Federal Reserve will wait longer before slowing its support for the US economy

Liam Roche
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Federal Reserve will wait longer before slowing its support for the US economy

Fed Chairman Jerome Powell said risks to economic outlook remain

The Federal Reserve said on Wednesday that the economy is making forward progress thanks to the continued vaccine roll-out.

Continuing to toe the line that inflation is mostly transitory, the Fed also kept its interests rates close to zero.

The US central bank said that risks to the economic outlook remain, despite positive data regarding jobs and the strength of the economy.

Hinesh Patel, portfolio manager at Quilter Investors, believes that the Fed must act sooner or later if inflation continues to rise:

“Jerome Powell and co. like where the economy is heading and seem content to wait until the data becomes even clearer and as such will continue to sit on their hands for just a while longer yet,” said Patel.

“Unfortunately for them there is very little they can do just now. The effects of this pandemic, and the subsequent recovery, have been felt very differently by varying groups of the population. So far it has been a two-speed recovery with low-income workers continuing to be adversely affected. With so many still relying on government support and not yet back in work or seeking employment, Powell will keep the spending taps on to support the wider economy.”

A time will come when the market will need to see a clearer plan for the reduction in quantitative easing, according to Patel.

“Inflation is a beast that can quickly get out of control and if the Fed has to act harsher than it would have done if it did so previously volatility would ensue.”

“With the recovery well under way and vaccination remaining a priority, the US arguably doesn’t need easing at their current levels. Powell obviously doesn’t want to act too early or make a misstep, but communicating further under what conditions tightening would take place may go some way to placating markets that are worried about price rises getting out of control,” Patel added.

AstraZeneca receives boost from Covid vaccine

Liam Roche
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AstraZeneca receives boost from Covid vaccine

AstraZeneca acquires rare medicines business Alexion

AstraZeneca (LON:AZN) saw its revenues surge during H1 thanks to its development of new medicines and sales of its coronavirus vaccine.

The pharmaceutical company made $1.2bn in sales from the vaccine over the six month period ending in June, rising from $275m in Q1.

It has been suggested that the Astrazeneca vaccine is superior to its rivals in combatting the pandemic as it is more affordable and easier to use. AstraZeneca and it has supplied 1bn doses to 170 countries so far.

$572m of vaccine sales during H1 came from Europe, while $455m came from emerging markets. The FTSE 100 company pledged to produce the vaccine on a not-for-profit basis during the pandemic.

In non-vaccine news, AstraZeneca acquired rare medicines business Alexion, an addition to its expanding cancer medicines unit.

With Alexion taken into account, AstraZeneca expects its total revenue to rise by over 20% this year, excluding sales from the vaccine.

The AstraZeneca share price is up by 0.21% just before lunchtime on Thursday.

Sheena Berry, equity research analyst at Quilter Cheviot, commented on the pharma company’s results:

“AstraZeneca’s core business continues to generate good growth with sales up by a quarter on the month. Even without factoring in the revenue from the Covid-19 vaccine, sales of other pharmaceutical lines increased by 12% to $7.3bn, 2% higher than expectations,” said Berry.

“Demographic trends and the swelling middle classes in emerging markets continue to act as a big tailwind for the pharmaceutical business, with EM sales up 31% and sales in China up 12%.”

“AstraZeneca has updated its guidance following the completion of the Alexion acquisition last week. Alexion specialises in orphan drugs to treat rare diseases, and offers both margin expansion and Improved cash generation for the wider group.”

“AstraZeneca has increased revenue guidance from the low-teens to the low-twenties percentage, excluding any contribution from the Covid-19 vaccine, but it seems likely this may prove to be a conservative estimate.”

Positive momentum for UK banks continues with Lloyds results

Liam Roche
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Positive momentum for UK banks continues with Lloyds results

Lloyds resumes dividend as profits bounce back

Lloyds (LON:LLOY) confirmed on Thursday that it swung to a H1 profit, as well as announcing an interim dividend.

The news comes as the FTSE 100 bank is being supported by a surge in home buying and an improving economic outlook in the UK.

Lloyds’ update closely follows that of rival Barclays, which posted positive earnings results yesterday for much of the same reasons.

“Put Lloyds results together with Barclays’ from the day before and you have the beginning of a trend in UK banking,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

“Massive swings in the level of bad loan provisions is flattering the bottom line, leading to a huge leap in profits for Lloyds this quarter. We expect that trend to continue for much of this year, assuming the outlook for the UK economy continues to brighten, but come 2022 the tailwind will have blown itself out – it will be up to banks to make their own weather.”

Lloyds made a profit before tax of £3.9bn for the six month period ending in June, which surpassed the average analyst forecast by £0.8bn.

Over the same period a year ago the banking giant made a H1 loss of £602m, having set aside billions as an insurance against bad loans caused by the pandemic.

Lloyds also confirmed a 0.67p interim dividend, while its share price rose by 0.79% to 47.15p per share. Since the turn of the year the Lloyds share price is now up by 35.33%.

Rob Murphy, Managing Director, Edison Group, also commented on Lloyds’ results.

“Today’s announcement that Lloyds had acquired Embark, a retirement platform business will help accelerate business momentum. This acquisition emphasises the Group’s continued commitment to expand its presence in the retirement and estate planning markets.”

“The past six months have identified the Group’s resilience, and with lockdown finally having eased, it comes as no surprise that guidance for the year has now been updated as the positive momentum looks set to continue. Following a string of new hires at the top of the business and with the Group now awaiting the arrival of its new CEO in August, the company looks to have settled on a senior leadership team. The combination of this and an impressive first half to the year, the outlook for customers, investors and other key stakeholders looks positive,” Murphy said.

FTSE 100 advances as Chinese stocks stage mini-comeback

Liam Roche
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FTSE 100 advances as Chinese stocks stage mini-comeback

The FTSE 100 advanced 0.65% to 7,062 on Thursday, with the top riser being ratcatcher Rentokil after it said its core businesses had all returned to growth.

“The UK market saw investors flock to stocks that would benefit from economic expansion, principally commodities producers and banks,” says Danni Hewson, financial analyst at AJ Bell.

More broadly, across the world, global markets cannot seem to make their mind up.

“After the debacle involving a big sell-off in China-related stocks, Asian markets staged a big comeback with Hong Kong’s Hang Seng index up 3.1% and China’s SSE advancing by 1.5% on chatter that Beijing wouldn’t be overtly draconian towards Chinese companies with listings in foreign markets if they kept in line with local laws,” said Hewson

Regulatory interference has been behind the recent slump in China-related stocks and there have been growing fears this would lead to investors turning their backs on the growing number of Chinese companies listed in places like New York.

FTSE 100 Top Movers

Rentokil (5.8%), Anglo-American (4.36%) and Shell (3.63%) are leading the way atop the FTSE 100 on Thursday, having each released positive results.

At the other end, Smith and Nephew (-7.66%), BT Group (-7.11%) and SSE Group (-4.43%), have been dragging back the UK index.

Everyman Media Group poised for strong recovery

Liam Roche
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Everyman Media Group poised for strong recovery

Everyman used the closure period to upgrade its facilities and improve its customer experience

Everyman Media Group (LON:EMAN), the independent cinema company, confirmed on Thursday that the business returned to a profit following its re-opening.

Admissions in the period since re-opening until 1 July reached 66% of 2019 levels, ahead of director expectations.

This is despite restrictions such as the Rule of Six, table service, 50% capacity restrictions in venues, and social distancing all being in place during this period.

The news comes after all of its venues were closed for the first 20 weeks of FY21 due to Covid, with 33 venues re-opening on 17 May, and social distancing measures remaining in place until 19 July.

The AIM-listed company used the closure period to upgrade its facilities and generally improve its customer experience.

Alex Scrimgeour, Chief Executive Officer of Everyman Media Group, said:

“We are delighted to have welcomed back so many Everyman customers since re-opening in May, subsequently delivering a period of profitable, cash-generative trading.”

“The speed and confidence with which the Everyman community has returned, together with our increased market share, demonstrates the ongoing appeal of our offering. People are clearly still looking to spend a great time out with friends and family, in an environment which instils confidence and provides high quality hospitality; now more than ever.”

“With significant available liquidity and more positive market conditions we are excited to be again turning our focus to plans for growth. We’re expecting you, Mr. Bond.”

The Everyman Media Group share price is up by 0.36% during the morning session on Thursday.

Diageo poised for return of nightclubs but warns of volatility ahead

Liam Roche
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Diageo poised for return of nightclubs but warns of volatility ahead

Diageo increased its dividend by 5%

Diageo (LON:DGE), the alcoholic beverages company, confirmed on Wednesday that its net sales rose by 16% on an organic basis to £12.7bn.

The company, which makes Smirnoff, Guiness and Gordon’s, saw growth in all regions, which it put down to its downturn in sales during the pandemic.

Diageo’s underlying profit rose at a quicker rate than its sales, with an increase of 18% to £3.7bn.

The FTSE 100 company confirmed it will pay a final dividend off 44.59p per share, an increase of 5% compared to the year before, bringing its full year payment to 72.55p.

The alcohol seller is expecting its organic net sales growth to continue into the next financial year, as well as anticipating a return to pre-pandemic levels of growth in North America.

At the time of writing the Diageo share price is down by 0.31%.

Sophie Lund-Yates, Senior Equity Analyst at Hargreaves Lansdown, commented further on Diageo’s results:

“As the maker of Smirnoff, Guinness and Gordan’s it comes as no surprise that the shuttering of bars and night clubs left Diageo with a nasty hangover of problems.”

“However, the strength of the group’s brands means it was able to recoup some of its losses through a huge increase in supermarket trade in some key markets, and it’s come out of the pandemic in remarkably resilient shape. It’s now poised to make the most of the re-opening of Europe’s bar and nightclub scene.”

“Something to keep in mind is the volume of footfall in bars and nightclubs. There’s certainly excitement about re-opening, we’ve all seen the early queues, but there’s also a have-fun-at-home sentiment that’s been bred by lockdowns. It’s possible this could see a permanent reduction in the number of feet on dancefloors as things get back to normal, which could see the likes of Diageo face a headwind.”

Facebook warns of slow growth ahead

Liam Roche
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Facebook warns of slow growth ahead

Facebook revenue surpasses analysts’ expectations for the quarter

Facebook (NASDAQ:FB) on Wednesday revealed that it expects its revenue growth to slow “significantly” in H2 of 2021.

During the three months to 30 June the social media company’s revenue rose to $29bn (£21bn). The figure was up from $18.69bn compared to the same period a year before.

Th revenue figure surpassed analysts’ expectations of $27.9bn.

The tech giant reaped the rewards from lockdowns as its ads targeted people who were at home more often than usual.

However, as Facebook “laps” periods which previously saw high levels of growth, it expects to see a slowdown in its sales.

Facebook warned that revenue growth during Q3 and Q4 was likely to “decelerate significantly”. In after-hours trading on Wednesday the Facebook share price fell by 4%.

Year-to-date its share price has added 38.8%.

Facebook’s results come amid a string of strong performances from America’s tech giants, including Alphabet, Apple and Microsoft, over the past quarter.

Facebook now has 2.9bn monthly users and owns WhatsApp and Instagram.

Tip update: More than 40% rise in Hargreaves Services price in three months

Andrew Hore
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Tip update: More than 40% rise in Hargreaves Services price in three months

Hargreaves Services (LON: HSP) has put out a string of trading statements since it was recommended during April. A strong performance from the German associate boosted profit in the year to May 2021, while the longer-term prospects for the core operations are good.
Last year was a tough one for Hargreaves Services, but it remained profitable and cash generative.
Hargreaves Services is no longer involved in coal or British Steel. That hit the contribution of the environmental, logistics and minerals business. The mechanical and electrical engineering and materials handling businesses increased ...

Barclays share price: dividends are back as profit smashes expectations

Liam Roche
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Barclays share price: dividends are back as profit smashes expectations

Barclays Share Price

Barclays (LON:BARC) topped the FTSE100 on Wednesday after its quarterly numbers sounded the right notes with news on dividends, share buybacks and a greater than expected release of provisions set aside to cover any potential loan losses relating to Covid. During the afternoon the Barclays share price is up by 3.74%, bringing it into the green over the past month.

Following a hot start to 2021 for the bank, the Barclays share price plateaued from the middle of March onwards. However, with today’s news, investors will be hoping now is a turning point for the Barclays share price to regain momentum.

Dividend

Firstly, a key reason for today’s jump is Barclays confirming it will be resuming its dividend payout, in addition to announcing a £500m share buyback.

After the Bank of England gave the green light for payouts to resume back in July, Barclays confirmed its shareholders will receive an interim dividend of 2p per share.

The FTSE 100 bank will also buy back £500m of its own shares. This is on its expectation that impairments will remain below historical levels on the improved outlook of the UK economy.

Profits

Secondly, Barclays is able to commit to a shareholder payout as its profit levels far exceeded its own expectations. 

Barclays’ profit before tax increased by 52% to £1.6bn, well ahead of estimates of £1.2bn. Its profits came about thanks largely to its investment banking arm, which thrived during the pandemic. First half feed rose by 27% to £1.7bn on merger and acquisitions and stock market flotations.

UK Outlook

The improving outlook of the UK economy helped the Barclays share price. As restrictions are mostly lifted, while cases are set to fall for the seventh consecutive day, the banking giant was able to release £1bn in bad debt provisions. It had initially set the money aside to cover pandemic-induced defaults. 

However, the bank warned: “the outlook remains uncertain and subject to change depending on the evolution and persistence of the Covid-19 pandemic”. 

While the results smashed expectations, which was reflected by the jump in the Barclays share price, investors may not yet be in the clear.

Helium One share price bounces as company overcomes drilling delays

Liam Roche
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0
Helium One share price bounces as company overcomes drilling delays

Helium One Share Price

The Helium One share price (LON:HE1) is up by 18.04% over the pst five days as the helium exploration company revealed some positive news regarding drilling results. The Helium One share price has been on an outstanding run since the beginning of the year, adding 223.1% in the period. Following a mini-dip, which started at the end of June and finished at the end of July, investors will be hoping the Helium One share price can kick on. Chief Executive Officer David Minchin certainly has confidence in his company’s strategy.

Drilling Results

Earlier in July, Helium One identified helium gas in the Red Sandstone Group between 552m and 561m. However, there were delays in drilling due to parting of drill pipe in the midst of drilling the gas show.

Two things can be learned from this event which impacted the Helium One share price recently and will continue to do so. Firstly, there is a great deal of potential at the Tai-1 well. Secondly, however, while the company is in its early stages, things do not, and will not always, go smoothly. This will result in an element of volatility in the Helium One share price, which also has the potential for a longer-term upwards trajectory.

On this occasion, the drilling set the company back a few weeks, although it will not hope to make a habit of such delays, which could weigh down on Helium One’s overall development.

“The sidetrack has been a success, so we can now start to push to our target depth, and we’ll be, obviously, keeping the market informed as the drill hole progresses and we move on first exploration drill into our first discovery drill,” said Minchin.

Strategy

Helium One is a helium exploration company, with its main focus being on its flagship project in the Rukwa basin in Tanzania. The AIM-listed firm has so far acquired 4,500 square kms of sought after ‘helium prospective land’.

Crucially for Helium One, helium is a useful commodity in the transition to a greener world economy.

“We’ve got a 100 best estimates un-risked prospective helium resources of 138 billion cubic feet, we’ve measured the gas coming up to surface at 10.6% helium, which positions us well to be a potentially strategic player in provision of this important commodity into the next century,” David Minchin said.

Investors with an eye on the Helium One share price will be well served by understanding the future impact of helium on the world economy, in addition to Helium One’s ability to find and supply the commodity effectively.

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