TODAY’S FAYRE – Sunday 6th April 2014
“Oh, give us pleasure in the flowers today;
And give us not to think so far away
As the uncertain harvest; keep us here
All simply in the springing of the year.
Oh, give us pleasure in the orchard white,
Like nothing else by day, like ghosts by night;
And make us happy in the happy bees,
The swarm dilating round the perfect trees.
And make us happy in the darting bird
That suddenly above the bees is heard,
The meteor that thrusts in with needle bill,
And off a blossom in mid-air stands still.
For this is love and nothing else is love,
To which it is reserved for God above
To sanctify to what far ends he will,
But which it only needs that we fulfil.”
Robert Frost – poet – 1874-1963
I think it would be fair to say that commentators on world affairs have never been very complimentary about George ‘Dubya.’ Whatever they have said in the past, if someone has been to Harvard, he is unlikely to be a knuckle-head! Six years after his eight year occupation of the White House we now have been exposed to another side of the formerly despised 43rd President of the USA that most never knew about. We know he is a very wealthy farmer from Crawford, Texas; but how many knew he was quite a decent artist. He has painted very recognisable images of Blair, Merkel, Musharraf and Putin! There is good in everyone!
Pineau De Re’s brilliant fairy tale win in Saturday’s Grand National is all the more enjoyable as a glorious spectacle as it exemplifies the highly charged emotions of the greatest steeplechase in the world! This gelding, winner of the Ulster Grand National, was trained by a physician Dr Richard Newland, who only has 12 horses in his care and was ridden by a superb journeyman jockey, Leighton Aspell. It was all the more enjoyable when you were on at 25/1, though only in a modest amount!
Whilst most economic geeks took out their Bletchley Park code books to decipher the contents of Friday’s Non-Farm payroll data, another orchestrated conspiracy was taking place on the Street of Dreams – the exposure of what many people considered to be the potentially ‘bubble’ valuations ‘a la dot.com boom’ of some tech sector constituents. On Friday the NASDAQ put in its worse daily performance since 3rd February 2014 – down 2.74%. Google Class A shares fell by 4.6%, so did Facebook and Amazon.com dip by a similar amount. Biotechs also took a larruping – that index was down by 4.1%. Conversely GrubHub Inc, a debutante on Friday rallied by 31% – there’s no accounting for taste. Halozyme Therapeutics fell by 7%, having added 79% up in a year up until the end of last February. Netflix sank by 4.9% having quadrupled in value in 2013.
The Employment data was just about good enough to keep FED chairman Yellen on track with her tapering programme, which is down from $85 billion to $55 billion, but the numbers – 192k jobs created in March and unemployment still at 6.7% – still flag up some imponderables, even though there were some upward revisions for January and February. Firstly the US is still 437k short of replenishing the 8.7 million jobs lost during the recession in 2008. We need to wait another 3 months to be comfortable that the inclement weather did not damage the rate of recovery. Secondly temporary employment is still too dominant and there are nothing like enough well educated people available to cope with the strong demand for jobs in technology. Finally we need to see whether retail activity has selected another gear.
At the end of last week the S&P 500 had scooped up 1.4%, the FTSE 100 1.21%, European bourses an average of 1.54% and Japan’s Nikkei 2.50%. Gold has been very variable dropping down to $1287 an ounce but rallying to $1302 by the end of the week. The Euro fell slightly towards the end of the week, thanks to some nebulous comments on deflation made by ECB’S Mario Draghi. Inflation stands at 0.5%, which will not stimulate economic activity. Draghi told Thursday’s press conference that it was ready to provide more stimulus, such as cut rates or even implement negative rates for its depositors or buy in commercial bonds rather than just sovereign debt, but as the Bard said so succinctly in “Richard 111” – ‘talkers are no good doers!” However in a surreptitious manner bond market punters are believing the Gospel according to Draghi. Considering the poor state of health Spain’s and Greece’s economy is in, how can their 10-year bonds yield only 3.27% and 6.40% respectively? In the US GM’s Mary Barra struggled in front of Congress over faulty vehicles, which caused some deaths. Her evidence and lack of information was not appreciated. However car sales did well in the US with 16.3 million likely to have been sold on the last year. In the UK the SMMT announced that car sales had risen by 18% in the last month thanks to cheap financing deals.
Last week there were plenty of nuggets of information emanating from the UK’s economy. Manufacturing dipped in March though the news on house building was positive even though prices have risen alarmingly in the last year – 9.2% in UK and 18.2% in London. London’ meteoric price rise is driven by overseas investment; so I am less worried about a ‘bubble’ than some. At least the BOE and the government acknowledge the threat of a bubble. Banks are geared up to rain in lending if house prices keep cracking dangerously on. M&S announced ludicrous expansion plans for expanding abroad – 250 new shops. This suggests that sales that Thursday’s trading statement will not make good reading and that serious discounting will have been offered to get stock off the shelves. I doubt that general merchandise sales will have increased.
M&S needs to start dealing with its dowdy fashions before it embarks on another expensive international failure. How long can Marc Bolland survive? Tesco’s Phil Clarke is also under the cosh. Tesco announces full year results on Wednesday week 16th April. Like for like sales may have fallen by 1.1% and by 6.1% for the year. In recent times Tesco has lost the services of Messrs Higginson, Potts Brasher and Mason. On Friday we heard that Laurie McIlwee, the FD will be leaving shortly. His relationship with Clarke is said to have been frosty.
There was much speculation about plans to break off BHP Billiton’s non-core mines from its core operation and either IPO them or maybe just keep selling assets. Mick Davis ex BHP and CEO of Xstrata is purported to have a voracious appetite to buy up to £2.5 billion of assets. I am less than worried that talks broke down about an £8 billion merger between Weir Group and Finland’s Metso. A return to the negotiating tables is highly likely. Just-Eat enjoyed the fruits of a very successful £1.47 billion IPO when the shares went to a 5% premium on Friday.
The market was convinced that China’s Sampower had all but bought House of Fraser for £450 million. House of Fraser has 60 shops in the UK with brands such as Dickens & Jones, Jenners, Howells, DH Evans, Barker’s and Army & Navy. Boots and Lonrho have had a pop in the past and Mike Ashley of Sports Direct had built a small stake in recent times. He was unhappy at the prospect of losing out to Sanpower; so he muscled in on the deal by increasing his stake to 11%, buying out Sir Tom Hunter. Next week will be interesting. The deal will either go through with the Newcastle United Maverick making a few quid on the way or Sports Direct will set down its stall.
The FCA’s Martin Wheatley survived last week from the pensions’ debacle but someone’s head will need to role after the enquiry – Mr Adamson? Vivendi eventually sold SFR to Numericable of France for £11.1 billion heading off Bouygues’s challenge. I was interesting to note that neither Weir Group nor Amec are supportive of Scottish Independence. Salmond will get very little support from big business.
These are David Buik personal views
Twitter – @truemagic68
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