TODAY’S FAYRE – Tuesday, 27th October 2015
“When we two parted In silence and tears,
Half broken-hearted To sever for years,
Pale grew thy cheek and cold, Colder thy kiss;
Truly that hour foretold Sorrow to this.
The dew of the morning Sunk chill on my brow–
It felt like the warning Of what I feel now.
Thy vows are all broken, And light is thy fame;
I hear thy name spoken, And share in its shame.
They name thee before me,
A knell to mine ear; A shrudder comes o’er me–
Why wert thou so dear?
They know not I knew thee,
Who knew thee so well–
Long, long I shall rue thee,
Too deeply to tell.
In secret we met–
In silence I grieve,
That thy heart could forget,
Thy spirit deceive If I should meet thee
After long years,
How should I greet thee?–
With silence and tears.
George Gordon, Lord Byron – poet – 1788 – 1824
So unsurprisingly the Government’s tax credit legislation failed to get through the House of Lords, which will have ruffled the Chancellor’s feathers. No doubt Mr Osborne will vent his spleen on the upper house. Frankly it is dispiriting if George Osborne cannot see that for the poor and under privileged it is a visceral and cruel levy. If the UK needs to cut the debt by £16 billion a year, so be it. Try elsewhere; cut public expenditure in other departments or raise some taxation. It is high time that the NHS stopped being a political football and became a service for the common cause. Its ridiculous employment and salary structure for management is, currently I am told, protected by the NHS trusts under law from government scrutiny and interference. This is nonsense and everyone knows it! The number of people/administrators earning between £100k and £500k in the NHS, who bring very little to the party, is proportionately ridiculous. Doctors and nurses at the lower end of the scale do not get a fair crack at the whip. How the government can raise the threshold for inheritance tax, when the poor are being disenfranchised escapes me and that comment comes from a true Conservative.
Monday came and went rather unspectacularly. With Thursday’s and Friday’s Euphoria having been duly inhaled by investors and fund managers, the rest of us were left to deal with the toxic fumes of uncertainty associated with the doubtful quality of the 3rd quarter earnings season. In Europe the cream was skimmed off yesterday, with the FTSE 100 losing a mere bagatelle – 27 points to 6417. The day was all about TalkTalk and a further 12% loss in its share price, though a 15 year old hacker is alleged to have been apprehended. The atmosphere on the Street of Dreams was somnolent with the DOW easing by 0.13%, the S&P by 0.19%, though the NASDAQ staying just above the Plimsoll line at +0.06%. Xerox’s results did not impress and house builders including DR Horton, Lennar, Toll Brothers and Pulte were also under the cosh losing between 2-3%. Valeant, the Canadian drug company shed another 3%. The market is understood to be calling for a probe in ‘short-selling’ activity. It was confirmed that ICE is to buy Interactive Data Corporation for $5.2 billion. Apple is the most interesting as well as the most influential company to report earnings today. After stellar earnings last quarter can the iPhone sales maintain the same momentum? The FED starts its two-day meeting tomorrow, but I doubt we will be any the wiser as to when rates go up. With what is going on around the world it is hard to believe that a hike will be implemented before January 2016.
Asia enjoyed a lack-lustre performance thanks to concern about earnings and pre-FED neurosis ahead of tomorrow’s 2-day meeting. The mood in Asia this morning was not dissimilar with the ASX closing down -0.03% and the NIKKEI was 0.90% at the time of writing. At lunch the Shanghai Composite and the Hang Seng were easier – down 0.78% and 0.31% respectively, but recovered to stick their noses above the water line towards the close. The two successful IPOS – China Re and Japan Post ($11.9 billion) failed to trigger much in the way of a follow through.
Sir Martin Sorrell, WPP’S CEO made eye-catching comments on the back its recent set of numbers, which were decent – an increase in like for like revenues of 4.2%, though in the UK they only rallied by a marginally disappointing 1.1%. In my humble opinion Sir Martin is a brilliantly accurate barometer of economic activity. Why? Well, WPP is the largest advertising/PR agency with over 120 affiliated companies on a global basis, which include JWT, Y&R, Hill & Knowlton, Grey, Ogilvie and Mather.
Yesterday Sir Martin was not as ebullient about the outlook for global growth as many hoped he might be – down from 3.5% to 3% in his estimation. The US and Germany had performed well. The UK was far from ‘gung-ho’ on corporate expenditure. There were signs of anxiety in BRIC countries apart from India and some encouraging comments about China. The shares fell 2.2% to 1448. In the past 5 years shares have rallied from £8 to 1448p.
Considering oil prices fell by 40% in the last year and bearing in mind that BP may have a full and final settlement with the US authorities of $53 billion (outrageous behaviour by US government, this oil magnates figures were better than expected. Revenues fell from $98.4 billion this time last year to $55.9 billion – better than expected. The profit was $1.8 billion against expectations of $1.3 billion ($3 billion a year ago). Capital expenditure is understandably down to $19 billion in 2015 against expectations of £24-26 billion. BP intends to divest itself of another $10 billion of assets. The partnership with Rosneft gleaned a profit of $382 million against $110 million in 2014. BP intends to maintain its dividend policy.
This morning St James Place posted record profits and funds under management. Funds under management total £54.5 billion up from £49.1 billion. Bloomsbury Publishing saw profits increase from £1.7 million to £1.9 million. This company gets its publicity on the back of Harry Potter, but well done them. Sales were up 45% thanks to children’s and cook book sales. 3rd quarter GDP for UK due to be announced today – down from 0.7% to 0.5-6% – for the year 2.4%. We are too reliant on the service sector for contributions.
We hear from Apple and Alibaba tonight with their interim results. These results are key, as we wait for the rest of the week’s earnings, which could be patchy. BASF in Germany was a disappointment. I won’t be surprised if we see a modest slide in equity values during the week. Apple may be pivotal.
UK companies posting numbers – Tuesday – BP, WILLIS GROUP, BLOOMSBURY (TS), St JAMES’S PLACE (TS), Wednesday – LLOYDS BANKING GROUP, C&C GROUP, BAT (TS), NEXT, ANTOFAGASTA (TS), STANDARD LIFE, GSK, Thursday – BARCLAYS, BT, AVIVA, ROYAL DUTCH SHELL, SMITH & NEPHEW, HENDERSON GROUP, NATIONAL EXPRESS, Friday IAG, RBS, BG, PETS-AT-HOME, MYLAN, AON – Monday 2nd November – HSBC BANK
U.S. companies posting interim results – Tuesday – ALIBABA, FORD, COACH, MERCK, JETBLUE, PFIZER, BMS, FIDELITY, APPLE, Wednesday – PAYPAL, VALERO ENERGY, HERSHEY, STARWOOD HOTELS, BOSTON SCIENTIFIC, NORTHROP GRUMMAN, MARRIOTT, AMGEN, Thursday – AETNA, GOODYEAR, BUNGE, PITNEY-BOWES, MASTERCARD, EXPEDIA, INKEDIN, STARBUCKS, Friday – EXXON MOBIL, CHEVRON, BRINKS
ECONOMIC DATA – Tuesday – US CONSUMER CONFIDENCE, UK PRELIMINARY GDP, Wednesday – FOMC MEETING, US OIL INVENTORIES, Thursday – US INITIAL JOBLESS CLAIMS, Friday – EU JOBLESS RATE, UK CONSUMER CONFIDENCE
David Buik – market commentator
Panmure Gordon & Co