ODAY’S FAYRE – Thursday 10th April 2014

TODAY’S FAYRE – Thursday 10th April 2014

“No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thine own
Or of thine friend’s were.
Each man’s death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.

John Donne – poet – 1571-1632

I was asked yesterday by several people why I had not made a comment about Culture Minister Maria Miller, her expenses and the PM’s intransigence from removing her from office or for postponing her inevitable resignation. Let me just say in passing that as far as I was concerned it was not worthy of comment, suffice to say that I was astonished she took so long. The possibility of a comeback in the future must be close to zero. She should have taken a leaf out of Lord Mandelson’s book and gone within minutes of exposure. He rose three times like the phoenix from the ashes back in to government, thanks to sound judgement on his part. Many like me think that the blunt speaking Sajid Javid will make an excellent Secretary of State for Culture, Media and Sport.

On my way to work yesterday I switched my iPod on to the 1964 recording of ‘Tosca’ with Maria Callas, Carlo Bergonzi and Tito Gobbi – the first opera I ever saw at the Royal Opera House. There have been many recordings since, by the likes of Pavarotti, Domingo, Freni, Milnes, Capuccili, Alana and Gheorghiu, but for me this is still ‘La Stupenda!’

Markets had a much better feel to them yesterday. The cream had previously been quite taken off the top of the tech sector on valuation issues and quite rightly. Equities regained their poise on the Street of Dreams thanks to comments made by Fed Chairman Janet Yellen on interest rates returning to commercial normality. M/S Yellen was tidying up her act after a few months of apprenticeship in the job. Her previous comments required updating and reclassifying. The 6.6% unemployment threshold that could trigger rates going up has been shelved. It will be part of an overall package in the decision making process. The recovery process for the US economy still looks a little patchy. Clearly the ferocious winter took its toll and Chairman Yellen is right to be concerned about the low level of inflation, hoping that it does not disappear altogether. Looking in amongst the tea leaves in her cup, it would not be reckless to suppose that it will be at least six months after tapering of QE has been complete before rates start to increase. That takes us to March 2015 at the earliest. M/S Yellen will also certainly have at the back of her mind that it has been recommended that US banks made need their capital bolstered by $68 billion.

Equities certainly took heart from thee comments and selected another gear on the Street of Dreams with the DOW adding 1.1%, the S&P 500 1.09% and the NASDAQ a very satisfying 1.72%. Facebook led the charge adding 7.2%. Alcoa, the first of the companies to report second quarter earnings pleased their acolytes resulting in the shares adding 3.75%.

Here in London after a very slow start the market gained in confidence with the FTSE 100 adding 44 points to 6635. Kingfisher on an upgrade added 3.3% with Evraz grabbing in 3.8% having enjoyed a very torrid time over the last year. ARM was back in the game – +4.5%. Barratt Development and Tullow were also popular. Lord Simon Wolfson waved his £4 million bonus and gave his 20k employees £200 each due to the fact that Next had trebled its share price and 65% rise in earnings per share over the past three years meant his bonus “has become more valuable than I could possibly have hoped”. Lord Wolfson may be a rich man but was an astonishing gesture in recognition of his staff’s performance. Others could take a leaf out of his book. Charity begins at home. Toyota has recalled 6.4 million vehicles affecting 35,000 in the US. This recalling of faulty vehicles has been going on since 2009. At least the problems have been recognised and are being dealt with. Anthony Thompson has left Metro Bank and will now chair the digital internet bank ATOM which opens next year with First Direct’s Mark Mullen as CEO.

China’s trade numbers were surprising. Exports were down 11.3% though imports were only down 6.6%, suggesting a temporary softness though an underlying robustness continues to manifest itself. Asian equity markets were mixed, though Tokyo did manage to erase its loss on the day of 0.7% to settling just above the Plimsoll line – +0.16% at the close. UK Exports for March came in at £23.5 billion – its lowest level for 3.5 years. The UK’s recovery is based too heavily on the consumer and we need to get the lead out to improve our exports around the world and not rely on flabby European demand.

M&S trading statement was as per the expected script. Overall sales were up 1.7%. International sales were up 4.7%, Internet sales were encouragingly up by 12.5%. Food was ebullient with like for like sales up by 2.5%. However general merchandising whatever Marc Bolland and Belinda , say were disappointing – down 0.6%! The fashions are dowdy! The young are not shopping there! Something needs to be done. Will shareholders’ patience run out? Frankly Mr B has had long enough. He seems to lack flair in terms of recognising stylish fashions.

Finally, Lord Myners, the former very successful fund manager at Gartmore and together with Alistair Darling the only government ministers to come out of the financial crisis in 2008 with his reputation enhanced, resigned as a director of the Coop. We wondered why the annual results had been delayed on Monday and it has become clear that Lord Myners’s inability to persuade the Coop to adopt the correct corporate governance for the bank is one of the reasons. The impasse has triggered Lord M’s resignation. Lord Myners pointed out the fallability of the management in appointing highly inappropriate people in to positions of authority, mainly within the bank, witness the Rev Flowers, who have no commercial or financial experience to justify such appointments. This backs up Ewan Sutherland’s decision to resign as CEO. Lord Myners insisted this policy must cease forthwith. Just for the record Lord Myners took on this job for the princely and nominal sum of £1! There’ll be trouble at mill in raising the 30% extra capital requirement from the movement.

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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