Dow Jones flattened by housing market mixed messages

Jamie Gordon
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Dow Jones flattened by housing market mixed messages
The Dow Jones had a tough time deciding where it wanted to go after the bell, with US housing market news neither going one way or the other. After dropping over 150 points, the index bounced, fluctuated and now sits 0.34% up at 25,959 points. The confusion began with the headline that monthly home sales were at a nine-and-a-half year low in May, with US home sales falling 9.7% to just 3.91 million units. This fall was far greater than the anticipated drop of 3%, to 4.12 million during May, and represents the worst sale figure since October 2010. Existing home sales constitute about 90% of all US home sales, and the number of owned homes on the market in May was down 18.8% year-on-year.
Further, existing home sales were down 26.6% year-on-year during May, which represents the largest annual decrease since 1982.
On the other hand, June saw a decade-high number of mortgage applications, likely because of the lapse in activity the month before, in addition to some cut-price offerings from those keen -but until now unable – to sell their properties. The issue now becomes one of whether home sales will show a resurgence during the remainder of summer. Much like the Dow Jones today, analysts appear to be caught in two minds. On one side, the number of mortgage applications would suggest a healthy rebound is on the way when the current month’s data is released. On the contrary, and perhaps with a longer term outlook in mind, bears will cite the 44 million unemployment claims and limited stock of new homes being built, and perhaps anticipate any kind of rebound will be muted at best. “Home sales may bounce with pent-up demand following the shutdown of the economy starting in March, but the massive scale of job losses and cautious consumers rebuilding their savings may limit the sales turnover of the housing stock,” said Chris Rupkey, chief economist at MUFG in New York. One thing we ought to keep in mind, is the fact that fewer sales don’t necessarily correspond to lower prices. While median US house prices only saw an annual increase of 2.4% – the smallest increase since February 2012 – we can expect this rate of growth to accelerate as the summer progresses. No matter the anticipated hindrances to home-buying appetite, it is likely the demand for US homes will recover more quickly than the supply of new-builds, which has an inevitable effect on prices.

Happily, the Dow Jones was willing to let the contrasting house market data cancel each-other out; and happier still to ignore the growing number of US Coronavirus cases, as well as President Trump‘s ill-conceived ‘joke’ about slowing down testing to stop that number rising any further.

Plans filed for £770m Greenwich Peninsula tower cluster

Bronte Carvalho
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0
Plans filed for £770m Greenwich Peninsula tower cluster
Property developer and investor U+I (LON: UAI) has filed a planning application for a “major mixed-use” £770 million cluster of towers as part of its ongoing Morden Wharf scheme on the Greenwich Peninsula. The company’s share price has dropped, however, amidst widespread market uncertainty and the news that the Bank of England is expecting to wind down its quantitative easing measures in the months ahead, leaving the economy to fend for itself towards the end of the year. The Morden Wharf development plans include around 1,500 new homes on a six acre site, featuring “high-quality public realm” and a landscaped park running alongside the River Thames. A total of 12 residential tower blocks make up the base of the project – with additional room for commercial, retail and community spaces – as well as a new boathouse for Queen Elizabeth II’s royal barge, the Gloriana. Designed by private Dutch architecture firm OMA (Office for Metropolitan Architecture), the proposal features a riverfront park which will “offer fantastic views of the Maritime Greenwich World Heritage Site and Canary Wharf across the River Thames”. U+I has emphasised that the project’s design is “inspired by the site’s history as a marshland and will add a significant new ecological resource to the area” and is intended to “address the existing deficit of open space in the area”. The scheme offers a mix of private and commercial sales – of which 35% are described by the development firm as “affordable” – with a focus on family homes with “play and recreation” space for all ages. The project is predicted to generate some 1,100 permanent new jobs and an additional 2,400 during the construction process. Capitalising on the site’s rich history, the Morden Wharf is renovating “an existing warehouse on the site of an old pub, The Sea Witch, that was destroyed by a bomb during the Second World War” into a new bar, adding to the long list of amenities that make the proposed scheme so attractive to potential buyers. Overlooking the River Thames and only a short tube journey away from Canary Wharf and the o2 arena, the project is sure to drum up considerable interest. U+I Chief Development Officer Richard Upton welcomed the proposal with a statement on the company’s official website: “Morden Wharf will bring together new homes, retail, leisure, employment and an extensive riverfront park, to create a diverse community rooted in the site’s heritage. Centred on a beautiful park and world-class public realm this scheme is set to transform the area into a distinctive, green, mixed-use development, while driving growth and employment and delivering 1,500 much-needed new homes”. The plans are currently sitting with the Royal Borough of Greenwich waiting for approval, following “extensive consultation with the local community and key stakeholders”.

Investor insight

U+I’s share price has failed to jump following the firm’s announcement, down a disappointing 4.76% or GBX -4.00 at GBX 80.00 BST 15:37 22/06/20. A positive leap, however, from a nadir of GBX 76.30 during March. The company’s dividend yield currently stands at 0.099%.

CBI states UK factory output fell at fastest rate since records began

Jamie Gordon
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CBI states UK factory output fell at fastest rate since records began
The CBI noted that UK factory output had fallen at its fastest pace since records began in 1975, during the first three months of the year. The pressure group stated that 360 firms responded to their survey between late Mate and mid June, and of that number, an unsurprising 74% said they had produced less in the three months to the end of March. The CBI said the negative balance, between gross increase and decrease in factory outputs, reflected a 57 percentage point dip -which is the largest fall since records began in 1975. While most subsectors of manufacturing reported falls, the greatest declines were seen in vehicle, transport, mechanical engineering and metal products. Despite a modest recovery in June, the CBI noted that order books remained weak, with 71% of firms reporting that order books were below normal levels for the time of year – down 58 points in June versus negative 62 points in May. Similarly, export books were at their lowest level on record, with a mere 2% of respondents stating that their output was better than normal. Commenting on the results, CBI Chief Economist Anna Leach stated: “The UK manufacturing sector remained in a deep downturn in June due to the ongoing Covid-19 crisis. Output volumes declined at a new record pace and export order books fell to an all-time low, reflecting the significant fall in demand in the UK and abroad. Firms are again hoping this will ease somewhat in the next three months.” “The government has already undertaken a huge amount of work to provide financial lifelines to businesses throughout this unprecedented period. With firms having been encouraged to restart operations, the government must continue to engage with the sector to understand their specific concerns and provide support as needed.” Further to the CBI’s announcement, the Employers’ Organisation stated that no evidence had been found in its monthly industrial trends survey to suggest that the recovery in high street and online spending had filtered through into greater demand for British manufactured goods.

Rishi Sunak announces Nikhil Rathi as new FCA Chief Executive

Jamie Gordon
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Rishi Sunak announces Nikhil Rathi as new FCA Chief Executive
Chancellor of the Exchequer Rishi Sunak announced on Monday that Nikhil Rathi will take over as Chief Executive of the FCA. Prior to today’s announcement, Mr Rathi served as the Chief Executive of the London Stock Exchange from 2015, and is well-acquainted with Treasury officials, having served as Director of Financial Services for five years from 2009. In his new role at the Financial Conduct Authority, Rathi will succeed Christopher Woolward, who acted as the interim Chief Executive following Andrew Bailey‘s departure to head up the Bank of England in March. Rathi is being appointed on a five-year term, with Woolard continuing to act as interim Chief Executive until the appointment begins. Speaking on the announcement, Chancellor Rishi Sunak, said: “Nikhil is the outstanding candidate for the position of Chief Executive of the Financial Conduct Authority, and I am delighted that he has agreed to take up the role.” “We have conducted a thorough, worldwide search for this crucial appointment and, through his wide-ranging experiences across financial services, I am confident that Nikhil will bring the ambitious vision and leadership this organisation demands.” Once Rathi assumes his new role, he will be paid an annual salary of £455,000 and be required to give up any of his existing interests in the London Stock Exchange. As reported by The Guardian, he will be the first BAME chief of the FCA, and during his tenure, Rathi aims to make the FCA a ‘more diverse organisation’, as well as focusing policy on tech innovation, climate change and continuing Woolward’s legacy of focusing on vulnerable consumers. Speaking on his new role, incoming FCA Chief Executive Nikhil Rathi commented: “I look forward to building on the strong legacy of Andrew Bailey and the exceptional leadership of Christopher Woolard and the FCA Executive team during the crisis. FCA colleagues can be very proud of their achievements in supporting consumers and the economy in all parts of the UK in recent months.”

“In the years ahead, we will create together an even more diverse organisation, supporting the recovery with a special focus on vulnerable consumers, embracing new technology, playing our part in tackling climate change, enforcing high standards and ensuring the UK is a thought leader in international regulatory discussions.”

 

BoE Governor says UK was on brink of insolvency

Bronte Carvalho
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1
BoE Governor says UK was on brink of insolvency
Bank of England governor Andrew Bailey candidly revealed the true extent of the impact of the coronavirus pandemic on the UK economy, admitting that Britain reached the brink of insolvency in the early stages of the outbreak. If the Bank had not intervened, the government would have faced a “market meltdown” and struggled to fund itself for the first time in its 325-year long history.

Unprecedented times, unprecedented measures

Speaking to Sky News podcast ‘The World Tomorrow’ on Monday morning, Bailey reflected on the extreme measures that the Bank of England was forced to take in order to keep the UK economy afloat earlier this year. After a record 20.4% contraction in April and warnings that the economy could shrink by 14% over the course of 2020, the Bank has already injected a total of £300 billion in efforts to maintain market liquidity, but the forecast for the rest of the year remains decidedly grim. Bailey warned that many viable British companies will fail to make it to the other side of the crisis – with widespread predictions of a recession – and added that the Bank’s unprecedented quantitative easing programme should not be taken for granted. Last week, the finance institution raised its bond purchase target to £745 billion, following on from a record drop in interest rates to 0.1% back in March. He commented on the economy’s 2020 performance: “We basically had a pretty near meltdown of some of the core financial markets”.

Getting back on track

After starting as Governor of the Bank of England in the week before UK lockdown measures came into force, Bailey has faced a challenging first few months on the job. He has since suggested that the Bank should start to cut back on its asset purchases before it begins to raise interest rates again, in direct opposition to his predecessor’s strategy. “When the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on a sustained basis”. Previous Governor Mark Carney said that the Bank would increase interest rates before selling purchases back to the market in its post-pandemic plans. On the contrary, Bailey stated that he wants to avoid high central bank holdings of government debt in the future, adding: “Elevated balance sheets could limit the room for manoeuvre in future emergencies”.

Uncertainty grips markets

After a tumultuous Monday morning for global equities amid fears of a second wave of coronavirus, the FTSE 100 (INDEXFTSE: UKX) is down by 18.42 points or 0.29% BST 14:25 22/06/20. The DAX (INDEXDB: DAX) continues its downward trajectory at -0.49% CEST 15:07 22/06/20 and the CAC 40 (INDEXEURO: PX1) struggles to recover from a pessimistic performance earlier on at -0.47% CEST 15:09 22/06/20.

Centrica shares dip despite announcing digital and renewable British Gas X

Jamie Gordon
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0
Centrica shares dip despite announcing digital and renewable British Gas X
British energy company Centrica (LON:CNA) announced on Monday that it had launched British Gas X, a modern-day challenger to its British Gas flagship brand. The company said a test website for British Gas X was already up and running, and that the new service would be entirely online and designed for ‘digitally savvy’ consumers. It added that existing British Gas customers can switch to the new service ‘at any time with no exit fees’, and that they will offset the energy customers use from ‘100% renewable’ sources. The new company has been launched in an effort to stay with the times, in the highly competitive British energy market. This follows the continued trend towards decarbonising British energy, which is having something of a renaissance under the ‘build back better’ initiative, which aims to see Britain rebuild from the Coronavirus pandemic by relying on greener energy solutions. The likes of BP with its drive towards renewables, Drax Energy extending its ESG facility and Abuandance launching its renewables-based fixed-rate debentures, are all testament to recent efforts to modernise British energy generation. Today’s news also comes after the announcement that Centrica would axe up to 5,000 jobs, while rival Ovo planned to close offices and lay off 2,600 staff. Following the update, Centrica shares dipped by 3.51% or 1.51p to 41.51p per share 14:05 BST 22/06/20. The company’s p/e ratio stands at 5.89, its dividend yield is generous at 12.09%.

FTSE 100 wavers amid fears of coronavirus second wave

Bronte Carvalho
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FTSE 100 wavers amid fears of coronavirus second wave
The FTSE 100 (INDEXFTSE: UKX), DAX (INDEXDB: DAX) and CAC 40 (INDEXEURO: PX1) all opened with an underwhelming performance on Monday morning, dropping over 1% as markets responded to mounting fears of a second wave of coronavirus. By mid-morning, both the DAX and the CAC 40 had recovered, up 0.4% – however the momentum trailed off not long after, with all 3 markets slipping back into the negative by noon. Reports of an outbreak at a German meat processing factory and a spike in cases in Beijing have concerned investors, throwing cold water over the progress made at the start of the month when the FTSE 100 traded at its highest level since the start of the pandemic.

Markets can’t make up their minds

The markets’ tumultuous behaviour is a reflection of the conflicting news to hit the headlines in the past week. Russ Mould, investment director at stockbroker AJ Bell, commented on Monday morning’s performances:

“Investors continue to be pulled from different directions by various headwinds and tailwinds. On one hand there is positive news such as Spain accepting UK tourists without the need for quarantine, adding to the list of restrictions being lifted across Europe. On the other hand, the US still seems to be struggling to contain the coronavirus and the risk of a second wave is still front of mind for many people”.

Jim Reid, strategist at Deutsche Bank, weighed in: “The virus spread continues to create a lot of uncertainty in markets. For example, does it matter that the troublesome US states are continuing to see case numbers increase or does it provide some good news that economies can stay open as cases rumble on?”. UK investors may find solace in Prime Minister Boris Johnson’s announcement scheduled for tomorrow, in which he is expected to lay out the government’s plan to reopen the hospitality sector by the 4th of July – amid a revision of the official 2m social distancing guidelines, deemed by industry leaders as too restrictive. Non-essential retailers opened last Monday to queues and crowds in England, indicating that the relaxation of lockdown measures could bring a much-needed boost to the economy after months of suffering and a record 20.4% contraction at the peak of the pandemic. However, the travel industry in particular continues to struggle as countries refuse to reopen borders and summer holiday plans are scuffled. British Airways-owner IAG (LON: IAG) share price slipped almost 5% at noon, with cruise operators Carnival plc (LON: CCL) down 5.26% and easyJet (LON: EZJ) weathering a 0.80% drop.

The road ahead

So, mixed signals overall as share prices almost universally slide and global news bulletins continue to focus on coronavirus-induced anxiety. At midday there was a snippet of market confidence as the seasonally adjusted IHS Markit UK Household Finance Index (HFI) reported a rise to 40.7 in June from 37.8 in May. Joe Hayes, an economist at IHS Markit, was quick to dampen any over-excitement on the good news: “It is reassuring to see the UK Household Finance Index rebounding in June, as it suggests that the financial hardship endured during the height of the lockdown is easing. Job security perceptions are still at extreme levels of pessimism, and the data here suggest there has been little pickup. This isn’t surprising given that large parts of the UK economy remain shuttered, but such negativity towards employment status is likely to generate risk aversion in consumption habits, which will undermine the recovery. Incomes from employment were also in deep contraction territory during June. Key to the economy returning to pre-COVID-19 levels of economic output as quick as possible will be strong demand, which will encourage robust business activity and employment growth. If households are fearful for their job security and their incomes are falling, the UK’s path of recovery could be a slow one”.

Go Outdoors on brink of administration

Safiya Bashir
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Go Outdoors on brink of administration
The JD Sports brand, Go Outdoors, is expected to fall into administration. As the Coronavirus pandemic is putting pressure on the UK high street, the brand has suffered from closed stores and a lack of online demand. JD Sports bought Go Outdoors in a £112m deal in 2016. The brand has 67 stores and has over 2,000 employees. The Manchester-based retail group specialises in fishing, cycling and camping gear and has not yet commented on the news, reported first today by Sky News. JD Sports is expected to publish full-year results in July. It’s Go Outdoor brand was struggling before the pandemic. In August 2019, it posted a loss of around £40m. Go Outdoors will be the most recent of a string of companies that have been hit by the Coronavirus pandemic. Since the crisis hit the UK, retailers including Laura Ashley, Debenhams, Oasis and Warehouse have called in administrators and thousands of high street jobs have been axed. Whilst the high street reopened earlier this month, compared to the same period in 2019 footfall was down 45.3% according to retail analyst firm Springboard. Although shops are reopening, our changed shopping habits will affect the high street for months to come. “Consumers have changed their spending habits, and will be increasingly used to going without much of their discretionary shopping,” said Duncan Brewer, head of the UK retail and consumer team at consultants Oliver Wyman. “With the inevitable recession coming, it’s likely that many will continue to be careful with spending, even if they are comfortable shopping in the first place,” he added. The JD Sports (LON: JD) share price is trading -1.89% at 634.80 (0941GMT).    

CyanConnode shares jump on the roll out of Indian contract

UK Investor Magazine
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CyanConnode shares jump on the roll out of Indian contract
CyanConnde (LON:CYAN) has announced the commencement of an India contract relating to CyanConnode’s Narrowband Radio Frequency Smart Mesh Networks. CyanConnde’s Smart Mesh Networks enable the Internet of Things (IoF) in end applications such as smart metering in power distribution. Today’s announcement signals the eventual commencement of a Indian contract that had suffered delays, causing revenue to be recognised in a different accounting periods than previously expected. Despite the delays, the first shipment of 10,000 CyanConnode OmniMesh Modules has been made to the project in India and the production of Smart Meters its set to begin shortly. CyanConnode shares rallied over 11% in early trade on Monday following the news. “The shipment is part of a contract to supply up to 200,000 Omnimeshenabled smart meters, worth £3.3m, as per the group’s press release issued in January 2020,” analysts at Arden Partners said in a research note. “CyanConnode’s original expectation was that the installation of the project would be completed within fifteen months of kick-off, and that c.80% of revenue would have been recognised during the first two years with the remainder received over the 7-year support and maintenance contract commencing from the point of the project ‘going live’.” CyanConnode pointed to COVID-19 slowing progress but were confident on ongoing demand and the growth of their Omnimesh Network Canopy. “There has been a good start towards providing the Omnimesh Network Canopy, which will provide a hybrid RF Smart Mesh and Cellular communication network, that is licensed for up to 200,000 Omnimesh enabled smart meters,” said Anil Daulani, CyanConnode India CEO and MD. “India is still seeing an increase of Covid-19 cases, and I wish to express my sympathies to families who have been affected. I remain optimistic and look forward to giving further updates relating to new orders in due course.” CyanConnode shares were 11.68% stronger at 4.30p in early Monday morning trading in London.  

Online growth for Joules

Andrew Hore
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Online growth for Joules

There are signs of improvement for fashion brand Joules (LON: JOUL) and the recent fundraising has strengthened the balance sheet. Online sales have prospered.
Even so, Joules lost up to £3m in the year to May 2020. Stock has been kept under control. A few months ago, the worry was obtaining stock from China, but that changed to concerns about the ability to sell stock.
Last year’s revenues were better than expected because of the online growth. These are likely to have been particularly strong in April and May. It is existing customers that have been spending more online with less being spent...

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