Beat Brexit
Portfolio plays
Fund management giant Pimco clearly got some inspiration from our Brexit special last week and has advised investors to tweak their portfolio to take advantage of the uncertainty. Portfolio manager Mike Amey suggests snapping up long-dated gilts, selling the pound and buying bank bonds - the latter have underperformed recently and come with a yield of 8 per cent, which Pimco is confident would be delivered regardless of the 23 June referendum. While gilts have performed strongly, a benign interest rate environment is expected to help returns here.
Overdraft max
Open wallet
He's in charge of the country's finances, but chancellor George Osborne's control over them seems to be hit and miss. Government borrowing for the year to the end of March was revised up by £2bn to £76bn, meaning the Office for Budget Responsibility's £72.2bn prediction is well in the rear-view mirror. Net public sector borrowing excluding banks in April fell £0.3bn year on year to £7.2bn, though. Samuel Tombs at Pantheon Macroeconomics called it "a poor start to the year" and suggested more austerity may be needed or the goal of a surplus by 2020 abandoned.
Static fog
Fumes not clearing
The Volkswagen emissions scandal had new life breathed into it this week after two shareholder advisory bodies plumped for a special investigation into the car manufacturer's top managers and directors. Hermes Equity Ownership Services, which advises 20 pension funds with VW stock, said it was recommending that shareholders use the company's annual meeting on 22 June to vote against management and the supervisory boards, and called for an inquiry into these people. Deminor, a consulting firm specialising in corporate governance, filed a motion calling for a special investigator to decide if legal duties were breached.
Hurdle to jump
Bookies' deal
The hoped-for merger between the UK's second- and third-largest bookmakers - Ladbrokes and the unlisted Gala Coral - does give rise to competition concerns, according to the Competition and Markets Authority (CMA). But the body has provided a fence that the duo could choose to clear in order to help the deal over the line. This is to sell off 350-400 shops - Ladbrokes has 2,231 in Great Britain and Northern Ireland now and Coral has 1,850 in Great Britain. The CMA identified 659 local areas where the merger would lead to "a substantial loss of competition".
Trading doldrums
Commodity malaise
Research company Coalition has released data showing that the biggest banks active in commodities trading have seen income from the activity drop by 40 per cent to $1.1bn in the three months to March. This is the worst start to a year in more than a decade as fewer clients looked to hedge, or lock in prices, in what are proving to be very volatile markets. The banks covered by the research include Goldman Sachs, JPMorgan, Citigroup and nine other investment banks. Revenues also fell as banks became wary of doing business with hard-up oil companies.
Frock stock
Clothier listing
Upmarket clothing company Joules was set for its flotation at the London market as we went to press. It follows on the heels of Hotel Chocolat, whose shares rocketed after becoming available to investors. Joules' listing on the junior Aim market at 160p a share, gives it a market capitalisation of £140m. The £77.5m raised will pay interest on a shareholder loan, with the remainder going to existing shareholders. Founder Tom Joule, who started the brand in 1989, will reduce his stake from 80 per cent to 32.2 per cent.
Is GMO good to go?
Monsanto starts talking
Shares in US agribusiness Monsanto took a healthy jump after it said it was open to further talks with would-be acquirer Bayer. Monsanto has already rejected a $62bn bid from the German company but has now said it would be “open to continued and constructive conversations”. In spite of the share price rise to $108, the stock remains below Bayer’s $122-per-share offer potentially suggesting worries of investors to competition issues if the deal went ahead. Analysts at Berenberg said while Monsanto faced some issues, it could argue the agri-commodity cycle could turn at any moment and that the multiple implied by the offer is too low compared to the multiple paid by ChemChina for Syngenta.
Gross mortgage lending receded in April after the stamp duty-beating rush in March, which saw lending surge to £26.2bn as buy-to-let purchasers scrambled to beat the tax hike that came in on 1 April.
Overall mortgage lending is estimated to have dipped by almost one-third in April to £18.5bn, although this remains well up on the £16bn lent in April 2015. The data from the Council of Mortgage lenders tallies with house price data from lender Halifax that indicated a cooling of prices in April and sets the scene for a somewhat more becalmed period for the housing market, with uncertainty around the forthcoming Brexit vote also expected to suppress demand. Notably, remortgaging activity mitigated some of the drop away from buy-to-let demand in April as borrowers took advantage of ongoing low interest rates to lock in new deals.
