TODAY’S FAYRE – Thursday 31st July 2014

TODAY’S FAYRE – Thursday, 31st July 2014

“HOW vainly men themselves amaze
To win the palm, the oak, or bays,
And their uncessant labours see
Crown’d from some single herb or tree,
Whose short and narrow-verged shade
Does prudently their toils upbraid;
While all the flowers and trees do close
To weave the garlands of repose!

Fair Quiet, have I found thee here,
And Innocence thy sister dear?
Mistaken long, I sought you then
In busy companies of men:
Your sacred plants, if here below,
Only among the plants will grow:
Society is all but rude
To this delicious solitude.

No white nor red was ever seen
So amorous as this lovely green.
Fond lovers, cruel as their flame,
Cut in these trees their mistress’ name:
Little, alas! they know or heed
How far these beauties hers exceed!
Fair trees! wheres’e’er your barks I wound,
No name shall but your own be found.

Andrew Marvell – poet – 1621-1678

One of the greatest ‘belcanto’ tenors of 20th century, the Italian Carlo Bergonzi died on Tuesday at the age of 90! He particularly enjoyed singing with Dame Joan Sutherland, never more so than in Lucia di Lammermoor. Many opera commentators are of the opinion that when he sang Mario Cavaradossi opposite Maria Callas with Tito Gobbi as Baron Scarpia in 1964, this production of Tosca was one of the Royal Opera House’s finest achievements.

Despite a nebulous session in Asia yesterday and some interesting corporate results in the UK – particularly Barclays and BATS, which cheered investors, Europe’s bourses just continued to drip some value, with the FTSE 100 easing by 34 points to 6773. The threat, implementation and ramifications of sanctions on Russia weighed heavily on investors’ minds.

However across the pond, there was a compendium of mixed news from the front! Sanctions also created some furrowed brows. Some corporate results were OK – some good – Twitter settled up 20%, US Steel added 19%, Amgen 5.4%, Regemeron 5.8% and Edwards Lifesciences 10%. However DreamWorks did not pass muster and was shredded by 12%. During the afternoon the US government announced a blockbuster 2nd quarter GDP number – +4%!! When markets were only expecting +3%. Argentina defaulted on its debt repayment again. It last happened 13 years ago

FED Chairman Janet Yellen announced a further $10 billion tapering of QE, taking the facility down to $25 billion. QE is expected to be finished in October. The school of investment geeks that think equities may have run their race in this cycle is growing by the day. Having been propped by the Central bank for 6 years and with the distinct possibility of rates rising in 2015, many luminaries believe that equities may be due a correction. There are so many imponderables, the future is hard to call. Tomorrow it is possible that the employment data may tell us more. 240,000 jobs are expected to have been created in July with the unemployment rate settling at 6.1%. Even though he left the FED 9 years ago, the octogenarian Alan Greenspan still keeps throwing his 2 cents worth in to the pot, having left a trail of financial devastation in his wake. Sir, the golf course beckons!

On Tuesday we had Sir Richard Lambert’s submissions about a Banking & Financial oath – laudable but Victorian in attitude. Totally understood and embraced by my generation, but today I fear it’s up to the management and the individual to acquit themselves or pay the price for falling short. In other words, it you live by the sword, you must be prepared to die by it! Yesterday BOE Prudential Authority CEO, Andrew Bailey – a man of great standing and universally respected – let it be known that senior bank bosses would be personally held to account if their staff transgressed. Management must endorse that dealers/sales staff that they are fit and proper people, checking their personal characteristics on a regular basis. Also reasonable care must be taken to remove those not considered worthy to hold down their positions, thus protecting the public and clients from harm. Some of this language is quite pithy and quite nebulous. However at the end of the day if those in authority don’t do their job, they risk, fines jail loss of benefits etc.

Many of these offences are historical. The FCA is now running a much tighter ship and bank compliance officers are very much more on the case. In the past it would have been very difficult to prove fraud against incompetence as was the case with Fred Goodwin. He was certainly guilty of incompetence, but fraud? No! Jail retrospectively for offenders brought to book has serious ramifications. The time to bring prosecutions was 2008/9. It is too late now. Such is the hatred of the banking sector by the media and public, a fair trial would be impossible. Going forward the threat of a custodial sentence is not only right; it is also just!

LLOYDS Banking Group’s results saw a 32% increase in profits to £3.8 billion. Another £600 million was allocated to PPI payments making a total of in excess of £9 billion. Impairment charges fell by 58% to £758 million. Applications will be sought to pay a dividend in 2nd half. This may incense those shareholders who have felt the 64% gain in the last year but none of the pain previously. The taxpayer still owns 25% of this bank that was bailed out for £25 billion. It is clearly going in the right direction though LIBOR fines still have to be agreed and the £218 million fine for manipulating repo rate was horrendous. Royal Dutch Shell posted a 33% increase in last quarter profits to $9.12 billion. RDS’s shares have rallied by 18% in the last year. Centrica saw profits down by 40% to £890 million thanks to BG Group’s fall in profits much due to the warm weather. Ian Conn from BP is due to succeed Sam Laidlaw as CEO of Centrica.

Today these companies have also posted results –DIAGEO, COUNTRYWIDE, BT GROUP, BODYCOTE, SPIRENT, WEIR GROUP, MERLIN ENTERTAINMENTS, SCHRODERS, THOS COOK, ROLLS ROYCE, BAE SYSTEMS, Friday – DIRECT LINE, SMITH & NEPHEW, RBS, WILLIAM HILL, MAN GROUP.

BNP PARIBAS posted an astronomical loss for the last quarter of E4.3 billion thanks to the US imposed fine of $8.9 billion. SANTANDER beat expectations with a profit of E1.45 billion for 1st half of the year with Tier One Capital at 10.93% – very acceptable.

In the US the following post interim results – Thursday – EXXON MOBIL. LINKEDIN, CME, KELLOGG, CONOCOPHILLIPS, MASTERCARD, EXPEDIA, LEGG MASON, PIXELWORKS, Friday – PROCTOR & GAMBLE, CHEVRON and FORD.

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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