TODAY’S FAYRE – Tuesday 4th March 2014 – market update

TODAY’S FAYRE – Tuesday 4th March 2014

“That is no country for old men. The young
In one another’s arms, birds in the trees
– Those dying generations – at their song,
The salmon-falls, the mackerel-crowded seas,
Fish, flesh, or fowl, commend all summer long
Whatever is begotten, born, and dies.
Caught in that sensual music all neglect
Monuments of unageing intellect.

An aged man is but a paltry thing,
A tattered coat upon a stick, unless
Soul clap its hands and sing, and louder sing
For every tatter in its mortal dress,
Nor is there singing school but studying
Monuments of its own magnificence;
And therefore I have sailed the seas and come
To the holy city of Byzantium.

O sages standing in God’s holy fire
As in the gold mosaic of a wall,
Come from the holy fire, perne in a gyre,
And be the singing-masters of my soul.
Consume my heart away; sick with desire
And fastened to a dying animal
It knows not what it is; and gather me
Into the artifice of eternity.

Once out of nature I shall never take
My bodily form from any natural thing,
But such a form as Grecian goldsmiths make
Of hammered gold and gold enamelling
To keep a drowsy Emperor awake;
Or set upon a golden bough to sing
To lords and ladies of Byzantium
Of what is past, or passing, or to come.”

William Butler Yeats – poet – 1865-1939

When the sound of war blows in our ears many great sayings and platitudes come out such as the famous advice offered by Nathan Rothschild to react immediately and “buy at the sound of gunfire,”

Oscar Wilde once described marriage as the triumph of imagination over intelligence and second marriage as the triumph of hope over experience.

So much has been written about the ‘Oscars’ that my ‘two-penny’s worth’ will add nothing of note apart from to say how delighted I was that Lupita Nyong’o won the ‘gong’ as best supporting actress in “12 Years a Slave” – what a performance! Also the fact that ‘Gravity’ won 7 ‘Oscars’ tells us that the UK film industry is very much alive and kicking!

In the wake of the Ukraine crisis markets were true to form and reacted accordingly. Singing from that well-known hymn sheet of uncertainty, a chorus of sellers appeared from all over have the globe, starting in Asia, gathering momentum in Europe and finally a more muted sell-off in the US. Who know where these shenanigans will all end up? I make two observations. Firstly the US President seems to have little stomach for any fight, as its electorate won’t have it at any cost, but one cannot help feeling that the US Presidency does not have the aura and respect it used to have in yesteryear. Secondly Putin knows this or feels omnipotent to such a degree he is very comfortable flexing his muscles regardless of potential economic damage to his country which is desperate for Dollars and capital with many oligarchs probably very unhappy having their assets trashed or frozen.

Putin rules the EU’s energy pipe lines through Ukraine and has every chance of making life very tricky if the stand-off prevails for some months, making Europe’s fragile recovery looking nigh on impossible. The domino effect of economic uncertainty is extremely potent. Chancellor Merkel also seems rather feckless – too happy to humour the soviet ‘bully-boy.’ Putin, again, realises that the EU is not a united political unit. Rhetoric is one thing; action is another. I suppose it is fair to say that military action seems a less likely option than it did 72 hours ago. This morning Putin stopped military exercises in Western Russia – just toning down the jingoism. The Moscow stock exchange rallied by 2.75%. The IMF is in Kiev discussing the urgency of a $35 billion loan and austerity measures that will go with it.

In conclusion, though observers and investors may feel more comfortable than they did yesterday, the crisis is unlikely to be sorted out in the next couple of weeks. Many think Putin is there for the long haul. After, possession is nine tenths of the law. Eastern Ukraine and Crimea are to all intents and purposes Russian – at least Russian speaking!

What happened yesterday? Well the Moscow stock exchange shed 11%, with Gazprom and Lukoil suffering double digit losses during the session. Crude Oil went up by about 2%, gas by 3% and wheat by 4%. Bond yields fell as one would expect with the flight to quality with gold also benefitting – up 1.7% to $1350 an ounce. European stock markets took a pounding with the FTSE 100 shedding 1.4% and the DAX 2.36%. Mining stocks not connected with gold suffered; so did banks, insurance companies and fund management. It was more about marking down prices generally across the spectrum rather than virulent selling.

The Street of Dreams took a rather more lenient view. The DOW did shed 0.9%, but the S&P 500 and the NASDAQ only eased by 0.7%. The fact that there was decent ISM manufacturing data probably helped to ameliorate the ferocity of a threatened pull back, though GM car sales fell 1% in February and Ford’s light vehicle sales tumbled 6.1%. On the M&A front Men’s Wearhouse and Jos A Bank signed non-disclosure agreements.

Yesterday was Monday and there was little corporate news. However it was good to see that Thornton’s had a great Christmas with sales up 4.5%. The profit for the last 6 months was up 40% to £6.1 million. Sir Bill Gammell served notice to leave Cairn Energy as CEO after over 30 years with the company. Markit/CIPS confirmed that manufacturing jobs grew at their fastest rate for three years last month. There seems to be some evidence of investment – good news!

Bank lending figures fell in January by £600 million – £300 million to SMES, though mortgage lending did increase. It is hardly surprising when banks like RBS are attempting to clean up their balance sheets that banks become slightly circumspect as to who they will lend to. RWE, the German utility posted an E5 billion loss this morning. European markets are expected to cautiously bounce back a tad from yesterday’s sell-off – nothing dramatic. There has been another terrible snow storm on the east coast of the US. Will economic activity be affected?

These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

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