US bonds enter first bear market in decades

Natasha Doris
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US bonds enter first bear market in decades

Analysts marked an accelerating decline in bond markets, bringing bad news for fixed income investors in an already difficult market environment.

Global bonds have lost a fifth of their value so far in 2022, with the fresh surge on US government bond yields on the back of US Fed chair Jerome Powell’s hawkish stance at the Jackson Hole convention adding to investor concerns.

Across the Atlantic, bonds in several European nations saw their worst monthly performance in decades last month, sparking a move in the Bloomberg Aggregate Bond index down approximately 20% from its peak for the first time in history.

Bonds are recognised as an asset class for typically reliable returns, making the 20% decline a sharp surprise for analysts and signalling a entry into a bear market.

Investors are speculating the weakness in bonds will persist as central banks tighten monetary policy in the fight against surging inflation in the US and internationally.

Experts expect the US Federal Reserve to hike interest rates by an additional 0.5% to 0.75%, following Powell’s hawkish remarks at the Jackson Hole conference in late August.

US Nonfarm Payrolls beat analyst expectations with 315,000 jobs

Natasha Doris
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US Nonfarm Payrolls beat analyst expectations with 315,000 jobs

The US added 315,000 nonfarm payrolls in August 2022, representing the smallest job gain since April 2021.

The figure comes after a downwardly revised 526,000 result in July. The report exceeded market forecasts of 300,000 jobs and indicated a remaining tightness in the labour market.

The positive jobs results will boost speculation in the markets about a hawkish US Fed interest rates hike, with chair Jerome Powell citing the tight labour market as a contributing factor to continued aggressive rate hikes from the Reserve.

Sectors with high jobs increases included professional and business services, health care and retail trade.

Although August marked a historically less impressive period for new jobs growth, nonfarm employment is currently 240,000 over the pre-Covid level in February 2020.

Establishing World-Class Assets and Utilising Direct Lithium Extraction with CleanTech Lithium

UK Investor Magazine
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Establishing World-Class Assets and Utilising Direct Lithium Extraction with CleanTech Lithium

We were delighted to be joined by Dr Aldo Boitano, CEO of CleanTech Lithium, for a deep dive into lithium markets and CleanTech’s operations in Chile.

Register to hear from CleanTech Lithium at the UK Investor Magazine Virtual Conference 27th September

CleanTech Lithium are developing three assets within the ‘Lithium Triangle’ in Chile and are targeting first production by 2024/25. The Lithium Triangle of Chile, Bolivia and Argentina is thought to hold some 50 million tonnes of lithium and CleanTech are setting about increasing this with additional resources from their lithium brine projects.

CleanTech will employ Direct Lithium Extraction (DLE) techniques across their portfolio. Dr Boitano provides a fascinating overview of DLE efficiencies and the ESG characteristics of DLE lithium production methods.

Aldo breaks down CleanTech Lithium’s portfolio and what investors can expect on the journey to first production.

Register to field questions to CleanTech Lithium at the UK Investor Magazine Virtual Conference 27th September

AIM movers: Shoe Zone buy back and Serinus Energy well disappoints

Andrew Hore
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AIM movers: Shoe Zone buy back and Serinus Energy well disappoints

Footwear retailer Shoe Zone (LON: SHOE) is buying back up to £3.5m shares over a period up until the end of November or when the money is spent. Shoe Zone is the best performer on the day with a 15.1% increase to 167.5p a share. This follows further positive trading news earlier in the week. Management raised 2021-22 pre-tax profit guidance from £9.5m to £10.5m.

Property investor Panther Securities (LON: PNS) says that its swap liability position has fallen from £15.3m to £3.9m in the six months to June 2022 and since then it has declined to £400,000. Panther Securities is benefiting from being sheltered from higher interest charges as rates increase. The share price rose 5.45% to 290p.

Sunrise Resource (LON: SRES) says Tolsa has identified multiple sepiolite horizons at the Pioche sepiolite project in Nevada. Tolsa, which is the world’s largest producer of sepiolite, has an option to purchase the project for $1.25m plus an ongoing royalty of 3%. Sepiolite is used in agriculture to carry pesticides and bind animal feed, high temperature drilling muds and pet litters. It is a scarce commodity with a limited number of commercial deposits one of which is in the US. The share price is 7.89% higher at 0.1025p.

Pharma software provider Instem (LON: INS) has gained its largest ever contract that is worth at least $12m over five years. The deal is with a contract research organisation and is for the company’s cloud-based Aspire clinical trial acceleration software, which will be launched with the customer in one year. There is $3m for implementation and the rest is paid in instalments of $2.25m a year over four years. The annual recurring revenues are $1m more than for the Instem system that is being replaced.

Oil and gas producer and explorer Serinus Energy (LON: SENX) says that the results of the Canar-1 exploration well in Romania did not justify flow testing. That sent the shares 22.2% lower at 10.5p. There were signs of residual gas, and it is possible that the gas migrated through this zone. Arden Partners has reduced is risked NAV from 55p a share to 53p a share. The next well to be drilled is Monfrinu Nord-1.

The Competition and Markets Authority (CMA) intends to seek a competition disqualification order against Alliance Pharma (LON: APH) chief executive Peter Butterfield. Alliance Pharma is one of four pharma companies that the CMA says infringed competition law. Alliance Pharma is appealing the decision and a £7.9m fine. The appeal should be heard next year. The investigation related to prochlorperazine and infringement was between June 2013 and July 2018. Alliance Pharma out-licenced prochlorperazine to a distributor in 2013 at a fixed transfer price and says that it did not profit from any market sharing agreement. Last year, the drug generated revenues of £700,000. The share price slumped by 13.6% to 80.8p on the day and it has fallen by one-quarter so far this year.

Pound steadies ahead of PM appointment

Natasha Doris
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Pound steadies ahead of PM appointment

The pound Sterling steadied on Friday in advance of the upcoming Prime Minister appointment next week.

The currency took a sharp drop earlier in the week on the back of a report from the Resolution Foundation, which revealed the UK was facing its largest drop in living standards in a century.

The pound fell to its weakest level since the country kicked off Brexit in 2016 following the devastating report.

According to Reuters, some analysts worried the pound could flirt with its lowest record level of approximately $1.05, which it hit in 1985.

Liz Truss currently stands as the front runner in the Prime Ministerial race, anticipated to beat former chancellor Rishi Sunak for the position.

Truss has been called on to bring billions of pounds in urgent support to UK households, in the form of raising benefits in line with inflation and imposing a more reasonable energy price cap to assist families with budget-devouring energy bills set to hit the population in October with an 80% price cap rise to over £3,000 per year on average.

The favourite for leadership has instead tried to push the appeal of tax cuts, however Truss didn’t explain how she intended to fund urgent public services as the country heads into a difficult winter for social services and the struggling NHS.

The pound is currently also contesting with a strong Dollar, as the US Fed looks set to raise interest rates higher following Fed Chair Jerome Powell’s hawkish stance at the Jackson Hole convention in late August, along with expected strong data from the US Nonfarm Payrolls report today, boosting incentive for more aggressive rate hikes in the realm of 0.5%-0.75%.

One pound equated to 1.1564 Dollars and 1.1565 Euros in late morning trading on Friday.

G7 to push forward on Russian oil price cap

Natasha Doris
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G7 to push forward on Russian oil price cap

G7 finance ministers are reportedly set to shore up plans for a price cap on Russian oil, with the aim of kneecapping Russia’s revenues for its invasion of Ukraine, while maintaining crude flows to avoid additional spikes in price.

The G7 members will be meeting virtually to discuss the implementation of plans to help mitigate the energy crisis storm in Europe, which has seen energy prices skyrocket across the continent.

Details remained unclear, including the per-barrel level of the price cap, above which nations would refuse insurance and finance to crude and oil products shipped from Russia.

UK Finance Minister Nadhim Zahawi commented in Washington on Thursday that he was optimistic minister at the meeting would “have a statement that will mean that we can move forward at pace to deliver this … we want to get this oil price cap over the line.”

Western leaders came to a conclusion in June to discuss a potential price cap to place a limit on the cost refiners and traders would pay for Russian crude. However, Moscow said it would not abide by the decree and could circumvent it by supplying oil to countries not bound under the price agreement.

White House spokesperson Karine Jean-Pierre did not issue comment at the time of writing, and said she did not want “to get ahead of that meeting.”

Dollar strengthens in advance of US Nonfarm Payroll report

Natasha Doris
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Dollar strengthens in advance of US Nonfarm Payroll report

The Dollar reached a close to two-decade high in advance of the US nonfarm payrolls report, as markets awaited confirmation of promising jobs data which could advance hopes of a hawkish stance from the US Fed at the next interest rates meeting.

US Fed chair Jerome Powell previously commented at the Jackson Hole convention that a tight labour market was one of the factors boosting the organisation’s movement towards continued aggressive rate hikes, with the Fed aiming for a softening in the labour market to tackle spiking inflation, which currently stands at 8.5% in the US.

Analysts are currently estimating a 300,000 jobs growth in August, adding to the stretch of positive employment data over the past couple of months for the States.

One Pound equated to 1.1567 Dollars and one Euro equated to 0.9991 Dollars in late morning trading on Friday.

Shell CEO Ben van Beurden to resign, says Reuters

Natasha Doris
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Shell CEO Ben van Beurden to resign, says Reuters

Shell CEO Ben van Beurden is set to resign after almost a decade in the position, according to Reuters.

Two sources close to the matter apparently told the news organisation van Beurden had shortlisted four potential candidates to replace him in the leadership role.

Shell head of integrated gas and renewables Wael Sawan is said to have made the list, along with head of downstream refining operations Huibert Vigeveno.

Chief financial officer Sinead Gorman and upstream head Zoe Yujnovich round out the final options for the CEO role.

Reuters said Shell’s board succession committee led by Chairman Andrew Mackenzie had met several times over the last few months to discuss plans for van Beurden’s leave from the company.

Van Beurden joins Reckitt Benckiser CEO Laxman Narasimhan in the exodus of FTSE 100 CEOs over 2022, with the Shell boss representing the 18th leader to jump ship so far in the volatile market environment.

“After yesterday’s surprise departure of Reckitt Benckiser chief executive Laxman Narasimhan, it looks as if another FTSE 100 company is poised for a change at the top as Shell’s Ben van Beurden is reportedly preparing to step down,” said AJ Bell investment director Russ Mould.

“While there has been considerable volatility in the interim, ultimately since van Beurden took over at the beginning of 2014 he has delivered a total return to shareholders of 45.1%. Given this period encompassed an oil price crash very early in his tenure and a global pandemic, this is not too shabby.”

“Whoever prevails will have to balance the demands of the environmental lobby, governments and investors. At least van Beurden spared them the decision of cutting the dividend, a step taken for the first time since the Second World War in 2020. However, there will be more hard decisions to come if the company is going to live up to its net zero rhetoric.”

Shell declined to comment on the article at the time of writing.

Cornerstone FS acquires Pangea FX Limited for £200k

Natasha Doris
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Cornerstone FS acquires Pangea FX Limited for £200k

Cornerstone FS shares gained 5.2% to 8.95p in early morning trading on Friday, after the forex group reported its agreement to acquire the entire issued and to be issued share capital of Pangea FX Limited for a maximum consideration of £200,000.

The company said it would pay the maximum amount of £200,000 depending on future performance, and would transfer the payment in cash and loan notes.

Pangea FX Limited is a treasury and specialist FX consultancy focused on helping its clients control the impact of currency volatility on their business, primarily via a bespoke service to UK corporate clientele.

Cornerstone FS commented it believed the acquisition would accelerate the company’s growth through the acquisition of Pangea FX founders Joe Jones and Stuart Plummer, who will join the group as senior sales executives.

Jones and Plummer will lead Cornerstone FS’ sales function, with Jones based at the company’s London headquarters and Plummer positioned at the firm’s Dubai office.

Each are set to receive 550,000 options in the firm’s share option scheme. The options vest after two years at 10p per share, pending the successful execution of relevant performance criteria.

Cornerstone FS confirmed additional benefits in the form of Pangea FX’s existing clientele migration, alongside operational synergies from the closing of the Pangea FX office and relocating their employees to the main Cornerstone office.

“We are pleased to have completed this acquisition and welcome the Pangea FX team to Cornerstone. Joe and Stuart have done an excellent job of building the Pangea FX business and we look forward to benefitting from their skills and experience, both in the UK and in Dubai,” said Cornerstone FS chairman Gareth Edwards.

“As we stated at the time of our fundraising, our intention was to invest in our sales team to drive growth and we believe this is the optimum means of achieving that as we also gain a book of business in the short term, which we expect to be significantly expanded going forward.”

“With Joe and Stuart having worked with our team members in the past, we are confident that they will be strong additions to Cornerstone and we look forward to updating the market on their success.”

Ashmore Group profits slide on £49.9m seed capital investment loss

Natasha Doris
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0
Ashmore Group profits slide on £49.9m seed capital investment loss

Ashmore Group shares fell 0.4% to 193.3p in early morning trading on Friday, after the company announced net outflows of $13.5 billion and negative investment performance of $16.6 billion in FY 2022.

The emerging markets investment manager attributed its results to widespread risk aversion linked to the Ukraine war, inflation and higher rates across international territories.

The Ashmore Group said market weakness in HY2 resulted in a £49.9 million unrealised mark-to-market loss on seed capital investments.

The firm noted a consequent 58% statutory pre-tax profit decrease to £118.4 million.

Meanwhile, the Ashmore Group reported a 13% adjusted net revenue decline to £257.2 million, with net management fees of £243.5 million against £270.9 million and performance fees of £4.5 million from £11.9 million.

The group confirmed a 7% reduction in adjusted operating costs year-on-year, driving a £164.3 million adjusted EBITDA against £195.7 million the year before, with an EBITDA margin of 64% from 66%.

The firm also highlighted an operating cash flow of £184.9 million from £213.1 million the last year.

The Ashmore Group mentioned an adjusted diluted EPS of 18.7p against 23.3p in the previous year.

“While the global macro environment still presents some near-term uncertainty, the situation in Emerging Markets is improving and the breadth of investment opportunity helps to mitigate the risks,” said Ashmore Group CEO Mark Coombs.

“Ashmore’s long-term investment approach has been proven across many different market cycles and facilitates access to the exceptionally attractive valuations currently available across Emerging Markets. Risk appetite will improve as some of the recent macro headwinds abate, supporting a recovery in Emerging Markets asset prices and higher investor allocations.”

“Ashmore’s business model, with significant cost flexibility and a well-capitalised and liquid balance sheet, responds to market cycles and generates meaningful cash flow, as seen again in this period. Together with Ashmore’s consistent focus on its growth strategy, this underpins the delivery of long-term value for Ashmore’s clients, shareholders and employees.”

The Ashmore Group recommended a final dividend of 12.1p per share for FY 2022.

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