TODAY’S FAYRE – Sunday, 17th August 2014

“Hold on,”
She said, “I’ll just run out and get him
The weather here’s so good, he took the chance
To do a bit of weeding.”

So I saw him
Down on his hands and knees beside the leek rig,
Touching, inspecting, separating one
Stalk from the other, gently pulling up
Everything not tapered, frail and leafless,
Pleased to feel each little weed-root break,
But rueful also …

Then found myself listening to
The amplified grave ticking of hall clocks
Where the phone lay unattended in a calm
Of mirror glass and sun-struck pendulums …
And found myself when thinking: if it were nowadays,
This is how Death would summon Everyman.

Next thing he spoke and I nearly said I loved him.”

Seamus Heaney – poet – 1939-2013

On Saturday morning, I was fortunate to catch the Evening Standard’s veteran defense correspondent, Robert Fox talking to Radio 5-live’s Tony Livesay on the crisis in Iraq! He talked passionately about the lack of understanding of what was required on the ground in Iraq to keep the ISS and insurgence in general at bay. This required positive world leadership, which was totally lacking as politicians are reluctant to take decisions that are vote losers. In Fox’s opinion public opinion was irrelevant. If decisions need to be made for the good of mankind, then so be it. Messrs Bush & Blair never finished the job. There were no contingency plans for Iraq’s future. Therefore the West owes Iraq. It must lead from the front to stop unnecessary tribal bloodshed! Many of you will remember what a brilliant raconteur and journalist Robert Fox was during the Falkland Islands campaign back in 1982.

On Saturday I welcomed myself back to reality – life in the championship – Fulham V Millwall! Millwall’s eclectic fans came in their thousands. Those locals spending a quiet afternoon in Bishops Park must have wondered what hit them – the noise! I have never seen so many policemen on duty – many in riot gear – at a football match. I suppose Millwall’s fans reputation went before them. The support of the 4000 travelling fans at Craven Cottage was as rowdy as anything I have ever heard since watching Liverpool at Anfield back in 1966!

Considering the geopolitical temperatures had risen sharply in Iraq and Ukraine last week, equity markets remained remarkably sanguine, particularly as the strength of the US economy seemed to take somewhat of a battering, if the data was anything to go by. Retail sales for the second month in a row were flat, Consumer Confidence dipped quite sharply, the Empire State Index missed and PPI was uncomfortably benign at +0.1%. Investors’ attitude was rather bizarre. Instead of taking the cream off the top of the three main indices – not a bit of it; cheers could be heard ringing down Wall Street that the prospect of higher interest rates in the autumn had receded, inviting punters to buy some more stock. Though quantitative easing in the US may have finished come October, one could be forgiven for thinking investors had been rather too gung-ho! Anyway if a ‘pull-back’ is due, it seems unlikely that anything major will occur until the fund managers and bankers return from the Hamptons and Martha’s Vineyard. Talking of the latter That President Obama is some cool dude; he won’t have his golf or the family holiday messed up too much! I am pleased for him, Michelle and the kids that temporarily the situation is Gaza looks slightly less awful than dire!

It was interesting to note that bond yields fell right across the spectrum last week with the yield on 10-year German bunds dropping below 1%! These are the current yields for 10-year bonds – some are ludicrous, but if you are a member of the Mario Draghi protection fund, Christmas comes around quite regularly! – Germany 0.95%, France 1,34%, UK 2.32%, US 2,34%, Spain 2,39%, Italy 2.58%, Portugal 3.48%, and Greece 5.78%. Gold fell from it’s recent ‘highs’ to $1305 an ounce.

Once the books had been totted up at the end of the week, the S&P 500 had added 0.65%, the FTSE 1.85%, the European bourses an average of 1.33% and the NIKKEI 3.65% (Abenomics rules OK for most – not me!). On the Street of Dreams, retail stocks suffered with Macy’s Nordstrom and Wal-Mart downgrading sales. JC Penney seemed to be the exception to the rule, with sales up 5% in the last reporting season. Coca-Cola confirmed that it would pay $2.15 billion for a 16.7% stake in Monster Beverages.

Last Wednesday, we enjoyed the life and times of Governor Mark Carney from the quarterly ‘Inflation Report’ meeting. He was at his smoothest and most waspish, doing a brilliant job of being very non-committal. We had great news from the ONS that the UK economy was flying with growth for the year likely to hit 3.2% – the best performance since 2006. However with Europe producing virtually no growth and such as there was came from the likes of Spain and Greece both up 0.6% from a rock bottom position, the Governor’s MPC should have been left with quite a conundrum. When should rates start to go up? At the meeting Mr Carney refused to be drawn – he just said when the time is right slowly and steadily at about 0.15% at a time, implying to maybe a maximum of 2.25% by the end of 2017. However we learn from the Sunday Times this morning that the BOE may not wait for pay to recover before putting rates up. You will recall that average pay fell last year, due to variable productivity (manufacturing and banking did not deliver) and the BOE has dropped its forecast for wages increases for 4th quarter from +2.5% to just 1.25%. To impose higher servicing of debt with interest rate hikes could be very damaging to the economy, leaving the consumer with even less disposable income to spend on retail – the heartbeat of growth! Admittedly property prices seem to be off the boil; so that takes some heat out of the kitchen, but there are still millions committed to very severe mortgage payments. Mr Carney also said that some British banks may need to raise fresh capital to meet with forthcoming stress test criteria. He was also still unhappy about executive pay.

In London last week there were a fair number of story ‘nuggets’ but nothing to set the world on fire. If Carillion and Balfour Beatty grab the headlines you know its August. Carillion are expected to sweeten the terms this week in attempt to draw its reluctant bedfellow in to the sack. L&G withdrew from the ABI. Admiral after average results said that motor premiums may have to go up. There was positive news from BHP Billiton that it may hive of $15 billion of assets for sale. Premier Oil may have a share buyback. It looks like it may be gloves off as BT Sports prepares to have a real pop at Sky over football rights. CEO Gavin Patterson has set down his stall to perhaps bid £3 billion for full Premiership rights. I can’t see Sky standing idly by! We shall wait with interest. However in passing, BT have more screens in pubs than Sky! BP’S commitment to Rosneft with its 19% stake is a worry going forward. Regardless of the political ramifications, this investment must be nursed through these troubled waters, as it could prove to be fundamentally so important with Russia dominating Europe’s energy supply.

Equity markets feel very heavy, but with the sun high over the yardarm with so many not at their desks, perhaps an impending correction will have to wait until the autumn unless economically the world girds up it loins. Maybe pink elephants fly? There are too many not convinced that the US has its back burners on to provide momentum to really positive growth.

Next week the following post numbers – Monday – AMLIN, CLARKSON, Tuesday – CAIRN ENERGY, BHP BILLITON, JOHN WOOD GROUP{, Wednesday – GEM DIAMONDS, Thursday – KAZAKHMYS, WH SMITH, QUINDELL.


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 – The information in this e-mail and any attachments is confidential and may be legally privileged. It is intended solely for the addressee(s). If you are not an intended recipient, please delete the message and any attachments and notify the sender of miss-delivery: any use or disclosure of the contents of either is unauthorised and may be unlawful.

David Buik
Market Commentator

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

The information in this e-mail and any attachments is confidential and may be legally privileged. It is intended solely for the addressee(s). If you are not an intended recipient, please delete the message and any attachments and notify the sender of mis-delivery: any use or disclosure of the contents of either is unauthorised and may be unlawful.

Panmure Gordon (UK) Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange.

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