TODAY’S FAYRE – Sunday, 13th September 2015
“Now mind is clear
as a cloudless sky.
Time then to make a
home in wilderness.
What have I done but
wander with my eyes
in the trees? So I
will build: wife,
family, and seek
perish of lonesomeness
or want of food or
lightning or the bear
(must tame the hart
and wear the bear).
And maybe make an image
of my wandering, a little
image—shrine by the
roadside to signify
to traveler that I live
here in the wilderness
awake and at home.
Allen Ginsberg – poet – 1926-1997
I remember a fascinating conversation a few years ago when Roy Hattersley told John Humphrys in a Radio 4 interview that UK politics were only fun when it was ‘Right’ v ‘Left.’ Then its unequivocal; none of this wishy-washy’ centre ground nonsense. It is all about conviction politics. For the avoidance of doubt not a hair’s breadth of ambiguity! I think he was right. In the wake of Sadiq Khan’s clinical destruction of Dame Tessa Jowell’s aspirations to become Mayor of London, came a unanimous endorsement for Jeremy Corbyn (59.5% of votes cast!) to lead Labour towards the next General Election.
If a push comes to a shove, I think Jeremy Corbyn may not really want to become a Labour PM. I think he just wants to change Labour’s agenda – more nationalisation, state control, less influence from America and a total redistribution of wealth. Oh yes and he wants the cost of climate change to head off the ‘Richter scale’ and for the UK to take in hundreds of thousands of refugees! All laudable policies, but they won’t work though it will be fun watching his manifesto unfold. In the event of achieving his goal of changing Labour’s culture, I think Corbyn will hand over to someone like David Miliband, who could water down such draconian policies, which are far from pragmatic, and perhaps lead Labour in to an election with some plausible policies. We shall see!
I was enormously grateful to Panmure’s CEO, Phillip Wale for allowing me to accept an invitation to BGC’S Charity day. I was totally overwhelmed by the warm reception I received. It is marvellous how over the past 14 years the day has changed from one of mourning, reflection and help to a day of celebration for those people and their charities that are less fortunate than most of us. Whatever the detractors, cynics and critics say, the City of London is an immensely generous place. Thank you to those trading in banks for lightening the burden of those who suffer! Of course those that perished in the World Trade Center will never be forgotten.
Last week was yet another one of frustrating indecision and seismic volatility. Most major indices ended the week above the Plimsoll line even the Shanghai Composite burst through – up 1.3% on the week, with policy makers pledging further stimulus measures if required. Considering all the imponderables mentioned, it was somewhat surprising that the S&P was up 2.07%, the FTSE by 1.45%, European stocks by an average of 0.61% and the Nikkei by 2.65% – the latter’s rally was down to a 7.71% burst on Wednesday triggered by another wave of enigmatic and nonsense Abenomics and a 3.3% cut in corporation tax.
Until the outcome of next Thursday’s FOMC meeting, markets are likely to remain on ‘high-alert’ or in ‘high dudgeon.’ A decision on rates remains 50-50. Certainly the U.S. Labor data provides Janet Yellen’s committee members with more than a little encouragement to make that 25 basis point symbolic jump in to the unknown. However international issues suggest further reflection and that playing a waiting game might be more prudent. Anyway let’s not forget that a year’s vacillation by the FED and to a lesser degree the MPC has damaged the confidence of emerging nations strengthening the Dollar unnecessarily as well as allowing China to fill its boots with ludicrously cheap dollars (in terms of cost) which its banks have lent indiscriminately, often to buy equities, making them vulnerable in terms of a possible credit crisis. The supporters of ‘forward guidance’ are certainly diminishing, with many believing that the process is counter-productive.
In the UK on Thursday the MPC committee left rates at 0.5% for the 6th year and 5 months running, with just Ian McCafferty the only dissenting voice. He has wanted for some time to put rates up. The dissenting numbers are likely to swell their ranks before too long with Kirstin Forbes and Martin Weale likely to jump from the ‘No Change Ship!’ Mark Carney’ comments were more hawkish than many had expected, since the BOE has dropped GDP targets for the 3rd quarter from 0.7% to 0.6% and also manufacturing output was very disappointing as was the construction data. Governor Carney expects the trigger to be pulled early in 2016.
In the U.S. It wasn’t a significant week for earnings though on Friday the supermarket Kroger posted great numbers, triggering a 5.3% rise in its share price. This long-overdue global equity correction if that is what it is, has not dampened the enthusiasm there is for M&A activity, though IPO deals may be less prevalent until sentiment gets on the front foot. Actelion and ZS Pharma are in talks across the pond to merge their operations and there was a surprising deal confirmed in London by AMLIN that the Lloyd’s Insurance operator had agreed to be taken over by Mitsubishi Sumitomo Insurance for £3.5 billion – 670p a 35% premium. The UK’S Worldplay looks as though it might escape the clutches of Germany’ Wirecard and France’s Ingenico, by being brought to the market by Goldman, Morgan Stanley and BOAM in a £6.6 billion IPO – about £4 billion above the price RBS sold it off. The Sunday Times also informs us that Ibstock and CMC are also waiting in the wings for conditions to improve.
It was a big week for UK retail operators with Carphone Warehouse and Next producing great numbers. The same cannot be said particularly of Wm Morrison and of John Lewis/ Waitrose, who is the past have set the bar fairly high with high standards and great appeal to middle-England. NEXT, John Lewis and JD Wetherspoon expressed their concern about the ‘living-wage.’ Their respective costs will go up. Over 5 years it may cost NEXT £27 million, which will be passed on to the consumer. However Waitrose, as will other supermarkets, will be looking over their shoulder at Lidl and Aldi. Lidl intends to open 251 outlets within the M25 ASAP and both German retail juggernauts have aspirations to have 1500 outlets in the UK over the next 5 years. Retail war has been declared.
The long awaited resurgence of Williams & Glyn as a bank from the ashes of the Coop’s abortive deal to buy 314 branches from RBS/NatWest may take place as an IPO in the 2nd half of next year in £1.5 billion float on the arm of BOAM. CEO Jim Brown and CFO Leigh Bartlett have just taken up their appointment. This bank will have 1.4 million retail customers and about 200k small businesses. The bank will employ about 4000 people. In September 2013 the Corsair Consortium, led by Standard Chartered Bank’s former chairman and Labour minister, Lord Mervyn Davies, agreed to by the 314 branches, beating a Andy Higginson consortium to the punch to the surprise of many onlookers. RBS was forced by the EU to sell these branches in 2008, as was Lloyd’s Banking Group forced to create TSB, which was recently bought by Banco Sabadell.
UK companies posting interim results – Monday – ESCHER GROUP, Tuesday – KINGFISHER, OCADO (TS), Wednesday – JD SPORTS, IMAGINATION TECHNOLOGIES, Thursday – KIER GROUP, JUST RETIREMENT, PREMIER FARNELL, MERLIN ENTERTAINMENTS, INVESTEC, MANCHESTER UNITED, FRENCH CONNECTION, Friday – PETRA DIAMONDS
US companies posting results this week – Wednesday – ORACLE
Economic data – Monday – EU INDUSTRIAL PRODUCTION, Tuesday – EU CPI & BALANCE OF TRADE, Wednesday – US CRUDE OIL INVENTORIES, Thursday – FOMC, US RETAIL SALES, INITIAL JOBLESS CLAIMS, PHILI-FED INDEX, Friday – EU BALANCE OF PAYMENTS, US LEADING INDICATORS
David Buik – market commentator
Panmure Gordon & Co