Choppy Trading in Europe, Carnival Seeks Credit

Then again, the US’s situation is far worse in comparison with here, so perhaps it won’t come to that. Prime Minister Johnson said that now is not the time to step back in relation to the economy. Mr Johnson wants to double down on spending on technology, infrastructure and education. Like other governments, the strategy is to throw money at the problem.

Grainger confirmed that it has issued a £350 million bond at a coupon rate of 3% for 10 years. The funds will be used to pay down a £200 million bank facility as well has increase its housing stock. The property specialist raised £187 million in February from an equity offering. In today’s update, Grainger also said that business has been performing well since it released its half year figures last month. In May, 96% of rents were collected on time, which was a slight improvement on April and March’s readings, which were 94% and 95% respectively. Occupancy rates held steady at 97%.

Carnival has announced term loans of $1.86 billion and €800 million. The debt instruments will have maturities of five years. The $1.86 billion tranche will be issued at 96% of its face value and the interest on it will be adjusted LIBOR, with a 1% floor, plus 7.5%. The €800 million will also be issued at 96% of its face value, and the interest will be ERUIBOR, with 0% floor, plus 7.5%. The cash raised will be used for general corporate purposes, such as paying down other debts.

Hunting, a supplier to the energy industry, issued a downbeat trading update. In light of the sharp fall in the oil market in March, the company said that most of its businesses in the second quarter saw a decline in activity. Titan, the group’s energy services division, saw a 40% fall in first half revenue on an annual basis. As a reaction to what has gone on in the oil and gas sector, the company cut its headcount by 25% and the restructuring will be completed this month. Cost savings has been in the region of $60 million. The capital expenditure budget has been cut by 50%.

Wirecard shares have soared today on chatter that Worldline, the French payments group, might seek to buy parts of the struggling company. Trading in Wirecard shares has been choppy recently as the company filed for insolvency last week.

British Airways, which is a part of the International Consolidated Airlines Group, announced in April it will cut up to 12,000 jobs. It was reported over the weekend that 350 pilots will be let go, and 300 will be added to a pool for re-hiring, if or when business picks up again.

Last year, Prime Minister Johnson, said all of the UK would have superfast broadband by 2025, but BT Group feel that target will be difficult to achieve. The pandemic has set the process back and there are concerns about Huawei too, as the company will play a role in the UK’s 5G network, but things might change in relation to The West’s relationship with China.

BP will offload its petrochemicals business to Ineos for $5 billion. The oil titan has achieved its $15 billion disinvestment plan one year ahead of schedule.

Barclays raised its price target for Unilever to 4,370p, from 4,310p.

EUR/USD and GBP/USD have been given a lift by the pullback in the US dollar. The greenback pushed up at the end of last week as it attracted risk-off flows. UK consumers are keen to pay down debt as the Bank of England consumer credit report showed that £4.59 billion debt was paid down in May. UK mortgage lending last month was £1.2 billion, which was a big improvement from the £292,000 posted in April.

On Friday, Facebook shares tumbled as a number of companies said they would halt their paid advertising on social media platforms, and some of those firms specifically mentioned Facebook. Recently a number of anti-racist bodies have claimed that Facebook has not done enough to root out content that could be considered to be hateful, so the organisations have called for a boycott of the social media giant.

Major corporations such as Verizon and Unilever have decided to stop advertising on Facebook. The issue is gaining momentum so more firms will probably also turn their back on social media platforms. Twitter is likely to be in the spotlight too.

Micron Technology will be in focus as it will release its third quarter numbers tonight after the close of trading in the US. The group’s second quarter numbers were well received as EPS were 45 cents, topping the 37 cents forecast. Revenue for the three month period was $4.8 billion, exceeding the $4.69 billion consensus estimate.

In May, the company raised its guidance. It now expects third quarter revenue to be $5.2-$5.4 billion, up from between $4.6 billion and $5.2 billion. The group expects EPS to be 75-80 cents. There has been an increase in demand for data centre space due to the surge in working-from-home. Server chips have seen a rise in popularity as retailers have been ramping up their – e-commerce exposure.

We are expecting the Dow Jones to open 135 points higher at 25,150, and the S&P 500 is called up 14 points at 3,023.

By David Madden (Market Analyst at CMC Markets UK)

Wirecard Confirms Previously Missing 1.9 Billion Euros Do Not Exist

Wirecard, a German payment processor and financial services provider that links retailers, announced that previously missing 1.9 billion euros ($2.1 billion) it had booked in its balance sheet do not exist, tarnishing the image of a fast-growing online payments business in the country.

The German financial startup is in process of negotiations with banks, attempting to sell or close parts of its business to survive a mounting liquidity crunch.

Felix Hufeld, the head of Germany’s financial watchdog sees the event as a “total disaster”, describing it as “a scandal that something like this could happen”, reported Reuters.

Wirecard has appointed investment bank Houlihan Lokey to help it float through. The company’s Chief Executive Markus Braun resigned on Friday, June 19, following denial by two Philippine banks thought to be holding the funds, who said they never had them.

Wirecard’s Statement

The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion euros ($2.1 billion) do not exist.

The company previously assumed that these trust accounts have been established for the benefit of the company in connection with the so-called Third Party Acquiring business and has reported them as an asset in its financial accounts. The foregoing also causes the company to question the previous assumptions regarding the reliability of the trustee relationships, the company said.

The Management Board further assesses that previous descriptions of the so-called Third Party Acquiring business by the company are not correct. The Company continues to examine, whether, in which manner and to what extent such business has actually been conducted for the benefit of the company.

Wirecard outlook

After the announcement, Wirecard shares plunged massively on Monday, hitting its lowest level in nearly a decade. The Munich-based company has wiped out about $19 billion in market value. At the time of writing, Wirecard share was down 43% to EUR 14.77. It is already down about 90% so far this year.

Moody’s has already slashed Wirecard’s rating to ‘junk’ last week and said, “insufficient or otherwise inadequate information to support the maintenance of the ratings”.

An independent researcher cuts target price to EUR 12.00 from EUR 40.00 and rated ‘Sell’. Equity analyst at Autonomous Research, Josh Levin, slashed Wirecard’s price target to ZERO from EUR 39.