TODAY’S FAYRE – Thursday 23rd July 2015
“OFTEN and often it came back again
To mind, the day I passed the horizon ridge
To a new country, the path I had to find
By half-gaps that were stiles once in the hedge,
The pack of scarlet clouds running across
The harvest evening that seemed endless then
And after, and the inn where all were kind,
All were strangers. I did not know my loss
Till one day twelve months later suddenly
I leaned upon my spade and saw it all,
Though far beyond the sky-line.
It became Almost a habit through the year for me
To lean and see it and think to do the same Again for two days and a night.
Recall Was vain: no more could the restless brook
Ever turn back and climb the waterfall
To the lake that rests and stirs not in its nook,
As in the hollow of the collar-bone
Under the mountain’s head of rush and stone.”
Edward Thomas – poet & soldier – 1878-1917
So Jonny Bairstow is in for fellow Yorkshireman Gary Ballance. There’s no way Adam Lyth should have kept his place and despite Ian Bell being a brilliant servant for England over the past decade, he is very lucky to have been retained in the team to bat at No;3. I feel very sorry for James Taylor. I also think Australia would be well advised to let Chris Rogers to sit out the Edgbaston Test next week, allowing him plenty of time to recover from the blow to the head and the dizzy spells that followed.
So, despite the wrath and indignation from a raft of the plebiscite, it looks as though PM Tsipras is likely to bulldoze further required austerity to keep Greece afloat for another few months courtesy of the ECB and IMF. It’s still a disgraceful economic charade, not worthy of any respected pillar of democracy. Well, come to think of it, the EU is no democracy. However these events, for the time being, qualify as inside page news, enabling investors to consider other equally pressing issues.
Tuesday night saw US markets given heavy blows in the solar plexus by Apple, Microsoft and to a lesser degree Intel and IBM, which took the wind out of investors’ sails for 48 hours. These are of course tech companies, whose respective share prices may have got ahead of themselves.
However it is interesting to observe that of the 20% of S&P companies which have so far reported results, 73% of them are ahead of expectations as regards earnings. Why? Firstly with interest rates remaining dormant for 6 years and inflation virtually non-existent, margins start to erode. Hence we have seen an enormous number of share buybacks from many large corporations (20% of S&P 500 companies have had buy-backs), allowing shareholder value to be delivered. IBM’s earnings have increased by 22% in recent times as a result of buy-backs and Apple’s by 10%. Also we have seen many large ticket mergers of companies that may have synergies, but probably become more successful as a result of cost cutting exercises. The same is happening in the UK in terms of EPS for large cap companies, as pointed out by my colleague Simon French in a recent note, though there appears to be plenty of scope for SMES. P/E ratios for the S&P and FTSE and for that matter the NIKKEI look quite rich – FTSE 100 16.3 x, S+P 500 17.8x, Eurostoxx 600 16.9x and Nikkei 19.5x
Yesterday as a result of tech turmoil the DOW eased by 0.38%, the S&P 500 by 0.24% and the NASDAQ by 0.70% (Apple down 4.2% and Microsoft -3.7%). Coca-Cola posted numbers in line with expectation – net revenue declined 3% and organic revenue grew 4%. Reported EPS was $0.71 and comparable EPS was $0.63 with global volume growth of 2%. Boeing’s revenue increased 11 percent for the last quarter to $24.5 billion reflecting record commercial deliveries and in the case of American Express this bank also beat expectations. Here in Old Blighty the FTSE 100 had a horrible day with mining stocks taking a frightful beating, with Anglo-American and Glencore both losing over 5% in value. BHP Billiton saw strong iron ore sales though forward guidance was disappointing – FTSE down 101 points at 6667. ARM Holdings, on the back of Apple was a big loser – shares down 5%. Astra’s treatment for eye cancer has failed to pass muster yet. Sage Group under Steve Kelly posted better revenues. easyJet took the yellow jersey for the session with shares up 4.9% on better passenger numbers. The SMMT posted the best UL car sale figures since 2008. 143k cars were sold in June up 5.4% and 793k in the last year – +0.3% up on 2014.
This morning Roche and Syngenta posted OK numbers and Tidjane Thiam, Credit Suisse’s recently appointed CEO posted Brady Dougan’s good works for this Swiss bank with profits for the last quarter beating expectations with CHF1.1 billion against estimates of CHF780 million. Tier One capital at 10% seemed a tad low. Fresh capital in terms of a rights issue of CHF5 billion may be required at a later date. It also seems likely that Asia will be the main platform for expansion. In early skirmishes CS’S shares were up 3%.
There were a slew of earnings this morning in London. Reed Elsevier, SAB Miller, Kingfisher and Unilever all very much satisfied their acolytes. The same could not be said for DMGT, whose shares were down 7% after expectations for the year will come in at the lower level of expectation. Aberdeen Asset Management is having temporary issues with their commitment to Far East markets and shares were down 2.5%. The market approved of Britvic’s acquisition of a Brazilian soft drink supplier for $193 million; so shares were only down 0.5%. Ashtead suffered again today as a result of issues with United Rentals of the US dropping by 5% yesterday.
UK companies posting results this week – Thursday – DMGT, UNILEVER, DE LA RUE, PREMIER FOODS, BRITVIC, SAB MILLER, KINGFISHER, ABERDEEN ASSET MANAGEMENT, HALMA, Friday – ANGLO-AMERICAN, AG BARR, LONMIN, VODAFONE, CLOSE BROTHERS
US Companies posting interim results this week – 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 – Thursday – UK Retail Sales
David Buik – market commentator
Panmure Gordon & Co
David Buik – market commentator
Panmure Gordon & Co