Monthly Archives: September 2014

TODAY’S FAYRE – LLOYDS, MORRISON, BALFOUR, NEXT & MARKETS

TODAY’S FAYRE – Tuesday, 30th September 2014

“All Nature seems at work. Slugs leave their lair –
The bees are stirring -birds are on the wing –
And Winter slumbering in the open air,
Wears on his smiling face a dream of Spring!
And I the while, the sole unbusy thing,
Nor honey make, nor pair, nor build, nor sing.

Yet well I ken the banks where amaranths blow,
Have traced the fount whence streams of nectar flow.
Bloom, O ye amaranths! bloom for whom ye may,
For me ye bloom not! Glide, rich streams, away!
With lips unbrightened, wreathless brow, I stroll:
And would you learn the spells that drowse my soul?
Work without Hope draws nectar in a sieve,
And Hope without an object cannot live.”

Samuel Taylor Coleridge – poet – 1772-1834

Tom Watson is my all-time favourite golfer – very talented and a gentleman. Like everyone else I am sure he has human failings, but he did not deserve the treatment meted out to him by Phil Mickelson so soon after the US was vanquished on the golf course at Gleneagles. The corpse of defeat was still cold and riddled with rigger–mortis. Tom may not have been a great captain, but the last action a member of the team should take is to lay out the ‘dirty-linen’ until the dust has settled – very bad form!

Like many other market observers I am slightly in fear over the protests by students in Hong Kong, who insist on having a say in who will be the colony’s next leader. Hong Kong may appear to be democratic but it is part of China, which is not. I fail to see how these students can win, even if the demonstrations remain peaceful. When HK left the UK’s jurisdiction in 1997, it surrendered the right to enjoy totally autonomy. The Hang Seng fell nearly 2% yesterday and was down another 1.41% at lunch today. The Hang Seng is now in negative territory for the year. Markets dislike uncertainty; so this impasse needs a very quick resolution, otherwise there could be more pain to come. I was hugely interested that student communication comes more often than not through ‘firechat’ in an attempt to avoid attracting the attention of the Chinese authorities. How long that works remains to be seen.

Yesterday the HK student demonstrations, where 74 people were arrested and the threat of higher interest rates in the US being implemented sooner rather than later, took the froth off the Street of Dreams. The DOW and the S&P 500 both eased by 0.25% and the NASDAQ by 0.14%. Ford posted dire sales figures for August thanks to recalls and weak demand – shares down 7% after hours. China has given the go-ahead for Apple to sell is iPhone 6. Asia did not enjoy a great session this morning with Japan’s NIKKEI down by 1.37% thanks to poor consumer spending and the adverse effect from the implementation of its sales tax.

London pondered its over-sized navel for most of the day, but the level of activity was very limited with the FTSE 100 ending down 2 points at 6646. There was rather more interest in George Osborne’s plans for limiting taxation on pensions and for his bold and necessary plans to cut the deficit by £25 billion in the next 2 years, than the mind-blowingly and balls-achingly levels of inertia that prevail in share dealing in London. There is still so much fat in the public sector that can be cut from dodgy welfare to technology expenditure, which has been dangerously profligate for years!

September has been the worst month of the year so far for equities, with the NASDAQ falling by 1.6%. Russia’s RTS Index has lost 20% so far from its peak in June – now entering bear market territory.

There were several interesting developments yesterday. Balfour Beatty posted its 5th profits warning in 2 years. Having dispensed with CEO Andrew McNaughton’s services in May, Steve Marshall had his work cut out explaining the need to write off £25 million of regional building and infrastructure projects. The fact remains Balfour Beatty does not have enough contracts particularly government ones and should have sold its US interest in Parsons Brinckerhoff and merged with Carillion. The proportion of any new company will surely now have changed. Balfour’s share price has dropped by 42% since March and by 33% since yesterday!

As if Sir Richard Branson wasn’t rich enough already. He owns 42% of Virgin Money, which seeks a £1.5 billion IPO quotation in London soon. Virgin Money is run by Jane-Ann Gadhia, an E&Y accountant with experience gained later on at Norwich Union, before becoming CEO of Virgin. Her first chairman was the much respected Sir Brian Pitman – he of the great Lloyds Bank days before the debacle – gave her sound advice before his untimely death. Virgin bought the good parts of Northern Rock for £747 million and then later on added some mortgage assets and a credit card portfolio. Last year Virgin Money posted a profit of £59.7 million. I am sure this business is as sound as a pound, but I cannot help thinking that it is a marketing tale and Virgin Money probably won’t eat too heavily in to the high street business – a decent boutique? – Probably, as will Aldermore prove to be, under Philip Monk, ex-Barclays.

Much was written about the ascendancy of Aldi yesterday. Market share had increased from 4% to 4.8% so far this year. Tesco has dropped from 31% 2 years ago to 28.8% and ASDA, which has performed adequately in recent months to 17.4%. We wait with bated breath for Sainsbury’s trading update tomorrow, when a drop in like for like sales may be as depressing as -3-4%. There is also a rumour that the rotten apples from Tesco’s trees may well have been well and truly shaken off. So perhaps the £250 million over-exaggeration of profits is where it really is. The auditors would surely have advised that the worst possible financial position should be posted. Here’s hoping!

Yesterday Lloyds Banking Group Chairman Lord Norman Blackwell and CEO Antonio Horta-Osorio announced that 8 staff have been dismissed for fixing LIBOR on Yen and Sterling trades and had forfeited their joint bonuses of £3 million. The bank was fined £218 million by the FCA for these transgressions. It will be interesting to see whether any criminal proceedings are brought against any of these individuals. If there are allegations to answer, why not?

Next’s sales in August were strong, but unseasonably warm weather has adversely affected trade in September. Consequently quarter 3 sales are only up 6% rather than the expected 10%. Wolseley’s results for the year saw a 6.1% increase in revenue with profits up 6.8% to £761 million with EPS 9.9% ahead of last year with a 25% increase in dividend to boot!

Finally the FCA has charged the former treasurer at Wm Morrison with insider dealing in shares of Ocado during the period when the two retailers were planning a £200m joint venture. Paul Coyle who was also head of tax was charged with offences related to trading in shares in Ocado between February and May 2013.

UK companies posting numbers – Tuesday – ICAP, WONGA, DMGT (TS), QINETIQ (TS), Wednesday – J SAINSBURY (TS), Thursday – DOMINO PIZZA, TED BAKER, Friday EASYJET (TS).

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
http://www.panmure.com – 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
http://www.panmure.com

SUPERMARKETS – “THE WORST PERFORMING SECTOR IN FTSE 100 THIS YEAR!”

Supermarket 30/09/13 29/09/14 % fall

TESCO 359p 191p -47%
SAINSBURY 391p 250p -36%
MORRISON 280p 171p -39%
M&S 496p 421p -15%

SUPERMARKETS – “THE WORST PERFORMING SECTOR IN FTSE 100 THIS YEAR!”
“SCOOP UP ALDI IN UK? – NEVER! GERMAN PROTECTIONISM!”

There are times when I feel as if I have been walking around in the dark. Until 2 years ago I had never heard of Aldi and Lidl. I was then told they were German supermarket chains but I had no idea how big they were. Aldi has 9600 outlets globally and Lidl, owned by the Schwartz Group has 9,800 outlets globally, with both operations committed to opening more.

There has been no food inflation to speak of for nearly 2 years and with the consumer consistently having reduced disposable income to spend, Aldi & Lidl have been right on the money, slashing prices whilst penetrating existing market share with impunity, knowing they can afford to. Stripping Waitrose out of the frame, the others have watched the world go by in blissful ignorance. Apart from M&S which has a problem with its general merchandise, like for like sales have dipped quarter after quarter in the past year and for some longer. I have left ASDA out of the frame as being owned by Wal-Mart, its share price is relatively inconsequential to investors in the UK. However supermarkets is without doubt the worst performing sector in the FTSE 100 this year and many suspect that when Mike Coupe posts Sainsbury’s trading statement on Wednesday morning it may not make pretty reading. Like for like sales may be down between 3-4%

I am told that Aldi made £263 million in the UK last year, whereas Tesco overstated profits by £250 million in three months. Perhaps Tesco should have a pop at Aldi in the UK for the quality of its management, which is valued at about £2.5 billion. Competition regulators would not have it and I doubt it would be for sale at any price. Germany always protects its own.

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
http://www.panmure.com – 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.

TODAY’S FAYRE – Sunday 28th September 2014

TODAY’S FAYRE – Sunday, 28th September 2014

“Peace, peace! He is not dead, he doth not sleep –
He hath awakened from the dream of life –
‘Tis we, who lost in stormy visions, keep
With phantoms an unprofitable strife,
And in mad trance, strike with our spirit’s knife
Invulnerable nothings. -We decay
Like corpses in a charnel; fear and grief
Convulse us and consume us day by day,
And cold hopes swarm like worms within our living clay.

He has outsoared the shadow of our night;
Envy and calumny and hate and pain,
And that unrest which men miscall delight,
Can touch him not and torture not again;
From the contagion of the world’s slow stain
He is secure, and now can never mourn
A heart grown cold, a head grown grey in vain;
Nor, when the spirit’s self has ceased to burn,
With sparkless ashes load an unlamented urn.”

Percy Bysshe Shelley – poet – 1792-1822

One has to hand it to Nigel Farage! UKIP’s timing at their annual conference hosted at Doncaster Racecourse has been impeccable. The announcement that Mark Reckless the Conservative member for Rochester & Strood has defected to UKIP, creating yet another by-election, which UKIP could win, will come as untimely and irritating news for the Tory faithful, which gather in Birmingham today for their annual jamboree. The trials and tribulations of the Tories was exacerbated by Minister for Civil Society, Brooks Newmark’s resignation, triggered by some grubby sex scandal. The PM, the Chancellor and chairman Grant Shapps certainly have their work cut out in attempting to unite the party on devolution in Scotland and England, an EU referendum, immigration and foreign policy. The fact that GDP for the 2nd quarter may hit 3.2% when data is announced on Tuesday – the best for years – may not attract front page headlines, when it should be at the top of the agenda!

Whilst the twists and turns of the Ryder Cup, staged from the most picturesque of gold courses – Gleneagles – has gripped the nation, including myself, but I must confess that I have taken as much satisfaction from Fulham’s long awaited first victory of the season at St Andrew’s yesterday, where they put Birmingham City to the sword by 1-2!

September often proves a difficult month for markets and this September proved to be no exception to the rule. There were so many dark clouds and imponderables hanging over markets last week, particularly the US coalition upping its game in Syria and Iraq, with an increase schedule for bombing having finally added the UK to its list of supporters. Market cynics feel that the level of preparation for the aftermath will be hopelessly inadequate as they were in 1997 and 2003. I think I am representative of most people in feeling that the job should be done properly or not at all. It strikes me that on the ground Iraq and other Middle-East neighbours are incapable of bringing the terrorists to book and as for Syria, the less said the better. Add Russian sanctions, the threat of higher rates in the US transpiring sooner than expected plus growth shortcomings in China and maybe other emerging economies to the list of investor’s concerns and a toxic cocktail of uncertainty and the stench of fear manifests themselves. No surprises that some risk was taken off the table and that is what happened last week.

Last week the S&P 500 surrendered 1.4%, the FTSE 100 2.7%, European stocks 1.8% and the NIKKEI 1.56%. The CBOE Vix index fell by 6%. The reason for the FTSE performing worse than its peers was down to Tesco’s news and the subsequent knock-on-effect of other supermarkets. Mining and banks were also not in good shape. Tesco is purported to have pulled out of £3 billion refinancing deal with 15 banks just pre the profits warning announcement. It is understood that Carl Rogberg, an accountant had brought accounting irregularities to Tesco’s UK finance director’s attention, but they were not heeded. The plight of supermarkets may not improve for the time being as Sainsbury’s may report a 3.5-4% drop in like for like sales on Wednesday. Also last week Tate & Lyle and De La Rue both posted profits warnings – both companies were caned – -16% and 33% respectively. Ocado on Friday was down 3.7%, Sainsbury by 3.1% and Morrison by 1.7%. Shire rallied by 1.7% as it appears that Abbvie may add an extra $7 billion of financing. EasyJet ahead of next Friday’s update had a little run on the rails – +1.5%. RBS enjoyed Citizens Bank’s success as an IPO, when 25% of the bank was sold at $21.50 a share raising $3 billion to the ailing bank’s coffers. There may be an extra amount due if underwriting banks exercise their options to buy another 21 million shares.

In the US Nike posted great numbers – sales up 15% for the last trading period and profits 23% to the good. The shares rose like grilse by 10%. Linkedin added 3% at the end of the week. Apple, despite selling 10 million iPhone6 in the first weekend had technological issues that need answers quickly – -3.8% and Alibaba settle down at $89.89 – 5% below its high after the IPO, but still 32% above the issue price. After many years of service to Pimco, Bill Gross left in slightly acrimonious circumstances to join Janus Capital. Mr Gross’s prognoses on markets seems to have fallen slightly short of his high standards. Maybe this move will revitalise him.

US equities had a fillip at the end of the week, when the US economy advanced an annualized 4.6 percent in the second quarter of 2014, according to the final estimate released by the Bureau of Economic Analysis. It is the highest growth rate in 2-1/2 years, as business investment and exports grew more than expected.

Russia’s state-run Rosneft said a well drilled by the Arctic Ocean with Exxon Mobil struck oil, showing the region has the potential to become one of the world’s most important crude-producing areas. Igor Sechin, Rosneft’s chief executive officer made this announcement on Friday. These wells could potentially hold more than U.S. reserves in the Gulf or Mexico, he said.
The thorny issue of FX rate fixing may rear its ugly head this week when UK regulators may impose fines totalling £2 million on several banks. HSBC, JP Morgan, Citigroup, RBS, Barclays and UBS are purported to be amongst those who may have transgressed. Then of course the US regulators will no doubt be even more draconian in dishing out their punishments if there is a tacit admittance to these transgressions. My fear is that litigation could follow. FX is the largest trading market in the world bar none and the ‘domino-affect’ could be catastrophic – banks, brokers, agents, companies could all be adversely affected by a slew of transgressions. FX rate fixing could make PPI and Libor look like vicarage tea parties in terms of the damage inflicted on the banks.

There is important economic data this week on both sides of the pond. In the US next week, Chicago PMI is posted on Tuesday, ADP Index (+200k jobs estimate in the private sector in September). Then on Friday Non-Farm Payrolls – estimate +215k jobs expected to have been created in September – Unemployment rate to remain at 6.1%. In the UK on Monday Consumer Credit, Money supply and mortgage applications will be posted. Tuesday Nationwide House prices. It was interesting to note that London house prices rose by 21.6% in the last year. Also on Tuesday ahead of the Chancellor’s speech the final reading for 2nd quarter UK GDP is likely to make good reading – 3.2% on an annualised basis.

UK companies posting numbers – Monday – COMPASS GROUP (TS), ABERDEEN ASSET MANAGEMENT (TS), Tuesday – ICAP, HOMESERVE, WOLSELEY, WINGA, DMGT (TS), QINETIQ (TS), Wednesday – J SAINSBURY (TS), Thursday – DOMINO PIZZA, TED BAKER, Friday EASYJET (TS).

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
http://www.panmure.com – 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
http://www.panmure.com

TODAY’S FAYRE – Friday 26th September 2014

TODAY’S FAYRE – Friday, 26th September 2014

“Once more unto the breach, dear friends, once more;
Or close the wall up with our English dead.
In peace there’s nothing so becomes a man
As modest stillness and humility:
But when the blast of war blows in our ears,
Then imitate the action of the tiger;
Stiffen the sinews, summon up the blood,
Disguise fair nature with hard-favour’d rage;
Then lend the eye a terrible aspect;
Let pry through the portage of the head
Like the brass cannon; let the brow o’erwhelm it
As fearfully as doth a galled rock
O’erhang and jutty his confounded base,
Swill’d with the wild and wasteful ocean.
Now set the teeth and stretch the nostril wide,
Hold hard the breath and bend up every spirit
To his full height. On, on, you noblest English”

William Shakespeare – playwright & poet – 1564-1616

It may have been a rubbish week for equities and bonds, but on a personal basis it has been absolutely scintillating for me in terms of events visited. An invitation to the Windsor Festival to hear a concert in the Waterloo Room followed by refreshments in the beautifully refurbished St George’s Room, was particularly memorable. We all remember the devastating fire which swept through St George’s Room in 1992. The renovation has been breath-taking – such pictures and treasures on display – such a privilege to see it.

So Parliament is being recalled today for endorsement of the US coalition bombing raids in Syria/Iraq. No doubt the PM will win the vote. Such a pity there was no stomach for the fray from President Obama, when PM Cameron looked for support to give Assad a bloody nose 2 years ago.

In the past 24 hours the world’s equity markets have experienced a measurable shake down and it may just be that September will have been a negative month for investors. There was a toxic compendium of news items that shook the rafters of Wall Street yesterday – Geopolitical issues over Iraq & Syria, reprisals by Russia that threatens to seize assets, US Durable Goods falling 18% last month and a possible hike in US interest rates manifesting itself earlier than originally expected. The DOW shed 254 points with consummate ease – 1.54%, with the S&P 500 taken down by 1.62% (-1.9% so far in September) and the NASDAQ by a short 2% (-2.5% this month), thanks in the main to Apple losing 3.8% as a result of issues with its iPhone 6 and inadequate software update of its i.O.S.8.1. The Russell indices for SMES has seen the most vehement sell-off for small caps. The Russell 2000 has dropped 8% since 3rd July.

IG’S Chris Weston makes the following interesting observations – “Unlike other recent sell-offs of late, driven by moves in the US bond markets as Fed rate hikes increase, what we saw in Europe, the US and today in Asia is a classic ‘risk off’ move. In the US, the S&P printed a bullish outside day on Wednesday, suggesting the bulls were in firm control. However, this move lacked follow-through buying yesterday and, as the S&P 500 moved through the 50-day average, selling picked up on rumours of a sizeable sell program hitting the market. The bears will certainly be enthused by the fact the index closed not only below the September 15 low of 1978, but also on session lows.”

The climate in Europe was no better yesterday with the DAX being larruped by 1.57%, the CAC by 1.32% and the FTSE 100 by 66 points to 6639. It was only a few weeks ago that 7000 was being considered as a possible goal for the FTSE by the end of the year. Now it is just a smidgen under 300 points light of its record of 6930 in January 2000. Banks, miners, supermarkets, retail and drugs were larruped yesterday. That did not stop Sports Direct’s entrepreneurial CEO Mike Ashley from wading in to the ring to buy a ‘put-option’, which potentially exposes him to a £43 million loss in the very unlikely event of Tesco going to the wall. Few know the exact details of this transaction. Ashley has been there before with raids on Debenhams and has been known to have a tilt at the ring with spread betting when shorting HBOS with some success a few years ago. Asia experienced another downbeat session today with concern over China’s property market and the strength of the Dollar. Here is Europe markets may open flat, which may just be a rather whimpish bear squeeze rally.

Lloyds of London posted numbers yesterday and it is just possible that there could be liabilities of up to $600 million from the Malayan Airline disasters and the Libyan crisis. Mark Carney had a pop at the insurance industry, implying that he and the regulators will come down hard on insurance companies that give a distorted view of risk to decrease the amount of capital they are expected to hold. Both Mr Carney and Minouche Shafik also gave a clear signal that higher rates in the UK were on their way. There was much speculation as to who would succeed Sir Philip Hampton as chairman of RBS. I am championing the cause of Lord Myners who ticks all the boxes. However no one will listen to me. Other candidates include Richard Meddings, Sir Sandy Crombie, who is currently on the board, Sir Gerry Grimstone (Standard Life) Brendon Nelson and Lord Gus O’Donnell.

Lloyds Banking Group has sold another 11.5% of its stake in TSB – 57.5 million shares at 280p worth £161 million, leaving the Black Horse with a 50% stake to dispose of when the time is right.

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
http://www.panmure.com – 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
http://www.panmure.com

TODAY’S FAYRE – Thursday 25th September 2014

TODAY’S FAYRE – Wednesday, 24th September 2014

“Too hot, too hot!
To mingle friendship far is mingling bloods.
I have tremor cordis on me: my heart dances;
But not for joy; not joy. This entertainment
May a free face put on, derive a liberty
From heartiness, from bounty, fertile bosom,
And well become the agent; ‘t may, I grant;
But to be paddling palms and pinching fingers,
As now they are, and making practised smiles,
As in a looking-glass, and then to sigh, as ’twere
The mort o’ the deer; O, that is entertainment
My bosom likes not, nor my brows! Too hot, too hot!
To mingle friendship far is mingling bloods.
I have tremor cordis on me: my heart dances;
But not for joy; not joy. This entertainment
May a free face put on, derive a liberty
From heartiness, from bounty, fertile bosom,
And well become the agent; ‘t may, I grant;
But to be paddling palms and pinching fingers,
As now they are, and making practised smiles,
As in a looking-glass, and then to sigh, as ’twere
The mort o’ the deer; O, that is entertainment
My bosom likes not, nor my brows!”

William Shakespeare – playwright & poet – 1564-1616

I must have seen Verdi’s ‘Rigoletto’ thirty times, more often than not at the Royal Opera House – with the likes of Sherill Milnes, Ingmar Wixel, Peter Glossop, Piero Capucilli and Renato Bruson in the little role – also at the ‘Met’, at Holland Park and in Tokyo. Never have I seen empty seats at any these venues as I did last night. I suppose there comes a time when £220 a pop for a seat is a bit too rich for some of the public’s blood, particularly if the main singers are unfamiliar to the audience. Those who stayed away have missed an absolute triumph of a production.

The performances of Simon Keenlyside in the title role and Aleksandra Kurzak as ‘Gilda’ were electric – both full of remorse, passion and jealousy in almost equal portions coupled with exquisite singing – as good as anything I have seen since Sherrill Milnes, Joan Sutherland and Luciano Pavarotti appeared in the 1976 production at the ROH – just superb! For choice the director and make-up people might have made Rigoletto look a little older. Saimir Pirgu as the licentious Duke of Mantua had delightful and lyrical belcanto tenor voice, but it was too small for the huge auditorium and the deep stage at Covent Garden. Surely there has never been a better ‘Sparafucile’ than Brindley Sherratt, whose rich bass voice was every bit as powerful as that of Martti Talvela, the giant Finn, who dominated base roles in the ‘60s and ‘70s. What a privilege it was to witness this rendition! – Unequivocally my favourite opera. I will never tire of it!

After 3 days of equity reverses, due mainly to a compendium of uncertainty created by bombing raids made by US coalition on Syria and Iraq, the damage to the world’s economy inflicted by sanctions on Russia, the inability of the EU’s economy to get out of second gear, tax inversion threats and China’s ailing economy. However yesterday investors on the Street of Dreams decided that this fall had gone far enough, unless it just turns out to be a ‘bear squeeze rally!’ Time alone will tell! The DOW added 0.9%, the S&P 500 0.78% and the NASDAQ 1.03%. Decent New Home Sales – up 18%; the best figure for 6 years – helped to buoy sagging confidence. Healthcare, retail and consumer stocks on rumours of decent holiday sales performed with aplomb with Bed, Bath & Beyond excelling adding 7.4% in value. Walmart also had a little run on the rails adding over 2%. Post the Obama tax inversion edict Pfizer is rumoured to have rattled Actavis’s chain about joining hands in holy matrimony. NIKE and MICRON TECHNOLOGY post interim results. Consumers have companied about software issues re Apple’s iPhone and whether it is robust enough!

RBS sold 25% of Citizens Bank yesterday at $21.50 a share in an IPO. Many thought shares would go on sale between $23-25. However there was a 7% premium initially and $3 billion is on its way to RBS’s coffers. It is hoped that this bank will do well, which will swell the taxpayers insatiable appetite to be repaid in full ASAP. It was ironic that news of RBS’S chairman Sir Philip Hampton served notice to leave the bank and head for the hot-seat at Glaxo SmithKline replacing the indomitable Sir Chris Gent – he of Vodafone fame a decade or so ago. Glaxo will be keen to restore its tarnished reputation post the $490 million fine imposed by the Chinese authorities for bribing doctors and hospitals. I sincerely hope that RBS heads for Lord Myners’s services. Whether he will do the job remains to be seen. However he ticks all the boxes. He was the minister responsible for RBS during the crisis. He is well known and respected in the corridors of political and commercial power and he is a successful financial heavyweight in every respect. To finish with banks, not only has Barclays had to recently contend with ‘dark pool’ allegations in the US, but the manner shares were purchased by Qatar during the credit crisis is under scrutiny.

Across the Channel the economic news is not good with some leading countries. France’s PMI data last month was the lowest experienced in 2014. There is also considerable concern about growth in Germany. This will not have escaped ECB’s Mario Draghi attention. He felt that unemployment was unacceptably high and that it may be necessary to let it be known that monetary policy may have to be loosened and who knows, though he and Merkel are fighting the prospect, QE may not be too far away in coming. Bank are struggling to recover, fresh capital is needed and the banking sector’s appetite for risk is waning and capital requirement costs for trading and for investment banking by the Central banks is prohibitive. Chancellor Osborne also had news ahead of the Conservative party conference starting this coming weekend that he could well have done without – an extra borrowing requirement of £11.6 billion.

The FTSE 100 rallied by 30 points yesterday to 6706. The news re Tesco was still dispiriting. Why are there no non-executive directors with retail experience? Why did Philip Clarke take responsibility for the role of FD when Laurie McIlwee left on 4th April – 5 months! Blackrock sold £150 million worth of shares. That send out the wrong message. The sooner the results of Deloitte’s investigation are posted the better. CEO Dave Lewis’s and FD Alan Stewart’s hands are more or less tied until then. Tesco also have a £2.6 billion pension fund deficit to deal with. RAC’s future may not be in an IPO. There is a possibility that Singapore’s GIC could step up to the plate.

In Asia China’s banks look as if they will offer fresh stimulus to the property market in the form of easier mortgage facilities. Shanghai Composite was up 0.78% at lunch, the Hang Seng was just below the Plimsoll line at -0.1% and the Nikkei on a softer Yen blazed the trail +1.28%. We expect a reflective opening in Europe this morning, – FTSE unch, DAX +12, CAC +5. Hennes & Mauritz have seen sales increase by 15% in the last 9 months and profits for the 3rd quarter were in line at SKR 7 billion – shares are up 17% in the past year.

Finally Bloomberg posted some interesting data in regards to shareholdings by company insiders. Only 7,181 insiders bought shares in their own companies so far this year through September 12, down 8% from a year ago, while 23,323 sold shares – approaching the worst buy-sell ratio since 2000.
This insider aversion for their companies’ stock is in sharp contrast to stock buybacks that their companies have undertaken. When it comes to using their own money, insiders have become very bearish, diversifying out of their companies, selling hand over fist. When it comes to using other people’s money, they have no such compunction: corporate share buybacks reached a near record in the first half. And for the trailing 12 months, according to FactSet, buybacks jumped 29% to $539 billion.

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
http://www.panmure.com – 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
http://www.panmure.com

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.

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TAX INVERSION – MAY NOT BE NECESSARY TO LOSE SLEEP!

Inversion Subversion : Strong language from US Treasury Secretary is not yet a game changer

Senior UK Economist – Simon French +44 (0)20 7886 2753
Overnight the US Treasury Secretary, Jack Lew, announced rules designed to limit recent growth in corporate tax inversions. This has profound implications for the UK Biotechnology and Pharmaceutical sector which has been the main focus of takeover activity. Well-documented UK-based inversion targets have seen their shares take a hit in morning trade – AstraZeneca & Shire both (>5%. However we remain bullish for consolidation in this sector that stands to benefit from a rapidly ageing population and a government that has fostered an accommodating corporation tax regime. A deal in the US Congress on tax simplification – a red line for Republicans to sign inversion legislation – would appear unlikely in an increasingly hostile environment leading up to and beyond the US mid-terms. As such we remain bullish that inversion opportunities have not vanished but must now adapt to a more hostile political backdrop.

Market update – THIS MARKET IS HANGING IN RAGS!

Today’s Fayre – Tuesday, 23rd September 2014

The little hedge-row birds,
That peck along the road, regard him not.
He travels on, and in his face, his step,
His gait, is one expression; every limb,
His look and bending figure, all bespeak
A man who does not move with pain, but moves
With thought—He is insensibly subdued
To settled quiet: he is one by whom
All effort seems forgotten, one to whom
Long patience has such mild composure given,
That patience now doth seem a thing, of which
He hath no need. He is by nature led
To peace so perfect, that the young behold
With envy, what the old man hardly feels.
—I asked him whither he was bound, and what
The object of his journey; he replied
“Sir! I am going many miles to take
A last leave of my son, a mariner,
Who from a sea-fight has been brought to Falmouth,
And there is dying in an hospital.”

William Wordsworth – poet – 1770-1850

So there was nothing new or particularly sensational about Ed Balls’s speech to the Labour party faithful yesterday. A little bit of ‘clobber the rich’ accompanied by some good housekeeping. All makes sense from his perspective. The problem is one would be mad to believe it in the long-term. The difference between this Labour party and the one from the Wilson/Callaghan dynasties is that the older generation was always happy to engage with the City, whereas this generation only wants to preach to the converted apart from trade associations – a very short sighted policy if you want to be ‘on-side’ with the country’s most important sector in terms of generating revenue for the exchequer! Irresponsibly I dare not even contemplate what Ed Miliband said today apart from saving the NHS, which ever political party has had at the top of their agenda for ever and a day!

This missive will be brevity personified, as it is Panmure’s results day with many meetings.

Hats off to M&S’S Marc Bolland for allowing Alan Stewart to join Tesco today, rather than forcing him to see out his contract! – Extremely sensitive response and a laudable gesture. However there was more pain for Tesco to feel with New York investors reacting adversely to the supermarket titan’s plight! – Down 4% at 12 noon!

When the ‘market opening’ was called up 10 points I had my doubts in the wake of geopolitical issues – particularly the bombing of Syria – and China’s indifferent economic data. Then of course President Obama’s threat to close up loopholes in the tax inversion system really rattled investors’ cage. Astra Zeneca felt the wheels of pain across its back – -5%; so did Shire -6% and Smith & Nephew -3.4%. Frankly with Obama likely to lose his majority in Congress, I doubt he would ever get that kind of regulation through, but clearly there is a real threat. At noon the FTSE was down by 90 points at 6682. The boards were a sea of red! Banks were down by between 1% and 1.5%. Retail was under the cosh – Sainsbury -4%, Morrison -2%, and AB Foods -2%. Tate & Lyle’s profits warning cost it dearly – -17%. Mining has been mixed thanks to Chinese PMI not looking dire – BHP +0.75% and Rio +1%.
There’s IG’s Brenda Kelly selling Jimmy Choo’s IPO on Sky – whatever next! Panmure Gordon, after encouraging results saw its stock up by 12%

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
http://www.panmure.com – 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.

MARKET UPDATE – TESCO & DEALS

Market update – Tuesday, 23rd September 2014

“Capitalism is the astounding belief that the most-wickedest of men will do the most-wickedest of things for the greatest good of everyone.” – John Maynard Keynes – economist – 1883-1946

Well at least we had the Tesco crisis to keep us going today. There has been a catalogue or litany of catastrophes ever since a few months before Sir Terry Leahy handed over to Phil Clarke in August 2011 after 32 years with Tesco and 14 years as its CEO. Clarke was at Tesco for 25 years. As we understand it, Chris Bush, the UK CEO and 3 colleagues have been temporarily relieved of their duties, pending an enquiry by Deloitte. Frankly I also want to hear from PWC and from Alan Stewart’s predecessor as CFO – Laurie McIlwee and Chairman. How did these profits get exaggerated by £250 million forcing profit forecasts to be dropped from £2.8bn for the year to £2.4bn?

Have there been issues with inventories. Have these accounting irregularities been going on for years? Tesco also had an unsuccessful sortie in the US with Fresh & Easy losing £1 billion. Also £1.3 billion was spent smartening their stores. Tesco have very little to show for it. Tesco has been in decline for 4 years with more than one profit warning. It looks as though Dave Lewis is a man of action; he needs to be, if the rot is to be stopped. Aldo and Lidl are under a wet sail. Tesco is down 8.5% today to 211p. These shares have fallen 43% in the last year and 44% since Sir Terry Leahy left.

There were some semblances of good news about today – Jimmy Choo may be up for a $1.4 billion IPO in London. Siemens took Dresser Brand, a rotating equipment manufacturer for $7.6 billion. Merck KgaA is set to acquire Sigma Aldrich of the US for $17 billion. The DOW is down 40 points Alibaba’s share price has slipped a smidgen to $92.05 from $93.30 and the FTSE 100 is down 50 at 6787.

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
http://www.panmure.com – 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.

TESCO – AN EXPLANATION OF ARITHMETICAL ABBERRATION PLEASE

TODAY’S FAYRE – Tuesday, 23rd September 2014

“O, that this too too solid flesh would melt
Thaw and resolve itself into a dew!
Or that the Everlasting had not fix’d
His canon ‘gainst self-slaughter! O God! God!
How weary, stale, flat and unprofitable, (135)
Seem to me all the uses of this world!
Fie on’t! ah fie! ’tis an unweeded garden,
That grows to seed; things rank and gross in nature
Possess it merely. That it should come to this!
But two months dead: nay, not so much, not two: (140)
So excellent a king; that was, to this,
Hyperion to a satyr; so loving to my mother
That he might not beteem the winds of heaven
Visit her face too roughly. Heaven and earth!
Must I remember? why, she would hang on him, (145)
As if increase of appetite had grown
By what it fed on: and yet, within a month —
Let me not think on’t — Frailty, thy name is woman!”

Hamlet, Prince of Denmark

William Shakespeare – playwright & poet – 1564-1616

‘Labour’s’ plans for the economy make really cheery reading on a Monday morning! Child benefit would rise by only 1% in the first two financial years if ‘Labour’ wins the next general election – less than the retail price index, currently 2.4%. The £400m saved would be used to help cut the deficit. Wow! I’m overcome – £400 million is chicken-feed!
Mr Balls is going to cut ministers’ salaries by 5% for 5 years and will hammer those earning £150k a year by reintroducing the 50p threshold. Goodbye incentives and cheerio to investment coming in from abroad! Though ‘Labour’ lead the ‘Tories’ in the opinion polls for the next election, surely there is not that much amnesia about? The financial nightmares of 2007-2010 will start to be rekindled on almost daily basis! Thank goodness I do not have to listen to this twaddle today!

After Alibaba’s hugely successful IPO opening when shares closed up 37.5% at $93.30 after hours, equity geeks, after a week of frenetic activity, had every reason to be at peace with the world Monday morning’s machinations have not been overly encouraging. China’s manufacturing data indicated that growth for the year was unlikely to breach 7%, which took Asian markets lower – CSI 300 in China is down 2.2%, the ASX by 1.3%, Hang Seng by 1.3% and the NIKKEI by 0.7%. Then there was bad news from Tesco. The new CEO Dave Lewis, who hardly has his feet under the table, announced that profits for the 6 months up until 23rd August 2014 had been over-estimated by £250 million, which lowered the forecast for the year to £2.4 billion from £2.8 billion. The shares initially fell by 11% to 204% – down 44% in the last year but rallied by 8.30am to 212p – down 7.5p at 8.45am.

Ever since Sir Terry Leahy vacated the ‘hot-seat’ back in March 2011, Tesco has been under the cosh. Phil Clarke was cloned rather intransigently in Sir Terry’s mould. Tesco should have recognised that a change in management style was essential. Tesco, despite having close to 30% share of the market, has never got to grips with the fact that Aldi and Lidl were ahead of the game in identifying what shoppers wanted and at what price. There has been no food inflation in recent times, but there has been a vicious price war. So sales have been dropping for nearly 3 years. Consequently profits are on the slide.

Dave Lewis, the CEO who replaced Phil Clarke, has hardly got his feet under the table, fresh from Unilever, when ‘lo and behold’ there is an irregularity in the books. Profits for the six months to 23rd August seem to have been over stated by £250 million, resulting in the year’s forecast being lowered from £2.8 billion to £2.4 billion. We understand that 4 executives have been suspended. Mr Lewis refused to confirm that Chris Bush, quite recently appointed CEO of the UK, was amongst those temporarily stood down. If that is the case there is speculation that Robin Terrell will take over.

What the market wants to hear is – where is Laurie McIlwell the former FD, recently replaced by Alan Stewart from M&S? He must give an account of himself to placate the market, which is displeased with TESCO’s arithmetical aberration. Shares fell by 11% and at 9.45am they are down 9% at 209p. In the last year Tesco’s shares have fallen by 43.5%. It would be great to have some reassurance from Chairman Sir Richard Broadbent.

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
http://www.panmure.com – 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.

TODAY’S FAYRE – REFERENDUM WAS DAMAGING!

TODAY’S FAYRE – Sunday, 21st September 2014

“Half of my life is gone, and I have let
The years slip from me and have not fulfilled
The aspiration of my youth, to build
Some tower of song with lofty parapet.
Not indolence, nor pleasure, nor the fret
Of restless passions chat would not be stilled,
But sorrow, and a care that almost killed,
Kept me from what I may accomplish yet;
Though, half way up the hill, I see the Past
Lying beneath me with its sounds and sights,–
A city in the twilight dim and vast,
With smoking roofs, soft bells, and gleaming lights.–
And hear above me on the autumnal blast
The cataract of Death far thundering from the heights.”

Henry Wadsworth Longfellow – novelist & poet – 1807-1882

David Aaronovitch, the celebrated “Times” feature writer sent out this classic ‘tweet’ on Friday – “50.001% ‘Yes’ would have meant Scottish separation in perpetuity. Apparently a ‘No’ win by 10.6% lasts only until the Yes campaign wants it to!” – Many a true word spoken in jest.

How astonishing that just over 5% (3.6 million people) of the total population of the UK – 64.1 million as at the last census in 2013 – were called upon to make such a momentous democratic decision and 3.1% of the UK’s population decided it. That cannot be right!

Many people felt that last week ‘Scottish Referendum’ vote was a great week for democracy. Sadly I felt that it was a shambles. The whole campaign was unbelievably ineptly handled by Westminster, resulting in one of “Yesterday’s heroes” – Gordon Brown – being taken out of mothballs to give a quite brilliant and passionate speech, which may just have saved the Union’s bacon. Whether the PM gave the former Labour leader an unambiguous mandate and an open cheque book for unconditional freebies to placate Scottish voters remains to be seen. All will be revealed next week during the Labour party and Conservative party conferences. The Conservatives are already at loggerheads over the PM’s initiative to throw in a change to the voting system for issues concerning England, which has horrified the opposition. Clarification is required as it appears extra devolution concessions for Scotland goes in tandem with the PM’s agenda for England and maybe the same applies to Wales and Northern Ireland.

What is absolutely clear is that this referendum may have been extremely damaging for the UK. The UK looks far from united politically and the positive perception the rest of the world may have held towards UK PLC as a business partner or a country to invest in, may well have been impaired. Some serious work will be required to shore up this breached dam of trust!

On Friday after the rather comfortable ‘NO!’ result was posted, the Pound soared against the Dollar by almost 2 cents and the FTSE looked as if it might open up 75 points to the good with banks, retail and insurance companies blazing the trail. At the close of business the FTSE 100 was only up 18 points and the Pound closed more or less flat on the day. The referendum result may have saved the UK’s bacon by snatching victory from the jaws of death, but from a business perspective its hull was breached quite measurably. This is a real shame as the economy has been improving all the time, unlike our brothers in the EU.

We had decent employment data last week and encouraging retail sales. The only blight was poor wages growth. Many believe that the positive referendum results will pave the way for the BOE to consider raising rates in early 2015. Mark Carney’s MPC committee may be forced to reconsider, if this recovery process experiences a setback in the autumn and winter. Chancellor Osborne will also be on his metal as Labour throw goodies at business in the form of business rates cuts of up to £1 billion. Conversely the ECB/EU problems seem to be getting worse. Poor bank loan demand may trigger the introduction of QE by Mario Draghi sooner rather than later.

After this embarrassing interlude maybe we should consider the real geopolitical problems, which affect the world, such as those surrounding Syria, Iraq, IS and the sanctions imposed by US, EU and the UK towards Russia and how fearful the ramifications might be. Our little parochial spat is important but pales in to insignificance in terms of global importance.

At the end of this last momentous week the S&P 500 was up 1.3%, the FTSE 100 by 0.4%, European stocks by an average of 1,3% and Tokyo’s Nikkei by an incredulous 2.3%, based on “Abenomics baloney!” Alibaba deserved to grab the main headlines for the week with its hugely successful IPO, which raised $25 billion + with the share price closing up 37% on the opening day at $93.30. This company is now valued at $200 billion. Softbank, Yahoo! and Jack Ma have all made a King’s Ransom from this deal and good luck to them. I doubt Goldman Sachs and others advisors are suffering too badly either. Apple sold 4 million iPhone 6 on the first day – a huge relief to CEO Tim Cook. Oracle shares fell 5% after Larry Ellison served notice to step down after over 30 years with the company. Exxon’s drilling in Russia Arctic is on hold thanks to sanctions. How long now before BP starts to suffer?

In the UK, it was really all about the stocks that might be affected by this wretched referendum. To some degree Standard Life, RBS, Lloyds, Babcock International and Diageo regained some poise. GSK was fined $490 million by the Chinese authorities for bribing their doctors. Can Sir Andrew Witty survive this crisis of confidence? Phones 4U went into administration thanks to 02, Vodafone and Orange/T-Mobile withdrawing custom. Vodafone have agreed to employ 900 Phones 4U staff. Jimmy Choo is rumoured to be announcing IPO plans next week. In closing it will be interesting to see whether rumours and initiatives surrounding InBev, SAB Miller and Diageo come to any fruition or is it just hot gossip?

Next week’s UK company results – Monday – Dairy Crest, Tuesday PZ CUSSONS, CLOSE BROS, REGENERSIS, AG BARR, CARNIVAL, Wednesday – TOPPS TILES (TS), UNITED UTILITIES (TS), UK MAIL (TS), Thursday – LLOYDS OF LONDON, HENNES & MAURITZ, M&B (TS), WS ATKINS (TS).

US – Monday – AUTOZONE, Tuesday – AAR CORPORATION, Wednesday – KB HOMES, JABIL CIRCUIT, Thursday – NIKE, MICRON TECHMOLOGY, Friday – FINISH LINE

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
http://www.panmure.com – 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
http://www.panmure.com

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.