TODAY’S FAYRE – Sunday, 4th January 2015



In my craft or sullen art

Exercised in the still night

When only the moon rages

And the lovers lie abed

With all their griefs in their arms

I labour by singing light

Not for ambition or bread

Or the strut and trade of charms

On the ivory stages

But for the common wages

Of their most secret heart.


Not for the proud man apart

From the raging moon I write

On these spindrift pages

Nor for the towering dead

With their nightingales and psalms

But for the lovers, their arms

Round the griefs of the ages,

Who pay no praise or wages

Nor heed my craft or art”



Dylan Thomas – poet – 1914–1953


With just two months to go until the Cheltenham Festival, a few likely contenders to win some of the championship races have emerged in recent weeks. I don’t very often have an ante-post bet, but I have made a decision to break a habit of a life time this year. Though the ‘New One’ looks like a really ‘useful tool’, I think ‘Faugheen’ looks very special and will go one better by landing the Champion Hurdle for Rich Ricci and Willie Mullins. I also thought 10/1 was a working man’s price for Noel Meade’s and Gigginstown Stud’s ‘Rags to Riches’ to win the Gold Cup.


In terms of equity trading, the latter half of December in Europe, after such a buoyant rally, was a pretty inauspicious period, particularly the FTSE 100. December, as a trading month, ended in negative territory and the FTSE 100 surrendered 2.7% in value during 2014. The FTSE AIM had even more of a shocker losing 17.8% in the same period. The DAX and the CAC faired marginally better, but nothing to write home about – up by 2.7% and down -0.6% respectively. Asia was mixed. After 2 poor years and despite GDP falling in China the Shanghai Composite added 57.9% in 2014 and the NIKKEI, aided and abetted by ludicrous levels of stimulus packages including QE known as ‘Abenomics’ added 8.9%. However the Hang Seng eased by 0.8%.


In all fairness the Street of Dreams grabbed the yellow jersey in terms of performance by mature markets. The DOW was up 9%, the S&P 500 by 12% and the NASDAQ by 14%. Some of the BRIC countries, apart from China had a torrid time in the last 3 months particularly Brazil – down 6.8% on the year and -20.4% since September – and Russia (a surprisingly modest loss of 4.7% in 2014 but -12.5% in the last 2 weeks of December), though these losses paled in to insignificance in to comparison to the loss made by the Ruble during last year – 60% against the Euro and 40% against the Dollar. After a positive general election result, India’s Sensex blazed the trail adding 33.5%. There is no need for me to chronicle the minefield of imponderables that made 2014 such a difficult and volatile year to trade.


Last week was an interrupted stilted affair for equity trading. The appetite for risk was plainly not there. The S&P 500 eased by 1.1%, the FTSE 100 by 0.8%, European stocks by an average of 0.4% but the Hang Seng bucked the trend adding 2.2% thanks to expectations of further stimulus packages.


There are a number of imponderables that threaten world growth in 2015. The first of a plethora of issues that will tax European investors in the months to come emanate from Europe. This coming week The ECB’S Mario Draghi is expected to enlighten us as to how he hopes to tackle the possibility of deflation, which is staring the EU full-on in the face. Most reasonable pundits expect Draghi to introduce some degree of QE in the next couple of months. Certainly yields on European bonds continue to fall like stones – 10-year yields Germany 0.50%, Spain 1.48%, UK 1.72%, Italy 1.74 % and Greece 8.99%. However German Chancellor Merkel has been more than just muttering under her second chin about her concern of the EU lurching to the ‘right.’ Her inability to allow Draghi to deal with EU’S listless economy will be worrying the on-looking world. One suspects that an inadequate level of QE will eventually be introduced – too little too late!

Of equal concern is the outcome of the Greek General Election, due to take place on 25th January 2015. Syriza of the ‘left’ is expected to win. It’s passion for austerity is nil and Greece’s responsibility to repay and service debt now would seem to be of little moral consequence to ‘Syriza!’ What would the ramifications be?     The logical outcome should be Greece bidding ‘Sayonara’ to membership of the EU. However that seems an unlikely conclusion. Despite Germany’s contribution to the demise of Greece’s economy by allowing Greece to become members, when the economic criteria was not even close to being met, exit would set a dangerous precedent.

A more likely outcome would be a fudged settlement negotiated by the Troikas, EU and ECB – or should I say capitulation – allowing Greece more time to avoid default with some debt being written off. Within 3 years Greece with a devalued Drachma would benefit hugely by being out of the EU. Of course Spain & Italy will be watching developments with eagle eyes, with a view to exploiting any weakness in the EU’S resolve.


Crude oil has fallen 50% since its high of last year. Investors find themselves experiencing a bit of a conundrum over the effect it will have on growth. Many are convinced that the sharp fall in oil prices could add 0.5% to global GDP. Russia certainly would not agree with you. Russia needs oil to be at least $60 a barrel to balance the books. Many like me feel that the manipulation of the oil price is a political issue every bit as much as a commercial issue. Senior acolytes at Panmure Gordon & Co believe oil could be back at $85 a barrel in 18 months.


The two largest cumuli nimbus clouds to stunt an equity market advance are sanctions against Russia and reprisals against the EU and the UK plus some spice provided by insurgency in the Middle East and Ebola. The EU is in an economic mess drowning in a morass of political incompetence and the impasse with Russia will just exacerbate the situation. So expect the DAX and CAC to have a rough ride in the next few months. Then there is the political uncertainty that prevails in the UK. It would not surprise me if the FTSE 100 lost 10% in the first 4 months of the year! Why? The UK is looking to the outside world that it might be ungovernable. No one can forecast the outcome of the General Election on 5th May 2015. Suffice to say some sort of unsatisfactory coalition looks a distinct possibility. Markets deal well with bad and good news, but have no answers to uncertainty. Two elections in 2015 cannot be ruled out. Once there is clarity the FTSE 100 could crack on, particularly as about 70% of earnings are dollar based.


We will certainly be starting the week off with a controversial bang, Supermarkets sales around the holiday period could prove to be very discouraging. On Wednesday Sainsbury is expected to post a 1.8% fall in like for like sales for the quarter up to the end of the year. Tesco’s Dave Lewis has a real problem on his hands. Sales may be down 5% for the quarter up to the end of November and down 2.5% over the Christmas period. 23 offices could be closed this year and Tesco will need to spend over £2 million to revamp its business. So with a £3 billion pension hole to contend with, Tesco might just seek a rights issue. Al will be revealed on Thursday. On the same day M&S is expected to post a 0.9% increase in like for like sales over Christmas, but general merchandise including clothes could be down by as much as 3%!




US companies posting interim results this week – Monday – FORD (sales), Tuesday – SONIC, Wednesday – MICRON TECHNOLOGY, Thursday – CONSTELLATION BRANDS, BED, BATH & BEYOND, APOLLO, RUBY TUESDAY.


After years of being blocked by Democratic leader Harry Reid, the Washington Times last week reported that the Senate will finally get a chance next year to vote on legislation to force a broad audit of the Federal Reserve’s decision-making. Ron Paul’s flagship legislative efforts have been picked up by his son and now has the backing of the leader of the new Republican majority, Sen. Mitch McConnell, whose office says the legislation will earn a floor vote. While the bill is not a sure thing, it appears to have The Fed worried as Reuters reports Janet Yellen and other Fed officials are lobbying Capitol Hill to drop the audit push.




David Buik

Market Commentator


+44 (0)20 7886 2775

Panmure Gordon & Co  One New Change | London | EC4M 9AF | United Kingdom


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