TODAY’S FAYRE – Wednesday 18th February 2015
“Nobody heard him, the dead man,
But still he lay moaning:
I was much further out than you thought
And not waving but drowning.
Poor chap, he always loved larking
And now he’s dead
It must have been too cold for him his heart gave way,
They said. Oh, no no no, it was too cold always
(Still the dead one lay moaning)
I was much too far out all my life
And not waving but drowning.”
Stevie Smith – poet – 1902-1971
I don’t know much about peoples’ sleep pattern. However I do know that since the start of the cricket World Cup in Australia and New Zealand, mine has gone to hell and a high place. This morning I even found myself turning on to see what was happening in the Bangladesh v Afghanistan match! At the time of writing Bangladesh are 178 for 4 after 38 overs – plenty of people watching live at the ground. Fantastic that this competition has been embraced so wholeheartedly!
Yesterday Greece, despite its inability to find even a temporary settlement with the EU/ECB over its bail-out facility, managed to find very easy headlines in the media. Even though the gulf between the parties seems irreconcilable, markets are supremely or perhaps misguidedly confident that an agreement will be fudged by Friday. Yesterday the Athens stock market fell by 5% and Greek bank shares by an average of 9%. Yet global equity markets were so chilled out – in fact the FTSE 100 added 41 points to 6898 – to a fifteen year record and only 32 points light of the all-time record of 6930 achieved on 31st December 1999. Even taking in to account dividend yields over the past 15 years as well as inflation, equities, which have been through the TMT crash, wars and a credit crisis, have not been good value in that period. However, without the cosmetic advantages of QE introduced on 9th March 2009, when the FTSE 100 stood at 3460, where would equities be? All equity geeks should ‘doff their titfers’ to the BOE! Also with interest rates being unchanged in the UK for 71 months, alternate asset classes seem unattractive.
Yesterday many commentators were saying that yesterday’s inflation number of 0.3% was the lowest level since time immemorial. Nonsense! Go back to March 1960, the month when Merryman II won the Grand National – the first Scottish horse to do so. Perhaps “…the way prices are falling there will be plenty more Merryman this month!” …… Best I stick to the day job and leave Michael McIntyre a free passage in the humour and comedy department! On a more serious note the fall in oil prices as well as food makes the idea that we may be heading towards deflation in May/June, plausible. However as my colleague economist Simon French warns, this will be a year of two halves. By the end of the 3rd quarter inflation will bounce back. Certainly oil prices look more resilient than they did a month ago!
Yesterday’s session on the Street of Dreams when traders, economist and fund managers returned to work, having done damage to their livers, whilst at the same time boosting the valuation of Napa’s vineyards by the excessive consumption of Sauvignons and Cabernets, was somewhat somnolent and nondescript. There was little to get the investing taste-buds going, though there is still that feeling that we are in a bull market in the US. However the level of activity yesterday was derisory – DOW & S&P 500 +0.16% and the NASDAQ was better by a parsimonious +0.11%. It was interesting to note that BOA Merrill Lynch’s CEO John Moynihan took a 7.1% pay cut to $13 million – a mere bagatelle!
Asian bourses were buoyed by an optimistic outcome to the Greek impasse. Though the BOJ made no changes to its monetary policy, the recovery looks brittle in Japan with retail activity very disappointing. It appears the BOJ will act accordingly in March or April, if further stimulus is required. The ASX closed up 0.89% and the NIKKEI +1.18%. The Shanghai Composite was up 0.76% and the Hang Seng by 0.16% at lunchtime. The deal of the day was Japan Post buying Australia’s Toll Holdings for $5 billion.
Yesterday London was a little short of top corporate news, though the purchase of Brit Insurance for £1.2 billion by Fairfax Financial of Canada captured the imagination. Having seen Catlin sold for £2.8 billion to XL Omega Insurance of the US, could this leave Beazley, a diversified insurance operation, vulnerable? Could Hiscox or Lancashire or Novae fall? Since 1989 when Lloyds of London was all but insolvent or at best severely under the cosh, what a miraculous recovery.
UK companies posting results this week – Wednesday – COCA-COLA HBC, MORGAN SINDALL, Thursday – BAE SYSTEMS, CENTRICA, SPORTS DIRECT, Friday – STANDARD LIFE
US companies posting interim results –Wednesday – HYATT, BJ RESTAURANTS, MARRIOTT, MARATHON OIL, Thursday – NORDSTROM.
David Buik – market commentator
Panmure Gordon & Co
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