TODAY’S FAYRE

TODAY’S FAYRE – Tuesday, 18th November 2014

 

 “Out of the night that covers me,

Black as the Pit from pole to pole,

I thank whatever gods may be

For my unconquerable soul.

 

In the fell clutch of circumstance

I have not winced nor cried aloud.

Under the bludgeonings of chance

My head is bloody, but unbowed.

 

Beyond this place of wrath and tears

Looms but the Horror of the shade,

And yet the menace of the years

Finds, and shall find, me unafraid.

 

It matters not how strait the gate,

How charged with punishments the scroll.

I am the master of my fate:

I am the captain of my soul.”

 

William E Henley – poet – 1849-1903       

 

The PM and his cohorts must be dreading Thursday’s by-election at Rochester & Strood. With Labour’s vote, in what was Bob Marshall Andrews QC’s former constituency, looking as though it might collapse, poor Kelly Tolhurst, an excellent local Tory business woman, is very likely to be eclipsed by the perceived treachery of Mark Reckless, who is likely to win the seat for UKIP with something to spare. The PM has failed to articulate himself with conviction over Europe and immigration. The public seem to have difficulty empathising with him. What a joy it was listening to Sir John Major on ‘Marr on Sunday.’ Here is a man rich in experience and a genuine statesman. Statesmen are becoming ‘endangered species’ in the 21st century. Sir John is like decent Pomerol. He gets better and better with age!

 

Yesterday it was all about Japan entering in to recession – 3rd quarter GDP diving down to -1.6%, resulting in the NIKKEI shedding 2.9% in value. Abe-San will be relentless in his quest to reaffirm Japan’s resolve to re-stimulate the economy, postpone the proposed 2015 sales tax hike and finally few will be surprised if the PM does not call a General election on 8th December. Some market commentators believe that yesterday’s GDP revision may prove to be over cautious. The quality of corporate earnings is good; so that news may filter through, triggering an improved revision before too long. The NIKKEI rallied by 1.9% today on stimulus momentum, though the rest of Asia was rather lack-lustre. There is evidence that China’s property market is off its best levels and the authorities will be keeping a watching brief.

 

The FTSE 100 enjoyed another rather anaemic rally – +18 points to 6671. Mining stocks did well. Serco parted company with Chairman Alistair Lyons. The shares have fallen 32% in 12 days. Personally, though this is not investment advice, I have great faith in Rupert Soames, as CEO. If he cannot pull Serco round, few can! Rakesh Kapoor Reckitt Benckiser’s CEO announced that a ‘spin-off’ of its pharma division from its main core activity could be made in December. The company is to be called INDIVOR and the development of this operation seems to be centred on its heroin addiction drug Suboxone. Now this pharmaceutical business is supposedly valued at around $2.5 billion, despite its sales falling by 8%. However to entice investor support, surely we must presuppose that Kapoor has other plans to give the business a greater product base.

 

HSBC hit the ethics buffers again yesterday. Allegations of tax dodging antics by its Swiss based private bank, involving about 1000 Belgian clients are under investigation. Mitie’s results did not pass muster with a £58 million loss over the past 6 months. M&S, I discovered have appointed Helen Weir, she of Lloyds Bank fame and more recently John Lewis fame, has been appointed head finance honcho! She had a big reputation at Lloyds, but few were ever quite certain what she achieved. She was an Eric Daniels favourite – that’s for sure! Quindell suffered further ‘slings and arrows of outrageous fortune.’ It lost its broker Canaccord, which caused the stock to slump by 24% down to circa 55p – down from a valuation of over £2billion since inception to £300 million!

 

M&A activity buoyed activity on Street of Dreams, just keeping the DOW and the S&P 500 above the Plimsoll line. Activas agreed to pay $66 billion for Allergan (+5.3%) the Botox titan, easily trumping the Canada’s Valeant Corporation’s bid, which initially it had a $45 billion in mind. Halliburton reconfirmed its acquisition plans for Baker Hughes (+8%). Urban Outfitters missed – down 4.9%. Some tech stocks were not in vogue yesterday – Google -1.5%, Linkedin -4.5% and Apple -0.2%. However Yahoo! and Cisco Systems had a little run on the rails.

 

This morning there were great numbers from EasyJet (travelled & arrived -1.5%), British Land (+2.5%) and Prudential (+2%). Enterprise Inns were in line. Balfour Beatty had more encouraging news and we hear from Manchester United when the Big Apple opens.

 

Panmure Gordon’s Simon French previews CPI and PPI data due today!

 

UK consumer and producer prices are out later this morning and you can feel the scribes at the Bank of England sharpening their pencils. CPI is expected to dip below 1% by the end of the year on the back of the declining oil price and aggressive retail discounting. A letter from Carney is likely to be seized upon by the Coalition ahead of the Autumn Statement as evidence of darkening international clouds – and a mandate for further austerity. The silver lining has been the weakness of the Pound in recent weeks – particularly against USD – this should ensure that the deflationary pressures do not accelerate further in the New Year.

 

By contrast, the oil price decline spells the largest threat to the Eurozone where inflation is already an anaemic 0.4%. Here the deflationary impact on the public sector debt burden will be acute, and should it be allowed to embed will begin the slow and painful process towards a Eurozone break-up – most likely commencing in Italy where the debt burden and demographics are the most unfavourable. We still anticipate a Summer 2015 rise in UK rates off the back of an increasingly tight labour market and a post-General Election bounce for the UK economy – but with the risks increasingly weighted towards a move to the right.  

 

 

US companies posting results and trading statements this week – Tuesday – MEDTRONIC, DICKS’S SPORTING GOODS, TJX, JACK-IN-THE-BOX, Wednesday – TARGET, STAGE STORES, Thursday – BEST BUY, ROSS STORES, GAP, Friday – ANN INC, FOOT LOCKER

 

 

UK companies – Tuesday – UK MAIL, SMITHS GROUP Wednesday – ROYAL MAIL, AMLIN, ICAP, CHESNARA, MELROSE, Thursday – CENTRICA, CLOSE BROS, JOHNSON MATTHEY, INVESTEC, FRENCH CONNECTION, BABCOCK INTERNATIONAL, MOTHERCARE, QINETIQ.

 

 

 

David Buik

Market Commentator

 

+44 (0)20 7886 2775

Panmure Gordon & Co  One New Change | London | EC4M 9AF | United Kingdom  www.panmure.com

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