WEEKLY FAYRE – Monday 18th May 2020

May 18, 2020

Earth has not anything to show more fair:

Dull would he be of soul who could pass by

A sight so touching in its majesty:

This City now doth, like a garment, wear

The beauty of the morning; silent, bare,

Ships, towers, domes, theatres, and temples lie

Open unto the fields, and to the sky;

All bright and glittering in the smokeless air.

Never did sun more beautifully steep

In his first splendour, valley, rock, or hill;

Ne'er saw I, never felt, a calm so deep!

The river glideth at his own sweet will:

Dear God! the very houses seem asleep;

And all that mighty heart is lying still!”


William Wordsworth – poet & author – 170--1850


‘Blondemoney’, last week posted its alarming report on the state of sport in the UK, especially our national gamesfootball and cricket, due to the coronavirus pandemic. Let us hope these cries from the wilderness do not fall on Government deaf ears. The Culture and Sports Secretary of State, Oliver Dowden MP is a sympathetic supporter; So, here is hoping!

A majority (47 out of 71) of English Football League clubs posted an operating loss this season in their most recent accounts and six clubs are in serious financial trouble, according to the latest ‘Begbies Traynor Football Distress Index’, including established clubs such as Oldham Athletic and Notts County, the world’s oldest professional club. English Football League clubs, on average, rely on gate receipts and TV income for more than two-thirds (69%) of their revenue. 

County Cricket clubs are less reliant on matchday income than other sports due to a grant from the ECB. The average county club takes 12% of revenue from gate receipts and a further 24% from commercial, catering and hospitality. This means that just over a third of income is at risk from a prolonged lockdown. Of those clubs for which accounts are available, 50% posted an operating loss in their most recent accounts. 

Unsurprisingly, other major sports are also suffering. What a joy it was to watch live horse racing on TV from Longchamps last week. Though I am no student of the French flat form, the return of live sport was a real tonic. Racing acolytes will be thrilled that Royal Ascot will be televised behind lock doors – 16th-20th June 2020 - and that the classics will be run, even though they will take place 6 weeks after they normally grace Newmarket’ Rowley Mile and the Epsom Downs.



11th May 2020

15th May 2020

% profit/Loss

FTSE 100
















S&P 500

























From the moment global stock markets decided that coronavirus was going to be an international crisis on 15thFebruary 2020, there was little doubt that derivative, futures and programme traders were going to play ‘matinee idol’ roles in unfolding this terrifying drama and so it proved to be, as they collectively, with fund managers following in their wake, took most of these equity markets down between 20% and 30% up until 23rd March. This sell-off manifested itself even though it took until 11th March for the WHO to declare this catastrophe a pandemic.

On the 23rd March it became increasingly clear that the Central banks, with the FED very much in the driving seat would then take over the ‘matinee idol’ roles in the second series of this highly charged drama with the derivative brigade only assuming ‘spear carrying’ walk-on parts; nonetheless still very effective and influential. The likes of JP Morgan, Goldman Sachs and Bill Ackman contributed important cameo appearances, encouraging investors to ‘get on this good thing’ – a horse racing analogy or euphemism for suggesting the market had bottomed out and had probably been oversold. There was also a feeling that the world knew it had to go back to work, sooner rather than later. The longer the global economy was left to fester, the longer it would take to recover.

Almost half the loss incurred in the 6 weeks since the start of the ‘melt-down’ has been regained. This is astonishing considering the toxic level of economic data, which is posted day after day. Last week it was employment, GDP, and retail sales data – all absolutely appalling right across Europe and the US in particular. GDP in the UK for the first quarter came in at -2%, with Germany at -2.2% - both numbers are historic; therefore irrelevant. Few believe that GDP in either country will be less than -20%, with unemployment coming in at no lower than 10% by the end of July. Retail sales in the UK were down 19.1% in April.  The economic climate is no better in the US. Thursday Initial Jobless claims make ghastly reading – very sad for a further 2.9 million who claimed benefits – that makes a total of 36 million in 8 weeks, which could lead to a 14% unemployment rate by the end of July 2020. Industrial production fell by 11.2% in April (cars down 70%), while retail sales fell like a stone – down 16.4% in the same month. Again 2nd quarter GDP in the US looks every bit as dire as the rest of the world – possibly down 20% as well.

Just when it might be logical to think that a further fall in equity values was inevitable, the FED’S Chairman Jay Powell pops his head above the parapet to tell us there is more in the locker, if required. Despite the gargantuan level of global debt – estimated at $260 trillion and heading North, we are led to believe, that with low interest rates likely to prevail for at least 3 years, selling debt and servicing it, is manageable. I have my doubts. Consequently, equity geeks refuse to lie down and keep battling on in the belief that Central banks will underpin markets. Hence Wall Street was happy to breathe some more life into banks on Friday with JP Morgan adding 4% and Citibank -2.8% on Friday. The other issue which could control the value of equities is the price of oil – WTI up from $11 a barrel tow weeks ago to $30 this morning. Many hope this will stimulate the airline and travel sector. With the US leading the charge on equities, it is as well to remember that Microsoft, Amazon, Apple, Alphabet and Facebook make up 38% of the NASDAQ. No other index can compete with that phenomenon. Finally, on this subject any increase in the level of retail activity would endorse any recovery. Frankly, no one is under any illusion, the key to a rapid recovery is a vaccine. The quicker one is found, the quicker the recovery.

Just to pour salt in the wound, this pandemic has forced the UK Government to increase its borrowing this year from an estimated £55 billion to £298 billion.  It is hard to believe that the huge level of global debt, mentioned above, can be sustained, and serviced, though distinguished economists such as Lord Mervyn King believe it is possible for governments to do so. One must surely worry about the banking sector with so many people likely to lose their jobs, with small businesses going to the wall, despite significant government help.

Last week was another ‘roller-coaster ride for equities, with most international bourses surrendering some value as the bears started to win the tussle with the bulls. Thanks to the Street of Dreams’ belligerence, investors refused to take their punishment, and their aggression paid some temporary dividends as the market rallied on Thursday and Friday. The ‘bulls’ are convinced that the FED is ‘King Kiddy!’, thus underpinning valuations up to a certain level.  Companies such as Netflix, which added 13million customers to generate $1.09 billion extra revenue. Zoom grew from 10 million users to 200 million and Amazon’s sales jumped 23% to $13.4 billion, provided some comfort to their thought process.

Lloyd's of London has said it expects coronavirus-related claims to cost the insurance titan £2.5bn to £3.5bn) – the worst level of claims since ‘9/11’. Several large UK companies posted numbers that were of interest, but observers cannot help thinking they might be irrelevant, when the next three months do not bode well for growth and sales. Intercontinental Hotels Group saw a 55% drop in occupancy for its hotels in April, though units are being opened in China. BT results were neutral, though its share price was bolstered by rumours that Openreach, thought to be worth £20 billion, may be sold off as a joint venture. Vodafone’s numbers were nothing to write home about but maintaining a 9p dividend was well received by the market. Wm Morrison posted a 5.7% increase in like-for-like sales – excellent in the current climate, but it might be folly to think that level of activity could be maintained. Tui Travel managed to get bail-out help from the German Government to the tune of €1.8 billion, but may have to let 8000 workers go, despite telling the market the outlook for 2021 was reasonable.

With BA letting 12000 jobs go and Ryanair replying with 3000 redundancies, Sir Richard Branson felt obliged to sell a $500 million stake in his Galactica enterprise to help save the future of Virgin Atlantic, which hung in the balance and may still not be 100% certain to survive. However, Sir Richard will be encouraged that the Telegraph believes that Elliott, the hedge fund is ruminating over taking a stake. Few fancy Sir Stelios’s chances of ousting the board of easyJet, despite his family’s 34% stake in the short-haul carrier.  There was potentially good news for Nissan’s operation in Sunderland. Renault, Nissan’s partner, may expand its car assembly operation in the North East as it threatens to close-down its operation in Barcelona, with some of its operation potentially heading for South Africa.

The Sunday Times informs us that the Government is considering a ‘Bad Bank’ to nurse the likes of BA and Rolls Royce back to full health – similar t0 UK Investments used in 2008 to park the likes of Northern Rock, HBOS and RBS back to health eventually selling off toxic assets. The idea of nationalisation is an anathema to this government. Burberry posts its numbers on Thursday. It is thought there will be a 30% drop in sales courtesy of the pandemic. A cut in dividend is likely from 42.5p to 33.8p. CEO Marco Gobbetti has taken a 20% pay cut but there are other contractual spates to sort out.

This morning, confidence is growing again, as U.S. and European stock futures advanced along with Asian equities, as investors took some encouragement from signs of businesses reopening across major economies, with crude oil, gold and other commodity prices advancing

UK companies posting interim results this week – Monday – International Game Technology, Tuesday – Imperial Brands, Homeserve, Shoe Zone, Wednesday – TBC Bank Group, Compass, Ixico, Bloomsbury Publishing Wincanton, Thursday – Essentra, AJ Bell, Severn Trent, Friday – Burberry, Pets At Home

US companies posting earnings this week – Tuesday – Walmart, Kohl’s, Home Dept, JC Penney, Wednesday – Target, Shoe Carnival, L-Brands, Expedia, Thursday – Best Buy, TJX, BY Wholesale, Hormel Foods, Hewlett-Packard, Ross Stores, Agilent, Nvidia, Friday – Foot Locker

Economic data to be posted this coming week – Monday – Japan GDP, US NAHB Housing, Tuesday – UK Employment data, Germany ZEW, US Housing Starts & Building Permits, US API Oil, Wednesday – UK PSBR, UK Inflation data, CPI, PPI and RPI, US FOMC minutes, HIS Markit UK PMI manufacturing & Services, US Initial Jobless Claims, US PMI Manufacturing and Services, US Phili-Fed Index, US Existing Home Sales, FED Chairman Powell Speech, Friday – UK Retail sales,

SOURCES – BBC, CNBC, Reuters, Daily Mail, FT, The Times, Sunday Times, Telegraph Group, Bloomberg, Yahoo Finance