WEEKLY FAYRE – Monday, 27th September 2021

September 27, 2021

‘What need you, being come to sense,

But fumble in a greasy till

And add the halfpence to the pence

And prayer to shivering prayer, until

You have dried the marrow from the bone;

For men were born to pray and save:

Romantic Ireland’s dead and gone,

It’s with O’Leary in the grave.

 

Yet they were of a different kind,

The names that stilled your childish play,

They have gone about the world like wind,

But little time had they to pray

For whom the hangman’s rope was spun,

And what, God help us, could they save?

Romantic Ireland’s dead and gone,

It’s with O’Leary in the grave.

 

Was it for this the wild geese spread

The grey wing upon every tide;

For this that all that blood was shed,

For this Edward Fitzgerald died,

And Robert Emmet and Wolfe Tone,

All that delirium of the brave?

Romantic Ireland’s dead and gone,

It’s with O’Leary in the grave.

 

Yet could we turn the years again,

And call those exiles as they were

In all their loneliness and pain,

You’d cry, ‘Some woman’s yellow hair

Has maddened every mother’s son’:

They weighed so lightly what they gave.

But let them be, they’re dead and gone,

They’re with O’Leary in the grave.’

 

William Butler Yeats – poet – 1865-1939

 

‘The Ryder Cup’, played this year at Whistling Straits on the shores of Lake Michigan, Wisconsin, was not the usual ‘nail-biting’ epic contest between the US and UK/Europe that golf fans have come to expect. This course proved to be a serious challenge, especially when the wind got up. Many thought it might suit the UK/European team, with their experience of links courses, but they failed to rise to the challenge, apart from Garcia and Rahm with cameo roles played by McIlroy, Westwood Lowry, Poulter, Hovland and Wiesberger. The excitement was not there this year, but the quality and competitive nature of the golf was there in spades! UK/Europe never really stepped up and were outclassed by the USA. The difference between the two teams was mainly putting. On a handicap basis, the US golfers were two shots better per man than their European peers, as they ran out winners by a record margin 19-9.

 

INDEX

20th September 2021

24th September 2021

% Loss/

Gain

FTSE

6963

7051

+1.26%

DAX

15259

15531

+1.78%

CAC40

6450

6638

+2.92%

DJIA

34459

34798

+0.98%

S&P 500

4402

4455

+1.19%

NASDAQ

14758

15047

+1.96%

SHANGHAI

3664

3613

-1.41%

HANG SENG

24589

24192

-1.61%

NIKKEI 225

30606

30248

-1.17%

 

 

Looking at the table above, one might be forgiven for thinking it was just another average week for global stock markets – not so! For equity investors, last week has probably been the most demanding and challenging week they have been confronted with this year, with so many imponderables gathering momentum. They have had to contend with two major Central bank meetings – the FED on Wednesday and the Bank of England’s MPC on Thursday. Then the supply chain (especially energy issues), inflation, Evergrande’s gargantuan debt of £219 billion and perceived inflated portfolio valuations have had to be assimilate – not an easy task.

Apart from Asia, the recovery during the week was marked and remarkable in the circumstances. By last Monday the FTSE, DJIA and S&P 500 had fallen by 4% since the beginning of September. By Wednesday, it seemed that a solution to servicing Evergrande’s debt mountain had been found, which triggered a relief rally. However, at the end of the week, it transpired that a key debt payment deadline for $83 million without payment had been missed, reigniting fears that China’s largest property company could collapse. Evergrande has now entered a 30-day grace period. If that period passes without obligations being met, it will default. We shall, no doubt, see an adverse reaction in markets, especially the banks, if these banking covenants have been breached.

Last Wednesday’s comments from the FED chairman, following the FOMC meeting, gave the market a bit of clarity and some veiled warnings. There was no change in rates (0.25%), though the possibility of tapering QE being implemented before too long. Estimation for inflation rose to 3.6%, with a downward revision on growth for 2021 from 7% to 5.9%. Chairman Jay Powell indicated that he expected two modest rate increases in 2022 and maybe three in 2023. The public was led to believe that the US economy was still recovering quite robustly, though the strength of the labour market was still a concern, but it will be necessary to see 8th October’s Non-farm employment data for September posted before passing judgement. Thursday Initial Jobless Claims claiming bounced above expectations, with 350,000 people claiming benefits.

Last week’s MPC meeting saw no change in base rate (0.1%), but Sir Dave Ramsay and Michael Saunders voted to taper QE from the current £895 billion facility (7-2 against). The Bank of England cut its forecast for growth for the 3rd quarter from 2.5% to 2.1%. There is little doubt that that economic bumps in the road such as a shortage of gas and insufficient lorry drivers to guaranty petrol and food supplies could eat into positive growth forecasts. Inflation is expected to reach at least 4% by the end of the year. Most people attempting to read the BoE’s ‘tea leaves’ think the UK will be the first major economy to raise rates at a moderate rate in February 2022. The UK Public sector borrowing figure for August came in at £20.6 billion, an improvement on £26 billion this time last year, but still an eye watering sum of money.

An added ingredient of concern for investors to consider is geopolitical, but significant, as Angela Merkel relinquishes the Chancellorship of Germany after 16 years. Who will succeed her? – it looks like SDP, with another coalition is likely? Blondemoney’s Helen Thomas thinks Germany is heading ‘left’ politically and definitely going ‘Green!’ Merkel’s economic achievements have been significant. However, the German Chancellor’s good relationship with Putin over the years has resulted in Germany and Eastern Europe being almost entirely reliant on Russia for gas and energy. This could prove dangerous. Many will also feel uncomfortable at the prospect of France’s President Macron assuming the Napoleonic role as figurehead of the EU.

US corporate news flow has been relatively quiet last week. Nike’s earnings were disappointing thanks to supply chain issues, with sales likely to slip well below the 12% increase expected. Netflix agreed a $500 million deal with the Dahl family as consideration for all book, film, and animation rights. On the earnings front in the UK, Kingfisher, Compass Group, Saga and DFS all made great strides in terms of sales since the economy ‘opened up.’ Not quite the same can be said for PZ Cussons, who came up short and whose shares eased by 9% last Tuesday.

DraftKing’s audacious of £16 billion bid for Entain (Coral, Ladbrokes, Bwin etc) has come just 6 months after CEO Jette Nygaard-Andersen rejected an £8 billion from MGM Resorts, with whom Entain already enjoy a working relationship. This is the last throw of the dice in terms of ‘big deals’ on the gambling front for infiltrating the US on-line betting market, which is ‘opening up’ and looks like being a very fertile hunting ground. If successful the likes of Nygaard-Andersen, Kenny Alexander, Barry Gibson, and other executives are likely to scoop a £110 million deal jackpot.

It will be a relief for many investors to hear that Business Secretary Kwasi Kwarteng has called for a full investigation into Parker Hannifin’s £6.3 billion takeover of defence expert Meggitt. Many are concerned that the sale of the likes of Cobham, Ultra Electronics and now Meggitt are not in the best interests of the UK on security grounds. Since the pandemic the shares of National Express and Stagecoach have halved. So, it makes business sense for them to join hands in corporate ‘holy matrimony.’ Stagecoach has lost its UK rail franchise and sold its US bus operation. So now there appears to be great synergy for the two operations. It is possible BT Sport may have finally found an enthusiastic suitor in media titan Dazn to buy its business, which will require Sky’s approval. Dazn’s major shareholder is understood to be Sir Leonard Blavatnik. The rumoured price tag was £9.5 billion, but this has yet to be confirmed. The UK’s Vertical Aerospace has won a £585 million contract with Japan for its electric areo-taxis. Virgin Atlantic and American Airlines are also expected to sign up. Charlie Mullins has sold his Pimlico Plumbing to Neighborly, owned by KKR, for a purported £150 million, of which Mr Mullins could pocket 90%. His son Scott Mullins will remain as CEO.

There has been good news on the entertainment front. Having shed 74 outlets, made 1,000 redundant and incurred a loss of £256m in 2020, Pret A Manger’s fortunes have turned very positive. Pret will be opening 200 outlets and employing 2000 people in the next two years, investing £100 million in expansion plans. Travel Lodge is looking for 750 new staff, which reflects the upturn in its business. Addison Lee’s fleet of 4,000 taxis (mainly VW) will be electric by 2023, usurping Uber’s goals by two years. Aldi is to join Tesco and Morrison in pioneering a ‘no checkout’ system in many London stores.

The City of London has enjoyed a stellar period this year. After only nine months the London Stock Exchange, AIM and Aquis Stock Exchange have floated over 70 companies, with more deals in the pipeline, possibly including EG Group, Oxford Nanopore Technologies, Jaguar Land Rover, BrewDog, Monzo, Starling, McLaren Group and Virgin Atlantic, which are all considering their options. There are always going to be one or two which get through the net. Universal Music was one and Cazoo will be another. Universal Music floated last week in Amsterdam, for reasons best known to itself (probably influence from Vivendi and Canal+) valuing the company initially at €30 billion. The shares went to a 35% premium. Vivendi owns 20% of the stock, but its CEO Sir Lucian Grainge walking out of the ring with €105 million!

Let’s end on a bright note for Rolls Royce, which has suffered ‘the slings and arrows of outrageous fortune’ in the last eighteen months. The Sunday Times tells us that RR has landed a $2.6 billion deal with the US Air Force to supply engines76B – 52H reconnaissance planes.

UK Companies posting earnings this week – Tuesday – Close Brothers, Card Factory, Ferguson, Moon Pig, Smiths Group, AG Barr, United Utilities, Pennon, Wednesday – Quiz, NEXT, Thursday – Go-Ahead, Avacta, Boohoo, Renishaw, Friday - JD Wetherspoon

US companies posting interim results this week – Monday – IHS Markit, Micron Technologies, Wednesday – Jabil Circuits, Thursday – Bed, Bath & Beyond, Jeffries Financial,

Economic data to be posted this week – Monday – EU Money Supply, US Durable Goods, Tuesday – US House Price Index, US Consumer Confidence, Wednesday – BRC Shop Prices, Nationwide House Prices, UK Mortgage Applications, UK Consumer Credit, EU Consumer Confidence, US MBA Mortgage Applications, US Pending Home Sales, US Crude Oil Inventories, Thursday – UK GDP, US Initial Jobless Claims, US GDP, US Chicago PMI, Friday – UK, EU, US PMI Manufacturing, US ISM Manufacturing