Markets flustered by US impeachment inquiry and UK Supreme Court ruling
The difficult start to the weak was continued, especially in already-fragile Eurozone indices, by Tuesday’s political turmoil. The well-documented and precedent-setting rejection on the UK Parliament shutdown began the furore, but not to be outdone, the US followed later in the day with its long-awaited impeachment inquiry. Markets will no doubt suffer more before they improve, and we will wait and see how many of Donald Trump’s and Paul Manafort’s Ukrainian black-ops are uncovered before the impeachment inquiry expires.
Talking on the market opening, Spreadex Financial Analyst Connor Campbell stated,
“There’s just a bit TOO much going on at the moments for the markets, leading to another tricky start for all involved.”
“It appeared on Tuesday that the UK and US were engaged in a bizarre game of one-upmanship, battling over which nation’s political mess is the biggest. First you had the Supreme Court ruling that Boris Johnson’s prorogation of Parliament was unlawful, bringing to an end – for now, at least – its suspension. Then, that evening, Nancy Pelosi announced a long-awaited, and much sought after, impeachment inquiry into Donald Trump, the tipping point being the ongoing Ukraine scandal.”
“And for investors who like their politics safe and stable, not perpetually on fire, that’s a problem. Overnight the Dow Jones fell to a fresh 2-week low of 26850, setting the tone for Wednesday’s European open.”
“The DAX, already having a rough week thanks to Monday’s manufacturing PMI migraine, lost another 0.6%, sending it under 12250 for the first time since September 10th. The CAC, meanwhile, was down 0.8% and back below 5580.”
“Interestingly there was rare agreement between the FTSE and pound after the bell. The UK index dropped half a percent, like it’s US and Eurozone peers striking a 2-week low in the process. This despite sterling giving up yesterday’s post-Supreme Court ruling pop; cable slipped 0.4%, while against the euro the pound dipped 0.2%.”
“Needless to say, the resumption of Parliament in the UK, and the next steps in the impeachment furore in the US, are going to be closely watched by nervous investors.”
Elsewhere in markets and macro economic news, there have been updates from; the Supreme Court’s ruling, the collapse of Thomas Cook (LON: TCP), ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Jo Johnson quitting, Hilary Benn’s Brexit delay bill, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).
Sainsbury’s: improved sales momentum, opens and closes stores
Sainsbury’s (LON:SBRY) said in a second quarter trading statement on Wednesday that it has experienced an improved sales momentum across all business areas.
The company also announced that it will be closing many stores and opening new ones.
Shares in the supermarket chain were up during trading on Wednesday.
Sainsbury’s said that second quarter total retail sales were up 0.1%, excluding fuel, and like-for-like sales were down 0.2%, excluding fuel.
Meanwhile grocery sales increased by 0.6%, general merchandise sales declined by 2% and clothing sales rose by 3.3%.
The supermarket chain added that it will be opening 10 new supermarket stores whilst closing up to 15.
Sainsbury’s also said that 70 Argos stores will be closed and 80 Argos stores will be opened in Sainsbury’s supermarkets.
Moreover it will close 40 convenience stores and open 110 new ones.
Sainsbury’s expects the closures to deliver a profit benefit of £20 million each year.
“Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in Grocery,” Mike Coupe, Chief Executive Officer, commented in a company statement.
“We have focused on reducing prices on every day food and grocery products and expanding our range of value brands, which have been very popular with customers,” the Chief Executive Officer continued.
“At the same time, we are investing significantly in our supermarkets, driving consistent improvements to service and availability.”
“Argos continued to grow market share in key categories, but sales were impacted by reduced promotional activity and the timing of new product releases in gaming and toys. Clothing sales were boosted by clearance activity and strong online growth and Tu continued to grow market share.”
Additionally, Sainsbury’s said that though retail markets remain highly competitive and the consumer outlook remains uncertain, it is on track to deliver full year underlying profit before tax in line with expectations.
Shares in J Sainsbury plc (LON:SBRY) were trading at +2.21% as of 11:13 BST Wednesday.
Boohoo profits soar
Boohoo group plc (LON:BOO) posted a leap in profit before tax on Wednesday in its half year results.
Shares in the UK-based online fashion retailer were up during trading on Wednesday.
Boohoo, which was founded in Manchester in 2006, said that profit before tax for the six months ended 31 August grew 83% to £45.2 million.
Meanwhile revenue rose 43% to £564.9 million.
The company also owns the brands PrettyLittleThing and Nasty Gal.
The online fashion retailer said that it is increasing its market share through “highly effective marketing strategies”.
Indeed, the company uses a range of high profile celebrity campaigns, influencer associations and digital and traditional marketing initiatives.
Love Island contestant Maura Higgins joined the list of celebrities recently as she signed for boohoo.com as a UK brand ambassador.
“It has been a fantastic first half of the year for the group,” John Lyttle, CEO, commented in a company statement.
“We have delivered significant market share gains across all of our key markets, and for the first time in our history, revenue has exceeded £1 billion in the last 12 months,” the CEO continued.
“We have delivered strong growth and operating leverage in our more established brands and will continue to invest in both our more established and newly-acquired brands. We enter the second half of the year well-placed and confident that our platform, which combines the latest fashion, great prices and excellent customer service, all underpinned by a well-invested infrastructure, will deliver further market share gains.”
Boohoo confirmed that it continues to maintain a “highly positive outlook” for the online fashion sector globally.
As for the UK high street, many retailers have suffered lately amid a gloomy trading environment.
Earlier this year, Boohoo also posted a rise in group revenue for the three months to the end of May.
The company is aimed at 16-30 year olds and offers low-cost clothing, shoes and accessories.
Shares in Boohoo Group plc (LON:BOO) were trading at +0.45% as of 10:22 BST Wednesday.
Pound rallies on Supreme Court Parliament prorogation ruling
The Pound Sterling rallied to four month highs against the Euro, following the Supreme Court’s verdict, which deemed Boris Johnson’s prorogation of Parliament not only illegal but null and void.
Speaking on the day’s movements following the verdict, Spreadex Financial Analyst Connor Campbell commented,
“Celebrating Boris Johnson’s latest defeat – his short premiership has so far been defined him turning a blind eye to repeated failure in hopes of securing a ‘people vs parliament’ election – the pound popped higher on Tuesday.”
“The Supreme Court ruled that the PM’s prorogation was, as evident to many, a cynical and illegal act, clearing the way for Parliament to resume on Wednesday. That means, instead of sitting by the side lines, sterling can strap back into the gut-churning Brexit rollercoaster, as Leavers and Remainers battle over the fate of the county.”
“For now undaunted by the impending headache, the currency climbed 0.4% against the dollar, allowing cable to cross $1.2487. Against the euro, meanwhile, the pound was up 0.3% and back at a 4-month peak of €1.1342.”
“Johnson was joined in his displeasure at such an outcome by the FTSE, which tumbled 0.6% in the face of the pound’s gains. The UK index is now trading at 7280, returning to the 2-week lows struck during Monday’s session. That its mining and oil stocks were all firmly in the red didn’t help one bit.”
“Over in the Eurozone the situation was mixed. The DAX, still nursing its wounds after yesterday’s horrorshow manufacturing PMI, fell 0.2%, but with the CAC unchanged at 5625. The Dow Jones, meanwhile, remained in post-Fed/pre-trade talks limbo, adding 0.1% as it trying to keep hold of 27000.”
Though likely more of a symbolic than practical loss for Boris’s camp, it nonetheless adds to the list of defeats for the prime minister, as preserved due processes prove testing for his fast and loose populist modus operandi. Elsewhere in markets and macro economic news, there have been updates from; the Supreme Court’s ruling, the collapse of Thomas Cook (LON: TCP), ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Jo Johnson quitting, Hilary Benn’s Brexit delay bill, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).TUI responds to Thomas Cook collapse
German travel and tourism company TUI AG (LON: TUI) issued a statement today, in response to what has been a strong start to the week’s trading for the Company, following the capitulation of its counterpart, Thomas Cook.
The Company reported ‘balanced results’, with demand shifting from Western to Eastern Mediterranean locations, and their Turkish destinations in particular seeing increased footfall.
TUI went on to say that it expects to see customer growth on the back of its acquisitions of Destination Management and Musement, and the launch of its new cruises; the Mein Schiff 2, Marella Explorer 2 and Hanseatic nature for Hapag-Lloyd Cruises. It also said that it hoped to expand the portfolio of its TUI Blue hotel portfolio from 10 to 100 by the end of 2020.
The Company added that its Winter Programme is currently in line with the prior year’s trading, and in response to Thomas Cook’s collapse, the Company’s shares bounced over 8% on Monday.
TUI AG comments
Speaking on the update, Chief Executive Friedrich Joussen, said, “On Monday 23 September 2019, our competitor Thomas Cook UK Plc and associated UK entities entered into compulsory liquidation. TUI is preparing measures to support. Where TUI customers are booked on Thomas Cook Airlines flights and these are no longer operated, replacement flights will be offered. We are currently assessing the short term impact of Thomas Cook’s insolvency under the current circumstances, on the final week of our FY19 financial result.” “Our vertically integrated business model proves to be resilient, even in this challenging market environment. Our Holiday Experiences business continues to deliver strong results. Meanwhile, ourMarkets & Airlines business faces a number of ongoing external challenges such as the grounding of the 737 MAX aircraft, airline overcapacities and continued Brexit uncertainty. The Summer 2019 season is however closing out in line with expectations and we therefore reiterate FY19 underlying EBITA guidance stated in our ad hoc announcement of March 2019 of approximately up to minus 26% compared with underlying EBITA rebased in FY18 of EUR1,177m.” “These external challenges will continue in FY20 – therefore, we will focus on becoming more cost competitive in our Markets & Airlines business to protect and extend our market share where possible. Going forward, our two key digital strategic initiatives will deliver greater customer reach in new markets complementary to our existing markets, through our new GDN-OTA2 platform as well in our Destination Experiences markets through our Musement platform, driving further demand to our own Holiday Experiences businesses. TUI is well-positioned to become an integrated digital tourism platform business.”Investor notes
After Monday’s rally, the Company’s shares continued to rally on Tuesday, up 7.83% or 70.60p to 972.00p per share 24/09/19 15:44 BST. Shore Capital analysts reiterated their ‘Buy’ stance on TUI AG stock. Elsewhere in travel and aviation, there have been updates from; Thomas Cook (LON: TCP), Fastjet PLC (LON: FJET), John Menzies plc (LON: MNZS), Wizz Air (LON: WIZZ) and Ryanair Holdings Plc (LON:RYA).Supreme Court rules Boris Johnson’s prorogation of Parliament unlawful
Just past mid-morning on Tuesday a new precedent was set for the UK’s separation of powers-based democracy. The Supreme Court ruled that Boris Johnson’s advice to the Queen in favour of suspending Parliament for five weeks, was not only unlawful but in turn that the prorogation was ineffective and non-existent.
The judgement of eleven justices was delivered by Lady Hale, who – after a three-day emergency hearing last week over discrepancies in interpreting the UK’s uncodified constitution – agreed unanimously that not only was it the place of the court to examine Boris Johnson’s advice to the Queen, but subsequently rule that the advice in question was illegal.
Delivering the verdict, Lady Hale stated,
“The question arises in circumstances which have never arisen before and are unlikely to arise again.”
“This court has concluded that the prime minister’s advice to Her Majesty was unlawful, void and of no effect. This means that the Order in Council to which it led was also unlawful, void and of no effect should be quashed.”
“This means that when the royal commissioners walked into the House of Lords [to prorogue parliament] it was as if they walked in with a blank sheet of paper. The prorogation was also void and of no effect. Parliament has not been prorogued.”
Lady Hale continued, “It is for parliament, and in particular the Speaker and the Lord Speaker to decide what to do next. Unless there is some parliamentary rule of which we are unaware, they can take immediate steps to enable each house to meet as soon as possible. It is not clear to us that any step is needed from the prime minister, but if it is, the court is pleased that his counsel have told the court that he will take all necessary steps to comply with the terms of any declaration made by this court.”
“The court is bound to conclude, therefore, that the decision to advise Her Majesty to prorogue parliament was unlawful because it had the effect of frustrating or preventing the ability of parliament to carry out its constitutional functions without reasonable justification.”
Speaking on behalf of his client Gina Miller, James Lisbon, executive partner at Mishcon de Reya, commented,
“We are glad that the court recognised the threat to the rule of law caused by a prorogation based on misleading advice given to the Queen.”
“This second success for our client Gina Miller in the Supreme Court is a testament to her resolve to take whatever steps are required to ensure executive overreach does not become a feature of our democracy.”
“This case shows that our courts can be relied on to hold the executive to account when necessary and is evidence of the robustness of our system of separations of powers.”
The prime minister is currently attending the UN climate conference in New York, and will probably feel like his sweet big apple has just gone a little sour. Hardly the end of the road for Brexit, or – yet – for the prime minister, today’s verdict throws a spanner in the works for Boris Johnson, but likely means he’ll face a wall of bombast from a Labour party which much of the electorate currently consider to be dangerous and unelectable.
Going forwards, today’s verdict should warm the hearts of those fearing our unwritten constitution places no value on due process, and that even if the courts in London got it wrong the first time, the courts in Scotland were happy to offer recourse for democracy.
If you are fearing the uncertainty of a potential general election, and the woeful offerings provided by all parties, we can offer only slight cause for hope –
Following the judgement, little time or energy was spared by those calling for Parliament to reconvene with immediate effect, with additional fervour used by those who didn’t hesitate to lambaste the currently preoccupied prime minister.Watch Lady Hale announce the UK Supreme Court verdict on Boris Johnson’s suspension of Parliament:
“The prorogation was also void and of no effect. Parliament has not been prorogued. This is the unanimous judgement of all 11 justices.” https://t.co/4aYtENRxp1 pic.twitter.com/DS8YHVX3Nx — CNN International (@cnni) September 24, 2019
We’re sitting… pic.twitter.com/GdApCgcpbp
— Tom Tugendhat (@TomTugendhat) September 24, 2019
In what will likely be one of the rare and final moments of glee left in John Bercow’s tenure, the Speaker of the House stated following the verdict,
“I welcome the Supreme Court’s judgement that the prorogation of Parliament was unlawful.”
“The judges have rejected the Government’s claim that closing down Parliament for five weeks was merely standard practice to allow for a new Queen’s Speech.”
“In reaching their conclusion, they have vindicated the right and duty of Parliament to meet at this crucial time to scrutinise the executive and hold Ministers to account,”
He concluded, “As the embodiment of our Parliamentary democracy, the House of Commons must convene without delay. To this end, I will consult the party leaders as a matter of urgency.”Responding to what was ultimately their victory, the lawmaker who brought the Scottish case, Joanna Cherry, and lawyer and activist, Gina Miller, reacted to this morning’s news.
Mrs Cherry said in the Chamber,
“This is an absolutely momentous decision,”
“There is nothing to stop members of Parliament such as myself and my colleagues from resuming immediately”
“I am absolutely delighted that the United Kingdom Supreme Court has agreed with Scotland’s Supreme Court,”
On Boris Johnson, Mrs Cherry concludes, “His position is untenable and he should have to guts to do the decent thing and resign,”
Elsewhere in markets and macro economic news, there have been updates from; the collapse of Thomas Cook (LON: TCP), ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Jo Johnson quitting, Hilary Benn’s Brexit delay bill, Parliament being prorogued, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).“Given the Prime Minister acted unlawfully, the time has come for a figure the nation can trust to take charge…” #SupremeCourt pic.twitter.com/OZG7zfVB4B
— Larry the Cat (@Number10cat) September 24, 2019
AG Barr profits down, profit outlook unchanged
AG Barr (LON:BAG), the maker of Irn-Bru and Rubicon, posted a decline in profits on Tuesday in its results for the six months ended 27 July.
The soft drinks manufacturer did however confirm that it expects to meet its revised profit expectations, which it issued back in July.
Shares in the company were up during trading on Tuesday.
AG Barr said that, for the six months ended 27 July, revenue amounted to £122.5 million, compared to the £136.9 million figure recorded in 2018.
Meanwhile, the company posted a statutory profit before tax of £13.5 million, down on the £18.2 million seen in the prior year.
“Our innovation performance and pipeline remain strong with encouraging initial trade and consumer response to the recently launched IRN-BRU Energy range, which following the initial launch in Scotland, is now planned to roll out across the wider UK market later in the year,” AG Barr said in its interim results.
Indeed, AG Barr launched its Irn-Bru Energy range in July, and has seen an “encouraging” initial trade and consumer response.
AG Barr said that “we did however underestimate the volume benefit we received in 2018 from both one-off trading factors and favourable weather”.
“This, combined with some specific brand challenges, saw a deterioration in financial performance as per the revised market guidance issued in the pre-close trading update on 16 July 2019,” the soft drinks manufacturer added.
Indeed, in July the company warned of a 20% decline in annual profits, blaming the poor weather and the impacts surrounding last year’s sugar tax.
Roger White, Chief Executive, added that “our focus remains on delivering long-term growth”.
“We have plans in place to address our specific brand related challenges and are ensuring that the business is appropriately scaled to perform in the current market,” the Chief Executive continued.
Shares in A.G. Barr plc (LON:BAG) were trading at +4.78% as of 12:11 BST Tuesday.
Moss Bros revenue up in half year results
Moss Bros Group plc (LON:MOSB) posted a rise in revenue on Tuesday in its half year results.
Shares in the formal dress wear retailer were up during trading on Tuesday morning.
Moss Bros said that, for the 26 weeks ended 27 July, total group revenue excluding VAT amounted to £65.4 million – 1.4% up on the previous year.
Meanwhile, online sales across all platforms grew by 20% when compared to the same period a year prior. Moss Bros added that online sales from all channels now represents 15% of its total sales.
However, the company added that loss before tax widened to £2.7 million, deeper than the £1.7 million figure recorded for the first half of 2018.
Earlier this year, the company posted a £4.2 million loss for the year in its annual results, blaming warmer weather and a “volatile” trading environment.
Indeed, many retailers have struggled for survival amid the gloomy trading environment to have hit the UK high street.
Moss Bros confirmed that it expects to deliver full year results in line with market expectations.
“Our online sales continue to grow strongly as a result of increased investment in new customer acquisition to our own website www.moss.co.uk and we are also seeing positive momentum of product sold via the Next online marketplace as we expand the product options stocked via that site,” Brian Brick, Chief Executive Officer, commented on the results.
“Growth of online revenues remains central to our future success and has now reached 15% of our total sales,” the Chief Executive Officer continued.
“We are acutely aware of the challenges which we face in our Hire business. We plan to invest in a focused way in updated product to ensure that we remain relevant in terms of product offer. We are also actively investigating what newer and fresher hire or rental services can be offered to address changing customer requirements as soon as Spring next year, whilst ensuring that we maintain our market leading position for customers not simply wishing to purchase their formalwear outright.”
Shares in Moss Bros Group plc (LON:MOSB) were trading at +5.70% as of 08:10 BST Tuesday.
Thomas Cook collapse: reactions
News emerged on Monday that the British global travel group, Thomas Cook (LON:TCG), had collapsed, leaving thousands of British holidaymakers stranded abroad.
Meanwhile, some Thomas Cook customers have accused other airlines of capitalising on the collapse of the travel company. The BBC reported that in some instances, the prices for replacement flights have tripled.
Roughly 800,000 Brits had bookings set for the future with the failed travel company.
As customers and staff took to Twitter to share their experiences, we take a look at some online reactions to news that Thomas Cook has collapsed.
https://platform.twitter.com/widgets.jsTo help our friends at #ThomasCook, TUI Airways will bring home 473 holidaymakers from Tenerife and Turkey this evening. We keep our colleagues at Thomas Cook and its customers in our thoughts. And to our affected customers – please visit https://t.co/BhAyjcbP4X for updates. pic.twitter.com/r7FvPAyBzA
— TUI UK (@TUIUK) September 23, 2019
https://platform.twitter.com/widgets.jsI’ve been made redundant from the aviation industry before and it isn’t nice to be made stop what you love doing. But what’s great about this industry is things will get better and new jobs and opportunities will present themselves. #ThomasCook
— Andy Monks (@AndythePandy_) September 23, 2019
https://platform.twitter.com/widgets.jsHearts go out to every #ThomasCook employee who has lost their job today. I know it’s frustrating for those with cancelled/disrupted holidays, but it’s nothing compared to the families and individuals who have lost jobs. 💔 ☹️ #ThomasCookcollapse
— Elly Hoult (@HoultElly) September 23, 2019
https://platform.twitter.com/widgets.jsIt will cost £600 million to bring holiday makers home. It would have cost £200 million to rescue the business. Thousands of jobs gone. Hundreds of thousands of holidays ruined. What kind of government makes such a stupid decision? #ThomasCookcollapse
— Bill Esterson (@Bill_Esterson) September 23, 2019
https://platform.twitter.com/widgets.jsFeel so privileged to have worked for Thomas Cook Airlines and I’m glad I took these shots in the hangar last week to remember it by… #ThomasCook #ThomasCookCollapse pic.twitter.com/43DIQYMbI2
— Damian Matthews (@tsundokuist) September 23, 2019
https://platform.twitter.com/widgets.jsYesterday, our repatriation programme operated 64 flights, bringing back 14,700 passengers.
Today, there will be 74 flights bringing back more than 16,500 passengers – https://t.co/gEjPAHgBel If you are affected by failure of #ThomasCook visit https://t.co/g4G2b6RlHc pic.twitter.com/kaFm2pxeQ7 — UK Civil Aviation Authority (@UK_CAA) September 24, 2019
Everyman Media Group profits rise
Everyman Media Group (LON:EMAN) plc posted a strong six month period of growth on Tuesday, driven by increasing admissions and the amount spent on food and drinks.
Revenue for the six months grew 16% to £28.9 million and operating profit increased 14% to £1.6 million.
Everyman Media Group said that these were supported by increasing admissions and the amount spent on food and beverages.
Admissions were up by 9.4% to 1.5 million across the period and the cinema company experienced continued growth in average food and beverage spend, up by 13.2% to £6.95.
Meanwhile, Adjusted EBITDA increased by 61% to £6.6 million, up from the £4.1 million figure recorded the year prior.
Everyman Media Group, which saw its box office market share grow to 3% from 2.5% for the same period a year earlier, added that it has committed to an additional 15 new venues, of which four are expected to open in the second half of the year.
“The appetite for Everyman has never been stronger with our continued roll-out allowing us to deliver exceptional experiences to more audiences across the UK with our increasing footprint,” Crispin Lilly, Chief Executive Officer of Everyman Media Group, commented in a company statement.
“As a result, we have seen progress across both our financial and operational KPIs, with growth in revenue and operating profit driven by increasing admissions and F&B (food and beverages) spend. This has resulted in the record market share we are reporting today,” the Chief Executive Officer added.
Crispin Lilly said that the company remains “confident that there is significant room for expansion,” as Everyman Media Group is set to open its first international site in Ireland next year.
At the beginning of the year, the cinema company posted a rise in profits on the back of new openings.
Shares in Everyman Media Group plc (LON:EMAN) were trading at +0.49% as of 16:25 BST Monday.