TODAY’S FAYRE – Thursday 16th July 2015


“Here further up the mountain slope

Than there was every any hope,

My father built, enclosed a spring,

Strung chains of wall round everything,

Subdued the growth of earth to grass,

And brought our various lives to pass.

A dozen girls and boys we were.

The mountain seemed to like the stir,

And made of us a little while-

With always something in her smile.

Today she wouldn’t know our name.

(No girl’s, of course, has stayed the same.)

The mountain pushed us off her knees.

And now her lap is full of trees.”

Robert Frost – poet – 1874-1963


This has to be the best Thursday of the year with the 2nd Test against Australia at Lord’s commencing plus the first round of the Open Golf starting at the R&A at St Andrews. I noted with interest the whingeing and complaining that the BBC will lose the coverage of the Open to Sky after 60 years. Sad it maybe as there will never be another Peter Alliss or a Henry Longhurst or for that matter a Ken Brown. However money talks and Sky are not exactly shabby at covering golf around the world – witness the Ryder Cup, if nothing else!


Watching Alexis Tsipras pleading with the Greek Parliament to accept the terms of a third Greek bailout, which includes a further E83 billion of debt was rather a pathetic sight, particularly as the Greek PM thought it was a bad deal for Greece. At best it was embarrassing and as well as humiliating. Unsurprisingly the deal went through, though there are still a number of hurdles to negotiate; so ‘it’s not all over till the fat lady sings!’


Tspiras had to force the deal through as the ECB have been instructed not to back a four week bridging loan. So as people have to eat, get money out of the wall, pay for their drugs and medicine, as well as petrol for their cars and general transportation, it was ‘Hobson’s Choice.’ Also the IMF and European Commission have serious issues with Greece’s debt load. Mme Lagarde has made it crystal clear that she wants creditors to take a ‘haircut’ for the IMF to participate in the bailout, vehemently dismissed by Merkel and Schauble. The realignment of Greece’s debt will take some negotiating and superficially it appears that Greece just has to agree whatever is thrown at them. The ECB will need to take a pragmatic view on the quality of collateral, when agreeing loans. This is far from guaranteed. What an awful undemocratic state of disrepair!


European bourses took the outcome of the ramifications of the Greek vote very much in its stride yesterday. The FTSE’s performance was neutral adding just 4 points at 6753, though there was a touch of arrogance in the manner that both the DAX and CAC finished comfortably above the Plimsoll line. Though there was a small setback with the UK’S employment data for June with about 15k jobs being lost which sent the unemployment rate up a tick to 5.6% (1.85m unemployed), there are signs that that number was just a temporary blip. Manufacturing and industrial production feels good and wage inflation has really started in crease – 3.2%. So Mark Carney, the Governor of the Bank of England and the MPC will not be deterred from raising base rate later in the year even if inflation is close to zero. If the EU’S economy starts to falter over Greece and the Spain in the autumn, the MPC may have to think again.


Of those companies reporting yesterday Burberry was the most interesting. Even though revenues increased by 8% in the last quarter, CEO Chris Bailey admitted that activity in HK was not encouraging. The share price fell by 2.5% to 1548p and has dropped 19% in the last 3 months. The fact that BG Group will make another 5% cut in the price of gas to the consumer, the news hardly created a ripple, as there has been a 25% cut in natural gas since December 2014.


The Street of Dreams spent much of yesterday’s session reflecting on the comments made by FED Chairman Janet Yellen on the first day of her two-day confessional evidence to Congress on the US economy and the outlook for interest rates. Yellen liked the progress the US economy is making particularly in the Labour market. A symbolic hike is on for the autumn, but she believes it is the hikes that follow will have the most relevance. DOW closed down 0.02%, the S&P 500 by 0.07% and the NASDAQ by 0.12%. Bank of America doubled its profits for the last quarter and its shares rallied by 3.9%. There was some idle but informed gossip that merger talks were under way between Starwood and Intercontinental Hotel Group. Both share prices had a bit of spring in their respective heals. After hours Intel’s sales outlook on digital data for personal computers was very positive and its shares rose by 1.62% after hours. However it was Netflix that grabbed the yellow jersey adding 3.3 million subscribers to its network. Investors chose to ignore that hat number was not reflected on the bottom line – shares up 9.8% after hours!  


There is still a good deal of investor discomfort over the Chinese share market, despite efforts of stimulation by the authorities, some of it expressed by a senior market luminary – Bill Ackman. The Shanghai Composite rose by 0.99% towards lunch but has fallen 25% in the last month. The Hang Seng was near enough flat with the NIKKEI up by 0.52% towards the close. The Greek vote played a very marginal role in the trading activity.


Sir Mike Rake has served notice to leave Barclays as deputy chairman in the autumn to take up the chairmanship of WorldPay. Sir Mike is, of course, the Pillar of Financial Society – an accountant and an excellent chairman of BT just as an example, as well as being very popular in the political corridors of power – Labour and Tory. However Rake is establishment just like Sir David Walker and Antony Jenkins. He would never be John McFarlane, the new chairman’s bag. McFarlane is his own man and he needs forceful salesmen and entrepreneurs. There is only one way – “the McFarlane way!” Careful diligent and conservative members of the establishment, he needs like a hole in the head. So the parting of the ways is very prudent and understandable.


Some decent cars sales numbers were posted by the EU and EFTA – up 8.2%, 7,4 million units, in six months to end of June and up 14.8% last months – 1.41 million units. Some great figures emerged from Carphone Dixon. Profits were up 21% on £8.26 billion. Dividend was increased by 42% with EPS at 2.5%. Shares have rallied by 392% in last five years, much of that down to Dixons before the merger. Sports Direct’s numbers are out later this morning. The Taxpayer’s stake in Lloyds Banking Group has dropped another 1% to 14.98% – Well done Morgan Stanley.






Economic data – Wednesday – Thursday – EU CPI, ECB MEETING, US JOBLESS CLAIMS, Friday – US CPI & HOUSING STARTS



David Buik – market commentator


Panmure Gordon & Co



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