Mayhem, Madness and the Rise of The First Trillionaire:
It’s true! Our latest market news has seen some simply staggering numbers. Whether it’s Amazon’s profits or the spending (sorry!) ‘investment,’ announced by President Biden, there is no denying the ‘unprecedented’ times are continuing.
Once upon a time, we talked about a ‘standard unit’ of currency as a million. Company profits and valuations were given in millions. Debt was considered in millions. But, the pandemic has undoubtedly changed that default unit of currency. And, the latest market news indicates that ‘billions’ are officially the new ‘standard.’ That’s right! Borrowing in billions. Seeing company profits in billions (if you’re Amazon). And, let’s face it, no self-respecting start-up would venture onto the stock market without first being worth at least (you got it!) a billion!
After a billion, of course, comes a trillion (12 zeroes!). In April, US President Joe Biden turned his attention to the ‘trillions’ – and if Amazon’s profits keep rising, it won’t be too long before we witness the world’s first ‘trillionaire.’ Are we the only one’s with Del Boy’s mantra going round in our heads… ‘This time next year, Rodney…’
The International Monetary Fund started the month optimistically. They are predicting UK growth of 5.3% this year and 5.1% next year. Forecasts for global growth were also upgraded slightly, to 6% this year and 4.4% in 2022.
The UK and Australia agreed on the vast majority of a trade deal. It came as Australia stepped away from its previous trade deals held with China. The gloom continued for the Eurozone economy, and a potential political earthquake started to judder in Germany.
As always, let’s take a look at the finer details!
It was the construction sector leading the economic recovery for the UK in this month’s commentary. February’s numbers showed that the UK economy edged up 0.4% in the month. This was driven by a 1.6% rise in the construction sector, with new builds, repairs, and maintenance all performing well. By the close of April, Nationwide reported that house prices had risen to 7.1% higher than on prior year, with the average property now totalling £238,831. According to one analyst, the housing market is ‘on the boil,’ and the BBC reported particularly strong demand for south coast properties.
Inevitably there was some gloom, though. This time, as you might expect, it centred around Government borrowing. Pandemic measures have pushed government borrowing to its highest level since the end of WW2, hitting as much as £303.1bn in the year to March.
The high street continued its usual onslaught of redundancies and closures. This time, it was the turn of defence giant Babcock, who announced plans to cut 1,000 jobs. And, thanks to us all baking at home, Asda is now to make 1,200 of its bakers redundant. By the close of the month, 5,000 jobs at Liberty Steel were also at risk, and the BBC reported that 1 in 7 shops is empty post-lockdown.
Overall, though, April was a positive month for UK economic market news. The market grew 4% in April, closing the month at 6,970. Meanwhile, the pound was virtually unchanged against the dollar in percentage terms and closed April trading at $1.3817.
The month got off to an ominous start in Europe. France began its third lockdown, with schools closing and people being banned from travelling more than 10km ‘without good reason.’
German’s Commerzbank then added to the gloom by announcing a $3.3bn loss. The bank plans to cut up to 10,000 jobs and close ‘hundreds’ of branches in a bid to return to profitability this year.
The Purchasing Managers’ Index from the middle of the month seemed to confirm that the pace of recovery was lagging in Europe. It indicated that the service sector in Spain and Italy are being particularly slow to recover. Figures from the end of the month then confirmed that the Eurozone economy is officially back in recession. It shrank 0.6% in the first quarter, having been hard hit by renewed surges in infections and the consequent restrictions and lockdowns.
It will not be long now until Germany is heading to the polls. And the question of the moment is whether we will see the election of the first Green Chancellor? Currently, the Greens are leading in the polls, with their pledged €500bn (£435bn) for ‘socioecological transformation’ of the economy. This would see increased welfare payments, a doubling of carbon taxes, a ban on short-haul flights and increased income taxes. Additionally, there would be a 30-hour working week and the right to work from home. Green candidate Annalena Baerbock would replace Angela Merkel if her party went on to win the election.
Away from politics, the market news from Germany and France indicated they’d had a reasonable month. The German DAX index rose 1% to 15,136. Meanwhile, the French market grew 3%, closing April at 6,269.
The US got April off to a good start, adding no less than 900,000 jobs. The staggering numbers were largely driven by re-openings at restaurants, bars, construction sites and schools. Further good news came in the shape of US medical authorities giving fully vaccinated Americans the all-clear to begin travelling again, both at home and abroad.
As we all know, in any crisis, there are winners and losers. And Apple was undoubtedly a winner! A surge in iPhone sales saw Apple’s profits double since the start of the pandemic. Alphabet (Google’s parent company) saw net profit grow by 162% to $17.9bn in the three months to March. Facebook revenues for the first quarter jumped from $17.7bn last year to $26.1bn this year. Tesla made $438m in the first three months of the year, although this was dented somewhat by CEO Elon Musk’s $299m – compensation package.
All these company figures, though, paled into insignificance in the face of the President’s plans for a $4tn (trillion) “once in a generation investment in America itself.”
With the plethora of positive news in the US, it is little surprise that the US stock markets took note. The Dow Jones index grew 3% to 33,875 while the S&P 500 index rose 5%, closing the month at 4,181.
Recent market news has confirmed China’s economic growth (during a pandemic that originated in the country) as being no less than 2.3%. While economies around the rest of the world contracted, eyebrows will no doubt be raised at Forbes annual rich list. It showed that Beijing has overtaken New York as the city with the most billionaires, adding 33 last year alone.
That aside, the Chinese regulators are flexing their muscles, and no one – not even Alibaba boss, Jack Ma, can escape. Alibaba recently faced a £2bn fine, with the regulators claiming the company had ‘abused its dominant market position’ for a number of years.
Away from China, Samsung reported handsome profits. At $6.4bn, the firm’s first-quarter profits were the strongest since 2018. The rise came largely on the back of strong mobile phone sales, though there was also strong demand for TV’s.
Meanwhile, it was Australia’s turn to disgruntle China. The Australian government used new powers to tear up deals made between Victoria and China that formed part of China’s Belt and Road initiative. The government insisted they were doing so purely to ‘protect Australia’s national interest,’ while the Chinese government said the move was ‘provocative.’
In terms of the Far East stock markets, South Korea came out on top. It’s market rose 3% to 3,148. Hong Kong’s Hang Seng index grew 1% to 28,675, while China’s Shanghai Composite index closed the month at 3,447. The Japanese market fell 1%, closing the month at 28,813.
Naturally, the headlines that dominated our Emerging Market news were all about India. Few can have missed the dire sure in Covid cases as a new variant runs rampage.
The middle of April drew alarming scenes of huge crowds gathering to bathe in the Ganges during the Kumbh Mela religious festival. Since then, we will all have become familiar with the tragic news bulletins detailing the daily number of cases surpassing 400,000.
Meanwhile, Russia drew attention as thousands of people joined unauthorised rallies. Protests against the continuing detention of jailed opposition leader Alexei Navalny were ramped up amid news that he was not receiving proper medical care. Navalny finally ended his hunger strike but appeared as a ‘gaunt skeleton’ for his latest court appearance. Naturally, the verdict did not go in his favour.
All in all, it was a quiet month for the three major stock markets covered in this section. The Indian market decreased 1% to close the month at 48,782. Russia’s stock market gained only two points and closed the month at 3,544. Meanwhile, the market in Brazil rose 2%, to close April at 118,894.
Last month’s ‘And finally…’ was a bit lacklustre. For some reason, the world was a disappointingly sensible place in March. Thankfully, the natural order of things has since been restored!
Having recently written that pet food pouches might soon be in short supply, we must, sadly, report even worse news this month. There is a shortage (hold your breath!) of garden gnomes!
As one of the few places open during lockdown, garden centres have apparently been inundated with people wanting to buy a few more friendly faces to surround themselves with at home.
Compounding the situation, no doubt is a lack of raw materials – inevitably, this has been made all the worse by our good friend, the Suez Canal blockage.
In other news, Marks and Spencer has begun legal action against Aldi, arguing that their Cuthbert the Caterpillar cake infringes its Colin the Caterpillar trademark. They duly lodged an intellectual property claim in the High Court – and a very expensive Queen’s Counsel will shortly be arguing the merits of a cake being intellectual property. No doubt other barristers will be queuing up for a slice of the action…(sorry, couldn’t resist)
…And that’s it for this month. Except for the news that Standard Life Aberdeen is having a re-brand. Having no doubt paid design and brand consultants plenty, they are to re-emerge as abrdn. The almost vowel-less re-brand (the A is apparently from Standard) is described to be ‘modern’ and ‘dynamic.’
Of course it will – and not for one minute will we be left behind. We’ll be back this time next month with our modern and dynamic MRKT CMMNTRY.
As always, if you would like to speak to a financial adviser, please do call us on 01243 767 469. Alternatively, you can email us from our contact page, and an adviser will be in touch!