Monthly Archives: July 2015

TODAY’S FAYRE

 

TODAY’S FAYRE – Tuesday 21st July 2015

 

“O Captain! my Captain! our fearful trip is done;

The ship has weather’d every rack, the prize we sought is won;

The port is near, the bells I hear, the people all exulting,

While follow eyes the steady keel, the vessel grim and daring:

But O heart! heart! heart! O the bleeding drops of red,

Where on the deck my Captain lies, Fallen cold and dead.

 

O Captain! my Captain! rise up and hear the bells;

Rise up–for you the flag is flung–for you the bugle trills; 

For you bouquets and ribbon’d wreaths–for you the shores a-crowding;

For you they call, the swaying mass, their eager faces turning;

Here Captain! dear father! This arm beneath your head; I

t is some dream that on the deck, You’ve fallen cold and dead.

 

My Captain does not answer, his lips are pale and still;

My father does not feel my arm, he has no pulse nor will;

The ship is anchor’d safe and sound, its voyage closed and done;

From fearful trip, the victor ship, comes in with object won; 

Exult, O shores, and ring, O bells! But I, with mournful tread,

Walk the deck my Captain lies, Fallen cold and dead.”

 

Walt Whitman – poet – 1819-1892

 

Against my better judgement I went to see the controversial and much heralded documentary on Amy Winehouse – “AMY” – directed by Asif Kapadia, who made that brilliant film – “SENNA.” Amy Winehouse’s music is, as you might imagine, was not my bag at all. However this amazing reconstruction of her life in this film, warts and all – the drugs, sex, rock ‘n roll, depression and vulnerability certainly helped to illustrated her breath-taking talent, whilst at the same time these antics were destroying her. Amy had an extraordinary voice with a wide-ranging style of songs, most of which she wrote. From the evidence portrayed by the film, her Father Mitch and husband Blake Fielder have much to answer for. Her father clearly exploited her commercially without displaying any sensitivity towards her vulnerability. As for Mr Fielder, despite protestations to the contrary he enjoyed the ride he shared with her into ‘cocaine Elysium!’ What a tragedy and a waste of a young life! Amy died aged just 27!

 

Greece almost took a back seat yesterday in terms of financial headline domination. Banks re-opened in Greece and Greece repaid €2.05 billion to the IMF as scheduled and €1.45 billion to the ECB. That is by no means the end of the drama, which will continue to unfold in the months to come. However there were other matters that captured investors’ imagination. Top of the list would be gold and its recent fall from grace. The threat of higher interest rates in the US, the very strong Dollar and China’s diminished appetite has precipitated a 33% fall in the price of gold in recent months since 2012 to $1102 an ounce and a 42% fall since its all-time high $1900 in 20010. It is interesting to note that China’s gold reserves have been bolstered by 57% in the past months.

 

Falling gold prices took the gilt of the ginger bread on the Street of Dreams yesterday with Barrick Gold falling by 16% at one time and Newmont Mining by 12%. Randgold in the UK also had a torrid time easing by 4%. Anglo-American only fell 0.6% this morning but this company has proved very disappointing investment in the last year down from 1650p to 862p and down from 3300p in 2011 – hardly surprising with such a steep drop in mineral prices. Morgan Stanley posted decent numbers with revenues up 13%. Conversely IBM (Old Blue), though it posted better than expected earnings, revenues and sales for the last quarter fell 13%. IBM’S shares fell by 4%. Lockheed Martin is expected to complete the purchase of Sikorsky Helicopters for $9 billion. The DOW & S&P 500 were both up 0.8%, when the bell was wrung and the NASDAQ closed up 0.17%.

 

All eyes will be on Apple’s results after hours. Analysts are expecting 47 million iPhones to have been sold, with sales in China expected to be responsible for 29% of a 32% increase in sales for the third quarter, generating an estimated $49.3 billion of revenue. Apple’s shares have added 40% in value in the last year.

 

There was a temporary sense of relief yesterday in Europe; so the performance of its bourses was mixed – some still bouncing out of the ‘Doldrums’, with the FTSE 100 suffering from a little bit from falls in mineral and commodity prices and some holiday inertia – up just 13 points at 6788. Barclays’ shares did not respond to the likelihood that 30k redundancies may be made in the next couple of years. We also wait with bated breath on management changes implemented at Standard Chartered by Bill Winters. Will Mike Rees survive? This morning we had a slew of earnings – but no ‘Big Berthas!’ Royal Mail posted a bland trading statement. Though European volumes were up 8%, it may be that the falling value of the Euro could wipe much of those gains out. PZ Cussons’s efforts were nothing to write home about and though AO World’s shares rallied 9.6% thanks to UK sales being up 6.5 per cent, while orders were up 13.9 per cent for the three months to 30 June. There may be an element of a ‘dead cat bounce’ in that price. The stock has been heavily shorted! IG Group saw revenues up 8% but was still suffering at the hands of the Swiss Central Bank’s unexpected ‘Exocet missile!’ CEO Tim Howkins will be leaving and Peter Hetherington, the COO will assume charge until a replacement has been appointed. Yesterday Pearson’s shares popped 5% on rumours that the FT together with 50% of the Economist might be for sale for about £1.1 billion. If that price includes pension costs, that valuation may be a tad rich, according to Panmure’s Jonathan Helliwell.

 

 

UK companies posting results this week – Monday – 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, VODAFONE, CLOSE BROTHERS

US Companies posting interim results this week – Monday – Tuesday – BANK OF NEW YORK MELLON, UNITED TECHNOLOGIES, LOCKHEED MARTIN, OMNICOM, HARLEY-DAVIDSON, BAKER HUGHES, APPLE, MICROSOFT, YAHOO!, 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 

 

David Buik – market commentator

 

Panmure Gordon & Co​

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THIS MORNING’S FAYRE

 

THIS MORNING’S FAYRE – Monday 20th July 2015

 

A glimpse, through an interstice caught,

Of a crowd of workmen and drivers in a bar-room, around the stove, late of a winter night–

And I unremark’d seated in a corner;

Of a youth who loves me, and whom I love, silently approaching, and seating himself near, that he may hold me by the hand;

A long while, amid the noises of coming and going–of drinking and oath and smutty jest, There we two, content, happy in being together, speaking little, perhaps not a word.”

 

Walt Whitman – poet – 1819-1892

 

That effort by England yesterday at Lord’s – out in 37 overs for 103 – could only be described in any language, as gutless! The wicket was flat. The Australian bowlers are on the whole, taller than ours; therefore they get more natural bounce. However had our 6 front line batsmen been patient and applied themselves, they could have lost with a degree of dignity and true grit. Time has surely run out for Lythe, Bell and Ballance – au revoir, if not goodbye. Welcome Hales, Taylor and Bairstow! Folk will argue about Hales. However he puts bat to ball and could be a decent foil for Cook.

 

So Greek banks are open today and the market’s reaction suggests they think the problem is “done and dusted!” In my humble opinion nothing could be further from the truth. So customers are allowed to draw €420 a week out of their bank instead of €60 a day. It amounts to the same though any queues for money may dissipate. However once the ECB has paid over $7 billion temporary loan and Greece has returned €3.5 billion of it to the IMF today, can anyone put their hand on their heart and tell us that Greek banks are truly solvent and that from here on in, its onwards and upwards? If they do, I respectfully don’t believe them. Who is going to put money in to them apart from the ECB, IMF and some ‘gung-ho’ domestic depositors?

 

Then there is the question of the €7 billion Greece is due to repay next month. The situation can only get worse. Greece’s population of 11 million, without adequate input or contribution from business, industry and commerce, cannot service or hope to repay debt of gargantuan proportions – €326 billion, unless there is a haircut – ‘No way, Jose’ say Merkel & Schauble – or its debt should be rescheduled and extended for 25 years with a zero coupon. I suspect that in all honesty that is a very unlikely option, though easily the most sensible proposition, though personally I think the party is over! Finally on this irritating and crazy subject the fact that Greek 5-year bonds yield 16.7% and 10-year bonds circa 11%, suggest all in the garden is far from rosy!

 

Life was rather uneventful on the Street of Dreams on Friday and there was little gossip or events emanating from Asia this morning to digest, though more Chinese stocks can be traded than last week. Asian markets were slightly down. Tokyo was shut for Marine Day. The Dollar put in a very strong performance on the back of Yellen’s soothing warning about the possibility of higher rates starting in the autumn. This news spike the Dollar and took gold down to its lowest level for some time – down 4.2% in Asia to $1087 an ounce. Mark Carney also brought forward guidance in to play today, suggesting inflation may rise in early 2016 with stronger oil prices, slowly triggering rate rises to perhaps 2.25%, having been stagnant at 0.5% for 6 years. With the EU making a pig’s ear of their economy and China not guaranteed to deliver 7% GDP, I have my doubts.

 

This morning the FTSE got off to a sedentary start but by 11.00am it was up 34 points at 6809. With news that Barclays chairman John McFarlane was looking to hose out about 30k people in the next couple of years, we expected its share price to push on, with evidence of blood running down North Colonnade from Churchill Place – no such luck up 1p as was RBS. Randgold suffered from the falling gold price down 3%, but Anglo American was only down a penny. Rolls Royce announced two new contracts worth £1.4 billion – shares up 0.5%. Oil stocks were up 1% and pharmaceuticals an average of 0.9%. Aveva are going to be involved in a reverse takeover with Schneider Electric worth £1.3 billion. Aveva’s shares rose by 26%. The price of diesel has fallen below the price of petrol for the first time almost since Noah left the Ark. We heard that Morrison, under Dave Potts’s leadership might start a fuel war with its peers. Tesco, Morrison and Sainsbury were all but unchanged. Travel Lodge will be making a decision whether to apply for an IPO through Deutsche Bank valuing the operation at circa £1 billion or sell to another hotel group or private equity.

 

This week equity geeks will be concentrating on this quarter’s earnings season on both sides of the pond. Last week’s efforts in the US were good, with JPM, BOA, Wells Fargo, Netflix, Johnson & Johnson and Google blazing the trail. With a strong Dollar prevailing, there is concern that sales of some companies may drop. Conversely many UK companies, which are part of the FTSE 100 could benefit.

 

UK companies posting results this week – Monday – BRITISH LAND, Tuesday – C&W COMMS, SSP GROUP, IG GROUP, ROYAL MAIL, PENTAIR, PZ CUSSONS, QINETIQ 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 – Monday – MORGAN STANLEY, HALLIBURTON, IBM, RAMBUS, Tuesday – BANK OF NEW YORK MELLON, UNITED TECHNOLOGIES, LOCKHEED MARTIN, OMNICOM, HARLEY-DAVIDSON, BAKER HUGHES, APPLE, MICROSOFT, YAHOO!, 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 

 

David Buik – market commentator

 

Panmure Gordon & Co​

TODAY’S FAYRE

TODAY’S FAYRE – Sunday, 19th July 2015

 

Late August, given heavy rain and sun

For a full week, the blackberries would ripen.

At first, just one, a glossy purple clot

Among others, red, green, hard as a knot.

You ate that first one and its flesh was sweet

Like thickened wine: summer’s blood was in it

Leaving stains upon the tongue and lust for Picking.

Then red ones inked up and that hunger

Sent us out with milk cans, pea tins, jam-pots

Where briars scratched and wet grass bleached our boots.

Round hayfields, cornfields and potato-drills

We trekked and picked until the cans were full

Until the tinkling bottom had been covered

With green ones, and on top big dark blobs burned

Like a plate of eyes. Our hands were peppered

With thorn pricks, our palms sticky as Bluebeard’s.

We hoarded the fresh berries in the byre.

But when the bath was filled we found a fur,

A rat-grey fungus, glutting on our cache.

The juice was stinking too.

Once off the bush The fruit fermented, the sweet flesh would turn sour. I

always felt like crying. It wasn’t fair

That all the lovely canfuls smelt of rot.

Each year I hoped they’d keep, knew they would not.”

 

Seamus Heaney – poet – 1939-2013

 

On my way home from a highly enjoyable day Lord’s, if a little dispiriting from an England’s supporter’s perspective, I walked passed a rather splendid terrace house – about 400 yards from cricket’s ‘Mecca’ – in Cunningham Place. It sported a blue plaque to commemorate the life of Guy Gibson VC, who had live there until his untimely death in Holland on a bombing raid in 1944 at the tender age of 26! You will recall that Wing Commander Gibson lead the brave and gallant ‘Dam Buster’s’ very successful attack, with Barnes Wallis’s bouncing bombs, on key dams in Germany in 1943.

 

Last week was another extraordinarily bizarre one to manifest itself – full of sound and fury, signifying a fair amount of economic insanity in places. There was also a compendium of financial gossip, particularly resulting from the antics of John McFarlane wielding the knife through the corridors of 1, Churchill Place in Canary Wharf and with Martin Wheatley’s demise as top retail regulator at the FSA more or less next door in North Colonnade. There was also the start of what initially seems to be a buoyant 2nd quarter earnings season in the U.S. so far, to ruminate over and the rate titillation comments made by the FED’S Janet Yellen and BOE’S Mark Carney to contemplate. So there was certainly a full bag of tricks to keep investors and observers on their toes!

 

Let’s get the Greek tragedy out of the way first and foremost. It did not require a brain surgeon’s ability to realise that a fudged deal would be cobbled together at the last moment by the EU, IMF and Greece to allow Greece’s abjectly forlorn and downtrodden people to stay in the EU at a fearful human cost, as well as financially. The agreement also allowed the ECB to provide a temporary €7 billion loan, which should enable Greek banks to open tomorrow and for the immediate repayment of its €3.2bn loan to the IMF to be made. Yes, Greek governments may have been corrupt for generations. They have failed to understand or collect taxation, but everyone apart from the EU was persuaded years ago that Greece would never going be able to comply with its financial obligations. So we wait for not only this problem to rear its ugly head again in 6 months or a year’s time, notwithstanding that an adverse Spanish general election could also cause problems for the EU.

 

In her two-day confessional to Congress – I think formerly known as the Humphrey Hawkins lectures – FED chairman Janet Yellen served notice that the first interest rate hike could be implemented in the autumn of this year. She was pleased with the Labour data and told legislators that further regular upward adjustments to rates would indicate that the economy was in good nick. BOE Governor Mark Carney also indicated that the MPC’S forward guidance indicated that rates would start to rise in early 2016. The UK economy was in good shape. Wage inflation of about 3.2% was encouraging, though there must be concern about China dragging down global growth and the EU making a pig’s ear of recovery with its inability to deal with Greece and other dramas, which could force the BOE to rethink. However on Friday Sterling enjoyed its best day since 2008, responding positively to the Carney ‘call to arms!’

 

Last week stock markets managed to put the shameful machinations of the EU towards the back of their minds. They attempted to focus on as much on results, stimulus packages implemented by China including state owned banks being prepared to underwrite Shanghai markets with a war chest valued at $200 billion if required and central bank activity. Last week the FTSE added 1.52%, the S&P 2.41% European bourses an average of 4.24% and the NIKKEI 4.4%. The Shanghai Composite has suffered a terrific larruping losing a net 25% in the last month. Perhaps the fall has been abated; we shall see. It is interesting to note that China’s gold reserves leapt by 60%!  I wish I shared the market’s enthusiasm for the current European rally. I suppose because I am so incandescent with rage over their political ineptness I am unable to be objective.

 

On the Street of Dreams on Friday Honeywell and GE posted good numbers. The latter saw a 5% rally on industrial profits as shareholders watched the implementation of a $68 billion disposal of GE Capital’s assets. GE shares were up 1.67%. Google shares responded to great sales adding over 16% on the week. Rapid7, the cyber security start up IPO saw a 67% premium on its first day of trading. Hertz restated its profits and its shares rose like a proverbial grilse by 11%. Mattel did not please its acolytes with shares falling by 3.3% on Friday.

 

Here in Old Blighty Sir Terry Leahy’s baby B&M saw sales drop from 31% to 24% in the last trading period with like for like sales down from 4% to 3.4%. However the shares kept their poise – up 0.7%. Investors vented their spleens on Ocado, for failing to identify an international partner – down 6.9%. Royal Mail eased by 3.5% ahead of this week’s numbers on Tuesday thanks to aggressive pricing damaging competition. BT has been all over Sky like a bad rash over sport for the last few years with some very considerable degree of support and success.  However the moment Ofcom gets heavy over splitting BT’s assets and the possible hive off of Openreach, BT threatens legal action. I dislike any interference with competition. Charge what the traffic will bear. Make up your mind! You either accept competition or you don’t! 888 Holding beat off competition from GVS to land Bwin Party in an £898 million acquisition. Expect a management shake-up at Standard Chartered Bank next week.  I understand that Mike Rees, Peter Sands’ right hand man, who has earned over £60 million in the last decade may not be as eponymous as he was before.

 

When one saw M&S’S remuneration packages – Marc Bolland £2.1 million and John Dixon (Head of General Merchandise), supposedly Bolland’s heir apparent, only £217k, the writing was on the wall. So it was no surprise that Dixon’s notice was handed in and that he will probably be joining ASDA to eventually replace Andy Bond as CEO, though not confirmed. One can surmise that Steve Rowe, who has replaced John Dixon as head of General Merchandising is the anointed successor with Laura Wade-Gery snapping at his heels. M&S to me, despite the modest improvement is still a very disappointing retail icon, despite the 46% rally in the share price in the past 9 months. What about all our yesterdays?

 

John McFarlane put himself about last week in the wake of Antony’s Jenkins’s demise and despite the poor PR effort by Barclays, which required Sir Mike Rake to reiterate that he will stay as deputy chairman until the next CEO is appointed. We all know that John McFarlane fancies the position and he will want to effect immediate changes in senior management before appointing the new CEO. Hester is the best independent candidate, but no doubt Whitehall would be unhappy about it, though he did a very decent job at RBS in the circumstances, despite the fact that he and the Chancellor did not get on! Barclays will probably appoint a ‘preppy’ investment banker with a Harvard background, who still remains purer than the driven snow.

 

Finally to Martin Wheatley, the chief executive of the FCA, who was told he would not have his contract renewed by George Osborne, felt that in the circumstances he would be better off leaving in September handing over to Tracey McDermott until a full-time replacement had been found. Wheatley was generally liked and admired whilst with the LSE both in London and HK. Perhaps he gave the impression of being over-zealous towards the banks in terms of retribution, but that is what the public wanted. Chancellor Osborne seems to have softened his tone towards banks, capital requirements and ‘ring-fencing.’ Martin Wheatley never really recovered from the life assurance leak, which damaged the share prices of many companies severely. One suspects that it probably wasn’t his fault, but the buck sits at the top!

 

UK companies  posting results this week – Monday – BRITISH LAND, Tuesday – C&W COMMS, SSP GROUP, IG GROUP, ROYAL MAIL, PENTAIR, PZ CUSSONS, QINETIQ 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 – Monday – MORGAN STANLEY, HALLIBURTON, RAMBUS, Tuesday – BANK OF NEW YORK MELLON, UNITED TECHNOLOGIES, LOCKHEED MARTIN, OMNICOM, HARLEY-DAVIDSON, BAKER HUGHES, APPLE, MICROSOFT, YAHOO!, 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

TODAY’S FAYRE

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.

 

UK companies posting results next week – Wednesday –Thursday – DIXONS CARPHONE, SPORTS DIRECT INTERNATIONAL, POLYUS GOLD INTERNATIONAL and HILTON FOODS (TS).

U.S. companies posting interim results – Thursday – CITIGROUP, CHARLES SCHWAB, eBAY, MATTEL, GOLDMAN SACHS, GOOGLE, SCHLUMBERGER, Friday – COMERICA, GENERAL ELECTRIC

 

 

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

 

 

David Buik – market commentator

 

Panmure Gordon & Co

 

TODAY’S FAYRE – COULD IMF BE FLY IN THE OINTMENT?

TODAY’S FAYRE – Wednesday 15th July 2015

 

“I have been one acquainted with the night.

I have walked out in rain — and back in rain.

I have outwalked the furthest city light.

I have looked down the saddest city lane.

I have passed by the watchman on his beat

And dropped my eyes, unwilling to explain.

I have stood still and stopped the sound of feet

When far away an interrupted cry

Came over houses from another street,

But not to call me back or say good-bye;

And further still at an unearthly height,

A luminary clock against the sky

Proclaimed the time was neither wrong nor right.

I have been one acquainted with the night.”

 

Robert Frost – poet – 1874-1963

 

I should not bring myself to talk about football in July, especially not two days before the Lord’s test match, where I am positively levitating three inches above the carpet at the prospect of another great game, despite Australia looking a little depleted in losing Haddin and Watson. However £49 million paid by Manchester City for a 20-year old, Raheen Sterling – full of promise maybe – looks insanity personified. However with the likes of BT and ESPN upping the ante with Sky, prices, sadly are only going one way! I am all for free enterprise; so charge what the traffic will bear, but do deals of this nature make sense!

 

Most of us bad-tempered market observers had a chance yesterday to stop chuntering on about Greece or in my case metaphorically spitting blood at the crass stupidity of the EU’s leaders and the duplicity of PM Tsipras! There were, thank goodness, other matters to consider and talk about, though there are rumours that the IMF is demanding haircuts from the bail-out and Germany is adamant there won’t be any! This is not a helpful strategy or intervention by the IMF at this juncture, though many suspect it is a shallow attempt to restore its tarnished reputation. The whole deal certainly does not feel ‘done and dusted!’ Tsipras needs to get this deal through Parliament today even though rumour has it that he far from convinced that he should be recommending it. Too late I fear – Hobson’s choice. Greek banks are close to running on empty! We were all delighted to hear that Chancellor Osborne was adamant that the UK would not pick up any cost suggested at E800m for this absurd bail-out.

 

I have already apologised for failing to enter in to the spirit of the Iran accord, agreed by Secretary Kerry for the US and 5 other nations. Despite the prospect of Iran contributing between 250k and 500k barrels a day to world oil output, which saw oil prices ease back on the prospect, it only took a few hours to rumble that there were many headwinds to encounter before this agreement became meaningful– maybe a couple of years – and then we could have a Republican President and no agreement on controlling nuclear proliferation. Up went crude oil prices later in the day. In isolation preventing war is paramount, but it would be folly to attach too much credence and importance to the accord.

 

Yesterday in Europe equity geeks accepted that the relief rally had run its race until some good news passes under their nose. The Street of Dreams performed well considering Retail Sales fell by 0.3% in June, which was not what was required. However the quality of the early ‘movers & shakers’ to post 2nd quarter interim results were better than expected. JP Morgan Chase saw profits up by 5.2% despite legal litigation bills of $190 million down from $430m a year ago. However since the financial crash JPM has spent $35 billion in total on litigation since the start of the financial crash in 2008. The shares were up 1%. Despite a very modest dip in profits, Wells Fargo managed to lend $40bn in home loans in the three months to the end of June. Johnson & Johnson pleased their acolytes yesterday, though the strong Greenback may affect sales during this results season. The DOW ended the session up 0.42%, the S&P 500 was better by 0.36% and the NASDAQ bounced up by 0.66%. FED Chairman Janet Yellen starts her two-day Congressional testament today, hopefully throwing some bright light on her plans for hiking rates in the autumn, though there can be no guarantees.

 

London was relatively somnolent. The FTSE was up a fraction at the close – 16 points to 6753. Johnston Press had a shocker losing 18% to deficient advertising revenue. FirstGroup and Michael Page posted adequate numbers and Carillion buzzed over a housing deal with BP in the Middle East. However house builders lost about 1% thanks to veiled threats from Mark Carney, the BOE Governor that just because inflation remained at zero in June, it did not necessarily preclude a rate hike, which may be necessary in the autumn. With all the rubbish going on Europe and with faltering growth in China, despite a 7% GDP number being posted for the 2nd quarter (EST: 6.8%) and pockets of disappointing US data, many like me will be surprised if anything more than a symbolic rise in rates is implemented this year. Unemployment data will be posted at 9.30am this morning. Perhaps a further cut in the number of unemployed will encourage the MPC to give further consideration and credence to a forthcoming rise in rates.   Glaxo Smithkline announced a link up with the research body Francis Crick to collaborate on new drugs. Asian markets were mixed today. Despite GDP number Shanghai Composite was under siege and was down 4.38% at lunch. The Hang Seng was light by 1.01%, though the NIKKEI advanced on a weak Yen – up 0.38% at the close.

 

This morning Burberry, despite pressure from falling sales in HK, saw revenues up 8% in the last quarter. The shares have had a torrid time in recent months – down by 17% from 1950p 3 months ago. However they should rally by 2% at the opening. JD Wetherspoon posted a 2.9% increase in like for likes sales in the last quarter and Halford’s trading statement was satisfactory.

 

UK companies posting results next week – Wednesday – BURBERRY (TS), ICAP, HALFORDS, MONEYSUPERMARKET, SEVERN TRENT, JD WETHERSOON, RPC GROUP Thursday – DIXONS CARPHONE, SPORTS DIRECT INTERNATIONAL, POLYUS GOLD INTERNATIONAL and HILTON FOODS (TS).

U.S. companies posting interim results – Wednesday – BANK OF AMERICA, DELTA, U.S. BANCORP, BLACKROCK, INTEL, NETFLIX, Thursday – CITIGROUP, CHARLES SCHWAB, eBAY, MATTEL, GOOGLE, SCHLUMBERGER, Friday – COMERICA, GENERAL ELECTRIC

 

 

Economic data – Wednesday – UK EMPLOYMENT DATA , US INDUSTRIAL PRODUCTION, Thursday – EU CPI, ECB MEETING, US JOBLESS CLAIMS, Friday – US CPI & HOUSING STARTS

 

 

David Buik – market commentator

 

Panmure Gordon & Co

 

MARKET UPDATE – I’M STILL INCANDESCENT WITH RAGE!

I promise you I am doing my level best to ‘raise’ my game and limp in to second gear. However I am suffering still from yesterday’s machinations. I remain incandescent with rage at the outcome of this “Fred Karno Greek Tragedy”, played out over the last few weeks in Brussels. I still cannot believe the crass stupidity of the EU and IMF but perhaps it is their relentless quest for federalism, intoxicated by the aroma of power. As they say in the vernacular – “What-ever!”

 

Anyway the relief rally that prevailed late last week and yesterday seems to have run in to a cul-de-sac and may stay there unless the market is the recipient of good news. Zero inflation for June posted this morning, with comment from Mark Carney that zero inflation does not prevent a hike in interest rates, does not constitute good news.

 

I really did try hard to get excited about the accord with Iran, but to no avail. Frankly the GOP will never vote it through Congress so long as night follows day and in 2 years’ time, we will have another President and it could be a Republican – so don’t hold your breath. The crude oil market certainly saw it that way – with Nymex and Brent firming up a tad, which gave the likes of BP and Shell a little momentum – both up about 0.8% at 3.30pm. The FTSE 100 took a deep breath and swam just above the Plimsoll line to be up 5 points at 6747. Trading was sepulchral. Of those companies that reported today, Johnston Press was down a whopping 18%, Michael Page down 1.5% having been down 3.25%. Carillion was flat having jumped 3% at the opening and FirstGroup was down a smidgen.

 

The Street of Dreams enjoyed decent results from JP Morgan Chase uip 1% at $68.77 and Johnson & Johnson up 0.7% at $99.58 – hence the DOW was up 43 points, having breached the 18,000 threshold. The Dax was unchanged and the CAC +0.4% at 3.30pm

TODAY’S FAYRE

 

TODAY’S FAYRE – Tuesday 14th July 2015

 

When I go up through the mowing field,

The headless aftermath,

Smooth-laid like thatch with the heavy dew,

Half closes the garden path.

And when I come to the garden ground,

The whir of sober birds

Up from the tangle of withered weeds

Is sadder than any words

 

 

A tree beside the wall stands bare,

But a leaf that lingered brown,

Disturbed, I doubt not, by my thought,

Comes softly rattling down.

I end not far from my going forth

By picking the faded blue

Of the last remaining aster flower

To carry again to you.’

 

Robert Frost – poet – 1874-1963

 

BASTILLE DAY – 14th July 1789

 

“They seek him here, they seek him there

Those Frenchies seek him everywhere

Is he in heaven or is he in hell?

That demned elusive Pimpernel”

 

Baroness Orczy – ‘The Scarlet Pimpernel”

 

Australia’s cricket coach Darren Lehmann made me shriek with mirth after his side’s ignominious defeat last week, when asking the Lord’s grounds man to prepare a hard quick wicket at Lord’s this week.  So you want one that Johnson and Siddle can bounce balls around our batsmen’s’ ears, such as was perfected in Australia during England’s 5-0 thrashing! – In your dreams, mate.  So when we next come to Perth, a feather-bed wicket will be made to measure for England?  I don’t think so!

 

 

Emily Watson’s portrayal of Julie Nicholson, the mother of Jenny, who was mutilated by terrorists in the 7/7 bombings ten years ago in the BBC’S brilliant re-enactment of that tragedy in ‘A Song for Jenny’ was  a truly memorable performance, which surely guarantees her at least a ‘BAFTA’ if not an ‘EMMY!’

 

 

I doubt my colleague and friend, Simon French, Panmure’s senior economist, could have described the Greek Crisis more succinctly when he compared it to a ‘PONZI SCHEME MASQUERADING AS A RECOVERY PLAN!” The whole deal is absolute ‘cobblers!’ The EU/IMF and Greece will eventually rue the day they ever agreed to such gobbledygook. Anyway enough said! One presumes that Tsipras with the help of right wing parties will get this dire recovery plan through Parliament tomorrow for no other reason than the fact that it needs the ECB’s largesse on Thursday and also Greece needs to repay €3.2 billion on 20th July to the IMF and then a further €7.2 billion in August. So, as they say – ‘Hobson’s Choice!’ Without the ECB Greek banks will remain closed; food will rot, people will die without medicine and cars will eventually come to halt with petrol unavailable. Dramatic exaggeration on my part, but a possibility without much needed assistance.

 

 

Anyway this ‘carve-up’ had the desired affect that equity markets were looking for, though the bond market was slightly underwhelmed. The rally was a relief one – no more no less! There is little evidence with current valuations and with oil and commodity prices remaining subdued that these bourses should crack on. The DAX and the CAC rallied at close by 2%. The FTSE was not quite so effervescent adding just about 1%. Banks, pharmas and Vodafone led a muted charge.

 

On the Street of Dreams the three main indices lost little opportunity in grabbing some much enjoyed relief value – DOW +1.22%, S&P +1.11% and the NASDAQ +1.48%. Apple shares added 1.93% to circa $125.66, which coincided with this tech giants publicity campaign on the consumers;’ ability to use ‘Apple Pay’ to settle their bills in the UK. News permeated that Apple’s smartphone industry profits soared by 92%, despite only having 20% of the smartphone market. The US 2nd quarter earnings season starts today with JP Morgan and Johnson & Johnson. Though this week’s results should pass muster, sales figures may well drop this quarter due to a persistently strong Greenback.

 

 

There was a little turmoil in Shanghai and HK this morning. At one point the Shanghai Composite was down 3% but was only down 0.86% towards the close, with the Hang Seng easier by 0.93%. The NIKKEI, on a weak Yen was up 1.47%. The FTSE this morning was anaemic – down 2 points at 9.00am. Johnston Press fell 11% thanks to unexpectedly poor advertising revenues. There were solid results from Michael Page and First Group and Carillion was up 3% thanks to a BP contract won in the Middle East for new employee homes. I suspect that markets will be somnolent until the Greek vote tomorrow and the ECB’s action on Thursday

 

UK companies posting results next week – Tuesday – MICHAEL PAGE, FIRST GROUP, Wednesday – BURBERRY (TS), ICAP, HALFORDS, MONEYSUPERMARKET, SEVERN TRENT, JD WETHERSOON, RPC GROUP Thursday – DIXONS CARPHONE, SPORTS DIRECT INTERNATIONAL, POLYUS GOLD INTERNATIONAL, HILTON FOODS (TS).

U.S. companies posting interim results – Tuesday – JP MORGAN CHASE, AAR CORPN, JOHNSON& JOHNSON, CSX GROUP, Wednesday – BANK OF AMERICA, DELTA, U.S. BANCORP, BLACKROCK, INTEL, NETFLIX, Thursday – CITIGROUP, CHARLES SCHWAB, eBAY, MATTEL, GOOGLE, SCHLUMBERGER, Friday – COMERICA, GENERAL ELECTRIC

 

 

Economic data – Monday – US TREASURY BUDGET STATEMENT, Tuesday – UK CPI & EU INDUSTRIAL PRODUCTION, Wednesday – UK EMPLOYMENT DATA , USINDUSTRIAL PRODUCTION, Thursday – EU CPI, ECB MEETING, US JOBLESS CLAIMS, Friday – US CPI& HOUSING STARTS

 

 

David Buik – market commentator

 

Panmure Gordon & Co​

GREECE -‘WE’LL MET AGAIN, DON’T KNOW WHERE DON’T KNOW WHEN..’

 

As Dame Vera Lynn sang all those years ago –“We’ll meet again, don’t know where don’t know when! But I know we’ll meet again some sunny day! The accord agreed at the eleventh hour between the Eurozone and Greece has to be another ‘Fred Karno Circus act’ at best or a stitch-up at worst. None of the parties comes out of this saga with a scrap of its reputation in ‘tact.’ To have agreed a tougher deal, with a larger bail-out figure (+€80bn) than before with a country that is stony broke, is ludicrous at best and downright irresponsible. Merkel has proved herself to be a federalist bully, desperate to keep Greece in the Euro, abrogating any responsibility for austerity contributing to the collapse of Greece economy and terrified at the prospect of Rajoy losing the Spanish election in November.

 

For terms to have been unanimously agreed on the realignment of debt without ‘hair-cuts’ and the implementation of tough economic and fiscal measures on taxation and the sale of assets is nothing short of a joke. Tsipras has been humiliated and the Greek people have been rubbished.

 

Nothing has changed fundamentally; in fact the terms are worse as Greece has required a larger bailout by in excess of €80 billion. However some sort of a deal was a ‘nailed on’ certainty. Why? The banks have run out of money and needed shoring up so people can buy food, drugs, petrol etc. So there was no question of just walking away from Greece’s problems. This is equally as much of a humanitarian problem as it is an economic and financial one. Banks are likely to be closed all week and the Wednesday deadline to agree politically on all issues looks arbitrary. There are also added pressures of loans that Greece has to repay the IMF and its creditors in July (€3bn) and in August (€7.2 billion).

 

We shall be here again in 6 months’ time or 2 years or five years’ time. Nothing has changed. Greece is BROKE. They cannot EVER repay its debts – €240 billion with 12 million people and little industry and commerce! GREXIT is inevitable. The EU/EUROZONE/GREECE are behaving recklessly! Tsipras and his cronies have been economical with the truth and it will take a lifetime to restore trust. The Greek electorate will be devastated by the capitulation.

 

In the small hours this morning European equity futures were sharply down – DAX -100 & FTSE -20. At 5.00am they were about flat – then at 6.30am DAX -150, FTSE -60 and CAC -70. News of an agreement sent markets rising like a grilse. But here in London, we are cynical. The rally took place on Thursday and Friday and this deal not only fudged but a disgrace! At 10.30am the FTSE is up 41 at 6717. Banks and insurance companies are popular in thin trading. Greek bond yield indications are as follows -10Y at 13.05% and 5Y at 16.02%. More significant is 2 year (lower duration) 21.06%. Every picture tells a story. The Euro against the Dollar is off a tad since Friday from €/$1.12 to €$1.1060.

 

Though Greece has damaged sentiment, there is no doubt that growth in China and valuations in the US make P/E ratios look quite rich. From their ‘highs’ the DAX fell by 10% and the FTSE 100 by 7%. There has been a decent rally in the past three days. That may be enough until we see evidence of better news.

TODAY’S FAYRE

TODAY’S FAYRE – Sunday 12th July 2015

 

Season of mists and mellow fruitfulness,

Close bosom-friend of the maturing sun;

Conspiring with him how to load and bless

With fruit the vines that round the thatch-eaves run;

To bend with apples the mossed cottage-trees,

And fill all fruit with ripeness to the core;

To swell the gourd, and plump the hazel shells

With a sweet kernel; to set budding more,

And still more, later flowers for the bees,

Until they think warm days will never cease,

For Summer has o’er-brimmed their clammy cell.

 

Who hath not seen thee oft amid thy store?

Sometimes whoever seeks abroad may find

Thee sitting careless on a granary floor,

Thy hair soft-lifted by the winnowing wind;

Or on a half-reaped furrow sound asleep,

Drowsed with the fume of poppies, while thy hook

Spares the next swath and all its twined flowers;

And sometimes like a gleaner thou dost keep

Steady thy laden head across a brook;

Or by a cider-press, with patient look,

Thou watchest the last oozings, hours by hours.

 

Where are the songs of Spring?

Ay, where are they?

Think not of them, thou hast thy music too,—

While barred clouds bloom the soft-dying day,

And touch the stubble-plains with rosy hue;

Then in a wailful choir, the small gnats mourn

Among the river sallows, borne aloft

Or sinking as the light wind lives or dies;

And full-grown lambs loud bleat from hilly bourn;

Hedge-crickets sing; and now with treble soft

The redbreast whistles from a garden-croft,

And gathering swallows twitter in the skies.”

 

John Keats – poet – 1795-1821

 

 

Michael Holding summed up England’s brilliant victory in Cardiff very succinctly. He felt there was very little to choose between the two batting line ups, but Australia’s bowlers performed well below their capability in comparison to their form back home. Also England had acquired confidence in spades, which had been missing until the change in management! What a great game! Despite the beautiful weather I was a ‘couched-potato’ for all of Saturday! – Enthralling!

 

‘Sell in May; Go away and come back on Leger Day!’ That plan of action was fine 30 years ago, but it would have been imprudent to have adopted that idea in 2015! The Greek charade has created tsunami-styled waves in markets and the the equity bubble in China may not have burst but it certainly needed some pumping up to avoid bursting! In a period of three weeks during June the Shanghai Composite fell by 30%, having rallied 150% from June ’14 to June ’15. It took some days after intervention by the Chinese authorities, using brokers and insurance companies, to shore up the market. However with many company shares not being traded or quoted and a significant number of shareholders  and the ‘support’ operators being restricted from selling, the market appears quite false and far from orderly. At the end of the week the Shanghai Composite regained just over 10% in value – much of it on Thursday and Friday. Concern grows by the day that China’s goal of sustaining growth of 7% this year may be unsustainable. So it may be some weeks before we know whether intervention has broken the fall in to just an acceptable adjustment.

 

We have also many bond yields rise like a proverbial grilse and fall back again in some places, caused by the threat of GREXIT to perhaps being followed by Spain reacting adversely assuming PM Rojay loses the election in November. There are strong indications that he will! Also last week oil and commodity prices dropped sharply, but rallied on Friday.

 

Looking at the performance of global indices last week  in isolation – S&P 0.03%, FTSE 100 +1.33%, European bourses an average of +1.62% and Japan’s NIKKEI -3.70% – the final outcomes are not representative of what happened during one of the most uncertain turbulent weeks experienced politically and economically in recent times. Conditions were uncomfortably volatile. What astonished me was the ‘hung-ho, fixed bayonet & over the top’ resolve shown by market traders in London and Europe. Their appetite for risk returned with gay abandon, suggesting that a last minute cobbled together deal between the EU/ECB/IMF for Greece’s survival was ‘a nailed on’ certainty!  I hope for their sake, there are right. Greece’s revised proposals went in on Friday – a worse proposition for the Greek people than what they voted ‘NO!’ for, with tax increases in VAT, early retirement out of the window, pension adjustments and a reluctant sale of assets with a view to being granted a third bailout for circa €60 billion, which EU leaders will make a decision on Sunday afternoon.

 

Clearly the U.S. Have brought pressure to bear, wanting a positive resolution out of the EU. France seem ‘gung.-ho’ with Germany reluctant and supposedly refusing any hair-cut for the creditors. The IMF seem relatively supportive of restructuring debt, which was always going to be the right course of action if Greece was to avoid GREXIT. Greece needs debt to be restructured – zero coupon bond for 20 years or so.

Even if there is an accord on Sunday, the ECB has the problem of dealing with the acute liquidity problem of the Greek banks, which have haemorrhaged and have been closed for a week. That won’t be easy!  Capital controls will need to remain in place for Greek banks for at least six months to keep the afloat after a gargantuan run on their deposits.

 

What is clear to almost everyone is that no parties involved in this crisis have come out of this with any credit. This weeping carbuncle of a problem needs lancing. It is never going to go away! Greece is broke and will remain so. These issues will return to the scene of the crime in 6 months, 2 years whenever! The bullet should have been bitten years ago! The EU politicians have been guilty of the worst political leadership and mismanagement imaginable! We all wait with bated breath until the politicians’ findings are made known!  If the terms are not agreeable and Greece head for the exit door, Germany is obliged morally help Greece in to an orderly GREXIT, having bullied the Hellenic Republic into the EU when it was nowhere near meeting the required criteria. GREXIT does not have to be sackcloth and ashes; it requires sensitive handling. A few hours ago EU finance chiefs were seeking further signs and guarantees from Greece that it was serious about delivering its promises of reform and repaying it’s debts in return for a third bailout! Greece is far from done and dusted!

 

David Cameron has been given enough basic cannon fodder to play a venomous game of hardball with the EU as regards renegotiation, imaginable. He will never be in a stronger position to make serious and uncompromising demands. There are very few positives that the UK would find attractive to remain wedded to a eclectic and dysfunctional society. The PM must not throw away this golden opportunity.

 

So much has already been written about the unsurprising demise of Barclays’ CEO, Antony Jenkins with indecent haste last week. That canny ‘old jock’, John McFarlane, who some including himself, refer to as ‘Mack the Knife’, summarily dispensed with Jenkins’s service on the grounds of inertia in terms of making the bank fire on all cylinders. I’m sorry, however forceful and ruthless a character McFarlane is, there is only one ‘Mack the Knife’ – and that was John Mack of Morgan Stanley! I nearly had cardiac arrest when I heard that Mr Jenkins could eventually take £28 million out of the ring for his troubles – £2.4 million ‘golden goodbye’, £11 million in bonuses and £15 million from a share incentive scheme. Extraordinary!

 

Wednesday’s Budget was Chancellor Osborne’s crowning glory! There was plenty of controversy over welfare and benefit cuts with the OFS attempting to rubbish the Chancellor’s and the OBR’s data on minimum wage.  However in order to counteract allegation that the OBR have had a slew of mishaps and data failures, the Chancellor has commissioned Sir Charlie Bean, the former deputy Governor of the BOE to do an independent review of accounting and forecasting procedures. There have also been issues over housing and measuring the Scottish economy. All in all, though, business was very pleased with the Budget though legislation against the banks in terms of higher profits tax was not welcome, especially by new challenger banks. George Osborne also had good news that weekly earnings were at an 8 year high at 3.3%.

 

Mining and energy stocks provided most of the limbs tests last week, with fairly volatile trading conditions. Both sectors suffered severe pull-backs on Monday and Tuesday but they regained some poise on Thursday and Friday.  The introduction of higher minimum wages sent the likes of M&S, Tesco, Next and Sainsbury in to reverse. M&S pleased its acolytes more than they pleased me – food like for like sales +0.3% and general merchandise on the same basis down 0.4%. That’s not great! Maybe the £150 million going back to shareholders captured the imagination. I hope investors get time to see through the clouds of Greek uncertainty next week and give thought to US second quarter earnings – so important. Mergers in the last quarter have been gargantuan in size. Does that mean that margins for profits have been eroded and that the outlook going forward won’t be all that encouraging? FED chairman Janet Yellen has not signalled any change in her thoughts that the first increase in rates is likely to be in September. Sirius Minerals, the North Yorkshire mine is currently negotiating with two investment banks a £2 billion fund raising operation.

 

UK companies posting results next week – Monday – CONVIVIALITY GROUP, Tuesday – MICHAEL PAGE, FIRST GROUP, Wednesday – BURBERRY (TS), ICAP, HALFORDS, MONEYSUPERMARKET, SEVERN TRENT, JD WETHERSOON, RPC GROUP Thursday – DIXONS CARPHONE, SPORTS DIRECT INTERNATIONAL, POLYUS GOLD INTERNATIONAL, HILTON FOODS (TS).

U.S. companies posting interim results – Tuesday – JP MORGAN CHASE, ASR CORPN, JOHNSON & JOHNSON, CSX GROUP, Wednesday – BANK OF AMERICA, DELTA, U.S. BANCORP, BLACKROCK, INTEL, NETFLIX, Thursday – CITIGROUP, CHARLES SCHWAB, eBAY, MATTEL, GOOGLE, SCHLUMBERGER, Friday – COMERICA, GENERAL ELECTRIC

 

 

Economic data – Monday – US TREASURY BUDGET STATEMENT, Tuesday – UK CPI & EU INDUSTRIAL PRODUCTION, Wednesday – UK EMPLOYMENT DATA , USINDUSTRIAL PRODUCTION, Thursday – EU CPI, ECB MEETING, US JOBLESS CLAIMS, Friday – US CPI & HOUSING STARTS

 

 

David Buik – market commentator

 

Panmure Gordon & Co

TODAY’S FAYRE

TODAY’S FAYRE – Thursday 9th July 2015

 

Lo! I must tell a tale of chivalry;

For large white plumes are dancing in mine eye.

Not like the formal crest of latter days:

But bending in a thousand graceful ways;

So graceful, that it seems no mortal hand,

Oe’en the touch of Archimago’s wand,

Could charm them into such an attitude.

We must think rather, that in playful mood,

Some mountain breeze had turned its chief delight,

To show this wonder of its gentle might.

Lo! I must tell a tale of chivalry;

For while I muse, the lance points slantingly

Athwart the morning air: some lady sweet,

Who cannot feel for cold her tender feet,

From the worn top of some old battlement

Hails it with tears, her stout defender sent:

And from her own pure self no joy dissembling,

Wraps round her ample robe with happy trembling.

Sometimes, when the good Knight his rest would take,

It is reflected, clearly, in a lake,

With the young ashen boughs, ’gainst which it rests,

And th’ half seen mossiness of linnets’ nests.”

 

John Keats – poet – 1795-1821

 

The Budget preoccupied most of yesterday; so I had to rely on highlights programme for first day of the Cardiff test match. ROOOOOOT! Brilliant! What struck me most was the fact that Mitchell Johnson is nothing like the ‘tour de force’ he is on a rock hard surface, when bowling on a relatively slow pitch with little bounce. Great recovery by England’s batting, after a disastrous start. Ian Bell looking very short of confidence. He needs a ‘biggy’ in the second innings as Bairstow and Taylor wait in the wings!

 

Once the shackles of a coalition government were shaken off, Chancellor George Osborne presented the first Tory Budget for 19 years with verve, gusto and confidence. It was a really powerful performance and I thought it a decent budget on the whole – better for business than the CBI’s John Cridland did. Improved personal tax allowances, investment of £200k per annum with tax efficiencies, Corporation tax eventually falling to 18%. An increased apprenticeship scheme as well as improved university loans.

 

I greatly enjoyed the Northern Power initiative under the stewardship of Lord Jim O’Neill. I am hopefully that it won’t be a toothless tiger with hollow rhetoric – full of sound and fury signifying nothing! I have every confidence that Lord O’Neill will be an inspiration.

 

Few will be sure how positive the living wage improvement will be against cuts in Welfare and tax credits. In passing IDS and Frank Field spent years having the drains up over welfare. Both are very decent people, but the necessary changes have been poorly articulated to date, suggesting that the vulnerable are being clobbered! This is not the case! Also the mortgage relief tax cut for buy to let houses may hurt a few people. We had to look in to the small print for asset sales – the plans there were for the sale of the balance of Lloyds and a chunk (79%) of RBS as well as the Royal Mail and the toxic assets of Bradford & Bingley and Northern Rock. I had also hoped that MOD land would be up for sale to stimulate house building. I was glad that the bank levy was only going to be calculated on UK business and that it would eventually be replaced with an 8% surcharge on profits. Increasing tax insurance premiums by 9% I thought was harsh. There is also little doubt that the minimum wage could damage supermarkets and retailers.

 

 

Greece has asked for a three year loan agreement. Tsipras attended a session of the EU Parliament yesterday. I think he will have been left in no doubt how irritated members were by Greece’s intransigent stance to negotiations, apart from Nigel Farage, who was at full throttle, goading Tsipras to give up the unequal struggle and GREXIT much to the chagrin of Donald Tusk and the former Belgian PM, whom I have never heard off treating the UKIP leader and his so called ‘RIGHT WING’ followers with contempt. Greece has until Sunday to submit an acceptable plan or it is the road to GREXIT on Monday morning. I am of the opinion that GREXIT is what Tsipras wants despite violent official protestations to the contrary. It really is crunch time for the EU. Spain’s Rajoy will almost certainly lose the Spanish election in November. Spain has had enough austerity! Contagion for the region is a real possibility – tin hats to the fore!

 

I was pleasantly surprised how kind the press were to ‘Saint Antony Jenkins’ as Standard’s Nick Goodway referred to him as. Yes, Barclays’ share price had recovered substantially since his appointment in 2012, but from a very trashed position caused by BOE/FSA/Government insisting on the ‘hosing’ of Bob Diamond as CEO – the man who controversially had made most of the profits for the Bald Eagle for the past decade. Ironic that Exec-Chairman John McFarlane should in ‘open forum’ state that he was unimpressed by the 350 odd committees and the general management style with little appetite for investment banking, which the former ANZ chief is a fan of! McFarlane will assume CEO status until a successor is found. When he is identified will McFarlane be prepared to be chairman rather than meddle in to day to day affairs? The problem with Mr Jenkins and part of the cause of his demise is that he did not appear to have friends in high places.

 

New York had a bad session exasperated by a tech glitch, which closed the NYSE for 3 hours. The DOW’s colours were lowered by 1.47%, the S&P 500 by 1.61% and the NASDAQ by 1.75%. Sentiment was poor due to Greece, China stock market meltdown and a feeling the growth in the US may not be sustainable. Japan’s NIKKEI closed down 1% today and towards the close Shanghai Composite was up close to 5%, obviously responding to the Chinese Banking Regulators supporting the stability of Capital markets, despite rules implemented preventing 5%+ stakeholders in companies from selling! – Rather a retrograde step, I felt.

 

There were good performances from AB Foods (+1.25%0, Dunelm (+1%), SuperGroup (+5%), Premier Oil (+3%) and Barratt Development (+2.2%) today and a profits warning from Balfour Beatty down 7.8%.

UK companies posting results – Thursday – AB FOODS (TS), BARRATT DEVELOPMENT, PREMIER OIL, ASHMORE, NCC GROUP, SUPERGROUP (TS).

US companies posting results – Thursday – GAP, FRED’S, WALGREEN BOOTS ALLIANCE, PEPSICO and PRICESMART.

 

 

Economics – Thursday – MPC MEETING

 

 

David Buik – market commentator

 

Panmure Gordon & Co