Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

And just like that...

Written by Maria Julia Pieraccioni, associate
Edited by Iain Gibson, associate partner

6 January 2022 

Good morning,

Highly anticipated and coveted by millennials, Generation X-ers and the Y2K fandom alike, And Just Like That, the sequel to the late nineties/early aughts HBO series Sex and the City, gave us the return of famed characters Carrie Bradshaw, Charlotte York, Miranda Hobbes, and Mr. Big. Albeit for one episode only.
 
In fact—spoiler alert—Mr. Big dies of a heart attack during a ride session on his Peloton in the very first episode. In a rare case of fiction influencing reality, Peloton must have felt its own tremors, as its shares quickly plummeted the day after, going from $45 before the first episode aired to $39.42, with many pointing to its depiction in the series. However, as analysts pointed out, Peloton’s vacillating shares are nothing new. Credit Suisse downgraded the company’s earning potentials at the end of Q4 2021, predicting that people would eventually return to gyms and forego pricey home workouts. JMP Securities followed suit and downgraded Peloton’s stock at the end of 2021, after its shares lost a cumulative 76% of their value year-on-year.
 
Peloton’s fall from market grace might have been the most heart-wrenching for its avid bikers, but it’s certainly not the only tech stock to feel heat. Just yesterday, the Federal Reserve meeting minutes indicated that it was ready to hike interest rates quicker than analysts had anticipated. Tech company shares are high-growth stocks, which are particularly sensitive to rising interest rates and policy tightening. In turn, the Fed’s long-time-coming decision will likely curb future earnings potential and consequently the sector’s high valuations.
 
That tech stocks started 2022 on the back foot might be indicative of a change within the entire industry. Apple, Microsoft and Google owner Alphabet were the big winners in 2020 and 2021, according to one study conducted by the Financial Times. Tesla, Amazon, and Meta Platforms follow suit among the big winners, both for market capitalisation and company valuation.
 
However, the same study’s biggest losers reveal changing attitudes towards both Silicon Valley and the Silicon Valleys elsewhere in the world. Alibaba, the Chinese commerce group, was the study’s biggest loser, as tightening policy led to the company losing 43% in market value.
 
Elsewhere, Siliconites are dealing with similar policy blows. In 2020, Big Tech – Amazon, Apple, Facebook, and Google – were found to be “anti-competitive”, after a 16-month investigation by the House Judiciary Subcommittee on Antitrust. While American policymakers introduced a series of bills in the House and Senate to check Big Tech, the Federal Trade Commission and the Department of Justice’s Antitrust Division are hard at work to determine the best way of enforcing these new antitrust laws.
 
The tech industry may be starting to feel the heat as changing policy attitudes will shape its fate in 2022. At the moment, the exact political and financial ramifications for tech leaders are unclear. However, one thing we do know is that the industry they propel forward is here to stay, regardless of whether we break it up or all move as one into the Metaverse.

News

The UK government has confirmed that travel rules introduced to curb the spread of the Omicron variant will be scrapped on Friday. The current required pre-departure test for arrivals into the UK and day 2 PCR test will be replaced by a lateral flow test once arrived, with no requirement to quarantine before receiving a negative result. The prime minister suggested that these measures were first introduced to curb the spread of Omicron, however they have had limited impact on the growth in cases. (£)
 
Novak Djokovic is due to fly out of Australia today, after he was denied entry by the Australian Border Force. The Victoria state government confirmed the visa with which he attempted to enter Australia does not allow for exemptions for unvaccinated applicants.
 
Russian-led military troops from the Collective Security Treaty Organisation nations will be deployed in Kazakhstan, in an attempt to help ‘stabilise’ the country amid anti-government demonstrations. In addition, Kazakh president Tokayev has imposed a nationwide state of emergency, which includes an overnight curfew and a ban on mass gatherings, vowing a tough crackdown on protestors.

Business and economy

Leader of the House of Commons, Jacob Rees-Mogg, is leading a growing revolt within the Tory party against the planned £12 billion tax rise intended to fund NHS and social care. According to reports, cabinet tensions erupted on Wednesday, with Rees-Mogg arguing that the national insurance rise could not be justified at a time of rising inflation, living costs and energy bills. (£)
 
A survey conducted by the British Chambers of Commerce among its members reveals that firms are equally wary of an ‘unprecedented’ surge in inflation as well as another rise in interest rates. It also revealed continued apprehension over supply chain disruptions and the impact of inconsistent cash flows.
 
Goldman Sachs has predicted that Bitcoin’s price could hit $100,000 in a trading note sent to its clients earlier this week. The global investment bank suggests that the digital currency could surpass gold as a store of value in the next five years.

Columns of note

In The Economist’s “The World Ahead 2022” Georgia Banjo writes about the trend among world leaders to increasingly discard human rights to reach political dissidents abroad. While she argues this behaviour has played out for decades among larger countries, Banjo notes that in 2021 we saw targeting of political dissidents rise in smaller countries, suggesting their confidence was buoyed by larger nations such as Russia and Saudi Arabia seeming to get away with their actions. Banjo predicts that in 2022 not only will these instances become more frequent, but countries will also become more brazen in their targeting and harassment of political dissidents abroad. (£)
 
Aditya Chakrabortty argues in The Guardian that the battle between Labour and Conservative parties will culminate on who proports to be better equipped to handle the cost-of-living crisis. Ahead of Ofgem setting the new maximum price for energy bills on 7 February, Chakrabortty notes that Labour is not alone in clamouring against the prime minister’s handling of the impending issue, with Tory backbenchers and MPs now starting to join the chorus, leading to a dynamic that could potentially shape the future of the UK’s political leadership.

Markets

What happened yesterday?

After weeks of speculation on when the Federal Reserve would be raising interest rates, the latest minutes from yesterday’s meeting seemed to confirm that not only a rise to curb inflation is imminent, but it will arrive more quickly than anticipated. This news caused a massive sell-off in global technology stocks and was particularly felt in the US, where the technology-heavy Nasdaq Composite lost 3.3%. The S&P 500 slipped 1.9%, dragged down by its technology sub-index, which lost 3.1%.
 
In the UK, the FTSE 100 ended the session in a mixed state, up 0.16%, saved by having only a relatively small number of tech companies within the index. Sterling was on the rebound against the dollar, trading up 0.29% at $1.35, and the euro, gaining 0.1% at €1.197.
 
On the continent, the pan-European Stoxx 600 closed just above the hairline, gaining 0.07% since the day before. Despite economic growth in the eurozone easing in December due to the spread of the Omicron variant, European shares fared much better, benefiting from the rebound in value stocks.

What’s happening today?

Final Ex-Dividend Date
Brewin Dolphin          
Up Global       
Baillie Geu     
 
Interim Dividend Payment Date
Redcentric     
Castings         
Caledonia       
 
Interim Ex-Dividend Date
Workspace     
Qinetiq
Aveva Group  
Xps Pensions 
Experian         
Martin Currie Global Portfolio Trust  
Auto Trader    
Aberdeen Sml.co       
Northern 3 Vct
Hibernia Reit  
Finncap Group

Quarterly Ex-Dividend Date
BMO Private Equity Trust      
 
Special Ex-Dividend Date
Unicorn Asset Management  
 
Trading Announcement
Next

Source: Financial Times

did you know

Throwing snowballs was illegal in Severance, Colorado until 2018. The law was changed because a nine-year-old boy petitioned the town to be allowed to have snowball fights. (Source: @qikipedia)

Parliamentary highlights

House of Commons 

Oral questions
Digital, Culture, Media and Sport (including Topical Questions)
Attorney General
 
Business Statement
Business Questions to the Leader of the House
 
Backbench Business
General debate on Russia’s grand strategy
 
Adjournment
Anti-Semitism and Bristol University
 
Westminster Hall debate
Second homes and holiday-lets in rural communities
The Afghan Citizens Resettlement Scheme

House of Lords 

Oral questions
Various
 
Statement
COVID-19 update
 
Debate
Urgent international response to the estimate by the United Nations High Commissioner for Refugees that 82.4 million people are displaced worldwide
 
Short debate
Effect of rising energy costs on households, pensioners, and those on low incomes
 
Statement
January return to education
 
Debate
Increasing numbers of skeleton bills and the associated use of delegated powers

Scottish parliament 

No business scheduled.

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