TODAY’S FAYRE – Tuesday, 8th September 2015

 

“Summoned by conscious recollection,

she would be smiling, they might be in a kitchen talking,

before or after dinner. But they are in this other room,

The window has many small panes, and they are on a couch embracing.

He holds her as tightly as he can, she buries herself in his body.

Morning, maybe it is evening, light is flowing through the room.

 

Outside the day is slowly succeeded by night, succeeded by day.

The process wobbles wildly and accelerates: weeks, months, years.

The light in the room does not change, so it is plain what is happening.

They are trying to become one creature, and something will not have it.

They are tender with each other, afraid their brief,

sharp cries will reconcile them to the moment when they fall away again.

 

So they rub against each other, their mouths dry,

then wet, then dry. They feel themselves at the center of a powerful and baffled will.

They feel they are an almost animal washed up on the shore of a world–

or huddled up against the gate of a garden–

to which they can’t admit they can never be admitted.” 

 

Robert Haas – poet – 1941-​

 

I imagine all you ‘NETFLIX’ aficionados will know of ‘NARCOS’ – the new 10-part drama series about drug trafficking in Mexico. I am told that it is even more outrageous and exciting than ‘Breaking Bad.’ I’m not good at watching a drama on my iPad, so I will wait for the box set to be in circulation.  I am told that it is an absolute must! Even BBC’S Andrew Neil has been an avid viewer and finds the series irresistible!

Once the Labour party leadership has been decided on 12th September, politics will turn to the EU Referendum. UKIP’S Nigel Farage has already starting massing his troops and is happy to do business with Corbyn or the devil incarnate if it means a ‘No!’ vote will prevail.  I am a great fan of ‘Business for Britain’ and I suspect ‘Conservatives for Britain’ and particularly Steve Baker, will make themselves heard.  However all the ‘anti-factions’ still lack a standard bearer with political clout! However the movement is in dire need of coordination.  This ‘headless chicken’ problem will need to be addressed sooner rather than later if the ’YES!’ Brigade led by the PM and Chancellor, prevent a proper debate. I was delighted to hear that the House of Commons insisted yesterday on holding the Government accountable on the procedure for the EU referendum. I know the Mail/Sky poll implied a slim ‘No!’ majority, but the ‘Yes!’ campaign are very much better organised.

 

Yesterday Chinese markets returned from their 72-hour break with some expecting less volatile trading conditions than had been experienced in the previous two weeks.  It was not to be.  It was another very volatile session with the Shanghai Composite and the Hang Seng bobbing up and below the Plimsoll line like a cork in a bath to finish down 2.52% and 1.23% respectively. The Nikkei closed up 0.38% having surrendered 7% the previous week. There were plenty of supporters for the Chinese economy from George Osborne to many economists and fund managers, who to date had been rather somnolent, who suddenly popped their heads above the parapet suggesting China’s economic plight was nothing like as bad as some had made out.  We shall require some evidence that growth has not fallen much below 6.6% and some confirmation as to the devaluation plans for the Yuan before investors’ confidence returns.  The Shanghai Composite has dropped 44% in the last 2.5 months but still remains 35% above where it was a year ago. There is little doubt that the Chinese authorities have been burning through cash reserves in the past couple of months and the banking sector must have real credit issues. This morning there was discouraging trade figures though the trade surplus widened last month from $40.6 billion in July to $60.2 billion. Year-on-year imports fell by 13.8% and exports by 5.5%.

 

This morning China’s data was interpreted as discouraging and the Shanghai Composite was down 1.3%. However in the last hour it has risen like the proverbial grilse – up 2.9% as I write, with the Hang Seng 0.71% to the good. The Nikkei closed down 2.39%. US futures are expected to open up an average of 0.5%.

Yesterday was Labor Day; so market activity was somewhat curtailed with the FTSE DAX and CAC consequently only made modest progress with the DAX adding 0.5% and the CAC 0.4%. The FTSE was 31 points to the good at 6074, despite manufacturing growth forecast for 2015 in the UK being cut from 1.5% to 0.7%. Glencore’s initiatives gave the market its early impetus, in announcing the sale of assets, cutting its debt by a third to about $20 billion and injecting capital of some $2.5 billion and slashing the dividend. The Euphoria was short-lived after the initial 13% gain to close 7% up on the session. AB Food’s trading statement had its indigestible pieces in the corner of its sardine tin. Sugar sadly is not a vogue product and currency fluctuations may cost as much as $30 million this year. However Primark continues to thrive and on Thursday a store opens in the USA with another 6 to follow. Let’s hope Primark has learned from mistakes made by M&S and Tesco in the past. Zara and H&M have been far more on the mark. AB Foods shares fell 0.8% on the day. Tesco finally served notice to sell its South Korean operation for £4.2 billion to MBK Partners and an array of pension funds. We also await further details of Wm Morrison’s sale of its convenient stores to Greybull Capital for between £30 and £50 million.

 

This morning RSA, due to be taken over by Zurich announced the sale of its South American business for £400 million. Mitsui Sumitomo Insurance bid 670p a share cash for AMLIN PLC – a 35% premium to last night’s closing price! There are still great deals out there! Slightly disappointing 2nd quarter sales figures from Whitbread may see its shares down 2.5% this morning. There were encouraging performances from Hilton Foods, McBride, Redrow and Ashmore, though funds under management for emerging markets have dropped from $75 billion to $58.9 billion. BP’s chairman, Carl-Henric Svanberg, bought 1 million shares yesterday at 343p. This purchase coincided and unconnected with UBS upgrading the stock as a ‘BUY!’ There is still some potentially very lucrative business within the drug sector as Shield Pharmaceuticals and Faron Pharmaceuticals both ‘gear up’ for IPOS. Hikma has announced intentions to buy 98% of an Egypt0ian operation.

UK companies posting interim results – ASHMORE GROUP, REDROW, HILTON FOODS, WHITBREAD (TS), BERKELEY GROUP (TS), Wednesday – MONITISE, BARRATT DEVELOPMENT, SPORTS DIRECT,, Thursday – HARGREAVES LANSDOWN, NEXT, WM MORRISON, HOME, RETAIL (TS), DARTY (TS), DIXONS CARPHONE (TS), Friday – JD WETHERSPOON. US companies posting results this week – Tuesday – KORN/FERRY, MEN’S WEARHOUSE, Wednesday – BARNES & NOBLE, KRISPY-KREME, Thursday – PEAK RESORTS, Friday – KROGER Economic data – Tuesday – BRC SALES, Wednesday – UK BALANCE OF TRADE, INDUSTRIAL PRODUCTION & MANUFACTURING OUTPUT, – Thursday BOE MPC MEETING

David Buik – market commentator

Panmure Gordon & Co

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