Rio Tinto share price may have peaked as investment bank anticipates fall in iron ore price

Liam Roche
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Rio Tinto share price may have peaked as investment bank anticipates fall in iron ore price

Rio Tinto Share Price

The Rio Tinto share price (LON:RIO) is up by 1% on Friday, bringing the mining giant to 5.53% since the beginning of the year. Following a steaming run towards the end of 2020, the FTSE 100 company’s performance has steadied out this year. The rise of the Rio Tinto was unsurprisingly aligned with the soaring price of iron ore. However, there are now question marks over the longer-term prospects of the commodity, which could have kick-on effects for the Rio Tinto share price.

Iron Ore

Analysts are way less bullish than before when it comes to iron ore. Analysts at UBS believe the commodity used to make steel could face some issues that put pressure on its price level over the coming months.

This includes concerns over excess supply. Brazilian iron ore is seeing an increase in supply levels, while there are abnormally large stockpiles at Chinese ports, as the country attempts to control the price of commodities.

UBS analysts say iron ore could drop by 50% or more ‘over 12-18 months’ and add that the current Rio Tinto share price is therefore unattractive based on the ‘normalised iron ore price’.

Price Target

UBS downgraded its buy rating for Rio Tinto from ‘neutral’ to a ‘sell’ this week. The investment bank added that Rio Tinto would still generate strong cash flow, while its dividends should remain high in 2021.

However, it added that it does not believe this will be sustained by Rio Tinto over the longer-term.

“Near-term risks for the commodity complex are increasing with the Fed turning more hawkish & China taking action to deflate commodities (eg by selling strategic base metal reserves note); we expect this to accelerate the unwinding of the ‘reflation trade’.”

After delivering outstanding long-term returns of 171.8% over five years, the Rio Tinto share price may have, for now at least, peaked.

JD Sports share price spends five consecutive days in the green despite bonus scandal

Liam Roche
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JD Sports share price spends five consecutive days in the green despite bonus scandal

JD Sports Share Price

The JD Sports share price is heading up the FTSE 100 on Friday on a week that has seen the sportswear brand spend five consecutive days in the green. Including its 3.23% gains on Friday, at the time of writing, the JD Sports share price, at 942.03p, is up by 15.67% since the beginning of the year. The clothing company has now well surpassed its pre-pandemic peak of 878.8p. As lockdown restrictions continue to ease, investors could look towards JD Sports, as it will look to capitalise on increased footfall. However, despite being in a strong financial decision, aa furore over bonus payments could derail the JD Sports share price.

Performance

Going back to before the pandemic, JD Sports was performing consistently well. The sportswear company managed to increase its revenues by 29.5% by the end of 2020, compared to thee previous year.

JD Sports increased its sales by 1% during thee pandemic. However, when taking into account the fact its physical stores were closed for large parts of the year, this can be considered an impressive signal of its ability to make online sales.

JD Sport’s net debt is at £700m, however ended the last financial year with £964 million in cash holdings. The company had a net debt/EBITDA ratio of 0.9, in addition to LT-debt-to-assets ratio of 32.7%.

Investor Revolt over Bonuses

Despite the company’s balance sheet looking pretty healthy, some worrying news emerged last week for investors. The possibility of a revolt by major investors has emerged as hefty bonuses were paid out despite the company to repaying the government Covid related support.

Sky News reported last week that the Investment Association’s influential IVIS service has ‘red-topped’ JD Sports over votes on bonus payments and its future remuneration policy.

The alert adds IVIS to recommendations from other proxy advisers, one being Glass Lewis, which have told investors they should oppose the board of JD Sports.

Having seen his base salary reduced during the initial stage of the pandemic, executive chairman Peter Cowgill, received a £5m pay package last year.

The leading sportswear brand also received more than £60m from the furlough scheme and £38m in business rates relief. JD Sports refused to pay the sums back, despite other major retailers doing so.

JD Sports will be holding its annual meeting on the first day of July when investors could get aa response to this issue as well as a better understanding of the company’s outlook for the future.

Nearly four in ten homes are selling for asking price or more

Liam Roche
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Nearly four in ten homes are selling for asking price or more

The average property price in Britain is now worth £336,073

The amount of homes selling for at least the asking price is rising as buyers seek new homes in a busy market.

Since the housing market reopened last year, this percentage has been increasing, culminating in a record high.

According to data by Rightmove, as recorded in January this year, 37% of homes sold in England and Wales achieved their final asking price or above.

Nationwide Building Society reckons that annual house price inflation has jumped since then, by 10.9% in May, therefore the 37% figure could be higher.

As housing activity in the UK increased on the stamp duty holiday, the number of buyers surpassed the number of sellers, causing competition in terms of prices.

With the average property in Britain worth £336,073, house prices are at record highs.

However, as the stamp duty holiday approaches an end, there are signs of a slowdown in the market.

Managing director of Ascend Properties Ged McPartlin told City AM: “It’s certainly a sellers market at present and despite the initial stamp duty holiday deadline fast approaching, we continue to see multiple buyers attempt to outbid each on what limited options are available which is driving up the percentage of asking price achieved.”

“The North of England continues to lead the way in terms of the strongest performing regions and with many sellers achieving near enough what they’re marketing their property for, it’s no wonder there has been such steep rates of house price growth of late.”

“We may see this heightened market activity subside slightly once the current stamp duty holiday is done and dusted, however, the ongoing imbalance between supply and demand should ensure this trend persists well into next year.”

FTSE 100 edges higher on US infrastructure plan and UK’s green light update

Liam Roche
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FTSE 100 edges higher on US infrastructure plan and UK’s green light update

The FTSE 100 edged 0.1% higher to 7,118, with energy stocks leading the way.

“It’s quite ironic that oil producers have been a key source of strength for UK stocks this year given how so many people had declared that industry dead. Brent crude continued to trade above $75 per barrel though that could come under pressure if oil producers’ cartel OPEC decides to increase supply,” said Russ Mould, investment director at AJ Bell.

“Large government spending plans once again came to the rescue of the markets, with US stocks last night racing ahead, followed by gains across Asia on Friday. US banks also passed their stress tests, adding another catalyst for markets,” says Mould.

The UK Government’s decision to put Malta and Ibiza on the green list for travel gave some renewed hope for the travel sector and lifted shares in EasyJet, Ryanair and International Consolidated Airlines. However, the industry is still frustrated at restrictions which continue to cast a cloud over whether the public will be able to freely visit popular destinations this summer such as mainland Spain and Greece.


“Airlines continue to face pressure on earnings, yet other sectors are enjoying a post-lockdown boost. Among them is the car retail sector where Marshall Motor’s shares jumped 3.4% after it issued a very positive trading update. Used car prices are shooting up and demand remains very strong. The key question is whether this is a short-term boost as individuals seek alternative ways to travel to work than use public transport, or whether the car retail sector is going through a long-term structural change.”

FTSE 100 Top Movers

JD Sports (4.54%), CRH (2.21%) and Ashtead Group (2.19%) are heading up the FTSE 100 as the week draws to a close.

Trailing the pack on the UK index is Flutter Entertainment (-2.40%), M&G (-2.09%) and Persimmon (-1.66%).

Green list addition not enough says travel chiefs

Liam Roche
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Green list addition not enough says travel chiefs

Fares to the new destinations on the green list surged immediately

Airline industry leaders have warned that the government’s recent expansion of the UK’s green list is not sufficient enough.

As of Wednesday, people returning from 16 places will not be required to undergo a quarantine.

Grant Schapps, the transport secretary, also confirmed that plans are in place for fully vaccinated people returning from amber list countries to not have to undergo a quarantine. This could be put into place “later this summer” Schapps said.

easyJet has come out and said the government’s timetable doesn’t go far enough, adding that there has been a huge surge in people booking holidays to countries on the green list.

Chief executive of easyJet Garry Wilson has also questioned why certain places, including the Canary Island and Greek Islands, were not added to the list.

Fares to the new additions to the green list surged immediately after they were announced as being quarantine-free destinations, the Independent revealed.

Flights with British Airways from London Heathrow to Funchal in Madeira more than doubled after the announcement earlier this week. While flights from Manchester to Malta via easyJet saw a 25% increase.

Ibiza’s director of tourism said the island would welcome people “with open arms” if the UK government added it to its green list, the Financial Times reported.

The UK government plans to review England’s traffic-light system for overseas travel every three weeks.

Logistics Robotics and Automation with GXO’s Mark Manduca

UK Investor Magazine
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Logistics Robotics and Automation with GXO’s Mark Manduca

The UK Investor Magazine Podcast is joined by the Chief Investment Officer of GXO, a company spun-out from XPO Logistics.

GXO is set to list on the NYSE in the third quarter 2021 and drive forward with the Contract Logistics division of the business.

Having invested heavily in technology for years, GXO accounted for 38% of overall XPO Logistics revenue in 2020 and will be a logistics power house in its own right on completion of the spin-out.

Mark Manduca discusses the drive behind the spin-out as well as the adoption of automation and robotics within logistics.

GXO are heavily focused on ecommerce and the requirement to provide efficiencies to their clients has pushed GXO to innovate their processes through automation.

XPO Logistics in conjunction with Nestle built the UK’s first fully digital warehouse harnessing robotics and automation.

Stock markets in US and Asia rise after Biden announces infrastructure deal

Liam Roche
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Stock markets in US and Asia rise after Biden announces infrastructure deal

Biden’s deal includes an eight-year plan to invest in roads, bridges, the power grid, the internet and public transport

As President Joe Biden confirmed a bipartisan deal had been reached on an infrastructure plan on Thursday, markets in the US closed higher.

The Dow Jones Industrial Average pushed up, while the S&P 500 and Nasdaq Composite closed in record territory.

In Asia, Japan’s Nikkei was up by 0.66% while Hong Kong’s Hang Seng jumped 1.4% and the Australian stock market gained 0.5%.

The US Senate eventually agreed on a $1.2trn infrastructure bill, after Biden was forced to come down from his initial pitch which surpassed $2trn.

The deal includes an eight-year plan to invest in roads, bridges, the power grid, the internet and public transport.

Biden said that investment would create millions of jobs. “We’re in a race with China and the rest of the world for the 21st Century,” he added. “This agreement signals to the world that we can function, deliver and do significant things.”

Michael Hewson, chief market analyst at CMC Markets UK, told The Guardian:

“Last night’s gains [on Wall Street] were helped by the bipartisan agreement of an infrastructure bill, much less than the Democrats would have liked, but still a fairly decent addition to all of the other stimulus packages seen in the past six months. The new spending would include money for roads, bridges, rail and public transit, all areas that have been sorely neglected over the years. While the agreement is welcome it still faces a high bar in passing into law given the Democrats narrow majorities on Capitol Hill.”

“As a consequence of last night’s strong US finish, markets here in Europe look set to open higher, with travel stocks likely to be in focus after the government added Malta, Madeira and the Balearics to the green list, as well as indicating that it would look at dropping quarantine rules for fully vaccinated UK residents returning home from amber list countries later in the summer.”

Jobless claims jumped last week against expectations as the US employment market is undergoing a recovery, the US Labor Department said this month.

First-time requests for unemployment insurance reached 412,000, up by 37,000 from the week before. It is the highest number recorded since May 15.

BuzzFeed confirms plan to list on the New York Stock Exchange

Liam Roche
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BuzzFeed confirms plan to list on the New York Stock Exchange

Buzzfeed to acquire youth entertainment business Complex Networks for $300m

BuzzFeed is set to list on the New York Stock Exchange through a Special Purpose Acquisition Company (SPAC), valuing the media company at $1.5bn.

The deal, which includes a $150m convertible note financing led by Redwood Capital Management, is expected to go through in Q4 of 2021.

Other institutional investors, including CrossingBridge Advisors, Cohanzick Management and Silver Rock Financial, are involved.

BuzzFeed was previously valued at $1.7bn in 2016, when NBC Universal invested $200m in the company.

Towards the end of last year, BuzzFeed acquired HuffPost, a similar news platform, for an undisclosed figure.

The digital platform also announced it reached an agreement with Hearst and Verizon to acquire youth entertainment business Complex Networks for $300m.

The management team will remain the same with founder and chief executive officer Jonah Peretti and chief financial officer Felicia DellaFortuna staying in their positions.

“BuzzFeed is now the undeniable leader for the next generation of media. We’ve built a slate of essential brands, loved by the most diverse, engaged, and loyal audience on the Internet,” said Jonah Peretti. “With today’s announcement, we’re taking the next step in BuzzFeed’s evolution, bringing capital and additional experience to our business. I am thrilled to have Adam join our team as we work towards becoming the world’s preeminent digital media company.”

Peretti added, “the acquisition of Complex Networks will expand our reach into new audiences, complement our entertainment, news, and lifestyle brands, and open the door to even more revenue opportunities.”

Special purpose acquisition vehicles, known as SPACs, are shell companies that raise funds through an IPO to take a private company public through a merger at a later point in time.

BuzzFeed will be listed on a public exchange under the ticker symbol “BZFD”.

Deliveroo share price surges as court rules its riders are not workers

Liam Roche
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0
Deliveroo share price surges as court rules its riders are not workers

Deliveroo said its riders are self-employed and therefore not entitled to the rights of “workers”

Deliveroo came out victorious following a legal battle over the employment status of its riders as judges dismissed a trade union’s appeal.

The London-listed food delivery company made the case that the riders are self-employed and therefore not entitled to the rights of “workers”.

The fact that Deliveroo successfully defended its business model also cheered investors with the Deliveroo share price climbing rapidly, up by 8.5% in afternoon trading.

The legal case dates back to 2017, and was brought by the Independent Workers Union of Great Britain (IWGB), which represents gig economy workers.

However, a number of rulings, held up by a trio of Court of Appeal judges, have found that they cannot be considered “workers” under trade union law.

“Deliveroo has consistently argued in court that the way it engages with its riders means that they are self-employed and so should not be classed as workers,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “Now the company has won the latest skirmish in its legal fight with judges dismissing an appeal, ruling that because riders are not in an employment relationship with the company, they could not form a collective bargaining unit.”

“The company’s success appeared to hinge on the fact riders are able to ask another person to take on a job for them. This was the crunch factor which led to the UK Supreme court ruling that because of the lack of substitution rights, Uber drivers should be classed as workers.”

“Concern about the company’s reliance on the gig economy model was one of the factors which contributed to its disastrous IPO in March,” Streeter added.

Since the end of March, the Deliveroo share price is down by over 5%, following a disastrous IPO.

The battle for improved working rights being fought by contractors is far from over with a European Commission review of how the gig economy operates still underway.

Job adverts rise as Brits on furlough falls to record low

Liam Roche
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Job adverts rise as Brits on furlough falls to record low

Number of UK job vacancies posted online is up by 2% compared to a week ago

The number of people on the furlough scheme in the UK fell to the lowest level since the beginning of the pandemic as more businesses are reopening.

Around 1.5m Brits are still on the furlough scheme, significantly down from the 3.4m people who made use of the scheme during March and April.

The figures released by the Office for National Statistics (ONS) show a 1% fall in the number of people on the furlough scheme compared to the month before.

Additionally, the number of UK job vacancies posted online is up by 2% compared to a week ago. This is according to job search engine Adzuna.

The total number of adverts is above levels seen before the beginning of the pandemic.

The categories that saw the biggest increase in the number of adverts were for legal and graduate jobs, up by 7% and 6% respectively.

Rishi Sunak rejected calls for an extension of the furlough scheme and business rates this month, despite the month-long delay in the easing of restrictions, which were previously set for 21 June.

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