Monthly Archives: October 2014


TODAY’S FAYRE – Thursday, 30th October 2014

“He drowsed and was aware of silence heaped
Round him, unshaken as the steadfast walls;
Aqueous like floating rays of amber light,
Soaring and quivering in the wings of sleep.
Silence and safety; and his mortal shore
Lipped by the inward, moonless waves of death.

Someone was holding water to his mouth.
He swallowed, unresisting; moaned and dropped
Through crimson gloom to darkness; and forgot
The opiate throb and ache that was his wound.
Water – calm, sliding green above the weir.
Water – a sky-lit alley for his boat,
Bird-voiced, and bordered with reflected flowers
And shaken hues of summer; drifting down,
He dipped contented oars, and sighed, and slept.

Night, with a gust of wind, was in the ward,
Blowing the curtain to a glimmering curve.
Night. He was blind; he could not see the stars
Glinting among the wraiths of wandering cloud;
Queer blots of colour, purple, scarlet, green,
Flickered and faded in his drowning eyes.

Rain – he could hear it rustling through the dark;
Fragrance and passionless music woven as one;
Warm rain on drooping roses; pattering showers
That soak the woods; not the harsh rain that sweeps
behind the thunder, but a trickling peace,
Gently and slowly washing life away.”

Siegfried Sassoon – poet & soldier – 1886-1967

Having never seen a ‘Harry Potter’ film or read a JK Rowling book. I have decided to take my grandsons to see ‘Harry Potter’s World at Warner Bros Studios – the only Hollywood studio to own and operate a production facility in the UK, following a £100 million-plus investment into the re-building and expansion of their operation, at Leavesden, near Watford. I’ve never been into witches, goblins and other such mumbo-jumbo. I am happy to be a convert, but don’t hold your breath! An update before too long!

The only people who were not aware that the UK had a major energy crisis on their hands were its politicians. Labour had no plausible policy and Messrs Huhne and Davey seem to have been an unmitigated disaster at the Department of Energy. Ed Miliband knows as much about energy as I know about non-ferrous welding if he intends to freeze prices. Against the uncertainty of that climate no energy company will want to invest.

Nothing like enough attention has been spent developing gas, which is relatively cheap and clean. The cost of decarbonising is absolutely prohibitive. By 2020 I am reliably informed that it could cost about £500 billion or £1500 extra for each family per annum. I could forgive wind farm energy for being ugly, but when it is so expensive as well; well that is just too much! Unless something very drastic in terms of policy changes is implemented there is every chance that the lights will go out, thanks to inadequate investment in our power stations.

A cynic’s interpretation of the FOMC’s achievements –

“We completely screwed up increasing the FED’s balance sheet to over $4 trillion. We regret not allowing the market to correct instead of mortgaging the future to the point that every generation’s prospects henceforth will be lower than the one before, until the end of time. We are stuck like pigs and have no choice but to continue along the same path, as we believe a dismal future is better than no future at all.”

Last night as expected the FED said ‘sayonara’ to quantitative easing by withdrawing the final $15 billion facility. Rates are likely to remain low for a considerable period of time. The tone of the accompanying comments was not as dovish as many had hoped. It appears that conditions are improving in the Labour market, with unemployment already down to 5.9%. The outlook for inflation is also seen as benign. The key to the FED’s statement was interest rates. Now the next game in town is guessing the hike date – July 2015 or could it be earlier – perhaps March? The under-performance in terms of growth by much of the rest of the world will probably be a contributing factor to that question.

What of the market’s reaction? I think the Street of Dreams just wanted to reflect, having had a particularly ebullient run on the rails during recent sessions. The DOW and S&P closed just below the Plimsoll line and the NASDAQ eased by 0.33%, much of that loss was exaggerated by Facebook losing 6% in value. Chartists and geeks are obviously concerned about the strength or softness of equities’ belly without its ballast (QE). However those that know about these things tell me that historically equity ‘sell-offs’ generally take place about 18 months after a major upward move in interest rates. So maybe we have time. Today US GDP data may enlighten us a little more as to the robustness of the US economy. 3% is the figure bandied about following the stellar number of 4.6% for the 2nd quarter.

The fact that the Serious Fraud Office is launching a criminal investigation into the accounting affairs of Tesco, which triggered an over-statement of profit to the tune of £263 million for the quarter ending August 2014 comes as no surprise at all! Most people’s concern is the length of time it will take. A 2-year investigation programme by the SFO could damage the recovery process. If, however, Deloittes are close to submitting their findings from their independent investigation to Dave Lewis and the FCA, this could well speed up the process. Tesco’s share price has halved, wiping about £12 billion off its value; so investors venting their spleen anymore seems a pointless exercise. However without a quick conclusion to the SFO’s deliberations, it will be very difficult for Tesco to rebuild their image and restore the consumers’ trust particularly as Lidl and Aldi are still rampant cutting prices with a really smart business models in place. Tesco needs a fresh business plan, innovative marketing and probably needs to sell some assets to shore up the balance sheet. I think Tesco is a brand that people want to love, but any delay could be very damaging.

Yesterday was a good day for the FTSE 100 which added 51 points to 6453. The miners got their act together; so did Tui Travel. Next had a modest setback with its trading statement. The shares were initially down 3% courtesy of sales falling short thanks to clement weather. Sales only increased by 5.4% instead of the expected 10%, which may cost £25 million in revenue. However the shares eventually settled down just 0.33%. Mortgage lending fell to its lowest level for 14 months with only 61k applications considered. With house prices starting to ease – even if only temporarily – it seems unlikely we can expect a rate increase here in Old Blighty until well in to next year. A lack of wage inflation is worrying.

Asian markets seemed relative receptive to the FED’s policy with to Australia ASX adding 0.8% and the Nikkei the same towards the close. Shanghai was also up 0.8% at lunch though he Hang Seng was down 0.7%. Samsung we hear seems to have lost ground in the handset market to its peers and may post its worst results for some time.

Barclays posted its results today against the threat of even more litigation in the form of a Saudi business man suing for £10 billion for supposedly a fraudulent approach to obtaining a banking licence. Though Barclays passed the EBA’s stress test with flying colours, it seems likely that he BOE/PBA may want Barclays to increase its leverage ratio from 3.5% to nearer 4%. Anyway for 9 months Barclays increased its pre-tax profits by 5% to £4.93 billion. Expenses have also been cut by 7%. However, provisions are still substantial – PPI +£170 million – FX investigations £500 million and interest rate issues £160 million. Tier One Capital came in at an acceptable 10.2%. Investment banking income fell by 13% and its profit base fell by 38%. This is not surprising since the bank’s policy has been cut its presence. Barclays in the process of cutting 12000 jobs announced a few months ago – half in the UK.

Jorma Ollila, chairman of Royal Dutch Shell will stand down in 2015 and will be replace by Charles O Holliday, formerly with DuPont and currently a director of Bank of America. For the 3rd quarter Shell posted a pre-tax profit of $8.1 billion and spent $8.5 billion on capital projects. Aviva, Cairn Energy, St James’s Place, Kazakhmys and Smith & Nephew also post results today.


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.


C&C’s results did not quite meet expectations today. Perhaps CI&C’s empire may need more time to mature in the light of its recent $350 million acquisition of Vermont, before making an assault on Spirit Pubs. Perhaps the way is now clear for Greene King to complete this very synergistic acquisition.

PANMURE’S SIMON FRENCH makes telling comments on mortgage applications & rates

Simon French makes these very telling observations in response to falling mortgage applications and interest rates in general

This morning’s Bank of England data on mortgage approvals provided further signs of a slowing in the UK Housing market. There were just over 61,000 mortgage approvals in September (Chart 1) – the lowest since June 2013. Credit conditions however remain extremely supportive with the interest rates on outstanding fixed and variable rate mortgages continuing to fall (Chart 2). With exceptionally loose monetary conditions set to continue well into next summer there is, as yet, little sign that UK households are becoming stretched in repaying mortgages in the way that they were in the lead up to the GFC (Chart 3). The Price Earnings ratio of UK Housing (Chart 4) therefore has become a less reliable indicator of overstretched households than in previous housing cycles. We remain cautious however for the medium term prospects for UK Housing given the political risk associated with 2015 General Election, valuations that ran ahead of economic fundamentals in the first half of 2014 and the risk that households are adjusting budgets to these lower servicing costs – making them more sensitive to rate rises when they eventually arrive.


TODAY’S FAYRE – Wednesday, 29th October 2014

“SHE walks in beauty, like the night
Of cloudless climes and starry skies;
And all that ‘s best of dark and bright
Meet in her aspect and her eyes:
Thus mellow’d to that tender light
Which heaven to gaudy day denies.
One shade the more, one ray the less,
Had half impair’d the nameless grace
Which waves in every raven tress,
Or softly lightens o’er her face;
Where thoughts serenely sweet express
How pure, how dear their dwelling-place.

And on that cheek, and o’er that brow,
So soft, so calm, yet eloquent,
The smiles that win, the tints that glow,
But tell of days in goodness spent,
A mind at peace with all below,
A heart whose love is innocent!”

George Gordon, Lord Byron – poet – 1788-1824

Smaller companies are the main beneficiaries in a bull market due to a lack of liquidity. In a bear market they suffer more! The Aim 100 index has fallen 21.3 per cent this year, but rebounded 3.3 per cent last week, after seven straight weeks of losses.

On the way to Spain I sat next to Dennis Waterman, the actor famous for his portrayal of Terry in ‘Minder’ as well as John Thaw’s side kick in ‘The Sweeny’ and more recently in ‘New Trick.’ He never addressed a word to me and why should he? However he read the Daily Mail and the Telegraph from cover to cover. I think he might vote Conservative!

The vibes from the current FOMC meeting seem to be relatively dovish, which may well explain why equities have been on such good terms with themselves in the past few sessions, particularly yesterday, when the DOW rose by 1.13%, the S&P 500 by 1.19% and the NASDAQ by 1.85%. FED chairman Janet Yellen is expected to announce that the final $15 billion monthly QE facility will be withdrawn. Market activists and cognoscente in this arena tell us that rates are unlikely to go up before July 2015. What we don’t know is whether the withdrawal of QE will adversely affect the value of equities. US equities since 9th March 2009 have outstripped GDP by a ratio of five to one! Certainly the quality of earnings was decent yesterday and the improvement in Consumer Confidence gave credence to the strong rally.

Though Pfizer’s sales were down 2% at $7.6 billion, CEO Ian Read certainly left his calling card to the effect that Pfizer was not yet done with Astra Zeneca and there was more to talk about. After hours Facebook’s numbers did not pass muster. The outlook for growth has contracted and costs are increasing. So investors vented their spleen on Facebook by taking the shares down by 9.5%, despite a 90% increase in profits to $806 million. Also Linkedin fell by 2%, Twitter by another 2.2% and Amazon by 0.88%.

Yesterday the FTSE added 38 points to 6402. Miners were in good form. Punters latched on to Vodafone +3% over loose chat about the acquisition of TalkTalk. Investors in Salamander Energy, who are probably ‘under-water’ enjoyed the 6% rally, as its shares flirted with 100p on takeover gossip. The Lloyds PR bandwagon was all about damage limitation on its 9000 redundancy plans. Initially the shares were easier by 5%, but at the close they were up 0.61%. Job done, but I think the policy is a ‘nonsense!’ How can you evaluate your customer if you rarely if ever meet him/her? I even found myself in agreement with Dr Vince Cable that no town/conurbation should be left without a branch of a bank. Now there’s a surprise!

Standard Chartered Shareholders were in no mood to accept the 16% fall in profits without retribution. The shares were clattered by 10%. Peter Sands must now be under the cosh. Considering the cumuli nimbus clouds that hang over BP’s assets in the Gulf of Mexico and in its investment in Rosneft plus the 20% drop in oil prices, the market seemed happy with yesterday’s numbers. On the economic front Deputy Governor Sir Jon Cunliffe joined the BOE bandwagon in stating that interest rates were unlikely to rise in the foreseeable future, endorsing similar comments made by his colleague Minouche Shakik. The lack of wage inflation continues to be a concern. Today BOE banking lending figures are expected to filter in to the domain.

This morning Deutsche Bank posted a loss of E94 million for the last quarter. This German titan has been heavily involved in litigation and was rather smug about getting through the stress test. Investors took a different view this morning taking the stock down 2% in early skirmishes, despite the implementation of management changes. NEXT’s sales were a tad disappointing due to the clement warm weather – sales were up 5.4% in the last quarter against hopeful estimates of 10%. Retail sales were up 2.4% and the Directory by 9.7%. Shares were easier by 3%. This stock has been a barnstormer in the last 3 years up from £27 to £63! Well done Lord Wolfson! We suspect this is a temporary aberration. Finally Standard Life saw inflows increase by £3.4 billion to £290 billion. The market perceived this performance as rather neutral – shares down 1%.

Next week the following UK companies post results – Thursday – AVIVA, BARCLAYS, ROYAL DUTCH SHELL, ST JAMES’S PLACE, CAIRN ENERGY, KAZAKHMYS, SMITH & NEPHEW, Friday – DIRECT LINE, RBS.


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.


TODAY’S FAYRE – Tuesday, 28th October 2014

“My heart is like a singing bird
Whose nest is in a water’d shoot;
My heart is like an apple-tree
Whose boughs are bent with thick-set fruit;
My heart is like a rainbow shell
That paddles in a halcyon sea;
My heart is gladder than all these,
Because my love is come to me.

Raise me a daïs of silk and down;
Hang it with vair and purple dyes;
Carve it in doves and pomegranates,
And peacocks with a hundred eyes;
Work it in gold and silver grapes,
In leaves and silver fleurs-de-lys;
Because the birthday of my life
Is come, my love is come to me.”

Christina Rossetti – poet – 1830-1894

The UK’s former heavyweight boxing champion and world heavyweight aspirant, David Haye, was taking in the rays at the Hotel Principe Felipe in La Manga last week. He looked well but was carrying a bit of condition and I thought I saw the semblance of a ‘Derby!’

When I have been away for a week, I feel like a lamb to the slaughter, when it comes to getting a grip with markets. I have little ‘feel’ for market sentiment and more often than not I get lulled in to a sense of false security. Last week’s rally was made understandable with Ebola looking as if it might have come back on the bridle and with 3rd quarter earnings looking not too bad with 79% of those who have reported beating expectation and 61% of them beating sales forecasts, contributed to market momentum. Finally, with the EU threatening to put in some stimulus packages, even if there is little likelihood of any agreement on full blown QE, investors were happy to latch on to the perception that the ECB was attempting to get its act together for the good of the EU economy.

However, today supposedly signals the end of QE in the US with the final $15 billion facility being withdrawn tomorrow at the FOMC meeting. Since 9th March 2009 the S&P has rallied by an average of 4.7% per quarter – way in excess of GDP. Also that is an increase of about 180% since that fateful day when QE was introduced. The FTSE 100 has only rallied by about 65%. Could the withdrawal of QE trigger a major pull back? Let’s face it the recovery is hardly breath-taking, in its magnitude.

It strikes me that the EU’s timing in demanding a E1.9 billion surcharge from the UK looks like political suicide from all quarters, particularly as the request had hardly been made when the rather nebulous EBA banking stress tests were posted. Initially there were 25 out of 130 failed to pass muster. After some capital raising exercises there just 13 banks looking a little light and they have 9 months to get their act together. To cynics like me the whole exercise looks like a bit of charade. The perception the market has held for some time now is that the banks in Europe were about E200 billion light of capital. Efforts have been made to sort this shortfall out, but one gets the impression it is just semantics. There is a long way to go with the unemployment rate stuck at least 11%, with every likelihood that it will rise further.

Of the 25 banks that failed the EBA test, there were 9 Italian banks with Monte Dei Paschi di Siena, the oldest bank in the world, looking as though it was E2.1 billion light of the capital requirement criteria, despite having been bailed out for E5 billion a couple of years ago. Monte Dei Paschi lost nearly 20% of its equity value on that news. There was talk of either UniCredit or Intesa stepping up to the plate as the white knight in shining armour, but I don’t expect them to fall over each other in excitement. The market’s mood yesterday was negative in response with banks leading the way south – UniCredit -3.4%, Intesa -2.5%, Societe Generale both -1% and RBS and Lloyds both -2% at the close. The FTSE 100 ended the session down 25 points at 6363.

There was also a compendium of interesting titbits of news yesterday. Chiquita showed intention to be bought for $682 million by Brazil’s Grupa Cutrale. Partnership Insurance’s CEO Steve Groves was told that the FCA’s investigation had been called off. Denis Holt former executive director of Lloyds Bank and former deputy chairman of Bank of Ireland has been made chairman of Cooperative Bank. Salamander Energy has been talking to Spain’s CEP and Jynwel Capital and will consider a 103p bid. Salamander’s shares were up 16.5% yesterday.

Yesterday markets closed quite flat on the Street of Dreams. Merck posted numbers better than expectation thanks to cost cutting. Amgen also beat expectations. These results were nullified by disappointing US housing and manufacturing data. After hours Twitter fell by 11% to $43.22. Tweeters were up 23% to 284 million but tweeting was down – 181 billion tweets. The outlook was not considered to be that buoyant. Allergan’s results may well force Valeant to increase its $40 billion bid for the Botox titan.

This morning BG Group posted numbers in line. Standard Chartered Bank posted a 16% drop in profits, with a cost in closing its presence in Korea and impairment charges taking their toll. How long can CEO Peter Sands hang on? BP posted a drop in profits from $4.4 billion to $3.9 billion on the same quarter. Oil prices falling 20% will have contributed. Also BP’s 20% stake in Rosneft was less profitable with profits down from $808 million to $110m for the same quarter last year. The dividend was increased by 5.3%. The Gulf disaster’s cumulative cost remains unchanged at $43 billion. UBS’s numbers were disappointing – third quarter profits coming in at CHF 762 million with litigation provisions of CHF1.8 billion. These provisions are expected to improve.

Finally Lloyds posted a 35% increase in profits for 9 months to £5.9 billion and for the last quarter profits came in at £1.614 billion. There was another £900 million PPI charge bringing the total to £8.9 billion! Though Lloyds was close to not meeting the criteria for the EBA stress testy, it is fair to say that Tier One Capital came in at 11.1%. However 9,000 redundancies over the next 3 years will not be popular; nor will the closure of 150 branches. Yes we live in a digital age where internet banking rules OK. However banking is a service industry and until such time as bank managers get to know their clients well, how can they be expected to make rational and measured judgement to loan requests. This policy is insane. Also older people have an innate fear of the internet. Why can they not be accommodated? This morning markets were quite upbeat on reasonable results and a lack of adverse data.

Next week the following UK companies post results – Wednesday – STANDARD LIFE, NEXT, Thursday – AVIVA, BARCLAYS, ROYAL DUTCH SHELL, ST JAMES’S PLACE, CAIRN ENERGY, KAZAKHMYS, SMITH & NEPHEW, Friday – DIRECT LINE, RBS.


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.


TODAY’S FAYRE – Sunday 19th October 2014

“I have been here before,
But when or how I cannot tell:
I know the grass beyond the door,
The sweet keen smell,
The sighing sound, the lights around the shore.

You have been mine before,
How long ago I may not know:
But just when at that swallow’s soar
Your neck turned so,
Some veil did fall—I knew it all of yore.

Has this been thus before?
And shall not thus time’s eddying flight
Still with our lives our love restore
In death’s despite,
And day and night yield one delight once more?”

Dante Gabriel Rossetti – poet – 1828-1882

‘Lunch with the FT’ has always been a particular favourite of mine, especially if I am really interested in the person, who is being interviewed. This week it was Kevin Petersen, who was being wined, dined and interviewed by Matthew Engel at Zuma in Knightsbridge. I have not eaten there for a decade, but I would hardly call it an intimate restaurant; nonetheless Matthew Engel seemed to get the best out of him, which is more than can be said for the ECB and its managers. Of course KP is arrogance personified, truculent and moody; but what a talent! Could the management not harness the talents of such a great player? It does not say much for their inter-personal skills that they consummately failed. All great sportsmen have egos! It’s just that KP’s is bigger than most. Like thousands of other devoted England fans, I miss his swashbuckling batting!

I was greatly heartened by Foreign Secretary Philip Hammond’s tough rhetoric towards the EU and its inability to get its economic act together. He implied that failure to do so could see the UK’s withdrawal. At last someone of standing has spelt the situation out unambiguously. Confidence in world leaders is at its lowest ebb in recent memory. In Germany only 15% say that they “trust” the professional group of politicians. One has to wonder just when will the German people start to say –‘Enough is enough!’? I am also delighted to hear that the UK is vehemently resisting adopting the EU’s draconian changes in the bonus systems for the banking fraternity, which in this country has a global presence.

Last week’s eclectic machinations, which pulled the plug on world stock markets for a few days, brought back memories of 2008/9. It was quite like old times! Hysterical traders seemed every bit as demented as they were in those dark days of the banking and credit crisis, though the rationale was very different from the threat to the collapse of the global banking system.

The remedial action taken by the Central banks by way of quantitative easing five years ago, which inexorably triggered the gargantuan rally of global stock markets, was the main contributory reason for the long-overdue correction, which manifested itself last week. Gains by the S&P of 159% and the FTSE by 70% in the past 5 years are by any standards are humungous and they cannot keep pushing on unchecked. Couple the continuing uncertainty over QE with global growth falling, serious issues over the EU’s inability to deal with dire economic conditions in Greece, Italy and even France and suspect stock market valuations all rearing their ugly heads at the same time, there was a ready-made explosive cocktail to bring about a measurable retrenchment! Markets at these levels looked unsustainable. The fox had to be put in to the chicken coup for market protagonists to regain a sense of proportion!

Looking at the net positions of many international bourses at the end of last week, one could be forgiven for thinking that investors and traders had witnessed anything more than some negative anxiety. The S&P 500 was down by 0.66%, the FTSE 100 by 0.47%, European stocks by an average of 1% and the NIKKEI was the exception to the rule, falling sharply by 5%. The fact that most US/European indices lost between 2.5% and 5% in the odd session during the week was shrouded and lost in the sharp rally at the end of the week, which transpired as a result of soothing comments by two Central banks on interest rates. The FED’s James Bullard – not a voting member in passing – felt that QE could be retained whilst imposing a pause on any pending rate hike whilst the rest of the world suffered, was plausible. Then the BOE’s brilliant Andy Haldane expressed his concern about the weaker global economy and the lack of wage inflation, which meant that rates were likely to remain low for some time for the ‘jobs-rich’ and ‘pay-poor’ recovery. He was quite gloomy about the future. He felt the climate had changed in the past 3 months. Many will recall that in August Governor Carney and the BOE had been quite hawkish about rates rising.

Oil fell also sharply with Nymex testing the $80 threshold before recovering strongly to $82.75. Brent rallied to $86.16 a barrel. Gold, by way of a hedge and stronger Dollar in recent times, was quite chipper at $1238 an ounce – up $15 on the week. For reasons best known to itself the Euro, after a dreadfully torrid time, was up 1.1% against the Greenback on the week.

Last week’s fearful gyrations coincided with the start of the 3rd quarter earnings season. Goldman and Morgan Stanley excelled. Citi and Wells Fargo passed muster but JPM missed, as did Google on Thursday. Netflix was larruped as investors were in an unforgiving mood – down a net 19%. In Old Blighty, Tesco, who suspended another 3 executives, pending the enquiry by Deloittes and Sainsbury were trolleyed as were energy and mining sector stocks, though they did regain some poise towards the end of the week. However there appears to have been evidence that a few Tesco managers misled its auditors about the level of sales and costs, which could have flattered the profitability of this supermarket titan. The outlook for Tesco’s profits for the 1st half of the year do not look promising for Thursday – maybe down 50% at £850 million.

Rolls Royce also had a day to forget on Friday with a profits warning. John Rishton said markets had become very challenging resulting in shares falling 11.5% – £2 billion in value. The £7 billion loss incurred by Shire when Abbvie pulled the plug on the takeover may have inflicted quite serious damage on some hedge funds, which may well have exacerbated the level of volatility in the FTSE 100 last week as some were forced to meet their obligations. BSKYB’s results were good thanks to digital sales. Next week is a huge earnings week on both sides of the pond and their quality will be closely scrutinised.

Advisers to Aldermore’s £800 million were wise to postpone the IPO in such torrid and volatile condition. Also there is a degree of anxiety and loss of appetite post TSB and Lloyds sales for bank shares in such an unattractive banking environment.

VIRGIN MONEY has been postponed until after 24th October (just raising £150m), BRITISH CAR AUCTIONS, COUNTRYWIDE & McCARTHY & STONE (yet another IPO for them) are in the pipeline. Also it would be advisable for EE (T-Mobile & Orange) to keep their aspirations for a £12 billion IPO on the back burner for the time being.

The market looks as if it might be suffering from an acute dose of indigestion. That does not mean the IPO market is no longer attractive. It means investors are price and value sensitive – in other words they are looking for a snip from BIG company offerings. They also want these IPOS to come on to the market when conditions are positive; if not at least benign! Jimmy Choo raided the market for just £545m. It had an international flavour and would have had some appeal to a specialised investors’ market. Its price hasn’t exactly leapt like the proverbial grilse – 144p at time of writing!



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.


Banks and to a lesser degree punters and traders have been running around like headless chickens today. Yesterday they felt that had the situation hacked – a sensible long-overdue 10-15% correction for equities. The banks admitted that they had ‘extracted the Michael’ vigorously, hanging on to the coattails of quantitative easing and the good humour of the Central banks who have provided a bountiful supply of cheap money to buy assets; allowing them to regain more than their fair share of lost ground since 9th March 2014. This facility provided a great platform to restore confidence after the credit crisis.

Since that fateful day the FTSE 100 has gained 68% and the DOW 159%. The market has had a ‘fix’ from the Central banks. This facility has nearly run its race in the US, though in the last few minutes we are hearing rumours from the FED that QE may not be completed on 28th October 2014.

Though QE, which is desperately needed to kick-start the recovery, has yet to be introduced in the EU, the rest of the world was contemplating ‘going cold turkey’ as the realities of a financially ill-disciplined EU fights the threat of deflation and recession, putting international bond markets under huge duress – German bunds, Gilts and reluctantly French bonds excluded. In the last 24 hours yields on 10 Treasuries have dropped like a stone 2.09%, Gilts to 1.98% and French bonds to 1.13%. However Italian bonds have shot up to 2.45% and that looks unrealistically low with Italy having little appetite to show more constraint thus acquiescing to the criteria required. Greece is a mess with its 10 year yield having shot up from 6.50% a couple of days ago to nudging 9%. The world really needs Frau Merkel to stop being insufferably selfish and come to the aid of the world’s recovery. It is high time she put the EU at the head of her agenda rather than just look after Germany’s needs.

In the US Industrial output last month was at its highest since November 2012. Initial jobless claims fell by 23k to 264k lowest since 2000 and Goldman Sachs beat the street with something to spare – eps $4.57 against expectations of $3.21. Early doors the FTSE was up 1%, then after the bond news it was down 2% and at 3.45 it is only down 0.58% at 6175, finishing the session down 0.25% at 6195. The Dow was down 0.44%. This level of uncertainty will carry on with stocks bobbing around like corks in a bath whilst political inertia prevails! Nymex breached below the $80 threshold.


TODAY’S FAYRE – Thursday, 16th October 2014

“I am monarch of all I survey;
My right there is none to dispute;
From the centre all round to the sea
I am lord of the fowl and the brute.
O Solitude! where are the charms
That sages have seen in thy face?
Better dwell in the midst of alarms,
Than reign in this horrible place.

I am out of humanity’s reach,
I must finish my journey alone,
Never hear the sweet music of speech;
I start at the sound of my own.
The beasts that roam over the plain
My form with indifference see;
They are so unacquainted with man,
Their tameness is shocking to me.

Society, Friendship, and Love
Divinely bestow’d upon man,
O, had I the wings of a dove
How soon would I taste you again!
My sorrows I then might assuage
In the ways of religion and truth;
Might learn from the wisdom of age,
And be cheer’d by the sallies of youth.”

Alexander Selkirk – poet – 1676 – 1721

After gloomy US economic data, particularly on the retail front, appeared on the Street of Dreams yesterday coupled with an average set of numbers from Bank of America Merrill Lynch, almost in unison the ‘sell’ button was pushed by the traders on Wall Street. I have not witnessed a shake-out of that nature since 2008 and before that at the time of ‘9/11.’ The DOW reacted like a yoyo, such was the volatility and at one point it was down 460 points – the best part of nearly 3%. Europe was already heading for the ‘chopping block’ with blood running down the streets of London, Frankfurt, Paris and all European capital cities – FTSE 100 -2.83%, DAX -2.87%, CAC -3.63%, MIB -4.4%, IBEX -3.59% and Greece -6.3%.

Towards the end of this rather torrid session in New York, markets regained some sort of poise with the DOW closing only down 1.06%, the S&P 500 down by 0.81% and the NASDAQ by a modest 0.28%. This stock market turbulence across the world was the culmination from a compendium of international imponderables – lack of EU growth plus an absence of financial discipline – Ebola, company valuations, shortfall of growth in China and global geopolitical instability. However above all else we have seen a QE nurtured market rally almost indecent as well as unrealistic proportions since 9th March 2009 – the S&P 500 by 175%! And the FTSE 100 by 69%! Surely this is a well overdue and healthy correction, rather than a crash? These indices cannot keep going up unless it is accompanied by requisite growth and improved company performances. Volumes in New York were way above average with over 12 billion shares changing hands on the Street of Dreams. It is also worth noting that the Euro 600 Index is down 11% since its high in June and the FTSE 100 is down 9.8% since its high at the beginning of September. This correction is not thought by many to be a cathartic, cataclysmic capitulation!

Despite the general sell off in London yesterday, which saw energy, banks, mining and retail stocks take a good hiding, much of the headlines were grabbed by the Abbvie/Shire deal, which saw Shire’s share price rise from £35 to £51 yesterday morning before trading. Abbvie wanted a re-think. Shire’s shares fell 28% to £36. Many market observers thought the deal was dead – well that’s what the share price told us. It was confirmed this morning that Abbvie would recommend that the plug be pulled on the acquisition of Shire. It is thought that Abbvie has its collar fingered by the US government not to indulge in tax inversions. So there were are! There will be some positions which require nursing, as Shire’s share price could fall by another 10% this morning. The fact that Rio turned out some decent numbers yesterday went unnoticed. The UK’s employment data which saw unemployment down from 6.4% last quarter to 6% last month – just 1.97 million unemployed hardly grabbed a headline. The only blight on those numbers was lack of wage inflation – +0.9%.

After hours in New York, Netflix posted profits which were almost double but below expectation and the subscriber figures appeared to be 700k light. Investors vented their spleen and took the stock down by 26% – $7 billion in value. Also Walmart sales will only grow between 2-4%. Shares dropped 4.6%.

This morning there may be some respite with the FTSE possibly opening up by 30 points. Roche, the Swiss pharmaceutical titan beat expectations. BskyB announced a 6% increase on revenues to £1.93 billion with profits for Q1 up by 11% to £316 million. The acquisition of Sky Deutschland and Italia are expected to be completed shortly. Diageo’s sales fell by 1.7% in their third quarter. Oil came under pressure again yesterday with Nymex falling to $80a barrel and Brent to $83 and change. The Pound came under pressure against the Euro and Dollar Cable $1.5918 and E/$1.2819.



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.

Market update – Heartbreak Hotel

I used the terminology ‘Bad Day at Black Rock!’ a few weeks ago – so repetition is not a good idea! – So let’s give Elvis a run on the rails today – ‘Heartbreak Hotel’ well that’s what it feels like. Just for the benefit of all market anoraks – this year the FTSE 100 is down 7%, FTSE 250 -8.5%%, AIM -19.2%. This ventures to suggest that markets are not liquid! Mind you in a bull market AIM and FTSE 250 would outperform the FTSE 100. Today is the first day for some time that you can visibly see sentiment turning sower. 10-year gilt yields have fallen from 2.13% to 2% and US Treasuries from 2.20% to 1.99% – unprecedented in 24 hours. Rates are clearly not going up in either country in the foreseeable future. The situation in the EU looks absolutely dire with Greece’s 10-year bond yield up from 6.85% to 7.45%. Many market observers think that France and Italy have also lost the plot. Mario Draghi could come galloping over the hill like a knight in shining armour, but will Frau Merkel let him do his job? It would appear not! China’s economy looks flabby with CPI falling again to 1.6%.

There is little to crow about. Sentiment has turned ugly. Insurers were the best performers down just 1.5%. Miners have had a good hiding down over 2%. Banks have been larruped – Barclays -4%, RBS -3%, Oils have had a torrid time with the oil price falling – Nymex at $82.20 – Royal Dutch Shell down 1.6%. Drug stocks have received some tap thanks to Shire’s parlous state of uncertainty – Shire is only down 23% at 3945p, having been down 30% – a loss of £7.5 billion in value. Even Tesco have received wheels of pain across their back – -2%, Next -1.6% and M&S -0.75%. It is a sea of ‘red’ out there – only Royal Mail in positive territory – +3%. At 3.40pm the FTSE was down 133 at 6267. The DOW in New York was light by 180 points. Conditions are exceptionally volatile with 718 million shares changing hands on the LSE with an hour to go – way above recent averages. Are we in a bear market? It still feels relatively like a controlled sell-off. However we could use some good news!

TODAY’S FAYRE – Wednesday 15th October 2014

TODAY’S FAYRE – Wednesday, 15th October 2014

“Between us now and here –
Two thrown together
Who are not wont to wear
Life’s flushest feather –
Who see the scenes slide past,
The daytimes dimming fast,
Let there be truth at last,
Even if despair.

So thoroughly and long
Have you now known me,
So real in faith and strong
Have I now shown me,
That nothing needs disguise
Further in any wise,
Or asks or justifies
A guarded tongue.

Face unto face, then, say,
Eyes mine own meeting,
Is your heart far away,
Or with mine beating?
When false things are brought low,
And swift things have grown slow,
Feigning like froth shall go,
Faith be for aye.”

Thomas Hardy – author & poet – 1840-1928

I have always been a great supporter of BOE and the Governor. However I must confess to being disappointed at Governor Mark Carney’s high-handed attitude towards bankers. Yes, regulatory controls are his domain and the retribution for mal-practices he wants the FCA to implement is for him and the Government’s to decide. But to attack bankers over ‘top-golf-club’ membership is ludicrous and frankly offensive. Where executives play their golf should be on no concern to him!

Looking at the performance of most global indices yesterday in isolation, you would be forgiven for thinking market conditions were quiet. They are far from quiet. Volatility rules OK! US markets closed either side of par. The Street of Dreams was initially bouncing off the walls. JP Morgan just marginally disappointed with EPS perceived to be 2 cents light at $1.36 on $5.57 billion revenues. However the Wall Street titan had to find an extra $1 billion for legal expenses. Wells Fargo and Citibank (+3%) both beat the Street with the latter serving notice that it would withdraw consumer banking services from 11 international centres to concentrate on ‘Uncle Sam’ for its expansion plans. Then we saw oil prices continuing to drop like a stone – Brent $85+. This put the skids under energy stocks and took the wind out of Wall Street’s sails. After hours Intel posted better than expected numbers with sales up 14% in the last quarter at $14.5 billion. Mature markets did particularly well, with emerging countries less than ebullient.

In London yesterday, against a background of negative data and comment coming from the EU, the FTSE 100 gave the market its best shot. Having opened up down 34 points it rallied on the back of good performances from miners plus a ‘better feel good factor’ to close up 26 points at 6392. Burberry’s sales were up but comments made by CEO Chris Bailey that condition were getting tougher including sales to China took the shares down 3.6%. Mulberry also let the luxury good ship down with sales off by 17% in the last trading period. Michael Page’s efforts failed to pass muster as well. The shares received visceral treatment – down 10.7%. Qualcomm came in this morning with a slam-dunk £9 cash bid for CSR. The shares were up 35% at 875p.

Inflation in the UK fell from 1.5% to 1.2% with all the reasons well chronicled by far better economic geeks than me. Suffice to say that Sterling received a good slapping down to $1.59 and I suspect that hell has a better chance of freezing over than rates in the UK going up before June 2015. Eat your heart out Messrs McCafferty & Weale. I suspect next month’s MPC vote won’t read 7-2!

This morning it has been all about Shire and a re-think by AbbVie on whether a takeover of Shire is in their interests. It seems that Abbvie may have been collared by the Obama administration in regards to tax inversion benefits. Shire’s shares stood at £35 when AbbVie stepped up to the plate. They closed last night at £531.5p. They are now £38.25 (at 9.30am), having fallen as low as £36.25. Down 25%! It would appear that the market hold out very much hope on this deal being rekindled. Perhaps someone else will cast their beady eyes over Shire’s books. Tesco saw fit to stand down 3 further executives, pending investigations and findings by Deloitte – shares down 0.5%. This morning oil stocks are being killed on the back of falling crude. Not surprisingly drug stocks – Astra, GSK and S&N are out of sorts and miners have slipped in to reverse. Rio posted encouraging results – down 1.5% – travelled and arrived.

CPI data in China continues to look soft – 1.6% last months – a worry that might trigger further stimulus packages by the authorities. Talking of economic data, UK unemployment fell from 6.4% last quarter to 6.0% in September – 1.97 million people out of work – the lowest level since 2008. This is encouraging news though one slight blight – still too many people discouraged from looking for work, similar problems to those in the US. At 9.45am the FTSE 100 was down 77 points at 6315.



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.