TODAY’S FAYRE – Wednesday, 22nd January 2015


“Looking up at the stars, I know quite well

That, for all they care, I can go to hell,

But on earth indifference is the least

We have to dread from man or beast.


How should we like it were stars to burn

With a passion for us we could not return?

If equal affection cannot be,

Let the more loving one be me.


Admirer as I think I am

Of stars that do not give a damn,

I cannot, now I see them, say

I missed one terribly all day.


Were all stars to disappear or die,

I should learn to look at an empty sky

And feel its total dark sublime,

Though this might take me a little time.”  


WH Auden – poet – 1907-1973   


‘The American Sniper’ – what a terrific film!  It had everything – excitement, patriotism, ruthless gratuitous violence, a love story and outstanding acting from Bradley Cooper, who also produced the film and surprisingly to me, Siena Miller, who had an excellent Texas accent in her role as Brad Cooper’s wife. He may be 85 years old this coming May, but Clint Eastwood has lost none of artistic guile or thespian touches directing this movie. I am not remotely surprised that this film is up for 6 Oscar nominations at the Academy Awards next month including best actor – Bradley Cooper and best director – Clint Eastwood.  This is a must movie. You’d be daft to miss it!  

“One final paragraph of advice: do not burn yourselves out. Be as I am — a reluctant enthusiast… a part-time crusader, a half-hearted fanatic. Save the other half of yourselves and your lives for pleasure and adventure. It is not enough to fight for the land; it is even more important to enjoy it. While you can! While it’s still here! So get out there and hunt and fish and mess around with your friends, ramble out yonder and explore the forests, climb the mountains, bag the peaks, run the rivers, breathe deep of that yet sweet and lucid air, sit quietly for a while and contemplate the precious stillness, the lovely, mysterious, and awesome space. Enjoy yourselves, keep your brain in your head and your head firmly attached to the body, the body active and alive, and I promise you this much; I promise you this one sweet victory over our enemies, over those desk-bound men and women with their hearts in a safe deposit box, and their eyes hypnotized by desk calculators. I promise you this: You will outlive the bastards.”Edward Abbey – American Author – 1927-1989


There is only one game in town today, whatever you might hear to the contrary from those aficionados, ‘lording it’ on the slopes of Davos, putting the world to right – IT’S THE ECB CIRCUS, which comes to town with a box full of tricks accompanied with all the fun of the fair! – A rumoured €50 billion monthly facility to buy in bonds until the end of 2016. Is it too little too late? Will it come with infrastructure projects to help with abject unemployment? Will the EU agree Draghi’s package?


Panmure’s economist – SIMON FRENCH – makes these comments ahead of the ECB meeting – The Press conference starts at 1.30pm and Draghi’s propositions will be put to the EU. Remember this is Day One of a two day meeting.



“I believe that there will be an initial relief bounce stemming from the fact that the ECB have (almost certainly) agreed a QE package. I expect this bounce to be short-lived – I would liken it to recent Budgets & Autumn Statements in the UK when the underlying details emerge during the day and unpick the headline announcements. The trigger for a reversal in sentiment will be the lack of any agreement on spending increases or tax cuts – a relaxation of the EZ’s fiscal compact. This will be further amplified by the looming election in Greece on Sunday and the strong possibility of negative briefing against QE by the German Finance Ministry. Together this will dilute the important transmission from additional ECB liquidity into increases in consumer sentiment and demand for credit.


Part of the success of QE in the UK was that the Treasury and BoE (Federal Reserve and White House) were seen as unified in efforts to boost confidence – and were committed to higher inflation in the UK (US). If this unity is absent between EZ finance ministers and the ECB then this transmission mechanism from QE to greater confidence breaks down – and the intended outcome of increased spending (taking advantage of lower borrowing costs) will fail to materialise.


One particular thing to look for from the ECB will be any agreement over the risk-pooling of any losses sustained from QE. If this risk sits with sovereign central banks within the Eurozone (rather than pooled on the ECB balance sheet) then we may see government bond yields diverge again between the core and the periphery – the implicit guarantee of Germany will be removed. There are strong signals that pooling of risk is a red-line for the Germans and this has the potential to undermine any package, regardless of its size.


We continue to recommend overweight on UK equities (our sector calls and conviction stocks are in the attached) given strong labour market data – particularly given the recent return of real wage growth to the UK economy. The trigger for a shift into more Eurozone exposure would be if tomorrow’s announcement included any of:


  • a relaxation of the Eurozone fiscal compact
  • a strong statement of support from the German Finance minister – specifically one that sanctions risk-pooling
  • Extension of QE into high grade corporate bonds – we expect tomorrow’s announcement to limit purchases to government debt at the shorter end of the yield curve.


Equity markets surged modestly in Europe yesterday, on hope rather than genuine expectation. However the FTSE 100 had a terrific run on the rails (+1.6% to 6728), with energy and mining stocks continuing to regain some poise. Pearson ended yesterday’s session with the ‘yellow jersey’ adding over 4%. There is a feeling that the FTSE is still the markets choice to perform better than its peers in 2015, though the road could be full of political and economic potholes! The Street of Dreams was comfortable in its own skin, with some earnings looking pleasing – Netflix adding another 4% on top of the previous 13% on Tuesday and eBay +3% being the main picks. IBM slightly disappointed and was down 3.2%. Energy stocks were in demand as were some techs. The DOW add 0.22%, the S&P 500 0.47% and the NASDAQ 0.27%.


This morning, after a rocky start, Asian bourses came back on the bridle. The ASX closed +0.22% and the NIKKEI gathered in 0.53%. Chinese equities were wobbly to start with but after lunch the Shanghai Composite was +0.28% and the Hang Seng +0.61%. This morning European bourses have started the session in a reflective mood and conditions are sepulchral ahead of the ECB meeting. Solid numbers from St James’s Place and Royal Mail and there was profit taking after Countrywide and Chemring posted their comments and numbers.


UK companies posting results for the rest of this week –Thursday – CARD FACTORY, ST JAMES’S PLACE, CHEMRING, EMIS, COUNTRYWIDE, PARAGON, ROYAL MAIL, Friday – PREMIER FOODS, CLOSE BROTHERS US companies posting interim results –Thursday – TRAVELERS, STARBUCKS, Friday – BANK OF NEW YORK MELLON, HONEYWELL, MCDONALD’S, STATE STREET. Next week, APPLE, GOOGLE & MICROSOFT post their interim results

 David Buik

Market Commentator


+44 (0)20 7886 2775

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


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