WEEKLY FAYRE – Monday, 29th June 2020

June 29, 2020

“What of the faith and fire within us

Men who march away

Ere the barn-cocks say

Night is growing gray,

Leaving all that here can win us;

What of the faith and fire within us

Men who march away?


Is it a purblind prank, O think you,

Friend with the musing eye,

Who watch us stepping by

With doubt and dolorous sigh?

Can much pondering so hoodwink you!

Is it a purblind prank, O think you,

Friend with the musing eye?


Nay. We well see what we are doing,

Though some may not see—

Dalliers as they be—

England's need are we;

Her distress would leave us rueing:

Nay. We well see what we are doing,

Though some may not see!


In our heart of hearts believing

Victory crowns the just,

And that braggarts must

Surely bite the dust,

Press we to the field ungrieving,

In our heart of hearts believing

Victory crowns the just.


Hence the faith and fire within us

Men who march away

Ere the barn-cocks say

Night is growing gray,

Leaving all that here can win us;

Hence the faith and fire within us

Men who march away.


Thomas Hardy – author & poet – 1840-1928


After 30 years, Liverpool finally won the most coveted of trophies in professional football – the Premiership - by a country mile. What was sad for the club, its players, its manager Jurgen Klopp and its huge fan base, was that moment of magic was achieved by Chelsea beating Manchester City and with the stands at Anfield including the Kopp empty. The silence was deafening. Well done to Liverpool! It was an accolade richly deserved with some brilliant football, played by a collection of talented creative players. Some games were won comprehensively, when not always playing at their best. If needs must Liverpool knew how to win ‘ugly.’ That is a fantastic attribute in what is almost certainly the most competitive league in the game.

I know that ‘lockdown’ is coming to an end, as the world cautiously returns to work. However those people who relentlessly look for quality escapism, that is in very short supply on terrestrial and digital TV, may I recommend ‘Le Bureau’ – several exciting series about the French secret service’s adventures in Syria, Iran, Azerbaijan, Libya and Russia. These episodes are available on Amazon Prime or on DVD.




22nd June 2020

26th June 2020

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The behaviour pattern of global stock markets is often irrational at best and at times bordering on insane. I felt that was the case last week. For the early part of the week investors were determined that the worst was over, that the world was going ‘back to work’ and that recovery was on the way in spades. In isolation, without taking in to account all the other challenging imponderables, such as the toxic economic data, the thought process was plausible. Many indices, especially those in the US rallied sharply with the tech dominated NASDAQ briefly reaching fresh record heights above the 10k threshold. The performance of the DAX in Germany and the CAC 40 in France was none too shabby either. There was no doubt that traders and analysts were encouraged by positive PMI construction, manufacturing, and service sector readings, which showed significant improvement on April’s efforts on both sides of the pond. Oil prices bounced to over $40 a barrel, which encouraged observers to believe that demand was increasing. China was shut for two days holiday (Wed & Thurs) and Hong Kong was closed on Wednesday.

However, news that the coronavirus had started to spike sharply in Arizona, Texas, Florida and California, started to rattle investors’ cage. The virus was also rearing its ugly head in China, South Korea and to some degree in Germany. When you add this inauspicious news to some of the adverse economic data and informed comment that was being posted throughout the week, it makes quite a toxic and discouraging cocktail.  What did stick out like a sore thumb during last week was the price of gold – up over 35% since March to $1784 an ounce. Interest in gold is often an indication that investors are concerned that equities may be overpriced – hence the flight to quality.

The IMF global growth forecasts for 2020 did not make great reading - Global -4.9 percent in 2020, down from -3% made a few weeks ago, France and Italy -12.8%, UK -10.2%, US -8%, Germany -7.8%, and Japan -5.8%. The IMF has never been known for the accuracy of its forecasts, but even if it is a few percentage points out, these forecasts look dire. The IMF also believes that Covid-19 will cost the global economy $12 trillion. Then, of course US GDP for the first quarter came in at -5%, with the prospect of the second quarter reading showing a massive decline of between -25% to -30%! Thursday’s US initial jobless claims of 1.48 million workers looking for benefits was seen, as a modest improvement, but a 13.4% unemployment rate seemed eyewatering, even though there was a 0.5% improvement on the previous week. Durable Goods orders offered some solace increasing by 15.8% on a month-on-month basis to $194.4 billion in May following April's decline of 17.7%, the US Census Bureau reported on Thursday. This reading came in better than the market expectation for an increase of 10.6%. The final ‘nail in the coffin’ for Wall Street was provided by the FED Chairman on Friday. Jay Powell was keen to prevent the banks from paying dividends, as there were signs of the banking stress tests coming under duress, as the economic conditions threatened to deteriorate.

If people start to analyse this tsunami of worrying data and comment, who can blame investors for giving the ‘thumbs down’ to the Street of Dreams on Wednesday and Friday. There is a seriously tough battle to be won against such caustic news and it will probably not end in a ‘V-shaped’ recovery. On Friday market makers and hedge funds vented their spleen on airlines such as Delta, United and American Airlines (-6%), American Express (-4%), Apple (-3%), Boeing (-2.8%). The mood had certainly turned sour. In Europe this change in sentiment was not so marked, which is often the case when an index only has 30-40 stocks – not always the best barometer of their respective economies. The FTSE 100 was temporarily buoyed by the UK government relaxing lockdown restrictions, which should help to ‘open-up’ the economy, but again the FTSE 100 is an international index, which is not exactly a correlation of the UK’S economic activity.

There was some unusual terminology used by BoE Governor, Andrew Bailey in an interview with Sky’s Ed Conway – “Britain nearly went bust in March.” I am not sure Mr Bailey meant to say that. What I think he meant was that without the BoE’s intervention, the situation would have been grave. There is no doubt that the lowering of rates and the introduction of fresh quantitative easing (£200 billion) reduced the Government’s borrowing costs as Covid-19 crisis hit markets. As we all know, that was the BoE doing the job it is meant to do, as part of the Treasury, leaving, of course, its independence on interest rate policy aside. Chancellor Rishi Sunak appointed a new head of the FCA – Nikhil Rathi, currently CEO of the LSE – rather than the temporary head, Chris Woolard. Mr Rathi had also had a senior position at the Treasury as head of international financial services, making him well-qualified to deal with this fresh challenging role.

UK car production fell 95.4% in May. In May, 4260 cars were exported, and with English showrooms not reopening until 1 June, only 1054 models were built for domestic buyers. Year-to-date, UK factories have made 324,763 cars, down 41.7% on 2019. That translates to 230,000 fewer vehicles made and revises the SMMT’s production outlook for 2020. The SMMT stated that within three to four weeks production could be up to 100% capacity, but today its just 50% of normal capacity.”

Tesco posted first quarter sales on Friday – up 8.7% domestically and 7.9% internationally. Basket sizes increased by 64% but frequency visits dropped by 32%. Tesco Bank made a loss. Overall, the market seemed a little disappointed. This was CEO Dave Lewis’s valedictory update before he hands over to Ken Murphy of Walgreen Boots in September. H&M also posted numbers on Friday: 2nd quarter sales were down 50% at SKR 26 billion. Sales in June eased by 28%. There are likely to be many unit closures in 2020. JD Sports have agreed to reverse their decision to let Go Outdoors go into administration by pumping in £56 million into the operation, thus saving perhaps as many as 2400 jobs in 67 units.

In principle Mitie has agreed to acquire Interserve.  Two of the UK's biggest government outsourcers have agreed to merge their support services to create a business employing almost 80,000. Mitie Group said it would buy the facilities management arm of rival Interserve for £271m. The deal will help Mitie gain scale in the UK's huge outsourcing industry at a time when others are struggling to cope with the coronavirus crisis. Both firms serve clients such as the NHS and the Ministry of Defence.  

The day of reckoning has finally come for Intu Properties, the owners of the Trafford Centre in Manchester, the Metro Centre in Gateshead and Lakeside amongst others. The writing was on the wall way before the coronavirus crisis.  This is a debt problem, where Intu is into its banks for £4.5 billion. The Company has grown too fast and stretched itself too far. With many retailers unable or unwilling to pay their rents in full in the current climate, Intu’s banking covenants have been breached, with little possibility of their debt being serviced.  Unless the administrator can find willing purchasers of these centres, I fear they will be left to decay with many retailers forced to close their units. According to the Sunday Times the Canadian Pension Fund that dashed Intu’s survival hopes is pushing for a quick sale of the Trafford Centre; very much its preferred choice to the damage that might be done by a 15-month debt standstill.

Many redundancies have been announced this past week including those made by Swissport, which is set to cut more than half of its UK workforce as air companies struggle with the effects of the coronavirus crisis - The firm said it was consulting on cutting up to 4556 jobs. 6000 jobs will be going at Qantas. Royal Mail served notice to ‘bin’ 2000 employees after posting very average numbers. 

Germany’s Wirecard’s financial problems were finally brought to light. This digital payment titan seems to have mislaid €1.9 billion from its balance sheet in the last two years. Their problems were exposed some time ago by the FT, which had two of its journalists charged with criminal behaviour for suggesting allegations of fraud in Singapore. The EU has called for an investigation into the German regulator, on concerns that their poor controls may be a threat to investor trust in the EU. CEO Markus Braun gave himself up to the police in Munich and he is being investigated for fraud. The share price has fallen from €112 to €1.28 since the beginning of the year. It is thought that the total loss my be €3.5 billion. Over 1000 investors have joined a class ‘A’ action seeking up to £1 billion from auditor EY.

Life in Old Blighty is not all bad. There are nuggets of good news and here is one - The European Space Agency has selected Leicester for its new space tech incubation centre. Expected to create 2,500 jobs, the £100m-plus Space Park Leicester development has already attracted global companies including Lockheed Martin, Thales, Airbus and Hewlett Packard. 

Finally, the US government has warned Hitachi against selling its North Wales Horizon nuclear power project to China. CGN is keen to buy the site after Hitachi wrote off £2 billion after repeated delays from Westminster in signing off on the project.

UK companies posting interim results this week – Tuesday – GW Pharmaceuticals, On the Beach, Wednesday – J Sainsbury, React Group, Thursday - DS Smith, Meggitt, Friday – Fuller, Smith & Turner

US companies posting earnings this week – Monday – Jack-in-the-Box, Micron Technology, Tuesday – FedEx, Wednesday – Macy’s, General Mills, Constellation Brands, Thursday – Korn/Ferry

Economic data to be posted this coming week – Monday – Japan Retail Sales, UK Mortgage lending, BoE Consumer Credit, EU Consumer Confidence, US Pending Home Sales, Tuesday – UK GDP Q1 final, Nationwide House Prices, EU Inflation, US Chicago PMI, FED Chairman Powell testimony, Wednesday – Japan’s Tankan Manufacturing Survey, UK HIS Markit, Manufacturing PMI, US ADP Employment Index, US MBA Mortgage Applications, US Construction Spending, US ISM Manufacturing, Thursday – US Vehicle Sales, US Initial Jobless Claims, US Non-Farm Payrolls (EST: 2.5 million), US Unemployment (EST: 13.2%), BOE Financial Stability Report, Friday – UK Gfk Consumer Confidence, IHS Markit PMI Services and Composite, US Holiday – Independence Day.