TThe FTSE 100 index had risen 25% in a straight line, more or less, since the vaccines arrived last November, so a swing, one would assume, was overdue. The fact that a 2.3% drop occurred on the so-called ‘Freedom Day’ was accidental as the UK stock market reflected international concerns about the spread of the Delta variant. But the coincidence also highlighted what should already have been clear: Escaping a nonfree and restricted economy is likely to be a messy affair.
First, no one can be 100% sure that lifting most restrictions on coronaviruses will be truly ‘irreversible’. If cases could reach 100,000 a day, as Health Secretary Sajid Javid warned, it would be foolish to take any political promise as solid. Second, the “pingemia” problem is real and is being felt by businesses as far away as pubs and auto factories; the exception to self-isolation rules, as the Prime Minister said on Monday, will not help everyone.
Third, the consumers’ response to “freedom” is unknowable. Yes, 60,000 people (plus a few irregulars) were happy to enter Wembley Stadium for a flagship final, but will punters as a whole go to pubs, restaurants in 2019 style? Meanwhile, short-haul tourist travel is an intimidating maze of shifting traffic lights and PCR testing.
The EasyJet share price illustrates the tensions on most consumer-related stocks: at 770p, down 6.5% on Monday, it sits between the locked-in 500p gloom of last December and the premature optimism of £ 10.50 in the spring.
Let’s not forget, however, that the concern last week was that the economies in rebound mode might get too hot. The rise of the Delta variant changed the mood, but the underlying economic probabilities haven’t changed much in a matter of days. The “British experiment” of dropping restrictions, as Deutsche Bank analysts called it, will be closely watched elsewhere, but concrete results will be weeks or months away. In the meantime, just expect a volatile summer for the stock markets.
Embarrassment for Speyer board as shareholders reject acquisition
The humiliations for boards of directors are no greater than seeing an agreed takeover bid for the company rejected by shareholders. That was the fate of Spire Healthcare on Monday. The private hospital operator needed 75% investors to back a £ 1.04bn offer from Australian group Ramsay Health Care and got just 68% on one point and 72% on another .
The victory belongs to the main rebel investor Toscafund, who had always described the offer as a significant undervaluation, launched “at the wrong time and at the wrong price”. The fund stuck to its line even when Ramsay increased conditions at the 11th hour from 240p per share to 250p.
Trying to whistle happily, Speyer chairman Sir Ian Cheshire said the directors had “fulfilled our duty” in letting shareholders vote on the deal, which is probably correct since Mediclinic, Speyer’s largest investor with a 30% stake, was enthusiastic even at the lowest price. Likewise, however, you could say that the Mediclinic factor doubles the embarrassment of the board. Having 30% in favor at the opening bell normally guarantees success. Not this time.
The valuation debate revolves around whether the NHS backlog represents a boom for private operators or whether potential gains evaporate under cost pressure. There will be no quick answers on this. It’s easier to predict that the rejection of a significant chunk of Speyer shareholders has dashed Cheshire’s slim hopes of becoming BT chairman.
No news is good news after Ocado robots start a warehouse fire
Ocado didn’t bother to make a stock market announcement on Monday about its latest warehouse fire, which, if the company and its city councilors got it right, means shareholders can relax. This suggests that any financial blow will be negligible. Otherwise, the company will have to express itself.
Indeed, if you are very merry, you could say that the containment measures worked better in Erith, in south-east London, than they did when a huge fire broke out at the facilities of ‘Ocado in Andover, Hampshire in 2019. Or maybe the weekend fire, caused by the robot collision, was just smaller than at Andover, where a battery charging unit was put in cause. Either way, the company stands by Saturday’s non-financial statement that “less than 1%” of the robot grid has been affected.
The relaxed stock price reaction – down 1.9%, thus better than the FTSE 100 index – was justified. A third fire, however, may not be taken so calmly.