TODAY’S FAYRE – Wednesday, 19th August 2015
“We live in our own world,
A world that is too small
For you to stoop and enter
Even on hands and knees,
The adult subterfuge.
And though you probe and pry
With analytic eye,
And eavesdrop all our talk
With an amused look,
You cannot find the centre
Where we dance, where we play,
Where life is still asleep
Under the closed flower,
Under the smooth shell
Of eggs in the cupped nest
That mock the faded blue
Of your remoter heaven.”
RS Thomas – Vicar & poet – 1913-2000
Congratulations to Lord Sebastian Coe on being elected President of IAAF, an appointment he has long-coveted. His first goal must be to clean up the severely tarnished reputation of athletics. It was interesting to note that Sergey Bubka – For so many years this Russian held the pole-vault world record – has been elected Vice-President.
Yesterday was another day of market turmoil and uncertainty, exacerbated by the fact that the world and his wife was away attending to their tans around the world or selectively shooting grouse on the moors of Scotland and Yorkshire. Some of course will be at the Kia Oval on Thursday and Friday, looking to England’s cricketers to finish the job off with a 4-1 rout in the current Ashes series.
However for those interested, there was plenty for the market’s protagonists to get their teeth in to. The oil and resource sectors continued to be friendless in the ring and many large oil companies and miners continued to surrender value. On the Street of Dreams, ahead of this afternoons FOMC’S minutes from the July meeting and the consternation expressed over China’s economy coupled with Putin clearly enjoying regurgitating trouble in the Ukraine, investors took a back seat and decided to watch the world go by. The DOW eased by 0.19%, the S&P 500 by 0.26% and the NASDAQ by a measurable 0.64%. Walmart posted their quarterly numbers, which were disappointing, triggering a 3.2% fall in its share price. Net income for the quarter ending in July fell from $4.09 billion last year to $3.48 billion this year. However stores open for more than a year saw sales up 1.5% totalling $120 billion. The disappointing part of his financial report was the dire performance of ASDA, which saw like for like sales down by 4.7% in the last quarter. This will give CEO Andy Clarke something to think about, as the Lidl and Aldi continue to titivate the consumers’ taste buds. Walmart’s shares have fallen from $91 at the beginning of the year to $69 yesterday – 23%.
In Asia this morning the brittle outlook for the Chinese economy and the fact that further stimulus packages seems to have remained in the in-tray pro-tem, saw the Shanghai Composite lose another 4% before settling down -3.1% at lunchtime. This follows a 6.1% loss yesterday. Japan was faring a little bit better as Tokyo heads towards the close – down 1.29%. Japan’s exports have fallen quite sharply as the world demand seems to be slackening. In London oil stocks and resources took some more stick yesterday as the FTSE eased by 24 points to 6526 – oils down 1-1.5% and mining 2-2.5%. Glencore posted numbers this morning. Not unexpectedly EBITDA was down 29% – $4.6 bn. An operating profit for the first half was better than expected at $882 million against estimates of $728 million. There was a net loss of $680m. Shares may rally by as much as 5% today from a low of 176p – down 23% in the last month! Also Imperial Tobacco posted a trading statement in line with expectations. Carlsberg posted a significant drop in profits with sales in Russia being dire. Shares may be down 10% this morning. Hikma and Admiral also posted numbers.
There were few surprises in yesterday’s inflation number for July – +0.1%, when Zero was expected. Next month’s figure, which will include the recent fall in oil prices may see inflation dip below zero, before it starts to increase towards the end of the year. The figure the MPC is concerning itself with is wage inflation – currently heading towards 2.8%. This will trigger a rate rise, probably not before 2016 unless David Miles gets his way. The current strength of Sterling is doing the BOE’S job for it.
Nationwide posted stellar numbers yesterday, with profits for the last three months to 30th June, rising to £379m from £253m a year earlier. Gross mortgage lending has increased by 17.2% to £6.8bn and net lending was up 23.5% to £2.1bn. However CEO Graham Beale expressed his concern that the Chancellor’s plan to change the bank levy by introducing an 8% surcharge on profits could cost this building society £300m over 5 years and thus affect mortgage lending.
A $2 billion court settlement agreed by leading banks in New York has opened the flood gates to a global wave of civil actions over the industry’s manipulation of prices.
Barclays, Goldman Sachs, HSBC and Royal Bank of Scotland were among the nine institutions which agreed to compensate small investors over losses due to price manipulation. FX is the biggest market in the world and banks are very vulnerable due to the possibility of a domino effect. From broker, to fund manager, to property developer, to exporter to the consumer. If any party feels wronged they could all want a piece of the action. PPI, credit cards and ‘interest-on-interest’ will still be fertile hunting grounds for litigious predators.
Tonight’s FOMC minutes which will be posted early this evening, will be eagerly awaited. The economic turmoil around the world will cause Janet Yellen some sleepless nights before she and the FED attempt to raise rates in the US. 70% of economists believe she will go for September with a 25 basis point increase. The Labour market endorses this theory but manufacturing and retail put the decision in doubt.
UK companies posting results – Wednesday – HIKMA, ADMIRAL, GLENCORE, IMPS (TS), Thursday – WH SMITH, RANK, PREMIER OIL, KAZ MINERALS
U.S. Companies posting interim results this week – Wednesday – TARGET, Thursday – SEARS HOLDINGS, GAP, HEWLETT-PACKARD, ROSS STORES
Economic data – Wednesday – US CPI & PPI, US MBA MORTGAGE APPLICATIONS, FED MINUTES, Thursday – UK RETAIL SALES CBI INDUSTRIAL TRENDS, US INITIAL JOBLESS CLAIMS, Friday – UK PUBLIC SECTOR FINANCES.
David Buik – market commentator
Panmure Gordon & Co