TODAY’S FAYRE – Sunday 5th October 2014

TODAY’S FAYRE – Sunday, 5th October 2014

“There is a happy land, far, far away,
Where saints in glory stand, bright, bright as day.
Oh, how they sweetly sing, worthy is our Savior King,
Loud let His praises ring, praise, praise for aye.

Come to that happy land, come, come away;
Why will ye doubting stand, why still delay?
Oh, we shall happy be, when from sin and sorrow free,
Lord, we shall live with Thee, blest, blest for aye.

Bright, in that happy land, beams every eye;
Kept by a Father’s hand, love cannot die.
Oh, then to glory run; be a crown and kingdom won;
And, bright, above the sun, we reign for aye.”

Andrew Young – poet – 1807-1889

I have always felt hat Ben Affleck was a fine actor – not just a good looking fellow with an electric pair of ‘come-to-bed-eyes’ for the girls. His performance and direction of ‘Argo’, which grossed $154 million and was unlucky not to win the ‘Oscar’ for best movie in 2012. His performance proved that he is amongst the best. We took in ‘Gone Girl’ over the weekend, in which Affleck stars with the decorative and talented Rosamund Pike in a clever combination of a marital melodrama and murder mystery. A splendid film – escapism at its best with plenty of ‘twists and turns’ along the way!

I hope the country unites behind Chris Grayling and the Government over abandoning full support for the European Court of Human Rights, with the ability to use the power of veto. Every country has the right to protect itself from evil people. I noticed that concern was expressed that our armed forces are inadequately protected when abroad. They must be! – A prerequisite!

It had not been much of a week for equities until Friday. A compendium of geopolitical issues suddenly weighed rather heavily on investors, resulting in some materialistic profit taking. The trees were shaken. Most of the major indices experienced their worst month of the year. Then it seemed as though good sense might prevail in Hong Kong in terms of civil disobedience, though by Friday night the climate was beginning to look murkier with the humidity starting to make the protestors more than a tad impatient and tetchy!

However greatly aided and abetted by better than expected non-farm payroll data for September – +248,000 jobs created and unemployment down from 6.1% to 5.9%, the lowest level since mid-2008, suggesting the labour market is improving faster than previously thought – investors on the Street of Dreams decided enough was enough for the time being. Not only did the three main indices rise like grilse, but so did the Russell – +0.8% (-1.3% on the week). The DOW added 1.24%, the S&P 500 +1.12% and the NASDAQ +1.03%. On the week the S&P 500 was down 0.8%, but is up 6.5% on the year. Wall Street’s performance was also enhanced and underwritten by better than expected non-manufacturing ISM data. Also investors seemed to be not remotely perturbed by the prospect of higher interest rates being implemented sooner rather than later.

Maylan +8%, Medtronic +3.5% after it confirmed interest in buying Ireland’s Covinden and the airlines + an average of 2.2% were amongst the best performers. RadioShack, which seemed dead in the water until refinancing arrangements had been agreed, rallied by 38%. The 3rd quarter earnings season starts on Wednesday 8th October with Alcoa stepping up to the plate. Oil and gold fell in value as the Dollar increased in value against all major currencies. I noticed with interest in Saturday’s LEX column, that the US banking sector had enjoyed a sparkling period since mid-August, with BOA adding some 13% in value. The comfort of higher interest rates before too long have triggered support for the likes of BOA, JPM and City and M&A activity at Goldman and Morgan Stanley has been rampant.

In the UK the FTSE lost 1.8% on the week though Friday was an encouraging session, as London’s main index added 81 points to 6527. EasyJet was the standard bearer adding 6.4%. Supermarkets, especially Tesco (-3.4% at 172p an 11 year low) and Sainsbury had taken London lower during the week and many mining and energy stocks had not exactly put their best foot forward. The market is expecting Tesco to shake up its non-executive directors before too long, with at least three new appointments. Shire reached a record level as Abbvie closes in on its prey. Dixons Carphone and Debenhams had a little run on the rails, the latter as a result of Mike Ashley increasing his stake by 5% to 11.2%. United Utilities also had a decent session on Friday – up 3%. Miller Homes pulled its £450 million IPO on Friday due to lack of market appetite.

Virgin Money set out some details for its forthcoming £1.5 billion IPO, with surprisingly no allocation of shares to the retail investor. Only £150 million worth of shares are being offered for sale. I think this is poor judgement as it will make the share register look rather unbalanced. Also with Branson & Ross owning over 90%, there will always be people who will be unhappy about the huge percentage these two individuals own and the excessive value of their success.

Then on Friday Aldermore posted details of its £850 million IPO due to go public at the end of October. Aldermore specialises in lending to SMES. Its CEO Philip Coombs is ex Barclays and comes well recommended. Again much of the largesse will be distributed to the lucky few with AnaCap, Morgan Stanley and Goldman amongst the main beneficiaries. The issue price range has been set between 217-265p. Market conditions remain choppy; so to avoid market indigestion both banks would be advised to offer a snip, ensuring success. Though there seems to be a little indigestion in the IPO market, the first 9 months of this year has seen 66 companies float in the UK with a total valuation of £12.2 billion – 11% of the global market. This business has yielded £345 million of professional fees – hardly shabby.

After Wonga wrote off chunks of its debt – £220 million+, thanks to great pressure from the FCA, the world of ‘pay-day’ lenders looks very uncertain, with perhaps as many as 90% of these lenders unlikely to make the cut. One has to wonder whether the regulator has not been rather heavy handed. Apache Corporation has served notice to sell its interest in the North Sea. Apache is the 3rd largest producer in this area after BP and Shell. Its main activist shareholder Jana Partners wants Apache, which currently produces 70k barrels a day to focus its resources on shale and gas production in the US.

Finally on the UK economy, with growth likely to fall in the 3rd and 4th quarter and with inflation looking particularly benign and wage inflation almost negative, don’t look for an early increase in rates in the UK. You may be disappointed. On Thursday the MPC is expected to keep rates at 0.5% where they have been for 5.5 years. The bear members McCafferty and Weale will need to be patient. On Wednesday the IMF revises its global economic outlook. As part of the EU Troika the IMF has proved to be a very disappointing contributor to the recovery plan of this vast and very important trading area with a population of 300 million. It is high time those undemocratically elected to power stopped abrogating the responsibilities and dealt more vigorously with the acute issues at hand – no growth the threat of deflation and a banking sector which needs a blood transfusion.

The following UK companies post results this week – Tuesday – ST IVES PLC, ROBERT WALTERS PLC – Wednesday – FIRST GROUP, MARSTON’S, Thursday – N BROWN GROIP, HAYS, WOOD GROUP, XP POWER.

And in the US – Tuesday – YUM BRANDS! – Wednesday – COSTCO, RUBY TUESDAY, ALCOA – Thursday – GAP, FAMILY DOLLAR, PEPSICO, Friday – FASTENAL

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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