TODAY’S FAYRE – Friday 23rd May 2014

TONIGHT’S FAYRE – Friday, 23rd May 2014

“For beauty being the best of all we know
Sums up the unsearchable and secret aims
Of nature, and on joys whose earthly names
Were never told can form and sense bestow;
And man has sped his instinct to outgo
The step of science; and against her shames
Imagination stakes out heavenly claims,
Building a tower above the head of woe.
Nor is there fairer work for beauty found
Than that she win in nature her release
From all the woes that in the world abound;
Nay with his sorrow may his love increase,
If from man’s greater need beauty redound,
And claim his tears for homage of his peace.”

Robert Bridges – poet – 1844-1930

This whole Putin saga, made sensational by the Prince of Wales having a private conversation, which triggered an intemperate remark by HRH, just goes to prove how incredibly toxic and menacing all types of media and particularly its social cousins can be! These comments were almost certainly taken out of context. However, just look at the potentially damaging effect this unfortunate and regrettable indiscretion could have in terms of diplomatic and trade fall-out with Russia?

We shall have to wait until Sunday before we know how strongly the Farage bandwagon has gathered momentum in the European elections. Certainly outside London, UKIP look to have done well enough in the local elections to suggest Messrs Cameron, Miliband and Clegg will have collected bloody noses. If the Conservatives and Labour are to regain their poise and more to the point support, these personal attacks on Nigel Farage must cease.

The economic data in the UK remains solid with recent retail sales figures gathered in around Easter, showed that the consumer is not perhaps quite yet, ‘gungho, fixed bayonets! And over the top!’ However he/she is certainly gaining in confidence to such a degree that the hawks on the MPC are ruffling their feathers in suggesting that some interest rate increase may have to be implemented before the end of the year.

One can be forgiven for being frustrated that equities are meeting with a little resistance at these new levels and the 6930 record threshold for the FTSE 100 seems agonisingly far away. I’m afraid we need to see better quality results in places for equities to select another gear. Like many other cynics, I am less than convinced that the EU’s economy is as ready to come off ‘life support’, despite the Barosso/Van Rompuy PR thrust.

We are also seeing investors losing their appetite for some IPOS, unless they are priced as snips! We await news on Saga this morning, particularly since the issue price has come in right at the bottom end of the range. This, I am sure, is only a temporary rejection by the market place. Zoopla, with DMGT as a major shareholder, will surely find its supporters when it steps up to the plate in the late summer or early autumn. And let’s not forget the likes of B&M Retail and Wizzair. Sir Stuart Rose’s Fat Face has pulled out due to lack of shareholder support. Technology stocks are notoriously in the doldrums in the summer. Again come the autumn I expect the sector to come under a wet sail again.

There again yesterday in New York, – a sort of Chinese answer to Amazon – gained 10% on its $1.78 billion IPO debut on Wall Street. The company is valued at $25 billion. We wait with bated breath for Alibaba in the hope that it ignites interest in the same manner. With this juggernaut of a company in terms of value, conceivably $150 billion, the mind boggles.

Yesterday on the Street of Dreams decent industrial production numbers and factory orders persuaded investors to stay with the game, though the DOW only added 0.06 %. However the S&P 500 gained 0.24% and the NASDAQ 0.55%. Hewlett-Packard fell short of estimates with its shares falling 2.3%, with the likelihood of another 16,000 jobs being lost. That Meg Whitfield is some tough cookie! Best Buy was up 3.4%, Williams Sonoma by 8.7% and good old Dollar Tree by 6%.

The FTSE closed near enough flat yesterday at 6820 in a very nondescript session with little turnover. There was a wave of support for Astra’s shares yesterday as the likes of Blackrock who own 7.8% of the drug titan would like all parties to return to the negotiating table, despite having voted against accepting the £50 a share bid. They and other shareholders feel there is room for Pfizer to up the ante! Royal Mail Group’s results were in line with expectation with profits up 12% at £671 million. However CEO Moya Greene had some warning shots across the bow about competition from the likes of TNT, which was forcing the RMG to agree to Sunday deliveries as well as a price war. Investors shed some risk and the shares eased by 7%. Rumours abounded that BATS were helping Reynolds American owners of the Pall Mall and Winston cigarette brands to buy Lorillard, who make the menthol Newport cigarette, before merging with the new unit. Unilever have sold Ragu and Bertolli food brands to the Japanese food titan Mizcan for $2.1 billion. These brands were disposed of for 3.5 times sales, which appears healthy.

On the economic front Germany confirmed 1st quarter GDP at +0.8% with an annualised rate of 2.5% for 2014. S&P upgraded Spain’s debt to BB and Greece’s to B. We shall watch with interest the progress of these two economies. In the UK George Osborne will not have been pleased at the prospect of the UK’s borrowing requirement rising by £2 billion to £11.5 billion in April.

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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