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“After US stocks concluded a see-saw session in positive territory the FTSE 100 is managing to put on its happy face on Friday, eking out modest gains,” says AJ Bell Investment Director Russ Mould.
“The UK Government borrowing figures are eye-watering but not surprising given the levels of intervention in the economy as it looked to cushion the blow of Covid-19.
“More relevant to markets are signs that US lawmakers might navigate partisan differences to sign off on a big package of fiscal stimulus – a mooted vote on it next week could act as a catalyst to improve investor sentiment.
“Gold prices, which have lost a lot of their shine in recent days on a strong dollar, regained a bit of sparkle but remain below $1,900 per ounce.”
Boohoo
“The independent review into Boohoo’s supply chain has found many failings with the company being told to pull its socks up with regards to governance, oversight and compliance.
“The fashion seller is going to have to change its processes and that could result in higher costs which may ultimately be passed on to customers.
“A key appeal of Boohoo is its relatively low prices so management are going to have to weigh up whether the company will stomach some of the extra costs to avoid alienating customers or whether it has the magic of pricing power. The latter is where a business has the confidence that it can push up prices without causing demand to fall.
“Getting its house in order could ultimately benefit Boohoo in the long term. Indeed, it may even prompt other businesses to conduct an independent review of the way they work to drive improvements.
“ESG issues are now front and centre and companies which aren’t looking at how they operate and work with suppliers will feel the pressure from investors to make sure they do address the issue.
“Fans of the business might suggest Boohoo could go from villain to a trailblazer in how to make amends and improve standards to make them fit for the modern world. That obviously depends on the company acting on the recommendations in its independent review and not simply brushing them under the carpet.
“For now, there is a huge amount of work to do based on the review and Boohoo sceptics are unlikely to reappraise the company until they can see full evidence of change.”
Shaftesbury
“The latest update from West End property investor Shaftesbury reveals just how stark the impact of Covid-19 has been on Central London.
“To have collected just half of the rent due for the six months to 30 September is a real sign of stress in the capital’s property market. Vacancy rates have doubled too.
“London is particularly reliant on footfall from office workers and foreign visitors, both of which are effectively being kept away by coronavirus restrictions which have just been tightened again.
“That means far fewer visitors to the pubs, shops and restaurants which make up Shaftesbury’s portfolio and seriously compromises the ability of these concerns to pay rent. The group also faces an impact from an exodus of overseas renters of its flats.
“And in the same way that the Government is having to extend financial support to help get people through the winter, so Shaftesbury is extending its own package of support for tenants.
“It would be a shock to see the company continue to pay dividends against this backdrop and sure enough a payout is off the table for the foreseeable future.
“While management outwardly espouse confidence in the ability of London and the West End to eventually bounce back, they face the pressing task of ensuring they have sufficient liquidity to endure a period of drastically reduced rental income, hence the push to extend covenant waivers on its debt.”
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