TODAY’S FAYRE – Wednesday, 22nd July 2015
“War was return of earth to ugly earth,
War was foundering of sublimities,
Extinction of each happy art and faith
By which the world has still kept head in air,
Protesting logic or protesting love,
Until the unendurable moment struck – The inward scream, the duty to run mad.
And we recall the merry ways of guns –
Nibbling the walls of factory and church
Like a child, piecrust; felling groves of trees
Like a child, dandelions with a switch.
Machine-guns rattle toy-like from a hill,
Down in a row the brave tin-soldiers fall:
A sight to be recalled in elder days
When learnedly the future we devote
To yet more boastful visions of despair.
Robert Graves – poet – 1895-1985
As we entered the foyer of the Old Vic last night to see their production of ‘High Society’, my wife made the most salient of comments – ‘Attempting to replicate this most iconic of musicals, which starred Grace Kelly, Bing Crosby, Frank Sinatra and Louis Armstrong, could end up being a regrettable occupational hazard!’ How right she was! Though this production was well staged with enthusiastic dancing, it was cheesy with an embarrassingly poor script. I must dust down the original film and soundtrack to remind myself how wonderful the 1956 original was!
Are the cracks in earnings starting to appear, endorsing an underlying feeling that growth may not be there to the degree that many of the pundits thought? Tech results on the Street of Dreams after hours, following in the wake of marginally disappointing efforts from Intel and IBM, ventures to suggest it is a possibility. Expectations for Apple’s results were at fever-pitch. Superficially they were very good and beat expectations, but the outlook for revenues in the 4th quarter did not pass muster with the market’s butchers, whose knives were at the ready! Profits for the quarter were up 38%. The sale of iPhones were up 35%. Apple sold 47.5m iPhones, Mac sales were up 9%, iPads sales were down 18%. A profit for the quarter came in at $10.7 billion on revenues of $49.6 billion. After hours investors were merciless about the future and took the share price at the knee-caps, taking it down 6.8% wiping $50 billion off the value of the stock – the greatest pullback seen since 21st January 2013 when $59 billion was wiped off. Has the market become too reliant on Apple? The iWatch did not seem to have made much of an impression. Unfortunately NASDAQ/DOW geeks were in the mood to mood to meet out rough treatment on Microsoft, which posted its biggest ever net loss of $3.2 billion – much of it down to writing down the acquisition of Nokia by $7.5 billion. The shares were taken down by 4%. Against that background Yahoo! lost 1.6% thanks to a moderate showing, again after hours, and despite its holding in Alibaba. IBM had been struggling since the day before from poor sales and eased by another 5.9%. So all in all it was a ‘Bad Day at Black Rock’ for the technology industry! So perhaps Goldman’s prognosis that US stocks may have run their race for the time being and that EU stocks are the way forward may be sound advice.
Wall Street had enjoyed a fairly lack lustre session prior to all this news with the DOW easing by 1% and the S&P by 0.43% and the NASDAQ hovering nervously below the Plimsoll line – down 0.21%. Asia took little comfort from New York’s performance and most of the bourses lowered their flags exacerbated by Apple’s/Microsoft’s results – ASX closed down 1%. The Nikkei was easier by 1.19% towards the close, with the Shanghai Composite down 0.95% and the Hang Seng down by 1% heading to lunch. It was interesting to note that the resignation of Tanaka-san and 7 other executives from Toshiba for over stating profits for 6 years to the tune of circa £780 million saw the share price ease by only 1.6%. Olympus’s antics from 4 years ago when Michael Woodford turned whistle blower cost the company plenty!
ARM Holdings posted a 32% increase in profits this morning from revenues totalling £228 million – £94.7 million with a 25% increase in dividend. However will CEO Simon Segars’s outfit be affected by the Apple syndrome since it gleans so much revenue from that company? Falling sales of personal computers is a worry. easyJet’s numbers were marginally better than expected. Revenues per seat were down by 2.8% but passenger numbers were up 6.2%. Revenues for the quarter were down 1% at £1.23 billion, but that number was encouraging.
Though tax revenues in the UK have been quite buoyant recently spending is starting to get out of hand. So the £12 billion cuts announced in the Budget may now be nearer £20 billion. So those government departments not ring fenced may be forced to make cuts of up to 40%. That will test the resolve of many – very painful, but necessary to keep the cost of UK ‘borrowing’ down.
UK companies posting results this week – Wednesday – FENNER, JOHNSON MATTHEY, MARSTON’S, PAYPOINT, SAGE, LAND SECURITIES, SHIRE PHARMACEUTICALS, EASYJET, ARM HOLDINGS, Thursday – DMGT, UNILEVER, DE LA RUE, PREMIER FOODS, BRITVIC, SAB MILLER, KINGFISHER, ABERDEEN ASSET MANAGEMENT, HALMA, Friday – ANGLO-AMERICAN, AG BARR, LONMIN, VOADFONE, CLOSE BROTHERS
US Companies posting interim results this week – Wednesday – WHIRLPOOL, COCA-COLA, BOEING, ABBOTT LABS, XILINX, AMERICAN EXPRESS, Thursday – GENERAL MOTORS, RAYTHEON, BOSTON SCIENTIFIC, BRISTOL MYERS SQUIBB, MCDONALD’S, PULTE, KKR, COMCAST, AT&T, BJ RESTAURANTS, CHUBB, AMAZON, VISA, STARBUCKS, Friday – ABBVIE, BIOGEN.
Economic data – Monday – UK bank lending, UK Public Sector Finances, Wednesday – BOE Minutes, Thursday – UK Retail Sales
David Buik – market commentator
Panmure Gordon & Co