TODAY’S FAYRE – Tuesday 25th August 2015


You go up the long track

That will take a car, but is best walked

On slow foot, noting the lichen

That writes history on the page Of the grey rock.

Trees are about you At first, but yield to the green bracken,

The nightjars house: you can hear it spin

On warm evenings; it is still now

In the noonday heat, only the lesser

Voices sound, blue-fly and gnat And the stream’s whisper.


As the road climbs,

You will pause for breath and the far sea’s

Signal will flash, till you turn again

To the steep track, buttressed with cloud.

And there at the top that old woman,

Born almost a century back In that stone farm, awaits your coming;

Waits for the news of the lost village

She thinks she knows, a place that exists

In her memory only.

You bring her greeting

And praise for having lasted so long

With time’s knife shaving the bone.

Yet no bridge joins her own

World with yours, all you can do

Is lean kindly across the abyss

To hear words that were once wise.”


RS Thomas – vicar & poet – 1913-2000


Much written about the BETFAIR/PADDY POWER merger, which has, in essence, been well received by the market, with both stocks rallying sharply to the cause – up 24% and 19.5% respectively. The synergy is good – bookmaking and exchange trading with expansion plans probably focused overseas. The Competition Commission is unlikely to stick its unwelcome oar in to the proposal. The same may not be said about the forthcoming merger proposal set down by Ladbrokes and Gala Royal. One expects that several shops will need to be sold to satisfy the regulator. Not unrealistically, Ladbrokes and William Hill’s share prices took some tap – down 2.7% and 2.9% respectively.


I think world markets operators have been a little naïve in interpreting the seismic gyrations of the Shanghai Composite in the last 2 months. Forget the fact that the Chinese authorities have been economical with the truth over the robustness of its economy.


Folks we need to remember that this index has only been open for 25 years. It is still a very immature market. We must remember that 80% of Chinese householders (owners) have borrowed money from the banks to buy equities, particularly aggressively from June of last year, when there was a slew of IPOS, resulting in the index rallying by 150% in a year to June 2015 – the herd mentality. So in view of the concerns arising from growth in China and the ham-fisted way stimulus packages have been managed, by manipulating equities, bank liquidity and the devaluation of the Yuan from their tool kits, no one should be that surprised that that there has been a 38% retrenchment of the Shanghai Composite in the past two months. However this has hammered the retail investor and margin calls will put great strain on the banking system. We should be far more concerned about the durability of the banking sector than the Shanghai Composite. Few think that China’s economy is going to fall off a cliff!


So to markets in the last 48 hours – Investors are still cynical towards the Composite, despite China pumping a further Yuan 140 billion liquidity in to the market. As the expression goes, when you have a weak animal by the jugular, keep squeezing! Yesterday the FTSE made some effort early on to recover, but by the afternoon, the teenage scribblers, HFT, algorithms, programme trading and in particular the spivs from the futures markets became omnipotent. Plain vanilla traders gave up the unequal struggle and the FTSE 100 closed down 100 points. The Street of Dreams was having none of this nonsense. Good sense after a measurable correction in the last week started to prevail. The DOW rose like a grilse adding 619 points – I understand the single biggest daily rally for 6 years. The S&P and NASDAQ made up nearly 4%. Apple added 6%, Google up 8%. McDonald’s, Starbucks and Best Buy all responded positively. Let’s hope that when we have an orderly return to work with a bit of human input, some of the gyrations will be ironed out, though we must expect some volatility for some weeks to come.


This morning, after a bit a lively start in Asia courtesy of a positive sentiment in New York, the Shanghai Composite started to show signs of anxiety but the region had a very strong finish – Shanghai Composite +5.95% (flat an hour ago!), Hang Seng +4.12%, NIKKEI +1.08%. Europe had a bright start this AM and as I write at 911am the FTSE 100 is up 125 points to 6104 with the DAX better by a very healthy 2.9% and the CAC by 2.6%. There were great numbers from Aldermore – up 10% – profits up 112% with encouraging lending to SMES and domestic mortgages. Hays also did not disappoint, with Playtech, Evraz and Amec posting acceptable efforts.


The next hurdle markets have to negotiate is the Jackson Hole meeting of Central bankers this weekend. Richard Fischer is likely to play down the necessity of a rate rise by the FED next months and many suspect that Mark Carney, who speaks on Saturday will have similar misgivings towards guarantying a symbolic rate rise in January. My good friend and Panmure’s excellent economist, Simon French, believes that instead of raising rates, both Central banks probably should cut back on their respective bond buying facilities. It could prove to be more effective way of achieving their goals. It is an unorthodox approach and almost certainly won’t be adopted. Next month £17 billion of Gilts mature. The BoE will definitely reinvest. Simon would argue the BOE would be better placed to start tapering back re-investments – say 50% of each maturity – and sterilising the redemptions. He makes a very good point!




US companies posting interim results – Thursday – FRED’S, DOLLAR GENERAL, AEROPOSTALE, SMITH & WESSON, Friday – BIG LOTS.


Economic data –  Thursday – US GDP& JOBLESS CLAIMS


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