TODAY’S FAYRE – SHANGHAI, MARKET, M&A

 

THIS MORNING’S FAYRE – Monday 27th July 2015

 

“When I am an old woman I shall wear purple

With a red hat which doesn’t go, and doesn’t suit me.

And I shall spend my pension on brandy and summer gloves

And satin sandals, and say we’ve no money for butter.

I shall sit down on the pavement when I’m tired

And gobble up samples in shops and press alarm bells

And run my stick along the public railings

And make up for the sobriety of my youth.

I shall go out in my slippers in the rain

And pick flowers in other people’s gardens And learn to spit.

 

You can wear terrible shirts and grow more fat

And eat three pounds of sausages at a go

Or only bread and pickle for a week

And hoard pens and pencils and beermats and things in boxes.

 

But now we must have clothes that keep us dry

And pay our rent and not swear in the street

And set a good example for the children.

We must have friends to dinner and read the papers.

But maybe I ought to practice a little now?

So people who know me are not too shocked and surprised

When suddenly I am old, and start to wear purple.”

 

Jenny Joseph – poet – 1932 –

 

I have never heard of Italo Montemezzi’s ‘L’Armore Dei Tre Re’, which was composed and written in 1907. Clearly opera Holland Park’s Martin Lloyd-Evans is more than familiar with it. He directed with passion, panache and high drama.  The music is spectacular.  The singing was rather Wagnerian with a wide display of base and baritone voices intermingled with the odd very good tenor and soprano. The opera is about love triangles and conflicts between private love and public duty, which are played out through just four principals, with the minor characters and chorus providing only occasional, albeit important, support. For me, like Wagner, the very lyrical music does not quite gel with the singing, though all the performances are of the highest quality.  Glad I saw it, but I doubt I will go again.

 

What can one say about Chris Froome winning the TdeF for the second time in three years – amazing achievement! People that know more than me on this sport say that this year’s course was tailor-made for Sky’s leading rider and next year, were he to compete, it may be a totally different proposition.

 

John Gosden and Anthony Oppenheimer were right not to run ‘Golden Horn’ on soft ground in the King George V1 & Queen Elizabeth Diamond stakes at Ascot on Saturday. Opportunities will present themselves in the Juddemonte at York and The Champion Stakes at Ascot and f the ground does not come up soft at Longchamps in the Prix de L’Arc de Triomphe on the first Sunday in October!

 

After a lack-lustre session on the Street of Dreams last Friday, concern over growth in China, the quality of its data and falling oil and commodity prices plus valuations, all hung over Asian equity bourses like large black threatening cumuli nimbus clouds. The NIKKEI closed down 0.95% today, with Hang Seng investors watching blood run down Stanley Street as it dropped 3% by the close. However it was the Shanghai Composite that really rattled investors’ cage, falling by 8.48% during today’s session. It just goes to prove that international investors are too savvy to believe in ‘rigged’ centrally controlled markets particularly if you limit selling or trading specific stocks. Though the Shanghai has surrendered at 37% in the last five weeks – the biggest for 8 years, it is still up by about 113% in the past year. It’s a brave man that calls the end of the ‘shake-out!’

 

European markets opened with little appetite for risk this morning. After an hour the FTSE 100 was down 30 points, but at the time of writing it is up 5 points at 6585. Reckitt Benckiser after encouraging results posted today, with net revenues up 5% and operating profits up 10% saw its shares rally by 2%. Reckitt’s shares have been very solid for years – up 21% in the last year. Mining stocks experienced a dead cat bounce this morning – up between 1 and 2%, with Randgold up 3% at 10.30am. Gold has fallen 9.5% in three months and 40% since its high four years ago. Drug and banking stocks remained moribund ahead of earnings being posted throughout the week.

 

With BP posting numbers on Tuesday, Total on Wednesday and Royal Dutch Shell on Thursday it will be interesting to hear what contingency plans they have made to combat the 60% fall in oil in the last year and the 20% drop in the last few weeks. We are led to believe that major oil moguls will have put the brakes on most exploration and development projects totaling $200 billion. Apart from those mentioned, Statoil, Chevron and Woodside Petroleum will also be included, affecting potentially 46 big oil and gas projects. In the past year BP has lost 23% in value with Royal Dutch Shell eclipsing that number – down 32%. As for the banks, ahead of their results, RBS’S progress has been flat over the past year, Lloyds Banking Group is up 13% over the same period and Barclays by 28% – 10% rally since John McFarlane showed Antony Jenkins the front door. This morning UBS’s Sergio Ermotti’s posted a 53% increase in profits for the last quarter with fund management going gang busters. UBS’s shares were easier by 1.29%, though they are up by 50% since January this year.

 

Early this morning, we heard news that Israel’s Teva was close to concluding a $40 billion acquisition of US’s Allergan’s generic drug business, including Botox. It was not that long ago that Allergan attempted to buy Mylan. This deal may prove more synergistic.   There will be more deals of this nature as pipe-lines continue to dry up and margins become eroded. The drug sector could be a classic M&A hunting ground as could media and telecoms.

UK companies posting results this week – Tuesday – PACE, DRAX, BP, GLENCORE, ITV, INFORMA, SEGRO, WILLIS, NEXT (TS), MONDI (TS), Wednesday – BARCLAYS, MAN GROUP, GLAXO SMITHKLINE, TULLOW, SKY, M&B, 3iii GROUP, TATE & LYLE, ANTOFAGASTA, Thursday – ASTRA ZENECA, BAE SYSTEMS, BT GROUP, REXAM, SMITH & NEPHEW, INTERCONTINENTAL HOTEL GROUP, CENTRICA, THOS COOK, RBS, MERLIN ENTERTAINMENT, WEIR GROUP, MERLIN, ROLLS ROYCE, ROYAL DUTCH SHELL, Friday – BG GROUP, IAG, B&M, LLOYDS BANKING GROUP.

 

US Companies posting interim results this week –  Tuesday – FORD, DR HORTON, PFIZER, REYNOLDS AMERICAN, JETBLUE, Wednesday – HOSPIRA, CARLYLE GROUP, NORTHROP GRUMMAN, ALTRIA, GOODYEAR, WYNN RESORTS, WHOLE FOODS, REVLON – Thursday – STARWOOD HOTELS, TIME WARNER CABLE, PITNEY-BOWES, PROCTOR & GAMBLE, LIKEDIN, AMGEN, Friday – CHEVRON, EXXON MOBIL

 

Economic data – Tuesday – UK 2nd quarter GDP, Wednesday – Consumer Credit, Friday – Consumer Confidence

 

 

David Buik – market commentator

 

Panmure Gordon & Co

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