WEEKLY FAYRE – Monday, 22nd November 2021

November 22, 2021

“When you are old and grey and full of sleep,

And nodding by the fire, take down this book,

And slowly read, and dream of the soft look

Your eyes had once, and of their shadows deep;

 

How many loved your moments of glad grace,

And loved your beauty with love false or true,

But one man loved the pilgrim soul in you,

And loved the sorrows of your changing face;

 

And bending down beside the glowing bars,

Murmur, a little sadly, how Love fled

And paced upon the mountains overhead

And hid his face amid a crowd of stars.”

 

William Butler Yeats – Poet – 1865-1939

 

What a feast of rugby internationals the public was privileged to watch this weekend. England beat South Africa, the world champions, 27-26 in a pulsating tie. In the second half it looked as if the power of the Springboks might win the day, with England conceding a raft of penalties. However, England had that touch of inspired class to see them through at the death. France inflicted a consecutive defeat on the All-Blacks 40-25 with some scintillating display of handling. Scotland’s victory over a plucky Japan, 29-20, was closer than the Murrayfield crowd would have liked. Not to be outdone, Wales pulled off a great victory against Australia by one point, 29-28! Yesterday, Ireland thrashed an ill-disciplined Argentina 53-7. These performances surely augur well for a great 6-Nations next year!

I must indulge myself and mention ‘the men in white’ – aka Fulham FC – 4-1 winners against Barnsley in a polished performance at Craven Cottage; their seventh consecutive win, leaving the Cottagers six points clear of the herd in the championship, and a point clear of Bournemouth!

Sir Lewis Hamilton cut Max Verstappen’s lead in F1 to a mere six points with a comfortable win in Qatar. With two rounds to go, the championship is set up for a grand slam finale.

 

INDEX

15th November

19th November

% gain/loss

FTSE

7347

7223

-1.69%

DAX

16109

16175

+0.41%

CAC 40

7090

7108

+0.25%

DJIA

36128

35601

-1.46%

S&P 500

4689

4697

+0.18%

NASDAQ

15894

16057

+1.02%

Shanghai

3542

3560

+0.49%

Hang Seng

25437

25049

-1.53%

Nikkei 225

29807

29745

-0.21%

 

Economic uncertainty continued to play a ‘leading’ role in equity markets’ rocky journey during most of last week. Shares in Europe continued to oscillate in a narrow range. Inflation, the supply chain, and the threat of inevitable central bank rate increase intervention played heavily on the minds of investors. US inflation hit 6.2% the week before last. Wednesday’s UK inflation rate did not reach that exalted level, but CPI came in at an uncomfortable 4.2% and is expected to hit 5% by the end of the year.

The Governor of the Bank of England, Andrew Bailey, came under heavy fire for his reluctance to bring influence to bear at the last MPC meeting, by influencing a rate increase. The fact that the MPC voted 7-2 to maintain the current level was a mystery to many. I could understand the rationale of allowing the recovery process to gather momentum through what the Bank thought was a transitory period of inflation. However, the MPC must have had access to the strong and positive employment data which was posted on Tuesday. As it happened the UK unemployment rate declined to 4.3% in the three months to September 2021, the lowest since the three months to July 2020 and below market expectations of 4.4%. Still, the rate remained 0.3 percentage points higher than before the pandemic. The number of unemployed people was down by 152,000 to 1.45 million, while employment rose by 247,000 to 32.52 million, above expectations of a 185,000 gain. This data will surely provide sufficient ammunition for rates to rise on 16th December.

US retail sales surged 1.7% mom in October of 2021, above an upwardly revised 0.8% rise in the previous month and beating market forecasts of 1.4%. It is the strongest gain since March, as consumers spend more on early holiday shopping and gasoline. In the UK, retail sales were stronger than expected at +0.8% (EST: +0.5%), a marked improvement from -0.2% in September. The UK’s public sector borrowing requirement for October came in at £18 billion, less than last year’s £21 billion but significantly higher than the forecasted £12.4 billion.

Last week the Dow Jones industrial average finished below the Plimsoll line due to poor stock trading performances from Walmart, Chevron, Boeing, Goldman and American Express, all heavily weighted component stocks of the DJIA 30. The S&P 500 and the NASDAQ Composite kept their nerve, both finishing in positive territory. In the UK, the mining sector, BT, BATS and the large drug companies Astra Zeneca and GSK, despite decent corporate announcements, were out of favour with investors. The DAX and CAC 40 made very modest progress, but having only thirty and forty stocks respectively, these indices are hardly accurate barometers of their respective economies. Asia remained in the doldrums. Alibaba’s earnings were disappointing, and their its fell 11% on Thursday. Some modest gains were made in Shanghai, but Chinese stocks remain something of an enigma for international punters.

There were strong results from Walmart and Target last week, with sales up by 9.2% and 12.7% in for the last quarter, but narrowing margins and inflation resulted in investors taking some risk off the table, ending in their shares losing about 4%. Amazon confirmed that it intends to stop accepting payments made using UK Visa credit cards from early next year. Charges made by Visa to Amazon are thought to be unacceptably high. Many observers believe there is room for negotiation. Nvidia, despite conceivably failing in its attempt to buy ARM Holdings for $30 billion, posted satisfactory results last week, as did Sonos. However, Cisco Systems earnings were ‘light’ on expectations. JP Morgan served notice that it is suing Tesla for $162 million over tweets in 2018 by boss Elon Musk that he could take the electric car maker ‘private.’ JP Morgan's suit, filed in a Manhattan federal court, says the companies had an agreement signed in 2014 that allowed the bank to buy Tesla shares at a set price and date.

Here in the UK, there were sound earnings and trading statements posted by Diageo (shares hitting an all-time high), Imperial Brands, Restaurant Group, Kingfisher, Wizz Air, Serco and especially Royal Mail, which saw revenues reach £6 billion, and the company will be returning £400 million to shareholders. Prior to the pandemic you could not give RMG shares away, and many thought it might fall into the arms of UPS, FedEx, or Deutsche Post. RMG shares have added 301% in value since late March 2000. Premier Foods earnings were mixed. Post the pandemic, the need for comfort food has dissipated. However, there is a growing demand for Mr Kipling’s cakes and other products in the US.

The market was much more pleased about Tuesday’s quarterly earnings for Vodafone than I was. First half sales increased by 5% to €22.5 billion, This has been such a disappointing investment since the turn of the century, apart from excellent dividends (currently yielding close to 7%). Vodafone has been drowning in debt since it paid €225 billion for Mannesmann in 2000 and despite selling its stake in Verizon for $130 billion in 2014. Its shares have eased from a ‘high’ of 516p in February 2000 to 114.4p on Friday (+0.9% on the week). CMC Markets has found the going tough in the last quarter as market volatility has eased. Lord Cruddas, the main shareholder is in line to pick up £6 million in dividends and the company is expected to be spit in two – spread betting and a retail investment platform. CMC’s profits have dropped by 74% to £36 million in the last six months and the shares have eased by 40% year to date. The Carlyle Group has withdrawn its interest in buying Metro Bank causing its shares to drop sharply by 20%.

Dismissed Barclays CEO, Jes Staley is not going down without a fight. He has engaged the services of top barrister, Lord David Pannick to defend his corner against allegations of an ill-advised professional relationship with Jeffrey Epstein, which he refutes. Mr Staley is also at the centre of controversy over his £2.5 million severance package. Entertainment and leisure are rarely far away from the financial headlines. Last Week Flutter (Paddy Power/Betfair), having been subjected to some unfavourable sports results, decided to pay £402 million for Tombola, a bingo operation, owned largely by Sunderland-based Phil Cronin. Eddie Jordon is fronting up a consortium – JKO Play – in a bid to pay £3 billion for the gambling tech titan Playtech, thus ‘elbowing’ Australia’s Aristocrat Leisure’s £2.1 billion bid ‘into the long grass.’ Comcast (owner of NBC & CNBC in the US) has agreed to pay $2.7 billion over the next 6 years for the rights to screen Premiership football in the US, such is the growing popularity of soccer in the USA.

M&S seems to be going from strength to strength with innovative ideas. Last week M&S agreed to sell thirty food products through Costa Coffee owned by Coca-Cola. M&S shares are up 83% since the turn of the year. After two years negotiations, Unilever has agreed to sell its tea business – Ekaterra, which has amongst its brands, Lipton, PG Tips, Pukka, T2 and Tazo, for €4.5 billion. Unilever’s tea sales totalled €2 billion last year. Emma Walmsley. CEO of GSK, was due some good news, which hopefully will encourage Elliott Management and Paul Singer to get ‘out of her hair.’ She received it in spades last week. The UK regulator approved its HIV medicine, and the US is to spend £740 million on Covid treatment. The final piece of good news came in the form of the EU approving GSK’s asthma jab.

The Bain Capital/LV saga continues to create an acrid corporate and political storm. The publicity attracted by chairman Alan Cook and CEO Mark Hartigan has been negative. The negotiations lack some transparency. The investing public would like to know more about Royal London’s plans. Maybe there is room for both Bain and Royal London to have ‘a piece of the pie,’ thus making the existing deal more attractive. The future of the chairman and CEO seem uncertain, as does the emoluments for staying or going! It is all hands to the pump next week, to persuade the 1.2 million shareholders that there is considerable value in the deal, in the future. Despite brave attempts by CEO Matt Moulding to sort out corporate governance issues at tech retailer, The Hut Group, the process has not gone well with the company losing 76% of its value since its IPO a year ago.

UK Companies posting earnings this week – Monday – Quiz, Tuesday – Avon Rubber, Compass Group, AO World, Cranswick, Petershill, Pets at Home, Severn Trent, Wednesday – Mulberry, Brewin Dolphin, AB Dynamics, Britvic, Virgin Money, De La Rue, Revolution Bars, United Utilities, Friday – Reach, JD Sports

US companies posting interim results this week – Monday – Zoom, Urban Outfitters, Tuesday – Best Buy, Dollar Tree, Nordstrom – Thursday - THANKSGIVING

Economic data to be posted this week – Monday – Germany ifo & Gfk Consumer Confidence, US existing Home Sales, Tuesday – Germany GDP, Wednesday – US MBA Mortgage Applications, US Durable Goods, US Initial Jobless Claims, University of Michigan Consumer Confidence, US New Home Sales, US Crude Oil Inventories, Thursday – THANKSGIVING, Friday – EU Money supply