TODAY’S FAYRE – CLIMATE TO STRESS TESTS TO MARKETS

TODAY’S FAYRE – Tuesday, 1st December 2015

 

“The fountains mingle with the river,

And the rivers with the ocean;

The winds of heaven mix forever

With a sweet emotion;

Nothing in the world is single;

All things by a law divine

In another’s being mingle–

Why not I with thine?

 

See, the mountains kiss high heaven,

And the waves clasp one another;

No sister flower could be forgiven

If it disdained its brother;

And the sunlight clasps the earth,

And the moonbeams kiss the sea;–

What are all these kissings worth,

If thou kiss not me?”

 

Percy Bysshe Shelley – poet – 1792-1822

 

I must confess that I am entirely ambivalent about tennis but I certainly ‘doff my titfer’ to Andy Murray and team GB for the incredible feat in winning the Davis Cup for the first time since 1936, when Fred Perry was all but omnipotent as GB’s best player of all time. On Monday morning I was somewhat surprised that Jessica Ennis-Hill, popular though she is, was still installed at the ‘jolly’ as BBC ‘SPOTY’ at a very skinny 5/4 with Andy Murray at 2/1 shortened in from 11/4 on Sunday morning. I know Jessica is an exemplary sports person – an icon to all – but in terms of achievement I would have thought Murray was ‘nailed on!’ Tyson Fury is 6/1, Lewis Hamilton 12/1 and Jamie Vardy 33/1. Chris Froome, having won two ‘Tour de France’ has been given scant hope by the bookmakers – 10/1. Of course I keep forgetting that only about 500,000 people vote – so perhaps it is not a real reflection of public opinion.

 

In the past Japan in 1998 hosted a global Climate change Conference in Kyoto. It was a disaster, as President Clinton was not interested in playing ball. Copenhagen hosted one in 2009. It wasn’t much better as without being disrespectful, the political ‘heavy brigade’ never turned up in force. So little progress on this key issue was achieved.  This week it is the turn of Paris. Almost every political luminary is making an appearance. Whether it is out of respect to France in the wake the recent catastrophic terrorist attack, time alone will tell. Prince Charles has also been there to add his two ‘penny-worth’ with an impassioned plea about concern for children and grandchildren. The rhetoric will be powerful and heartfelt, but until India, despite PM Modi’s encouraging sound bites, tows the party line over power based on cheap coal, progress with these talks will be limited. However if President Obama is to be believed a deal is in sight.

 

Forgive my cynicism, but we have been here before and though cutting pollution is of paramount importance, wasting taxpayers’ money on ridiculously expensive renewable energy alternatives is not.  Solar panels, like everyone else, I do get. However until recently no UK government realises that gas is the way forward for the next decade. It’s clean and it’s cheap – well relatively! The rest can wait! The world has far greater priorities like poverty and hunger!

 

The Street of Dreams returned to work only to fire off 3 cylinders. I suppose the slightly disappointing outcome to Black Friday and Thanksgiving took the main indices down a tad with Wal-Mart, Target, Macy’s and Home Depot all surrendering a modicum of value. Also the health care sector was marginally under the cosh. In quiet trading conditions, the DOW eased by 0.44%, the S&P 500 by 0.46% and the NASDAQ by 0.37%. This is a huge week for the world’s economy. Not only must we take in to account the Climate Change jamboree in Paris, there is also OPEC to consider though I suspect Saudi Arabia will dig its little ‘tootsies’ in about cutting production.

 

Most global indices apart from the FTSE (dragged down by the vagaries of BHP -6% and other mining constituent stocks) rallied yesterday in the hope the ECB would introduces fresh stimulus packages, increase QE and maybe cut rates by 10 basis points. So the ECB better do its stuff on Thursday. It is interesting to note that the German government with a view to standing on the Greek government’s corns have flagged up 10,000 Greeks not paying tax! Finally on Friday November’s Non-Farm payrolls are expected to take the market out of its misery by producing a decent jobs figure of around +200k, thus triggering the FED in to finally implementing a 25 symbolic rise in rates on 15/16th December. Not surprisingly the IMF greeted the Yuan as a reserve currency welcoming it in to its SDR basket of currencies. This move confirms the huge importance of China’s economy to global growth. Early this morning Chinese PMI manufacturing data disappointed. Even the Shanghai Composite ‘cocked a snook’ at this number, adding 0.71% during today’s session. The ASZ closed 1.93% to the good and the NIKKEI, aided by a weak Yen added 1.34%. The Hang Seng bristled with confidence adding 1.35%.

 

The FTSE at 11.00am was up 38 points as predicted at 5.00am this morning. The banking sector reacted on positive stress test results from the BOE prudential Banking Authority, with gains between 1.5 and 3.5%, which contribute much of the FTSE 100’s progress this morning. All the major 7 banks passed the stress test – this year’ tests are based on an Asian collapse as well as one in the UK. However Mark Carney and Andrew Bailey warned RBS and Standard Chartered that their respective Tier One capital could use a bit of topping up. We are told that this is work in progress. Certainly Bill Winter, Standard Chartered Bank’s new CEO will be aware of the need to act positively. Mark Carney made it clear that next year a further £10 billion of fresh capital may need to be injected in to the banking system. As well as economic stresses, new costs of £40bn were assumed to pay for potential misconduct. However on the whole banks are in a much better place than they were six years ago. Last time the Coop failed to pass muster. This bank is now mainly in the hands of capital provided by the US hedge fund operator Aurelius Capital.

 

Few companies posted results today, though Merlin Entertainments made an encouraging trading statement after the Alton Tower’s disaster. Topps Tiles efforts were sound if not spectacular.

 

UK companies posting results – Tuesday – TOPPS TILES, COLLOGEN, Wednesday – BREWIN DOLPHIN, ZOOPLA, GREENE KING, Thursday – GW PHARMACEUTICAL, DS SMITH, Friday – BERKELEY GROUP, EASYJET (TS) US companies posting interim results – Tuesday – FORD (sales), Wednesday – AMERICAN EAGLE, AEROPOSTALE, Thursday – KROGER, DOLLAR GENERAL, BARNES & NOBLE, Friday – BIG LOTS Economic data – Tuesday – UK PMI manufacturing, Wednesday – US Beige Book, UK Construction, Thursday – ECB meeting, Friday – US balance of trade. Non-Farm Payrolls.

 

David Buik

 

Market Commentator – Panmure Gordon & Co 

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