TODAY’S FAYRE – markets, Lloyds & Glencore

TODAY’S FAYRE – Tuesday, 6th October 2015

 

 “Two loves I have of comfort and despair,

Which like two spirits do suggest me still:

The better angel is a man right fair,

The worser spirit a woman colour’d ill.

To win me soon to hell, my female evil

Tempteth my better angel from my side,

And would corrupt my saint to be a devil,

Wooing his purity with her foul pride.

And whether that my angel be turn’d fiend

Suspect I may, but not directly tell;

But being both from me, both to each friend,

I guess one angel in another’s hell:

Yet this shall I ne’er know, but live in doubt,

Till my bad angel fire my good one out.”

 Sonnet 144

 

William Shakespeare – poet & playwright – 1564-1616

 

 ‘Teddy Ferrara’ is a play currently being produced at the Donmar about the lives and times of students on an American University campus focusing on its ‘gay’ community and the aspirations of ‘Gabe’ and other contenders wishing to be chairman of the LGBT Students Group. Gabe has one eye on a future in politics and one eye on Drew, the editor of the university newspaper. This play is brilliantly acted but frankly the sex, which on this occasion happened to be ‘gay’ but could ordinarily have been hetero, was a little too prolific, ‘full-on’ and graphic for my catholic tastes. Sadly this play classically depicts the promiscuity that prevails in the world today!

This play is directed by former Royal Court Artistic Director Cooke. The cast comprises Nancy Crane, Oliver Johnstone, Kadiff Kirwan, Ryan McParland, Matthew Marsh, Anjli Mohindra, Luke Newberry, Pamela Nomvete and Nathan Wiley – none of whom I have ever heard of, but suspect I will in the future. If you like being shocked, you need to see this!

 

Denis Healey, who died a few days ago, aged 98, was a neighbour of mine in Highgate. His political views were never in synch with his life style. 60 years ago he was MP for a Leeds constituency, who, whilst in opposition used to write a lively column on alternate Sundays with Randolph Churchill in the News of the World. He was always delightful company, with his family always making a cheerful and constructive contribution to community life. He enjoyed a decent glass of claret; so he had to be a man going places! RIP!

 

It appears to me that Chancellor Osborne is now overseeing the economy, welfare, the EU Referendum and defence. Is there anything left for the PM and his Cabinet to look after? You could say a man going places. I do wish the Conservatives did not have such a cruel stance over tax credits for the very needy. Yes, it is important that people should stand on their own two feet, but there is a limit!

 

All I can say is that I am glad to be a commentator in this existing climate of turmoil, rather than a trader or broker. These current conditions are incomprehensible. Yesterday, the indifferent US payroll data gave investors an excuse to either back the truck up or buy some index based futures. With Shanghai closed until Thursday, the Composite and the Chinese economy became a temporary irrelevance, even though it looks as though the TPP trade agreement could actually happen, even though the level of bureaucracy could weigh heavily on negotiators’ minds. So Sydney, Hong Kong and Tokyo girded up their loins again allowing the ASX to close up 0.33% and the NIKKEI up by 0.66%, with the Hang Seng down 0.47% at lunch time, but nearly 8% up over the last four sessions.

 

These sessions followed another gangbuster trading day in New York, which saw the DOW wheel in 1.85%, the S&P 1.83% and the NASDAQ an acceptable 1.56%. Confirmation of Jack Dorsey being appointed CEO of Twitter saw the shares rally 7%. There were also strong performances from GE +5.3%, Caterpillar +5.3% and Cisco +4.2%. News of a possible IPO of Ferrari cocked a few eyebrows, some believing the timing may be less than perfect with Chinese and other Asian appetites perhaps being not quite as voracious for luxury goods as perhaps they were a few months ago. We were also amused that the World Bank has downgraded Chinese growth for 2015 from 7.1% to 6.9% – in their dreams, I suspect. Try 4% for size!

 

From the platform of the Manchester Conference centre Chancellor Osborne announced the sale of £2 billion Lloyds Banking Group shares at a 5% discount and a one for 10 bonus script issue to retail investors for up to £1000 and £200 of bonus shares in the spring of 2016. We knew this was coming in the Budget. It sounds as if generosity killed the cat. But let’s face it, we, the taxpayer, own these shares. Currently Lloyds’s share price is above breakeven 73p – currently 77.5p. If that were to be the case next year, a 10% discount to current market value and a script issue would be a serious hand out – far better than just a few scraps from Lazarus’s table currently on offer. To date Morgan Stanley has done a great job dribbling stock out on behalf of UKFI. The taxpayer only owns 11.98% of the ‘Black Horse!’ down from 24% a year ago. It should not be forgotten that a hangover in banking stocks prevails and let’s remember that £40 billion of RBS shares could come roaring up on the horizon, hastily waiting to be ditched by UKFI. This will require sensitive and deft handling in the wake of tougher regulatory requirements for banks as well as more PPI payments!

 

Rolls Royce served notice to dump another 400 people from its marine engine division on top of 600 let go a few weeks ago. The market likes the idea of blood running down factory floors in Derby or wherever as Warren East, the CEO starts flexing his muscles whilst making his presence felt. It was confirmed that BP had agreed a full and final settlement of another $20 billion for the ‘Macondo’ disaster. This will make a total settlement of $53 billion. Ironically, BP was downgraded by S&P last night. I remain wholly underwhelmed by the manner the US authorities have dealt with this issue. A special relationship with the UK – the US jests! Glencore’s shares rallied initially by 21% on the back of baseless takeover rumours and a feeling that banking covenants and the servicing of its debt were in hand, before setting up 9.8%. The purchase of shares by CEO Glasenberg and possibly Chairman Hayward last month will have been seen as positive.

 

Yesterday Ryanair announced passenger levels had increased by 12% last month with a load factor of 94%. This morning easyJet’s response was an increase in September of 7.6% with an increased load factor of 93.3%. Ted Baker announced sales were up 25% in the last quarter – shares up 1.5% at the time of writing. Greggs, the makers of the best sausage rolls in the world saw sales up 5% and its shares rallied 4%. With a view to greater transparency, SAB Miller posted an early trading statement ahead of a possible takeover by AB InBev. Sales were up 2% in the last quarter but taking in to account foreign exchange gyrations they were down 9% – share drifted by 2.3%. There seems to be a bit of indigestion in the market post some substantial recent gains. At 9.05am the FTSE 100 was down 35 points at 6260. Alcoa posts 3rd quarter results on Friday. It is expected that 3rd quarter US earnings may be 5% lower than in the same period in 2014. Next week the floodgates start to open. These earnings could well have a considerable bearing on the stock market’s performance heading towards Christmas.

 

UK companies posting number – Tuesday – TED BAKER, GREGGS, ROBERT WALTERS, Wednesday – TESCO, Thursday – HAYS, DUNELM, TATE & LYLE, MONDO, CARILLION, CENTAMIN, DOMINO PIZZAS, Friday – XPOWER and VEDANTA RESOURCES.

U.S. Companies posting interim results – Tuesday – PEPSICO, Wednesday – YUM BRANDS!, MONSANTO, CONSTELLATION BRANDS, Thursday – ALCOA, RUBY TUESDAY

 

ECONOMIC DATA – Tuesday – EU PMI RETAIL, Wednesday – UK MANUFACTURING & INDUSTRIAL PRODUCTION, Thursday – MPC, Friday – UK BALANCE OF TRADE

 

David Buik – market commentator

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