WEEKLY FAYRE – Monday, 25th October 2021

October 25, 2021

“If I should die, think only this of me:

That there’s some corner of a foreign field

That is for ever England. There shall be

In that rich earth a richer dust concealed;

A dust whom England bore, shaped, made aware,

Gave, once, her flowers to love, her ways to roam;

A body of England’s, breathing English air,

Washed by the rivers, blest by suns of home.

 

And think, this heart, all evil shed away,

A pulse in the eternal mind, no less

Gives somewhere back the thoughts by England given;

Her sights and sounds; dreams happy as her day;

And laughter, learnt of friends; and gentleness,

In hearts at peace, under an English heaven.”

 

Rupert Brooke – Poet & Soldier – 1887-1915

 

England’s T-20 team were ruthlessly efficient in dispatching the Windies, the former champions, for 55 in Dubai on Saturday, winning comprehensively by 6 wickets. However, I am fearful that these very slow wickets, with slightly uneven bounce could make for very low scoring matches. I hope not. The conditions that prevail in Dubai, Abu Dhabi, Sharjah, and Oman could well suit India and Pakistan, whose batters tend to thrive in those conditions. Nonetheless England’s attack with Mills, Rashid, Woakes, Moheen, Jordan and hopefully Wood to the fore, look a mighty powerful unit. England’s batting needs to show a bit more consistency and who knows it might be in the vanguard at the day of reckoning. Yesterday, Pakistan performed a demolition job on the competition favourites, India, beating them by 10 wickets!

 

INDEX

18th October 2021

22nd October 2021

% Loss/Gain

FTSE

7234

7204

-0.41%

DAX

15518

15542

+0.16%

CAC40

6697

6733

+0.54

DJIA

35221

35677

+1.29%

S&P 500

4463

4544

+1.82%

NASDAQ

14839

15090

+1.69%

SHANGHAI

3571

3582

+0.32%

HANG SENG

25424

26126

+2.76%

NIKKEI 225

29093

28804

-0.99%

 

Last week the Dow Jones Industrial Average and the S&P 500 hit new all-time records, with the latter enjoying six consecutive positive sessions. Investors threw caution to the wind last week and seemed happy to take on a bit more risk. Some equity acolytes might have thought that attitude to be a little imprudent, in the wake of inflation and supply chain threats and evidence that the global rate of growth for this year is slowly contracting. However, at present, there seems no other alternate asset class to attract money away from equities, even if interest rates start to rise modestly in December, with perhaps two or three more increases in 2022. It is also fair to say that punters have been encouraged by the quality of most US earnings posted to date, apart from Intel, the world’s leading chip maker, whose outlook did not pass muster, with its shares closing, down 8% after hours on Wednesday; and nor for that matter did Snap Chat (-28%).

However, there were very solid efforts from IBM, Procter & Gamble and Johnson & Johnson, though both warned of the dangers of inflation, which will be passed on to the consumer. Tesla beat expectations with net income of $1.62 billion on revenue of $13.76 billion, with 241,000 electric cars being delivered in the last quarter. Tesla’s shares have added 24.6% year to date, valuing the company at a staggering $900 billion!

Netflix’ssubscriber growth for the last quarter attracted an additional 4.4 million members and expects to add a further 8.5 million subscribers in the fourth quarter, to bring its total 220 million. Content is now proving a vital ingredient with so much competition in streaming, coming from Disney, Comcast, Google, and Apple. Some 142 million people have watched “Squid Game” on Netflix . Revenues were solid at $7.48 billion. Facebook, which posts earnings this coming Tuesday served notice to change the name of its holding company to possibly ‘Horizon’ or maybe ‘Meta.’ Unless Mark Zuckerberg’s directors attend to its corporate governance shortcomings, I doubt the change will make a scrap of difference to the rather dwindling perception of its moral standards.

On the economic front, US Initial jobless claims continued to improve with only 290,000 claiming benefits. A year ago, there were 700,000 people suffering that plight. Here in the UK, as the Government heads for the Budget next Wednesday, the data was mixed. Inflation (CPI) was 3.1% in the 12 months to September 2021, down from 3.2% in August. On a monthly basis it rose by a rather mild 0.3%. This number was almost in-line with expectations. What business and the consumer are experiencing is very much higher. Price increases are taking time to filter through. Huw Pill the Bank of England Chief Economist is expecting 5% inflation by the end of the year to be reached. The threat of an increase in official rates in December is very much alive. Public Sector Borrowing was down marginally in September; by £7 billion to £21.8 billion. Nonetheless £2.2 trillion is the eyewatering total (95.5% of GDP).

The Government has big spending plans, especially the expansion of the green economy. Chancellor Sunak seems to have little room to manoeuvre in next week’s statement, though informed opinion tells us that he will find £35 billion for the NHS’s digital expansion. Relationships between the CBI and Government have not been that cordial since 2016, when BREXIT became official. The Director General at the time, Dame Carolyn Fairbairn, represented a trade body that was largely not in synch with leaving the EU. The current DG, Tony Danker seem to represent similar opinions. He has implored the Chancellor to keep increases in taxation for a future date. The CBI fears that any increases in taxation will discourage the necessary investment in a high-wage green economy. UK Retail sales fell for the 5th month running in August – by 0.2%, with non-food sales falling by 1.4%. Food sales were up 0.6%. The supply chain and inflation were contributory factors for the discouraging fall in activity, as were business rates. However, the consumer’s habits have changed. Sartorial elegance is no longer a prerequisite. People prefer to have a good time these days.

Corporate news was bountiful last week. Clayton Dubilier & Rice received 95% shareholder support for its £7 bn takeover of Wm Morrison. Sir Terry Leahy is expected to be installed as Chairman of the UK’s third largest supermarket. Unilever’s share price is down 12.7% year to date, Trading conditions have been tough. Sales grew by 2,5% in the 3rd quarter on turnover of £13.5 bn. Sales were particularly strong in India and Asia. CEO Alan Jope has warned that inflation is taking its toll and increased costs will be passed on to the consumer. Burberry has a new CEO, Jonathan Akeroyd, formerly with Versace. He follows in the same tradition as his predecessors – Rose Marie Bravo, Angela Ahrendts, Christopher Bailey, and Marco Gobetti – all of them quality operators with huge price tags, based on achievement. My Akeroyd could earn £11m his first year including £5m bonus he would have earned at Versace.

Barclays Bank produced the best set of numbers on the week. Thursday’s results saw a pre-tax profit for 9months of £6.9 bn on income of £16.8bn, with a 3rd quarter pre-tax profit of £2.4bn. Tier One Capital came in at 15.4%. Return on equity was outstanding at 14.9%. Investment Banking saw a 37% increase in revenue to £2.2bn. There was a credit impairment release of £600m. Barclaycard saw an increase in holders, but income was down 23%. That situation is expected to improve in the 4th quarter. Mortgage lending increased by £2bn. Barclays has seen its share price increase by 38.5% year to date. I suspect Edward Bransom will find the removal of Jess Staley as CEO hard to achieve in the current climate. Investment banking bonuses are likely to cause some furore, but profits have been earned and the exchequer will be benefit.

First Group sold its US Greyhound bus service to Germany’s Flix Mobility for £125m to focus on its domestic commitments. 888 Holdings saw its 3rd quarter revenues grow by 7% to £229.9m, having recently agreed to buy 1,400 Wm Hill betting shops off Caesar Entertainments for £2.2 bn. AJ Bell added 30% more customers in the past year to a total of 382,754. It also saw a 52% inflow of cash to £6.4 bn. Total assets under administration increased by 29% to £72.8 bn. The company may experience a slight slowing down in activity. Deliveroo posted a 59% increase in UK orders between July and September, though the size of orders fell from an average of £24.20 to £23.80. The Hut Group, the luxury cosmetic, fashion, and nutrition operation that went public a year ago, lost about 60% in value since its float up until last week. However, Matt Moulding the CEO decided to remove the ‘golden share’ that allowed Moulding control over takeovers and acquisitions. Hut Group’s shares bounced by 30%, before falling back by 9% on Friday due to uncertainty over corporate governance policy.

INEOS’ CEO Sir Jim Ratcliffe has chosen Germany, Norway, and Belgium for his first hydrogen plants, where he will be investing €2 bn. UK and France will disappointingly fall into the mix down the line. Playtech, the gambling software titan has been the subject of a takeover by Australia’s Aristocrat Leisure for £2.7 bn. Playtech’s shares bounced by 58%. Selfridge’s owners the Weston family are in talks to sell the retail emporium to Qatar for £4 bn. Other predators may also be interested. US Private equity has again popped its head above the parapet in the form of Bain Capital and expressed a wish to buy London Victoria for £530m. There may well be some strong resistance, with may financial luminaries showing concern that insufficient attention to protect these businesses is being shown.

The UK concluded another modest trade deal, this time with New Zealand worth £2.3 bn. 10% tariffs will be removed, with lamb and white wine likely to be attractively cheaper. This coming week Stockholm will host the £17 bn IPO of Volvo. The Swedish car maker sold about 700k cars this year, less than half of its German rivals, but it expects the number to increase to 1.2 million next year.

Mirona, the media entrepreneur, chaired by Lord Michael Grade and run by Marc Boyan may make an audacious bid for Channel4, advised by Rothschild. JP Morgan is advising the Government and we are told to expect strong competition from ITV, advised by Robey Warshaw and Credit Suisse as well as interest from Comcast and Viacom.

UK Companies posting earnings this week – Monday – HSBC, Quiz, Tuesday – Whitbread, Reckitt Benckiser, Wednesday – Bloomsbury Publishing, Glaxo SmithKline, Thursday – C&C, Invidior, Royal Dutch Shell, Gem Diamonds, Inchcape, Lloyds Banking Group, Friday – NatWest, Evraz, Vedanta Resources

US companies posting interim results this week – Monday – Kimberly-Clark, Facebook, Tuesday – Alphabet, Archers, Daniel Midland, JetBlue, 3Ms, Eli Lilly, AMD, General Electric, Lockheed Martin, Chubb, Raytheon, Microsoft, Twitter, General Dynamics, Hasbro, UPS, Visa, McDonald’s, Pfizer, Wednesday – Apple, Bristol Myers Squibb, Brinks, Boston Scientific, Boeing, Coca-Cola, eBay, KLA, Kraft Heinz, Ford Motor, PayPal, Thursday – Altria, Caterpillar, Hershey, Yum Brands!, Merck, Amazon, Mastercard, Molson Coors, Northrop Grumman, Friday – Abbvie, Aon, Exxon Mobil, Weyerheuser, Colgate-Palmolive, Chevron

Economic data to be posted this week – Monday – Germany ifo, Tuesday – US Housing Index, US Consumer Confidence, US New Home Sales, Wednesday – UK BRC Shop Prices, US MBA Mortgage Applications, US Durable Goods, US Crude Oil Inventories, Thursday – EU Industrial Confidence, Consumer Confidence & ECB Meeting, US Initial Jobless Claims, US Pending Home Sales, Friday – UK Mortgage Applications, UK Consumer Confidence & M4 Money Supply