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Last Week in the City: Coronavirus complacency eases

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped equity markets this week (10 – 14 February 2020).

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped equity markets this week (10 – 14 February 2020).
Garry white employee

by
Garry White

in Features

14.02.2020

Markets wobbled at the end of the week after China revealed a surge in coronavirus infections after it changed its methodology. But the news only punctured market optimism slightly, despite a raft of companies revealing the impact of the situation on their operations. Global supply chains will be hit.

The UK government also revealed it will insist on the right to diverge from EU financial services regulation as part of a post-Brexit trade deal with Brussels based on equivalence. This is the start of a war of words that both side hope will lead to an agreement before the end of Britain’s transition period outside the EU.  

The FTSE 100 rose 0.8% over the week by mid-session on Friday and the more UK focused FTSE 250 was up 1.1%

Jon Cunliffe, Charles Stanley's chief investment officer, looks at the market action so far this year here.

Coronavirus (Covid-19)

Markets snapped this week’s winning streak on Thursday after China revealed it had under-reported case and deaths related to the novel coronavirus, now named Covid-19. After changing its methodology there was a sharp rise in the number of reported infections and deaths.

Global oil demand will fall this quarter for the first time in a decade due to the coronavirus, according to the International Energy Agency. Demand is now expected to fall by 435,000 barrels per day year-on-year in the first quarter.

Unsurprisingly, home sales in China plunged in the first week of February. New apartment sales dropped 90% from the same period of 2019, according to preliminary data on 36 cities compiled by China Merchants Securities Co.

Car sales also slumped. Major automakers sold fewer than 2 million cars in the country last month, an 18% plunge from a year earlier, according to China's Association of Automobile Manufacturers.

S&P Global Ratings warned that the spread of Covid-19 will reduce US growth in the first quarter to just 1%, down from a previous forecast of 2.2%. However, it also predicted a recovery later in the year – unless the outbreak worsened. It also said that it was likely cut 0.1 to 0.2 percentage points off growth in the UK and the eurozone this year.

Economists at UBS predicted that Australia’s economy could shrink by 0.1% in the current quarter, as exports of commodities and agricultural goods to Chinese customers take a hit.

Eurozone investor confidence fell for the first time in four months, according to research group Sentix. It blamed fears that Covid-19 will have a serious impact on the global economy. Its confidence measure dropped to 5.2 in February, down from 7.6 in January. However, it’s important to note that the figure is still higher than last autumn, when the index was dragged into negative territory by concerns over Donald Trump’s trade war.

Digger manufacturer JCB is cutting production and working hours at its UK operations as it faces a shortage of components from China. It was the first major UK manufacturer warned about the epidemic's impact on its output. There will be reduced working hours for the 4,000 staff from Monday and an immediate suspension of overtime. More than 25% of JCB's suppliers in China are closed, while others are working at reduced capacity.

AstraZeneca expects its revenue to grow despite anticipating "unfavourable impact from China lasting up to a few months" due to the coronavirus outbreak. China is the pharma group’s second-largest market. The company also posted quarterly figures that were slightly shy of City expectations.

The factory shutdowns in China are having a significant impact on complex global supply chains. According to an analysis by market researcher Trendforce, the coronavirus crisis could slash global smartphone production by 12% this quarter. It forecast that just 275 million smartphones will be made in the first quarter of 2020, down from around 310 million in the equivalent period of 2019. Apple’s production will fall 10%, it estimates, while Huawei’s output will be 15% lower.

Rio Tinto said it was experiencing a slowdown in sending deliveries of copper concentrate from its Oyu Tolgoi mine in Mongolia to Chinese customers across the border, as efforts to contain the outbreak of Covid-19 cause logjams across the resources industry.

Carnival Corp told investors that it could face a per-share earnings impact of 55 cents to 65 cents in the current year if all operations were suspended in Asia until the end of April. While that has not come to pass and may be averted, the cruise line said there will still be a material impact on the business. Carnival owns the Diamond Princess, the ship that is docked in Yokohama, Japan and has reported upward of 175 infections from Covid-19.

The coronavirus outbreak is a “Black Swan event” which is having a “significant impact” on China’s economy, according to its biggest company. Daniel Zhang, chief executive of e-commerce giant Alibaba, has warned that the outbreak poses near-term challenges to its business.

About 300 employees of Singapore's largest bank, DBS, were evacuated after an employee was confirmed to be infected with Covid-19. The workers were evacuated as a precautionary measure and contact tracing is being done to verify who had been exposed to the affected employee.

Short-haul carrier easyJet revealed that one of the people diagnosed in Britain had flown to Gatwick on one of its flights from Geneva. Management attempted to reassure the flying public. “As the customer was not experiencing any symptoms, the risk to others on board the flight is very low,” easyJet said.

Luxury giant Kering, which owns fashion houses such as Alexander McQueen and Balenciaga, said the Covid-19 outbreak could hit sales trends and tourism flows in one of its major markets. Despite the stark warning, Kering posted stronger-than-expected sales for the fourth quarter, boosted by its flagship brand Gucci. Peer Ralph Lauren warned that its profits will be hurt by the crisis. Store closures will knock up to $70m off its sales in the current quarter, and up to $45m of operating profits from Asia.

French spirits group Pernod Ricard has cut its profit guidance due to the coronavirus outbreak. The maker of Martell cognac, Glenlivet whiskey and Absolut vodka now expects operating profits to only grow by 2% to 4%, down from 5-7% previously.

Casino operator MGM Resorts scrapped its full-year guidance as its casinos in Macau remained closed.

Singapore kicked off Asia’s largest aerospace event, but it was sparsely attended as potential attendees shunned the Singapore Airshow over Covid-19 fears. Organisers said they had taken extra precautions including heat-screening of attendees for signs of fever.

The Mobile World Congress, one of the largest trade shows in the world, was cancelled after a number of high-profile attendees pulled out over Covid-19 fears. Due to start on 24 February in Barcelona, BT Group, Facebook, Cisco Systems and Sprint all confirmed they were pulling out of the event, leading to its cancellation.

Markets are currently pretty relaxed about the impact of the Covid-19, but economic damage is being done. John Redwood examines the issues surrounding the outbreak here and here.

UK/Brexit

Boris Johnson reshuffled his cabinet, with the biggest news being the resignation of Chancellor Sajid Javid less than a month before the 11 March budget. Mr Johnson – and his powerful adviser Dominic Cummings – wanted Mr Javid to sack all of his advisers, a move he found unacceptable. The new head of the Treasury is Rishi Sunak, a move which boosted the pound on the hopes of tax cuts.

The government will insist on the right to diverge from EU financial services regulation as part of a post-Brexit trade deal with Brussels based on equivalence. Chancellor Sajid Javid said the City “will no longer be a rule-taker” and revealed that ministers were working on a white paper setting out a vision of the financial services sector once the Brexit transition period is over. EU chief negotiator Michel Barnier made it clear that equivalence regimes, which govern relations with foreign partners on specific financial sectors like clearing houses or stock exchanges, would remain under tight EU control, with no special treatment for Britain.

From next January, all businesses will have to fill out customs declarations and be liable to customs checks on goods for cross-channel trade. The government told businesses frictionless trade with the EU will end this year, with the introduction of import and export checks at the UK border. Officials said businesses have enough notice to prepare for changes in time for 1 January 2021. “The UK will be outside the single market and outside the customs union, so we will have to be ready for the customs procedures and regulatory checks that will inevitably follow," Michael Gove, Chancellor of the Duchy of Lancaster, said.

The UK will announce the location of up to ten post-Brexit freeports by the end this year so they can begin operating in 2021, the government said as it launched a ten-week consultation on the issue. Freeports are areas where imported goods can be held or processed free of customs duties before being exported again. They can also be used to import raw materials and make finished goods for export.

France is looking at ways to lure clearing in euro derivatives away from London to the EU, reports noted. The London Stock Exchange's LCH unit clears more than $200bn in euro-denominated derivatives each day for customers in the EU. Globally, it clears more than 90% of euro interest rate swaps. A source at the French finance ministry told Reuters that it considered clearing houses as systemic market infrastructure for the Eurozone.

Trade

Liu Xiaoming, China's ambassador to the UK, said Tory politicians opposed to Huawei playing a role in the UK's next-generation communication networks are conducting a witch-hunt. "Huawei is a private-owned company, nothing to do with the Chinese government... the only problem they have is they are a Chinese company," Mr Liu said. Boris Johnson and Donald Trump reportedly clashed on a phone call after the UK government decided to allow Huawei to participate in the construction of Britain’s 5G network, providing the equipment was at non-core sites. The US is pressuring governments worldwide to exclude the Chinese technology from their networks, arguing its component could be used for spying.

Washington ratcheted up its attack on Huawei. The US has expanded its lawsuit against the Chinese telecoms giant, accusing it of a decades-long plan to steal technology from US companies. Prosecutors said Huawei had violated the terms of partnerships with US companies and stolen trade secrets such as source code and robot technology. Such actions by the US seriously damage the country's “credibility and image”, China’s foreign ministry spokesman Geng Shuang said.

The US charged four members of the Chinese military with hacking into credit rating agency Equifax and stealing personal data and trade secrets. Equifax agreed to pay up to $700m in a settlement with US regulators over the data breach, which occurred in 2017 and affected more than 140 million consumers.

Donald Trump is furious at the EU’s protectionist stance on its agricultural sector. As he attempts to woo rural US voters ahead of the November elections, Brussels has a major headache brewing. Garry White looks at the issue here.

Economics

The UK economy stagnated in the final quarter of 2019, with no growth at all. This means that, during 2019, the UK economy grew 1.4% - up from 1.3% in 2018. There was some good news, however. Services, manufacturing and construction all managed some growth in December. That helped to grow the economy by 0.3% in the month, after a torrid November in which services and manufacturing both shrank. You can read the GDP report here.

There was more gloomy data from mainland Europe. Italy’s manufacturing output slumped by 2.7% month-on-month in December, matching similar declines in France and Germany. Economists had pencilled in a fall of just 0.5%. Germany’s economy stagnated, with GDP in the last three months of 2019 remaining flat month-on-month at 0.0%.

Chinese inflation jumped to an eight-year high, climbing to 5.4% a year in January, up from 4.5% in December. The outbreak of African swine fever has hit the country’s pig population and pork prices jumped 116% year on year in January because of the shortage. That drove the country’s food prices up by 20.6% year-on-year.

Geopolitics

US presidential election primaries are in full swing. Bernie Sanders won the New Hampshire contest, after losing out by a whisker to Pete Buttigieg in Iowa. It was a terrible night for former vice-president Joe Biden, who came last. If Mr Biden does not make a good showing in the next contest in South Carolina, it is likely he will leave the race. Former New York Mayor Michael Bloomberg did not take part in these primaries but will stand on Super Tuesday – which is on 3 March. As the Democratic candidates’ squabble, Mr Trump aims to capitalise on their division.

US attorney general William Barr publicly rebuked Donald Trump. He said that the president’s tweets about the case of Roger Stone “make it impossible for me to do my job” and that he would not be “bullied or influenced” over justice department decisions. Mr Stone is a long-time friend of Mr Trump and was convicted of lying to Congress.

The Irish election saw a surge for republican party Sinn Féin. However, the Fianna Fáil parliamentary party decided not to enter talks with the party about forming a new government. Sinn Féin topped the first preference poll but its total of 37 seats is one fewer than that of Fianna Fáil. No single party has enough seats to govern.

German politics is in crisis after Angela Merkel’s would-be successor Annegret Kramp-Karrenbauer, known as AKK, resigned the leadership of the Christian Democrats. The potentially fraught battle for the leadership now begins.

Profits warnings

Aim-listed industrial adhesive group Scapa shares tumbled on Wednesday after it warned that full-year trading profit would be "significantly" below consensus views as cost reductions take longer than expected.

German carmaker Daimler issued its third profit warning in a year and cut its dividend after 2019 earnings more than halved. Results were weighed down by restructuring and legal charges relating to the diesel emissions scandal. It is also investing in next-generation electric vehicles, an area in which the group has been slow to act.

IPOs

French media giant Vivendi wants to sell shares in its most-prized asset, Universal Music Group, by early 2023. Universal is the world's biggest music label and home to global stars Taylor Swift, Drake and Lady Gaga. This followed recent news that Warner Music Group, home to a host of artists such as Ed Sheeran and Katy Perry, plans to float in the US.

DRI Healthcare, an investment company investing in healthcare royalty assets, plans to sell up to $350m in a London IPO. Managed by Toronto-based DRI Capital, an investment manager with $2.6bn under management, DRI Healthcare wants to list on the main market. It will use the proceeds of the IPO to fund acquisitions, it said in a statement.

Reports suggested that FRP Advisory is on the verge of confirming plans to list on the London Stock Exchange with the intention of raising up to £30m. It is expected to be valued in the region of £200m, the reports suggested. The corporate financial services group recently handled the administration of Patisserie Valerie.

Avadim Health postponed its US IPO that would have seen the developer of non-prescription topical antiseptics raise up to $75 m.

US earnings

Holiday letting platform Airbnb swung to a loss last year, raising concerns ahead of its IPO later this year. Airbnb was tipped to be one of the few profitable tech firms to launch a stock market listing, following the disappointing flotation of Uber and Lyft and WeWork’s decision to abandon its IPO last year. However, rising costs have resulted in the business now being lossmaking.

Quarterly sales and earnings at ride-hailing group Lyft (LYFT) beat Wall Street's expectations, posting three-month revenues above $1bn for the first time. However, the shares fell after management said the group would remain lossmaking throughout 2020.

Hilton’s Worldwide’s 2020 earnings outlook was below analysts’ forecasts – and the hotel operator said the outlook didn’t include any possible coronavirus impact.

It’s tough on the US high street too. Bed Bath & Beyond shares slumped after it reported disappointing same-store sales growth.

Credit-rating agency Moody’s beat forecasts in its fourth-quarter numbers and its full-year outlook for 2020 was also largely above consensus expectations.

Shopify, an e-commerce platform, smashed expectations in the fourth quarter figures. Earnings per share came in at 43 cents compared with Wall Street expectations of 24 cents. The group posted its first-ever net profit and its shares soared to record highs.

Toymaker Hasbro reported quarterly profit well above consensus estimates. Sales fell short of Wall Street forecasts, however, despite Hasbro’s bottom line got a boost from toys related to Disney’s “Frozen 2” and “Star Wars” movies.

Fixed income

Trading in the fixed income markets alternated between ‘risk-on’ and ‘risk-off’ during the last week. Overall, the ‘risk-on’ trade seemed to be in the ascendancy, with government bond yields grinding slightly higher over the last few days.

Technology

Big technology companies now face the scrutiny of their small deals. The US Federal Trade Commission (FTC) issued special orders to Alphabet’s Google, Amazon, Apple, Facebook and Microsoft to provide information on mergers that were too small to report to antitrust regulators. The US Justice Department, the FTC, state attorneys general and the House Judiciary Committee are investigating the Big Tech platforms for potential anti-competitive behaviour. As well as major acquisitions, the companies have also spent billions on smaller companies, dramatically changing the competitive landscape in emerging tech sectors.

The sector faces further regulatory pressure after the UK government said it would make social media companies such as Facebook, Twitter and Snap responsible for blocking or removing harmful content on their platforms. However, it is thought the initial proposals will be diluted. Read the government response to the consultation here.

Facebook chief executive Mark Zuckerberg said he accepted that tech giants may have to pay more tax in Europe in future and recognises people's "frustration" over the issue. He also backed plans by think tank the Organisation for Economic Co-operation and Development to find a global solution. In the UK, Facebook paid just £28.5m in corporation tax in 2018 despite generating a record £1.65bn in sales in the country.

Amazon wants Donald Trump to testify about the controversial awarding of a lucrative military cloud contract, following claims that the US President wanted to "screw" the company because of founder Jeff Bezos’s ownership of The Washington Post newspaper. Legal documents unsealed on Monday show that the US tech giant wants Mr Trump to personally give evidence about how the Pentagon awarded the $10bn Joint Enterprise Defense Infrastructure (Jedi) contract to Microsoft instead of Amazon. On Thursday, a judge ordered the Pentagon to halt any Jedi activities while the case was ongoing.

After last year’s embracing debacle with WeWork, technology investor Softbank had some good news this week. Its shares surged after a US District judge ruled in favour of Sprint’s $26bn merger with T-Mobile US. Softbank owns Sprint. The ruling clears one of the final hurdles for the deal, which still can’t close until the California Public Utilities Commission approves the transaction. The judges’ decision took the sting out of the tail of its financial results, which were released shortly after the ruling. SoftBank’s profits dropped 99% in its latest quarterly earnings, dragged down by a £1.5bn loss made by its Vision Fund technology investment division. Analysts had only pencilled in a 20% fall.

South Korea’s Samsung unveiled its new foldable phone – the Galaxy Z Flip. The phone looks like a modern take on the classic flip phone from the early 2000s. Samsung said the phone has a new hinge designed to prevent debris from entering the phone, which should hopefully prevent the durability issues seen with the Galaxy Fold, its first foldable device.

In the US, Xerox sweetened its bid for HP to $24 a share from $22 a share. Its previous offer was made in November 2019 but was unanimously rejected by HP’s board for undervaluing the business.

Energy

Brent crude futures rose 4.4% to trade at about $57 a barrel over the week by mid-session on Friday, as hopes of supply-side cuts from Opec mounted.

New BP chief executive Bernard Looney said he wants the oil behemoth to sharply cut net carbon emissions by 2050 or sooner. Mr Looney said the company needed to "reinvent" itself, a strategy that will eventually include more investment in alternative energy. It follows similar moves by rivals, including Royal Dutch Shell and Total. Mr Looney said: "The world's carbon budget is finite and running out fast; we need a rapid transition to net zero.”

British Gas’s owner Centrica plunged to a loss of more than £1bn after the price cap cut the energy supplier’s earnings to all-time lows and falling gas market prices dealt a blow to the value of its North Sea business.

Mining

Brazil’s Vale officially lost its position as the world's top iron ore producer to Rio Tinto last year. In January 2019, a Vale-owned tailings dam burst, killing about 270 people in Brazil. The incident led to serious production stoppages.

There are signs the diamond sector is regaining its sparkle. Midcap miner Gem Diamonds said the average price achieved for the final three months of 2019 increased 21% to $1,713 per carat, while carats sold were ahead 17% at 29,945.

Property

Investor confidence in central London offices has been given a boost since Boris Johnson’s election victory, with more £500 m of deals agreed last month. Property agent Avison Young said £293m of City purchases were done in January, with £218m in the West End.

Retail landlord Intu Properties lost a third of its market capitalisation after an investor refused to take part in a fundraising, which aimed to slash its £4.7bn debt pile. Earlier in the week management confirmed that it was in talks with a number of investors over its £1bn emergency cash call. The owner of Lakeside in Essex and the Trafford Centre in Manchester said it was in “constructive discussions” with shareholders including the Peel Group and Link Real Estate Investment Trust regarding a proposed equity raise alongside its full-year results, which are due to be released at the end of February. However, the shares fell later in the week after Link pulled out of talks and said it wouldn’t participate in the share issue.

Industrial property group Segro reported a 10.8% improvement in adjusted pre-tax profit in its full-year results, which it said reflected a record year of development completions, high customer retention rates, like-for-like rental growth and a low vacancy rate.

Great Portland Estates reported a "productive" third quarter, which saw it complete 12 new lettings ahead of estimated rental value.

Financials

UK regulators are investigating Barclays chief executive, Jes Staley, over whether he was sufficiently transparent about his links to the disgraced financier and convicted paedophile Jeffrey Epstein. The probe is focused on Mr Staley’s “characterisation to the company of his relationship with Mr Epstein and the subsequent description of that relationship in the company’s response to the [Financial Conduct Authority] FCA”.

Royal Bank of Scotland plans to change its name to NatWest Group later this year, as it reported a near doubling of annual profits. The bank reported profits of £3.1bn for 2019, nearly double the £1.6bn seen the year before.

Credit Suisse reported its highest annual profits in almost a decade, just days after chief executive Tidjane Thiam was ousted in the wake of a spying scandal that erupted last year.

Supermarkets

Online supermarket Ocado fell into a £214.5m loss last year, which the company blamed on a huge fire which burned down one of its warehouses in Andover last February. Group revenue rose 9.9% in the year, up from £1.6bn in 2018 to £1.7bn last year. Despite the losses, Ocado's founder and chief executive Tim Steiner snapped up a £54m bonus last year.

Greggs is teaming up with Walmart’s Asda to have its own concessionary counters inside selected supermarkets. The bakery chain will operate its own shops-within-shops in partnership with Asda on a trial basis from next month.

Food

Meat processor Cranswick said it had bought the Buckle family's pig farming and rearing operations as well as its 50% stake in the White Rose Farms joint venture it set up with the family in 2018. The enlarged pig enterprise, to be known as White Rose Farms, specialises in the production of pigs in Yorkshire under the Red Tractor assurance scheme and will continue to be led by Rick Buckle.

Other retail

The British consumer is still cautious, despite an increase in confidence since the December election resolved the Brexit impasse. Total retail spending edged up by 0.4% year-on-year in January, the British Retail Consortium said. The average increase over the past 12 months was just 0.2%, the lowest since BRC’s records began in 1995, while like-for-like retail sales in January, excluding changes in floor space from one year to the next, were flat.

Homewares retailer Dunelm continued to buck the negative retail trends. After a solid first half, management said full-year pre-tax profit will be "slightly ahead" of the top of the latest range of analysts’ expectations. It also announced a special dividend payment.

Shoppers may be worse off online and in stores if JD Sports’ acquisition of Footasylum goes ahead, the Competition and Markets Authority (CMA) has warned in a preliminary ruling. The CMA said the merger could lead to fewer discounts and worse customer service, as well as less choice.

Consumer

Shares in William Hill rose after the group signed a major sports betting deal in the US with media giant CBS Sports. It makes the FTSE 250 firm the "official sports book and wagering data provider" across all CBS Sports platforms. That includes the opportunity to advertise to the 42 million people who visit the CBS sport website each month.

Defence

UK defence contractor Babcock lowered market expectations for profit for the year, bringing it down to the lower end of its previous guidance. This means it narrowly avoided being classed as officially a “profit warning”.  Babcock added that it would also incur a one-off £85m writedown on assets in its oil and gas business as the defence giant prepares to exit its operations in Ghana and the Democratic Republic of Congo.

Autos & transport

The boss of Ford’s European business raised concerns about a possible 2032 ban on petrol, diesel and hybrid cars in the UK. The date was suggested by Transport Secretary Grant Shapps as part of a range of potential dates. Commenting on the announcement, Stuart Rowley said: "Plug-in hybrids can be an important part of technology mix." He also called for more infrastructure investment for electric vehicles, including more access to chargers.

Shares in Tesla were hit after the electric carmaker said it is planning to offer about $2bn of shares in an underwritten deal. The company said chief executive Elon Musk will participate in the offering by purchasing up to $10m in new shares. Billionaire board member Larry Ellison will also participate by buying up to $1m in stock. Mr Ellison founded Oracle and is worth £68.4bn, according to Forbes.  Proceeds of the deal will be used to bolster the company's balance sheet. It was also revealed in an SEC filing that the US securities regulator had issued a subpoena for information on its financing arrangements. As Elon Musk may have said: “Funding secured”. The shares are still higher than a week ago.

Ride-hailing app Ola launched in London this week The Indian rival to Uber, which is backed by Japanese investor Softbank, claimed it will “focus on drivers, safety and a collaborative approach”. This canny marketing stance is an attempt to capitalise on the issues that have led to Uber’s licence to operate in London being withdrawn, although it is currently appealing that decision. Customer choice in the sector is certainly increasing, with other taxi-companies such as Bolt, Kapten and Kabbee already operating in the UK capital. Ola was established in Mumbai in 2010 and started operating in South Wales in August 2018. It currently offers its services in Liverpool, Birmingham, Bristol and Reading.

Volvo and its parent company Geely will investigate merging into a single company in order to become more competitive in the global car market. The Swedish car maker has been owned by Chinese giant Geely Auto Holdings since 2010 but remains a separate company.

Japanese car giant Nissan filed a civil lawsuit to reclaim 10 billion yen (£70m) from former chairman Carlos Ghosn for what it called "years of his misconduct and fraudulent activity". Mr Ghosn faces multiple charges of financial misconduct in Japan but fled to Lebanon before he could face trial. He denies any wrongdoing. The news came as the carmaker slumped to its first quarterly loss since 2010. Nissan shares fell to their lowest level in a decade.

Renault posted its first loss in a decade today as the French car giant took a hit from its alliance with Nissan. The company lowered its margin guidance on the back of the results, setting a margin between 3% and 4%, down from 4.8% in 2019.

Airlines & travel

Airbus slumped to a €1.4bn annual loss after receiving record fines for bribery but raised its dividend as aircraft deliveries hit an all-time high. The European aerospace group’s 2019 loss contrasts with a net profit of €3.1bn the previous year. Management set aside €3.6bn last month to cover settlements with authorities in the US, France and Britain after admitting it had paid huge bribes on an “endemic” basis to secure contracts in 20 countries.

The grounding of the 737 Max is hitting Boeing hard. The aircraft maker revealed that it didn't receive any new orders for commercial jets in January, compared to 45 orders a year ago. And it only delivered 13 commercial planes in the month, down from 46 a year earlier.

The UK government is considering taking a stake in troubled airline Flybe. The government is in talks with Flybe and the European Commission to ensure any rescue deal does not break state aid rules. The UK government said support is given to Flybe so far, such as a pledge to cut tax on some domestic routes, are industry-wide measures and are not classed as state aid.

Shares in holiday group Tui surged after management said strong bookings, particularly from the UK, will help it offset cost headwinds from the grounding of its fleet of Boeing 737 Max jets. As a result, the group raised the bottom end of its annual profit guidance.

Norwegian Air said its business had been "negatively impacted" by the global grounding of the Boeing 737 Max plane. The company said it lost 1.87bn Norwegian crowns (£155m) in the last three months of 2019. That was better than the group’s loss of 3bn crowns a year earlier but still worse than forecast.

Space

There was more bad news for troubled aircraft-maker Boeing. The group’s Starliner spacecraft, which is designed to carry NASA astronauts to the International Space Station, encountered a second, previously undisclosed, software issue during a botched test flight in December. Its first crewed flight is already years overdue.

In sharp contrast, the Airbus-built spacecraft Solar Orbiter was successfully launched from Cape Canaveral. It is on a European Space Agency (ESA) mission to study the sun to improve our understanding of how it creates the heliosphere, the bubble surrounding the solar system.

Virgin Galactic shares continued to head toward the stratosphere. After a wobbly debut in October, the shares are now up 104% in the year to date on hopes it will launch the first human space tourist flight later this year. The shares recent gains led to the shares being dubbed “the Tesla of the space industry” by some. Garry White explains that you are probably already invested in humanity’s reach for the stars here.

Media

Audioboom, an Aim-listed podcasting group that is backed by property tycoon Nick Candy, called in bankers to launch a strategic review that could trigger a sale of the group. Market chatter suggested potential buyers could include Rupert Murdoch’s News Corp, which owns TalkSport, Global, the owner of radio stations such as Capital and Smooth, and US-based iHeart Media.

Healthcare

It was another rollercoaster week for shares in Middle East hospital group NMC Health. Regulators demanded answers from the FTSE 100 listed group after management warned over possible incorrect reporting of shares owned by billionaire founder Bavaguthu Raghuram Shetty. NMC also confirmed it had been approached about potential takeover bids by private equity firm KKR and Swiss company GK Investment, but KKR rapidly denied it had made an approach. Mr Shetty, NMC’s chairman, was temporarily banned from board meetings along with fellow director Khaleefa Butti al Muhairi.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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