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.

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