TODAY’S FAYRE – Thursday 21st May 2015



He’s gone, and all our plans

Are useless indeed.

We’ll walk no more on Cotswolds

Where the sheep feed quietly and take no heed.


His body that was so quick is not as you knew it, on Severn River

Under the blue driving our small boat through.

You would not know him now…

But still he died nobly, so cover him over with violets of pride


Purple from Severn side.

Cover him, cover him soon!

And with thick-set Masses of memorised flowers-

Hide that red wet

Thing I must somehow forget.”


Ivor Gurney – poet & composer– 1890-1937



Yesterday morning I suspect that the banking sector felt as if it was on “death row!” It knew the punishment was coming for foreign exchange and other market manipulation, but the realisation and the ultimate punishment is another experience altogether. The sum of $5.7 billion was levied at six banks. Separately from the more than $2.5bn in total forex criminal penalties being paid to the DOJ, six banks will also be fined more than $1.8bn by the US Federal Reserve. The recipients of these fines were Citibank, BOA, JP Morgan Chase, UBS, Barclays and RBS.


Barclays will pay the largest penalty, at more than $2.3bn. Its larger payment partly reflects the fact that the bank is settling with most of the regulators — including the DFS, the US Commodity Futures Trading Commission and the UK’s Financial Conduct Authority. The FCA’s fine, at £284m, is the largest in the regulator’s history. Also evidence offered by the New York Department of Financial Services (DFS) quoted one Barclays trader as writing in a November 5 2010 chat: “if you ain’’t cheating, you ain’t trying”. Eight Barclays’ dealers have either been dismissed or suspended and one suspects that criminal charges will be made in the fullness of time. Frankly these people should be ‘named and shamed.’ These fraudulent acts have gone on long enough and those responsible must be brought to book. Until people go to jail for this type of activity, there is no real deterrent to stop this subversive activity.


The CFTC also imposed a separate fine of $115m on Barclays for attempting to manipulate US dollar ISDAfix swap rates, marking the first time it has taken action in connection with that benchmark. Barclays also has $488 million fine for electricity contracts in the US to dispute. Barclays believes that the FERC does not have regulatory for commodity futures contracts.


This is by no means the end of the affair. The domino effect could be gargantuan, dragging in litigants from brokers, corporate counter parties, buyers of shares and property; the list could be endless. If they feel they have been wronged, the litigation will rear its ugly head and who can blame them. FX is the largest market in the world with $5 trillion being turned over on a regular basis.


That was not the only banking story yesterday. Having threatened to leave these shores two weeks ago HSBC was rebuffed again in its bid to have Alan Keir installed as chairman of its ring fenced bank by the BOE PRA, implying conflict of interest – existing director of a bank becoming chairman of a ring-fenced bank. This will be another irritant for Stuart Gulliver and Douglas Flint. However it may not be a pivotal issue in HSBC’s decision making process over possible repatriation. The bank levy may well be the key to the kingdom. HSBC is concerned that all it assets globally will used to calculate its share of the bank levy rather than its UK domestic assets. It is also unlikely that HSBC will return to HK, because of concerns that the Chinese government would bring too much influence to bear over its activities. Singapore is a likely friendly port of call.


Global equities experienced an infinitely forgettable session yesterday. In expectation of the FED’s comments due yesterday, activity was somnolent at best. Target’s results were slightly better than expected – shares up 0.3% and Yahoo! served notice that it would like to IPO its stake in Alibaba. The content of the FED minutes were as expected. No chance of a rate hike next month. Weakness of manufacturing and retail data were causes for concern as was falling growth in China and the Greek financial crisis. The Street of Dreams’ reaction was neutral. The DOW closed down -0.15%, the S&P 500 was easier by 0.09% and the NASDAQ finished flat +0.03%. The P/E ratio for the S&P 500 is starting to look a little rich at 17X earnings.


China’s PMI numbers dropped below the 50 threshold mark. These numbers don’t look good, but the Shanghai Composite rallied in the thought that more stimulus would implemented, such as cutting rates before too long. The Shanghai Composite was up 0.82%, with the Hang Seng down by 0.45%. The Nikkei close +0.3%.


More earning were posted this morning. Royal Mail, having seen its shares soar in the wake of problems with Whistl, won’t be delirious about its results today showing a profit of £400 million. It seems to have been a bit of a struggle out there with letters down 3% though parcels are up 4%. The dividend was increased by 5%. Investec posted decent numbers with an 11.7% increase in dividend. Mothercare’s profits were up 37% and Rank saw revenues improve by 5% in the last quarter.


Simon French, Panmure’s economist comments on George Osborne’s speech to CBI last night.


“Chancellor spoke at the CBI annual dinner last night. Main takeaways were a “productivity plan” to be published alongside the Budget on July 8, reappointment of Ian McCafferty (hawk) to the MPC, a “City Devolution Bill” in next week’s Queen’s speech (this is part of Jim O’Neill’s brief on the Northern Powerhouse) and the biggie is the merging of the Shareholder Executive and UKFI (manages HMG’s stakes in LLOY and RBS) into a single GovCo sitting under the Treasury – previously this sat in the Department for Business. I have been carping on about Government mergers for a few weeks and I think this is the first of quite a few. I also think this particular one signals a drive to sell-off government assets during this Parliament (including the Bank stakes).”



US companies posting interim results – Thursday – BEST BUY, DOLLAR TREE, AEROPOSTALE, GAP, ROSS STORES, Friday – FOOT LOCKER, ANN INC.



David Buik – market commentator


Panmure Gordon & Co




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