Dow Jones dives 1,900 points as US unemployment claims hit 44 million

Jamie Gordon
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Dow Jones dives 1,900 points as US unemployment claims hit 44 million
After falling bellow 27,000 points on Wednesday, the Dow Jones followed the FTSE in making notable losses during Thursday trading. This followed a series of bleak Coronavirus updates and the painful Fed and OECD projections double-whammy.

During the Thursday session, the US market had to contend with the news that an additional 1.542 million Americans had filed for unemployment during the previous week. While this was both better than predicted and the lowest number since mid-March, it takes the total number of claims for the last three months to around 44 million – which completely dispels the glimmer of hope offered by non-farm gains last Friday.

In addition, the Dow is also having to take note of the possibility of a Coronavirus second peak, as US cases cross the two million mark. Leading the way in hospitalisations is Texas – little surprise, perhaps, given the resistance to lockdown measures.

With the grey outlook of Wednesday’s economic projections, alongside a dour employment and second wave situation, the Dow Jones dropped 1,862 points during trading. This took it down to 25,128 points, only days after hitting its 15-week high of 27,600.

Speaking on the reaction of Eurozone equities, Spreadex Financial Analyst Connor Campbell commented,

“With the US markets freaking out, the already hefty European losses levelled up. The DAX dropped 3.6% to hit 12100, with the CAC plunging a staggering 4% to just above 4850.”

“The FTSE, meanwhile, sank 200 points to 6125 – and it likely would’ve been even worse if the pound wasn’t also down 0.8% against dollar and euro alike. Sterling has hit the brakes on its recent rally, the currency bowing under the pressure of no-deal Brexit speculation.”

FTSE 100 sinks on fears of a second wave and warnings from the Federal Reserve

UK Investor Magazine
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FTSE 100 sinks on fears of a second wave and warnings from the Federal Reserve
The FTSE 100 sank on Thursday as the recent rally began to unwind on fears of a second wave of coronavirus and poor economic forecasts from the Federal Reserve. The FTSE 100 was down over 3% to 6,132 in afternoon trade on Thursday. The selling added to a poor week for the FTSE 100 which has seen the index retreat from 6,500 amid concerns the market has not properly understood the longer term impact of coronavirus. “There was no shaking the atmosphere of anxiety that has come to grip the markets this week, with Europe’s losses remaining at the nasty end of the spectrum,’ said Connor Campbell, Analyst at Spreadex. “With dire forecasts from both the OECD and the Federal Reserve, and fears that a second wave of coronavirus cases is emerging in the USA, the markets have spent the week being dealt one reality check after another.” These concerns were amplified by the news an number of US states had experienced an increase in the number of coronavirus cases. Texas and Florida were among those that had seen a rise in the number of cases, however, commentators pointed out that these were states that had never really taken the lockdown seriously. “The market has been rallying because they’re looking to 2021 and saying we’re going to get past this and then things will get sort of back to normal,” said Sean O’Hara, president of Pacer ETF Distributors to Reuters. “One thing that really could change the trajectory here would be if we have a big bounce in a second wave. That’s the big fear.” In London, the travel shares led the way down with Carnival and International Consolidated Airlines falling 15% and 9% respectively. The travel shares were the strongest performers in the recent equity market as investors bought into the beaten up sector on plans for the resumption of travel. Ocado was also weaker after it raised a £1 billion war chest to exploit the shift in grocery shopping habits during the coronavirus lockdown. The online delivery services said the funds would be allocated to their partner programme and an increase in capacity. Ocado shares were down 5.5% in mid afternoon trade.

Lloyds faces £64m fine over mortgage failures

Safiya Bashir
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Lloyds faces £64m fine over mortgage failures
Lloyds Banking Group has been fined £64m by Financial Conduct Authority (FCA) over its treatment of mortgage customers who are suffering payment difficulties. According to the City regulator, the banking group’s three brands did not provide support to customers in arrears between 2011 and 2015. Mark Steward, from the FCA, said: “By not sufficiently understanding their customers’ circumstances the banks risked treating unfairly more than a quarter of a million customers in mortgage arrears, over several years. In some cases, customers were treated unfairly, including vulnerable customers.” The fine received by Lloyds Bank, Bank of Scotland, and The Mortgage Business is the biggest given by the FCA for mortgage failures. A Lloyds Banking Group spokeswoman said: “We have contacted all customers who were affected between 2011 and 2015 to apologise and have already reimbursed all who were charged fees at the time.” “Customers do not need to take any action. We have since taken significant steps to enhance how we support mortgage customers experiencing financial difficulty, including investing in colleague training and procedures.” The banking group must pay the fine on top of £300m in compensation to the 526,000 customers affected. According to the FCA, all customers affected had already been contacted and reimbursed. Shares in Lloyds Banking Group (LON: LLOY) are trading -6.48% at 32.75 (1310GMT).

Centrica to cut 5,000 jobs – shares fall

Safiya Bashir
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Centrica to cut 5,000 jobs – shares fall
In plans to simplify its business structure, Centrica has said it will be cutting 5,000 jobs. The British Gas owner has a global workforce of 26,000, with about 80% of staff based in the UK. Chris O’Shea, Centrica’s chief executive, said that a simplified business structure will help the company grow. “I truly regret that these difficult decisions will have to be made and understand the impact on the colleagues who will leave us.” “However, the changes we are proposing to make are designed to arrest our decline, allow us to focus on our customers and create a sustainable company,” he added. Around half of the jobs lost will be from the corporate, management and leadership teams. Justin Bowden, National Secretary of the GMB Union, has criticized the move. He said: “A combination of the SVT cap and too little too late management decisions have left a once proud brand crippled and weak. Slashing thousands more jobs is not the answer. You cannot just cut your way out of a crisis.” Centrica is one of many companies to announce job losses this week. Mulberry and Lookers have also said they will be carrying out redundancies this year. Shares in the group (LON: CNA) are trading down 3.43% at 40.39 (1047GMT).  

Ocado raises £1 billion to fund accelerated expansion

UK Investor Magazine
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Ocado raises £1 billion to fund accelerated expansion
Online grocery delivery service Ocado (LON:OCDO) has raised in excess of £1 billion to fund the expansion of its services as demand for food delivery booms during the coronavirus lockdown. “Online grocery is experiencing an inflection point. The current crisis is proving a catalyst for permanent and significant acceleration in channel shift globally which we believe will redraw the landscape for the grocery industry worldwide,” said Tim Steiner, CEO and Founder of Ocado. The £1,007 million capital raise was made through an institutional placing, retail offer and convertible bond offering. The placing and retail offer was made at 1,960p representing a discount of 5.7% to the closing share price of 2,079p 10th June 2020. The majority of the £657 million raised from the issue of new shares was made by institutions. PrimaryBid facilitated the retail offer which amounted to 362,000 new ordinary shares. The convertible loan offer of £350 million had a 35% conversion premium to £19.60 and provides a 0.75% coupon. The Ocado capital raise will be used to grow capacity and expand their partner programme in the face of surging demand. Ocado estimates their target market is worth £2.8 trillion globally. “Ocado’s model is proven, providing a flexible platform with the best customer offer and economics, and we are already the partner of choice for nine of the world’s largest grocery retailers. The significant acceleration in online grocery provides us with greater opportunities than ever before,” Tim Steiner said. “As we emerge from this crisis Ocado has the opportunity to help our Ocado Solutions partners in the UK, and around the world grow faster, to welcome more partners in new markets, to innovate more and more quickly, and to further strengthen our leadership position. This Capital Raise gives Ocado Group the opportunity to accelerate our role in creating sustainable change in the industry, allowing us the flexibility to move at increased pace and capitalise on the full opportunity set over the medium term.” Ocado shares fell 6% to 1,950p on the results of the placing but are up 52% in 2020 and are the FTSE 100’s top performing stock this year.

Just Eat acquires Grubhub in $7.3bn deal

Safiya Bashir
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2
Just Eat acquires Grubhub in $7.3bn deal
Just Eat has announced plans to buy US-based app Grubhub in a $7.3bn (£5.8bn). When the merge is completed, Just Eat will become the world’s biggest food delivery company outside China. The announcement comes after the talks between Grubhub and Uber fell through due to antitrust concerns. “Like ridesharing, the food delivery industry will need consolidation in order to reach its full potential for consumers and restaurants. That doesn’t mean we are interested in doing any deal, at any price, with any player,” said a spokesperson from Uber. In after-hours trading, shares in Grubhub spiked 7%. The deal will need approval from shareholders and is expected to be completed in the first quarter of 2021. Matt Maloney, the CEO and founder of Grubhub, will join the Just Eat’s board and will lead the combined group’s businesses in the states. “Supported by Just Eat Takeaway.com, we intend to accelerate our mission to be the fastest, best and most rewarding way to order food from your favourite local restaurants in North America and around the world. We could not be more excited,” said Maloney. Just Eat’s chief executive, Jitse Groen, said: “Matt and I are the two remaining food delivery veterans in the sector, having started our respective businesses at the turn of the century, albeit on two different continents.” “Both of us have a firm belief that only businesses with high-quality and profitable growth will sustain in our sector. I am excited that we can create the world’s largest food delivery business outside China. We look forward to welcoming Matt and his team to our company and working with them in the future,” he added. When the deal is completed, Just Eat will have 70 million combined active customers globally. Shares in Just Eat (LON: JET) are trading at 7,644.00 (0937GMT). Shares in Grubhub (NYSE: GRUB) are up 1.95% at 59.05 (0937GMT).      

Somero Enterprises to cut costs in light of Coronavirus

Jamie Gordon
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Somero Enterprises to cut costs in light of Coronavirus
Florida focused building technology and concrete levelling specialist Somero Enterprises Inc (LON: SOM) announced on Wednesday that it would be implementing a series of cost-cutting measures to conserve cash, as it works to ascertain to implications of the Coronavirus pandemic. In spite of the move, the company said that it remains in a strong financial position, and remains confident in long-term growth prospects.

As per the actions management said it would undertake to protect the company’s financial position, Somero Enterprises said it would furlough approximately 20% of its workforce, as well as cancelling all 2020 bonus and profit-sharing payments for all employees.

The company continued, saying that it would curtail ‘discretionary spending’ across all of its departments, as well as further capital expenditure (excluding commitments to ongoing building expansion projects).

Somero predicted that the annualised pre-tax impact of these efficiencies would equate to a saving of approximately $5.0 million.

Somero Enterprises speaks on its financial position

The company’s statement read, “Somero entered this period of uncertainty with a strong balance sheet and good liquidity and its financial position has been strengthened further by these additional financial and cost saving measures. On 30 March, the Company indicated its net cash position exceeded US$ 24.0m. Management expects its net cash position at the end of 30 June will continue to exceed US$ 24.0m and the Company continues to have access to substantial additional liquidity through its US$ 10.0m line of credit. In addition, the Company will continue to closely monitor, and pursue as applicable, all US government funding opportunities for which the Company may be eligible. ”

Investor Insight

Following the update, the company’s shares booked a notable 4.77% or 10.50p rally, to 230.50p per share 17:08 BST 10/06/20. The company’s p/e ratio is 7.56, their dividend yield is generous at 6.37%.

Savings surge forces Goldman Sachs to close Marcus to new clients

Bronte Carvalho
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0
Savings surge forces Goldman Sachs to close Marcus to new clients
U.S. banking giant The Goldman Sachs Group, Inc. (NYSE:GS) has been forced to turn away customers from its easy-access online savings account, Marcus, after a £21 billion surge in deposits threatened to overtake regulatory limits. The company decided to temporarily halt new applications following fears it would reach the Bank of England’s £25 billion cap, after which UK banking regulations demand the money would have to be relocated to a ring-fenced separate financial institution in order to protect the banking system. Ring-fencing Marcus would involve having a designated board, limiting its ability to share capital with Goldman Sachs’ main investment banking arm and driving up costs that would jeopardise its competitive market rates. Since its launch in 2018, Marcus’s league-topping 1% AER interest rates – compared to a UK market average of 0.3% – have drawn considerable attention and attracted more than 500,000 savers looking for substantial cash returns. The coronavirus pandemic has provided a window of opportunity for eager savers, with expenditure plummeting in the wake of the closure of the retail and hospitality sector. Des McDaid, head of Marcus UK, explained, “We’ve really seen our growth accelerate under lockdown as people hold off on discretionary spending and take time to reorganise their finances and get the best deal for their money. Separating Marcus financially and operationally from Goldman Sachs would be a significant change to our low-cost business model, which allows us to pay consistently competitive rates to existing savers.” The impact of the coronavirus pandemic has driven projections of annual household savings to £57 billion, with a New Policy Institute analysis predicting the wealthiest 20% of Brits to reduce their spending by £23 billion by the end of the year. Sarah Coles, from investment firm Hargreaves Lansdown, commented, “The savings market has been engulfed by waves of cuts over the past few months, and Marcus’s easy-access account has been washed ashore. These waves are self-perpetuating. The most competitive account attracts too much money, so the bank cuts back.” Marcus remains open for new accounts in the U.S. and has stated that it hopes to reopen to UK clients later in the year. Meanwhile, as of GMT-4 15:20 10/06/20, The Goldman Sachs Group, Inc. share price has dipped notably by 2.03% or $4.43 to $213.68. The company’s dividend yield stands at 2.29%.

Abundance launches 7.1% p/a fixed yield renewables investment opportunity

Jamie Gordon
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Abundance launches 7.1% p/a fixed yield renewables investment opportunity
Ethical investment platform Abundance Investment announced on Wednesday that it would be launching an opportunity for consumers to invest in its ‘Build Back Better’ initiative – a programme designed to help the UK rebuild from the Coronavirus crisis by relying on ethical initiatives, in place of industries which contribute to global warming, inequality and militarism. The company’s new opportunity is a chance to invest in the forward-looking British renewables initiative, Agrogen, which is an on-farm Anaerobic Digestion plant geared towards helping UK AD plants to transition to more sustainable feedstocks. The plant aims to contribute as much as possible to delivering a ‘Net Zero’ future, by harnessing circular economy technology. It uses “waste materials to generate biogas, which is combusted in a Combined Heat and Power unit and boiler system to generate heat and electricity. The digestate that remains is a nutrient-rich fertiliser which is used on the farm and neighbouring farms, so nothing is wasted.” In the case of Agrogen, even the heat isn’t wasted – it is used to dry logs which are sold for domestic use. Among its other credentials, the plant is owned and run by ‘award-winning’ farmer and Anaerobic Digestion operator Rob Greenow, and receives an income from the Feed-in Tariff and Renewable Heat Incentive. The opportunity to get involved is being offered to investors in the form of tradeable debentures paying, a fixed rate of 7.1% p/a over a 16 year term. The goal of this offering is to raise a total sum of £2.65 million to finance upgrades to Agrogen’s existing technology, which will allow it to process a greater variety of farm waste. Abundance added that participants can start with as little as £5, and are eligible for inclusions in Abundance’s Innovative Finance ISA or SIPP.

Why should this interest us?

Speaking on the opportunity offered by investment in AD, co-founder and Managing Director of Abundance, Bruce Davis, commented, “AD is the unsung hero of the renewable energy sector and we have been looking for an investment in this sector for many years. People like Rob are showing farmers how they can make an important contribution to our green recovery – not only through producing homegrown food, but homegrown energy too. Agrogen is a great opportunity for investors to support a circular economy solution that can help UK agriculture to build back better after the pandemic.” Agrogen Director, Rob Greenow, added, “Agricultural ‘waste’ is a valuable resource, providing not only renewable energy but also fertiliser which can be used on local farms. We want to lead the AD industry by improving our environmental performance even further and this new technology, already used successfully in Austria, offers a greener and better way for farms using AD to generate energy from their waste products. We’re excited about enabling like-minded investors to share our enthusiasm!”

Premier African Minerals acquires Zimbabwe and Mozambique lithium portfolio

Bronte Carvalho
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2
Premier African Minerals acquires Zimbabwe and Mozambique lithium portfolio
Multi-commodity mining and natural resource development company Premier African Minerals Limited (LON:PREM) has announced the $104,000 acquisition of a hard-rock lithium portfolio based in Zimbabwe and Mozambique from Lithium Consolidated Ltd (ASX:LI3), following the latter’s shift in focus to projects based in Australia. The acquisition includes 1500 hectares of licenses in Zimbabwe, originally acquired by Lithium Consolidated in 2018, and a further 100 hectares in the Alto Ligonha Pegmatite Province of Mozambique. The move was intended to complement Premier’s existing operations on the continent.

Premier added that today’s acquisition emphasises its ongoing commitment to projects in the region, noting that the operation in Mozambique carries similar mineralisation to Zimbabwe. The acquisition joins a diverse portfolio including tungsten, rare earth elements and tantalum.

Chief Executive Officer of Premier, George Roach, commented on the announcement, “These properties in Zimbabwe are completely complementary to our existing operations and may have potential for small scale early production, something very important to our Company, as much as adding to our lithium inventory. The project in Mozambique has recently been identified as being potentially prospective for other mineralisation including gold.” As of BST 16:35 10/06/20, the Premier African Minerals share price has dipped modestly by 0.60% or 0.00060p, to 0.099p per share.
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