TODAY’S FAYRE – Monday, 29th June 2014

“I nursed it in my bosom while it lived,
I hid it in my heart when it was dead;
In joy I sat alone, even so I grieved
Alone and nothing said.

I shut the door to face the naked truth,
I stood alone—I faced the truth alone,
Stripped bare of self-regard or forms or ruth
Till first and last were shown.

I took the perfect balances and weighed;
No shaking of my hand disturbed the poise;
Weighed, found it wanting: not a word I said,
But silent made my choice.

None know the choice I made; I make it still.
None know the choice I made and broke my heart,
Breaking mine idol: I have braced my will
Once, chosen for once my part.

I broke it at a blow, I laid it cold,
Crushed in my deep heart where it used to live.
My heart dies inch by inch; the time grows old,
Grows old in which I grieve.”

Christina Rossetti – poet – 1830-1894

Having experienced heart-breaking reverses for England in the World Cup, a heavier defeat at rugby in New Zealand than most ardent followers expected and an embarrassing capitulation against Sri Lanka in a home based series for the first time, how inspiring was Andy Murray’s performance against Agut in the 3rd round at Wimbledon yesterday! – Fantastic!

It did not take long for Pippa Middleton to appear in the Royal Box at Wimbledon last week – as the sister to the wife of a future King, fair enough! I don’t expect her to ‘extract the Michael’ again by making another visit in that coveted enclosure during the final week. I fear I may be very disappointed. Surely she must see that a reappearance would be an abuse of privilege!

The PM has received bad press on two issues last week. He probably deserved it for poor judgement appointing Andy Coulson, as press honcho, when many expected that he carried baggage, though I have to say I thought he did the job in an exemplary manner, unlike one of his predecessors, who just could not stay off the airwaves with his acrid comments of contempt for those not of the same political persuasion – not the modus operandi of a Government press officer.

What surprised me is that he was vilified for his performance in Brussels over his disagreement over the manner J-C Juncker was appointed rather than elected as President of the EU. Whatever views might be held over membership of the EU and the UK’s current and future role, PM Cameron, in my humble opinion, did not deserve such malicious criticism. He was betrayed by the waspish and duplicitous self-interest of Merkel and her ‘Blackadder’ styled acolytes – Hollande and Renzi. Does the UK really want to lie in the same bed as these treacherous political philanderers? The fact remains, the UK is an outsider as far as the EU is concerned and this should be recognised. This country, hopefully, has no interest in the promotion of federalism and its standard bearer – J-C Juncker, President of the EU.

The PM was not the only ‘high-profile’ celebrity to receive mixed press last week. The Treasury Select Committee’s Pat McFadden accused the Governor of the Bank of England of oscillating over interest rates over the past few months as follows – “It strikes me the Bank is behaving a bit like an unreliable boyfriend – one day hot, one day cold. I think the Governor has been unfairly criticised over his ‘forward guidance’ policy. After all economic indicators are not like door numbers – they move! Growth has picked rather more resolutely in the UK than the Governor and most people expected. Perhaps too much credence was attached to unemployment falling below 7%, though Mr Carney insists that employment data is a key indicator.

The Governors most recent comments on interest rates were rather more dovish than those in his Mansion House speech, when the tea leaves in his cup suggested rates would start to climb slowly this autumn with a symbolic 0.25% hike to 0.75%. He then went on to say in his testimony at the TSC – “For the record, we expect that there will be a pickup in earnings growth… there has not been an acceleration in earnings, in actual earnings in the measured data that has actually been produced yet.”

The concern about rates, of course, has been driven by the threat of the property bubble bursting. The Governor requires no advice from the IMF, Finland or any other body. Carney is in the hot seat. We must support him. Plans to curtail large mortgages of £500k+ with a maximum for 15% of a bank’s mortgage total and 4.5 times earnings is sensible and prudent. The authorities can tinker with this problem all they want. However there is a huge housing shortage. Until local authorities are forced to release land for building, the situation is unlikely to improve more than marginally, unless our economy, possibly triggered by EU economic incompetence, goes in to reverse. It is interesting to note that mortgage approvals may have fallen 10% in recent weeks.

Last week was another enigmatic trading period with the Iraq fall-out, higher oil prices, concern over valuations, less than robust retail activity in the US coupled with the threat of higher interest, taking the froth off the top of the main equity markets. In all truth the appetite for risk has been tapered. The S&P 500 drifted down by 0.1%, the FTSE 100 fell by 1%, the European bourses by an average of 1.7% (growth seems negligible) and the NIKKEI by 1.66% (investors have turned cynical against the Abenomics charade.)

In New York, the ProGo IPO was a huge success as the video genie added 30% in value on the first day, shares having been issued at $25 and closing at $31.65. Alibaba, China’s answer to a combination of eBay and Amazon is likely to take its bow on the NYSE on 8th August 2014. 12% of the company is likely to be sold for $20 billion, valuing the operation at about $160 billion. What investors will enjoy is that Alibaba makes profits. On Friday Dupont eased sharply on gloomy news in terms of outlook.

In London last week, shares just drifted down, though energy stocks did well in attempting to buoy the market. Barclays took a clattering on Thursday, losing 6% in value. Its ‘dark-pool’ operations have come under allegations from NY Attorney General Schneiderman that this London based bank had profited from unconnected data damaging their less sophisticated investors’ positions and stock holdings, in favour of market professionals. Barclays seem to have lost the support from investors, which have removed their funds. CEO Antony Jenkins would appear to be holding a full-sale inquiry and is cooperating with the SEC and other regulators. These allegations, in the main, seem to have manifested themselves under the Bob Diamond/Skip Magee dynasty between 2006 and 2012, though further clarification is required. It’s funny how only UK banks come consistently under the cosh of US regulators – rarely their own! BNP finally agreed to pay the US DOJ E8.9 billion as a fine for breaking sanctions with the likes of Iran.

Rolls Royce had a good week as Airbus confirmed its undying support with the £1 billion share buyback providing some impetus after losing an Emirates contract the week before. There were rumours of a takeover of SAB Miller by Diageo, with AB InBev sniffing in the wings. Tui Travel is likely to tie up with its German namesake. Post the Carney comments on mortgages and interest rates, house building shares had a bit of a run on the rails. Abbvie has not quite given up the unequal struggle to buy Shire Pharmaceuticals. However for the time being it has turned its affections in the direction of NPS Pharmaceuticals for $4 billion – a mere bagatelle! GSK bribery issues in China seem to have been exacerbated by a sex scandal. A video would appear to have been sent to Sir Andrew Witty. Anglo-American is considering divesting itself of £2 billon platinum mines in South Africa.

On the economic front, the US authorities confirmed that the 1st quarter of 2014 was dire with GDP enjoying a horrifically negative -2.9%. France confirmed no growth at present – no surprises there with Hollande seeming to have totally lost the plot. EU CPI was marginally better than expected at +0.4% against estimations of +0.2%. It still remains dangerously low, leaving Mario Draghi with plenty to think about. UK GDP for the 1st quarter was reconfirmed at +0.8%.

Private equity in the form of Carlyle look as if it wants to take a quick profit from the rise in value of its investment in Addison Lee – up from £300 million to £500 million according to the Sunday Telegraph. Adidas, like to do brilliantly over World Cup sales, as will Nike, seems to be at pains to make peace with Sports Direct’s Mike Ashley, so important a customer SDI is. Adidas had complained about the scruffy nature of the shops. Stack ‘em high and sell ‘em cheap I say!

UK companies posting results this week – Monday – ENERGISER, Tuesday – OCADO, ST MODWEN PROPERTY, , Wednesday – ANITE, TOPPS TILES, CARILLION, TULLOW OIL, PERSIMMON, Thursday – GREENE KING, POWNDLAND.

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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