WEEKLY FAYRE – Tuesday, 1st June 2021

June 1, 2021

Everyone suddenly burst out singing;

And I was filled with such delight

As prisoned birds must find in freedom,

Winging wildly across the white

Orchards and dark-green fields; on - on - and out of sight.

Everyone's voice was suddenly lifted;

And beauty came like the setting sun:

My heart was shaken with tears; and horror

Drifted away ... O, but Everyone

Was a bird; and the song was wordless; the singing will never be done.”

Siegfried Sassoon – poet & soldier – 1840-1928 

 

Last Saturday night in Portugal, in front of 7,000 of their euphoric fans, Chelsea completely nullified Manchester City’s threat, as the most brilliant attacking force in the Premiership, by winning the ‘Champions League’ final 1-0, thanks to a neatly-taken goal by the German international Havertz. It is not often that Pep Guardiola is tactically vanquished by the opposition’s manager. Well, he truly was comprehensively outgunned by Thomas Tuchel, who previously managed last year’s beaten finalists PSG, Paris. Manchester City had just one shot on target in the whole match and were deservedly outgunned.

 

INDEX

24th May 2021

28th May 2021

% Loss/Gain

FTSE

7018

7022

+0.05%

DAX

15411

15519

+0.70%

CAC40

6395

6484

+1.39%

DJIA

34253

34529

+0.81%

S&P 500

4170

4204

+0.82%

NASDAQ

13557

13748

+1.40%

SHANGHAI

3486

3600

+3.27%

HANG SENG

28417

29124

+2.49%

NIKKEI 225

28212

29149

+3.32%

 

Last week there was not exactly a slew of economic data to either set equity markets on fire or burst their bubble, but the quality of what there was sufficient to keep all global equities above the Plimsoll line. In the US, confirmation of first quarter GDP coming in 6.4% provided a reasonable base for the Street of Dreams to consolidate. On Thursday, Initial Jobless claims continued to fall with just 407,000 people claiming benefits during the previous week. Inertia was clearly in evidence on Wall Street for much of last week. Nonetheless there was sufficient optimism for the three main indices to add a smidgen of value. Asia was perhaps the star performer. The reconfiguration of the Hang Seng to shortly include eighty stocks, up from fifty-five, provided much of the momentum together with the JD Logistics’ IPO, valued at $36 billion, which added 3% in value on debut. Japan’s Nikkei 225’s progress slightly surprised some of its acolytes, with Japan cutting its economic outlook, thanks to the virus emergency dampening spending. Also, the threat of the Tokyo Olympic Games being cancelled could cost Japan $17 billion, according to Nomura Securities. Despite these nuggets of dispiriting news, there was some underlying confidence for investors to pick up the cudgel.

In the UK, spending in the housing market in March 2021 was at its highest level since 2007 at £275 billion, £8 billion higher than in November 2007. However, UK tourism spending is estimated to come in at just about half pre-pandemic levels – down from £91.6 billion in 2019 to £51.4 billion this year. As to Government borrowing in April 2021, the public sector spent more than it received in taxes and other income requiring it to borrow £31.7 billion, £15.6 billion less than in April 2020, but still the second highest April borrowing on record. Retail operators dominated the earnings agenda in the USA, as the 2nd quarter season headed towards the close. Best Buy, Dollar Tree, Dollar General, Nordstrom and Big Lots fell short of market expectations with sale levels adversely affected by the pandemic. However, Abercrombie and Fitch, Urban Outfitters and Dick’s Sporting Goods, the largest retailer of guns, pleased their shareholders as did house builder Toll Brothers. Nvidia, which continues to aspire to take ARM holdings from Softbank’s clutches and popping it into its portfolio with a fiscal second-quarter forecast that is roughly a half-billion dollars more than expected. Its shares bounced by 5%.

Amazon completed its purchase of MGM studios for $8.5 billion. With its commitment to movie and TV production, Amazon has visions to eventually compete on streaming with Netflix, Disney, and AT&T. Subsequently, AT&T announced a $43 billion deal to merge Warner Media with Discovery. Under the agreement, AT&T said it would receive an aggregate amount of $43 billion in a combination of cash, debt, and Warner Media's retention of certain debt. Discovery shareholders would own 29% of the new company. Other M&A rumours this week involved whispers, which continue to prevail that a large US gambling operation has Rank, the owner of Grosvenor Casinos and Mecca Bingo, in its sights.

Airbus looked to have ‘upped its game’, hoping to increase the production of the A320 and A350 by about 10% this year and back to pre-pandemic levels by 2023. This augurs well, not only for 9,000 jobs making the wings, but also for Rolls Royce, which has just opened a £90 million servicing hanger to accommodate larger engines. Elliott Management have not quite ‘called off the dogs’ on GSK’s CEO Dame Emma Walmsley, whose position continues to remain marginally under pressure. Glaxo is the largest vaccine maker in the world on sales, contributing £7 billion out of total sales of £34 billion. Elliott Management thinks there might be a case for unlocking the value of the vaccine division. Dame Emma is due to make a presentation on her plans to demerger Glaxo’s consumer business from its pharma operations next month. Last year GSK and Pfizer merged their consumer healthcare businesses into a single joint venture, creating one of the largest over-the-counter companies in the world with major market share in important regions such as the US and China. GlaxoSmithKline shares have surrendered about 15% in value during the last two years, whereas Astra Zeneca’s shares are up by a similar amount. Conversely Astra’s proposed acquisition of Alexion for £27.5 billion has been referred to the CMA for approval, with concerns having been expressed over competition issues.

Nissan has announced plans to build a battery factory at its Sunderland plant. The factory is expected to eventually produce 200,000 batteries a year, keeping many of the 7,000 workforces in gainful employment. It is 21 years since Brent Hoberman and Martha Lane-fox brought Lastminute.com to the market. Shortly Mr Hoberman and others will head up Made.com’s IPO, valued at £1 billion. The company is looking to raise 25% of its value.

Investors and analysts were delighted with M&S’s earnings posted last Wednesday. The relationship with Ocado has generated £1.5 billion in sales. M&S will continue to streamline its operation by closing 30 stores. As a result of severe costs being incurred during the pandemic, a statutory loss of £201.2 million was incurred with a pre-tax profit of a rather parsimonious £41.6 million – a far cry from the £1 BILLION made in 2007. Food sales on a like for like basis were up 1.3%. Clothes sales for the last 6 months were down 31.5%, though on-line sales from a low base increased by 53%. Under Amanda Blanc’s fresh leadership, the fortunes of insurance mogul, Aviva have started to improve measurably, with general commercial insurance revenues increasing by 11%. Aviva’s shares are up 29% year to date.

AJ Bell, the on-line stockbroker, and funds under management operation have seen its shares rally by 96% since its IPO three years ago. Pre-tax profits for the last trading period were up 40% with customer numbers increasing by 32%. Dame Helena Morrissey becomes chairman of AJ Bell in July.

It is interesting to note that since the pandemic, 123 companies, valued at approximately £52 billion, have fallen into the hands of private equity, the most recent being KKR’s purchase of John Laing for £2 billion. Many jobs will have been lost as these companies are made mean and lean. However, to detractors of these deals, many jobs will also have been saved.

UK companies posting interim results this week – Wednesday – Bloomsbury Publishing, Wizz Air, Thursday – Pennon, Workspace, Chemring, FirstGroup, Friday – Fuller, Smith & Turner

US companies posting interim results this week – Monday – Manchester United, Tuesday – Zoom, Campbell Soups, Thursday – Broadcom, Ciena, Hewlett Packard

Economic data to be posted this coming week – Tuesday – Nationwide House Prices, UK, EU, & US PMI Manufacturing, EU Unemployment, US Auto Sales, Wednesday – UK Money Supply, UK Mortgage Application, UK Consumer Credit, BRC Shop Price Index, EU PPI, US MBA Mortgage Applications, US Crude Oil Inventories, Thursday – UK, EU & US PMI Services, US Initial Jobless Claims, Friday – UK PMI Construction, US Non-Farm Payrolls, US Unemployment rate, US Factory Orders, US ISM Services