Monthly Archives: June 2015

GREECE – THE PARTY’S OVER! IT’S TIME TO CALL IT A DAY!

Well the latest from the Acropolis is that the Greek Government has asked the ESM for a 2-year financing deal to carry the Hellenic empire through the next €7.2 billion bail-out facility. The terms for that are likely to be very draconian, if there is anything to talk about; so you can imagine what the terms will be in 2 years’ time when Greece owes REAL money. My friend and colleague Simon French is of the opinion that Greece should “Wake up and smell the coffee! Greece! Dear tragically glorious friends with such enviable culture – you are BROKE!  Hands up! Put the WHITE FLAG UP!”  “The party is over! It’s time to call it a day!  You burst your pretty balloon and taken the moon away!”

 

Be brave! Pick up the cudgel! Take a walk on the wild side! It cannot be any worse than it currently is.  With a devalued drachma and some low-profile financial help from China – nothing vulgar or too much in your face and in 5 years with a bit of hard endeavour, Greece could be smiling like Cheshire cats.  The longer Greece leaves it the worse it will get!

 

At 3.15pm the FTSE 100 was down 54 points at 6567. Trading conditions were dire. The market was dead as a witch’s nipple!  Mining stocks were down 2%, oil by 1%, banks by 0.5%.  Good luck Andy Murray!

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MARKET UPDATE AT NOON

So the Fred Karno Circus – alias the EU/IMF/GREECE slapstick comedy troop – is back in town! More rumours and counter rumours that one could shake a stick at, the most preposterous being that Greece was considering suing the EU for driving them out of the union and the most viable one suggesting that the EU will be offering fresh bail-out terms. That has a certain resonance to it. At the 11.9th hour Greece finally agrees terms pro-tem; Tsipras goes! Then we face the same problem in 6 weeks’ time, 6 months’ time, 1 years’ time and maybe 3 years’ time, when eventually Greece departs!

 

So uncertainty prevails! – The FTSE at 11.44am is down 25 points at 6595 – pharmas are flat, energy is down 1%, mining down 0.5% and banks down 0.5%. Conditions are decidedly sepulchral. Mary Magdalene would have been very comfortable.

Those companies that reported today – Imagination Group +2%, Ocado -1%, Northgate-8%, Ladbrokes – on talks still goin on – flat.

TODAY’S FAYRE – GREECE & ALL THAT JAZZ!

TODAY’S FAYRE – Tuesday 30th June 2015

 

“WHEN we two parted

In silence and tears,

Half broken-hearted

To sever for years,

Pale grew thy cheek and cold,

Colder thy kiss;

Truly that hour foretold Sorrow to this.

 

The dew of the morning

Sunk chill on my brow–

It felt like the warning

Of what I feel now.

Thy vows are all broken,

And light is thy fame:

I hear thy name spoken,

And share in its shame.

 

They name thee before me,

A knell to mine ear;

A shudder comes o’er me–

Why wert thou so dear?

They know not I knew thee,

Who knew thee too well:

Lond, long shall I rue thee,

Too deeply to tell.

 

I secret we met–

I silence I grieve,

That thy heart could forget,

Thy spirit deceive.

If I should meet thee

After long years, How should I greet thee?

With silence and tears.”

 

George Gordon, Lord Byron – poet – 1788-1824

As an international sporting show piece, Wimbledon seems to get more high-profile and grander as the years roll by. And how the behavioural patterns have changed as well – very much for the good!  It was great seeing so many fanatical Australians cheering on their former talisman Lleyton Hewitt in a five set thriller on Court 2 – sadly to no avail – in his first round defeat against the Finn, Neimenen! Seventeen years Hewitt has played at Wimbledon and it was thirteen years ago that he was champion – a record to be immensely proud of!

 

Investors’ reaction to equity markets was utterly predictable. Compile indecision, uncertainty and political incompetence together and it makes a lethal cocktail – tailor made for a measurable market correction. Observers and bystanders were not disappointed. The FTSE, least affected by gross EU/IMF ineptitude, eased by 1.97%. An hour before the close it was less than 1% down, but the power and influence from the Street of Dreams was too much – down it came! The DAX fell out of bed by 3.5% and the CAC by 3.7%. Greek Exchange remained closed and will probably remain so until after the referendum next Monday. The Street of Dreams also vented its spleen at the Greek crisis, as well as concerning itself with Shanghai Composite’s 6% drop yesterday, frothy valuations of US stocks and the threat of higher interest rates. The DOW closed down 1.95%, the S&P 500 by 2.09% and the NASDAQ by 2.40%. It is a worrying factor that the Shanghai Composite has lost over 20% in two weeks, which ventured to suggest that the authorities do not have a proper handle on monetary and fiscal policy. However this morning it has had a massive turnaround from -3% in the morning to +4.95% at lunch! The Nikkei closed up 0.63% this morning.

 

Who know what will happen at the referendum next Monday? Even if Greece votes to stay in and Tsipras is forced to resign, austerity will return to the agenda; so nothing changes. Greece with only 11 million and little industry or commerce can never service or repay €240 billion of debt – so long as night follows day! The problem is never going to go away. So we continue to reel from one crisis to another. The EU’s credibility has never been lower and it is fair to say that Tsipras has been duplicitous in the extreme. I may be dribbling from the corner of my mouth and walking on a Zimmer frame by the time Greece exits the EU, but it will happen!

 

Much as I admire George Osborne as Chancellor – I think he has done really well, he gave me a dose of the ‘pip’ yesterday by putting the fear of God into investors in warning of serious ramifications from a Greek GREXIT. Yes, I understand contagion, but if UK banks off their own bat or with the help of the BOE have not made contingency plans as to their holding of Greek assets and loans in the past couple of years, then I have scant sympathy for them. Yes, George Osborne has a Budget to present next Wednesday with £12 billion of welfare cuts for the electorate to swallow. However, if Greece is as serious a threat to the UK economy, as the Chancellor suggests it might be, then we have a real problem. The UK thrashed the EU, when it came to growth in recent years; no reason why we cannot keep trucking. I think I understand being political savvy and prudence, but being unnecessarily negative about prospects of economic situations can be very dangerous.

 

Yesterday Consumer Confidence was confirmed to be at its highest level in the UK since the 1990s. Carolyn Fairbairn will succeed John Cridland as CBI director General. M/S Fairbairn started life off as an economist at the World Bank and has since enjoyed successful sojourns as director of strategy at the BBC and ITV. We wish her well. Ladbrokes’ CEO Jim Mullen confirmed that merger talks with Coral Gala were still on-going. The joint company will have 4,000 betting shops out of 9,000. This will be a competition issue, which will require some thought as to what shops are sold or closed down.

 

This morning there were encouraging results from Ocado, Carpetwright, Northgate and Imagination Technology. After hours in Tokyo, Sony’s shares fell 8% after an announcement that $3.65 billion of fresh capital was required. With the advent of the ipad, iphone, lap-top, Sony has been caught napping, despite producing the finest televisions over the past 30 years.

 

UK companies posting results – Tuesday – LADBROKES (business plan), IMAGINATION TECHNOLOGY, CARPETWRIGHT, OCADO, NORTHGATE, Wednesday – ANITE, SERCO GROUP, GREENE KING, Thursday – PERSIMMON, TOPPS TILES (TS), TULLOW (TS),Friday – MARSHALLS, FERREXPO

US Company results – Wednesday – CONSTELLATION BRANDS, FORD MOTOR (sales) – Thursday. – RITE AID CORPORATION.

Global economic diary – Monday – UK Consumer confidence, Wednesday – BOE Financial Stability report – Thursday -US NON-FARM PAYROLLS (+2015k) rate 5.5%, Friday -US INDEPENDENCE DAY NEW YORK markets closed.

David Buik – market commentator

Panmure Gordon & Co

MARKET UPDATE

We have seen a bit of a bear squeeze rally, possibly driven by the Street of Dreams reluctance to fall like a stone – DOW Down 0.7% – 120 points at 3.15pm. Consequently the DAX is only down 2.6% and the CAC 2.3%.  The FTSE 100 half an hour ago was only 60 points down, but as I write it is in negative territory to the tune of 81 points at 6673 – down 1.2%.

 

Oils are down 1%, pharmas are easier by only 1.5% and mining stock are volatile but they are currently as a sector flat on the day. Barclays is down 2%, HSBC easier by 1.25% and RBS by 1.75%.  Easyjet has rallied from its ‘lows’ – only down 2%, and Tui Travel and Thos Cook are some way off  their worst levels – down 6.5% and 3% respectively.

 

I would not be bold enough to say the storm has blown over, but the EU/ECB/Greece will need to pull something very deftly out of the hat to prevent further carnage.  It is this indecision and political incompetence and ineptness that is killing sentiment.  

MARKET UPDATE – THE EU FEELS LIKE A TOTALITARIAN ‘BULLY-BOY’ STATE, even though Greece has not played the game

I know I am a bit of a simpleton and perhaps rather naïve when it comes to democracy.  I am such a huge believer in Democracy I tend to be blind to even subtle alternatives. Yannis Varoufakis, the Greek Finance Minister,  who must clearly be looking to play Malvolio in the next production of the RSC’s “Twelfth Night” revealed the quite shocking and anti-Democratic skulduggery that took place during the last EU meeting. Firstly, they seem to despise Yannis’ intellect as he clearly grasps fundamental economics rather better than any other academic geek in Brussels – hence the rumoured demand that Mr Varoufakis be excluded from any further negotiations . It appears that the EU does not want any member state to ever allow their respective electorate to vote on the Euro. Brussels, as many of us have suspected or confirmed that the governing capital city of the EU is intoxicated by the fumes generated from Federalism and Dictatorship.  The level of arrogance is breath-taking to behold.

Democracy in Europe is collapsing before our eyes and we are witnessing the birth of a new era – Economic Totalitarianism from political tyrants who are totally clueless beyond their own greed for power and money.

 

Hence we are in the midst of a temporary and totally unnecessary melt down of European markets. I suspect that we have not seen the end just the start of the beginning of what may be a very uncomfortable year.  New York has yet to vent its spleen, though quite a strong message was sent out an hour ago that Global X FTSE GREECE ETF market in New York was scheduled to open – DOWN 15% – National Bank of Greece down 30%! We shall know our fate in an hour. The Greek stock exchange remains closed and is likely to remain so for the week. The Euro hit $1.10 and the 10-year Greek bond yield flirted with 14%. I suspect that when the bond market is fully functioning, barring a miracle, the yield on 10-year Greek paper may well be nearer 20% than where it is now.

 

At 12.34pm the FTSE 100 was down 121 at 6631 – -1.8%. Volumes were average considering the downbeat sentiment. Market makers were quoting ‘coach and four’ prices to avoid getting hit! Tui was damaged despite only average exposure to Tunisia and Greece. The market is concerned overall about holidays – down 8%, Thos Cook down by -3.5% and easyJet -1.5%.

 

Banks were not the flavour of the month – Barclays -2.5%, HSBC -1.5%, RBS -2%. Oils were easier by 2%, pharmas were down 1.5%, mining by 1.25%. Even defensive stocks such as BATS, IMPS, Severn Trent and United Utilities were in the red. The Pru was down 1.5% and Aviva lost 2%. The DAX and CAC were in far worse shape – down 3.3% and 3.5% respectively. However there was far greater concern over the SHANGHAI COMPOSITE which has lost 18% in the previous 10 trading days, lost a further 6% TODAY!

MUCH ADO ABOUT NOTHING – GREECE & MARKET UPDATE

The Greek Stock Exchange is closed today and will probably remain so for the rest of the week.  The Greek 10-year bond yield has leapt like the proverbial grilse to 13.94%.  I suspect If I tried to sell some in size, I might fall at the first fence!

 

FTSE – down 110 at 6640 at 9.15am

 

Banks are off their lows – Barclays -2.6%, HSBC -2.3%, RBS -2% – clearly the exposure to Greece is limited.

 

Prudential and Aviva both down 1.9% – the same sentiment applies to them as the banks.

 

Pharmas are easier by 2%, oils by the same amount and mining is somnolent – down just an average of -0.5%. Tesco is in line with market down 2% and M&S is easier by 1.6%. Travel has not fared well – Tui Travel and Thos Cook both down 6% – not so much Greece and Tunisia more about concern for holidays overall. EasyJet is only down 2.6%.

 

No sign of ECB help for Greece – I think Dragi meant it.  That’s it folks.  Look to the EU and IMF for guidance.  I think it could well be GREXIT, here we come. When?  Who knows!

 

TODAY’S FAYRE – GREECE

TODAY’S FAYRE – Sunday 28th June 2015

 

“The piers are pummelled by the waves;

In a lonely field the rain

Lashes an abandoned train;

Outlaws fill the mountain caves. 

 

Fantastic grow the evening gowns;

Agents of the Fisc pursue

Absconding tax-defaulters through

The sewers of provincial towns. 

 

Private rites of magic send

The temple prostitutes to sleep;

All the literati keep

An imaginary friend. 

 

Cerebrotonic Cato may

Extol the Ancient Disciplines,

But the muscle-bound Marines

Mutiny for food and pay. 

 

Caesar’s double-bed is warm

As an unimportant clerk

Writes I DO NOT LIKE MY WORK

On a pink official form. 

 

Unendowed with wealth or pity,

Little birds with scarlet legs,

Sitting on their speckled eggs,

Eye each flu-infected city.

 

 Altogether elsewhere, vast

Herds of reindeer move across

Miles and miles of golden moss,

Silently and very fast. 

 

WH Auden – poet – 1907-1973

 

The latter part of last week was an unmitigated disaster from a human perspective with so many innocent holiday makers, religious worshipers and office workers butchered by the barbaric IS, who care not a jot for human life. Without being hysterical and hopefully never succumbing to the threat of terrorism, the number of safe places to live or visit on holiday diminish by the day. The immigrant crisis in the Mediterranean and in Calais as well as on the shores of our beloved ‘Sceptred-Isle’ get worse by the day and no one has offered anything looking remotely like a solution. It is truly an insufferable state of disrepair.

 

Though I have every sympathy for the Greek people, their suffering pales into relative insignificance in comparison to those under ferociously cruel attack from religious fanaticism.

 

As expected the Greek crisis produced not even the semblance of a resolution. In fact the temperature of the coterie of delegates hit fever pitch by Saturday with Greece, the EU and the IMF exchanging bitter accusations of mistrust and contempt. Chancellor Merkel goaded Tsipras into accepting the very generous terms offered by the creditors, which was rebuffed by the affronted Greek PM with counter charges that Greece was being blackmailed and threatened with ultimatums. It looks as though next Tuesday’s deadline to repay €1.5billion to IMF (30th June) will come and go without agreement, despite the urgent need to unlock €15.3billion bail-out fun, including €7.2 billion withheld since lady year. This atmosphere does not bode well for Sunday’s Eurozone Finance Ministers’ meeting.

 

PM Tsipras apparently refused a 5 month extension of the bailout. Barring a miracle Greece may see a run on its banks as early as next week, though they will remain closed on Monday. Unless the ECB offers reassurance about temporary liquidity help, there could be carnage on Monday morning in European bond and equity markets. Assuming no agreement, the EU will also discuss plan B with involves protecting the rest of the Union from any fall -out from Greece’s refusal to accept terms. Tsipras insists that the EU’s draconian proposals will stifle growth and recovery. Messrs Tsipras and Varoufakis are going to find it increasing difficult to get Parliament and or the Greek electorate to agree to this plan. The EU/IMF have rejected an extension of the loan facility until after the proposed referendum. Default threatens, but the ramifications are gargantuan.

 

This is much more of a political crisis than a financial and economic one. With GREXIT now a distinct possibility, there is no doubt that Portugal, Spain and Italy will be keeping tabs on the ramifications. Why should they be discriminated against? Could this be the end of the European dream? Greece being expelled could have serious repercussions. As discussed earlier a run on Greek banks is highly likely.  Will European bourses fall like a stone? Much of the problem may be priced in, but sentiment plays a far greater role than logic. The DAX and CAC could get larruped. The FTSE is much more of an international index reliant very much on Dollar earnings. The idea of Merkel playing hardball sticks in the crawl a tad.  It was Germany that ‘rail-roaded’ Greece in to joining the EU, when there was no chance of the financial criteria being met. She has a moral obligation to help the Greek people. The IMF and Mme Lagarde has not come out of these negotiations with very much credit according to many. It was felt that she should have given more scope to the EU to solve these issues. The IMF has conspired according to certain aficionados to turn a containable crisis in to a total disaster. However the IMF advises 188 countries and cannot be seen to unfairly accommodate Greece.

 

There are too many prophets of doom out there! GREXIT, expulsion from the Euro need not necessarily be Armageddon. The reintroduction of the Drachma, which would be devalued by as much as 40% would be the greatest possible ‘fix’ for Greece’s tourism. People would flock in.  Also attractive rates of taxation would encourage international corporations to open factories and business which would help unemployment.  The likes of Google, Apple, GM, Ford, Toyota etc would surely give great consideration to opening up operations. This would only be viable if there was an orderly GREXIT facilitated by every EU member.

 

Despite the weeping sore that is the Greek Crisis – exasperation for the rest of the world is hardly an adequate description – there was much to keep the investing public occupied, interested and concerned. Last week the S&P closed down -0.39%, the FTSE was up 0.64%, European stocks rallied by an illogical 2.9%, in the hope that Greece would be put to bed once and for all, with the DAX adding 4% and the Greek exchange 2%. The NIKKEI closed up 2.64%, hitting its highest level since 1996, thanks to one stimulus package after another being introduced.  China’s Shanghai Composite certainly saw the cracks of doubt appearing in terms of its equity bubble bursting. This Index has lost 18.8% in value since 12th of June and eased by 7.4% on Friday. China, on Friday cut its one year deposit and lending rates by 0.25%. The minutes of the FOMC, despite suggesting a symbolic rise in the not too distant future, had quite a dovish tone to it – hardly surprising considering the US economy has a slightly soft belly attached to it plus problems in China and Europe, which will concern Chairman Yellen and her troops.

 

June has been the best month for US IPOS so far this year, with $4.79 billion worth of trades. Nike added 4% after good numbers. Tesco added 2.7% last week after producing slightly less than awful sales numbers for the last 13 weeks – like for like sales down just 1.3% with Asia down 2.9%. This is the end of year one of a 5 year plan for a rejuvenated Tesco; so Dave Lewis has been given the benefit of the doubt. A rights issue may be required later and many expect Tesco to sell its Korean unit for $6 billion – maybe to private equity. On news of a possible merger with Coral Gala, LADBROKES shares rallied by 16% on the week. Few will be happy if Andy Hornsby walks out of the deal with a pot of gold post the HBOS debacle.

 

John Browett, former CEO OF Dixons and post an unsatisfactory sortie with Apple has been appointed CEO of DUNELM. Shell hope to complete its takeover of BG Group in a July. There looks as though there will be no deal between 3G Capital an Diageo. Miami Dolphin’s Stephen Ross in conjunction with Qatar were rumoured to be making a circa $8 billion bid for 35.5% of F1 owned by CVC Capital. However it is also believed that Sky and Liberty Global are weighing up the possibility of competitive offers. This private equity mogul’s stake is currently nursed by Bernie Ecclestone.  Sophos, the cyber security titan in competition with McAfee and Symantec is close to its £1. Billion IPO. About £125 million worth of stock will be offered for sale. Apax Partners currently own 65%. Former Labour minister Hazel Blears and Ruth Spellman have been nominated as directors for the Coop.

 

 

UK companies posting results – Tuesday – LADBROKES (business plan), IMAGINATION TECHNOLOGY, CARPETWRIGHT, OCADO, NORTHGATE, Wednesday – ANITE, SERCO GROUP, GREENE KING, Thursday – PERSIMMON, TOPPS TILES (TS), TULLOW (TS),Friday – MARSHALLS, FERREXPO

US Company results – Wednesday -CONSTELLATION BRANDS, FORD MOTOR (sales), Thursday. – RITE AID CORPORATIONS.

Global economic diary – Monday – UK Consumer confidence, Wednesday – BOE Financial Stability report – Thursday -US NON-FARM PAYROLLS (+2015k) rate 5.5%, Friday -US INDEPENDENCE DAY NEW YORK markets closed.

 

 

David Buik – market commentator

 

Panmure Gordon & Co

 

TAKE A LOOK AT EUROPEAN BANKS & MARKET UPDATE

Name March 2009 share price June 2014 share price June 2015 share price % loss/profit in last year
LLOYDS 18p 80p 87p +8.7%
RBS 197p 320p 362p +13%
HSBC 350p 590p 600p +1.6%
STAN CHART 627p 1192p 1067p -2.1%
BARCLAYS 54p 225p 274.60 +22.2%
BNP €20.40 €49.40 €56.67 +14.7%
SOCIETE GEN €17.40 €39.00 €43.70 +12.1%
DEUTSCHE €16.50 €26.10 €27.82 +6.6%
SKANDINAVISKA SKR30.00 SKR80.00 SKR109.30 +36.6%
COMMERZBANK €12.72 €11.62 €11.95 +2.8%
ING €2.35 €10.40 €15.29 +50.1%
INTESA €1.47 €2.27 €3.37 +48.4%
UNICREDIT €3.84 €6.30 €6.36 +0.9%
CREDIT AGRICOLE €6.00 €10.61 €13.98 +31.8%
SABADELL €2.17 €2.30 €2.28 -0.9%
BBVA €8.80 €9.39 €9.28 -1.1%
SANTANDER €4.60 €7.75 €6.70 -13.5%
DEN DANSKE DK40.71 DK153.60 DK200.30 +30.4%
         

 

 

When QE was introduced in March 2009 bank shares rose like the proverbial grilse until about 2012 – see above. Since then, with the exception of Italian, Scandinavian and to a lesser degree, French banks, the sector has not been a particularly attractive hunting ground – certainly in comparison to the US, where gains have varied from the sector by between 60% and 100% in the last 5 years, thanks to liberal help from the FED. In the UK with the exception of Barclays, the other main banks have been disappointing, though in fairness Lloyds and RBS have made some measurable gains, BUT from a seriously trashed base point. The fines and repayments imposed on HSBC, LLOYDS, RBS and BARCLAYS and a lesser degree STANDARD CHARTERED for LIBOR, PPI, FX and MONEY LAUNDERING total way in excess of £35 billion, have curtailed profits. Who would bet against this figure going up, particularly PPI, when calculations have finished on ‘interest on interest and credit cards – the mind boggles?

 

There is no doubt that the Chancellor is right to sell shares in Lloyds, RBS and W&G back to the public asap, even if the first tranches of RBS go at a loss. Time will hopefully be a big healer, but I will not be holding my breath waiting for egregious profits. It could to be an uphill struggle. Regulation is going to be very painful and expensive. Today’s news that bonuses could be called back from as far back as 10 years ago could discourage overseas operators from expanding their business in London. Messrs Carney and Bailey seem hell-bent on having their pound of flesh. I invite them not to throw the baby out with the bath water.

 

Let’s hope in the Budget on 8th July the Chancellor trims the bank levy due annually from HSBC and Standard Chartered to the business they do in London. In the case of HSBC, it only conducts 20% of its business here in London. It would send out a very bad message to the world if HSBC were seen to pack its bags and head east, however unattractive the idea of returning to HK or Singapore might be. I think HSBC is bluffing, but if the Chancellor plays fair on the levy it will not be a problem. Morgan Stanley has done well easing Lloyds stock out with the taxpayer now only owning 16.87%. RBS may prove quite a challenge to Goldman and Rothschild. £45 billion is a gargantuan amount and there could be some indigestion from the sale of too many bank shares.

 

Despite the prospect of a Greek settlement, trading conditions in London have been sepulchral. The FTSE 100 at 3.30pm is up 24 points at 6860. Mining stocks are up between 1.5% and 2%, oils by between 1 and 2%. Ladbrokes gave back 1% and punters acknowledged that Carnival’s figures were good – up 3%.

TODAY’S FAYRE

TODAY’S FAYRE – Wednesday 24th June 2015

  

“As I walked out one evening,

Walking down Bristol Street,

The crowds upon the pavement

Were fields of harvest wheat. 

 

And down by the brimming river

I heard a lover singUnder an arch of the railway:

‘Love has no ending. ‘I’ll love you, dear,

I’ll love youTill China and Africa meet,

 

And the river jumps over the mountain

And the salmon sing in the street, 

‘I’ll love you till the oceanIs folded and hung up to dry

And the seven stars go squawkingLike geese about the sky. 

‘The years shall run like rabbits,

 

For in my arms I hold

The Flower of the Ages,

And the first love of the world.’ 

But all the clocks in the cityBegan to whirr and chime:

‘O let not Time deceive you,You cannot conquer Time.

 

 ‘In the burrows of the Nightmare

Where Justice naked is,

Time watches from the shadow

And coughs when you would kiss.”

 

 WH Auden – poet – 1907-1973

 

Standard & Poor’s, the rating agency says Brexit could “significantly dent” UK financial services and insurance sectors. I don’t buy that – just jingoistic sabre rattling!

 

How impertinent of “The Pro-European Business for New Europe” to rubbish “Business for Britain’s” report and calculations in ‘Change or Go!’ as spurious, misleading and built on sand. I can assure M/S Lucy Thomas that BfB’s Matthew Elliott, Robert Oxley know exactly ‘how many beans make four’ when it comes to have the drains up on the ‘pros and cons’

 

How many rumours have we had about the possible sale of CVC Partners/Bernie Ecclestone stake in Formula 1 for prices varying from $5 to $10 billion in the past few years? He may be well into his 9th decade but our ‘Bern’ is surely as durable and robust as any other hard-nosed businessman. However ‘anno domini’ creeps up and someday the finishing line will be in this venerable genius’s sights! So the idea that Miami Dolphins owner Stephen Ross in conjunction with Qatar should jointly bid about $8 billion for 35.5% stake in ‘Formula 1’ is not that an outrageous prospect.

 

I will leave you to the public’s obsession with Greece’s fate to those who follow this never ending saga, which could reach a temporary conclusion tomorrow afternoon, when it is thought there will be some kind of accord, which PM Tsipras will have to put to the Greek Parliament/people – Good luck! It will, of course be only a temporary resolution. However the fact that it is thought that the ECB has temporary loans out with Greece/Greek banks totaling close to €140 billion, it seems unlikely that the EU/IMF will pull the plug. This saga will end up being a weeping sore for 20 years and will inevitably damage the overall credibility of the EU.

 

Whatever I think of Greece’s crisis is of no consequence at all. Equity geeks in Europe added further froth to the main indices – DAX up 1.3% and the CAC 1.4%. The FTSE just kept a sense of proportion – up 17 points at 6848. As discussed yesterday Ladbrokes grabbed most of the headlines – up 17%! Panmure’s Karl Burns, on limited information provided, believes this deal with Coral/Gala could be a ‘stonking’ one. If the value of Corals is on a similar ebitda to Ladbrokes, the ‘Magic sign’s’ share price could push on. Coral’s technology will be ‘key’ and it seems as though the joint venture will have to lighten up the size of its retail operation by 20% so as not to incur the wrath and indignation of the Competition Commission. RBC put out an encouraging note on Sports Direct and their drive to push ahead with on-line sales – +3%. In the US, the Street of Dreams made modest gains thanks to robust housing data, though progress was slightly dampened by poor factory activity. The DOW closed +0.13%, the S&P =0.06%, though the NASDAQ reached an all-time record – +0.12%. Facebook put on 3.7% yesterday to $88.70 a share, valuing the company’s share capital at $238 billion – now a larger company than Wal-Mart. Asia was mixed though the NIKKEI (+0.61%) reached its highest level since 1996 at 20k+, though miles away from the 38K achieved in 1987 before the crash. The Hang Seng was up 0.36% towards the close and the Shanghai Composite, having spent much of last week in negative territory (-13% last week), was up 1.96% heading to sunset.

 

Slightly disappointing UK house sale figures were produced by HMRC for May – only 98,000. This is hardly surprising considering the outcome to the General Election remained in doubt until the last moment. Estate agents have rarely been quieter in the months leading to 7th May 2015! June and July should see greater activity. Up to the credit crisis in 2009 there were 1.7 million transactions. This fell to 898k in 2010 and last year the number was back to 1.2 million still some way short of the halcyon days, due to restricted mortgage lending and a shortage of houses. John Lewis, which is involved in about 10% of all UK retail electrical business hope to crack on in the mobile phone market in conjunction with Vodafone to build up sales and a service department.

 

So far this year in the US $875 billion of M&A activity – up 9% on last year – have been transacted with the Time Warner/Chartered deal valued at $50 billion and the Kraft/HJ Heinz deal at $49 billion being the largest. June could be the biggest month of all time! 54% of US CEOS contacted think they will be involved in an M&A deal this year.

 

David Buik – market commentator

 

Panmure Gordon & Co

MARKET UPDATE – AN UNREALISTIC RALLY

Even though hope only occasionally springs eternal and let’s face it we still have no concrete evidence that Greece will be in a position to agree a meaningful deal with its creditors, the IMF, the European Commission and the ECB until later in the week, if at all. Consequently European equities rather surprisingly held on to their early morning gains, particularly the DAX and CAC – both up about 2.8% on the day at 1.30pm. I still fail to understand the irrational exuberance of equity geeks. This saga will probably run longer that ‘Peyton Place’ or ‘Eastenders’ and the problems associated with not only Greece but the EU as a whole are likely to be compounded in the years to come.

 

I suppose the DAX has rallied as much as it has, due to the fact that if this is a genuine relief rally, Germany and France on a pro-rata are into Greece more than other countries; therefore the relief should be that much greater. The betting is that we might see some peace accord agreed overnight – just breathing space mind you – so don’t be surprised if some of the cream is skimmed off the top. The FTSE 100 is in fact only up 1.3% at 6798 (+87 points) at 2.00pm. Most of sectors have been marked up by the market makers on no business. Resources and mining have been somnolent. The oil sector is up 1.5%. Utilities are 2% to the good on the back of the bid for Severn Trent – +4%. Media is 1.5% to the good, thanks to inflated gossip about Sky getting involved in M&A – +3.2%. Banks are about 1% to the good. The market is showing all the classic signs of not getting caught on either side of the spread with ‘coach and four’ prices. Tomorrow is another day!

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