The FTSE 100 index had risen by 25% in a straight line, more or less, since the arrival of vaccines last November, so a wobble, you could speculate, was overdue. The fact that a 2.3% fall arrived on so-called “freedom day” was accidental because the UK stock market was reflecting international worries about the spread of the Delta variant. But the co-incidence also highlighted what should already have been clear: escape from an unfree, restricted economy is likely to be a messy affair.
First, nobody can be 100% confident that the lifting of most coronavirus restrictions really will be “irreversible”. If cases could climb to 100,000 a day, as health secretary Sajid Javid has warned, it would be silly to take any political promise as solid. Second, the “pingdemic” problem is real and is being felt by businesses as far apart as pubs and car factories; exception from self-isolation rules, as outlined by the prime minister on Monday, won’t help all.
Third, consumers’ response to “freedom” is unknowable. Yes, 60,000 people (plus a few irregulars) were happy to enter Wembley stadium for a showpiece final but will punters as a whole go to pubs, restaurants in 2019 style? Meanwhile, short-haul tourist travel is a daunting maze of changing traffic lights and PCR tests.
EasyJet’s share price illustrates the tensions in most consumer-related stocks: at 770p, down 6.5% on Monday, it stands between the locked-down gloom of 500p of last December and the premature optimism of £10.50 in the spring.
Let us not forget, though, that last week’s worry was that economies in bounce-back mode were in danger of running too hot. The rise in the Delta variant has altered the mood, but the underlying economic odds haven’t changed very far in a matter of days. The “UK experiment” in dropping restrictions, as Deutsche Bank’s analysts called it, will be closely watched from elsewhere, but hard results will be weeks or months away. In the meantime, expect only a volatile summer for stock markets.
Embarrassment for Spire board as shareholders reject takeover
Humiliations for boards don’t come much greater than seeing an agreed takeover bid for the company shot down by the shareholders. That was the fate of Spire Healthcare on Monday. The private hospitals operator needed 75% of investors to back a £1.04bn bid from Australian group Ramsay Health Care and got only 68% on one count and 72% on another.
Victory belongs to chief rebel investor Toscafund, which had consistently called the offer a significant undervaluation, pitched “at the wrong time and the wrong price”. The fund stuck to its line even when Ramsay bumped up the terms at the 11th hour from 240p a share to 250p.
Trying to whistle cheerfully, Spire chair Sir Ian Cheshire said the directors had “fulfilled our duty” in letting shareholders vote on the deal, which is probably correct since Mediclinic, Spire’s largest investor with a 30% stake, was keen even at the lower price. Equally, though, you could say the Mediclinic factor doubles the embarrassment for the board. Having 30% in favour at the opening bell normally guarantees success. Not this time.
The valuation debate turns on whether the backlog in the NHS represents boom-time for private operators, or whether possible gains will evaporate under the pressure of costs. There will be no quick answers on that front. It is easier to predict that the thumbs-down from a significant portion of Spire’s shareholders has killed off Cheshire’s slim hopes of becoming chair of BT.
No news is good news after Ocado robots spark warehouse fire
Ocado didn’t bother making a stock market announcement on Monday about its latest warehouse fire, which, if the company and its City advisers have judged things correctly, means shareholders can relax. It suggests any financial hit will be negligible. If not, the company would have to speak up.
Indeed, if you’re very chirpy you could say containment measurements worked better in Erith in south-east London than they did when a huge fire broke out Ocado’s facility in Andover in Hampshire in 2019. Maybe lessons were learned. Or maybe the weekend fire, caused by colliding robots, was just smaller than at Andover, where a battery re-charging unit was blamed. Either way, the company is sticking to Saturday’s non-financial statement that said “less than 1%” of the robot grid was affected.
The relaxed reaction in the share price – a fall of 1.9%, so better than the FTSE 100 index – was justified. A third blaze, though, may not be taken so calmly.