WEEKLY FAYRE – Monday, 5th July 2021

July 5, 2021

“Shall I compare thee to a summer’s day?

Thou art more lovely and more temperate:

Rough winds do shake the darling buds of May,

And summer’s lease hath all too short a date;

Sometime too hot the eye of heaven shines,

And often is his gold complexion dimm'd;

And every fair from fair sometime declines,

By chance or nature’s changing course untrimm'd;

But thy eternal summer shall not fade,

Nor lose possession of that fair thou ow’st;

Nor shall death brag thou wander’st in his shade,

When in eternal lines to time thou grow’st:

So long as men can breathe or eyes can see,

So long lives this, and this gives life to thee.”

 

William Shakespeare – poet & Playwright – 1564-1616

 

It has been another massive week for sport! England play Denmark in the semi-finals of Euro-2020 at Wembley next Tuesday, having overwhelmed Ukraine 4-0 in Rome last Saturday evening. England put in an incredibly polished shift against Ukraine - very professional. I was never going to do cartwheels from excitement, but the goals were well taken, and the game was brilliantly managed by Gareth Southgate’s staff and the players alike! Can we dream of a place in the final against Italy or Spain next Sunday?

The Wimbledon Championships were also ‘under a wet sail.’ Djokovic performed like a juggernaut, sweeping all before him. Federer played with considerable style and panache for a man who is just a month short of his fortieth birthday to reach the fourth round. Ashleigh Barty looks a strong contender to win the Ladies’ title and Britain’s Emma Raducana’s performance to reach the last sixteen was the fairy tale element Wimbledon always produces.

Coolmore’s ‘St Mark’s Basilica’ looked a very useful tool in winning “The Eclipse” at Sandown Park on Saturday in the hands of Ryan Moore. It will be interesting to see whether he will be entered for the King George at Ascot or will the owners wait for the Juddmonte at York in August over a less testing 1 mile 2 furlongs?

 

INDEX

28th June 2021

2nd July 2021

% Loss/Gain

FTSE

7136

7123

-0.18%

DAX

15570

15638

+0.45%

CAC40

6611

6548

-0.95

DJIA

34428

34786

+1.04%

S&P 500

4284

4352

+1.59%

NASDAQ

14417

14639

+1.54%

SHANGHAI

3612

3518

-2.60%

HANG SENG

29002

28310

-2.39%

NIKKEI 225

29112

28783

-1.13%

 

It is unlikely that investors will ever experience such an extraordinary recovery of the global stock markets that transpired between the end of March 2020 and the end of that year, in their lifetime. However, apart from the Far-East, where the Shanghai Composite and the Hang Seng have only shown gains over the first six months of this year of 0.5% and 3.05% respectively with the Nikkei 225 easier by -5.59% in the same period, measurable progress has been made by the US and Europe in the past six months. 

It should not be forgotten that much of Asia’s economic recovery from the pandemic took place about six months ahead of the rest of the world.  Also, negative political vibes focused on China have prevailed, such as trade imbalances, human rights issues, and the centennial celebrations for the Communist Party. Some investors viewed these events with increasing concern with potential market risks attached. Gains in some of the major indices have been achieved since January 2021 are as follows – S&P 500 +17.6%, NASDAQ +15.28%, FTSE +8.39%, DAX +14.01%, CAC 40 + 17.25%. Investors need to remind themselves that the DAX and the CAC 40 only have 30 and 40 constituent stocks respectively and the FTSE 100 has underperformed due in the main to some mining stocks, and the likes of Rolls Royce, Vodafone, GSK, Imperial Brands, BATS, Informa, Tesco, Whitbread, and Smith & Nephew and of course, a lack of momentum from tech companies.  

Equity trading last week was all about momentum in the US, with all three major indices hitting new records. The economic data was decent from the manufacturing sector. US car sales continued at a blistering pace in the second quarter but showed some signs of slowing in June, as the number of vehicles on dealership lots continues to dwindle. General Motors Co. reported a nearly 40% increase in vehicle sales for the second quarter compared with the same period a year ago. Sales for Stellantis NV increased 32% in the second quarter, compared with the April-to-June period a year ago.  Volkswagen AG reported its best first-half US sales in nearly a half-century while managing tight supplies. The company now has about 32,000 vehicles in inventory.

Employment data posted in the US last week was progressive. Job growth leapt higher in June as businesses looked to keep up with a rapidly recovering US economy. Non-farm payrolls increased by 850,000 for the month, compared with the Dow Jones estimate of 706,000 and better than the upwardly revised 583,000 in May. The unemployment rate, however, rose to 5.9% against the 5.6% expectation. This data was preceded on Thursday with Initial jobless claims, which totalled 364,000 last week, below the 390,000 Dow Jones estimate. That was the lowest total in the Covid pandemic era as the jobs market continues healing. There are still more than 11 million Americans receiving benefits through pandemic-related programmes.

In the UK, the Nationwide posted an increase in house prices of 13.4% in the past year - the largest increase for 17 years, as the ‘Stamp duty holiday’ comes to an end. London house prices only increased by 7.3%. On Wednesday, the ONS posted a final estimate for UK GDP  for the 1st quarter -1.6%, slightly worse than expected. The fourth quarter for 2020 came in at +1.3%.  Lockdown damage for the first quarter was significant with consumer expenditure -4.6% (quite a big miss), though savings were up 19.9%. The UK is still expected to grow by 7% in 2021, endorsed by Panmure Gordon's Simon French on Wednesday morning. Comments made by Andy Haldane, the outgoing Chief Economist of the Bank of England in a valedictory speech, suggested that inflation in the next few months was a far greater threat than many experts think is the case. He is of the opinion that 4% could be attained, which could trigger higher interest rates being implemented rather more quickly than has been forecasted,

It looks as though over 100 countries have agreed to a minimum corporation tax rate of 15% to be implemented by 2023. The idea was hatched in earnest at the G7 conference, hosted by the UK last month. It will apply in the main to companies with a turnover of more than €750 million per annum, with the tax generated being moved back to the country or origin. Digital taxation is expected to generate €100 billion per annum. Business Secretary Kwasi Kwarteng provided the UK car industry with a great fillip by confirming that Nissan will invest £1 billion in a giga battery factory to produce electric cars in the North-East with the government providing supportive funds. This initiative could create a fresh 2,000 jobs for the region. Let us hope that the same help can be provided for Vauxhall’s Ellesmere Port factory.

Corporate news associated with US was generally upbeat last week. Not only did stocks hit record levels, but there was also a fresh IPO to accept and trade. Online grocer Dingdong Maicai slashed the target for its US initial public offering by nearly 74% on Monday, just three days after the company’s rival MissFresh debuted to disappointing results on the Nasdaq. Ding-Dong raised just $94.4 million, down by more than 70% from its original target of $357 million. The shares popped more than 25% on Tuesday and then surrendered most of the gains. Gap announced that it was closing all 81 outlets in UK and Ireland, but their clothes can still be bought on-line. Foot Locker saw like-for-like sales jump 80% in the three months to 1st May 2021, with on-line revenues increasing by 43% in the same period.

There were encouraging trading updates from AO World (59% increase in revenues in the last year) and Primark, where sales soared by 207% in the last quarter. During the worst part of the pandemic all their shops were closed and there was no on-line presence. Shares in AO World have bounced like the proverbial grilse adding 400% in value since March 2020. Marco Gobbetti served notice to leave Burberry as CEO and that he was heading off to Salvatore Ferragamo. Burberry’s shares took an 8% tumble on Wednesday.

H&M surprised the market with news that the Swedish retailer would be closing 250 outlets in the next two years. There was an unsavoury spat between shareholders and JD Sport’s CEO Peter Cowgill, who has been successfully in situ for the past 17 years. His bonus of almost £6 million seemed indigestible, despite having waived 75% of last year’s salary. JD Sports is estimated to make £500 million this year, yet the company has not yet decided to repay £86 million of furlough money of £38 million rates relief. Dixons Carphone, having lost the custom of BT and EE, have agreed an exclusive deal with Vodafone for 300 of its outlets. Also, in a statement on Wednesday Dixons Carphone announced strong trading in all markets; market share gains in all open channels. Electricals online sales grew by 103% to £4.7bn and the company had repaid £73 million of furlough money. Stagecoach told the market that revenues had fallen by a third in the past year to £928.2 million, with pre-tax profits drifting by 40% to £24.7 million.  The company has also lost control of East Midlands Trains. However, revenue is increasing from its regional bus services as the economy starts to open-up.

Bridgeport, the private equity group, which has had successful investments in Pret a Manger, Zizzi, Deliveroo, Itsu and Fat Face is seeking a public quotation, valuing the company at close to £2 billion. Elliott Management, with Paul Singer leading the charge, is continuing to give GSK’s CEO Emma Walmsley ‘grief’ over the company’s poor performance over recent years and the indecent time it has taken to split the company into pharma and health care. He is insisting that Dame Emma reapplies for her position as CEO! 

You know what they say? Save the best till last! Having rejected at £5.5 billion bid plus debt of £3.2 billion from Clayton, Dubilier & Ryan last week, ‘low and behold’ yesterday, William Morrison, the UK’s 4th largest supermarket, has accepted a £6.3 billion offer from Fortress and friends, plus, of course the debt. This deal will be accepted with some justifiable scepticism by shareholders and the 100,000 staff. Is this the right value? Is this action the start of asset stripping, with Morrison owning so much property? Will this start a bidding war? Will the ‘Great God’ Amazon suddenly appear from ‘left-field?’ Could Sainsbury’s soon be in play as another target for hungry predators? Morrison might look like ‘a snip’ to get cheaply into UK food market. The shares have gone nowhere in the last five years. Last year Morrison posted a profit of £201 million on sales of £17.6 billion.

UK companies posting interim results this week – Tuesday – Ocado, PurpleBricks, RM, J Sainsbury, Wednesday – FirstGroup, Superdry, Ferrexpo, Robert Walters, Thursday – Fuller, Smith & Turner, Entain, Persimmon, Electrocomponents, Friday – MJ Gleeson

US companies posting interim results this week – Thursday – Levi Strauss

Economic data to be posted this coming week – Monday – UK PMI Services, US ISM Services, Tuesday – UK PMI Construction, EU PMI Services, EU Retail Sales, US PMI Services & Composite, Wednesday – UK Balance Trade, Halifax House Prices, Thursday – RICS Housing Survey, US Initial Jobless Claims, US Consumer Credit, Friday – UK Industrial Production, UK Balance of Trade, UK GDP, US Wholesale Inventories