European stocks sink as vaccine optimism fades
European stocks continue to fall on Friday as excitement over the Covid-19 vaccine falls.
Shares started to wane yesterday and on Friday’s opening bell, started to fall further into the red as Coronavirus cases across the UK rise.
“With the worst of the cold weather yet to arrive and the pace of new infections only expected to increase as we head towards year end, it is slowly becoming apparent that the arrival of a vaccine can’t come soon enough,” said Michael Hewson, chief market analyst at CMC Markets UK.
“It is also quite apparent that even if one was to arrive in the near future it wouldn’t be able to change the situation on the ground as it is now, which means things are only likely to get worse before they get better.”
On Thursday, the UK reported a new daily record of cases. The number of people infected hit 33,470.
On opening, the FTSE 100 was down 0.7%, the Cac 40 is down 0.2%, the Ibex fell by 0.5%, and the Dax was down by 0.1%.
The biggest fallers on Friday morning were Rolls Royce, stocks were down 2.11%, and Royal Dutch Shell, where shares fell 1.94%.
Asian stocks were also lower on Friday. Japan’s Nikkei fell 0.6% and the Hang Seng index fell by 0.5%.
Commenting on the Asian markets, Jeffrey Halley, senior market analyst, Asia Pacific, OANDA said:
”The danger when financial markets price in two years of return to normal in the space of two hours, is that there are no stragglers in the herd left to continue the momentum. That appears to be the case after the Pfizer BioNTech announcement earlier this week. It only took a day or so for some to move back to the comfort of big tech, and the lack of macroeconomic drivers since, has sapped momentum.
“A plethora of central bankers since has stated that the road ahead remains cloudy and that a vaccine won’t be an instant panacea for the world’s economic ills. Even positive noises from the US’ Dr Anthony Fauci about the Moderna vaccine, initial results of which are due soon, failed to reinvigorate the rally.
“That probably tells us that the street went all in, and then went what now, as they found themselves marooned in the portable frozen Antarctic wastes required to distribute the Pfizer vaccine. Covid-19 continues to spin out of control across the US, Europe and other parts of the globe, with the ensuing movement restrictions sure to crimp Q4 growth. Any lingering hopes of a US fiscal boost receded further overnight, as US Initial Jobless Claims fell more than expected, although they remain above 700,000,” he added.
Unemployment: London job market lags
New figures suggest that the London job market is falling behind the rest of the country.
The Recruitment & Employment Confederation (REC) revealed on Friday that whilst job advertisements were rising in the north-west England and Wales, London was seeing a fall.
Between March and October, job adverts in the north-west jumped 36.8% whilst in Wales they surged 33.4%. Meanwhile in London, the number fell by 18.7% over the period.
Matthew Mee, director of workforce intelligence at Emsi, commented on the new findings: “One of the most interesting developments we are seeing in terms of employer demand is the ‘London lag’, which is seeing the capital return to pre-lockdown levels at a much slower rate than other regions of the country.
“When we couple this with the fact that furlough take-up has been higher in London than elsewhere, and that the highest rise in claimant counts has been in the London commuter belt, it seems that the restrictions since March may well have had a greater proportionate impact on the capital than on other regions of the country,” he added.
From the numbers, it was found that the number of job adverts for nurses amid the pandemic shot up. Since March, the number of active job postings for nurses grew by 39%.
Within the hospitality sector, postings for bar staff plunged -48.7% whilst adverts for chefs fell by -45.6%.
In the three months to September, unemployment rose to 4.8%. REC boss Neil Carberry said: “Unemployment and redundancy numbers earlier this week showed that this is a tough moment for our jobs market.”
“But we also know that there are always jobs being created by those businesses who can, and as this data reveals, there is hope to be found in many places and sectors.”
Global equities ran out of steam as vaccine and Biden jubilation fade
Having fallen during the week before last, global equities have since been spurred by the Joe Biden victory and Pfizer vaccine hopes. On Thursday, however, some of the good-feeling steam wore off, as investors greedily priced in potential upsides in the short-term.
Choosing to be overly optimistic in the moment, markets are now watching equities look for something to be excited about. As stated by IG Chief Market Analyst, Chris Beauchamp:
“Equities have moved lower this morning, as the vaccine bounce begins to fade across markets. After days of gains the rally in equities is beginning to slow down, as indices throughout Europe move into the red.”
“As enthusiasm about a vaccine begins to fade the FTSE 100 has lost ground, with a slowdown in the excited buying of hard-hit value names in sectors like travel, airlines, banks and others.”
Having soared on Monday, Rolls Royce has spent a few days shedding points, down by an additional 8% on Thursday. Similarly, having enjoyed an escape from a difficult year so far this week, oil blue chips such as BP and Shell followed the path of airlines, and watched their shares fall. Another issue has been a lack of positive developments – which is giving markets mixed messages. Mr Beauchamp added: “Political developments, or lack thereof, continue to have little impact, with the lack of any White House pronouncements helping to calm market nerves about the US political outlook.” Spreadex Financial Analyst, Connor Campbell, added on Brexit: “The mid-November deal deadline is almost upon us, with no agreement in site, and Boris Johnson’s government internally in chaos after the departure of director of communications, and Dominic Cummings ally, Lee Cain.” With global equities lacking a reason to celebrate, Eurozone indexes slipped, with the DAX down 1.2% and the CAC falling 1.5%. Slightly ahead of its European counterparts, the FTSE fell by 0.7%, lifted slightly by a sharp drop-off in Sterling. Notably, the Dow Jones was down by over 1.3%, and the Nasdaq fell by 0.8%. Even with vaccine jubilation fading – which should favour 2020’s growth stocks – big tech couldn’t muster up enough strength to lift US markets.Living for the long term…Mainstream Impact Investment and Emerging Market Strategies are breaking the mould
Sponsored by Red Ribbon Asset Management
Here’s an unsurprising fact. No business that operates week to week will survive six months: as Keynes might have said, but didn’t quite, in the short term we’re all blinkered: myopically fixated on the trees without ever seeing the wood. And this failure to adjust to long-term trends is anathema for any modern day economy. Think Betamax(or VHS for that matter), post-digital Kodak and any number of former leviathans from Woolworths to BHS, all of them victims of commercial myopia and all of them gone. We have to live for the long term, because there’s nowhere else to go. All of which makes it all the more surprising that any business in today’s uncertain world would willingly tether itself to yesterday’s ideas and yesterday’s technologies.
And that’s why Mainstream Impact Investment Strategies (“MII”) have become so important. Helping redefine and reshape our future as well as working to embrace the long-term needs of the planet. So it’s time (well beyond time) we started giving it a chance; well beyond time that we started to live with the future…
In essence, MII enables businesses to move away from short termism: creating wealth by investing in well regulated and profitable enterprises in mainstream markets, and succeeding because they look to the long term impact of their decisionmaking. And as well as that, by being responsive to global conditions and in particular the challenges climate change brings, it also deliver more robust and resilient businesses as well: better equipped to secure profits over the long term because they are able to engage with the complex issues posed by sustainability, not because sustainability is an end in itself.
That’s why the Global Risk Reportproduced by the World Economic Forum earlier this year concluded that “Business leaders have a crucial role to play, by putting nature at the core of their processes and decision-making and systematically identifying, assessing, mitigating and disclosing nature-related risks to avoid severe consequences. Businesses can be part of the global movement to protect and restore nature”.
Of course, its not only about creating wealth responsibly, its also about starting to see the wood from the trees.
The world has moved on significantly over the last quarter century, and it’s moving faster every day: well informed investors will be looking beyond the short term demands and challenges of quotidian economics, also taking into account the opportunities offered by Emerging Markets across the globe.
COVID or no COVID, India has been one of the fastest growing large economies in the world for the last decade: fifth biggest by GDP (bigger than the United Kingdom), with an increasingly consumerist and tech savvy population that is not only the fastest growing on the planet but also set to overtake China as the biggest in the world within a year.
CEO and Founder of Red Ribbon Asset Management, Suchit Punnose, knows how important these rapidly evolving changes can be (and will be) for world markets, having built a successful investment platform with a focus on the subcontinent: “At Red Ribbon we’ve been pioneering cutting edge investment strategies for more than a decade, translating UK knowledge and know how to optimise capital formation in India. And key demographic shifts on the subcontinent, combined with an explosion of technological and market based innovation means there’s never been a better time to invest in India”.
So here’s another unsurprising fact: investing in India isn’t an afterthought anymore, tethered to short-term investment culture. Smart investors will ensure the subcontinent’s stock makes up at least 10% of any balanced post Brexit portfolio. That’s what it means to be living for the long term…
Find out more about Red Ribbon Asset Management here
GVC Holdings sets out its strategy for conscientious gambling
FTSE 100 listed gambling company, GVC Holdings (LON:GVC), announced on Thursday that it would be implementing a ‘Sustainability Charter’, with the Group stating their view that “the most sustainable business in our industry will be the most successful business in our industry”.
As part of this drive for conscientious gambling, the company has what it describes as five cornerstones. The first of these is an ‘exclusive focus on regulated markets’. At present, 96% of its revenues come from markets that are nationally regulated or regulating. But by the end of 2023, it has committed to having 100% of its revenues come from regulated markets – which means it will be ‘exiting markets in which there are currently no viable paths to regulation’.
The second cornerstone will be ‘taking the lead on responsible gambling’. For this, the company said it is launching its Advanced Responsibility and Care programme, which it says will proactively implement additional checks on customers, as well as monitoring and interventions.
Third, GVC Holdings talked about ‘embedding responsible gambling into remuneration’. In this, the company said that from 2021, it would incorporate a responsible gambling metric into its annual group wide bonus conditions.
Fourth, the company committed itself to ‘pursuing the highest standards of corporate governance’. The Group says that it now has a corporate governance structure and policies that befit its status as a FTSE 100 company. It added that it remains committed to bringing greater diversity to the organisation, and that further changes ‘will be made on the board’s membership in due course’.
Finally, it talked about ‘investing in our people and local communities’. The company said it has a record of taking on and retaining the ‘best people in our industry’, and also contributing to the wider communities it operates within. GVC Holdings said on Thursday that it was launching the Entain (new company name) Foundation, which it said was committed to donating £100 million over the next five years, to causes including its own ‘Pitching In’ programme, which ‘supports grass roots sports and sports people’.
Commenting on the adjustments, the GVC Holdings statement said:
“These new actions and initiatives are unquestionably the right thing to do for the long-term, but in the short-term they will inevitably come at a cost. The actions outlined above will reduce EBITDA in 2021 by some £40 million but this is offset by strong underlying growth in our business, as set out below.”
Company CEO, Shay Segev, added:
“Today marks an exciting new chapter for the Group, and an important step forward in achieving our ambition of being the world leader in sports betting and gaming. Under our new corporate identity, we will continue to use our unique technology platform to build on the exceptionally strong momentum that we have in our existing markets, grow into new markets, reach new audiences, enhance the customer experience, and provide industry-leading levels of player protection.
We are absolutely committed to pursuing the highest standards of corporate governance, to providing outstanding career development opportunities for our colleagues, and to supporting the communities in which we operate. Our clear strategy of prioritising sustainability and growth will allow us to achieve these goals, thereby providing long-term value for all of our stakeholders.”
Overall, today’s announcements represent positive shifts in the Group’s corporate culture, but there are further measures that can be introduced in future. For instance, the company could consider offering larger contributions to gambling support organisations, or committing funds to enterprises which would help it offset the carbon from its operations.
However, reflecting broader market demand for sustainable and conscientious business, the GVC Holdings Sustainability Charter illustrates the company’s intention to move with the times. Reflecting the cost of these new measures, the company saw its shares drop by around 2% on Thursday.
QinetiQ shares rise on revenue growth
QinetiQ shares (LON: QQ) opened 10.86% higher on Thursday as the group released a trading statement for the for six months to 30 September 2020.
The group posted a 37% increase in orders and a 24% growth in revenue.
Thanks to a strong performance, the defence technology company reported a “strong” cash performance, with 134% underlying cash conversion.
Statutory operating profits fell 10% to £61.6m, which was due to a £13m property disposal gain the year previously.
QinetiQ has increased its full-year guidance and is now expecting a low double-digit revenue growth.
Steve Wadey, the chief executive, said: “We have delivered an excellent first-half performance despite a challenging environment. The resilience and determination of our people, who have continued to deliver for our customers in uncertain times has been outstanding and I would like to thank them for their contribution.
“We are entering the second half with confidence, with a significant order backlog, strong customer focus and an evolved strategy reflecting the increasing ambition of the Group and changing customer needs. We are increasing our full-year guidance whilst proactively managing the potential risks from further COVID-19 disruption.”
QinetiQ shares (LON: QQ) are trading +10.45% at 321,40 (1522GMT).
National Express posts growing revenue ahead of second lockdown
National Express (LON: NEX) has reported improving revenue between the first and second lockdown.
In its latest trading update, the FTSE 250 company said that October’s revenue was 60% higher than in April.
The group has been operating and roughly half of its services and in November amid the second lockdown is operating just 9% of last year’s services.
Group chief executive Ignacio Garat said: “In my first weeks in the group, I have been struck both by my colleagues’ professionalism, and by the resilience of our leading portfolio of businesses.
“The positive vaccine news of the last few days may signal a faster service recovery in the medium term than we had hitherto envisaged. Nonetheless, these remain difficult times for the public transport sector, at least in the short term.
“I am convinced, however, that National Express will continue to weather the challenges we face and has strong foundations in place to prosper once the pandemic is over.
“I am pleased by the strength of our relationships with customers and governments across the group. This is reflected in the amount of support we have and continue to receive.
“We will continue to proactively engage customers and relevant authorities to navigate the challenges the pandemic presents.
“Alongside this, we will continue to closely and carefully manage costs and remain very disciplined in the returns we seek on investment, as part of our broader focus on maintaining the group’s financial position.”
National Express has forecast full-year earnings to be in the range of £170m-£190m.
National Express shares (LON: NEX) have fallen from a year-to-date high of 485,00 and are currently 0.52% higher at 230,20 (1221GMT).
Vistry reinstates dividend on strong demand
Vistry (LON: VTY) has announced plans to continue shareholder payouts from next year.
Thanks to strong demand and sales, the housebuilder is on track to meet full-year profit at the top end of the £130m-£140m range.
The group has achieved a private sales rate of 0.67 per outlet per week, which is up from 0.58 a year ago.
Vistry chief executive Greg Fitzgerald said: ““Demand for our new homes has remained strong and we are on track to deliver profit for 2020 at the top end of our expectations.
“We are well positioned for 2021 with a record forward sales position and assuming stable market conditions, expect to see a step-up in completions delivering group profits of £310m.
“Our priority is reducing the group’s leverage while delivering on our medium-term targets.
“Cash generation has been strong, and we now expect our 2020 year-end net debt to be significantly lower than our previous expectations.
“Given this robust business performance and outlook, the board is pleased to confirm its intention to resume dividends in 2021 including an interim dividend next November, earlier than previously anticipated.”
Vistry shares (LON: VTY) are trading +4.77% at 796,22 (1136GMT).
In October, house prices jumped 7.5% according to data from Halifax. The average property now costs £250,457. House prices in the UK have increased at their fasted rate since 2016 amid the demand for more space and the stamp duty holiday.
The new vaccine chapter for value stocks and COVID-19 shares
The UK Investor Magazine Podcast is joined by Alan Green for a run down of the dramatic moves in markets this week and exploration of scenarios going into the end of 2020.
The Biden Presidential victory has been overshadowed by news from Pfizer had a breakthrough in the fight against COVID-19 with a vaccine demonstrating 90% effectiveness. We look at the sharp rally in markets and question the sustainability going forward.
We discuss Novacyt (NCYT), Synairgen (SNG), Avacta (AVCT), Blue Prism (PRSM) and Capita (CPI).
Burberry posts 62% fall in H1 profits
Burberry (LON: BRBY) has posted a 62% fall in pre-tax profits for the six months ending 26 September 2020.
The luxury retailer revealed a 31% decline in revenue and adjusted operating profit down 75%.
Sales were down 31% to £878m, whilst first-half pretax profits fell from £193m to £73m.
The retailer noted that despite the pandemic, it had seen strong strategic progress particularly in leather goods, growth on digital, and good brand traction.
Marco Gobbetti, the chief executive, said: “Though the momentum we had built was disrupted by COVID-19 at the start of the year, we were quick to adapt, while making further progress against our strategy. While the virus continues to impact sales in EMEIA, Japan and South Asia Pacific, we are encouraged by our overall recovery and the strong response to our brand and product, particularly among new and younger customers.
“In an environment which remains uncertain, we will continue to deliver exceptional product, localise plans and shift resources, while leveraging the strength of our digital platform to inspire customers.”
Looking forward, Burberry said in a statement: “We are encouraged by the recovery in Q2 FY2021 but remain conscious of the uncertain macro-economic environment caused by COVID-19. We currently have more than 10% of our stores closed globally following the recent lockdowns in EMEIA. With the brand resonating and attracting new and younger consumers, we have taken the decision to reduce markdowns and this will be a revenue headwind in H2 FY2021 with the main impact in Q3 FY2021 but will serve the long term interest of the brand. We are well positioned to continue to drive performance and deliver growth in the medium term.”
Burberry shares (LON: BRBY) opened 3.66% higher and are currently trading 2.65% higher at 1.670,11 (0952GMT).