TODAY’S FAYRE – Tuesday, 3rd November 2015
“My heart makes songs on lonely roads
To comfort me while you’re away,
And strives with lovely sounding words
Its crowded tenderness to say.
Glimmering against the forward dark,
Your face I see with pride, with pain
So that one time I did desire
Never to see that face again.
But I am glad that Love has come
To bind me fast and try my worth;
For Love’s a powerful Lord and gives
His friends dominion over the earth.”
Ivor Gurney – poet & composer – 1890-1937
Even for the uncommitted cricket should never be considered a turgid sport to watch. The purist or the aficionado would have enjoyed England’s fight back against Pakistan in an empty stadium in Sharjah yesterday. However with crowd enthusiasm or input it must be very difficult for the players to motivate themselves or for those avidly watching the game on television to remain enthusiastic!
The most interesting aspect concerning HSBC’S 3rd quarter results wasn’t the fact that profits were up 32% or down 14% after certain contingencies were allowed for (depending on how you viewed it!), it was the profitability figures of the various regions that captured my imagination – The Americas +15% to 51% dependent on the country – Asia, HSBC’S most dominant region down 4% and Europe down 44%. That data probably fuelled rumours that Messrs Flint and Gulliver were thinking about New York as an option for possible repatriation of head office. I have been known to have a tilt at the ring and I don’t think HSBC is going anywhere.
If Chancellor Osborne makes the necessary placatory noises in regards to bank levy charges and since Andrew Bailey has confirmed that a ‘ring-fenced’ bank can pass on dividends, there should be no need to move away from London. After all in terms of regulatory requirements New York is far more onerous and draconian in its requirements than London is!
As I said three weeks ago I was astonished that Porsche’s Matthias Muller was appointed CEO of VW. There was always a chance that Porsche and Audi would be directly or indirectly involved in the diesel saga. That appointment could never be transparent, however grand a pillar of society he was! Shares are down 4.4% this morning.
US ISM Manufacturing data gave equity markets some momentum on the Street of Dreams yesterday, as sentiment turned positive with healthcare, tech and energy stocks leading the charge. I know I am an old cynic and yes the DOW stuck its head above the Plimsoll line in to positive territory yesterday for the year, but these current market conditions are hardly going to set investors’ heart-a-racing! Maybe Friday’s non-farm payrolls will be stellar, giving the required and necessary ammunition for Janet Yellen and the FED to finally make a bold decision to raise rates symbolically by 25 basis points next month, rather than dangle the market on the end of a piece of string. I doubt that there will be any more increases for some months, if the FED does move in December. There is little doubt that the level of gargantuan M&A activity has been the greatest fillip to recent share market valuations. Visa’s acquisition of Visa Europe for $23.4 billion, ConAgra’s $2.7 billion bid for TreeHouse Foods and GE’s notification to buy Alstom energy operations for €9.7 billion provide plenty of ‘testament’ to that effect.
Visa confirmed its acquisition of Visa Europe for $23.4 billion. Visa paid €16.5 billion in cash and the rest in convertible loan stock. Visa Europe has 52% of the European market and together the joint venture will have access to over 500 million customers and what about the windfall beneficiaries! – Barclays £400m, RBS £200m, Lloyds £300m and HSBC £150m. Over 3000 companies will benefit. For the on-line games and consoles enthusiasts, Activision Blizzard, which has World of War Craft, Call of Duty and Diablo in its portfolio, agreed to pay $5.9 billion for King’s Digital (Candy Crush Saga), giving the joint venture access to 500,00 activists.
Asia, with Tokyo closed took it lead from New York and on the whole there was an air of cautious optimism. The ASX closed up 1.42% and the Shanghai Composite was down 0.3% with the Hang Seng +0.91% at lunchtime. Investors seem far from convinced that there is much more left in the tank this year unless there is further Central bank intervention.
The big news this morning was Standard Chartered’s results – very poor. Bill Winters, the CEO, ‘kitchen-sinked’ the statement, posting a loss for the quarter of $139 million against a profit of $1.5 billion last time. Impairment charges on Asian and Indian loans totalled $1.23 billion. 15,000 jobs could go in the next 3 years. 1700 people are employed in the UK. Many doubt many of them will be vulnerable. The shares were down 6.5% at 8.30am (SC represents about 1% of FTSE 100). AB Foods also disappointed with a 6% drop in adjusted profits with group revenue falling 1% to £12.8 billion. AB Foods are becoming increasingly reliant on Primark, which will be opening up another 20 stores. It feels as if the rest of the business is being consistently downsized. Imperial Tobacco and Direct Line posted solid efforts. Just Eat’s performance which saw a 64% growth in orders and a 48% increase in like for like sales due in some way to inclement summer weather conditions. Profit takers were in the ring taking the shares down 3.5% – rather unfairly so, I thought!
Finally UBS posted a 3rd quarter profit of CHF 2.1 billion. Included was a net tax benefit of CHF 1.295 billion related to revaluation of deferred taxes. Wealth Management and Investment banking (M&A) seem to be the juggernaut with a further CHF 3.5 billion being added to funds under management. CEO Sergio Ermotti said US Wealth management contributed $287 million. Investment banking contributed CHF 614 million to profits.
Monday – Tuesday – JUST EAT, JARDINE LLOYD THOMPSON, WEIR GROUP, STANDARD CHARTERED BANK, DIRECT LINE, AB FOODS, Wednesday – M&S, GLENCORE, VEDANTA, PERSIMMON, OLD MUTUAL, L&G, STAGECOACH, JD WETHERSPOON, Thursday – EASYJET, SPIRENT COMMUNICATIONS, CRODA, RSA, AMEC, TATE & LYLE, ASTRA ZENECA, SAB MILLER, HIKMA, RSA, JUST RETIREMENT, PARTNERSHIP, SCHRODERS, Friday – INMARSAT, 3iiis
US companies posting interim results – Tuesday – CIT, SPRINT, KELLOGG’S, HYATT, ZYNGA, GROUPON, Wednesday – MOTOROLA SOLUTIONS, WENDY’S, ALLERGAN, TIME WARNER, QUALCOMM, Thursday – METLIFE, MARATHON OIL, RALPH LAUREN, MOLSON COORS, PIXELWORKS, KRAFT- HEINZ, Friday – LIBERTY GLOBAL
ECONOMIC DATA – Tuesday – UK CONSTRUCTION PMI, Thursday – BOE MPC, INFLATION REPORT, Friday – US NON-FARM PAYROLL DATA & UK INDUSTRIAL PRODUCTION.
David Buik – market commentator
Panmure Gordon & Co