“HOW wisely Nature did decree,
With the same eyes to weep and see ;
That, having viewed the object vain,
They might be ready to complain !
And, since the self-deluding sight
In a false angle takes each height,
These tears, which better measure all,
Like watery lines and plummets fall.
Two tears, which sorrow long did weigh
Within the scales of either eye,
And then paid out in equal poise,
Are the true price of all my joys.
What in the world most fair appears,
Yea, even laughter, turns to tears ;
And all the jewels which we prize
Melt in these pendants of the eyes.”

Andrew Marvell – poet 1621-1678.

There was a massive turnout at St Martin’s-in-the-Field on Saturday for Komla Dumor, the BBC immensely charismatic and influential broadcaster, who so tragically died 2 weeks ago from a heart attack. The Church was jammed to the rafters for a fittingly warm and uplifting service, celebrating his all-too-short-life! There must have been 2500 people who listened intently and with great sadness to a stream of eulogies from friends and colleagues couple with music and prayer which had the perfect tone for the occasion. This larger than life extrovert with the most-friendly of dispositions will be sorely missed by all. It goes without saying by his devoted family, friends and colleagues but also by his millions of devoted follower in Africa.

Shame on Labour and the disingenuous Lib-Dem peers for voting down a referendum over the UK’s future membership of the EU in 2017. My God, who needs enemies when you have friends like the Lib-Dems! I am apoplectic with rage – positively incandescent!

PM Cameron’s entente cordiale with President Hollande – what a waste of space! However I must say as time goes by I would not give the PM more than a 16/1 shot to succeed in persuading the EU to change its culture. I suspect that hell has a better chance of freezing over!

It will not have escaped most market observer’s notice that this January, which finished last Friday, was the worst start to the year we have experienced since 2010. I can remember Paul Fisher, the deputy Governor of the BOE making a searching comment on the threat of tapering about six months ago – “If anyone believes that there won’t be a degree of volatility once the tapering of QE has been introduced, they delude themselves.” It looks as though that comment was profound guidance.

Well if that wasn’t a warning shot across the bows, I don’t know what should be. I think many people, not unreasonably, thought that the euphoria which prevailed at the end of the year might filter through until February, but it wasn’t to be. The tapering of QE is de-facto – leading markets into uncharted waters! There was too much poor data emanating from China – very particular concern over the fragility of the banking sector – which unless it is brought back on the bridle, could trigger another nasty global banking crisis.

Also some global indices are already looking fully valued and a marginally indifferent quality to the results from the 4th quarter earning seasons in the US and here in Europe, has proved too much for investors’ bottle not to be challenged. 4th quarter profits in the US only increased by an average of 6.6% and sales by 2.5%. Worst of all the threat of realty becoming fact with the first $10 billion tranche of tapering triggering a very adverse reaction to the health of emerging markets, particularly their currencies. Countries such as Turkey, Argentina, Indonesia and South Africa suffered visceral reverses. In a short space of time Turkey’s Lira had surrendered 13%. The raising of interest rates by the likes of Turkey last week – 7.75% to 12%, only helped superficially. For some protracted period of time emerging nations had access to cheap Dollars. When that facility is suddenly not so readily at their disposal, the damage to these respective economies can be venomous.

Last week, in his valedictory FOMC meeting, before handing over to the chairmanship of the FED to Janet Yelled on 1st February, Ben Bernanke confirmed on behalf of the US Central bank a further $10 billion tapering taking the facility down to $65 billion. From a US perspective this was a thoroughly justified course of action. Unemployment in the US has fallen to 6.7% and threatens to fall further. That was the main criteria to introducing tapering of QE. Also 4th quarter GDP was adjusted upwards to 3.2%.

Consumers opened their note cases and purses, spending 3.3% more than in Q3, up from the 2% rise in the previous three months. Data showed goods and services exports leapt by 11.4% in the final quarter, up from the 3.9% recorded in Q3. The slight dip in Q4 growth forecast was blamed on a 12.6% decrease in government spending, weaker business investment and slowing house purchases.

Philanthropy and compassion to others is not high on the list of US’S priorities for its economic agenda. The US economy has to come off its drip, as does the UK’s eventually. I suspect Europe may well have to extend its rather different form of QE before the year is out, such is the fragility of Europe’s recovery apart from Germany. It will be interesting to see if, in a few months’ time, tapering proves to have been an adverse initiative, which starts to damage the recovery process, as a result of emerging markets continuing to fall out of bed. Janet Yellen may be sympathetic and think about reversing, but the plight of the world may need to be intolerable for the FED to react accordingly. Friday’s NON-FARM PAYROLLS should give some telling news on US economic progress.

Anyway at the end of the day last month the S&P 500 surrendered 3.4%, the DOW a smidgen under 4%, the FTSE 3.5% and the NIKKEI by a very meaningful 8.5%. We must not forget that the NIKKEI added 57% in value in 2013. Facebook on good numbers added 12% last week. Amazon went in to reverse – down 9% on disappointing sales. Mattel, the toy maker was trashed by 10% and Mastercard , despite a reasonable showing was market down by 5%. At present investors on Walls Street are very unforgiving towards companies, which disappoint. Here in Old Blighty we had decent efforts from BskyB and from BT Group. BT increased is BT Sports subscribers from 2 million to 2.5 million. Diageo saw the world ease back on its alcoholic consumption. The share lost 5%. Mining stocks rallied temporarily to the cause. There was some self-retribution for poor performances from Shell. The new CEO said the show would shortly be back on the road. BG Group may see a fall in profits of 6% to be announced in February due to consumer and politically driven cuts and unseasonably warm weather.

I found Alex Salmon’s jingoistic threats that he would throw his economic toys out of his pram if the BOE refused to regulate Scotland and to allow Sterling to remain its currency and have access to the Gilt market by walking away from its £1.2 trillion share of the National Debt. Two or three or a dozen can play at that game. Who does Salmond think he is? He can’t take Scotland out on his terms alone. I’ve never heard anything so ridiculous in all my life. If he allows Scotland to default the rest of Europe, particularly the EU if Scotland wants membership and the world at large will make him pay accordingly – trade, foreign exchange, ability to borrow and probably sanctions! Grow up and behave like the statesman, well at least political leader, you are supposed to be. And as for taxation, Scotland would need to seek London’s acquiescence. There is also the tetchy problem of RBS and Lloyds Banking Group. I doubt Scotland would want to be saddled with these banks’ respective debt! So Mr Salmond – politically acute you may be – but you are being particularly ‘trappy’ and ‘gobby’ if I may say so!

I have to say I thought Mark Carney did an excellent job spelling out to Salmond and his committed brethren the pitfalls of independence, with adopting too political a stance.

This week the following post results or trading statements – Monday RYANAIR (may post pre-tax loss of £35 million O’Leary to remain in background – Tuesday – ANGLO PLATINUM, RANDGOLD, BP (TS), TALKTALK (TS), Wednesday – HARGREAVES LANSDOWN, GSK (TS), HOMESERVE, Thursday – ASTRA ZENECA, BEAZELEY, SMITH & NEPHEW, TUI (TS), VODAFONE (TS), (may take measurable currency losses in African and emerging markets), COMPASS (TS), EASYJET (TS), ENTERPRISE INNS (TS).

These are David Buik’s personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
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