- The Bank of England hints at further stimulus, Netflix falls short of guidance and more
Bank of England warning
Further stimulus likely
Gertjan Vlieghe – one of the nine members of the Bank of England’s (BoE) Monetary Policy Committee – believes that further intervention is likely needed to help support the economy. Amid the resurgence in Covid-19 cases, Mr Vlieghe warned of a “tremendous challenge ahead” with gross domestic product (GDP) still behind the trough of the last financial crisis. The BoE’s quantitative easing (QE) programme has already hit £745bn and, according to Mr Vlieghe, “the outlook for monetary policy is skewed towards adding further stimulus”. But he has cautioned that additional QE will be “less potent” in the face of low interest rates and believes that controversial negative rates may have to be considered.
Conoco to buy Concho
Oil industry consolidates
ConocoPhilips (US:COP) is set to buy rival oil producer Concho Resources (US:CXO) in an all-share takeover deal worth $9.7bn (£7.5bn). Reversing its recent strategy of asset disposals, the tie-up will increase Conoco’s footprint in the all-important US Permian Basin and the combined companies’ pro-forma global production will be over 1.5m barrels of oil equivalent per day (boepd). Following the Covid-19-driven oil price crash, Conoco is the latest shale player taking advantage of low valuations to consolidate the sector – Chevron (US:CVX) bought Noble Energy earlier this month for $5bn – and further M&A is likely to come.
Huawei pressure increases
Sweden announces ban
Sweden has become the latest European country to turn its back on Huawei, with the Swedish Post and Telecom Authority announcing that equipment from both Huawei and ZTE (HK:0763) will be banned from its 5G network. The regulator says the decision is based on security concerns and that existing infrastructure must be removed by 2025 at the latest – two years earlier than the deadline set in the UK. The move notches another win for the US in its proxy battle with China and will likely benefit Swedish telecoms equipment maker Ericsson (SE:SEK) and Finnish rival Nokia (FN:NOKIA).
LandSec plans £4bn sell-off
Portfolio overhaul
Commercial landlord Land Securities (LAND) has unveiled plans to sell around £4bn-worth of assets – close to a third of its total property portfolio – over the next six years. The move comes as the group looks to reduce exposure to sectors where it has “little or no competitive advantage” such as hotels, leisure properties and retail parks. LandSec currently has £4.3bn of retail assets and a “reimagining” of its strategy will see it focus on outlets and shopping centres rather than retail parks. The disposal proceeds will be reinvested in higher growth “urban opportunities”, which include mixed-use and residential developments.
Netflix’s crown slips
Expectations missed
With its lockdown boost coming to an end, Netflix (US:NFLX) added net 2.2m subscribers to its platform in the three months to 30 September, short of its 2.5m guidance and the 3.6m analysts had been expecting. The streaming giant had previously warned that the pandemic had pulled growth forward and that subscriber additions would slow in the back end of the year – it is pencilling in net 8.2m new subscribers in the second half of 2020 versus 26m in the first half. Netflix faces an increasingly competitive landscape, particularly as the likes of Disney (US:DIS) and Comcast’s (US:CMCSA) NBCUniversal reposition towards streaming. It also missed earnings expectations – third-quarter EPS of $1.74 was lower than the $2.13 analysts had anticipated.
Royal Mail parcel pick-up
Strategy shift
With the letters market in structural decline, Royal Mail (RMG) has been slow to capitalise on the rise of online shopping and parcel delivery, falling behind rivals such as UPS (US:UPS). As it looks to turn things around, the group has launched a new service that will see its postmen and women pick up parcels for delivery from people’s doorsteps. From Monday to Saturday, consumers will be able to have up to five packages collected for as little as 60p on top of the relevant postage charge. Royal Mail is touting the move as “one of the biggest changes to the daily delivery since the launch of the post box in 1852”.
Trainline derailed
Chief executive departs
Trainline’s (TRN) shares slid by over a tenth after it announced that chief executive Clare Gilmartin will step down at the end of February. Ms Gilmartin has led the online ticketing business for seven years and will be replaced by chief operating officer Jody Ford, who came aboard last month. Her departure comes as the group navigates an uncertain outlook for public transportation. Having enjoyed a successful market debut in 2019, Trainline’s shares were as high as 560p earlier this year. But that momentum was thrown into reverse by Covid-19 – net ticket sales for the six months to 31 August were around a fifth of those a year earlier. The group’s shares are currently well below their 350p IPO price.
According to estimates from the Office for National Statistics (ONS), the UK government borrowed net £36.1bn in September, the third-highest monthly deficit since records began in 1993. While heavy borrowing to counter the economic impact of Covid-19 was expected, analysts had been anticipating a lower net figure of £33.6bn.
At the end of last month, the total amount of money owed by the public sector to the private sector (excluding public sector banks) was around £2.1 trillion, equivalent to 104 per cent of gross domestic product (GDP). The last time the debt-to-GDP ratio was this high was in 1960.
