4th May 2021
Good morning! Hope you had a great bank holiday weekend, May looks like it could be a really good month - another bank holiday to look forward, indoor hospitality is set to resume and could international travel be back on the cards? Fingers crossed!
Friday's market moves
FTSE 100 +0.1% 6,970
FTSE 250 +0.5% 22,497
£/$ -0.8% 1.38
£/€ 0.0% 1.15
UK stock markets ended April strongly, the FTSE100 was up 3.3% - the third straight month of increase. Last week was dominated by company earnings reports with tech names being the big winners.
Success for London tech
It hasn’t been a great start to the year for tech initial public offerings (IPOs) in London. The much hyped Deliveroo listing was a flop (shares are down 46% since they went public) and Cazoo (the UK online used car portal) chose to list shares in New York and not London. So there was a sigh of relief in the City when shares in Darktrace, the Cambridge based cybersecurity company, jumped 40% on their debut.
Darktrace was founded in 2013 by former intelligence agents and maths professors. They use artificial intelligence to detect cyberattacks in large companies, their clients include the likes of Coca Cola and Rolls Royce. The rise of hacking has made cybersecurity a top priority for so many businesses and Darktrace has benefited, revenues have more than doubled to $200m in the past two years.
But there are some issues to be aware of
Darktrace’s biggest shareholder is an investment firm called Invoke Trust that is run by Mike Lynch. Lynch is a British tech entrepreneur (once dubbed Britain’s Bill Gates) who is in the middle of a long legal dispute related to fraud over the sale of his previous company, Autonomy, to Hewlett Packard.
Some investors have been worried that this connection could have a negative impact on Darktrace but CEO Poppy Gustafsson has said Lynch is not involved in the day-to-day running of Darktrace and his legal proceedings would have no impact on the company.
Darktrace has definitely had a better debut than Deliveroo but some of that was probably due to the fact that they almost halved their valuation to £1.7bn from a rumoured £3bn. Also unlike Deliveroo Darktrace doesn’t have issues over its gig economy model which scared off a lot of big name investors.
Will 2021 be the year of “revenge spend”?
It’s fair to say that the last 14 months have been pretty unprecedented. A global pandemic has meant millions of us have been stuck indoors, unable to go on holidays, eat out etc. And although some of us have tried to compensate by online shopping (thank you delivery men!)
UK consumer spending still fell by almost £200bn in 2020
But as lockdown restrictions are thankfully starting to lift people who have been fortunate enough to increase their savings are ready to splurge, so called
The Bank of England estimated that
UK households have saved £100bn this past year.
With all this cash saved up shoppers are looking to treat themselves after a tough year. There was evidence of this in China, the epicentre of Covid-19 over a year ago, when restrictions lifted in April 2020. Tiffany & Co.’s China sales surged 90% in May from the year prior, while
Hermes, raked in $2.7m in one day in one store after it reopened.
Barclays predicts that
revenge spending will propel the UK economy to its fastest growth rate since 1948.
But the economy has a lot of ground to recover, GDP fell 10% last year and experts say it will take until the middle of 2022 before we get back to 2019 levels.
And elsewhere in the world
The US economy is also on track to record its highest growth in decades. Government stimulus cheques over the past year has given households thousands of dollars of extra income, on top of additional savings. Already in the first three months of this year the US economy has grown 6.4%.
However in the Eurozone things are little less rosy, the economy is back in a recession – that’s when the economy shrinks for two quarters back to back. Rising infection rates, the relatively slow vaccine roll out and new lockdown restrictions are behind this.
Covid-19 Vaccine Update
65.7% of UK adults have had at least one dose of a vaccine, 29.4% of adults have had two doses.
Other stories to keep you in the loop
Stat of the day
Amazon made almost $1m in revenue per minute in the first three months of 2021