Monthly Archives: April 2015

Today’s equity session in London could best be described as a combination of enigmatic and rudderless – such a compendium of mixed economic and financial news to digest! There were mixed emotions over the 1st quarter GDP numbers, driven by another horrendous January as it was in 2014, which triggered a negative number for the first quarter of last year of -2.1%.  So +0.2% gain seemed a tolerable effort for this last quarter, particularly as February and March saw some improvement. It seems as though the FED will wait until at least September before hiking.  Then the EU told us that deflation was behind them – +0.1%.  It is an improvement but life in Italy and France is dire and as for Greece its ‘last rites territory’, isn’t it?


So against that background for the FTSE 100 to close up 14 points at 6960; well I’ll gladly take that! So many companies reported today, it is hard to separate the wood from the trees.  RBS disappointed its supporters easing by 3%. These fines and provisions – millions and millions of them – are giving investors a dose of the ‘pip!’ Royal Dutch Shell posted better than expected numbers.  Investors are getting to grips with the premium Shell is paying for BG. Dividend was maintained and profits though down 56%, they were better than expected – +1.2%.  Exxon Mobil and Conoco Phillips also posted better than expected results in the US today. So the sector seems to be regaining a bit of poise.


Drugs had a splendid day with Smith & Nephew and Shire both posting numbers right up to snuff! – Both up 3%. Keep an eye on Royal Mail Group – +5.5%! Why? There were some diseased ridden minds working overtime. After some gossip over Post NL there is a school of thought that thinks private equity might have a pop at RMG. Nokia lost 8% today after poor figures.  However ARM was only marginally affected on the periphery – down 1%. John Menzies rose like phoenix from the ashes – +6% and hats off to Zoopla, which paid £160 million for USwitch. Some thought this acquisition might dilute its parallel standing with RightMove to something nearer Moneysupermarket (+1.9% today). Wrong!  The punters loved it – up 16% on the day!


It would be churlish not to mention IAG, which reported numbers today – a profit of $25 million. When Willie Walsh took over the CEO position at BA in 2009 from Rod Eddington, this airline was in a parlous state. It was really struggling. Walsh has been indefatigable. He orchestrated the merger with Iberian Airlines, dealt with redundancies and cut costs. Clearly oil at these prices should mean a huge operating profit, close to $2 billion; but life is often not quite like that. Never mind! IAG’s share price has rallied from 185p 2.5 years ago to 545p! – An outstanding effort!


Panmure’s Simon French encouraged by the EZ’s path away from deflation!

A wealth of Eurozone data this AM so a brief summary: Inflation is ticking up to precisely 0% (-0.1% previously) – here the weaker Euro is doing its best by raising the price of imports. Core inflation is at 0.6% (1% UK) and the 5yr foward inflation-linked swap is at 1.7% (below the 2% target the ECB is shooting for). Deflation therefore remains a substantial risk in the Eurozone given unemployment (unch @11.3% – compared with 5.6% in US/UK) signalling a significant (4%-5%) output gap. Additonally the deteriorating demographics strongly point to structural stagnation over a longer time horizon particularly in Germany and Italy. I do not buy the equity-led/”wealth effect”/QE recovery story until unemployment starts to show signs of falling and there are widespread reforms to labour laws and welfare reform. In terms of country-specific data: Spain and Germany outperforming with Italy and France as lagards. The problem facing EZ is that they need to scrap the Stability and Growth pact and spend a bucket load on infrastructure to stimulate private investment – there is no threat of crowding out at the moment. Overall an improving picture thanks to QE & oil but it is set to be short-lived as things stand.


TODAY’S FAYRE – Wednesday 29th April 2015

Rain, midnight rain, nothing but the wild rain

On this bleak hut, and solitude, and me

Remembering again that I shall die

And neither hear the rain nor give it thanks

For washing me cleaner than I have been

Since I was born into this solitude.

Blessed are the dead that the rain rains upon:

But here I pray that none whom once I

loved Is dying to-night or lying still awake

Solitary, listening to the rain,

Either in pain or thus in sympathy

Helpless among the living and the dead,

Like a cold water among broken reeds,

Myriads of broken reeds all still and stiff,

Like me who have no love which this wild rain

Has not dissolved except the love of death,

If love it be towards what is perfect and

Cannot, the tempest tells me, disappoint.”


Edward Thomas – soldier & poet – 1878-1917


We knew that the Q1 GDP data, posted yesterday, was not going to be particularly encouraging and the market was not disappointed – +0.3%, down from 0.6% in 4th Q of 2014 – annualised at 2.4% against government estimations of 2.5%. Not good but not as bad as Messrs Miliband and Balls, who cackled and guffawed like hyenas with mirth at the timing of this critical news. January was a dreadful month, as it so often is. During the quarter, even the service sector was depressed and construction fell by 1.6%. It was left to retail to fly the flag for the UK’s economy. Manufacturing did offer a glimmer of hope. However in March the economy was on the march again, with construction posting its best number since 2010.


There were some decent earning season postings yesterday, such as Merck, which rallied 5%, that gave the Street of Dreams some momentum with the exception of the NASDAQ, which saw some profit takers on Apple – down 1.6%, after great numbers on Monday. IBM added 1.9%. There were also decent efforts from Pfizer and Bristol Myers and all in all, ahead of the FOMC minutes this evening equities were on good terms with themselves. Ford just missed profit estimates. Whirlpool was one that did not please its acolytes – down 18%. Also after hours disappointed investors vented their spleens on Twitter – down 19% to $42.27, despite users rising by 18% to an average of 302 million per month. The loss widened to $162 million from circa $130 million and investors wanted answers as to where the profit was going to be generated from. Tonight’s FOMC result is expected to hear Janet Yellen push any rate increase forward towards the end of the year, rather than a July hike. Inflation needs to reach out towards 2% and the Labour market must be a little more robust than it has been in the past month or so. 1st Q US GDP is expected to come in at 1% today.


At 6.40am this morning Asian stocks were mixed. Australia was having a terrible session losing 1.7%. China saw profit takers, though the Shanghai Composite was flat heading in to lunch – Hang Seng -0.30%. The NIKKEI was up 0.38%, with export stocks enjoying a quiet run on the rails. Korea’s Samsung saw earnings fall by 40% – not unexpected – A profit for the quarter of $5.63 billion on revenues of $44 billion. Mobile phones, particularly Galaxy A made an operating profit of $2.5 billion on revenues of $24.1 billion. The second quarter is expected to show improvement with margins of hopefully 10% being maintained.


Post the Agius/Diamond dynasty, the BOE/Government saw the necessity of appointing safe pairs of hands at Barclays in the form of Sir David Walker as chairman – a pillar of society – former BOE economist and chairman of Morgan Stanley – acceptable to everyone in the political corridors of power and Antony Jenkins as CEO – a corporate and retail banker in the truest sense. Without being too rude or uncharitable both are as dull as dishwater. They are slowly achieving their objective – pulling out of the dangerous but lucrative game of investment banking, which for many years gleaned Barclays between 40-60%. Barclays’ shares have gone nowhere this year – 250p to 261p. However the existing management would tell us job is being done. Investment banking division has been savaged apart from New York. Huge redundancies and cost cutting exercises have been implemented, but where does the growth come from. With great respect Sir David, who hands over to John McFarlane and Antony Jenkins didn’t fill us with confidence. Could they could sell ice to the Eskimos? Not a chance!


This morning’s trading statement saw profits up by 9% to £1.85 billion. Tier One Capital came in at 10.6%. Barclaycard profits up 9%. Impairment charges were down 7% to £448 million. Another £150 million provision for PPI was made and £800 for FX manipulation. Superficially these figures are OK, but when John McFarlane takes over as chairman – ex ANZ and Aviva – he guy eats nails for breakfast and spits rust out! He will ‘kick but’ and heads will roll if the management does not perform. Mr J! You and others have been warned.


A slew of companies have posted results – set out below – TSB and Next posted satisfactory efforts.


The Financial Times amongst others inform us of changes in Saudi Arabia – The king’s son, Mohammed bin Salman, was named deputy crown prince, elevating the youthful defence minister and royal court chief to second in line to the throne.In a series of royal decrees, the king, who took power when his half-brother Abdulaziz died in January, also replaced ailing foreign minister Saud al-Faisal with Adel al-Jubair, the country’s ambassador to the US.Adel Faqih was promoted from the labour ministry, where he is credited with introducing important reforms aimed at boosting the employment of nationals, to the post of economy and planning minister. Khalid al-Falih, chief executive of state oil company Aramco, was named health Minster and Aramco chairman.








David Buik – market commentator


Panmure Gordon & Co



David Buik

Market Commentator


+44 (0)20 7886 2775

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


At 2.35pm the FTSE 100 had eased by 78 points to circa 7030 (-1.1%). Uncertainty over the General Election, mixed earnings, a pull back from the ridiculous rally triggered by a change in spokesman on the Greek financial crisis and a temporary drop in UK GDP for the 1st quarter saw the whites of investors’ eyes , whilst they took some risk off the table. As we enter the last week of this colourless, bad tempered and tortuous General Election, I expect the FTSE 250 to surrender gains rather more vehemently that the FTSE 100, where 70% of earnings are Dollar related. The DOW opened up 35 points, but to date the FTSE has shown little inclination to rally to the cause on Wall Street’s back.


Though volumes were light losses stretched across the spectrum. Mining stocks were up an average of 2% apart from Rio which was down 0.5%. Banks were down an average of 0.75%, apart from Standard Chartered, which did not please its acolytes with a profit of $1.5 billion – down 3%, wiping most of yesterday 4% gain on rumours that new CEO Bill Winters may well join HSBC with repatriation plans.


Drugs were clattered – Astra down 3%, Glaxo -2% with Smith & Nephew and Shire both -1.5%. Even tobaccos were out of sorts – IMPS & BATS -2%. Media stocks after a terrific run on the rails were easier – Reed Elsevier and Pearson both -1.5%, Sky -1.2% and ITV -1%. BP was steady – up 0.25%. St James’s Place travelled and arrived after good numbers – -2.5%. Whitbread did much the same -3%. Carpetwright was up just 0.5%. US GDP tomorrow and the 2-day FED meeting will be very much on punters’ mind. However the election will continue to fuel volatility.

Panmure’s Simon French’s comments on GDP Q1

U.K. GDP growth slows to 0.3% in Q1 : A challenge to avoid a political shift to the left
Senior UK Economist – Simon French +44 (0)20 7886 2753
The U.K. economy grew by just 0.3% QoQ in Q1 2015, slowing the annual growth rate to 2.4% YoY. Despite these headline numbers, a weak January underpinned this reading, and growth momentum has since picked up. High levels of net migration (Fig 1), low interest rates – we have a Q1 2016 for the first rise in U.K. rates – and a suppressed oil price (we have $50/bbl across 2015) underpins our expectation that the U.K. will forge ahead during the remainder of 2015.


TODAY’S FAYRE – Tuesday 28th April 2015


“This is no case of petty right or wrong

That politicians or philosophers Can judge.

I hate not Germans, nor grow hot

With love of Englishmen, to please newspapers.

Beside my hate for one fat patriot

My hatred of the Kaiser is love true:-

A kind of god he is, banging a gong.

But I have not to choose between the two,

Or between justice and injustice.

Dinned With war and argument I read no more

Than in the storm smoking along the wind

Athwart the wood. Two witches’ cauldrons roar.

From one the weather shall rise clear and gay;

Out of the other an England beautiful

And like her mother that died yesterday.


Little I know or care if, being dull,

I shall miss something that historians

Can rake out of the ashes when perchance

The phoenix broods serene above their ken.

But with the best and meanest Englishmen

I am one in crying, God save England, lest

We lose what never slaves and cattle blessed.

The ages made her that made us from dust:

She is all we know and live by, and we trust S

he is good and must endure, loving her so:

And as we love ourselves we hate her foe.”


Edward Thomas – soldier & poet – 1878-1917


 It appears that the PM always took his time in every competition he ever participated in, metaphorically producing a terrific burst of speed with a late ‘rattle on the rails.’  Like all decent thoroughbreds he took time to come in his spring coat!


A Labour/SNP coalition, at this moment in the UK’s recovery process, could not come at a worst time. It is imperative for all business – great and small – to be given the chance of broadening their horizons in the next few years and that means that sentiment must remain positive and incentives must be offered to keep that light burning under the bushel of hope! Frustratingly Messrs Miliband and Balls don’t seem to understand that business thrives on incentives. That enables companies and employees to pay a large amount of tax to fund the public sector – particularly health and education, the two ‘golden services’ at the heart of our society.



My colleague and friend at Panmure, Simon French makes the following salient comments –


“Balls and Miliband see a market failure and believe that state intervention is the answer. Rent controls, energy freezes, nationalisation of rail franchises, abolition of ‘non-dom’ status. If you want more money for public services then by all means raise marginal tax rates or cut out waste – Clinton did this in the 1990s and grew the US economy! If however you want to run industry into the ground you replace the invisible hand of the market with the very visible and disruptive hand of the state. The U.K. is a trading nation with footloose international businesses creating jobs – should you make the U.K. less accommodating these companies do domicile elsewhere in the world?”


Lord Ashcroft’s poll yesterday suggests that ‘hope springs eternal!’ –


“The Conservatives lead Labour by 36% to 30% in this week’s Ashcroft National Poll, conducted over the past weekend. The Tories are up two points since last week and Labour is unchanged. The Liberal Democrats are down a point at 9%, UKIP down two at 11%, the Greens up three at 7% and the SNP.” 


Messrs Cameron & Osborne may not enjoy today’s forecasted drop in GDP to 0.5%/0.6%, to be posted at 9.30am this morning. Needless to say Miliband and Balls will be jumping for joy at that prospect!


So Finance Minister Varoufakis does not get on with some EU financial heavyweights – bovvered! So PM Tsipras moves him sideways and brings the Oxford educated sweet-talking Euclid Tsakalotos to spear-head negotiations. Athens’s index rallied by 4% and other European bourses took heart and cracked on! I never was the sharpest pin in the box, but what has changed? Greece is still broke. 11 million cannot service €240 billion let alone repay it. I am missing something. Is Aladdin about to rub his lamp with a view to the genie printing money? Mr Tsakalotos may be more amiable to deal with, but surely the day of reckoning has arrived? It’s HAIRCUT-TIME and an end to prevarication!


On the Street of Dreams it was a relatively quiet day for earnings and investors felt obliged to take a few profits. The DOW ended down 0.23%, the S&P 500 by 0.41% and the NASDAQ by 0.63%. Investors levitated two inches above the carpet for Apple results after hours. Apple’s acolytes were not disappointed! The figures were great, though the shares after hours only rallied by 1.3% to $134. In the last quarter 61.17m iPhones were sold. Profits were up 33% at net $13.57 billion, Sales advanced by 70% and revenues were up 27% at $58.01 billion. The cash pile grew by $29 billion to $194 billion. Sales to China via China Mobile were up 72%. IPad sales down 7% and Mac sales up 10%. No account was taken for iWatch sales – A great effort by Tim Cook and his team!


Heavyweight banks grabbed most of the headlines in Europe. Deutsche’s CEO Anshu Jain posted dispiriting numbers – a profit of €559 million, but also included were €1.5 billion legal charges and €2.3 billion fine for LIBOR – not the greatest achievement of Deutsche Bank’s life. Notice was also served, as expected, to sell Postbank in the next 18 months and to split the bank into a commercial bank and an investment one – clearly dropping the banks presence in trading. The shares after a bright start dropped 5%. As for HSBC, if I was a serious shareholder I would demand a feasibility study on repatriation. When a bank makes 80% of its profits away from these shores and appears to be financially discriminated against with the bank levy – £740 million and increasing, maybe it would be better to move to HK or Singapore. An IPO of the domestic operation in the name of Midland Bank for circa £20 billion may save a few blushes all the way round. Also EU regulation is tantamount to penury for UK banks. So Mr Gulliver, please proceed! I frankly think that HSBC is bluffing as the cost of leaving could be catastrophically high, but let’s hope, Miliband, Balls, and to a lesser degree Messrs Cameron and Osborne get the message. Don’t extract the Michael too vigorously – if so? HSBC shares were up 3.1% with Standard Chartered, due to post numbers this morning up 4.3%. RBS sold $5.6 billion North American debt to Mizuho and took a $30 million hit.

In concert with New York most Asian markets took some risk off the table, though the NIKKEI closed up 0.38%. The Hang Seng was down 0.15% and Shanghai by 1.37%.

There were a slew of earnings this morning. BP and Whitbread captured the imagination. BP’s numbers were better than expected, though there was no increase in the dividend, which there has been in recent times. There was a $450 million tax credit, which may have made the figures look a touch more euphoric. However Bob Dudley seemed pleased with the progress.


Whitbread posted excellent numbers, but there is a feeling that the level of improvement going forward is limited. Nonetheless group sales were up 6.5%; Premier Inn sales +15.3%; Costa sales +17.9% and profits for the year up 13.2% to £366 million.





David Buik – market commentator


Panmure Gordon & Co


TODAY’S FAYRE – Sunday 26th April 2015


When you see millions of the mouthless dead

Across your dreams in pale battalions go, S

ay not soft things as other men have said,

That you’ll remember. For you need not so.

Give them not praise. For, deaf, how should they know

It is not curses heaped on each gashed head?

Nor tears. Their blind eyes see not your tears flow.

Nor honour. It is easy to be dead. Say only this, ‘They are dead.’

Then add thereto, ‘Yet many a better one has died before.’

Then, scanning all the o’ercrowded mass, should you

Perceive one face that you loved heretofore,

It is a spook. None wears the face you knew.

Great death has made all his for evermore.”


Charles Sorley – soldier & poet – 1895-1915


I has been a great weekend for sport, with England comprehensively beating the West Indies in Grenada, promotion and relegation issues in football remaining on a knife-edge and the prospect of a joyous London Marathon today. However, unequivocally the weekend belonged to AP McCoy, who took his final bow at Sandown Park in front of 18,000 adoring fans, after 20 consecutive championships, 4.357 winners from 16,000 rides and 1000 falls. As a came in to the winners’ enclosure in 3rd place on BOX Office, to be greeted by his family, JP McManus, Jonjo O’Neill and others, there was hardly a dry eye in the house!  If ever a person with such total commitment, talent, indefatigable courage and an undying and relentless quest to win, deserves a knighthood; it’s AP McCoy! Let’s hope the public are not disappointed in June!



Looking at the basic statistics on global equity markets in isolation over the past week, one might be forgiven for thinking that life was full of fun and that no one should have had a care in the world. The S&P rallied by 1.75%, with the NASDAQ finally eroding all the losses incurred since the beginning of the century. The tech driven NASDAQ is up 6.7% since January and 22% in the last year – with acknowledgement to Apple for its amazing contribution. Also Amazon rallied by 14% after results on Friday. The FTSE 100 was up by 1.09% last week, with European stocks better by an average of 1.23% and the NIKKEI by 1.87%. The Chinese authorities also seem more than prepared to throw the kitchen sink in terms of stimulus packages to make sure that China’s growth does not fall short of 7%. Hence Chinese stocks have rallied no less than 35% this year! It should also not be forgotten that oil has risen 20% in the past month.


However life is never quite that simple as that and in point of fact it was shrouded in controversy. The quality of the earnings in the US so far have been better than expected but the outlook for the second half of the year is a tad murky for an ebullience to prevail. There is a school of thought which is gathering momentum that a correction may not be far away. The recovery in the US is patchy. Many believe that an interest rate hike is a possibility in the late summer or early autumn. Also the MPC minutes suggested that an interest rate in the UK was not also not a million months away. The uncertainty of the outcome of the UK election may a sting in its tail. The FTSE 100 looks solid, as 70% of its earnings emanates from the dollar, which is of course strong. However the Pound looks vulnerable and sentiment could turn 180% if a Labour led coalition was given a mandate.



On the Street of Dreams late last week Mattel, the toymaker and Starbucks excelled. In London news that Warren East, fresh from a fabulous career at ARM Holdings, would be taking over from John Rishden as CEO of Rolls Royce, gave engine maker’s share price a fillip. Having secured more contracts in the US, BAE Systems also saw it share motor – up 2.3% on Friday. Astra Zeneca’s pipeline dispirited Astra shareholders – down 1.7% and stand at £47 rather than the £55 a share Pfizer bid. There are questions to answer for this Anglo-Swedish drug titan.



I still cannot imagine why governments and markets are still so chilled out over Greece’s parlous financial sate. So the 3-year yield on Greek bonds fell from a recent ‘high’ of 28% to 23%; that hardly instils confidence that a satisfactory solution will be found between the ECB, EU and IMF with the wayward and unorthodox Messrs Tsipras and Varoufakis, who look to me as if they could not organise the finances of a corner shop in Steeple Bumpstead, let alone Greece’s dodgy finances. Talk about ‘kitchen-sing!’ It acquired new heights when Tesco Dave Lewis posted a £6.4 billion loss. At the end of the day’s trading shares after an initial spurt lost 5%, but recovered some poise by the end of the week.


And now to HSBC’s bombshell, when the chairman Douglas Flint, put the world on notice on Friday that a feasibility study was under way as to whether HSBC should relocate to HK or somewhere else rather than remain a sitting target for a potentially venomous Labour coalition, which would vent its spleen against personal incentives, thus killing the golden goose that laid the golden egg for recovery. Envy and spite are unattractive at the best of times, but to damage recovery to placate voters, who feel their lives have been irrevocably damaged by a few greedy idiots, is very short-sighted and counterproductive. 98% of people employed by banks are what Miliband describes as ‘hard-working people.’ Talk of concern expressed by HSBC that leaving the EU is a cause for concern is just a PURE ‘RED HERRING!’ If Miliband wins we are staying in the EU. If Cameron wins, he will try and negotiate better terms. We will still stay in. What HSBC is far more concerned about is draconian EU regulation and the cost of capital and the vituperatively nasty attitude by UK politicians towards banks – yes behaviour has been bad in places, but Andrew Bailey’s team at the PBA is very much on the case and there is consequently measurable improvement. Rest assured, as advised in today’s Sunday Times, if conversations with the government of the day go badly and the banks are hammered by a larger levy, expect HSBC to ‘sell off’ its UK branch as Midland Bank in an IPO, as no one in their right mind would buy it with a healthy premium with a price tag of £20 billion.


Lloyds Banking Group announced that shares are continuing to be sold by UKFI down to about a 20% taxpayer’s stake, but there is still £9 billion to be sold – £5 billion at a 5% discount to retail investors. The Treasury is concerned that hedge funds plus ‘spivs and vagabonds’ might be tempted to ‘short’ the stock for temporary convenience and will consequently be vigilant.



The celebrated controversial economist, Martin Armstrong suggests that the US equity bubble may not be that far from bursting. He says “Gold has been turning back down as it has lost much of its lustre among broader base investors. In fact, there are people now starting to say gold is dead since it has declined in the face of monetization by the Fed and the ECB. The wider view is the gold rally was all hype and it will never rally. This too is what I warned MUST take place BEFORE you get the low. We had to “shake the tree” and get them all out.


Everything appears on schedule to bottom with the Benchmarks. If that unfolds to the week, then this too will confirm we have a bubble top in government that should manifest itself in the bond markets.

We can see the churning in the share market. Volatility should start to rise come the first week of June. There remains the potential for the final flight to quality if the share market declines, people will run to government bonds even at negative rates. That should create the major high in bonds.


So while it may appear there is just depression story after depressing story about corruption, hopefully you will get a taste of what is necessary to turn the cycle. This is the collapse in trust of government. The paper currency, of what remains, says –

“IN GOD WE TRUST” not “IN GOVERNMENT WE TRUST” They are not one and the same.” His assessment seems a little hysterical but worth a listen!








David Buik – market commentator


Panmure Gordon & Co



David Buik

Market Commentator


+44 (0)20 7886 2775

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


It was in 1993 when Sir Willie Purvis repatriated HSBC’S head office from HK to London. HSBC had selected another gear as a leading international operator, acquiring Midland Bank, Chemical Bank and Republic Bank of New York, not forgetting Household, which eventually cost HSBC $53 billion post from sub-prime lending, with a view to expanding their global corporate and investment banking activities.  It became clear that after ‘Bing Bang’ London was the place to be to make that quantum leap forward in the world of capital markets and debt structuring. HSBC’S presence in London as leading player was long overdue!

It was a shrewd move, until the banking and credit crisis in 2008. HSBC, in all fairness, was the first to flag the sub-prime lending crisis and despite losing gargantuan sums at Household, the bank a had a pretty decent crisis.
In the advent of Lord Stephen Green and Michael Geageghan handing over to Douglas Flint and Stuart Gulliver in 2010, HSBC has experienced a litany of problems – money laundering in US, LIBOR and FX manipulation and tax issues at its Swiss banking arm – all very controversial and mostly very costly in terms of fines. HSBC has been vilified for not being in control of 300,000 personnel in their branches all over the world. CEO Stuart Gulliver was also castigated – grossly unfairly – for his personal tax affairs, when he has behaved in an exemplary manner since coming to the UK in 2009.

When the contents of the Vickers Independent Committee for banking recommended that banks should be split in to two – corporate/retail and investment banking, Gulliver served notice that HSBC may have to consider contingency plans in terms of its domicile. Since then so much more ammunition has been supplied as to why HSBC should serve notice on a feasibility study as to if and where head office should be relocated to.  No one should be remotely surprised. In answer to a lack of management control, and to comply with George Osborne’s wishes, HSBC will relocate its retail banking to Birmingham, creating 1000 new jobs. It also made everyone aware last week that HSBC intended to become simpler and smaller by pulling out of some emerging countries, flagging up Brazil and Turkey to start with.  However with draconian EU regulation and the cost of capital increasing disproportionately coupled with an increase in the bank levy, Gulliver, Flint & Co are obliged to consider shareholder value and no one can blame them for giving due consideration to domicile.  Last year HSBC paid £740 million in bank levy – easily the largest of all UK banks. This is disproportionate since HSBC makes 80% of its profits internationally. How the EU can have the same regulation criteria for banking in the UK as the rest of the EU the ‘Good Lord’ only knows – chalk from cheese. All European financial centres are Mickey Mouse in comparison to London. This is in no way any criticism of Andrew Bailey of the Prudential Banking Authority.

I hope and think HSBC is bluffing but who knows?  This threat is a warning shot across the bows to Miliband to stop banker bashing and show support for an industry that contributes 15% towards GDP.  To David Cameron & George Osborne, it tells them to fight harder on the renegotiation of EU terms particularly on financial regulation.

To those to the left of centre politically, don’t say good riddance! Don’t throw the baby out of the bath water. If HSBC is not placated and decides to leave, it will send out a terrible message to the international business community that London may not be the place to finance international trade, raise bonds and provide loans as it was in yesteryear. It could trigger the likes of Goldman Sachs, UBS, Deutsche Bank, Morgan Stanley to reserve judgement. HSBC employs 48k people in the UK. HSBC’S departure would be an unmitigated disaster for a country that is just getting its economic and trading act together!


TODAY’S FAYRE – Tuesday 21st April 2015

Such, such is Death: no triumph: no defeat:

Only an empty pail, a slate rubbed clean,

A merciful putting away of what has been.

And this we know: Death is not Life, effete,

Life crushed, the broken pail.

We who have seen

So marvellous things know well the end not yet.

Victor and vanquished are a-one in death:

Coward and brave: friend, foe. Ghosts do not say,

“Come, what was your record when you drew breath?”

But a big blot has hid each yesterday

So poor, so manifestly incomplete.

And your bright Promise, withered long and sped,

Is touched, stirs, rises, opens and grows sweet

And blossoms and is you, when you are dead.”


Charles Sorley – soldier & poet – 1895-1915


Gallipoli – 25th April 1915 – ANZAC DAY – RIP


If there is a happier way of spending an evening than watching a production of the Royal Ballet’s ‘La Fille Mal Gardee’, which hasn’t changed one iota since Sir Frederic Ashton used to perform the comical part of the mother fifty years, I have yet to witness it! It is full of innocence, humour, beauty, charm and grace with stunning music composed by Ferdinand Herold. So when it was posted that Carlos Acosta and Marianela Nunez were the principal dancers, any prevarication as whether this ballet should be seen dissipated. Attendees were enraptured! Enchanting!


The country continues to grind its way through this torrid, repetitive and acrid General Election campaign, which is becoming more toxic by the day. Perhaps it is not surprising with so much at stake. Aside from these parochial issues other global market land marks have been reached in recent days – not all of them records, but certainly worthy of note. Firstly after 15 years the NASDAQ has finally eradicated all those horrific losses which were incurred at the turn of the century, when the tech bubble finally burst. The demise of names such as Worldcom, with Bernie Ebbers ending up in the slammer for 25 years and Enron, with Kenneth Lay committing suicide, wiped billion off shareholder value. Tyco’s Dennis Kozlowski also ended up ‘doing bird.’ and its merger with Time Warner cost billions. AT&T, Verizon, Intel and Cisco Systems saw their share prices beaten up. It was one hell of a shake out!’ Well yesterday for many it was a forgotten nightmare. Since the lows of 2000, Amazon, as an example, despite rarely if ever making a profit, has seen its shares rally from $50 to circa $390! Hope springs eternal. The NASDAQ hit a low of 1335 in 2002 and closed at 5056 last night. The opening looks bright today with good results from Amazon (+6.7%), Microsoft (+3.37%) and Google (+3.11%) all ‘popping’ after hours. These followed in the wake of stellar numbers on Wednesday evening from eBay and a questionable effort from Facebook. The NASDAQ is up 22% in the last year and 6.7% since January 2015. It would also be churlish not to say thank you APPLE for its contribution!


The Street of Dreams enjoyed a decent session, buoyed by existing home sales on Wednesday (slightly disappointing effort from New Home sales in March) and a slew of acceptable earnings – P&G, Caterpillar and DOW Chemicals. CAT however was quite negative about the future thanks to a very strong Dollar and large footprints overseas. The regulators put their size 12 hob-nailed boots in the way of a merger between Comcast and Time Warner Cable. This deal looks dead in the water. At the close the DOW was up 0.11%, the S&P 500 by 0.24% and the NASDAQ by 0.41%.


Asian markets have been on fire in recent weeks, with the NIKKEI breaching the 20k threshold for the first time in 15 years. However Chinese stocks have really cracked on, courtesy of stimulus packages – up 36% so far this year and 53% in 2014. Today there was some profit taking with the Shanghai Composite easier by 1.7%.


I understand that there are signs of rapprochement between the EU and Greece. Greek 3 year bond yields fell from 30.5% to 24.87% – whoopee! Call me cynic but I don’t believe a word of it! Greece is bankrupt! Period! Surely ‘hell has a better chance of freezing over’ than Greece complying with the EU and IMF over its debt crisis in Riga at the ECONFIN meeting? Yesterday the FTSE 100 added 25 points at 7053. Tesco recovered a little poise after Wednesday’s clattering. Wm Hill’s results disappointed, but the mitigating circumstances re-tax and some adverse football results in January was a reasonable explanation. In line with Tesco’s cutting staff, Sainsbury find themselves under pressure on costs and served notice to cut 800 jobs. Sir Martin Sorrell was in sparkling form delivering WPP’s trading update, but he stood firmly and diplomatically on the fence over which party he supported at the General Election. I suspect no prizes for guessing!


The BOE minutes surprised many of us in suggesting a rate rise may not be a million miles away. Mind you, the MPC has wound us up before! What a great appointment for Rolls Royce – former ARM CEO Warren East. The market thought it inspirational with shares rallying 3% on Wednesday. Deutsche Bank was duly fined $2.5 billion for Libor manipulation. The bank did not come out of it to well, appearing to have procrastinated in helping the regulators.


The FT’s Jonathan Guthrie’s Lombard column brought a wry smile to my face in mischievously explaining that John McFarlane, the new chairman of Barclays, has written to shareholders setting out his priorities. Let’s call him the new ‘Mac the knife!’ Certainly the current management have been put on notice to deliver or else!


Out of interest, HMT’s shareholding in Lloyds Banking Group has been reduced by another 1%, and is now down to 20.95%. That is now a 4% reduction in the last couple of months via the Trading Plan.


Results will be posted today from ASTRA ZENECA, RECKITT BENCKISER.


US companies posting interim results – Friday – XEROX, AA,


David Buik – market commentator


Panmure Gordon & Co



David Buik

Market Commentator


+44 (0)20 7886 2775

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

TEVA/MYLAN – Comments by Panmure’s Dr Lucinda Crabtree

Teva (TEVA US, n/c) – so after all that Teva has made a $40bn offer for Mylan (MYL US, n/c) …this comes after much speculation in the media…and what an opportune time given recent news flow that Novartis/ Momenta’s (n/c) Glatopa was approved (first substitutable generic for copaxone, which is a multiple sclerosis drug, >$3bn sales in US last year, c. $72k list price per pt annually – see wall street journal article below ).


Mylan had made a big issue of stating all the reasons why such a combination would not be viable as well (in a statement issued Friday)….. it said that it was fully committed to its stand-alone strategy, including its proposal to acquire Perrigo (PRGO US, n/c), and this speculation has no impact whatsoever on this strategy.  Mylan noted that it has studied the potential combination of the two businesses for some time and believes it is clear that such a combination is without sound industrial logic or cultural fit. Further, there would be significant overlap in the companies’ businesses and Mylan believed it unlikely that any such combination could obtain anti-trust regulatory clearances.


Now it seems Mylans $28.9bn offer for Perrigo has been rejected (Teva did state that  it believes its offer is a more attractive alternative for Mylan shareholders than Mylans proposed acquisition of Perrigo) ….the rejection is because it is believed by the board that it substantially undervalues Perrigo (for example, they state that does not take into account the full benefits of the Omega Pharma acquisition) and is not in the best interests of shareholders….it is argued that Perrigo has a proven track record of value creation, generating returns of >970% since fiscal 2007 and it’s organic net sales 3  year CAGR goal for 2014 – 2017 is 5-10%….