TODAY’S FAYRE – 2nd June 2014

TODAY’S FAYRE – Monday, 2nd June 2014

“My mistress’ eyes are nothing like the sun;
Coral is far more red than her lips’ red;
If snow be white, why then her breasts are dun;
If hairs be wires, black wires grow on her head.
I have seen roses damask’d, red and white,
But no such roses see I in her cheeks;
And in some perfumes is there more delight
Than in the breath that from my mistress reeks.
I love to hear her speak, yet well I know
That music hath a far more pleasing sound;
I grant I never saw a goddess go;
My mistress, when she walks, treads on the ground:
And yet, by heaven, I think my love as rare
As any she belied with false compare.”

William Shakespeare – poet & playwright – 1564-1616

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Mark Twain – author – 1835-1910

Most people will understand the predicament Sir Jeremy Heywood was in, severely censoring the content of conversations which took place between Tony Blair and President George W Bush leading up to the Iraq war, prior to sending the ‘gist’ of the watered down comments to the Chilcot inquiry. The former PM will embarrass himself and will have done his credibility no favours with the electorate and hopefully he will have damaged Ed Miliband’s aspirations to win the next General Election for Labour.

The dichotomy Sir Jeremy and Mr Blair were in, was beautifully explained by Sir John Major in an interview he had with ‘Today Programme’s’ arch inquisitor, John Humphries last Friday morning. Sir John grows in stature and wisdom by the week.

Against this background of uncertainty Mr Blair continues to tout himself in a high profile, though unpaid capacity, as a pro-EU envoy, countering the rise in populism of Euro scepticism. I wonder whether his obsession to regain political power, however unofficial it might be, ahead of the Chilcot Inquiry, might not play in to UKIP’s hands

On Saturday, Lord’s looked a picture for the 4th ODI against Sri Lanka. The ground looked like a snooker table – dark, rich green baize. We witnessed a remarkable game when England fell short by 9 runs chasing 300. Had Joe Root, admittedly still very young, though very talented, not played a test innings, taking leisurely singles rather than aggressively run “2s”, England might have won, which would have made Buttler’s hundred even more of a Herculean effort than it already was. One can only hope that Root is not learning bad selfish habits from his co-tyke – one G Boycott!

This year it might well have been sensible not to have sold in May and to have returned on St Leger Day. Most global indices regained some poise last month, thanks to improving economic data with the exception of China, the containment of geopolitical issues in Ukraine and a wave of IPOS and M&A activity. Last month the S&P 500 added 1.9%, NASDAQ 3.7%, FTSE 1.3%, NIKKEI 2.4%, DAX 3.7% and Russian equities by 10.9%! – So much for economic sanctions over Ukraine!

Though the first quarter earnings season has near enough petered out in a satisfactory rather than a really positive earth shattering manner, there have been plenty of potential deals to ponder over. Pfizer’s Ian Read climbed back in to his box for the time being – well at least for 3 months – unless Astra Zeneca’s Pascal Soirot is forced to hail him back to the negotiating table by irritated and incandescent shareholders. However positive news posted recently about Astra’s trials for its lung cancer drug may have come to the directors’ rescue in the nick of time.

Weir group were rebuffed by its Finnish competitors – Metso – in a deal valued at $3.7 billion. Apple has agreed to pay $3 billion for Beats Music Beats. Valeant has upped the ‘ante’ for Allergan (Botox) to $42 billion. GE and Siemens are fighting it out over the hand in marriage of Alstom, France’s train maker, valued at €14 billion. Amsurg is to acquire Sheridan Healthcare for $2.35 billion; Tyson Foods has agreed to scoop up Hillshire Brands for $6.8 billion and Brown Forman is rumoured to be running its ruler over Remy Cointreau – and so it goes on!

Investors are beginning to encounter a little indigestion in the IPO market. There are concerns that in some cases private equity are selling their portfolios with indecent haste and there is a perception, maybe unfairly so, that the ‘fair has left town and investors have been left to pick up the trash!’ We have seen a slew of on line retailers come to the market – some good, some disappointing. The problem seems to be ambitious valuations. Saga’s debut last week was only a qualified success to date, with shares closing adjacent to the issue price of 185p. TSB served notice to sell 25% of the bank, valued at £1.5 billion in June. The issue has been cautiously received, as its value is hard to assess. Also investors know that Williams & Glyn, then another tranche of Lloyds Banking Group – maybe £5 billion – plus some European banks rights issues are waiting in the wings. So there is plenty of choice. Perhaps the market has just temporarily run out of steam. We shall see, as news broke on Friday that B&M Retail, chaired by Sir Terry Leahy, will come to the sacrificial altar of public ownership, valuing the company at £2.9 billion. Also there was news this morning that Germany’s Rocket Internet was being offered for sale through JP Morgan, Berenberg Bank and Morgan Stanley, valuing the internet incubator at $4 billion. Technology stocks rarely do well in the summer. However maybe it will be offered very realistically in terms of value.

So far this year in the US IPOS have totalled $27 billion. Though investors remain very cautious about valuations, there is great expectancy for the 2nd half of the year and many believe that 2013’s total of $62 billion will be passed, triggered by China’s Alibaba Group, which could be valued at $150 billion, seeking to raise $20 billion.

There is no doubt that growth has picked up in the US after appalling weather conditions brought the economy to a halt at the beginning of the year. The CBI and British Chamber of Commerce are very upbeat about the UK – growth targets for the year have been increased from 2.8% to 3.1%.

Next week important manufacturing data will be posted by EU countries. I have my doubts about the EU recovery, which could blunt the UK’S perceived brilliant progress. Many expect the ECB to drop rates on Thursday of this coming week against a real threat of deflation. US Non-Farm payrolls may see over 220k jobs created in May with the unemployment rate dropping to 6.1%. There is little reason to suppose that the FED’S Janet Yellen won’t continuing tapering quantitative easing by another $10 billion down to $35 billion. However much ‘huffing and puffing’ there is about interest rates they are unlikely to be increased on either side of the pond until late 2014.

There a few company results to assess this week, though it is rumoured that Tesco’s trading update on Wednesday May not make pretty reading. For these equity markets to take a quantum leap forward, the quality of corporate earnings will need to improve. Wolseley posts numbers tomorrow.

These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom
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