WEEKLY FAYRE – Monday, 13th September 2021

September 13, 2021

In Memory of those who perished in the World Trade Center, from a barbaric act of terrorism, on 11th September 2001

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With proud thanksgiving, a mother for her children,

England mourns for her dead across the sea.

Flesh of her flesh they were, spirit of her spirit,

Fallen in the cause of the free.

 

Solemn the drums thrill; Death august and royal

Sings sorrow up into immortal spheres,

There is music in the midst of desolation

And a glory that shines upon our tears.

 

They went with songs to the battle, they were young,

Straight of limb, true of eye, steady and aglow.

They were staunch to the end against odds uncounted;

They fell with their faces to the foe.

 

They shall grow not old, as we that are left grow old:

Age shall not weary them, nor the years condemn.

At the going down of the sun and in the morning

We will remember them.

 

They mingle not with their laughing comrades again;

They sit no more at familiar tables of home;

They have no lot in our labour of the day-time;

They sleep beyond England's foam.

 

But where our desires are and our hopes profound,

Felt as a well-spring that is hidden from sight,

To the innermost heart of their own land they are known

As the stars are known to the Night;

 

As the stars that shall be bright when we are dust,

Moving in marches upon the heavenly plain;

As the stars that are starry in the time of our darkness,

To the end, to the end, they remain.”

 

Laurence Binyon – poet – 1869-1943
 

When it comes to commenting on sport this week, there can only be one subject – tennis and Emma Raducanu’s meteoric rise up the rankings to win the US Open at Flushing Meadows. She beat Leylah Fernandez 6-4, 6-3 in a match of such grace and power. It is hard to believe these two ladies are still in their teens. This is unprecedented from a qualifier and Emma is the UK’s first ladies open finalist in 44 years. She has played 10 matches in New York to win Sunday’s final. Her talent is breath-taking, her smile captivating and her modesty being the icing on the cake.

Any talk this week of F1, the Premiership, the St Leger or the cancelled 5th Test match at Old Trafford should be considered as ‘spear-carrying’ ancillary events in the wake of this super-star-in-the-making’s achievement. Thank you, Emma, for bringing such happiness to millions of people who temporarily have had little to smile about!

 

INDEX

6th September 2021

10th September 2021

% Loss/Gain

FTSE

7138

7029

-1.53%

DAX

15818

15609

-1.32%

CAC40

6704

6663

-0.61%

DJIA

35401

34607

-2.24%

S&P 500

4532

4458

-1.63%

NASDAQ

15313

15115

-1.29%

SHANGHAI

3580

3703

+3.43%

HANG SENG

25827

26205

+1.47%

NIKKEI 225

29501

30381

+2.99%

 

As can be seen from the table above, the fortunes of global equities last week produced mixed results. A perception that most global markets were starting to look a bit frothy was gathering momentum, especially in the US, with the DJIA falling on four consecutive sessions; admittedly not prodigiously. Nonetheless, markets lost momentum too abruptly for my tastes. There is no doubt that the ‘delta variant’ has not ‘come back on the bridle’ in the US and the FED continues to worry about jobs, after the sharp fall in non-farm payrolls last Friday week – just 235,000 jobs created in August. Add fears of inflation and the supply chain ‘bottle neck’ to this agenda and it is understandable that investors’ confidence has been rattled. However, Thursday’s US Initial Jobless Claims offered a little solace with only 305,ooo seeking benefits last week – the lowest number since the pandemic began.

Some more austere analysts think there could be a severe contraction on the value of most global indices – 10-15%. Anything is possible, but whilst Central banks are reluctant to taper QE aggressively, let alone raise interest rates, many believe any pullback might be limited. The moment the Central banks reverse these strongly held views, it might be folly not to have one’s tin hat in touching distance.

ECB President Mme Christine Lagarde is generally known to be late to the party. Her comments from Thursday’s meeting stated that the Eurozone inflation notched a decade high of 3% in August and that GDP across the 19-member common currency bloc climbed 2% in the second quarter, exceeding economist expectations. The ECB agreed to set a moderately lower pace of net asset purchases under the (PEPP) than in the previous two quarters, but Mme Lagarde refused to accept it was akin to tapering QE.

Bank of England Governor, Andrew Bailey, in an interview with the Treasury Select Committee last Wednesday, indicated that growth was flattening out thanks to a few idiosyncrasies such as a spike in inflation, the dreaded supply chain choking and the bumps in the road for employment in the future. He felt that inflation would eventually iron itself out. That remains to be seen. The UK GDP data posted on Thursday was decent but below expectations for July – +7.5% (Y/O/Y) as against EST of +8%, +0.1% M/O/M against EST: +0.6% and +3.6% 3m/O/3m against EST: +3.8%. New car sales lagged in the UK through August again with registrations down 22% as chip shortages caused delays.

The imposition of two fresh levies by the Johnson administration of 1.25% on NI and a similar percentage on dividends, which is expected to raise £36 billion over three years to bolster the NHS and pay for social care, has attracted many critics. Firstly, it comes a year too early. Secondly many feel that this taxation is a smokescreen to bolster the needs of the NHS aggressively and finally it could cost 130,000 jobs, as employers will be reluctant to hire more staff.

I attended a very interesting and enjoyable investment symposium hosted by Waverton last week. There were two subjects which captured my imagination. Firstly, the outflow of investment funds from UK markets since June 2016 was very marked, as a lack of confidence in BREXIT gathered pace. Between £2 billion to £5 billion left the UK each year until 2021. This year the haemorrhaging has all but stopped. Global investors seem convinced that the UK offers opportunities. Clearly private equity is more than convinced. There is no doubt that debt is a much cheaper way of investing in companies than raising capital through equity. It is interesting to note that there have been 61 IPOS since the beginning of the year with many more in the pipeline, including Oxford Nanopore, which is expected to be floated on the LSE, valuing the operation between £2.5 and £4 billion.

Then the subject of ESG investments also came up – better known as ethical investment or to people like me as ‘WOKE’ investing. It does not matter what I think, as ESG investing is here to stay in spades. My problem is that by adopting this style of investment policy, the shareholder, who frankly puts up the money, gets scant, if any consideration.

On the M&A and IPO front there appears to still be plenty of momentum. Clayton, Dubilier & Ryan, and Fortress are still scrapping for Morrison’s hand in marriage, and we understand that regulatory approval having been granted, the deal is to go to auction, with a shareholder vote in October. Engineers, Smiths Group, having originally agreed to sell their medical operation to TA Associates for $2.3 billion, will now sell this division to ICU Medical of California for $2.7 billion. There will be a London listing for Goldman Sachs’s investment vehicle Petershill, conceivably valuing the operation at £3.6 billion. 888 Holdings looks ‘nailed-on’ to land William Hill’s European betting operations, which include 1,400 UK betting shops for £1.5 billion. The entire William Hill operation was bought by Caesar’s Entertainment in a £2.9 billion takeover in September 2020. Caesar’s wanted Hill’s US betting footprint. Sir Martin Sorrell’s S4 Capital continues to expand. It has bought Cashmere, its 25th acquisition since 2018 for circa $50 million.

There have also been a few disappointments along the way in the corporate arena. EasyJet has rejected overtures to be taken over from another airline, thought to be Wizzair. This enquiry has been rejected out of hand and the CEO Johan Lundgren is seeking a £1.2 billion rights issue from shareholders to bolster its balance sheet. EasyJet’s shares eased by 11% on Thursday. It looks very likely that the EU will attempt to block Nvidia’s takeover of ARM holdings from Softbank due to supply concerns. TransDigm has pulled out of takeover talks for Meggitt, the defence titan and its shares subsequently fell by 11%.

Lloyds of London, having posted a loss of £400 million last year, announced a profit of £1.4 billion for this year, despite the claims made for Hurricane Ida proving costly. On the corporate earnings front, B&M, which now has over 600 units expected to increase its profits from £235m to £280m for the 6 months to the end of September. Dunelm posted stellar numbers with profits rising 45% in the last trading period, resulting in an 11% bounce in its share price. Halfords continued to make steady progress in the first 22 weeks of the year and its shares are up 34% year to date. Ted Baker saw a marked improvement in its fortunes with retail sales up 30% in the sixteen weeks to 14th August, but sales remain below pre-pandemic levels. Wm Morrison posted a 37% drop in profits for the first half of the year to £105 million, due to pandemic issues ,but revenues, including fuel, were up 3.7% to £9.05 billion.

Ikea is to open a flagship store in Oxford Street, previously used by Topshop. It has paid an estimated £385 million for the privilege. Amazon paid a marginally increased level of taxation of £492 million last year on eye-watering revenues of £20.63 billion. Amazon has increased its number of employees in the UK by 10,000 to 55,000. Causeway Capital of the US having muscled in on Rolls Royce’s affairs, has also built up a 9% stake in WH Smith, whose shops have suffered severely during the pandemic. We await developments.

UK Companies posting earnings this week – Monday – Abcam, S4 Capital, Maxcyte, AB Foods, Tuesday – EKF Diagnostics, MJ Gleeson, JD Sports, Vectura, NCC Group, Petra Diamonds, Portmeirion, Wednesday – Darktrace, Fever tree, Redrow, Restaurant Group, Tullow Oil, Pendragon, Thursday – Ashtead Group, Galliford Try, Hilton Foods, Kier Group, The Hut Group, Friday – Auto Trader, Baillie Gifford

US companies posting interim results this week – Monday - Oracle, Friday – Manchester United

Economic data to be posted this week – Tuesday – UK employment data, US CPI Index, Wednesday – UK inflation, EU Industrial Production, US MBA Mortgage Applications, US Imports & Exports, US Industrial Production, US Crude Oil Inventories, Thursday – EU Balance of Trade, US Initial Jobless Claims, US Retail Sales, US Business Inventories, Friday – UK Retail Sales, US University of Michigan Consumer Confidence