TODAY’S FAYRE – Thursday 14th May 2015


We stood by a pond that winter day,

And the sun was white, as though chidden of God,

And a few leaves lay on the starving sod, —

They had fallen from an ash, and were gray.

Your eyes on me were as eyes that rove

Over tedious riddles solved years ago;

And some words played between us to and fro–

On which lost the more by our love.


The smile on your mouth was the deadest thing

Alive enough to have strength to die;

And a grin of bitterness swept thereby

Like an ominous bird a-wing….

Since then, keen lessons that love deceives,

And wrings with wrong, have shaped to me

Your face, and the God-curst sun, and a tree

And a pond edged with grayish leaves.”


Thomas Hardy – poet & author – 1840-1928


I commend you all to the FT’s ‘Lombard’ Jonathan Guthrie’s superb analogy of Bob Diamond’s shareholder revolt to an Alexander McCall Smith mystery story – Journalism at its most imaginative!


I wondered how long it would take before the ’right’ and ‘left’ started to fragment the party. I must say for a fellow colleague, Patrick O’Flynn, the former political editor of Daily Express, to describe Nigel Farage as a ‘snarling, thin-skinned, aggressive man who is turning UKIP into a personality cult’ as rather more visceral than necessary. With friends like that who needs enemies?


Whilst most investors were ruminating and analysing the damage the fall-out in the bond market was having on equities, as well as the improved GDP data coming out of the EU, with the exception of Germany whose +0.3%, which was disappointing, it was the content of the BOE Quarterly Inflation Report that grabbed most people’s imagination yesterday. The BOE has been obliged to be mute for 6 weeks, ahead of the General Election, Governor Mark Carney and his BOE colleagues set out the UK’s economic stall.


Not surprisingly the BOE reduced GDP forecasts for the next 3 years – 2015 and 2016 from 2.9% to 2.6% and 2017 from 2.7% to 2.5%. Though Mr Carney believes that the UK economy is solid and robust, he did express concern about the lack of wage inflation (1.9% in the last year and just 0.2% last month), stating that immigrant workers – maybe as many as 942k from Poland and the Eastern block – may well have blunted wage growth. At the manual Labour level, I am sure he is right. However there is a dichotomy here, as most economists are convinced that quality immigrants have contributed substantially to growth in recent times. Unemployment continues to come down – now at 5.5%. Inflation is not an issue. We may even have a negative number in June; so rates not expected to rise until January 2016.


It was interesting to note that France’s GDP performance was far better than expected – +0.6%. The EU as a whole grew at 0.5%. Despite the better than expected growth data investors in Germany and France had no appetite for risk yesterday. The DAX fell by 1.05% and the CAC by 0.26%. Concern over Greece debt still hangs over the EU like the sword of Damocles. However the FTSE ended the day in positive territory – up 15 points at 6949. Market observers must be mindful of the fact that a significant amount of funds have been withdrawn from equities in recent weeks. The P/E ratios of many indices have started to look quite rich; so some risk has been taken off the table. There are still a number of global imponderable, which don’t appear to have obvious solutions – falling growth, oil prices, debt and geopolitical issues such as Ukraine and IS!


Yesterday in London did not seem to be a very eventful, though comments from various companies created ripples of interest. Admiral’s CEO Henry Englehardt is to step down as CEO of Admiral Group next year. Premier Oil and Wood Group confirmed that as a result of the dramatic drop in oil prices, exploration and investment has been cut in the Falklands, but also in the Far East and in general across the board as far as Wood Group is concerned. Barratt’s Mike Clare having pleased the market with its sales for the year, up from 14800 house units to 16k, warned about the lack of bricklayers and skilful builders, whilst at the same time asking the government to get the ‘lead out’ out over releasing land for building. SAB Miller seems to have relied on the sale of soft drinks – up 8% – to bolster their numbers.


Inertia seemed to set in on the Street of Dreams yesterday with retail sale coming in very flat and uninspiring. The DOW closed down 0.04%, the S&P 500 was easier by 0.03% and the NASDAQ just popped its head above the Plimsoll line at +0.11%. In Asia this morning, investors seem to be waiting for more guidance of stimulus packages, resulting in a fairly uneventful session, apart from Japan which was down all but 1% on a strong Yen – Hang Seng +0.14%, Shanghai -0.39%.


Dealers in London seemed to arrive at the work with a monkey on their back this morning. They took the FTSE 100 down 50 points but in recent minutes it has rallied 40 points. Markets are likely to remain very volatile whilst this uncertainty prevails – particularly the concern over rising European bond yield. There have been a slew of earnings this morning. ITV with a 14% increase in revenues will have pleased its acolytes, but was a case of travelled and arrived -1.4%. Dido Harding’s TalkTalk was +2% having been down 2.7%. British Land, Aggreko and Old Mutual put in solid efforts.



US companies posting interim results – Thursday – APPLIED MATERIALS, NORDSTROM

19th May – WALMART, HOME DEPOT, 20th May – TARGET


David Buik – market commentator


Panmure Gordon & Co


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