TODAY’S FAYRE – Friday, 5th September 2014

So David Lammy, MP for Tottenham, may stand as Labour Candidate to be the next Mayor of London. So let’s hope Dame Tessa Jowell rises to the challenge to take Mr Lammy on! As a Labour candidate she would have the charisma to unite Londoners!

Though it appears that Lord Hill of Oareford has cross-party support to become the UK’s European Commissioner, his Eurosceptic stance may lead to his candidacy being rejected! – If so, this is another act of protectionism and resistance to any radical changes this country demands from the EU before 2017!

Yesterday, there they all were doing ‘ring-a-ring-a-rosies’ around Celtic Manor with President Obama and PM Cameron joined at the hip over ‘IS’ terrorism and Ukraine and quite rightly so. Then enter stage left the preposterous judge from the New Orleans Court slapping another $18 billion fine on BP for gross negligence and for being wilfully reckless. I have to say that when it comes to commercial cooperation and friendship, with friends like the US government, who needs enemies? I think this fine is disproportionate with the crime. It also appears to me that laying 67% of the blame for Deepwater Horizon disaster at BP’s feet and only 30% at Transocean’s and 3% to Halliburton is also discriminatory!

Anyway it does not matter what I think, the facts remain that this fine is likely to be confirmed. BP only made contingencies for at $4 billion, allowing the cost of 4.3 million barrels of oil. BP’s shares fell by 30p yesterday. Colin Smith, Panmure’s energy guru believes the cost of this fine is the equivalent of about 49p of the share price – not 30p. PLEASE CALL Colin (020 7886 2965), to have further ‘meat put on the bone!’

Though BP will appeal, the fact that its track record in Alaska and Texas City in recent years is less than exemplary, there may be other penalties which could manifest themselves in the months to come – probably in January. This news is double whammy for BP. I suspect Bob Dudley’s team knew BP was vulnerable in the US, particularly as this 2010 Gulf disaster follows in the wake of other disasters in Alaska and Texas City under Lord Browne’s stewardship – hence the tie-up with Rosneft. The benefit of this tie-up is sadly futuristic. What amazes me is the unbalanced thinking behind this ‘Get BP!’ at all costs. The irony is BP has more US investors than any other. 70% of its business is US based and the company employs over 30,000 people.

Enough said on interest rates. The ‘no change’ decision will no doubt be accompanied in next week’s minutes by protestation votes for a hike from Martin Weale and Ian McCafferty. However these exhortations may fall on deaf ears thanks to wages in the UK falling by 0.6% in the last 3 months. How can interest rates be increased on that news and the fact that the EU’s economy is in a dire state of disrepair! As for ECB’s Mario Draghi’s decision to provide a facility of up to €500 billion to buy asset backed securities, rather than introduce QE now; well, that was no surprise, though the market was caught on the hop with the drop in the repo rate from 0.15% to 0.05% and the deposit rate from -0.1% to -0.2%. This initiative won’t work, but if it makes Draghi feel better; then so be it. EU banks need more capital; so why should they lend money indiscriminately if they are uncertain of repayment until their balance sheets have been repaired?

Non-Farm payrolls today should confirm that another 225K jobs – ish were created in August and the unemployment rate could fall to 6.1% from 6.2%. The ADP Index of 204k was slightly disappointing yesterday, though the narrowing of the US trade gap to $40.5 billion was encouraging.

The Street of Dreams had a flat day, closing a smidgen below the Plimsoll line, thanks to energy shares like Exxon & Chevron losing ground. This performance followed in Europe’s footsteps of an upbeat equity session on the back of ECB stimulus packages, though the Euro fell like a stone – DAX +1%, CAC 1.65%. The FTSE 100 did not perform courtesy of BP! In London yesterday Standard Life grabbed the yellow jersey having sold its Canadian operation for £2.2 billion. This move added 8% to Standard Life’s share price. Betfair posted good numbers but the remuneration packages were challenged. SuperGroup posted a 3.7% like for like drop in sales but the CEO insists that the show is back on the road. This morning LSE’s shares fell by 2.5% thanks a slug of shares being placed on behalf of Dubai. At 9.18am the FTSE 100 was down 10 points. Let’s hope there is a ceasefire in Ukraine. I shall not hold my breath!

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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