TODAY’S FAYRE – Monday, 17th December 2018
“Keen, fitful gusts are whisp’ring here and there
Among the bushes half leafless, and dry;
The stars look very cold about the sky,
And I have many miles on foot to fare.
Yet feel I little of the cool bleak air,
Or of the dead leaves rustling drearily,
Or of those silver lamps that burn on high,
Or of the distance from home’s pleasant lair:
For I am brimfull of the friendliness
That in a little cottage I have found;
Of fair-hair’d Milton’s eloquent distress,
And all his love for gentle Lycid drown’d;
Of lovely Laura in her light green dress,
And faithful Petrarch gloriously crown’d.”
John Keats – poet – 1795-1821
Last week has seen bitter strife and an outpouring of hatred in Parliament, Brussels, the high streets as well as in the pubs, coffee shops and other watering holes dotted around the country on the issue of BREXIT – a subject voters are sick and tired of, with most people wanting a quick and long overdue resolution to it, before the country tears itself to pieces – shades of what has happened on the Champs Elysee!
The EU believes that PM May has no chance of getting her deal through the Commons and Europe’s leaders may well be perceived to be doing little to alleviate the UK’s distress, apparently showing few intentions of assisting in this tricky negotiation, even in the knowledge that ‘NO DEAL’ might still stare it in the face!
I think the EU is gambling on the fact that the total impasse that prevails around May’s deal could lead to a 2nd referendum, which could deliver a decision to stay in the EU. This is a dangerous perception and may be a wild gamble on its part, aided and abetted by rumoured reassurances from former PM Blair, who has been all over Europe contending against PM May’s authority. If his activities have been taking place, it does undermine the office of PM as well as the result of the 2016 Referendum. I have this feeling in my water that enough voters could be so dismayed at the lack of apparent compromise from the EU in the negotiations, they might just be persuaded to vote LEAVE again!
For the past two years, all I have heard is negative reasons for staying in the EU and how impossible it is to re-jig 40 years of ECJ legislation in less than a decade. That may be true. However, on the other side of the coin, Europe is the only continent whose growth is close to stagnant. It just seems that so many people want to be cosy in the comfort zone and sadly remain void of that ‘John Bull’ spirit which has sustained the UK for hundreds of years!
This wonderful test series between Australia and India is very evenly balanced. After India’s historic win in Adelaide, the second test in Perth is on a knife edge, with the wicket showing signs of wear and tear on the 4th day. Australia are 193 runs ahead with 6 wickets in hand, as I write. Batting has been tough with Kohli making a brilliant hundred in the first innings to keep India in the game. However, Australia look to be in the driving seat! The high quality of their bowling – Hazelwood, Starc, Cummings and Lyon very much to the fore – may well see Australia square the series!
||YEAR TO DATE
Global markets have experienced very turbulent conditions yet again last week, with fearful degrees of volatility and thermal styled gyrations, which continued to unsettle investors across the spectrum. I have been involved or observing markets for over 50 years and I cannot remember such incredible daily levels of gargantuan precariousness, particularly in the US with the DJIA very much to the fore as the main illustrator of uncertainty. Admittedly the advent of technological trading and the contribution of programme trades has exacerbated daily global volatility.
In years gone by, it was comments or interjections made by Salomon’s guru, Henry Kaufmann, US Treasury Secretary James Baker, FED Chairmen Paul Volcker and Alan Greenspan, the Bundesbank’s Tietmeyer, or even the ‘Ken & Eddie Show’ here in the UK that moved markets. But none of them ‘holds a candle’ to President Donald J Trump, who incessantly makes provocative comments on Twitter or to the media on his thoughts on the US economy, the FED, China and trade with monotonous regularity. His comments on the Sino/US trade situation – negative or positive and dependent on his mood – has occasionally caused the DJIA to have 1000-point swings in a day.
Apart from Europe, global equities surrendered ground last week, mainly due to Chines economic data – imports and exports, plus soft retail activity and dispiriting manufacturing output. Also, concern was expressed about the threat of global growth. The Dollar was strong with the Euro friendless in the ring. Lack of agreement on BREXIT talks put the Pound under pressure in the middle of the week but it recovered against the Greenback by Friday to $1.2616. Since the Pound was easier, the FTSE 100, dominated by Dollar earnings, responded accordingly. The FTSE 100 has not really been affected by BREXIT, unless measured against the value of Sterling. In the case of the FTSE 250, down 14.5% year to date, it is more reflective of the UK economy. Even with the focus on BREXIT, UK’S employment data was relatively decent – just 20k jobs lost in the last 3 months with 1.37 million unemployed (4.1%) – many of those I suspect down to retailers. However industrial production and manufacturing output were poor with uncertainty over BREXIT being a potential dominating explanation.
In the US last week, Apple’s shares dropped to $165 – down 28% since 3rd October (Nearly $500 billion in value) on sales concerns in Asia. Costco were also easier after margins were seen to be reduced. Johnson & Johnson was also a big faller (-10% on Friday) over baby powder/asbestos issues. Here in Old Blighty, Interserve’s woes continued with debt being swapped for shares. Interserve is exploring the possibility of offloading RWD Kwikform – one of its construction units valued between £250m and £300m – to the company’s lenders.
However, retail grabbed most of the other main headlines and mainly adverse ones, with Superdry losing 25% of its value on Wednesday and Carphone Warehouse easing by 16%, both on poor numbers. Superdry’s shares are down by 79% this year to date and Carphone Dixon 33% in the same period. Mike Ashley of Sports Direct is never out of the news for long. Sports Direct saw profits down by 27% for the first six months, much of the loss attributable to House of Fraser, whose outlets and units will surely need to be cut substantially. Sports Direct in isolation saw profits were up 15% to £180 million. Shares were down 12.7% on Thursday. There are also issues with Debenhams, whose shares fell to 5.35p (£68 million). CEO Sergio Bucher refused a £40 million interest free loan from Ashley. One suspects this is a ploy he knew would not be accepted. Presumably he will hope to pick up cheap assets down the line, provided there is still a little succulent meat left on the carcass. There are already signs of 80% discounts in the High Street in the hope of boosting Christmas sales. On-Line is where it is at and regardless of any further business rate cuts that may be in the pipeline, the public needs to get used to the fact that there will be less shops on the High Street.
Retail in the UK had a shocker with ‘foot fall’ supposedly down 9% this past weekend. Even some of the great retail brands have seen their respective share prices suffer the ‘slings and arrows of outrageous fortune’ during this calendar year. M&S -16%, Tesco down 7.6%, Kingfisher -34%, Mothercare -51% and Halfords -24%. Conversely Sainsbury, helped by its purchase of Argos, is up 14%, and Boohoo is only down 8% this year but it is up 37% in the past 2 years. I also salute Lord of Wolfson of NEXT. This share price is only down 2% so far this year – a great achievement in very difficult trading conditions. In the first 2 weeks of 2019 we hear trading statements from the following – Next, Debenhams, Morrison, Sainsbury, B&M, Greggs, Topps Tiles, Majestic, Moss Bros, M&S, Card Factory, Dunelm, JD Sports, AB Foods, Tesco, AO World and Mothercare. Don’t expect many of these results to ‘float your boat.’
As Nissan Chairman Carlos Ghosn awaits his fate in Japan about allegations that he concealed the total of his remuneration over many years, it seems that Renault are determined to support him.
It’s a big week for interest rates, starting on Wednesday with the FOMC who, despite rocky stock markets, may well implement a 25-basis point hike and on Thursday the fall in gilt yields suggests the MPC will leave rates unchanged with inflation not a real threat at present, though the Carney/Haldane ‘Bash Street Kids’ will be mulling over a hike. If Brexit was not a cumuli nimbus cloud an increase would be a distinct possibility.
UK companies posting results this week: Tuesday – Petrofac
US companies posting results this week: Monday – Oracle; Tuesday – Darden Restaurants, Micron Technology, FedEx; Wednesday – General Mills; Thursday – Nike, Walgreen Boots Alliance
Economic data posted this week: Monday – Rightmove House Prices, CBI Industrial Trends; Tuesday – US Housing Starts & Building Permits; Wednesday – UK Inflation Data, UK House Price Index, US FOMC; Thursday – UK Retail Sales, MPC; Friday – UK PSBR, UK & US 3rd Quarter & Final GDP Estimates, US Durable Goods & Personal Spending
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