FTSE 100 sees slight dip on Friday following yesterday’s sell-off

Liam Roche
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FTSE 100 sees slight dip on Friday following yesterday’s sell-off

After heavy losses on Thursday, there was only a modest drop in the FTSE 100 this morning, down 0.18% to 7,046 points.

“UK stocks held the line despite further weakness in Asia overnight, with retailers enjoying some strength despite signs that some of the pent up consumer spending had leaked from the high street to hospitality in July as restaurants and leisure facilities reopened,” says AJ Bell financial analyst Danni Hewson.

Public borrowing was revealed to be lower as the UK Government’s life support measures for the economy are gradually dialled back.

“Markets may struggle for direction until the latter part of next week given a dearth of corporate and economic updates with the Jackson Hole summit kicking off next Thursday and giving central bankers and other economic decision makers a chance to outline their plans for the next phase of the pandemic recovery,” Hewson added.

FTSE 100 Top Movers

Sainsbury (1.76%), Burberry (1.66%) and JD Sports (1.34%) are the top risers on the UK index on the last day of the week.

At the bottom end on Friday, Antofagasta (-2.62%), Diageo (-1.86%) and Compass Group (-1.77%) have made the biggest losses so far today.

Government borrowing falls in July as UK economy appears to be on track

Liam Roche
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Government borrowing falls in July as UK economy appears to be on track

Borrowing remains high when compared to the long-term pre-pandemic level

Government borrowing was down in July as the continued reopening of the economy improved tax revenues, according to the Office for National Statistics.

The budget deficit grew by £10.4bn in July, around half of the £20.5bn seen during the same month in 2020.

Borrowing remains high, at 10.8% of national income, when compared to the long-term average of 2.5% from before the crisis.

The recovery from the pandemic has seen tax receipts rise by £9.5bn in the year to July to £70bn.

Tax received from self-employed workers was particularly high last month as a result of the government’s tax deferral schemes.

Borrowing ended up at £78bn between April and July and continues to be under the Office for Budget Responsibility’s forecasts by about 25%. Economists said that total borrowing for the year would be at £175.3bn, down from £298bn last year.

Rishi Sunak, the chancellor, said: “Our recovery from the pandemic is well under way, boosted by the huge amount of support government has provided. But the last 18 months have had a huge impact on our economy and public finances and many risks remain. We are committed to keeping the public finances on a sustainable footing.”

“The numbers are going the right way; looking at money coming in since the start of the financial year almost every box is in the black. Corporation tax take is up 15%, Fuel duty nearly 50% and tax from self-assessment up a whopping 148%,” said Danni Hewson, AJ Bell financial analyst.

“The economic engine is purring, but keeping it ticking over during lockdowns and restrictions has taken its toll and the road ahead is unlikely to be pothole free. Any chancellor will have to become adept at tightrope walking for years to come. Lean too far, spend too little and there is a real danger that parts of the economy that have been pummelled the most will struggle. Tip the other way and the country might not get back in shape quickly enough to deal with the next big shock.”

Coinbase will add $500m in crypto to its balance sheet

Liam Roche
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Coinbase will add $500m in crypto to its balance sheet

Coinbase has also partnered with a Japanese bank to broaden its customer base

Coinbase (NASDAQ:COIN) is set to put $500m worth of cryptocurrencies on its balance sheet having received approval from its board.

The Nasdaq-listed crypto exchange also said it intends to reinvest 10% of its profits into holding bitcoin and other cryptocurrencies.

Coinbase recently revealed it is holding around $365m worth of crypto, as part of its filings.

The firm added that it might raise its allocation in the future and expects that more companies will hold crypto on their balance sheet as the industry grows.

Coinbase also partnered with Mitsubishi UFJ Financial Group, in the hope that it can use its customer base to secure itself in a key market for digital asset trading.

MUFG’s 34m domestic customers will get exclusive access to Coinbase’s services through their existing bank accounts, according to the terms of the deal.

MUFG’s customer base, who may not otherwise have been interested in crypto, will now be able to buy and sell bitcoin and other digital currencies.

Coinbase’s services are solely available to MUFG clients now, however, they could be extending to customers of other banks if the deal proved to be a success.

The Coinbase share price closed up 1.58% on Thursday.

Morrisons accepts improved £7bn takeover offer from US private equity firm

Liam Roche
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0
Morrisons accepts improved £7bn takeover offer from US private equity firm

Clayton Dubilier & Rice outbids rival Fortress with 285p per share offer

Morrisons’ (LON:MRW) board got behind a £7bn takeover by Clayton Dubilier & Rice yesterday as the private equity company outbid its rival with a 285p per share offer.

The FTSE 100 company’s board changed its mind having initially supported Fortress’ bid.

Fortress is now reviewing its options having previously had its £6.7bn bid accepted.

The Morrisons share price is up by 4.33% early on Friday, which could be a sign that another bid is expected.

Back in July Morrisons had turned down an offer of £5.5bn from Clayton Dubilier & Rice suggesting it was significantly under market value.

Andy Higginson, Morrisons’ chairman, said that the offer “represents good value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders.”

The supermarket chain said it would like Morrisons’ current management team to head-up a review of the company’s mission and strategy, working alongside Clayton Dubilier & Rice.

Morrisons consists of just under 500 stores and over 110,000 employees across the UK.

Morrisons first existed as a market stall in Bradford in 1899 owned by William Morrison. His son then took over the company and opened the first supermarket in the 1960s.

Jobless claims reach new low in positive sign for US economy

Liam Roche
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0
Jobless claims reach new low in positive sign for US economy

Jobless claims 15,000 below economists’ forecasts

The number of US citizens claiming unemployment benefits fell to the lowest point in 17 months last week following another month of solid growth.

However, the rising number of Covid-19 infections could pose a risk to the labour market recovery.

“A healthy drop in unemployment claims is the latest evidence the rise of the Delta variant isn’t having a significant effect on the economy,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, told Reuters. “We can infer that hiring remains strong in August, pointing to a healthy jobs report for this month.”

For the week ending August 14, initial claims for state unemployment benefits dropped by 29,000 to a seasonally adjusted 348,000. It is the fourth week in a row in which there has been a decline, resulting in the lowest levels since March.

Economists polled had previously forecast 363,000 applications for the latest week.

Markets were up and down on the back of the news, with the Dow Jones Industrial Average down by 0.43% at the time of writing.

A large portion of the fall in claims came from Texas, which fell by 8,311, according to unadjusted data.

A large jobs gap, however, persists, with 6m fewer Americans considered employed now compared to before the pandemic.

FTSE 100 CEOs received reduced pay for 2020 on pressure from investors

Liam Roche
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0
FTSE 100 CEOs received reduced pay for 2020 on pressure from investors

AstraZeneca’s Pascal Soriot was the highest paid CEO

The median pay given to FTSE 100 CEOs dropped to the lowest point since the 2008 financial crisis last year.

However, its remains 86 times greater than the median income of a full-time worker in Britain.

The leaders of firms on the FTSE 100 received a median £2.69m in 2020, down by 17% from £3.25m the year before.

This, as reported by The Times, is according two a yearly report by the High Pay Centre think tank.

The drop-off is a result of lower bonuses, chief executives taking voluntary pay cuts and pressure being piled on by investors on the back of the pandemic.

AstraZeneca’s Pascal Soriot was the highest paid CEO in 2020, receiving £15.45m, followed by Brian Cassin of Experian who received £10.30m.

Only 64% of FTSE 100 firms paid their bosses bonuses in 2020, compared to 89% a year prior.

Many shareholders revolted against the prospect of CEOs profiting during the Covid-19 crisis.

“With the pandemic resulting in large numbers of workers being furloughed on reduced pay, weaker returns to shareholders and major public expenditure required in support of companies, it is appropriate that executive pay levels have also decreased,” the High Pay Centre said.

“It is questionable whether a 17% reduction in median pay to ‘only’ £2.69m represents a sufficient economy given the immense hardship experienced by many, the accumulated personal wealth of CEOs who will typically have experienced long careers in high-earning roles, and the fact that all companies, having benefited either directly or indirectly from policy measures to support businesses,would have been in a much worse position without government intervention.”

MBH Corporation grows its healthcare vertical by acquiring Vista Care

Liam Roche
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1
MBH Corporation grows its healthcare vertical by acquiring Vista Care

MBH’s portfolio is now made up of 26 companies across eight industry sectors

MBH Corporation (ETR:M8H), a diversified investment holding company, on Thursday confirmed an agreement has been reached for the acquisition of Vista Care Solutions Limited (Vista Care).

It is the latest step in MHB’s extensive acquisition drive yet remains subject to regulatory approval for the proposed change of ownership from UK city councils.

Vista Care was launched in 2018 as a home care agency provider across the UK registered to provide personal care to people with a learning disability, autism spectre disorder, sensory impairment, people with an eating disorder, mental health and people who face issues with drug and alcohol misuse.

Their unaudited revenues for the financial year ended 31 May 2021 totalled £3.3m from
contracts with city councils in Nottingham, Newham and Redbridge who make up the company’s
list of customers.

The MBH portfolio is now made up of 26 companies across eight industry sectors and five countries.

“Vista Care has a clear set of growth targets that it is looking to achieve organically by increasing
bed count, in implementing their growth plans they have also set out a clear ESG policy
covering their environmental impact, the design and technology of their services and the
recording and reviewing of their progress,” MBH said in a statement.

MBH have utilised approximately €37m of its bond programme leaving a balance of
€13m to be used if required.

Callum Laing, CEO, MBH Corporation Plc, said: “Care homes are integral to the British
service economy and Vista Care represents the best of the sector with a future facing and
innovative offering that gives the people it cares for the best possible experience. We’re proud
to welcome the team on board and look forward to taking the next steps to growth alongside
them.”

Markets fall as Fed hints at move towards tapering of stimulus measures

Liam Roche
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0
Markets fall as Fed hints at move towards tapering of stimulus measures

S&P 500 closed down by over 1% on Wednesday evening

The Federal Reserve could shift its policy towards tapering its asset purchasing in the near future on the back of unexpected economic data.

Recent comments coming from officials at the US central bank have suggested this is the case as strong jobs figures and high inflation readings emerged.

Fed Governor Christopher Waller and Fed bank Presidents Eric Rosengren, Robert Kaplan and Jim Bullard have each publicly declared the need for a September taper.

Additionally, the notes from a Fed meeting at the end of July suggested that the American central bank will reduce its monthly purchases of $120bn of Treasury bonds and mortgage-backed securities.

However, it considers that there are substantial risks in doing so, including the ongoing concern from the Delta variant of coronavirus and the opportunity cost of a lack of hiring.

Stocks closed sharply lower in choppy trading, with the S&P 500 index down by over 1%.

“Today’s market moves and the minutes from the Federal Reserve’s latest meeting serve as a wake-up reminder for just how much markets are conditioned to be running on central bank support,” said Hinesh Patel, portfolio manager at Quilter Investors.

“Markets have become addicted to the sheer volume of money that has been available and this is clearly going to be a drawn-out process to reduce the liquidity it has become so accustomed to.”

The Fed certainly appears to have shifted its position from not even thinking about changing its policy to clearly entertaining the possibility of doing just that.

“As we have seen with various taper tantrums over the years, this spooks markets and is not helped by the mixed messages emerging from central banks,” Patel added.

“However, investors need to be better prepared. The current policy setting was appropriate for mandated economic shutdowns in the depths of a global pandemic, not the better state the US economy finds itself in today.”

FTSE 100 slumps on the back of Fed tapering talk

Liam Roche
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0
FTSE 100 slumps on the back of Fed tapering talk

The FTSE 100 is down by over 2% on Thursday morning as fears are growing over the impact of a potential switch in policy by the Federal Reserve.

“The FTSE 100 took a bath on Thursday morning, dragged lower by weakness in the resources sector amid fears the US Federal Reserve might be about to pull the rug from under the market by tapering its support for the economy early,” says AJ Bell investment director Russ Mould.

Mining giant Antofagasta saw a substantial drop in its share price as the firm lowered its guidance.

“But the Fed minutes, showing a split between members over when to start scaling back financial stimulus, the continuing spread globally for the Delta variant, weakness in the Chinese economy and the turmoil in Afghanistan add up to a cocktail of worries which are dogging investor sentiment,” Mould added.

“The question now is whether a volatile week is the prelude to the kind of late summer sell-off we have seen in previous years or if the market can regain its poise moving into the autumn.”

FTSE 100 Top Movers

Polymetal (0.70%), Just Eat (0.36%) and National Grid (0.26%) are the only three companies to be in the green at the time of writing on Thursday morning.

At the bottom of the FTSE 100, on a day of poor showings across the index, is Anglo American (-10.8%), Phoenix Group Holdings (-4.69%) and M&G (-4.6%).

Palantir buys $50m in gold to guard against ‘Black Swan Event’

Liam Roche
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Palantir buys $50m in gold to guard against ‘Black Swan Event’

Palantir will also accept Bitcoin payments

Palantir (NYSE PLTR), the data mining company co-founded by technologist Peter Thiel, confirmed recently via a statement that it purchased $50m in gold bars.

The move by Palantir is in response to what is deems to be an uncertain economic outlook, combined with a lack of desire to keep money stored in cash.

Last year, as the pandemic got worse and the US government continued its efforts to stimulate the economy, the price of gold went past $2,000 per ounce.

Investors are increasingly voicing their concerns around inflation, while gold is historically seen as a hedge against it.

“During August 2021, the Company purchased $50.7 million in 100-ounce gold bars,” Palantir said in the Aug. 12 earnings statement for its fiscal second quarter. “Such purchase will initially be kept in a secure third-party facility located in the northeastern United States and the Company is able to take physical possession of the gold bars stored at the facility at any time with reasonable notice.”

Other companies see cryptocurrencies, namely Bitcoin, as the superior asset in which to hold reserves. In particular Tesla, which bought $1.5bn worth earlier in the year.

It turns out that Peter Thiel’s Palantir has plans in that area too.

The digital mining company has also invited its customers to pay for its data analytics software in Bitcoin.

The American company revealed it would be accepting Bitcoin as a form of payment and hedge against uncertainty.

A spokeswoman told Bloomberg that no one has paid the firm in Bitcoin yet. COO of Palantir Shyam Sankar said the decision to accept Bitcoin “reflects more of a worldview”.

“You have to be prepared for a future with more black swan events,” he added.

The Palantir share price closed up by 5.47% on Wednesday.

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