TODAY’S FAYRE – Tuesday, 14th October 2015
“Is this a dagger which I see before me,
The handle toward my hand?
Come, let me clutch thee.
I have thee not, and yet I see thee still.
To feeling as to sight? or art thou but
A dagger of the mind, a false creation,
Proceeding from the heat-oppressed brain?
I see thee yet, in form as palpable As this which now I draw.
Thou marshall’st me the way that I was going; And such an instrument I was to use.
Or else worth all the rest; I see thee still,
Which was not so before. There’s no such thing!”
William Shakespeare – poet & playwright – 1564-1616
It looks very warm in Abu Dhabi. Fielding for two days will sort the men out from the boys! In those condition Pakistan’s 286 for 4 is more than a decent start against Alistair Cook’s side. It is just as well that the controversial Saeed Ajmal is not playing, as to bat last on that dusty wicket against him would be quite a challenge. Maybe Pakistan will produce an unknown spinning wizard! In passing Rashid’s ‘leggers’ proved very expensive. Let’s hope he tightens up!
A compendium of negative reasons manifested themselves yesterday as to why markets were less than enthusiastic about their immediate future – Chinese trade data, impending 3rd quarter earnings in the US, whose quality may not be exhilarating, UK inflation dipping temporarily in to the deflationary zone (-0.1% in September), a future raft of Chinese economic data, much of which may not be very appetising and last but not least concern about bank credit exposure particularly to emerging countries. Of course and I nearly forgot Germany’s ZEW investor confidence index posted yesterday calculated by the ZEW economic institute sank 10.2 points to stand at just 1.9 points, its lowest level since October 2014.
So it was hardly surprising that the Street of Dreams seemed to have no more than a passing interest in the day’s trading, which saw the DOW fall by 0.29% during the session, dragging the S&P 500 down by 0.68% and the NASDAQ by 0.90%. Oil and commodity prices dipped apart from gold, which stuck its head above the parapet as a safe haven for nervous investors – £1174 an ounce. JP Morgan Chase, despite a 22% increase in profits fell short of expectations due to a slump in trading profits – shares down 1,71% in after-hours trading. Johnson & Johnson’s efforts were solid but hardly inspirational – shares down 0.51%. After the bell Intel beat expectations with headline numbers which saw EPS come in at 64 cents (EST 59 cents), though earnings slipped 6% – a profit of $3.1 billion on revenues of $14.5 billion. There would appear to be a strong switch in chip manufacturing away from PCs to smartphones, which won’t be a surprise, but clearly adversely affects Intel’s sales. After hours shares fell 2.78%.
At the time of writing Asian stocks reacted nervously and slightly negatively towards Chinese inflation data – CPI rose just 1.6% against expectations of 1.8% in September Y/O/Y, but PPI fell an alarming 5.9% in the same period thanks to sharp drop in food prices. The Chinese authorities need to step in with stimulus packages before too long. One wonders what China’s GDP, industrial production and retail sales data holds in store for us on Monday. We can guess GDP at say 6.6%. Would that be accurate? Many have their doubts. The ASX closed down 0.11%. The Nikkei was down 2.10% towards the close and the Shanghai Composite was down 0.72% and the Hang Seng by 0.82% at the time of writing. The recent news that Japan is lowering its economic outlook is not only dispiriting but suggests, not for the first time, that Abenomics is not working.
Yesterday the FTSE 100 closed down 29 points at 6342. Oil and some mining stocks were adversely affected. Barclays was also down 3%. I find it hard to believe that the proposed appointment of Jes Staley as CEO affected the share price that much. I think the sector is suffering on growth and credit concerns. Mr Staley comes with fine credentials, having been a successful risk manager at JPM. UK banks, with the exception of Barclays with the unpopular Bob Diamond at the helm, whose BarCap delivered between 40-60% of the bank’s profits for a decade, have been lousy at investment banking, which is very lucrative. We must have a strong footprint here in London, if this centre is to maintain is credence and credibility.
Just look at the $3 billion which could be shared out amongst professional and financial advisors over a successful outcome to the AB InBev acquisition of SAB Miller! Regulators could well make this deal a hard one to consummate. Barclays have a strong presence in investment banking in New York and it seems silly to throw the baby out with the bath water. One can understand the concerns of Messrs Osborne, Tyrie, Dampier and Mann; their outrage is obvious. However given sensible conservative guidelines, this appointment would be bold, innovative and sensible.
Worldpay made a spectacular IPO debut in conditional trading which saw the shares rally from 240p to 265p. Philip Jansen, the CEO walked out of the ring with £50 million and the 4300 staff were given shares worth £6000. This payment operator was a distressed sale to Bain and Advent for £2 billion by RBS in 2010. Unconditional trading starts on Friday 16th September. Hargreaves Lansdown’s profits were up 11% at £70 million. The stockbroker attracted 24,000 new customers and attracted £1.46 billion of new business. Shares are expected to rise 2% this morning. What a huge success story this operation is!
UK companies posting number – N BROWN, FRESNILLO, HARGREAVES LANSDOWN, DOMINO PIZZA, Thursday – WH SMITH, BURBERRY, RANK ORGANISATION, BOOKER, MAN GROUP, UNILEVER (TS), RIO TINTO (TS), VIRGIN MONEY, Friday – EVRAZ
U.S. companies posting interim results – Wednesday – BANK OF AMERICA MERRILL, WELLS FARGO, DELTA AIRLINES, GOOGLE XILINX, NETFLIX, Thursday – PHILIP MORRIS, CITIGROUP, UNITEDHEALTH, GOLDMAN SACHS, BLACKSTONE, US BANCORP, MATTEL, and SCHLUMBERGER
ECONOMIC DATA – Wednesday – EU Industrial Production, US Beige Book, UK Employment data, Thursday – US CPI and Initial Jobless Claims, Friday – US Industrial Production.
David Buik – market commentator
Panmure Gordon & Co