is an on-going saga, involving the writing of debt to the tune of £500 billion over the next few years, which, with interest rates where the currently are (almost zero), appears to have been the right action to have taken. However, how long can increases in taxation be postponed? Most observers are of the opinion that the Chancellor will be obliged to increase the level of help, if urgently required to stimulate the UK economy back to health.  

Borrowing held few fears for Dr Gerard Lyons, the distinguished economist, writing in the Spectator. He recommended a ‘3 arrow’ approach for rebuilding the economy. As he put it - ‘These arrows must hit the bullseye!’  The first arrow should be credible fiscal activism, reducing the ratio of debt to GDP gradually over time, including the possible implementation of tax cuts down the line. The Second ‘arrow’ should concern a greater balance between monetary and fiscal policy. Finally, the third arrow should involve supply-side measures, including incentivising the private sector to invest, innovate and grow. Due to lack of space I have ‘precis’ what is a fascinating and interesting article. 

The US has all but set the investment agenda for mature markets. The ‘raging bulls’ have been involved in a ‘battle royal’ with science and medicine over the past week in the wake of nasty covid19 spikes all over the US with 60,000 cases being reported on three daily occasions, taking the total to 3 million. The stench of fear prevails. Covid19 refuses to take its leave. The longer it holds court around the world, the longer it will take the global economy to improve. Finding a vaccine to bring the horrors of this pandemic to a close is seen as fundamental. News that Novavax’s share price had rallied by 41% early in the week and that the US government was backing a relatively unknown company – ApiJect - to distribute a credible vaccine was acknowledged as relatively positive.  

Investors in the large cap NASDAQ stocks remain delirious over the gains they have made since the beginning of the year – Amazon (+50%), Netflix +58%), Microsoft (+30%), Zoom (200%+) and the same for Tesla (almost 300%!). It is astonishing to relate that since the ‘market low’ on the 23rdMarch 2020, the NASDAQ has rallied by 54%. Many of the constituent stocks appear to be immune from the vagaries of this pandemic, which will create unemployment levels not seen since the 1980s and probably the 1930s!

Through last week there was a wave of dispiriting corporate news, mainly concerning redundancies and unemployment across the global spectrum. The list was endless, and this update will limit itself mainly to news in the UK, with passing comment on the US. Walgreen Boots are to let 4000 people go with the closure of 48 ‘optician outlets.’ John Lewis, after a painstaking review under its new chairman Dame Sharon White, is to make about 1300 staff redundant and will be closing 8 stores, including one of its flagship stores in Birmingham near New Street Station. Burger King, which has 530 stores in the UK is to close 50 of them, leaving potentially 1600 people without work.

Reach the owners of the Express and Mirror newspapers have struggled financially to keep their head above water, resulting the possible loss of 550 jobs. To pour salt into the wound, Pret a Manger’s presence in the high street will diminish, with 30 outlets closing with the loss of 1000 jobs. With fewer people traveling to work on a daily basis, the demand for fresh sandwiches, salads and beverages has fallen off a cliff. H&M, the successful Swedish retail chain will be forced to close 170 outlets throughout Europe. Rolls Royce posted an unappetising trading statement on Thursday. Its aircraft had seen a 50% fall in flying hours in the first quarter and a 75% decline in the second quarter. Servicing as well as manufacturing engines is the life blood of Rolls Royce. CEO Warren East is expected to start the redundancy process of up to 9000 people before too long – many of them in Derby. The past six months has thought to have cost RR £3 billion. Many think RR may need government help.

In the US, Brooks Brothers, one of its oldest retailers and outfitters have been struggling with so many consumers not requiring formal apparel, have headed for Chapter 11. It currently has 300 shops across the US and employs 4000 people. Levi Strauss, which went public last year with a price tag of $6.5 billion is to let 700 employees go, due to a 62% drop in sales in the last quarter. Through all this unemployment carnage there was a glimmer of hope provided by Halfords. Despite sales being down 6.5% in the last quarter, the outlook appears bright for bicycles.

The respect that Boohoo has enjoyed from the retail sector fell from grace last week, with its shares falling 42% in the early part of the week, due to news breaking that in factories where their apparel is made, wages, as low as £3.50 an hour, were being paid. The minimum wage is £8.92. They lost the patronage of Next, Asos and Zalando, whether temporarily remains to be seen. Boohoo does not own the factories. However, Boohoo made restitution of supposedly £10 million resulting in the shares bouncing back by 27%. It remains to be seen if their brand has been damaged. The CEO of Royal Dutch Shell, Ben Van Buerden indicated that making this oil titan’s head office in London was being given earnest consideration. Aviva have replaced CEO Maurice Tulloch, who is leaving for family reasons, with Amanda Blanc. Expect a shakeup of its insurance and fund management operations.

INEOS owner, Sir Jim Ratcliffe is considering having his 4x4 Grenadier manufactured in Moselle in France rather than in Bridgend, where 500 new jobs would have been created. He may be a tax-exile, residing in Monaco, saving himself billions, but he should think again about France, where the employment laws are draconian, in comparison to the UK. Top UK accountants had a bad week with Deloitte’s likely to be fined £15 million for poor accounting procedures on Autonomy, which was sold to HWP for $10.2 billion in 2010.  Former Autonomy CEO Mike Lynch is wanted in the US to answer fraud charges and is fighting extradition.

Lloyds Banking Group will have a new chairman next year – Robin Budenberg, a former investment banker and head of UK Investments at the time of the banking crisis. The ‘Black Horse’ will also have a new CEO next year. A replacement for Antonio Horta Osorio is being urgently sought. William Chalmers the FD and J-P Mustier of UniCredit are amongst those being considered.

Sir Richard Branson looks as though he has helped cobble together a £1 billion rescue deal for Virgin Atlantic. He may be able to release £200 million from credit card ace First Data, which will bring in hedge fund Davidson Kempner Capital Management to pump in another £200 million. Sir Richard and Delta Airlines will maintain their 51% and 49% respective share holdings.

The 2nd quarter earnings seasons starts in earnest on Monday, beginning with the main US banks. Earnings for this quarter are expected to be down 44% in the US and as much as 60% in Europe. It is the outlook that investors will be concentrating on.

UK companies posting interim results this week – Monday – Dignity, Bodycote, Tuesday – AO World, Ocado, Halma, McBride, Wednesday – McCarthy & Stone, Dixons Carphone, Burberry, Thursday – Hays, SSE 

US companies posting earnings this week – Monday – PepsiCo, Tuesday – JP Morgan Chase, Delta Airlines, Citigroup, Barnes & Noble, Wells Fargo, Wednesday – Bank of New York Mellon, UnitedHealth, Goldman Sachs, Alcoa, Thursday – Morgan Stanley, Johnson & Johnson, Bank of America Merrill, Abbott Labs, Netflix

Economic data to be posted this coming week – Monday – BoE Governor Andrew Bailey Speech, US Consumer Inflation, Tuesday – UK manufacturing, Industrial Production and Construction, UK Balance of Trade, UK 2nd Quarter GDP (-24.5%, May 20.4%), US Inflation, Wednesday – UK Inflation, PPI, RPI, US MBA Mortgage Applications, US exports & Imports, US manufacturing, Industrial Production and Construction, Thursday – UK Unemployment rate, US retail Sales, US Initial Jobless Claims, Friday – US Housing starts, US Michigan Consumer Confidence