Tuesday 10/11/20

  1. In CORONAVIRUS NEWS, Pfizer’s revelation sparks a rally, optimism is tinged with caution and Eli Lilly gets approval
  2. In MACRO & TREND NEWS, the EU starts to impose tariffs on the US and the Turkish lira jumps while
  3. In M&A NEWS, VF buys Supreme and Countrywide gets an approach
  4. In INDIVIDUAL COMPANY NEWS, Ant Group faces hurdles, Norwegian Air is refused a bailout and Nikola’s losses deepen
  5. AND FINALLY, I bring you a tough coffee exam question…



So Pfizer sparks joy and Eli Lilly gets approval…

Covid vaccine breakthrough fuels broad global equity rally (Financial Times) highlights yesterday’s market euphoria in the wake of the announcement by Pfizer and BioNTech that their vaccine had been found to be over 90% effective in a late-stage trial. This added to the Biden win rally and Winners and losers on day of sudden reversals (The Times) identified a reversal of fortunes for sectors that had been in the doldrums due to Covid. The breakthrough sparked optimism that the aviation industry may be saved – so Rolls Royce (maker of jet engines and servicer of aircraft) and IAG (owner of British Airways) share prices shot up by 43.8% and 26% respectively. It also prompted the hope that people may be able to congregate in numbers once again – so Informa (the world’s biggest events company) was up by 22.2% – and that office life may return – meaning British Land was up by 21.9% and Compass Group was boosted by 21.7%.  Losers included recent strong performers such as Ocado – whose share price fell by 11.% – and Reckitt Benckiser, which saw its share price fall by a more modest 5.5%. The market frenzy had consequences as per Millions miss out as trading sites collapse (The Times, Ali Hussain), which shows that investors using firms such as Hargreaves Lansdown, AJ Bell and Fidelity were unable to trade as their respective websites crashed due to the sudden spike in activity. Trading 212 also crashed.

The whole vaccine thing is undoubtedly a great and uplifting story. HOWEVER, Market must show a healthy dose of realism, say experts (Daily Telegraph, Julia Bradshaw) highlights the fact that we are not home and dry yet given that drugs that reach stage three (like this one) have an 80% success rate and the trial is still only half way through, with safety data yet to be released. Other

candidates with drugs at the same stage include AstraZeneca, Moderna and Janssen. A first glimmer of hope for a Covid vaccine (Financial Times) points out that the end of the fight against the disease – even if these vaccines are successful – will take many months yet despite the US, UK, EU, Japan and other countries pre-ordering huge numbers of doses of the Pfizer vaccine. In this particular case, there are problems with logistics and distribution as Pfizer’s vaccine has to be stored below 80°C. Pfizer/BioNTech vaccine: a new hope (Financial Times, Lex) echoed a note of caution as there are other challenges as well – let’s not forget that Denmark is culling its mink population at the moment due to a new strain, which may scupper vaccine effectiveness and that scepticism abounds as per the findings of a Pew Research Center survey which showed that almost 50% of American respondents said they may not get a Covid vaccination if it were available right now. Staying on the subject of Covid-related things, Eli Lilly receives authorisation for Covid-19 antibody treatment (Financial Times, Hannah Kuchler) shows that the FDA has just given Eli Lilly an emergency use authorisation for its antibody treatment, called bamlanivimab, that is designed to boost patients’ immune systems with artificially-engineered antibodies. * SO WHAT? * There are some really encouraging developments here, but I think that markets got overheated with buying into bombed-out sectors like airlines (even if there is a vaccine, I don’t think there’s going to be any mass move to travelling abroad for some time yet) and selling off companies and sectors that are doing well now and will continue to do so for the foreseeable, like Zoom and Reckitt Benckiser, for instance. People aren’t just going to stop videoconferencing and washing their hands on the back of this news. This indicative, however, of what COULD happen when a vaccine really does get approved for mass usage. BTW, isn’t it interesting that all this news came out the day AFTER Biden won!



The EU doles out the tariffs, Turkey gets dramatic and we see the rush before the calm on UK retailing…

In EU hits US goods with tariffs in Airbus-Boeing dispute (Financial Times, Jim Brunsden) we see that Brussels is slapping punitive tariffs on American imports following the recent granting of the right to do so by the World Trading Organization. Tariffs will apply to around $4bn worth of US goods in the long-running (16 years!) transatlantic spat regarding the US government giving too much state aid to Boeing. Your move next, Mr Biden…

Elsewhere, Turkish lira jumps as Erdogan looks for a way out of crisis (Daily Telegraph, Tom Rees) shows that the Turkish lira shot up from historic lows yesterday as President Erdogan sacked the country’s central bank

governor (the fourth one in five years!) and the finance minister (Erdogan’s son-in-law, no less!) for not doing enough to save the lira. * SO WHAT? * Interest rate rises are usually expected in such cases in order to rein in high inflation, but Erdogan hates such moves, so it’s not a given. It seems that the markets are currently reflecting the hope that radical steps will be taken to address economic concerns.

Meanwhile, back in the UK, Stockpiling and Christmas shopping boost UK retail sales in October (Financial Times, Valentina Romei) shows that there was a major boost in retail sales before Lockdown 2.0 hit, according to the latest figures from KPMG and the British Retail Consortium but Footfall down 75% as England’s lockdown takes toll on shops (The Guardian, Larry Elliott) shows that there is a quiet few weeks in prospect, according to data from the British Retail Consortium and ShopperTrak. Unsurprising, given that most places are now on shutdown!



VF buys Supreme and Countrywide attracts interest…

Supreme streetwear brand sold to VF in $2.1billion deal (Wall Street Journal, Dave Sebastian) heralds the purchase of the cultish brand by VF Corp, the parent company of Vans and Timberland. Founder James Jebbia and a load of private equity firms will be getting a nice payday as a result! Fans are hoping that Supreme’s exclusivity won’t be sacrificed to sales under a more conventional owner.

Back home, Rival takes aim at Countrywide with £82m offer (The Times, Katherine Griffiths) shows that the troubled real estate agent which owns Hamptons and Bairstow Eves, among others, has received an £82m takeover bid from Connells, a smaller rival. Shares in Countrywide shot up by 41.4% on the news. Connells has 600 branches to Countrywide’s 850. It will be interesting to see how this goes and whether they can benefit as one in the event of continued strength in the housing market.



Ant Group faces hurdles for its return, Norwegian Air gets disappointing news and Nikola’s losses worsen…

In a quick look at some of today’s other key stories, Ant faces tortuous path back to market as Beijing tightens rules (Financial Times, Hudson Lockett, Primrose Riordan and Yuan Yang) shows that things could get even worse for Ant Group as the banking regulator suggested it would treat fintech like banks in a move that could have a dramatic effect on valuations. * SO WHAT? * As things stand currently, Ant takes on minimal risk for maximum profit but new regulations could force it to put more loans on its own books rather than shift the risk to someone else. At the moment it only has to fund 2% of its consumer loans book, but under new regulation it may have to hold up to 20%, which could potentially halve the company’s valuation. Ant’s near term fate hinges on being able to convince authorities that it is just an intermediary and not a bank. I would have thought that the authorities and fintechs will have to come to some kind of compromise because if Ant is going to suffer I would have thought it would be far worse for rivals – and does China really want to have to kill off something that it’s been doing rather well in at a time when they could do with more lending?

Elsewhere, Norwegian in a battle for survival after Oslo rejects second bailout (Daily Telegraph, Oliver Gill) shows that not all governments are willing to bail out failing state airlines as Norway’s transport ministry turned down an appeal for assistance. To give you an idea of the scale of the demise of the airline that was Gatwick’s third biggest airline pre-pandemic, the 10,000 staff working for the airline have now been cut to just 600 over the next few months. Brutal. Nationalisation was on the cards, but things are looking pretty shaky at the moment…

Then in Nikola’s losses widen as executives try to regain momentum, develop first truck (Wall Street Journal, Ben Foldy) shows that things continue to get worse for the embattled and controversial electric truck start-up as it reported bigger losses in Q3. This is largely due to the costs involved in developing its first semi-truck model and growing its workforce. * SO WHAT? * Will this thing survive?? At least when Tesla went through its “dodgy” phase, it could rely on Elon Musk wowing investors and blinding them with fairy dust to extract more money from them. I’m not sure whether Nikola will be given as much of a free rein. GM announced a JV with the company just days before a damning report came out about the latter and terms are still being negotiated at the present time. It may be a bit punchy to say this but I think that if GM walks away, Nikola will go down the toilet.



…in other news…

I thought I’d leave you this week with the tricky question in Coffee exam question bemuses students – and even baristas can’t agree on answer (The Mirror, Courtney Pochin). Hmm 🤔

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)