Tuesday, 7 April: Markets opened with the pound faltering, after it emerged PM Boris Johnson’s condition had deteriorated overnight, landing him in intensive care but it seems without the need for a ventilator. His friend had described him as fitter than he looks, which is perhaps not hard and also suggests that Boris Johnson has Park Run shy friends. Nevertheless, he seems to be doing fine. There was the usual steady raft of firms confirming the standard play, scrapping dividends, cutting management salaries, furloughing, cancelling buybacks and so on. But without any new intimidating figures bourses continued to climb, following gains on Wall St. and across Asia early this morning.
There has been criticism of firms who continue to lay-off staff rather than make use of the furlough scheme. It seems that when the dust settles it will leave a very different landscape. Yes some firms have taken advantage of the situation and played moves in a fashion as though it is there only option but in truth some have been desperate for an excuse to cut generous dividends, reduce physical stores estates and perhaps shed the workforce.
The FTSE 100 closed today 2.19% higher, with the FTSE 250 outshining with gains over 5%. As we have become accustom to, some shares have seen huge jumps as day by day risk appetite seems all or nothing at the moment. Cineworld jumped nearly 50% after confirming they had suspended the dividend and management have deferred their full salary payment bonuses. This comes despite the fact they were fairly weak heading into this crisis from a business standpoint and well, once lockdowns are relaxed or come to an end, are people really going to flock to go back inside. Surrounded by a large amount of other people. In seats many other people have just sat in. To watch more hours of big screen action following exhausting Netflix. Well, to make a bet would be foolish this year so we will leave you to decide on that one. Inchcape were another one who have cancelled the dividend and cut management salaries in order to cling to cash.
The dollar did lose ground as improved sentiment helped the euro and pound against the traditional safe haven that is the US dollar. In a similar way to many stocks lagging the huge gains this week are those that have performed well and have less ground to make up on.
One interesting argument being thrown around at the minute is the firms that could sustain their dividend actually scrapping it in order to take full advantage of some juicy M&A opportunities at the end of this. Yes of course scrapping the dividend isn’t a popular move but it’s more acceptable now than it will ever be. And yes it leaves income managers with really nowhere to go but shareholders should see, in the right case, that long term returns could be hugely beefed out of a firm could scrape some cash together to pick off some once in a blue moon opportunities. But again, we will see, having that even as a possibility is better than most at the moment. Once again stay safe and our Monopoly advice tonight would be, concentrate on your own properties. Don’t be that person watching the TV who cries when you get away with a £14 rent payment on their pink properties.