TODAY’S FAYRE – Sunday, 15th November 2015
“Fight the good fight with all thy might;
Christ is thy Strength, and Christ thy Right;
Lay hold on life, and it shall be
Thy joy and crown eternally.
Run the straight race through God’s good grace,
Lift up thine eyes, and seek His face;
Life with its way before us lies,
Christ is the Path, and Christ the Prize.
Cast care aside, upon thy Guide,
Lean, and His mercy will provide;
Lean, and the trusting soul shall prove
Christ is its Life, and Christ its Love.
Faint not nor fear, His arms are near,
He changeth not, and thou art dear.
Only believe, and thou shalt see
That Christ is all in all to thee.”
Rev. John Monsell – lyricist & vicar – 1811-1875
The terrible devastation at the hands of barbaric and inhumane terrorists in Paris on Friday night, when over 130 people lost their lives with over 200 badly injured, brought back of all the horrors of 9/11! We all constantly need reminding what an incredibly treacherous world we live in. Is there any where safe from religious fanatics anymore?
It is not unreasonable to think that after 2,731 people lost their lives in the World Trade Center & the Pentagon, including 721 from Cantor Fitzgerald/Eurobrokers that society might have learned something as a result of such atrocities. Sadly the situation threatens to get even worse. In regards to Europe one suspects that there needs to be a full review on immigration and border controls. In the wake of the numerous harrowing pictures and television footage, the outlook for the future looks very daunting. It has to be nil desperandum – decency must prevail.
Every now and again one is lucky enough to hear a wonderful nugget of entertainment on the BBC’S Today Programme, which one rarely hears elsewhere. Such was the case last Thursday, when Jim Naughtie interviewed Alan Bennett, who wrote the script for the play and forthcoming film of ‘The Lady in the Van’, starring Dame Maggie Smith and many young thespians, who cut their acting teeth on the ‘History Boys’ branding iron. I could listen to Alan Bennett all day, as a raconteur of tales and stories, with his earthy wit and humour. He may be 80, but he has all his marbles and more! The interview was 10 brilliant minutes!
The reason why all this is of special interest to me, is that, 40 years ago, my back garden backed on to Alan Bennett’s in Gloucester Crescent, where the ‘van’ was parked. I remember the old lady vividly, as I remember Alan Bennet riding his tatty old bicycle around Camden Town, clips and all, needless to say with no hat!
It was an utterly dispiriting week for equities, with most of the main indices either side of the pond losing about 3% in value! Why? There was no measurable good news on the horizon. Crude oil prices fell sharply, commodity prices show little sign of rising like the Phoenix from the ashes, thanks to China’s economy showing little inclination to come out of neutral. As I flagged up on Friday, courtesy of my Guv’nor Phillip Wale’s observation, which the Times’s Robin Pagnamenta latched on to in his Saturday article, the Bloomberg Commodity index has fallen from its high in 2008 at 238.7 down to 82.07 on Friday. One suspects that 120 is about break even for metal prices. That does not augur at all well for mining stocks and in particular LONMIN, currently struggling to attract funds for a $400 million rights issue. Lonmin’s share’s closed at 9.55p, having been at £12.5 years ago. Sadly after quite a rally 2 weeks ago Glencore’s share priced dropped below the £1 threshold. There were added concerns about global growth, indices, which looked too rich and most of all that imponderable – the fear created by the threat of higher US interest rates.
Governor Mark Carney looks to have the makings of just as serious a politician as he aspires to be as a Central banker. He’s obviously gearing himself up to take Justin Trudeau on in the next Canadian Prime Ministerial contents. He attended with other luminaries such as Mario Draghi The BOE Open forum, masterminded by Andy Haldane, at the Guildhall last week and suggested that the regulator was not yet ready to ‘hug a banker’. However it was an opportunity to wean the public back into a relationship with the banks, who are still held in wholesale contempt. The fact several people from Barclays and Deutsche Bank are being charged with Euribor rate rigging, gave the BOE added ammunition that banks are still in remission. If found guilty, no doubt, these alleged transgressors will suffer in a similar manner as Tom Hayes did, particularly if Tracey McDermott brings any of her uncompromising influence to bear. However the BOE needs to listen to the exhortations of Barclays’ John McFarlane to make sure that the EU regulators don’t ease London out from being the world’s largest and most influential financial centres with unnecessarily draconian financial regulation and onerous taxation measures. I also noticed that HSBC Bank will be beefing up its board by appointing Paul Walsh (ex-Diageo) and Axa’s Henri de Castries as board aficionados. Another concern for the BOE is mortgage lending. There will soon be greater competition that just the banking sector. It is expected that funds for mortgagees and those requiring car loans will soon be readily available from peer-to-lenders. One must hope that this facility is properly regulated.
As to the equity markets in brief last week, it was the energy and mining sectors that took both Wall Street and the FTSE 100 lower. Brent oil fell by 8% last week and the likes of copper was down by over 3% to its lowest level since 2009. Retail had a bad week in the US, with Macy’s and Nordstrom both losing double digit value on the week. Retail is so important in the US that we must hope that Thanksgiving records a measurable improvement in consumer sentiment in 10 days’ time. The US futures market indicates that there is a 70% chance of a 25 basis point increase in interest rates come December.
Here in old Blighty J Sainsbury and Rolls Royce were meted out some deserved visceral treatment. It took a while for investors to see through Sainsbury’s rather flimsy PR in terms of a recovery plan with its shares falling 12% on the week. The fact that Aldi plans to open 93 new outlets and Lidl 78 will keep the existing supermarket moguls on their toes. As for Rolls Royce, Warren East the new CEO posted a 5th profit warning in 2 years, with profits next year probably likely to fall by £650 million. This brilliant brand is under the cosh and looks vulnerable as a takeover target. One can only assume that the PM and Sajid Javid are both on the case. RR’S factories in Derbyshire employ 21k people and it would be shameful if contingency plans were not in place. China and India, our new best friends, may well be able to assist and if not, no doubt Siemens is sitting in the wings, waiting to pounce. This brand and the quality of the engines must be protected with a solid and viable plan. The shares fell 22% on the week. Kingfisher and G4S both also eased by over 3% on the week. There was a small scrap of comfort for George Osborne last week thanks to the completion of the sale of £13 billion of Northern Rock mortgages to Cerebus of the US. The government’s debt reduction plan shows continued signs of wilting. Travel Lodge may be the subject of a £1.5 billion bid from Starwood Capital or Apollo Global Management. The fall in oil prices may put Shell’s acquisition of BG in danger, as Qatar sells a £1 billion stake.
Despite the downbeat feeling in equity markets there was plenty of continued M&A activity with AB InBev closing out on its £70 billion acquisition of SAB Miller, which will result in some competing breweries being sold, a huge redundancy plan and $1.5 billion cost cutting exercise. ICAP and Tullett are close to exchanging voice broking capabilities, which will be the domain of Tullett with technological trading platforms being ICAP’S responsibility. I think Michael Spencer has landed the spoils and few would be surprised if there wasn’t a logical tie up with the LSE in due course. Mylan abandoned in $27 billion acquisition of Perrigo, the M/S and ointment biotech. There was insufficient shareholder support. This news followed in the wake of Teva’s overtures for Mylan being rejected.
So what of the ramifications for Monday’s opening, after Friday’s atrocities in Paris? A return to recession in France cannot be ruled out, and in an attempt to avoid it, the ECB’s Mario Draghi will surely be forced to throw the QE book at the problem. Equity markets are not in great shape courtesy of comments mentioned at the start of this missive and the CAC would probably have fallen by 0.5% on Monday anyway, without the added ingredient of a terrorist attack on Friday. However I suspect that initially the CAC could fall by 2.5%, though I doubt it will fall by more and could end the day down just 1.5%. There is no comparison to 9/11, when the DOW fell by 7.1%. The attack on the World Trade Center took place in working hours and was the first of its kind; so panic set in very quickly, as it did after the bomb attack on London. Markets will have had time to reflect on this current barbaric attack. So investors and traders will have been given the opportunity of regaining some poise. Nonetheless what an awful world we live. Hence it becomes increasingly important to make sure that decency and humanitarian values prevail!
UK companies posting results – MAJESTIC WINE, TAYLOR WIMPEY, HALMA, COATS GROUP, Tuesday – ENTERPRISE INNS, ENTERTAINMENT ONE, BRITISH LAND, PADDY POWER, SARCO, Wednesday – UK MAIL, MONEYSUPERMARKET, Thursday – GRAINGER, ROYAL MAIL, CLOSE BROTHERS, JOHNSON MATTHEY, TED BAKER, Friday – FULLER, SMITH & TURNER
US companies posting interim results – Tuesday – DICK’S SPORTING GOODS, TJX, Wednesday – TARGET, Thursday – BEST BUY, ROSS STORES, Friday – FOOT LOCKER, ABERCROMBIE & FITCH
ECONOMIC DATA – Tuesday UK PPI & CPI, Wednesday – FOMC MINUTES, Thursday – UK RETAIL SALES, EU BALANCE OF PAYMENTS, Friday – UK PUBLIC SECTOR FINANCES.
Market Commentator – Panmure Gordon & Co