WEEKLY FAYRE – Monday, 29th November 2021

November 29, 2021

“Well, they are gone, and here must I remain,

This lime-tree bower my prison! I have lost

Beauties and feelings, such as would have been

Most sweet to my remembrance even when age

Had dimm'd mine eyes to blindness! They, meanwhile,

Friends, whom I never more may meet again,

On springy heath, along the hill-top edge,

Wander in gladness, and wind down, perchance,

To that still roaring dell, of which I told;

The roaring dell, o'erwooded, narrow, deep,

And only speckled by the mid-day sun;

Where its slim trunk the ash from rock to rock

Flings arching like a bridge;—that branchless ash,

Unsunn'd and damp, whose few poor yellow leaves

Ne'er tremble in the gale, yet tremble still,

Fann'd by the water-fall! and there my friends

Behold the dark green file of long lank weeds,

That all at once (a most fantastic sight!)

Still nod and drip beneath the dripping edge

Of the blue clay-stone.”

 

Samuel Taylor Coleridge – Poet – 1772-1834

 

Instead of the usual sporting fayre that normally starts the weekly missive, I would like to draw to everyone’s attention an amazing song, written and sung by Charlie Starmer Smith, son of Nigel, the former rugby international and BBC commentator, who is suffering with acute dementia. Charlie’s song has had media coverage on the BBC, distribution on Spotify and Apple, supplemented with heart-rending articles in the Times, Daily Mail and in Monday’s Telegraph. The song is now No: 7 in the iTunes charts just two below ‘Adele.’ I am not exaggerating when I tell you the song is amazing, very emotional with a great tune and glorious lyrics. All the proceeds generated from the sale of this song, are being generously donated by Charlie, to Alzheimer’s. Please at least listen, if not buy a copy.

 

INDEX

22nd November

26th November

% gain/loss

FTSE

7223

7044

-2.49%

DAX

16188

15257

-5.75%

CAC 40

7130

6739

-5.48%

DJIA

35879

34899

-2.73%

S&P 500

4708

4594

-2.42%

NASDAQ

16042

15491

-3.43%

Shanghai

3562

3564

+0.04%

Hang Seng

25057

24080

-3.90%

Nikkei 225

29641

28751

-3.00%

 

When the news of the Covid variant, recently exposed in Southern Africa, broke on Thursday night, with its perceived dangerous threats from mutation, it was a signal for global equity traders to push the ‘sell’ button, with a view to taking some risk off the table. Consequently, even though the US were attempting to enjoy Thanksgiving, with turkey, pecan pie and all the trimmings washed down with several glasses of Cabernet, followed by exuberant action in the shopping malls or on-line for the Black Friday goodies, ‘the wind was taken out of their sails.’

Markets were already concerned about inflation, inevitable interest rate increases, virtually flagged up by the FOMC minutes on Wednesday and the increased virility of this pandemic, which simply refuses to abate. In fact, Europe is under siege again from yet another visceral wave, which threatens to damage the recovery process and could even send robust economies such as Germany into temporary recession by the end of the year. The arrival on scene of the Omicron variant, which may even threaten Europe, was the ‘straw that broke the camel’s back’ for investors on Friday.

There were a number of market luminaries who felt that equities were fully priced for the time being in view of the economic and medical storm clouds that were gathering in the gloom. After the spectacular gains made last year and the promise of an exaggerated recovery across the globe in 2021, which now looks like it has stuttered, the DJIA (+15.4%), S&P500 (+24.6%) the NASDAQ (+22%), the FTSE (+7.18%), the DAX (+11.5%), the CAC (+20.5%) have made only decent gains this year to date, in comparison to fantastic achievements in 2020. Unsurprisingly investors have been inclined to rule their books off for the year and bank their profits. The Hang Seng has surrendered 12% year to date, due to political and regulatory interference, with the Nikkei adding just 5.48%, Japan having failed to get Covid ‘back on the bridle.’

Friday’s ‘sell-off’ sent out a clear message of intent, rather than doling out a vituperative message. No one knows how rampant Omicron might be; so, investors have kept some of their powder dry. On Friday, the following were the major stocks, which saw an erosion of their value – US Boeing -5.5%, Exxon -3.5%, JP Morgan -3%, TESLA -3%, Delta -8%, United Airlines -9.5%. Zoom added 6%. Here in Old Blighty, the following felt the wheels of pain across their back – Rolls Royce -8%, IHG -6%, Whitbread -4.8%, Shell -4,7% and BP -5.8%. Even M&S, after a ‘wonderful run on the rails,’ surrendered 3.05%, but its shares are up 81% year to date. If the visual media continue to adopt an unnecessarily hysterical approach to this fresh variant, make no mistake markets could head lower.

On the economic front, there was a compendium of interesting news. US Initial Jobless Claims for the past week came in at 199,000, the lowest number of people claiming benefits since 1969. President Biden attempted to have crude oil inventories cut by 50 million barrels, but the market has yet to see the real benefit of his proposal. In the UK it became apparent that 300,000 workers have headed back to Europe as a result of Covid and tough regulatory requirements to stay. There has been a manufacturing boom in the UK relatively speaking, provided the supply chain does not damage the order book. Conversely, Germany’s growth slipped to +1.7% from July to September 2021. The OECD forecasts the UK will grow 6.7% this year but Germany may not grow more than 2.9%. There was damaging news about the bounce and other loans lent by the Government during the pandemic. Out of £48 billion lent, it is possible that £26 billion may have been either fraudulently acquired, or the borrowers are unable to repay. After the withdrawal of the stamp duty holiday at the end of September, house sales fell by 52% in October to 76,930.

The most serious piece of news to affect the UK consumer this week was the plight of Bulb Energy, with 1.7 million customers requiring a facility of £1.7 billion from the government to keep their customers warm, until alternative arrangements can be made. The addition of Orbit Energy and Entice makes it a total of 23 energy suppliers that have ‘gone to the wall’, since gas prices have risen like the proverbial grilse. Long-term solutions to this crisis will not be easily manifested.

Black Friday sales in the UK were heading for new records, despite a ‘drop’ in high street activity. Consumers are believed to have spent £3.38bn, equating to £9.185 billion. This figure is a 21.7% increase on 2020’s. This past weekend was a vital period for the likes of John Lewis, ASDA, and Curry’s. However, M&S and NEXT are sticking by their guns and were not involved. In the US, consumers, who spent $5.1 billion on Thanksgiving Day, are expected to have ‘shelled out’ between $8.8 billion and $9.6 billion on Friday, according to Adobe Digital Insights. The market research firm forecasts that online sales in November and December will hit a record $207 billion, which would mark a 10% increase over last year. Ahead of the Black Friday weekend, Best Buy, Urban Outfitters and Nordstrom posted disappointing earnings, resulting in these retailers surrendering double digit valuation losses, especially the latter which lost 32% of its value last week. JP Morgan’s enigmatic CEO Jamie Dimon is thought to have regretted making uncomplimentary remarks about China, Suggesting JP Morgan would outlast the Chinese Communist party. Many CEOs might well have lost their position from such an indiscretion, but Mr Dimon appears to be omnipotent on Wall Street,

Here in the UK last week, M&B, Mulberry, Mothercare, Pets at Home, Compass Group, and Britvic posted encouraging earnings, making strong recoveries from the pandemic. Conversely AO World found itself up against supply chain and driver issues during the last quarter. Shareholders were underwhelmed and took the shares down 16% on Tuesday. These shares had fallen by 25% at the opening. Lord Stuart Rose was appointed chairman of ASDA, having made a tremendous success as chairman of Ocado and previously as CEO of M&S. Talking of M&S, its fortunes and recovery seems to go from strength to strength. M&S have agreed to sell ‘Nobody’s Child’ merchandise as well as 30 food items through Costa Coffee. The German supermarket, Lidl, which has 9,000 branches in Europe intends to expand its empire in the UK by adding 220 outlets to a total of 1,100 by 2025, creating 4,000 new jobs. Lidl is top of the pile in terms of remunerating its staff. Wendy’s, which closed its UK operation in 1999, is to open 50 new sites in 2022, part of a 400-shop expansion plan in Europe and Asia, creating 12,000 jobs.

There was a change of heart by the Peruvian Government over silver and copper mines remaining open for extraction. This news caused Hochschild shares to bounce 20% on Thursday, having lost half their value earlier in the week. Johnson Matthey, the chemical titan, attempted to make amends to its shareholders, having pulled out of constructing car battery factories, by offering a £200 million share buyback. The sale by Softbank of ARM Holdings, the UK’s Largest chip manufacturer to Nvidia, based in California for $30 billion is far from done and dusted. The UK Government has grave concerns about on going security and Ministers would prefer that it was ‘offered for sale’ again on the London Stock Exchange. The sale of LV to Bain Capital for £530 million, is likely to be confirmed this week, despite considerable objections from a variety of sources. Many feel that Royal London’s proposal has not been carefully considered as a better partner, certainly for existing annuity business. I suspect GSK’s CEO, Emma Walmsley felt she had done enough with the perceived success of the HIV vaccine and progress over healthcare to see off Paul Singer and Elliott Management’s relentless quest to have her removed and force a change in policy direction. This may not be case, and Ms Walmsley may have to look for boardroom help to bolster up the barricades.

Markets on Monday morning, after the US Thanksgiving holiday could prove remarkably interesting as well as challenging.

UK Companies posting earnings this week – Monday – Countryside Properties, Amigo, Tuesday – easyJet, Pennon, Salesforce, Marston’s, Wise, Topps Tiles, Wednesday – Peel Hunt, Thursday – AJ Bell, Oxford Metrics, Go-Ahead 

US companies posting interim results this week – Tuesday – Barnes & Noble, , Chico’s FAS, Hewlett-Packard Enterprises, Wednesday – Constellation Brands, Snowflake, Thursday – Smith & Wesson, Dollar General, Kroger, Friday – Big Lots

Economic data to be posted this week – Monday – EU Consumer Confidence, EU Industrial Confidence, US Pending Home Sales, UK Consumer Credit, UK Mortgage Application, Tuesday – US House Price Index, US Chicago PMI, US Consumer Confidence, UK Nationwide House Price Index, UK M4 Money Supply, Wednesday – BRC House Price Index, UK, EU PMI Manufacturing, US Construction Spending, US Crude Oil Inventories, Friday – UK PMI Services, EU PMI Services, US Non-Farm Payrolls, US Unemployment rate, US PMI Composite, US Factory Orders, US ISM Services