Retail sales slump amid new restrictions
New data from the CBI distributive trades survey has shown retail sales in October to fall to -23%.
After an 11% growth last month, new social distancing measures are taking a toll and retail sales are indicating the biggest drop in sales since June.
Grocery sales have remained flat whilst retailer stores are reporting a fall in sales. Furniture, DIY, and recreational goods are still strong as people spend more time at home.
Ben Jones, CBI principal economist, said: “The fall in retail sales in October is a warning sign of a further loss of momentum in the economy as coronavirus cases pick up and restrictions are tightened across many parts of the country.
“It’s no surprise that sales have dipped despite no new direct restrictions on retail in England, as the evidence from earlier in the year suggests consumers become more cautious as case numbers rise.
“With footfall still down by one third, many retailers face a difficult run-up to the all-important Christmas period. It is vital that local authorities use their discretion over the new Tier 2 grant funding to target support in a way that helps keep town and city centres open for business.”
Car sales this month have also fallen, the CBI reported: “After three months of rising sales, motor traders reported falling volumes in the year to October (-32%, from +24%). Sales volumes are expected to fall again next month (-16%).”
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Bloomsbury Publishing posts record H1 performance, shares rise
Bloomsbury Publishing shares (LON: BMY) surged over 15% on Tuesday after the group posted a record first-half earnings performance.
Pre-tax profit grew by £2.1m to £2.7m, whilst revenue increased by 17% to £78.3m from £71.3m the year before thanks to a surge in demand for online book sales and e-book revenues.
Stand-out bestsellers during the period included Why I’m No Longer Talking to White People about Race, Crescent City: House of Earth and Blood, White Rage, Humankind and Such A Fun Age.
In light of the strong financial position, Bloomsbury Publishing has said it is resuming an interim dividend of 1.28 pence per share.
“We have continued to trade well during the first six weeks of the second half. In previous years, our revenue and earnings have been weighted towards the second half, with sales of trade titles rising for Christmas and sales of academic titles being strongest at the beginning of the academic year in the Autumn,” said the publisher in a statement.
Nigel Newton, the chief executive, said: “Bloomsbury experienced excellent trading in the first half with year-on-year profit growth of 60% to £4.0 million. This has delivered our highest first-half earnings since 2008 and exceeded the board’s expectations.”
“I would like to thank our staff, authors, illustrators, distributors and suppliers for their resilience, initiative and determination. They continue to be motivated, adaptable and effective, which is demonstrated by the strength of our first-half performance. This, together with the strength of our publishing strategy supported by our solid financial position, gives me confidence in Bloomsbury’s future performance,” he added.
Bloomsbury Publishing shares (LON: BMY) are trading +14.29% at 240,00 (1040GMT).
Genius Sports to go public in $1.5bn deal
Genius Sports Group has revealed plans to merge with Dmy Technology and go public on the New York Stock Exchange.
The deal, which was unanimously approved by both companies, will value the combined group at approximately $1.5bn.
Mark Locke, who is the chief executive of Genius Sports, will continue as the boss of the combined company.
“This transaction will help us continue to expand and strengthen our position as a nexus of the global sports, betting and media ecosystem,” said Locke.
Chief executive of Dmy Technology, Niccolo de Masi, commented: “Elemental data provider Genius Sports Group benefits from the growth of all participants in the global sports betting market.
“Marke Locke has pioneered the provision of official rights and live data which have been instrumental in building the modern sports betting market,” he added.
The group will trade shares on the New York Stock Exchange under the symbol “GENI”.
BP beats analysts’ expectations and swings to profit
BP (LON: BP) has reported an underlying profit of $86m (£66m) for the third quarter of 2020.
Stronger oil prices led to a profit, beating analysts’ expectations of a $120m (£92m) loss for the three months ending 30 September.
BP reported a record $6.7bn (£5.1bn) loss in the second quarter of the year.
“BP’s future financial performance, including cash flows, net debt and gearing, will be impacted by the extent and duration of the current market conditions,” said the group.
“It is difficult to predict when current supply and demand imbalances will be resolved and what the ultimate impact of COVID-19 will be.”
Chief executive, Bernard Looney, said: “Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that – performing while transforming. Major projects are coming online, our consumer-facing businesses are really delivering and we remain firmly focused on cost and capital discipline. Importantly, net debt continues to fall. We are firmly committed to our updated financial frame, including the dividend – the first call on our funds.”
So far this year shares in the oil giant are down over 50% and are still at near 25-year lows.
Credit Suisse analyst Thomas Adolff commented: “Despite the difficult macro backdrop, this was a strong underlying performance from BP.”
The group is planning to axe around 10,000 of its workforce over the next few quarters as part of cost-cutting measures.
Shares of BP (LON: BP) rose more than 2% during early-morning deals and are currently up 1.88% at 203,75 (0927GMT).
HSBC reveals 36% slide in profits
HSBC (LON: HSBA) has reported a 36% year-on-year drop in profits to $3.1bn (£2.4bn).
As profits fell for the three months to September, the lender warned that it could start charging customers for “basic banking services”.
“This latest guidance, which continues to be subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, assumes that the likelihood of further significant deterioration in the current economic outlook is low,” said HSBC.
Earlier this year, the lender scrapped its dividend for the first time in 74 years. The bank will release full-year figure in February.
HSBC has resumed plans to cut 35,000 global jobs. Chief executive, Noel Quinn, said in a memo to staff in June: “Since February we have pressed forward with some aspects of our transformation programme, but we now need to look to the long-term and move ahead with others, including reducing our costs. Against this backdrop, I am writing to let you know we now need to lift the pause on job losses.”
HSBC said that expected losses from bad loans are expected to be at the lower end of the $8bn to $13bn range it set out earlier this year.
“This latest guidance, which continues to be subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, assumes that the likelihood of further significant deterioration in the current economic outlook is low,” said the bank.
HSBC shares (LON: HSBA) are trading +5.65% at 337,40 (0912GMT).
Santander swings to profit, lender raises forecast
Santander has upgraded its full-year forecasts as the lender returned to profit for the third quarter.
Net profit at Santander rose to €1.75bn, which is three times the profit a year previously. Underlying profit increased by 18% on the second quarter.
The Spanish lender raised the profit forecast for the year to €5bn.
“These results speak to the strength and breadth of our customer relationships and the resilience of our diversified business and markets in which we operate,” said chief executive Ana Botin.
“This diversification has been a key driver of our recovery, with South America performing well and the UK recovering strongly in the third quarter,” she added.
“Given the Group’s current performance, the strength of our balance sheet, our liquidity profile and mix of businesses, I am confident that we will be able to resume cash dividends once regulatory conditions allow. As such, we are seeking shareholder approval today for a €0.10 per share cash payment to shareholders in 2021, once permitted.
“Although the outlook for 2021 depends on how the pandemic evolves, we have proven that our strategy and business model position us well to continue supporting our customers and delivering results for our shareholders.”
Santander has set aside €2.5bn to deal with expected loan losses over the third quarter.
By the end of 2020, the bank will have achieved the €1bn cost savings target in Europe it announced in 2019 and expects to reduce costs by an additional €1bn over the next two years in Europe.
Shares in the group (LON: BNC) are trading +4.97% at 162,70 (0844GMT).
Whitbread profits plunge 483% amid hotel closures
Whitbread (LON: WTB) has swung into a £660.5 loss for the six months to 27 August.
The loss for the Premier Inn owner is compared to the £172.2m profit in the previous year.
As hotels were closed during the lockdown, revenue plunged £76.9m to £250.8m in the UK and Germany.
Over the UK lockdown, revenue plunged by 99% as almost all hotels were closed.
Since reopening hotels, Whitbread has said that performance has remained ahead of the market.
“Whitbread’s long-term strategy remains as relevant and compelling as ever,” said Chief executive Alison Brittain.
“The impact of the Covid pandemic on the hotel sector will undoubtedly be significant and we are already seeing signs of distress and constraint in the competitive landscape.
“This is likely to accelerate the structural changes in the market with supply contraction and constrained investment amongst independent and budget branded operators in both the UK and Germany.
“We hold a uniquely advantaged position in the UK market as the largest player with the strongest brand.
“Our financial flexibility and resilience, combined with a strong balance sheet, give us the ability and the confidence to invest with discipline and focus on strong long-term returns.
“We will be well placed to enhance our market leadership position even further in the UK, and accelerate our growth in Germany, supporting our guests and teams and driving long-term value for all our stakeholders,” Brittain added.
Whitbread shares (LON: WTB) are trading 3.16% higher at 2.315,00 (0828GMT).
Global equities floored ahead of big week with election, company data and COVID
An obligatory Parental Guidance sticker has been stuck on Monday’s global equities movements. Because, between election, company data, and COVID jitters, it was an unadulterated horror show.
Global equities hardly elated over the election
Quaking in their boots just over a week out from the US election, global equities watch in horror as the Biden lead that was priced in, is slowly but surely being gnawed away at by a resilient Trump campaign. Having performed terribly early on – and bagged the Biden campaign a 12% poll lead – team Trump has now narrowed the consensus poll margin to 9%, with some outlandish pollsters now forecasting a Trump lead in voter sentiment – let alone electoral college votes.Now, sure, Rasmussen are Trump’s favoured pollsters, and they may well be trying to manifest a Trump lead into existence, but data such as these may still be enough to shake the confidence of some investors who’d previously banked on a Biden victory. Speaking on the markets’ preferences for election outcomes, Kingswood CIO, Rupert Thompson, said: “The market’s preferred outcome seems to be for a clean sweep by the Democrats which will allow the implementation of a sizeable fiscal stimulus. If by contrast, there were split control of the Presidency and Congress, this would effectively lead to a continuation of the status quo with divided government a major constraint on new policies. Worst of all, however, would be a close and contested result with possibly weeks of rancour and confusion in prospect.”National GE: Trump 48% (+1) Biden 47%@Rasmussen_Poll, LV, 10/21-25https://t.co/Okfy9Js3ZJ
— Political Polls (@Politics_Polls) October 26, 2020
Company data expected to be positive, but preparing for disappointment might add to Monday’s downside
Another factor weighing on global equities is the anticipation of blue chip company data being published during the week. And, while much of this earnings data is expected to have a positive tone, pricing in positive results creates the possibility of disappointment, and there’s every chance those kind of jitters have been amplified by Monday’s other worries. Some of the companies set to publish their performance data this week include the American big tech cabal, including Microsoft, Amazon, Apple, Alphabet and Facebook. Further, there will be a Q3 GDP reading on Thursday, on which, Spreadex Financial Analyst, Connor Campbell, comments: “That should, at least, be a positive, with analysts forecasting growth of 32% at the annualised rate, compared to Q2’s 31.4% contraction.”Nothing short of COVID carnage
The third and final factor weighing on Monday’s global equities performance, are ongoing COVID updates. With case numbers expanding rapidly across Europe, equities losses were led by Germany, with SAP shares down some 22%, and seeing the DAX shed 3.43% on Monday. IG Analyst, Joshua Mahony, adds:“The German focus has also been highlighted by the latest Ifo business climate figure, with the survey reversing lower for the first time since the height of the crisis in April.”
Following behind the German fall was the French CAC, down 1.50% as cases hit ‘record highs’, while Spain enters a state of emergency, and TUI and Carnival shares falling sees the FTSE shed 0.97%. Mr Mahony adds:
“While we are seeing nations attempt to stifle the spread of the virus through more localised and tentative restrictions, it seems highly likely that we will eventually see a swathe of nationwide lockdowns if the trajectory cannot be reversed.”
While further restrictions appear likely, hope prevails for a COVID vaccine to be developed during the early stages of next year. These hopes, however, were not enough to see Eurozone equities regain their composure, with the Dow Jones delivering a late gut shot, by opening down over 2.50%.Reluctance to invest during the pandemic could cost 5% of your returns per year
It’s an age-old and at times over-simplistic adage: buy low, sell high. But it exists for a reason, and research conducted by behavioural finance experts, Oxford Risk, shows just how much we might lose by choosing not to invest during the pandemic.
The company states that many retail investors make decisions on the basis of ’emotional comfort’, which they estimate costs your typical investor around 3% per year in returns – during an average year. Given the increased level of market volatility during the pandemic, however, they believe the level of emotional decision-making has increased ‘dramatically’, and so too has the potential cost of emotional investment.
In fact, Oxford Risk predicts that with many choosing to increase their cash allocation due to pandemic uncertainty, ‘reluctance’ to invest might cost retail investors between 4% and 5% per year in long-term returns.
The company adds that what it calls the ‘Behaviour Gap’ – losses due to timing decisions caused by investing more money when times are good for stock markets and less when they are not – costs investors an average of 1.5% to 2% a year over time.
Having built up an expertise in developing financial decision-making software, Oxford Risk states that wealth managers and financial advisors remain ‘ poorly equipped’ to deal with complexity, uncertainty, behavioural biases and the ’emotional and psychological roller-coaster ride’ their clients have faced during the COVID pandemic.
Speaking on emotional decision-making, Oxford Risk’s Head of Behavioural Finance, Greg B Davies, PhD, said that human conversations are vital during times of crisis, but added that better diagnostic tools are needed to assess clients’ personalities and ‘likely behavioural traits’. He says:
“The suitability processes of many wealth management businesses are typically too human heavy, inefficient, and front loaded to the beginning of the client relationship to keep up with rapidly changing client circumstances at scale during a crisis. Understanding of client financial personality is typically limited to risk profiling – often badly – and subjective human assessment.”
“Very few wealth management propositions are using the sort of objective, science-based measures that are needed to provide a comprehensive picture of their clients. There is too much guesswork and not enough technology.”
The company adds that there are common behaviours that investors adopt during volatile periods, which include focusing too heavily on the present and on small details, and feeling compelled to take action when the best solution might be a mroe hands-off, patient approach. These behaviours can lead to underinvestment, selling low, and decreased diversification, as clients choose to invest in the familiar.
Oxford Risk has launched a free Market Emergency Survival Kit which allows retail investors to measure six key dimensions of financial personality, which the company has identified through extensive research into investor psychology and financial wellbeing. The service also provides personalised recommendations on how best to invest, which are based on the findings.
Speaking on the measures investors can take, Oxford Risk’s CEO< Marcus Quierin, PhD, comments:
“Many of these actions will mean that investors turn paper losses into real ones. If they don’t need to withdraw money for immediate expenses, then the losses are only virtual… until they panic and make them real.”
“The investments in the news are not your investments. Retail investors should avoid watching the markets day-to-day as this will only increase anxiety to no useful end, and make you feel like you should be doing something, without any useful guidance to what that should be. Long-term plans should be looked at through long-term lenses.”
Mr Quierin adds that investors should focus only on factors that they can control, and in turn might postpone discretionary spending, and use volatile periods as an opportunity to take stock of long-term financial plans. He finishes by saying that consumers would benefit from choosing to invest in the ‘risk premium’. Put simply: the long-term reward for owning shares that eventually weather every short-term risk that can be thrown at them.