TODAY’S FAYRE – Saturday 28th February 2015


“There was a sound of revelry by night,

And Belgium’s capital had gathered then

Her beauty and her chivalry, and bright

The lamps shone o’er fair women and brave men.

A thousand hearts beat happily; and when

Music arose with its voluptuous swell,

Soft eyes looked love to eyes which spake again,

And all went merry as a marriage bell;

But hush! hark! a deep sound strikes like a rising knell!


Did ye not hear it? — No; ’twas but the wind,

Or the car rattling o’er the stony street;

On with the dance! let joy be unconfined;

No sleep till morn, when youth and pleasure meet

To chase the glowing hours with flying feet.

But hark! — that heavy sound breaks in once more,

As if the clouds its echo would repeat;

And nearer, clearer, deadlier than before;

Arm! arm! it is — it is — the cannon’s opening roar!


Within a windowed niche of that high hall

Sate Brunswick’s fated chieftain; he did hear

That sound the first amidst the festival,

And caught its tone with death’s prophetic ear;

And when they smiled because he deemed it near,

His heart more truly knew that peal too well

Which stretched his father on a bloody bier,

And roused the vengeance blood alone could quell;

He rushed into the field, and, foremost fighting, fell.


George Gordon, Lord Byron – poet – 1788-1824


The brutal assassination, yesterday, of former Deputy Prime Minister Boris Nemtsov in Moscow is a timely reminder that Russia is no closer to becoming a democracy that it was 53 years ago, when the Bay of Pigs off Cuba was a real threat to nuclear war. We in the UK need to shore up our defences PDQ as does the EU! Also President Obama needs to get off his butt and engage with Russia before there is the ‘mother and father of all accidents’ that is waiting to happen!


I so enjoyed the highlights of AB de Villiers 166 for South Africa v West Indies in 66 balls with only 7 ‘dot’ balls. The 150 was a record in the World Cup. What a talent! Such a pity Chris Gayle was out cheaply, thus preventing any sort of a meaningful contest.


New Zealand’s one wicket win over Australia at Eden Park was a ‘nail-biting’ affair, with New Zealand looking ‘nailed-on’ winners with only 30 runs required with six wickets in hand until Mitchell Starc entered the fray taking 6 for 28! New Zealand got home with one wicket to spare thanks to a six hit by Williamson. Epic stuff!


The events that dominated the financial agenda last week revolved around the bogus negotiations between the EU and Greece, Fed Chairman Janet Yellen’s geek chat to Congress about the US economy, which required a Bletchley Park Code Book to understand the content, some improving economic data from the EU and a proliferation of banking news in the UK. The only people who seemed uncertain whether a deal would be struck between Greece and the Troika were the two leading dramatis personae. Let’s start this week’s missive with EU economic data supplied by Panmure’s Simon French –


   “Despite my negative outlook for the Eurozone economy longer term (driven by poor demographics and an inappropriate monetary regime) there is now little doubt that the promise of ECB QE, a falling Euro and the falling oil price are together acting to reflate consumer demand – giving the zone a short term boost to growth. Figures out this AM show M3 (money supply) growth at 4.1% YoY – its highest level since June 2009 and a series of business and consumer sentiment data all strengthening – consumer confidence is at an 8-year high. Make hay while the sun shines – as without significant reforms to the supply side of these economies the poor demographics and inflexible economic structures will always win out.” Hopes springs eternal!


   I think Janet Yellen’s appraisal of the US economy was seen as positive and on-going decisions on interest rates will be based on data, especially Labor data, which when Friday’s Non-Farm payrolls are posted, should signal the robust and improving state of the US economy with 250k plus jobs having been created in February. However the FED boss’s stance on interest rates bordered on a cross between neutral and dovish. Few expect any increase until at least the third quarter. There is still a growing wave of opinion that the prosperity in the US may have been inflated by the role the FED played in implementing substantial QE facilities. Also there is a tiny bit of concern that US corporate results in the 3rd and 4th quarter may not be all that buoyant.


   On top of a fair compendium of financial and economic imponderables oil prices made measurable gains. Markets were no too sure what effect that might have on earnings. Nonetheless overall the week was positive for most markets, despite the Chinese New Year holidays. The People’s Bank of China announced Saturday that it was cutting the rate on a one-year loan by commercial banks by 0.25 percentage point to 5.35 percent to shore up economic growth. The interest rate paid on a one-year deposit was lowered by 0.25 point to 2.50 percent.


   The S&P 500 added 0.45% and the FTSE 100 was near enough flat, despite nudging through the 6930 threshold to a new record, which has taken 15 years to reach and improving consumer confidence. European stocks dined off the bogus EU/Greek accord and the effects of QE, which saw the EuroFirst 300 add 2.5% and the NIKKEI benefited from the promise of more stimulus packages thanks in some way to poor domestic consumption data. The Dollar hit an 11-year high against a basket of currencies against a threat of rates hiking in the late summer.


   Much has been written by the media on HSBC, their indifferent results and the negative publicity that surrounds its Swiss Private Banking operation. Douglas Flint and Stuart Gulliver were given a hard time at the Treasury Select Committee’s hearing and I suspect that tax evasion allegations will not be going away for some months. Much of the perception of the wrong doing at HSBC did not take place under Gulliver’s watch. However the managements’s problem is exacerbated by the fact that Mr Gulliver is a lousy communicator with the media and the public. Banking is a service industry. Bankers are not currently held in high esteem; all the more reason why they should be much more communicative.


   The appointment of Sir Howard Davies to succeed Sir Philip Hampton as chairman of RBS was a smart move. Sir Howard was responsible for bedding down 9 regulatory bodies at the FSA in 2000 for Gordon Brown – such a pity there was an inadequate number of qualified people to do the job. Therefore he is sufficient of a political chameleon to cope any combination of Osborne, Balls, Carney, Bailey, Shafik and Wheatley! Reflecting on RBS figures, the market was slightly disappointed. To have cut the balance sheet from £2.2 trillion to £1.1 trillion in 6 years is a considerable achievement. Investment banking will disappear. RBS will pull out of another 13 countries this year, just leaving a modest presence in 25 countries. Over 30,000 jobs have been lost in the UK in that period.


   Let’s be candid, after the financial debacle the government, politicians in general and the public are only interested in all UK banks being cloned as ‘BORING BANK PLC!’ Sir Howard and Ross McEwan tick those boxes brilliantly, as does Lloyds Banking Group CEO Antonio Horta-Osorio, who preened himself like a peacock in announcing a dividend, a profit and the possibility of another quick fire sale of Lloyds’ shares to investors on top of currently dripping stock out surreptitiously. Though the PPI misdemeanours, which have cost Lloyds £11.5 billion including 32.1 billion this year, came under Eric Daniels’s watch, I still think the whole episode was truly shocking almost worse than investment banking losses and the whole deal has been sort of swept under the carpet. Lloyds appears to have transgressed more than the other banks put together!


   Banking gurus thought the appointment of Bill Winters to replace the battle scarred Peter Sands as CEO of Standard Chartered was inspired. After 22 years with JP Morgan , when he is alleged to have fallen out with Jamie Dimon, and a dozen year in the UK building a reputation in private equity as well as assisting Sir John Vickers with his IBC policies, Mr Winters is obviously very well connected corporately and politically. Therefore scant knowledge of emerging markets is not that important. He will be able to acquaint himself with what is required from good lieutenants around him. Chairman John Peace did well in persuading him to accept the appointment.


We hear from Barclays Bank on Tuesday. Without being too disrespectful it is good for Barclays that Sir David Walker has been replaced by John McFarlane from Aviva as chairman. Sir David was politically acceptable, post the Agius/Diamond dynasty, but was always too old and could never sell the bank, if he tried. Frankly I doubt he could sell ice to the Eskimos. John McFarlane will be very visible and may make Antony Jenkins feel uncomfortable unless he delivers dramatic changes. I suspect that Tushar Moravia, the finance director waits impatiently in the wings.







David Buik – market commentator


Panmure Gordon & Co


+44 (0)20 7886 2775 – mobile – 07788 144 877

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


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