As we enter the month of April, it is 111 years since the great Titanic ship sank. Staying on the topic of sinking ships, Graham Potter was sacked as manager of Chelsea Football Club on Sunday. He was actually the second manager to lose his job that day, with Brendan Rodgers also being dismissed (from Leicester City). In total there have been 12 manager dismissals this season in the Premier League, a new record.
The weekly won’t be totally focused on football as we have had a significant week in markets. Monday saw the release of the Purchasing Manufacturing Index (PMI) in the US, which came in at 46.3. The PMI measures the direction of the manufacturing (and services) sector spending with a reading of 50 or above indicating growth in the sector. March’s release of 46.3 came in below the forecast of 47.7, pointing towards contraction in the sector. Excluding during the pandemic, it was the lowest reading since 2009. This is evidence that the interest rate hikes are beginning to slow the economy. The recent failure of Silicon Valley Bank has also led to banks tightening lending conditions, this mainly affects small businesses and consumers ability to access credit to spend.
OPEC and its allies on Sunday made the surprise decision to cut oil production by 3.66 million barrels a day, equating to 3.7% of global demand. This was a shock to markets and led to the oil price rising over 6% to around $85 a barrel. There are a couple of reasons behind this power move, firstly, OPEC were declaring their support for Russia following continual price caps on Russian oil from the West, irritating Washington officials. OPEC has also been thought to be keen to set a floor under oil prices at around $80, which could be a risk as countries reliant on OPEC supply may accelerate shifts toward alternative energy.
This week we are also seeing the effects of the UBS and Credit Suisse merger. Credit Suisse shareholders were keen to understand how the takeover would be completed successfully, with rumours of major job losses and concerns around the adverse impact on the country’s banking competition. The merger will make UBS the fourth largest bank in the world with a combined $5trillion in assets. UBS vice-chair, Lukas Gahwiler stated it was “simply too soon for any speculation” on potential job cuts but that the takeover in the short term would need everyone on board.
Another firm has filed for bankruptcy, Virgin Orbit Holdings, founded by billionaire Richard Branson. The company was forced to close after failing to secure long term funding. Virgin Orbit sends satellites into space using rockets but the most recent launch in January was a failure with the majority of its commercial and defence related satellites dropping into the ocean, leading to a halt in operations. Venture investments in space operations have dropped 50% year-on-year in 2022 as the global interest rate hikes have led to increases in cost of capital.
France will face another round of nationwide protests and strikes after the latest meeting with prime minister Élisabeth Borne and labour unions failed to come to an agreement. The protests have been fuelled by anger over the reformed pension bill – the retirement age has been raised by two years to the age of 64. Hundreds of thousands have protested in rallies organised by unions since the beginning of the year and have at times turned violent against the police. Unions have stated the only way the crisis can be averted is for the new legislation to be completely pulled.
To round up the weekly, I want to return to the record manager dismissals in the Premier League this season. Much like investing, it appears the football world is becoming more focused on the short-term and looking for instant success, which often isn’t possible, or sustainable. Although I’m not an Arsenal supporter, their long-term focus and ability to avoid the short-term noise on sacking Mikel Arteta last season is now paying dividends as they are firmly at the top of the league playing top quality football. The owners took a long-term approach to rebuilding the club and had a clear strategy in place to achieve their goals. This message is consistent with our own investment philosophy, where we try and take a long-term view and allocate capital to the best fund managers.
Nathan Amaning, Investment Analyst
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