WEEKLY FAYRE – Monday 25th May 2020

May 25, 2020

“HALF a league, half a league,
   Half a league onward,
All in the valley of Death
   Rode the six hundred.
'Forward, the Light Brigade!
Charge for the guns!' he said:
Into the valley of Death
   Rode the six hundred.


'Forward, the Light Brigade!'
Was there a man dismay'd?
Not tho' the soldier knew
   Someone had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Death
   Rode the six hundred.


Cannon to right of them,
Cannon to left of them,
Cannon in front of them
   Volley'd and thunder'd;
Storm'd at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
   Rode the six hundred.


Flash'd all their sabres bare,
Flash'd as they turn'd in air
Sabring the gunners there,
Charging an army, while
   All the world wonder'd:
Plunged in the battery-smoke
Right thro' the line they broke;
Cossack and Russian
Reel'd from the sabre-stroke
   Shatter'd and sunder'd.
Then they rode back, but not
   Not the six hundred.


Cannon to right of them,
Cannon to left of them,
Cannon behind them
   Volley'd and thunder'd;
Storm'd at with shot and shell,
While horse and hero fell,
They that had fought so well
Came thro' the jaws of Death,
Back from the mouth of Hell,
All that was left of them,
   Left of six hundred.


When can their glory fade?
O the wild charge they made!
   All the world wonder'd.
Honour the charge they made!
Honour the Light Brigade,
   Noble six hundred!”

 

Alfred, Lord Tennyson – poet & author – 1809--1890

 

I found a documentary on Netflix, which really has captured my imagination – “The Last Dance” – The story of Michael Jordan, clearly the greatest basketball player of all time and the Chicago Bulls' final thrust to win its 6th NBA championship in 1998, before the team was broken up. You might well say why, here in the UK, would I be interested in basketball, when I might be more interested in Muhammad Ali, or Babe Ruth, or Sir Donald Bradman, or Pele or Federer as the greatest sportsman of any generation?

I promise you this series is riveting theatre, with great coverage of some outstanding play coupled with incisive interviews, despite some of Jordan’s teammates attempting to rubbish Jordan in The Times last week. I imagine Scottie Pippen, Denis Rodman and others found Jordan self-centred, very opinionated, and difficult to deal with – totally understandable, especially as they were constantly being subjected to his universal adulation. How amazing that Jordan was paid $36 million a year 25 years ago. That was grown up largesse in those days. Try watching it – absolutely brilliant! Why should I be so obsessed with this story? I spent two years in Tokyo, watching the ‘Bulls’ astonishing achievements unfold from 1996-1998 on TV twice a week at the Tokyo-American Club.

 

 

INDEX

18th May 2020

22nd May 2020

% PROFIT/LOSS

FTSE

5799

5993

+3.35%

DAX

10683

11073

+3.65%

CAC

4361

4444

+1.90%

DJIA

24060

24465

+1.68%

S&P 500

2913

2995

+2.81%

NASDAQ

9177

9324

+1.60%

SHANGHAI

2872

2813

-2.05%

HANG SENG

23736

22930

-3.40%

NIKKEI 225

20097

20388

+1.42%

 

 

INDEX

31/12/19

22/5/20

% LOSS/PROFIT

FTSE

7604

5993

-21.19%

DAX

13385

11073

-17.27%

CAC

6041

4444

-26.44%

DJIA

28868

24465

-15.25%

S&P 500

3257

2995

-8.04%

NASDAQ

9092

9324

+2.55%

SHANGHAI

3085

2813

-8.82%

HANG SENG

28543

22930

-19.67%

NIKKEI 225

23204

20388

-12.14%

 

With five months of this tumultuous and destructive year now having flown by, I thought we should take a cursory glance at how most international indices have performed. The dramatic 25-30% fall in value from mid-February to 23rd March, apart from HK and Shanghai, which experienced difficulties in 2019, was wholly logical in the circumstances. However, the dissipation of nearly half those losses, apart from France and the UK, is harder to comprehend. Yes, the gargantuan contribution made by the Central banks to prevent the world’s economy disappearing without trace, has been the fulcrum and epicentre for the recovery. Their efforts have been aided and abetted by brave fund managers, who believe that the return to work had to be imminent if the global economy is to be salvaged and the recovery of global oil prices to circa $34 and $36 a barrel from circa $11 a barrel. In passing, the oil price did start to wobble on Friday, as we head to the end of the current contract period.

Conditions for weeks have been breathtakingly volatile, thanks in the main to uncertainty, which has been exploited by a significant army of futures and programme traders, keen to expose any weaknesses in the defences of the market.  They have certainly left their ‘mark’ on last week’s proceedings.  Market ‘bulls’ are still at war with the ‘bears’ and are winning the battle, but the outcome to the war remains unclear. The economic data across the spectrum continues to transmit a stench of toxic fear! Unemployment is at the top of that agenda in virtually every country in the world. Take the US’s initial jobless claims – a further 2.4 million seeking benefits making a total of just under 39 million in nine weeks, beating the previous record of 37 million, achieved in the Great Depression in the ‘30s, though the population of the US was only 120 million then; now it is 328 million! The UK news was proportionately and equally dispiriting, as the number of people claiming benefits rose by 853,000 to a total of 2.1 million suggesting an unemployment rate nudging 7%.

If that venomous data was not enough; it was exacerbated by poor PMI manufacturing and services sectors on both sides of the Channel. Life in the EU has fared little better and it has done little to enhance its reputation by failing to agree rescue packages. China’s GDP number for Q1 of -6.8% was no surprise, but the fact that China will not post an estimate for the rest of the year ventures to suggest that its recovery process is slower than anticipated. There is also the spat between Trump and Xi to dampen down. This will become acutely difficult whilst China continues to prevail on Hong Kong’s relative independence by introducing fresh security laws, which if implemented could lead to the kind of civil unrest which dogged the former British protectorate for much of 2019.

Friday was not a good day for the UK, with retail sales for April looking abject. Total sales were down 18.4% year in recent weeks. However, on-line food sales were up 83%. Clothes sales were down 50% with on-line household goods up 104% - Amazon must have played a blinder! Just to put UK economic issues to bed for the week, April’s public sector borrowing requirement was the highest on record at 62.1 billion, with the likelihood it could rise to £300 billion this year. The total figure for all of 2019 was £55 billion. Thank goodness borrowing will be cheap for a few years, though I pray for my children and grandchildren for the mess they will inherit. UK inflation dipped from 1.5% to 0.8% last month – again another illustration of the depth of the recession. Clearly the drop in oil prices and clothes led the sharp dive in inflation. Finally, BoE Governor, Andrew Bailey and Chief Economist Andy Haldane are considering using negative interest rates if the economy lacks stimulation. However, Japan, Germany and Switzerland have had mixed success using this facility. It is far from certain that directing money to industry business and commerce rather than to Central banks has the desired effect of bolstering the economy.

In the US last week, retail took its bow on the earnings theatre. Results were mixed. Walmart posted a 10% hike in sales with e-commerce for the last quarter up 74%. Revenue came in a $134 billion, with the size of shopping baskets up by 16%. Target’s efforts were not quite as startling though sales increased by 7% in the last quarter. Home Depot saw sales up by 6.4% from those stores that remained open, but revenue slipped by 10.7%. Macy’s and JC Penney continue to struggle.  

Mark Zuckerberg, CEO of Facebook announced that half of the 45,000 employees would now work from home indefinitely. Hertz surprised some by announcing it was heading for Chapter 11. Founded in 1918, it has survived through wars and recessions. It manages 568,000 cars, which includes 12,400 franchises. The Company has an eye-watering level of debt - $18.8 billion. Needless to say, these cars are leased and since traffic from airports has dropped by about 94%, it will come as no surprise that revenue from hiring has fallen off the cliff. At the start of the year Hertz had 38,000 employees; 12,000 have been made redundant and 4,000 have been furloughed. Its shares have fallen 82% since the beginning of the year. To survive, Hertz will need to downsize significantly.

Here in Old Blighty, M&S posted poor numbers with profits down to £403 million for last year and like-for-like sales down 6.2% for the year. Coronavirus is not M&S’s fault, but oh those dowdy fashions! On Friday, Burberry posted a 27% drop in sales, with news that its dividend, supposedly valued at £120 million will not be paid. Whitbread surprised the market by seeking and injection of an extra £1 billion to bolster its balance sheet. Its shares fell by 14% on Thursday but added 2.5% back on Friday. Carluccio's was bailed out on Friday by Giraffe and Ed’s Easy Diner owner Boparan Restaurant Group (BRG) in a move which will save 30 outlets and 800 jobs, though 1000 employees will lose their jobs. easyJet returns to the skies on 15th June, with Sir Stelios appearing to have lost the battle to have four board members removed.

Many observers thought Astra Zeneca was daft not to accept Pfizer’s £55 a share bid in 2014. CEO Pascal Soriot has been proved correct as Astra share price is now 8996p – up 45% since 16th March 2020. Last week it secured the mandate to manufacture and distribute 1 million Covid/19 vaccines, if approved. At least it is a start.

We hear from the Sunday Times that Jaguar Land Rover is haemorrhaging £1 billion a month. It is currently in talks with the Government for emergency loans. The operation is owned by Tata.

Despite next week being a holiday week in the UK, it will be interesting to watch the market’s approach to the deteriorating economic outlook. The only remedy that will guarantee success is a vaccine and that is probably months away!

UK companies posting interim results this week – Wednesday – Britvic, Biffa, British Land, De La Rue, Petropavlovsk, St James’s Place, Thursday – DMGT, First Group, SIG, PayPoint 

US companies posting earnings this week – Tuesday – Autozone, Wednesday – Toll Bros, Ralph Lauren, HP, Thursday – Abercrombie & Fitch, Dollar General, Costco, Dell Technologies, Dollar Tree, Nordstrom, Friday – Big Lots, Genesco.

Economic data to be posted this coming week – Tuesday – CBI Distributive trades, US Consumer Confidence & New Home Sales, Wednesday – BREXIT negotiations, ECB Lagarde Speech, US Beige Book, US MBA Mortgage applications, Building Permits and API oil stocks, Thursday – EU Consumer & Business Confidence, US 2nd quarter GDP, Initial Jobless Claims, Durable Goods, Pending Home Sales, Friday – UK Car Production, US Personal Spending, Goods trade Balance, Chicago PMI, Michigan Consumer Confidence, FED’s Powell Speech.