TODAY’S FAYRE – Tuesday, 15th July 2014

“Now sleeps the crimson petal, now the white;
Nor waves the cypress in the palace walk;
Nor winks the gold fin in the porphyry font;
The firefly wakens, waken thou with me.

Now droops the milk-white peacock like a ghost,
And like a ghost she glimmers on to me.

Now lies the Earth all Danae to the stars,
And all thy heart lies open unto me.

Now slides the silent meteor on, and leaves
A shining furrow, as thy thoughts, in me.

Now folds the lily all her sweetness up,
And slips into the bosom of the lake.
So fold thyself, my dearest, thou, and slip
Into my bosom and be lost in me.”

Alfred, Lord Tennyson – author & poet – 1809-1892

I cannot say that William Hague stepping down as Foreign Secretary came as any great surprise – just the timing! However upon reflection, if we all recall the larruping William Hague gave Tony Blair in the House of Commons, his appointment leading in to the election as Leader of the House of Commons may be an inspired one, as the PM attempts to rally the troops in his quest for another term in office! Make no mistake this will be a task of Herculean proportions.

I feel hugely embarrassed. For someone like me, who is a royalist and a major supporter of the Commonwealth, why can’t I get remotely enthusiastic about the forthcoming Commonwealth Games in Glasgow next months? At present I remain embarrassingly ambivalent. I need to raise my game.

How on earth does Adidas justify sponsoring Manchester United’s kit for 10 years at a cost of £750 million? No one knows that Manchester United will be the same world-wide unimpeachable brand in two years’ time let alone a decade, even if Louis Van Gaal proves to be Sir Alex Ferguson reincarnated! Also committing money of that magnitude to a family that owns nearly 90% of the equity in a public quoted company could be questionable!

The Street of Dreams is often rather a fickle environment. Sentiment can change by a puff of wind. Last week it was all doom and gloom with concerns over valuations and the quality of 2nd quarter earnings as well as the prospect of FED Chairman Janet Yellen becoming more hawkish about interest rates than she has been hereto! Yesterday Citigroup trotted out much better than expected results with earnings per share of $1.24 against estimations of $1.05. In passing Citigroup agreed to pay a fine of $7 billion to the regulators for miss-selling mortgages – perhaps a mere bagatelle in CEO Mike Corbat’s mind. Hopefully he is more concerned about meeting the regulator’s ‘stress test’ criteria!

Anyway the Street of Dreams latched on to the perceived good news resulting in the DOW adding 0.66%, the S&P 500 0.48% and the NASDAQ 0.56%. There was of course M&A activity to keep the momentum driving forward! Abbott Labs agreed to sell its branded generic units to Mylan for $5.3 billion. Like it or not there is a tax gain element to it with the Dutch tax rate being more attractive in comparison to the US. Shire’s management will recommend AbbVie’s improved offer of £53.20 to shareholders. This deal has been handled in an exemplary manner by both parties, who have conducted their business from across the table rather than in the press – the route chosen by Pfizer and Astra Zeneca in a rather desultory and visceral manner. Rather counterproductive don’t you think.

It is not surprising that the City gets average press when one sees the number of financial and legal advisors with their snouts in the trough over this Shire Pharma/AbbVie deal. I would not for one minute suggest that I was a doyen of M&A but is it really necessary for Deutsche Bank, Morgan Stanley, Evercore, Citigroup, Goldman Sachs plus from AbbVie’s camp just JP Morgan to share supposedly £103 million in fees? Yes, professional guidance is hugely important but a coterie of that magnitude – really?!

The FTSE 100 bounced out of the traps yesterday full of vigour and good intent. Again market makers were on their metal, with volumes still hugely disappointing. Sports Direct’s Mike Ashley grabbed some headlines by taking a 4.8% stake in the Sir Philip Green driven MyShop, which experienced an indifferent start to its public ownership 2 weeks ago. This gives Sports Direct immediate access to sports mad devotees. Andy Hastie, former RSA CEO has become chairman of Wonga. He has vowed to tighten the loans’ operator’s belt in regards to regulatory behavior, as well as capping the cost of borrowing triggered by action taken by the FCA. Wm Morrison has binned its disastrous investment in Kiddicare for £2 million retaining some of the property assets though 1000 jobs may be vulnerable. Richard Baker has been appointed chairman of Whitbread and Richard Pym, former CEO of Alliance Leicester and chairman of Coop is to head up Allied Irish Banks at the end of the year.

On the European economic front, many of us sigh at the confirmation of J-C Juncker’s appointments as a Federalist President of the EU. This news was coupled by a slowdown in industrial production in Europe, as it could get much slower – down 1.1% between April and May. Espirito Santo’s shares fell again by 7% yesterday making an aggregate loss of 70%. We hear everything is ‘tickety-boo! Well we’ll take Marshall Draghi’s word for it! Everyone was also saddened to hear that UK retail sales had grown at its slowest rate for 3 years – up 0.6% last month.

Asia enjoyed a positive session on the back of New York with most indices in moderately positive form. The FTSE 100 is 14 points to the good at 6760, with miners leading a moderate charge!


During the rest of this week the following companies post numbers or trading statements – Wednesday BRITISH LAND, ICAP, WINCANTON, RIO (TS), Wednesday – MOTHERCARE, LAND SECURITIES, COMPUTERCENTER & SPORTS DIRECT.

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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