Last Week in the City: Airlines call for health passports

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 26 February 2021.

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  1. Garry White

Hopes that international travel will reopen by summer resulted in a surge in bookings at airlines and package holiday companies. British Airways owner IAG called for the introduction of internationally-recognised digital health passports to allow the industry to reopen quickly and safely. However, concerns were mounting over a new variant of the viral infection that has emerged in New York.

The improved market conditions saw a raft of companies announce their intention to float, with Vodafone confirming its huge spin-off of its European mast business will take place in March.

The FTSE 100 was up 0.5%, with the FTSE 250 up 1.3% by the middle of Friday’s trading session.

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How much can I afford to give to charity? Louis Coke, a senior investment manager from Charles Stanley’s Guildford branch looks at how to go about giving back here.

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Covid-19

A new variant of Covid-19 is spreading in New York. The variant contains a mutation thought to help the virus dodge the immune system, it emerged.

US regulators have concluded the single-shot Johnson & Johnson Covid-19 vaccine is safe and effective. This decision paves the way for it to become the third Covid-19 vaccine to be authorised in the US, possibly within days. The vaccine would be a cost-effective alternative to the Pfizer and Moderna vaccines and can be stored in a refrigerator instead of a freezer.

The EU continues to wrestle with its vaccine crisis. The EU’s vaccine rollout was already sluggish last month when delays in deliveries of the Pfizer/BioNTech and Oxford University/AstraZeneca inoculations meant the bloc only administered a fraction of its planned doses. Now it has emerged that the take-up of available AstraZeneca doses is below expectations. Many people are skipping scheduled vaccine appointments, hoping for Pfizer shots instead, reports suggested.

European Union leaders discussed ways to fight new variants of the virus, step up inoculations and save Europe's tourism industry from another disastrous summer. "We have to prepare for a situation where we have to continuously vaccinate for a longer period of time, maybe over years, due to new coronavirus variants, akin to the situation we know from the flu," Germany’s Chancellor Angela Merkel said.

British Airways owner International Consolidated Airlines Group (IAG) called for digital health passes "to reopen our skies safely". This follows a jump in travel-related share prices after government plans for travel markets to possibly reopen from mid-May, prompting a flood of bookings. IAG also posted a huge operating loss of €7.4bn for 2020. Online booking platform Airbnb also said it is preparing for a "significant" travel rebound as the world emerges from Covid-19 lockdowns. However, management said it was still too early to predict the full-year outcome. Airbnb posted a near-$4bn loss for 2020.

China approved two more Covid-19 vaccines for public use, increasing the number of domestic vaccines approved in China to four. So far, China has not approved any Covid-19 vaccines developed by Western drug makers.

David Soloman, the chief executive of Goldman Sachs, called working from home an “aberration” and said was not “the new normal”. This echoed comments from Barclays boss Jes Staley last month who said working from home was “not sustainable” for the bank, because it impacted on collaboration and culture at the bank. However, HSBC said it planned to reduce its office space by 40% over the longer term.

Economics

UK lockdown rules forced businesses to furlough another 900,000 jobs last month. A total of 4.9 million wage bills were paid by the Treasury under the furlough scheme at January’s peak, surging from below 4m for most of December when more businesses had been allowed to open. It comes as Rishi Sunak, the Chancellor, is expected to use the 3 March Budget to extend the Coronavirus Job Retention Scheme (CJRS) beyond its planned end date of 30 April, because the restrictions are lasting for longer than previously anticipated.

The number of cars built in the UK fell by 27% last month, the worst January figure for more than a decade, as pandemic-related shutdowns and post-Brexit border friction hit production. The Society of Motor Manufacturers and Traders (SMMT) said just over 86,000 cars were built, a fall of 32,262 compared with January last year. January marked the 17th consecutive month of decline in output.

When economies reopen some expect a bounce back in sectors such as retail, hospitality and catering as soon as most controls are lifted. The situation is more complex than that. We explain why here.

Geopolitics

China’s military criticised the US for sailing vessels through the Taiwan Straits in the South China Sea, claiming the American fleet is undermining peace in the disputed waters. The US 7th Fleet, headed by the destroyer USS Curtis Wilbur, carried out a “routine Taiwan Strait transit” on Thursday.

The US undertook military air strikes in eastern Syria against facilities belonging to what the Pentagon said were “Iran-backed militia”, in a calibrated response to rocket attacks against US targets in Iraq. The strikes appeared to be limited in scope.

Cryptocurrency

Bitcoin had its worst week in almost a year after computing grandee Bill Gates voiced further scepticism over the cryptocurrency. The cryptocurrency fell by about a fifth over the week.

IPO’s

Companies continue to rush to market to take advantage of the improved market conditions.

Vodafone confirmed its well-flagged plans for the Frankfurt flotation of its vast European mobile phone towers business. The listing of Vantage Towers will take place before the end of March and should prove attractive to investors wanting exposure to the roll-out of 5G services in Europe. Vantage will pay a significant dividend in July.

Oatly, the Blackstone-backed vegan milk maker, is eyeing a valuation as high as $10bn in a US listing. Both Oprah Winfrey and Jay Z took part in a fundraising for the Swedish group last year, which valued the company at $2bn.

San Francisco-based cryptocurrency exchange Coinbase plans to do a direct listing, as opposed to following the IPO route. The decision means that Coinbase can float its shares on an exchange without hiring a financial institution to underwrite the flotation.

Online furniture retailer Made.com has reportedly appointed bankers from Morgan Stanley, Liberum and JP Morgan as it weighs a potential float by early summer. This could value the business at up to £1bn, the reports suggested.

Private members’ club Soho House is also considering a New York listing with a valuation of up to $3bn, reports suggested. Soho House, which operates 27 clubs around the world, first considered a Wall Street listing in 2018.

Cannabis euphoria has now come to Britain after Kanabo became the first company listed in London that produces medicinal products from the marijuana plant. But Garry White thinks investors really need to keep a clear head. Discover why here.

Technology

The war between Facebook and the Australian government is over. Australian news returned to the social media giant's platform after an eight-day blackout, and it will reach deals to pay news groups for their stories.

The owner of the Daily Mail newspaper accused tech giants of “blackmail” over the news content row in Australia and called into question the “unholy alliance” between Facebook and Rupert Murdoch’s News Corp. In a letter to the Financial Times, Lord Rothermere, chairman of Daily Mail & General Trust, said “politicians should be very worried” about the incident. After discussions with both companies, Australia agreed to amend the bill – which passed in parliament this week – and the social network agreed to lift the ban on sharing news.

Alphabet’s Google and Facebook have too great a share of the UK online advertising market, according to Andrea Coscelli, head of the Competition and Markets Authority. The regulator is seeking rule changes to deal with their market dominance.

Fighting the FANGs: Gains in technology business such as Facebook, Amazon, Netflix and Google – the so-called FANG stocks, as well as iPhone maker Apple – have led market gains. But more regulation is coming. We look at what threats lie ahead of the major technology companies here.

Government spending plans coupled with the hole in public finances following the Covid-19 pandemic indicate taxes are likely to rise. We think the US is likely to lead the charge in taxing the major tech groups. To find out more click here.

Financials

After NatWest and Barclays recently restarted dividend payments after being given the regulatory nod, HSBC, Lloyds Banking Group and Standard Chartered also returned to the dividend list. HSBC plans to cut 40% of its office space globally and shift leadership and investment to Asia. The bank, currently Europe's biggest, plans to move to hybrid working and will continue with existing plans to cut 35,000 jobs. The news came as HSBC revealed profits had slumped by more than a third in 2020. We took a look at some major shifts that lie ahead in the property market here.

Energy

The lockdown reopening narrative continued to boost oil prices. Brent crude prices jumped 5.3% over the week by mid-session on Friday, trading at about $66.25 a barrel.

Retail

Fast fashion chain Primark, owned by Associated British Foods, hopes to offload millions of pounds worth of last year's clothing stock when its shops reopen in England on 12 April. The High Street chain doesn’t offer online sales and says it expects to have lost £1.1bn in sales due to the latest lockdown closures.

The John Lewis Partnership said it was considering closing another eight stores. This would leave the department store with 34 high street outlets across the country.

Demonstrating slightly different fortunes, Pets at Home upgraded its profits guidance for the City for the fourth time since September, as the pandemic continues to boost pet ownership in the UK.

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