Recovery Helps To Shield Government From Cummings’ Allegations

This week we saw the man suspected for a time of running the government, trash said government. While Dominic Cummings might not be the most reliable  witness, his account of poor planning and decision making is certainly believable. How or if this changes anything is not clear, as most people appear to have made their minds up regarding the government’s competence. Despite the scale of the tragedy alleged, accountability is the only real consequence for those in charge and the successful vaccination programme has won the government a lot of tolerance.

Elsewhere we saw talk about ESG and ethical investing actually manifest itself in clear cut action. Exxon had two, possibly three, new directors forced onto its board by activists concerned it wasn’t taking climate change seriously. Notably the activists weren’t an environmental group, but a hedge fund whose challenge was backed by both BlackRock and Vanguard. The main concern being that if management didn’t take climate change into account they would damage profits and the share price. Climate change is now big business, and big business needs to take note.

 

UK: RATE OF GOVERNMENT BORROWING SLOWS AFTER RECORD YEAR

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UK government borrowing is beginning to slow as the country reopens after the Covid restrictions. Figures out this week show monthly borrowing fell compared to a year ago, but it still came in at the second highest for April since records began at £31.7bn, down from £46.6bn last year. A slight decrease in the rate of borrowing and a pickup of economic growth has seen total government debt as a percentage of GDP fall slightly to stand at 98.5 per cent at the end of April.

As the recovery continues the picture should also continue to improve and the latest forecast from the Office for National Statistics is for the government to borrow £234bn this year. The extremely low rates of interest on government bonds mean that despite the increase in total borrowing the cost of servicing this debt has barely moved and April’s interest payments were £0.1bn above last year – mainly due to an increase in the yield on index-linked bonds.

 

 

 

OIL: ENERGY COMPANIES UNDER PRESSURE TO ADDRESS SUSTAINABILITY

Big oil companies endured a tough week as activist investors and environmental campaigners stepped up efforts to get them to address their behaviour. Royal Dutch Shell suffered a setback in the Dutch courts as environmental activists won their case to force the company to accelerate its plans to reduce carbon emissions. Shell has appealed the ruling but if it loses the case it could set a precedent for campaigners to challenge other energy producers. Separately this week shareholders in Chevron passed a resolution calling on the company to ‘substantially reduce’ its emissions.

Most significant, perhaps, is the victory by activist hedge fund Engine Number 1 which succeeded in nominating two directors to Exxon Mobile’s board. The hedge fund’s motivation is financial rather than environmental but it has been very critical of Exxon’s lack of focus on cleaner energy and failure to prepare for a world less dependent on oil and gas. It warned that without action Exxon faces existential risk and its campaign was backed by the majority of shareholders despite opposition from Exxon’s management.

 

 

 

EQUITIES: THE BILLION DOLLAR BATTLE FOR CONTENT

equities blog thumbnailThe fight for subscribers intensified this week as Amazon agreed to buy film studio Metro-Goldwyn-Mayer for $8.45bn. The acquisition will bring a vast content library to Amazon Prime Video and is evidence of further consolidation in the streaming sector following the merger of TimeWarner and Discovery last week. It is Amazon’s largest acquisition since its purchase of Whole Foods for $13.7bn in 2017 and pushes media deals to their highest level in several years

Streaming content remains extremely competitive in 2021 after the pandemic drove a surge in subscribers. Netflix is still the market leader but its growth has slowed sharply after a big increase last year. The recent launch of services like HBO Max and Disney +, the relaunch of
Apple TV plus the presence of dozens of other smaller streaming services means companies are having to work harder to produce content to maintain subscriber interest.

 

 

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