Market Wrap

Market Wrap: British Pound soars, and the FTSE welcomes back the old school

Annie Charalambous, Friday, 4 June 2021

ETX Capital Market Wrap

This week, despite the enigmatic verbalizations by the Apple Mac-toting social media generation on the movements of such new-fangled follies as meme-based cryptocurrencies and the continual attempts to be trendier than each other by those with topaire facial hair and unusual hats, it has been the old fashioned establishment with a plodding, pseudo-civil service image that have come out in full force.

For those who spent their childhood in 1970s Britain, the beigeness of traditional utilities companies, television giants and flat-pack MDF furniture retailers will be an enduring memory as inspiring as a rainy afternoon in Manchester.

The companies, many of which come from the opposite end of the scale to today’s entrepreneurial, influential leadership-based tech economy and resemble a pair of slippers, a cup of Horlicks and and a strict watershed, have absolutely shone this week in terms of stock market performance.

Old guard back in pole position

ITV and Royal Mail, both about as modern as a piece of granite, are about to be readmitted to the prestigious FTSE 100 index on London Stock Exchange, in this month's stock market reshuffle, which is an interesting movement indeed.

Perhaps members of the media-loving public will tut and shake their head as much as they do when watching a corny comedy or are glued to a mundane reality TV show knowing that there are better ways to spend time but simply cannot tear themselves away from the action - or lack of it - when ITV is readmitted to the FTSE 100 index very soon.

ITV, led by Dame Carolyn Fairburn, had its revenues hit over the past few months which has largely been attributed to a drop in advertising spending during the lockdown period which is perhaps an odd decision considering that it had more of a captive audience than ever however many advertisers had been affected by government lockdowns which had damaged their revenues so badly that they were not able to afford placements even if it would have put them in front of an increased number of Deliveroo-dependent television watchers.

As this was reported, ITV shares struggled to stay above water though, dipping 0.5 per cent, or 0.65p, to 130.85p. Royal Mail rose 0.2 per cent, or 1.2p, to 595p and today they have plunged dramatically.

Usually, good news has a positive effect, but the potential re-inclusion in the FTSE 100 index has coincided with a drop for ITV shares.

Royal Mail is also on the list for re-admission to the FTSE 100 index this month, as the company has been performing well despite massive competition from the likes of Amazon, which itself is set to be the UK’s largest retailer over the next 5 years, demonstrating that it has the delivery market sewn up.

However, Royal Mail’s impending re-admission means that institutional EFTs will be forced to trade its stock, giving its stock an increase in credibility.

Pound at three year high

The Group of Seven (G7) finance ministers have a history of making big decisions, dating back to the Plaza Accord in 1985 when the G7 acted to devalue the dollar.

This year, Rishi Sunak, the man who used government money to pay people to stay home from work and then transferred the responsibility of the destroyed businesses that his government's lockdowns caused into the hands of the banks and the taxpayer, is looking to get in on the action as the public are wise to lockdowns, and he has to think of another ruse to introduce restrictions on businesses and livelihoods.

The forthcoming G7 COP26 Climate Change Conference currently looking for a host city, and it may well end up in the United Kingdom if the government, intent on putting obstacles in the way of hard-working citizens, has its way, however the sentiment of the British public and its continuance with normal life differs from the increasing pressure by global zealots, and the Pound's strong value shows it.

Despite the lockdowns and their drastic effect on business, and this potentially anti-business climate conference, the GBPUSD rose on Wednesday to a three year high at 1.4221 and this is a very important metric, because it is all very easy to say "this is the biggest boom in 70 years" if the last few months have been lower than 300 years but with GBPUSD values, the figures are there in black and white, and today's pound value genuinely represents a boom.

Plumbing the depth of future billionaires’ pockets

Victorian Plumbing, a supplier of bathroom fittings which is based in Liverpool, is one of the companies which has its sights on offering its shares for public sale on the London Stock Exchange, with the company hoping to raise £920 million in doing so.

The company was founded 21 years ago by Mark Radcliffe, who is now only 42 years old and who holds a 74% stake while his brother Neil has 14% and his mother 4%.

Current estimates have revealed that the valuation for the company upon its IPO could be as much as £1 billion, hence the £920 million estimate for its current owners.

Upon admission to the stock market, former William Hill chief executive Philip Bowcock will be appointed chairman. Damian Sanders, who is a board member at Cineworld and The Hut Group, will also become a non-executive director.

The firm recorded revenue of £208.7m and earnings of £26.2m in the year to September 30. The company's latest accounts show that in the six months to March 31 this year it achieved revenue of £140.7 million in revenues, and earnings of £20.1 million.

Low tech it may be, but this is the era of the billionaire tradesman and the fusion of the working man and the City gentleman.

Mark your calendars

Monday kicks off with Swiss employment rate data at 5:45 GMT, which is expected to have a positive change of 3.1% for May, whilst at 6:30, the Swiss Consumer Purchasing Index looks set to reveal the same data for May as for April demonstrating a steady economy. Later in the day at 19:00 GMT, the US government will release the consumer credit balance, which stands at $25.8 billion for April compared to $20 billion for March. At 23:50, Japan's GDP figures will be released for the first quarter of 2021, and they are expected to be down to -5.1% from -4.8% in the first quarter of last year but roughly the same as the previous quarter.

Tuesday, the Eurozone anticipates negative news, as the French current account balance remains a minus figure at -2.9 billion Euros, and French trade balance is due to be released at 6:45 GMT and is estimated to be -6.1 billion Euros. In North America, the API Weekly Crude Oil Stock figures, set to be announced at 20:30, are estimated to be -5.36 million barrels, which is in keeping with the reported increase in consumption that have taken place recently globally.

On Wednesday, Germany's trade balance is set to be announced at 6:00 GMT, with estimates currently showing that it has shrunk in April to 14.3 billion Euros from 19.5 billion Euros the month before. US Gasoline production is down by 0.182 million USD, a metric set to be announced at 14:30 and at the same time, crude oil inventories are set to be down for the period by 5.08 million.

Thursday sees the US Federal Budget balance, set to be announced at 18:00 GMT, and is estimated to be a minus figure of -226 billion dollars for May this year, and New Zealand's business PMI figures for May are set to be announced at 22:30, looking likely to be 58.4 billion NZD.

We end the week with Britain's trade balance on Friday, reported at 6:00 GMT and the April figure is set to show less of a deficit than March, at -11.71 billion pounds.

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