The wobbling of the FTSE 100 shows that escaping the constrained economy is likely to be messy | Nils Pratley
TThe FTSE 100 index had risen 25% in a straight line since the vaccines were launched last November, so a wobble, it was speculated, was overdue. The fact that there was a 2.3% decline on Freedom Day was accidental as the UK stock market reflected international concerns about the spread of the Delta variant. But coincidence has also made it clear what should already be clear: the escape from an unfree, restricted economy is likely to be a chaotic affair.
First, no one can be 100% sure that the lifting of most coronavirus restrictions will really be “irreversible”. If cases could soar to 100,000 a day, as Health Minister Sajid Javid has warned, it would be foolish to view any political pledge as solid. Second, the “pingdemic” problem is real and felt by companies as far apart as pubs and car factories; An exception to the self-isolation rules, as outlined by the Prime Minister on Monday, will not help everyone.
Third, there is no discernible consumer response to “freedom”. Yes, 60,000 people (plus a few irregulars) were happy to enter Wembley for a showcase final, but will the players overall be going to pubs and restaurants in 2019 style? Meanwhile, short-haul tourist trips are a daunting maze of changing traffic lights and PCR testing.
EasyJet’s share price illustrates the tension in most consumer-related stocks: at 770p, down 6.5% on Monday, it stands between the grim darkness of 500p last December and the premature optimism of £ 10.50 in the spring .
Let’s not forget, however, that last week’s concerns have been that recovering economies are at risk of overheating. The rise in the Delta variant has changed sentiment, but the underlying economic opportunities haven’t changed much in a matter of days. The “British experiment” to lift the restrictions, as Deutsche Bank analysts called it, is being closely watched by others, but hard results will be weeks or months away. In the meantime, just expect a volatile summer for the stock markets.
Embarrassment for Spire’s board of directors as shareholders reject acquisition
The humiliation for board members is not much greater than when an agreed takeover bid for the company is gunned down by the shareholders. That was the fate of Spire Healthcare on Monday. The private hospital operator needed 75% of the investors to raise a $ 1.04 billion.
The victory belongs to the chief rebel investor Toscafund, who repeatedly called the offer a clear undervaluation, “at the wrong time and at the wrong price”. The fund stuck to its line even as Ramsay raised the 11th hour terms from 240p a share to 250p.
Spire chairman Sir Ian Cheshire tried to whistle cheerfully, saying the directors “did our duty” to get shareholders to vote on the deal, which is likely correct as Mediclinic, Spire’s largest investor with a stake of 30%, was even interested in the lower price. Likewise, however, it could be said that the Mediclinic factor doubles the embarrassment for the board. 30% in favor of the opening bell usually guarantees success. Not this time.
The evaluation debate revolves around whether the backlog in the NHS means boom time for private operators or whether potential profits fizzle out under cost pressure. There will be no quick answers on this front. It’s easier to predict that the thumbs down from a significant portion of Spire Cheshire’s shareholders has dashed low hopes of becoming BT chairmen.
No news is good news after Ocado robots started campfires
Ocado didn’t bother making a public listing on its recent warehouse fire on Monday, which, if the company and its City advisors got things right, means shareholders can relax. It suggests that any financial damage will be negligible. If not, the company would have to get in touch.
Indeed, if you’re very perky, you could say the containment measurements in Erith, south east London, worked better than a major fire at the Ocado plant in Andover, Hampshire in 2019. Perhaps lessons have been learned from this. Or maybe the weekend fire caused by colliding robots was just smaller than in Andover, where a battery charger was blamed. In any case, the company is sticking to Saturday’s non-financial statement which stated that “less than 1%” of the robot network was affected.
The relaxed reaction of the share price – a minus of 1.9%, better than the FTSE 100 index – was justified. However, a third fire cannot be taken so calmly.