TODAY’S FAYRE

TODAY’S FAYRE – Thursday 9th April 2015
“DownhillI came, hungry, and yet not starved, 
Cold, yet had heat within me that was proof 
Against the north wind; tired, yet so that rest 
Had seemed the sweetest thing under a roof.

Then at the inn I had food, fire, and rest, 
Knowing how hungry, cold, and tired was I. 
All of the night was quite barred out except 
An owl’s cry, a most melancholy cry.

Shaken out long and clear upon the hill 
No merry note, nor cause of merriment, 
But one telling me plain what I escaped 
And others could not, that night, as in I went.

And salted was my food, and my repose, 
Salted and sobered too, by the bird’s voice 
Speaking for all who lay under the stars, 
Soldiers and poor, unable to rejoice.”

 
Edward Thomas – soldier & poet – 1878-1917
 
 
 
Poor old Paul Downton. He’s just been sacked by the ECB!  Having reappointed Peter Moores as England’s coach, which at best was questionable, he is paying the price for that decision and for England’s woeful performance in the World Cup. Moores has never delivered the goods for England.  England are currently a moderate side and it needs an inspirational coach like Jason Gillespie or Tom Moody to galvanise its players in to believing in themselves.  I doubt Moores has that capability.  Add that faux-pas to the ‘KP saga’ – so badly handled – and consequently Paul Downton was metaphorically ‘brown-bread!’ Very sad for a man who is universally liked, was a top-class wicket keeper and not a shabby stockbroker!
 
 
Yesterday most of the headlines were grabbed by merger-mania and understandably Shell & BG lead the charge. Shell’s shareholders were less than complimentary about the deal and the B shares fell by just over 5%.  The market also seemed uncertain whether Shell would bag all of BG’s assets, but on the whole the liquid gas fields, entry in to Brazil and the Australian business certainly captured Shell’s imagination in the £47 billion deal.
 
However it was the peripheral distribution of the largesse or spoils of war that captured my imagination. Let’s start with Helge Lund, the fairly recently installed BG CEO, who arrived with a very controversial £13 million ‘golden Hello’ with a big reputation as a deal maker at Statoil.  Rumour has it that when this deal is consummated he will take a further £25 million out of the ring. We are also led to believe that Ben Van Beurden, Shell CEO, may also have a humped back, crying all the way to the bank – a basic salary of £4.5 million plus massive bonuses. Investment banks, lawyers, accountants and PR companies last year missed out on £350 million of fees, which would have been gleaned had Pfizer successfully bought Astra Zeneca in a £69 billion deal. This time the following look as if they might share £200 million – Representing Shell BOA Merrill Lynch Simon Mackenzie-Smith and Julian Millcreest, representing BG Group, Goldman Sachs – Mark Sorrell (son of Sir Martin) and Laura Cook – lawyers Slaughter & May and Freshfields and let’s not forget the PR gurus – Finsbury with Roland Rudd to the fore for Shell and Brunswick led by Alan Parker for BG Group. Subject to this deal being completed Christmas is unlikely to be shabby!
 
 
 
There are several kites being flown as to who will follow in to the M&A melting pot whilst oil remains relatively cheap. Talk of BP falling to Exxon Mobil, is in my opinion folly, conceivably stretching the imagination too far.  Yes BP acquired Atlantic Richfield and Amoco when oil was dirt cheap, but the political ramifications – US/Russia/UK government – might prove insurmountable hurdles, let alone the premium that would be required to buy it. BP’ share capital is $120 billion.  Add the premium and you are talking $200 billion.  That’s a big mouthful even for Exxon Mobil! Ophir Energy and Tullow are far more vulnerable and could very likely fall in to the hands of BP in my humble opinion.  Investors and market protagonists are still jumping up and down looking for news from Sky/Vivendi, ITV and Royal Mail.  No news yet but be patient!
 
 
We started the US earnings season last night with Alcoa just missing thanks to higher costs. After hours the shares were down 3.22%.  This quarter market observers expect that S&P earnings will fall by about 3%, mainly due to energy stocks which will have been larruped.  Next week the banks post their results which may redress the balance of power.  The content of the FED minutes were a bit of a surprise.  Some FED board members refuse to rule out a rate hike in June – everything depends on the data. Many market professionals would be amazed if there was any movement before the autumn. However if Payroll numbers are good in April and May who knows?
 
 
The supermarket figures were interesting.  Though Aldi flip-flopped with Waitrose – 5.3% as against 5.1%, I would not be that worried about Waitrose. I just love the John Lewis business model.  They look after their staff based on success. Waitrose customers tend to be loyal. Tesco despite problems still has 28.4% of the market. Asda 17.1%, Sainsbury 16.4%, and Morrison 10.9%.  
 
 
We expect Greece to repay E450 million to the IMF today.  Where the money has come from remains to be seen.  PM Tsipras has been in Moscow seeing Uncle Vlad, who insists Greece has yet to put out the begging bowl.  Tsipras is probably incurring the wrath and indignation of the EU with these antics, but Greece is desperate for money!  Also China may well be tapped before too long!
 
 
 
This week’s UK results – Thursday – ARFEN, LAURA ASHLEY, MAJESTIC WINE (TS), 888 HOLDINGS (TS), PZ CUSSONS, Friday – HAYS PLC, ROCKHOPPER (TS).
 
US companies posting interim results – Thursday – WALGREENS, GAP, CONSTELLATION BRANDS, RUBY TUESDAY.
 
David Buik – market commentator
 
Panmure Gordon & Co
 
David Buik
Market Commentator
Panmure Gordon & Co 
One New Change | London | EC4M 9AF | United Kingdom
www.panmure.com
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