TODAY’S FAYRE – Wednesday 5th August 2015

 

“Love seeketh not Itself to please,

Nor for itself hath any care;

But for another gives its ease,

And builds a Heaven in Hells despair.

 

So sang a little Clod of Clay,

Trodden with the cattle’s feet;

But a Pebble of the brook,

Warbled out these metres meet.

 

Love seeketh only Self to please,

To bind another to Its delight:

Joys in anothers loss of ease,

And builds a Hell in Heavens despite.”

 

William Blake – poet & painter – 1757-1827

 

Apart from taking the family on their well-earned two-week family holiday, August is a loathsome month for innovative and ambitious business folk. I accept that people with children are entitled to a two-week family holiday.  However it does no entitle them to switch off for two months in the summer and a month over Christmas and the New Year. With respect, we know that France, Italy, Portugal and Spain are prone to be bone idle, give the slightest encouragement – maybe it is the weather! Instead of adapting the American culture of giving their respective employer their best shot, we in the UK have decided to adopt the European culture of being slothful throughout the summer. I fully understand how technology has cut corners for dealing and investing and how no one need be at their desk all the time, but there is nothing to replace interpersonal skills and a forum for exchanging views and ideas. 

 

The French, the Italians and the Spanish seem for decades to have been in a permanent torpor.  They are great nations, but their greatness is muzzled by the propensity to be so chilled that in the summer they appear to be horizontal with the ground.  If they all worked for another hour a day, the difference it could make to the growth of their respective economies could be astronomical. Yes, I understand the state of their economies. Nonetheless, mind over matter could achieve miracles. Perhaps also the regulators who have imposed draconian rules on entertainment are also to blame for the declining level of interaction amongst brokers and traders, which could generate a spirit of infectious enthusiasm for market activity.

 

Today is ‘Super Thursday!’ – The day that Governor Mark Carney sets down the MPC’S stall for interest rates together with the quarterly inflation Report. I think we know there will be no change in Bank Rate which has been at 0.5% since March 2009 and that inflation is currently zero. However by rolling these events into one, the BOE wants to change the culture more in the style of US transparency towards the market place than we have been currently used to here in Old Blighty. So we expect to hear from the Governor that the UK economy is robust, even though growth forecasts may be lowered a tad to say 2.4% for this year. As concern has been expressed by the MPC about inflation in property and share valuations, he will be massaging and weening consumers towards a symbolic rate rise perhaps in January 2016, with the possibility of further very gradual hikes if the economy warrants them. With general core inflation at zero, the BOE has a tricky balancing act – so as not to ‘throw the baby out with the proverbial bath water’ on growth. My colleague Simon French is far more erudite on these matters. So he will appraise you in a comprehensive manner after Mid-Day today! In expectation Sterling was strong yesterday.

 

One must not of course forget that the FED will be holding a press conference today. Good non- manufacturing ISM data yesterday will have given a few more arrows to Janet Yellen’s bow to hike rates slowly in September. However, data from payroll firm ADP yesterday showed that private employment in the US rose by 185,000 last month, below an expected increase of 215,000. So if tomorrow’s Non-farm payrolls don’t show that 200k+ jobs were created in July plus the need for another month or two of the same, she and the FOMC may find it hard to be convinced that starting to increase the cost of borrowing in September is the correct action. Most believe that the FED will be convinced.

 

On the Street of Dreams the economic data did not frighten off investors. The DOW closed just below the Plimsoll line but the S&P 500 added 0.31% and the NASDAQ +0.67%. Apple after sharp reverses on concerns about their business in China rallied a smidgen yesterday to $114 + change (+0.66%). Media stocks like Disney (-8%), Comcast and Time Warner (-7%) took a little stick yesterday as some royalty contracts started to look a little vulnerable and very strong evidence that viewers were transferring their affections to video and on-line rather than television. Though the flow of quarterly earning started to ease back, the general quality remained in tack.

 

Asia enjoyed another torrid session apart from Japan, which had added about 0.6% towards the close, thanks to a weak Yen and expected loose monetary policy by the BOJ. However investors became cynical towards Shanghai restrictive practices on ‘short selling’ and the Shanghai Composite was down 1.27% as traders headed off for rice and noodles at lunch.

 

Yesterday the FTSE 100 rallied by 65 points at 6752 thanks to strong rally in mining stocks up on average by about 3% and oils by about 1.5%. Some of that largesse is likely to be given back. Some good results were posted this morning by Aviva, Old Mutual, RSA and a better effort from Randgold. In the case of RSA their numbers were impressive with profits for the half year up from £68 million last year to £288m this year. Zurich’s overtures, which saw the share rise 36% last month, will be keen to expedite this takeover! Mondi also captured the imagination.

 

 UK companies posting results this week – Wednesday – Thursday – AGGREKO, OLD MUTUAL, AVIVA, MONDI, RANDGOLD, RIO, RSA, INMARSAT, SPIRENT COMMUNICATIONS, ENTERPRISE INNS, MYLAN, SAB MILLER (TS), Friday – WILLIAM HILL, BELLWAY.

U.S. Companies posting interim results this week – Thursday – FRED’S, ALLERGAN, VIACOM, ZYNGA, Friday – SOTHEBY’S, HERSHEY

Economic data – Thursday – BOE MPC INFLATION REPORT – Friday – US NON- FARM PAYROLLS

 

 

 

David Buik – market commentator

 

Panmure Gordon & Co

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