WEEKLY FAYRE – Monday, 26thApril 2021

April 26, 2021


“This royal throne of kings, this sceptred isle,

This earth of majesty, this seat of Mars,

This other Eden, demi-paradise,

This fortress built by Nature for her self

Against infection and the hand of war,

This happy breed of men, this little world,

This precious stone set in a silver sea

Which serves it in the office of a wall

Or as a moat defensive to a house,

Against the envy of less happier lands,

This blessed plot, this earth, this realm, this England,

This nurse, this teeming womb of royal kings,

Feared by their breed and famous for their birth,

Renownèd for their deeds as far from home

For Christian service and true chivalry

As is the sepulchre in stubborn Jewry

Of the world's ransom, blessèd Mary's son.

This land of such dear souls, this dear, dear land,

Dear for her reputation through the world,

Is now leased out - I die pronouncing it -

Like to a tenement or pelting farm.

England, bound in with the triumphant sea,

Whose rocky shore beats back the envious siege

Of watery Neptune, is now bound in with shame,

With inky blots and rotten parchment bonds.

That England that was wont to conquer others

Hath made a shameful conquest of itself.”

“Richard 11”

William Shakespeare – Poet & Playwright – 1564-1616

 

The duplicitous and mendacious plans of the so-called European Super League fell very flat within 48 hours of the announcement. The six clubs in the UK, plus those from Italy and Spain, had clearly not done their homework. The response in the UK from the Duke of Cambridge, the PM, the fourteen remaining Premier League clubs, FIFA, and UEFA, not forgetting most of football’s glitterati were so adversely hostile to the idea, that once Chelsea and Manchester City had withdrawn their applications, the concept was dead in the water. What these conniving avaricious clubs did not bargain for was the ferocious reaction of indignation of the fans from right across the spectrum of our ‘beautiful game!’

The infrastructure of football is brittle enough already with so many clubs drowning in debt, without the added complication of another self-interested league, with money their only goal, knowing that relegation and promotion were not on the agenda. Of course, the ‘super twelve’ could see their coffers being filled up with mobile users’ subscriptions in Asia and Africa responding to the best European football could offer. Real Madrid, Barcelona and Juventus may be in dire financial straits, but they will not be allowed to solve their financial problems at UK football’s expense. JP Morgan’s offer of a £4.6 billion facility will have left Wall Street’s top bank with red cheeks of embarrassment.

I suspect that the ESL will eventually resubmit its plans before too long, promising a significant share of the profits to be allocated to ‘grass-roots’ football.

 

 

 

INDEX

19th April 2021

23rd  April 2021

% Loss/Gain

FTSE

7019

6938

-1.30%

DAX

15496

15279

-1.40%

CAC40

6294

6257

-0.59%

DJIA

34182

34043

-0.41%

S&P 500

4179

4180

+0.002%

NASDAQ

13984

14016

+0.21%

SHANGHAI

3427

3474

+1.37%

HANG SENG

28960

29078

+0.41%

NIKKEI 225

29688

29020

-2.25%

 

 

The US economy, despite the damage the pandemic inflicted on it in 2020, appears to provide plenty of evidence for optimism. The vaccination programme has been an unqualified success in recent months. Retail sales appear to be buoyant. Housing sales are thought to be 20% above where they were forecasted to be, at the turn of the year. Initial Jobless claims seem to be abating, with only 547,000 seeking benefits this past week. There is no serious sign of inflation, yet. However, let us be under no illusions, the good people of the USA are going to pay for the Biden administration’s profligacy. The US National Debt has been increased by $4.7 trillion, which works out at an increase of $14,000 per person. Fuelling ‘printed money’ by $3.6 trillion over the past year, must surely come with an inflation warning attached.

The FED seems to have vice-like control of monetary policy with plenty of quantitative easing, as illustrated in the paragraph above. Bond yields seem to have selected ‘neutral’ for the time being. The Biden administration has thrown the kitchen sink at the economy with its $1.9 trillion relief package with another $2.5 billion infrastructure spending bill on its way to Congress shortly for approval.

Consequently, the DJIA was the only major US index to fall marginally below the ‘Plimsoll Line’ last week. So far, the earning season has produced decent results. Analysts at US financial data group FactSet estimate an earnings growth rate of 30.2% for S&P 500 companies, which would mark the highest year-on-year earnings growth rate reported by the index since Q3 2010, with virtually 80% of companies beating expectations.

Notwithstanding this upbeat assessment there are still concerns about President Biden’s administration. Many observers believe Joe Biden will have difficulty in preventing the Democrats from heading too far to the left. He also made Wall Street shudder with threats to raise income tax from 37% to 39% and Capital Gains Tax from 20% to 39% to those earning over $1 million a year, even though it is taken as read that this pandemic has a price to pay. Increased taxation is inevitable down the line. President Biden’s aides must also keep the 79-year old Commander-in-Chief on a very tight rein, preventing him from any repetition of calling President Xi Jinping a ‘thug’ or President Putin a ‘killer’, as well as desisting from making wild promises on issues such as climate change, however well-intentioned they may be. The Spectator’s Freddy Gray, in this week’s edition, thought the US media looked too kindly on Biden misspeaks. Gray felt that White House Aids ‘must work harder on keeping the President’s promiscuous verbosity under wraps’!

UK economic data posted last week was mixed. The Consumer Prices Index (CPI) rose 0.7% in the 12 months to January 2021, up from 0.6% to December 2020. Petrol and travel cost increases contributed to the modest bounce. However, courtesy of BREXIT and supply issues for goods such as food and semi-conductor chips, inflation could bounce before too long. Unemployment data, with almost 5 million of the UK’s workforce, still being furloughed, could make last Wednesday’s figure of 4.9%, down from 5% in February, rather misleading, when the furlough scheme ends. As for UK public finances, central Government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £20.8 billion in March 2021, bringing the total for the FYE March 2021 to £334.5 billion, substantially more than in any other financial year period since records began in 1984. The Governmentis estimated to have spent £941.7 billion on day-to-day activities (current expenditure) in the FYE March 2021, £203.2 billion more than in the FYE March 2020; this includes £78.2 billion expenditure on Coronavirus job support schemes.

The UK has enjoyed rocketing retail sales for March (+5.4%, with clothing up 17.5%) and PMI data indicating the strongest private sector growth in eight years in April. Hopefully, a measurable amount of largesse supposedly squirrelled away in the past year (circa £150 billion) will have parted company from consumers’ savings into the tills on the High Street. It is interesting to note that Barclaycard saw a 438% increase on credit card use for the week commencing 12th April 2021 as against the corresponding week in 2020. As Coronavirus restrictions were eased, the pound pushed higher. The Eurozone shrugged off tighter lockdowns and enjoyed record manufacturing expansion in April, while the service sector returned to growth.

As Central banks start to consider accommodating Bitcoin with perhaps some tighter regulation, it was interesting to note that Bitcoinfell 21% in value from $64,900 to $49,400 last week, its biggest weekly fall since February 2021.

The US earnings season started very well with stellar results from the banking sector, especially JP Morgan, Goldman Sachs, and Citigroup, which all produced outstanding trading and investment banking profits. Morgan Stanley’s $900 million contingency loss on loans to Archegos was the only ‘faux-pas.’ Last week, decent efforts from IBM, Coca-Cola, Proctor & Gamble, and Verizon kept up the momentum. Netflix’s subscriber numbers were 2 million light at 3.98 million for the past quarter. Despite increased profits, which were attributed to increased subscription charges, the Street of Dreams was ‘underwhelmed’, and it took Netflix’s share price lower by 8%. Tobacco stocks lost ground as Biden served notice on nicotine content. Altria too suffered, but not as much as Imperial Brands and BATS did! This coming week will be very significant with Apple, Microsoft, Amazon, and Exxon Mobil all stepping up to the plate.

UK corporate news was full of intrigue and interest last week. There were positive earnings and updates from Taylor Wimpey and the retail stockbroker, AJ Bell. Since its IPO in December 2018, AJ Bell’s share price has doubled. Though AB Foods did not post good numbers, there was light at the end of the tunnel in the form of trading figures from Primark, whose shops had been closed and which has no on-line presence. Record sales were thought to have been achieved in the first week after lockdown. John Lewis will not be closing any further shops, leaving the partnership with 34 in its portfolio. It has started to give one of its flagship stores, Peter Jones, a well-overdue facelift.

FirstGroup is to sell its US operation to Swedish private equity for £3.3 billion, whilst disposing of other public transport divisions, with a view to cutting its debt, which stands at £300 million and £365 million being allocated to shareholders. First Student, FirstGroup’s operation in the US, currently runs 42,500 buses, accommodating the needs of 5 million students. Softbank of Japan may be prevented from selling the chip titan, ARM Holdings of Cambridge to Nvidia of California in a $40 billion for security and competition reasons. An IPO could be an alternative disposure route for Softbank’s investment.

Jaguar Land Rover will be forced to close its factories at Castle Bromwich and Halewood temporarily, due to a shortage of chips. Japan’s auto industry has suffered badly from similar shortages, which has contributed to the lack-lustre performance of the NIKKEI 225. Jeff Fairbairn, the former CEO of Persimmon, who took a departing bonus of £82 million, has risen like a Phoenix from the Ashes, by joining forces with Berkeley de Veer and Avant as CEO of the joint venture. Despite the very disappointing IPO debut of Deliveroo, the Canadian chip designer Alphawave IP has chosen London for its forthcoming £3 billion IPO.

The Greensill scandal has already attracted sufficient press scrutiny. However, suffice to say that it has also severely clipped Credit Suisse’s wings, though to a lesser degree than the loss incurred by its involvement with the US hedge fund, Archegos. Credit Suisse posted a $275 million loss for the year including a loss of $827 million last quarter, which will necessitate this Swiss banking titan asking its shareholders for $1.7 billion to bolster its tarnished balance sheet. Antonio Horta Osorio, former CEO at Lloyds Banking Group, is due to assume command next month.

UK companies posting interim results this week – Tuesday – BP, HSBC, Wednesday – J Sainsbury, AB Dynamics, Glaxo SmithKline, Persimmon, Lloyds Banking Group, Thursday – WH Smith, NatWest Group, Royal Dutch Shell, Evraz, Flutter, Howden Joinery, Inchcape, Lancashire Holdings, Schroders, Smith & Nephew, Unilever, Friday – Astra Zeneca, Barclays, Smurfit Kappa

US Companies posting interim results this week – Monday – Tesla, Tuesday – Alphabet, 3Ms, Archer Daniels Midland, JetBlue, Eli Lily, Amgen, General Electric, Chubb, Starbucks, Raytheon, Microsoft, Wednesday – Apple, Boston Scientific, Boeing, Yum Brands!, Facebook, Ford Motor, Thursday – Amazon, Altria, Bristol, Myers, Squibb, Merck, Twitter, Friday – Abbvie, Aon, Exxon Mobil, Chevron, Colgate-Palmolive, Weyerhaeuser

Economic data to be posted this coming week – Monday – US Durable Goods – Tuesday – US House Price Index, US CB Consumer Confidence, Wednesday – Japan Retail Sales, US MBA Mortgage Applications, US Goods Trade Balance, FOMC Meeting, Thursday – UK Car Production, EU Consumer Confidence & economic Sentiment, US GDP (Q1 Q/O/Q EST: +4.3%), US Initial Jobless Claims, US Pending Home Sales, Friday – Japan Unemployment, UK Nationwide Housing Index, EU Inflation, EU GDP (Q1 Q/O/Q EST: -0.7%), EU Unemployment (EST: 8.3%), US Chicago PMI