THE WEEKLY FAYRE – Tuesday 3rd March 2020

THE WEEKLY FAYRE – Tuesday 3rd March 2020

March 3, 2020

“This was Mr Bleaney’s room. He stayed
The whole time he was at the Bodies, till
They moved him.’ Flowered curtains, thin and frayed,
Fall to within five inches of the sill,

Whose window shows a strip of building land,
Tussocky, littered. ‘Mr Bleaney took
My bit of garden properly in hand.’
Bed, upright chair, sixty-watt bulb, no hook

Behind the door, no room for books or bags —
‘I’ll take it.’ So it happens that I lie
Where Mr Bleaney lay, and stub my fags
On the same saucer-souvenir, and try

Stuffing my ears with cotton-wool, to drown
The jabbering set he egged her on to buy.
I know his habits — what time he came down,
His preference for sauce to gravy, why

He kept on plugging at the four aways —
Likewise their yearly frame: the Frinton folk
Who put him up for summer holidays,
And Christmas at his sister’s house in Stoke.

But if he stood and watched the frigid wind
Tousling the clouds, lay on the fusty bed
Telling himself that this was home, and grinned,
And shivered, without shaking off the dread

That how we live measures our own nature,
And at his age having no more to show
Than one hired box should make him pretty sure
He warranted no better, I don’t know.”

Philip Larkin – poet – 1922-1985

 

Astonishing that a rejuvenated Watford, under Nigel Pearson’s highly disciplined guidance should be the first premiership side to lower Liverpool’s colours at Vicarage Road on Saturday night - 3-0 on merit.

Ruminating over large gatherings, the Government and the health authorities have a real conundrum to face in the next few weeks. Should league football matches be allowed to take place, whilst the uncertainty of coronavirus prevails? Even more concerning is the annual pilgrimage to Cheltenham for the NH Festival a week today; that must surely be under threat. In terms of cost, untold millions will be lost, as well as leaving many owners, trainers and ancillary businesses in certainly emotional tatters, as well as economic. However, the heath of the nation is paramount. All should be revealed from Yesterday’s Cobra meeting.
 

INDEX 31st December 2019 28th February 2020 % loss/profit
FTSE 100 7604 6580 -13.5%
DAX 13385 11385 -14.9%
CAC40 6041 5299 -12.3%
DJIA 28868 24957 -13.5%
S&P 500 3380 2954 -12.6%
NASDAQ 9092 8567 -5.8%
SHANGHAI 3085 2880 -6.6%
HANG SENG 28543 26129 -8.5%
NIKKEI 225 23204 21142 -8.9%

 

INDEX 21st February 2020 2nd March 2020 % loss/profit
FTSE 100 7403 6580 -11.1%
DAX 13579 11835 -12.8%
CAC40 6029 5299 -12.1%
DJIA 28992 24957 -13.9%
S&P 500 3337 2954 -11.5%
NASDAQ 9576 8567 -10.5%
SHANGHAI 3039 2880 -5.2%
HANG SENG 27308 26129 -4.3%
NIKKEI 225 23386 21142 -9.6%


The last ten days have held more uncertainties for investors than the 1987 crash, which was ‘done and dusted’ in three days and the financial crisis of 2008/9, when at least there was some degree of confidence that governments and central banks had the ability to find a solution. For many the solutions such as the introduction of quantitative easing, though unpalatable, with thousands of people losing their jobs, were essential. Also, the financial crisis had a parochial feel about it, as folk went about their business as best they could.

This coronavirus crash, for want of a better expression, seems to have created a vortex of fear, which feels like it is a bottomless pit. The level of hysteria has been exacerbated by the global media and in fairness it has been a huge story. On the face of it, trade will be adversely affected, with containers in the wrong places. Supply chains have been severely damaged. The shipment of food could become a problem leading to increased inflation. Inevitably global growth will take a body blow. Few, however, know to what extent. Some economists tell us that China could suffer by as much as 1%, takings its GDP gown to 5% for 2020 - who knows what it will cost global GDP and whether a recession is inevitable. Much depends on how quickly this toxic illness can be brought ‘back on the bridle’! Many are also of the opinion that programme trading, especially futures and ETFs, have compounded the losses.

Helen Thomas of Blondemoney makes some very salient comments on the subject. She believes that risk reduction has hit liquid markets first. However, the real outflows have yet to begin. Monetary and fiscal policy could be useless. She is, as are many others, of the opinion that reducing freedom of movement of people will provide the ultimate liquidity squeeze. What is surprising is the lack of response from the world’s central banks to date. Maybe by the time this missive reaches you there will have been some intervention. Perhaps, they and their respective governments have pondered too long. So far, the foreign exchange markets have behaved in a relatively orderly manner. Credit spreads have widened, but there are few signs of panic. Market makers have always been very reliant on exchange traded funds for hedging purposes. It is possible that a liquidity mismatch could well create greater and more seismic levels of volatility.

In terms of value, the equity market losses made by most global indices last week have been the worse since the financial crisis. the FTSE 100 has lost circa £210 billion and the S&P 500/NASDAQ has surrendered close to $2 trillion. Global losses may have been in the $6 trillion region. With a view to putting some meat on the bone, last week the following FTSE 100 shares posted big losses - BP -10.6%, IAG -19.1%, Tui Travel -26.3%, easyJet -22.3%, M&S -10.7%, Tesco - 10,08%, NEXT -12.9%. On the Street of Dreams the following were exposed - Delta Airlines -15.69%, MasterCard -8.5%, Walmart -8.5%, Apple 8.08%, Exxon -10.09%, Amazon -5.99%, Boeing -13.79%, Intel -9.87%. By any standards these are measurable ‘pull-backs’. What was also very interesting was that it transpired that there was record turnover in ETFs bonds - $31 billion beating previous record of $18 billion.

Stock markets have thrived on quantitative easing over the past 12 years. Equity bourses have been holed below the Plimsoll line in the past two weeks; so, the need for central banks to maintain help is now a pre-requisite. Many will be surprised if they do not make their presence further felt in the days to come. Last year the FED cut interest rates three times. Until recently it had no plans to cut again. FED Chairman Jay Powell and his colleagues may have to have a rethink. Also, of concern were some dire Chinese PMI numbers for February posted on Sunday. This number fell from 50.00 in January to 35.7 in February. Clearly blocked supply chains and parts of China being in lock down would have hugely contributed to this dispiriting number. What we all need to know is was this number a temporary blip? To circa $50 a barrel and Treasury yields fell to their lowest level in living memory. Gold, having hit $1670 the previous week, fell irrationally to $1558 an ounce on Friday – back to $1585 yesterday. Oil also bounced by 4% to £52.51 a barrel.

It seems extraordinary that some investors are largely convinced that this coronavirus is thought to have sufficient impact to wipe out several years of corporate profits and maybe put a few companies out of business altogether. It seems a little early to form such a profound view. However on Monday the DJIA rose sharply in volatile trading as Wall Street – up over 1200 points (+5%) with 30 minutes to go, attempted to pare losses incurred during the worst week since the financial crisis amid fears of the coronavirus outbreak.The FTSE 100 also experienced similar uncertainty but finished the session at6,654.89 +74.28 (1.13%). Hope springs eternal that the central banks will sooner rather than later introduce stimulus packages. The Bank of England and the Bank of Japan seem attracted by the idea, when the moment is right.

Despite coronavirus grabbing the market by the jugular vein, there were other issues of interest, which occurred last week. Walt Disney served notice that its CEO Bob Iger would be leaving, though he would remain chairman for the transition period. He has been an outstanding media mogul. He added Marvel, Pixar, Lucasfilms and 21st Century to its portfolio. Also, Disney has already added 28 million subscribers to its streaming service.

Back here in old Blighty, UK inflation bounced from 1.3% to 1.8% in January, but the good news was wage inflation rose to 3.2%. Let’s hope that this virus crisis does not rock the improved outlook for the economy back on its heels. UK retail sales needed to jump in January 2020 and duly did - up 1.7%, with clothes up 1.3%, but sadly this key part of the UK economy is like to go to ‘hell in a handcar’ whilst under threat from this global health crisis.

On the earnings front, AB foods saw sales up 4.2% for the year with Primark to the fore. Corporate news was interesting, but it played a spear-carrying role behind coronavirus. Tesco will close 58 of its bakeries making 1800 of its 450,000-workforce vulnerable to redundancy. Diageo is of the opinion that this virus could clip £200 million off its profits this year. Metro Bank posted a £130 million loss last year resulting in its share price falling 19% to 155p. Dan Frumkin replaced Craig Donaldson as CEO post the £375m cash injection from shareholders, due to the accounting error. JP Morgan announced plans to make inroads in retail banking in the U.K.

The SFO will probably be pink with embarrassment, having failed to secure a conviction against Roger Jenkins, Tom Kalaris and Richard Boath of Barclays for fraud, when the bank raised £11.2 billion from Qatar, which kept Barclays afloat in 2008. The defendants vigorously denied any ‘wrong-doing’ from this fund-raising exercise. Former CEO John Varley was released without charge some weeks ago. There was insufficient evidence to answer any charge.

Lloyd’s Banking Group is likely to face further enquiries on fraud by Avon & Somerset police and the Issa Brothers from Blackburn may look at buying ASDA from Walmart.

UK companies posting earnings to be posted this week - Tuesday - Ashtead, Ibstock, Rotork, Fresnillo, Aggreko, Direct Line, John Laing, Greggs, Robert Walters, Elementis, Travis Perkins, Wednesday - Biffa, Costain, L&G, Polymetal, Chemring, Thursday - Admiral Group, Aviva, Cobham, ITV, John Lewis Partnership, Melrose, Premier Oil, Schroeder’s, Spirent, Domino’s Pizzas, Capita, Intu, Keir Group, PageGroup

US earnings to be posted this week - Tuesday - Ciena, Kohl’s, Ross Stores, Nordstrom, Target, Urban Outfitters, Wednesday - Abercrombie & Fitch, BJ Wholesale, Dollar Tree, Thursday - H&R Block, Friday - Brown-Forman

Economic data to be posted this week - Tuesday - UK PMI Construction, EU inflation estimate, Wednesday - UK, US EU PMI services, Thursday - UK New Car registration, Friday - US Non-farm Payrolls (+178k jobs created in February (est) - estimate for unemployment rate 3.6%, hourly earnings +3.2%).

SOURCES – BBC, CNBC, Reuters, Daily Mail, FT, The Times, Sunday Times, Sunday Telegraph, Guardia Yahoo Finance

by David Buik