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MARKET REPORT: Investors back Royal Mail move to offer delivery slots

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Shareholders cheered Royal Mail’s decision to keep up with heavyweight rivals such as Amazon by allowing customers to choose delivery time slots.

It will let customers pay more to send and receive letters and parcels at specific times and on specific days.

The company is in the process of putting together a ‘good, better and best’ three-tier system for its deliveries.

Royal Mail is in the process of putting together a three-tier system which will allow customers pay more to send and receive letters and parcels at specific times and on specific days

Choosing ‘good’ means customers would allow Royal Mail decide the delivery, the more expensive ‘better’ tier will give customers control over dates, while ‘best’ will probably be dates and times.  

Investors backed the idea and Royal Mail shot to the top of the FTSE 100 index, up 1.4 per cent, or 8.4p, to 599.4p. 

Royal Mail is using the money it has made during the pandemic to shake up its business and compete against peers such as Amazon.

Profit more than doubled to £702million last year as lockdowns and restrictions drove a surge in online shopping. 

Stock Watch – Filtronic 

Filtronic shot to the top of the AIM All-Share index after brokers at Edison published a research note about the company, which makes hi-tech radio-frequency kit.

Leeds-based Filtronic manufactures parts for wireless telecoms groups and is benefiting from the rollout of 5G in the UK.

Edison did not give Filtronic’s stock a rating.

But it said in the research note that it is a ‘highly unusual’ company due to the fact that it has such an extensive range of engineers, designers and equipment.

Shares rose 18.1 per cent , or 1.85p, to 12.1p.

 

The wider market also started the week on the front foot, with the FTSE 100 rising 0.1 per cent, or 8.18 points, to 7077.22, and the FTSE 250 by 0.3 per cent, or 75.33 points, to 22,908.06.

BT was the top blue-chip riser, jumping 3.7 per cent, or 6.5p, to 183.5p, after announcing it will start a business division that will give customers working from home enterprise-grade internet connections and extra support.

The telecoms giant was also given a leg-up by bankers at Jefferies, who lifted the target price on its stock to 260p, up from 24p.

Beleaguered travel stocks inched higher after a torrid end to last week when the UK removed Portugal from its ‘green’ travel list and refused to add any other countries, prompting many investors to head straight for the exit.

British Airways-owner IAG rose 2.8 per cent, or 5.46p, to 201.8p, while Easyjet climbed 3.1 per cent, or 29.2p, to 963.2p, and Wizz Air by 0.8 per cent, or 37p, to 4570p.

Housebuilders were also in demand after data from Halifax showed house prices rose to yet another record high in May to an average of £261,743.

Persimmon (up 2.7 per cent, or 85p, to 3236p), Barratt Developments (up 1.7 per cent, or 12.6p, to 768.4p), Taylor Wimpey (up 1.1 per cent, or 1.96p, to 173.35p) and Vistry (up 1.4 per cent, or 7.5p, to 1318p) were all among the winners.

But estate agent Foxtons suffered after it emerged it is facing an investor revolt from its biggest backer. Jeremy Hosking, the boss of Hosking Partners, which has an 11.2 per cent stake, has written to chairman Ian Barlow calling for ‘board-level change’ following a share price slump since the pandemic hit and expressing his dissatisfaction at hefty bonuses given to chief executive Nic Budden.

Shares lagged 1 per cent, or 0.6p, to 59p. It was a poor day for miners as the shine came off metals prices following disappointing economic data from China.

Anglo American dipped 2.7 per cent, or 88.43p, to 3153p, as a coal business it spun off into a separate listed entity, Thungela, dived from 150p on its first day of trading to 113p by the close. 

Short-seller Boatman Capital Research has branded Thungela’s South African coal mines ‘worthless’ and accused Anglo of greenwashing.

Tesco brushed off news that the supermarket giant will not renew a three-year alliance with French peer Carrefour on December 31. 

Tesco, whose shares rose 0.3pc, or 0.6p, to 225.6p, denied Brexit had any impact on the decision.

The deal was meant to cut prices for shoppers and expand the range of own-label products.

Clipper Logistics, on the other hand, secured an extension for a contract with retail giant Asos – up 2 per cent, or 98p, to 5044p – to deliver its wares in Europe. Clipper rose 0.8 per cent, or 6p, to 784p, and said that profits were likely to rise by 53 per cent to £32million.

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UK private equity giant CVC to take stake in professional tennis firm

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The UK’s biggest private equity company is preparing to take a stake in a new business combining the men’s and women’s professional tennis tours.

CVC, which is also in talks to buy a stake in the Six Nations rugby championship, has a reputation as a ruthless operator from its time as the owner of Formula 1 (F1).

It is in advanced talks to invest in Tennis One as part of a £420million deal that would transform the sport by combining the organisers of the men’s and women’s tours. 

CVC is in advanced talks to invest in Tennis One as part of a £420m deal that would transform the face of global tennis by combining the organisers of the men’s and women’s tours

CVC is said to be targeting approval from the ATP and WTA boards this month, Sky News reported.

The plans to bring the men and women’s game under one roof had stalled, despite the support of Roger Federer and Andy Murray, but executives think a merger could accelerate the sport’s recovery from the pandemic.

Last year, most top tournaments were cancelled or played behind closed doors, including Wimbledon, which was cancelled for the first time since World War Two.

The French Open, which finishes this week, has increased capacity up to two-thirds of pre-pandemic levels. CVC’s involvement will raise concerns after criticism of its stewardship of F1 motor racing.

During its ownership, between 2006 and 2017, it was accused of ‘raping the sport’ and ‘extracting as much money as possible’.

But CVC has now become a powerful force in world sport. It owns a £200million stake in Premiership Rugby and part of Pro14 and half the RAC, the roadside assistance provider.

It is trying to buy a 14 per cent stake in the Six Nations, which is being investigated by the UK competition watchdog.

CVC also has a stake in the International Volleyball Federation’s commercial rights, and is considering entries into US basketball and women’s football in England.

ATP and CVC were contacted for comment.

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Switch to Britcoin risks higher rates on loans, Bank of England fears

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The Bank of England has warned that loans could become more expensive if it decides to launch its own digital currency.

The Old Lady, led by Governor Andrew Bailey, is exploring whether it should create its own central bank digital currency, already unofficially dubbed ‘Britcoin’, in the UK.

It would offer a number of benefits to consumers including cheaper and faster payments, though the trade-off might be higher interest rates on loans.

Interest rates fear: The Bank of England is exploring whether it should create its own central bank digital currency, already unofficially dubbed ‘Britcoin’, in the UK

Unlike bitcoin and other cryptocurrencies, Britcoin would be linked to the value of the pound and backed by central bank reserves, so it would not swing wildly in value.

Bank of England officials, including the executive director for financial markets infrastructure Christina Segal-Knowles (pictured) and the director of CBDC Tom Mutton, are working on plans for Britcoin with the Treasury.

The currency could make payments quicker and easier, especially online, and drastically cut banking costs for small firms.

But the risk is that it will be more costly to borrow from banks if Britcoin takes off. This is because banks use deposits from customers to fund some of the loans they make. But if significant numbers hold Britcoins instead of keeping cash at the bank, lenders would have to tap other, more expensive, sources of finance to support their lending.

The Bank published a formal discussion paper yesterday.

‘On the one hand, the introduction of new forms of digital money may improve the range of transaction services available to people. 

Bank of England officials, including Christina Segal-Knowles (pictured) are working on plans for Britcoin with the Treasury 

‘On the other hand, it might reduce the efficiency of credit provision in the economy,’ it said. 

‘Commercial banks have never faced a large-scale, system-wide displacement of the deposits they create,’ the Bank added.

Planning is now understood to be a top priority. If the currency is adopted, it would create upheaval for high street banks.

Because Britcoins would be issued directly by Threadneedle Street, users would not even need a normal bank account to deposit money.

Sir Jon Cunliffe, one of Bailey’s deputies, said Britcoins could be ‘programmed’ for certain uses, such as children’s pocket money so it can’t be spent on sweets. 

‘There is a whole range of things [programmable] money could do…which we cannot do with the current technology,’ he told Sky News.

The Bank is concerned that, if introduced too quickly and without sufficient care, Britcoin could even interfere with its ability to regulate the economy through monetary policy, such as by raising or lowering interest rates.

Bailey said: ‘The emerging propositions have generated a host of issues that central banks, governments, and society, need to carefully consider and address. 

‘It is essential we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money.’

Etay Katz, a financial regulatory partner at law firm Ashurst, said the discussion paper was ‘a momentous junction in the development of digital money in the UK’.

He added: ‘The time is right for the regulators to embrace technology to enable the digital transformation that financial markets are going through.’

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HSBC bolsters China ties by appointing two new chief execs

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HSBC has shaken up its team of top executives as the banking giant doubles down on China.

The lender announced that it will now have two chief executives focused on its key Asia Pacific region – veteran bankers David Liao, who is likely to zone in on HSBC’s profit engine of Hong Kong and China, and Surendra Rosha, who will oversee the rest of the area.

They will replace Peter Wong, 69, who prompted a backlash from British and US politicians last year when he signed a petition backing China’s draconian national security law in Hong Kong.

Protesters stage a demonstration outside an HSC branch in Hong Kongin 2019. The London-headquartered lender now makes the vast majority of its profits in Asia 

The move was seen as a sign of HSBC’s support for Beijing, and an abandonment of the former British territory’s pro-democracy protesters who were threatened with imprisonment for speaking out. 

But Wong, a member of a political advisory body to China’s Communist party, will stay on as chairman of HSBC Asia Pacific – and will serve as an adviser to the bank’s group chairman Mark Tucker and chief executive Noel Quinn.

The promotion of Liao and Rosha, both of whom have been with the lender, which has its headquarters in London, for more than 20 years, show how much effort HSBC is putting into its Asia expansion.

In firing line: Peterr Wong has overseen a period of protest at HSBC

John Cronin, a banking analyst at Goodbody, said the appointment of two bosses for Asia Pacific was not a surprising move ‘as the bank seeks to forge closer ties with China’.

It already makes most of its profits in Asia, at £9.1billion compared to losses of £3billion in Europe last year, though most of this comes from Hong Kong, where HSBC was established by a Scottish trader in 1865.

China has a rapidly growing middle class, who are looking for wealth management advice and other banking services.

HSBC has more than 150 outlets in the country, employing more than 7,000 staff – the largest network of any foreign bank in mainland China. Despite being the epicentre of the pandemic, China was the first country to regain its pre-Covid levels of economic output.

Figures released yesterday showed its imports ballooned at their fastest pace for a decade in May, as manufacturing picked up further. HSBC is hoping to take a slice of this expanding economy, and Liao and Rosha bring a wealth of experience with them.

But by zoning in on China, HSBC is treading a fine line between East and West.

The bank has already drawn sharp criticism from US politicians for ‘kowtowing’ to Beijing. Last year, then US Secretary of State Mike Pompeo blasted the bank for its ‘show of fealty’ in the face of ‘coercive bullying tactics’.

British MPs have been equally unimpressed – the Foreign Affairs Committee accused HSBC of ‘aiding and abetting one of the biggest crackdowns on democracy in the world’.

Quinn has insisted that the lender must follow the rules of the countries it operates in – even the controversial laws imposed on Hong Kong by China.

Yesterday, he said: ‘I am very excited to have David and Rosha. Their collective experience of our markets across Asia Pacific, together with their combined knowledge of the bank and our customers mean they are ideally placed to grow the business. 

‘We are investing $6billion (£4.2billion) in Asia in the next five years and David and Rosha will lead this next phase of our Asia strategy.’

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