If there were ever a modern day version of history repeating itself,  Dominic ‘Guy Fawkes’ Cummings would be it.  His plot to take down Parliament was as elaborate,  included as much explosives,  and ultimately ended with an admission of guilt,  however we are yet to see if it was successful.  Cummings sat before the Commons Health,  and Science and Technology committee,  to present a number of allegations.  The first point he was quick to make,  was his own admission of guilt,  after all,  he was part of the decision making and ultimately was in the room with the key decision makers in this process.  “Tens of thousands of people died, who didn’t need to die”,  because officials and advisors “like me” fell “disastrously short of the standards that the public has a right to expect” was how he held himself accountable.  After nobly falling on his sword,  it was the rest of the cast who were due a dose of humble Cummings pie.

Sarah Own MP,  asked a well loaded question to a primed man on a mission,  ‘Was Boris Johnson a fit and proper person to get us through this pandemic?’  Predictably,  “no” was the curt response from Cummings,  who went on to highlight the key areas the Prime Minister fell short,  and how he was “a thousand times too obsessed with the media” and allegedly dismissing the pandemic as “the new swine flue” and “just a scare story.”  As ever,  hindsight can be a cruel and sullen mistress,  no more so than when you see statements like “let the bodies pile high” age so badly.  Cummings’s issues are clear,  there was a total lack of direction throughout the entire process and an alarming misunderstanding of the severity of the incoming pandemic,  which meant the Government was ‘not on a war footing’ when Covid-19 landed on our shores.

The fallout was not only contained to Boris Johnson.  Health Secretary Matt Hancock seems to have taken the majority of the larger blows.  Cummings articulately scythed Hancock’s reputation,  and potentially political career,  to pieces for his “criminal, disgraceful behaviour.”  It has come to light that Boris Johnson had been instructed by a plethora of staff and advisors to dismiss Matt Hancock,  due to incompetence,  however the entire inquiry did not lack drama,  and this episode was certainly full of fireworks.  Cummings goes on to explain that Boris Johnson’s primary motive for keeping the Heath Secretary in his role,  would be to utilise him as a scape goat further down the line, potentially during the 2022 inquiry into the Government’s handling of the crisis.  The wheels are truly in motion,  and now Matt Hancock has to stand before his peers and face MP’s to defend statements such as he is “completely incapable of doing the job” and “should have been fired for lying.”  This is a crisis no previous Government has faced,  with repercussions that are yet to be realised,  which can percolate down through our political landscape,  Hancock faces MPs in the House of Commons at around 10:30 to urgently face questions from the opposition.

Bloomberg ran an interesting article, calculating the cost to Japan if the Olympics were to be cancelled this year.  Currently this isn’t the plan and Prime Minister Suga is adamant that,  come the 23rd July,  the games will begin.  However,  most of the country is still in a declared state of emergency and it’s likely that restrictions,  due to expire next week,  will be rolled until mid-June.  The argument is two-fold,  in that if the games are cancelled there could be as much as a 1.7% hit to GDP as consumption in the country fails to meet the increased expectations that such a high-profile global event drives (though once you factor in the cost to the state of hosting the games,  the net upside isn’t that great. London 2012 probably made a net profit of £2bn).  The other side to the argument is that hosting the games could actually cost Japan more in the long-run,  as it would mean more social interaction and travelling across the country and could undo covid progress and mean more lockdowns,  which would ultimately cost more than cancelling the games.  No easy decisions here.

Beijing have told banks that they have to stop selling commodity linked investments to retail clients and unwind the existing trades that they have on the books.  They’re concerned that normal consumers are being tied into unusually high volatility by aligning themselves with the commodity market and the state is also keen to try and cool off the hot running market.  This directive is serving a couple of purposes:  protect consumers from losses,  but also stem the flow of retail money into commodities,  which in turn drives their prices higher.  Most commodities are on a rollercoaster ride at the moment and Bloomberg has a breakdown of what is moving and why – they also point out that it’s likely to continue,  as we get into the peak of the US growing season.

Another knock on of high commodity prices is squeezed profit margins for manufacturers.  With less money coming in,  there’s less incentive to invest in expanding and automating capacity,  particularly as there is still a lingering concern over global demand and whether the current surge in it is sustainable.  What this means is that Chinese factories are going to have immediate problems in not wanting to scale up to meet current demand and that will in turn lead to continued supply chain shortages.  Without wanting to appear as though we’ve only read one news source this morning… Bloomberg has the article!

In the US,  the SEC is considering new rules to apply to Special Purpose Acquisition Vehicles (SPACS) in a bid to give investors greater protections.  A SPAC is a publicly listed shell company that then goes and invests the money it receives from selling its listed shares in privately owned companies,  which enables them to be more agile and deploy money into target companies without having to go through arduous private equity raisings,  or through a direct IPO of the individual company.  The downside with this is that there isn’t much in the way of shareholder protection for what the SPAC goes and buys,  with the reasons for making the purchase and the price paid being reasonably opaque,  which could lead to conflicts of interest.  A SPAC is a relatively new market proposition,  but the appetite to invest in them has been huge,  which means the valuations they’re achieving might not be in any way realistic. Reuters has more.

Today we get an early smattering of data from Europe and at lunch,  Bank of England member Gertjan Vlieghe will be speaking on “what government bond yields can tell us about future growth and inflation” – which could be of interest given that markets have been calling inflation higher via the bond market for months,  whilst central banks resist accepting the message.  The afternoon has a host of US data including GDP,  jobless claims and home sales.  This data sheet along with month end repositioning could mean a busy day across asset classes.

Have a great day


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