TODAY’S FAYRE – Wednesday, 4th November 2015
“0, in a world of men and women,
Where all things seemed so strange to me,
And speech the common world called human
For me was a vain mimicry,
I thought-O, am I one in sorrow ?
Or is the world more quick to hide
Their pain with raiment that they borrow
From pleasure in the house of pride?
O joy of mine, 0 longed-for stranger,
How I would greet you if you came:
In the world’s joys I’ve been a ranger, I
n my world sorrow is their name.”
Isaac Rosenberg – poet & soldier – 1890-1918
More woes for VW! It transpires that some gas/petrol driven cars have emission issues as well. As many as 800,000 may have to be recalled costing VW another E2 billion. Shares were down 6.4% at the opening. This is going to be a long road to recovery!
It’s also a long road to recovery for Chelsea’s Jose Mourinho. Do I feel sorry for him? Absolutely not! However in the same breath anyone who underestimates him does so at his/her peril, provided of course, that Roman Abramovitch cuts him some slack!
In the past couple of weeks the world seems to have passed me by. Deep concern over the robustness of China’s economy was being expressed and many felt that the quality of earnings in the US might, overall, be a little suspect. This rather circumspect feeling has been contemptuously swept aside by the markets. All anyone sees now is roses and sunshine, with indices likely to push on! Why? Global growth, we are told, is on the march again, with any immediate possibility of recession now struck from the agenda. Decent ISM and PMI data shows that sustained progress is very likely. Even UK manufacturing, which was a cause for concern, rallied sharply last month with PMI jumping from 51.8 to 55.5. When I come to think of it, perhaps I am rather dopey in failing to remember that whenever there is ‘trouble-at-mill’ Central Bank QE or similar stimulus packages are never far away! The problem with QE is, when it is time to withdraw ‘the fix’, what will be damage to not only markets but also life! – A conundrum no one has the answer to. One factor that has become clear is that if the FED, after hopefully decent Non-Farm payroll data on Friday, symbolically raises rates by 25 basis points, markets look as if they will cope.
Yesterday saw a positive consolidation on the Street of Dreams with the DOW closing up 0.50%, the S&P 500 0.27% to the good and the NASDAQ +0.35% (record ‘HIGH’ March 2000). Again, on oil higher prices it was energy stocks and mining stocks that led the modest rally, with tech providing added interest. If one was looking for endorsement as to the strength of the US economy, look no further than October car sales, which were bumper. Cheap credit terms and constantly improving ‘labour data’ saw sales up 13.6% to 18.2 million vehicles sold last month – up from 16.6 million and the highest month since February 2000. GM was up 15.9%, Ford by 13.4%, Toyota by 13% and Fiat Chrysler by 14.7%. Car sales are certainly a great barometer.
The ASX closed just above the Plimsoll line – +0.06% and the NIKKEI, after a tumultuous IPO debut for Japan Post, its bank and insurance arms, all of whom commanded at least a 15% premium on the first day of dealing. This is largest IPO this year valued at $12 billion and it is interesting to note that some assets totaling Y1.7 trillion may find themselves leaving the bond market and heading for equities.
European gains were extensive yesterday and but for Standard Chartered losing 6.67% to 666p, having been down 9.9% at one time, banks and consequently the FTSE would have given a greater account of itself. As it was it was left to BP, Shell and some of the mining stocks to do the donkey work. Standard Chartered shares stood at £19.00 5 years ago. How are the mighty fallen! This bank will be glad of Bill Winter’s management skills. AB InBev have agreed an extension to confirming its acquisition of SAB Miller in a £325 billion deal until 11th November, having agreed the financing and due diligence.
This morning Persimmon posted a decent update. These shares have risen 528% in the last 5 years! There was what amounted to a profits warning from JD Wetherspoon – shares down 4.5% at 8.35am. Stagecoach, L&G and Old Mutual look to have satisfied their acolytes this morning. Now finally to M&S. I think I am one of the few on this planet who was underwhelmed by these numbers. Only twice in its history has M&S made £1 billion pre-tax profit – 1997 and 2007, when Stuart Rose was at the helm. This parsimonious effort of £284 million, which did beat estimates – up 6% on last time in isolation is good. The business looks to me as if it is being downsized. There are signs of shops being laid out better and they are becoming more user friendly. £59.5 of shares were bought back by the company, part of £150 million agreed in principle in May and the dividend was increased by 6.3%. So as a business it is being properly nursed through troubled waters. It needed to be as the sales are very disappointing – General Merchandise like for like sales down 1.2% in the last quarter and down 1.9% in the last six months. That is not good. The food as we know is great but with no inflation the sales are tolerable in the last quarter – +3.3% and just +0.2% on a like for like basis. The fashions are dowdy and rumours that M&S may buy Jaeger and or The White Company made not be a bad idea. My chum Charlie Newsome at Investec insists M&S is under owned and is a decent turnaround story. Some risks but valuation reflects these issues. To date with shares up nearly 14% in the last year, as an investor you have every reason to believe he has a point. CEO Marc Bolland has been there for nearly 6 years and should have done better with the brand than he has. They called Bill Clinton ‘Teflon Bill’. There is a strong case for ‘Teflon Marc.’ His personal PR is second to none. I think he should go, let alone sign a new contract.
Monday – 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 – 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 – Thursday – BOE MPC, INFLATION REPORT, Friday – US NON-FARM PAYROLL DATA & UK INDUSTRIAL PRODUCTION.
David Buik – market commentator
Panmure Gordon & Co