“By the rude bridge that arched the flood,
Their flag to April’s breeze unfurled,
Here once the embattled farmers stood,
And fired the shot heard round the world.
The foe long since in silence slept;
Alike the conqueror silent sleeps;
And Time the ruined bridge has swept
Down the dark stream which seaward creeps.
On this green bank, by this soft stream,
We set to-day a votive stone;
That memory may their uickdeed redeem,
When, like our sires, our sons are gone.
Spirit, that made those heroes dare
To die, and leave their children free,
Bid Time and Nature gently spare
The shaft we raise to them and thee.”
Ralph Waldo Emerson – poet – 1803-1882
Mitchell Johnson! – What a transformation! A few months ago he was just a ‘help-yourself-four-an-over’, erratic ‘hairy-quicky.’ Today he is a lethal exterminator of England’s rather brittle batting. He just seems to have risen like a phoenix from the ashes! The Adelaide Oval isn’t even a bouncy quick track. Sadly England’s batsmen have filled his cup with over-flowing confidence and have made him look better than he really is! There are shades of Frank Tyson – Typhoon – in his performances for England back in 1954. Tin hats at the WACCA!
So England have drawn Uruguay, Italy and Costa Rica in the World Cup and will have to travel prodigious distances. Well, if this side aspires to win there should be no complaints. However in mitigating circumstances every time I see the face or effigy of Sepp Blatter or Michel Platini, I cringe! In the case of Blatter; he just should not be there. He is an average advert for football at best. As for Platini; he just seems to want to make every competition British football is involved in a minefield; all down to his abject dislike of our country. If there are protestations to the contrary, he has a strange way of expressing himself.
This past week equity, bond and foreign exchange markets been rather surreal for market participators, economists, politicians and observers alike. There has so much in the way of important economic data and political machinations on both sides of the pond to deal with, sorting out the financial corn from the chaff has not been that simple. Here in Old Blighty many of our brain cells have been taken up analysing George Osborne’s pre-budget report, which included huge upgrades in GDP in the next 5 years (2.4% from 1.8% in 2014) plus the suggestion that there could be a budget surplus in 2019. Much of his Pre-Budget report contains a huge leap of faith and assumes that the EU will recover its equilibrium rather than put the brakes on the recovery process and I for one am a non-believer! However I do believe that the UK’s quest to trade and do business with countries such as China, where the PM has just completed a superficially successful visit, is where it should be headed.
‘Uncle Sam’ really does seem to have its show back on the road. Consumer Sentiment bounced last month; Initial Jobless Claims fell sharply; the ADP private sector employment data was better than expected; there was huge upgrade of 3rd quarter GDP from 2.8% to 3.6%. Finally the ‘Big Daddy’ of them all – Non-Farm Payrolls – last Friday produced some stellar numbers – 207k jobs were created in November and the unemployment rate fell sharply from 7.3% to 7% – its lowest point since 2005. Needless to say speculation for the implementation of tapering of QE in the US flew to the top of the agenda. At the moment it is no longer ‘if’ but ‘when!’ There may well be a symbolic start this month but I still favour March, when Janet Yellen has her feet under the table at the FED and there is some decent ‘follow-through-data’ to accompany the improving economic landscape. However all this news may good for the economic recovery, but it could temporarily take the wind out of the sales for equities, though they did have a decent run on the rails on Friday. Bond markets remain an enigma with yields rising. Interest rates unofficially are supposed to be sedentary, but the markets tell us that they are going up unofficially and will be up officially sooner rather than later in the US. The Dollar may well be on the climb before too long. Gold remains an anathema – $1229.10 and once and oil has started to creep up – Nymex $97.65 and Brent $111.61 per barrel.
As for the ECB, there is little likelihood of any advance in rates; inflation is unhealthily low. In fact Draghi may have to deal with negative bank interest rates or other stimulus packages. In the UK the MPC were happy with rates as they were leaving the £375 billion QE facility in place.
After a long, confusing nad frustrating week, where volumes remained irritatingly light, the S&P ended the week down -0.13%, the FTSE 100 was easier by 1.4%, European stocks by 2.66% and the NIKKEI by 2.3%, despite a strong rally on the Street of Dreams on Friday in response to the positive employment data. On Friday the DOW grabbed 1.3%, the S&P 500 1.1% and the NASDAQ 0.7%. Some retail stocks were under the cosh – JC Penney -8.6%, Big Lots -12%, American Eagle Outfitters -8% and Sears down 3.8%. Keep an eye on Apple. Its relationship with China Mobile may prove to be very productive in the months to come with China’s gargantuan distribution possibilities.
It was a lack-lustre week in London. Dealers seemed to be on the back foot until Friday. The stench of fear from tapering caused dealers to give up the ghost and a Christmas rally looks like a 5/1 shot rather than an odds on shot! There were some good performances from Shell – not before time – on Friday with the LSE and Petrofac also putting in eye catching performances. Barclays are up before the beak again facing allegations in a civil court from Guardian care homes. It is alleged that profits of £130 million on derivatives was squirreled away by Barclays in to an offshore fund called Ricardo. Bob Diamond may be called to give evidence. Talking of Bob Diamond. He is purring the final touches to a £150 million float for a shell company called Atlas Mara with aspirations of becoming an African bank backed by Ashish Thakkar.
Unconnected there is also the possibility that the Volcker rule could restrict proprietary trading for banks outside the US. I am none too sure how effective the WTO agreement will be. There seem to be too many imponderable, though the UK may stand to gain £1 billion is business deals with poorer emerging nations. Finally good news from China. Exports in November topped 12.7% against expectations of 7%.
These are David Buik’s personal views
Twitter – @truemagic68
Panmure Gordon & Co
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