TODAY’S FAYRE

 

TODAY’S FAYRE – Tuesday 28th July 2015

 

Woman much missed, how you call to me, call to me,

Saying that now you are not as you were

When you had changed from the one who was all to me,

But as at first, when our day was fair.

 

Can it be you that I hear? Let me view you, then,

Standing as when I drew near to the town

Where you would wait for me: yes, as I knew you then,

Even to the original air-blue gown!

 

Or is it only the breeze in its listlessness

Travelling across the wet mead to me here,

You being ever dissolved to wan wistlessness,

Heard no more again far or near?

 

   Thus I; faltering forward,

   Leaves around me falling,

Wind oozing thin through the thorn from norward,

And the woman calling.”

 

Thomas Hardy – author & poet – 1940 –1928

 

There was an article in yesterday’s FT suggesting that an early EU referendum could be the death-nail to Cameron’s premiership. It is not often that I would say to such an august publication – nonsense! – But on this occasion I have no hesitation in doing so. However the way the Government is setting about the task of having a referendum is cause for concern.

 

Firstly the FT, respectfully, is incapable of being objective over EU membership. It is non-negotiable that the UK remains in the EU, come hell or high water!  Leaving the FT aside for a moment, we need to bring this weeping carbuncle of an issue to a head sooner rather than later.  Uncertainty will damage trade globally and prevents major contingency plans being formulated. So the sooner the matter is brought to a head whilst Labour is in disarray, the better.

 

I do not buy the idea that there is insufficient time to negotiate with Frau Merkel & Co.  Despite white smoke rising from the Elysee Palace that George Osborne had made great progress with the French authorities, many like me get the impression that Messrs Cameron and Osborne are being hoodwinked by their peers in Brussels that all will be well.  Consequently they seem hell-bent in attempting to rail-road a deal through as quickly as possible. The ‘No!’ campaign or ‘need to discuss fully’ brigade must rally their troops with indecent haste.  I hear from ‘Business for Britain’ that the matter is well in hand.

 

The fall-out from the Shanghai Composite’s nose dive of 8.48% on other markets yesterday was pretty comprehensive, though in fairness the ‘bear status’ of Brent crude and cheap commodity prices certainly added some momentum to global stock market retreats. The DAX and CAC fell 2.5% and the FTSE by 1.1%, thanks to oils, banks and mining stocks. The Street of Dreams was also in poor shape due to the negative sentiment and there were few results to really analyse and put meat on the market’s bone – DOW down 0.73%, S&P 500 -0.58% and the NASDAQ -0.96%.  Profit takers were in the ring for Apple, taking the price down by 1.4%. The Teva/Allergan $40.5 billion deal looks good at the expense of Mylan, but watch Abbvie, Pfizer and others flex their muscles in the months to come. This sector has some momentum behind it. Let’s see if the FOMC brings further fear to equities with threats of interest rate increases or has the market already been placated? This morning the Shanghai Composite closed down 1.68% and the NIKKEI closed just below the Plimsoll line – down 0.1%

 

In London yesterday Merlin Entertainment’s Nick Varney admitted that the terrible accident at Alton Towers in May had affected earnings.  Despite remedial action, fear of these rides prevailed.  The market took the stock down by 4.28%. Panmure’s analysts Karl Burns likes the Ladbroke/Coral Gala deal – £2.3 billion, but thinks it may take a year to consummate.  It appears to be a good deal for Ladbrokes (52% of the joint venture).  Coral’s is the fastest growing on-line bookmaker.  There is no doubt that the regulator will need to be placated and it may well be that 20% of their retail estate will need to be sold. There could be as much as £65 million synergistic savings in the years to come. It looks as though Tesco’s senior management remuneration packages could upset a few people. CEO Dave Lewis could receive share incentives valued at £3.4 million and Alan Stewart £1.8 million.  A pool of £24.8 million could be spread amongst the 11 senior directors, despite shares having fallen 18% in the past year. However I would point out that Tesco’s shares, after the over-zealous profit statement, fell from 269p to 164p – down 39% – so work in progress by NEW management, which requires acknowledgement.

 

 

There was a slew of earnings this morning. The following pleased – NEXT, INFORMA, ITV, VIRGIN MONEY and DRAX. ITV’s shares were up 3%. External revenues were up 11% and though viewing figures were down, advertising revenues were up 5% on well viewed programmes.  The World Cup will be a decent little ‘Arfur Daley!’ BP posted a loss of $6.26 billion for the last quarter which included a settlement payment of $7.48 billion to the US authorities for the Deepwater Horizon tragedy.  The operating profit was $1.3 billion – 20% below expectation, 64% down Y/O/Y and 50% Q/O/Q. Oil prices have halved in the past year and are 20% down in recent months. However it should be stressed that CEO Bob Dudley has done a brilliant job for BP not only in the US but also by maintaining good relationship with Putin and the Kremlin over its joint venture with Rosneft, which will pay dividends if there is ever a bit of political détente. GKN announce the acquisition of assets from Fokker. Melrose disposed of assets to Honeywell of the US for circa $3 billion – shares up 7%. Royal Mail incurred the wrath and indignation of the regulator over charges, which it disputes – shares were down 3.3%.

 

This morning UK GDP should be confirmed at 0.7% for the 2nd quarter with the service sector leading the charge. We await news of the Troika’s visit to Greece to sign off on the bail-out.  Frankly I take any accord with Greece with a pinch of salt!

 

UK companies posting results this week – 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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