TODAY’S FAYRE – Sunday, 7th December 2015


The first-class brains of a senior civil servant

Shiver and shatter and fall

As the steering column of his comfortable

Humber Batters in the bony wall.

All those delicate re-adjustments

“On the one hand, if we proceed

With the ad hoc policy hitherto adapted

To individual need… On the other hand, too rigid an arrangement

Might, of itself, perforce…


I would like to submit for the Minister’s concurrence

The following alternative course,

Subject to revision and reconsideration

In the light of our experience gains…”

And this had to happen at the corner where the by-pass

Comes into Egham out of Staines.

That very near miss for an All Souls’ Fellowship

The recent compensation of a ‘K’ –

The first-class brains of a senior civil servant

Are sweetbread on the road today.”


John Betjeman – poet laureate – 1906-1984


 “Hearing nun’s confessions is like being stoned to death with popcorn” – Archbishop Fulton Sheen – 1895-1979

US Congressman Dana Rohrabacher – Chairman of the House Foreign Affairs Subcommittee on Europe, Eurasia, and Emerging Threats made this telling comment last week:

“Not radical Islam, but the Russians have been portrayed to us as the villains in this chapter of history. Yet our government demonstrates a lack of will, incompetence, or both, in confronting the most monstrous of the radical Islamic marauders now spilling vast quantities of innocent blood in the Middle East – as well as in Africa and France.

 When Russia courageously stepped into the breach we should have been applauding its willingness to confront ISIS. Instead, we continue to denigrate Russians as if they were still the Soviet Union and Putin, not Islamic terrorists, our most vicious enemy.”



Last week was always going to be hugely important from a global economic perspective rather than for company news or any ancillary M&A activity and so it proved to be. Starting with the Paris Climate Change jamboree, moving on to the outcome of the ECB meeting, where the market had written Mario Draghi’s script to Friday’s OPEC meeting and finishing with a flourish in Washington with the much vaunted Non-farm payroll data at 1.30pm. The week was full of incident from start to finish.

Enormous importance was attached to the Climate Change conference this week, though personally I find it very hard to take it too seriously when major countries such as China and India don’t really sing from the same hymn sheet. So much money is also wasted on heinously expensive renewable energy initiatives. Of course there is a moral obligation to cut out as much pollutions as possible, but less time should be spent talking hogwash on goals that are undeliverable.

On Wednesday FED Chairman Janet Yellen’s speech wound the market up on the back of decent ISM manufacturing data to prepare for a 25 basis point rate increase on 15/16th December. M/S Yellen isn’t exactly the most ebullient of characters, but she left few in doubt that she was satisfied that the US economy was robust enough to cope with a rate increase. There was little evidence that her resolve was rattled on Thursday when huge disappointment was expressed by the market at what was perceived as inadequate action taken by Mario Draghi and the ECB in terms of increased quantitative easing and cutting the deposit rate. Equity markets had certainly priced in rather more than they were given.

To recap the ECB, with a view to dealing with sluggish growth and the threat of deflation, extended the existing facility by 6 months to end of March 2017, which meant a further €360 billion would be available at a rate of €60 billion a month. The market appeared to expect that amount to be added to the existing monthly facility. It also expected a greater cut in the deposit rate than 10 basis points taking the rate down to a negative -0.3%. Up until lunch time on Thursday equities looked as though they had started a Santa rally, but investors felt they were ‘short-changed’ by the content from the ECB meeting, which saw them vent their spleens on the market. The Euro initially fell like a stone before rallying by 4 big figures, with the DAX and CAC surrendering the best part of 3%. Even the Street of Dreams reacted in an adverse manner, with the 3 main indices losing between 1% and 1.7%. When assessing the tea leaves, most observers were left with the opinion that Germany had brought excessive influence to bear on the decision making process, which prevented Draghi from having his way and thus being his own man. Both Merkel and the Bundesbank loath QE at the best of times, so excess stimulation would never be on their agenda.

And so to Friday’s non-farm payrolls. 211k jobs were created in November ahead of expectations of circa 190k. This result came as no surprise in the wake of the positive ADP data posted on Wednesday. The Street of Dreams held its breath for a few minutes and then decided a hike was virtually a done deal, which should not really damage growth and investors gave it their best shot taking the three New York indices up by an average of 2%. The Dollar remained strong; gold closed out some bear positions rallying by 2% to $1086 an ounce with Nymex crude oil dropping 2.7% taking it below $40 a barrel to $39.97, entirely due to OPEC’s decision to continue flooding the market with excess oil.


Looking at the way the major indices ended the week – S&P -.0.8%, FTSE -2.2%, average European bourses -3.6% and the NIKKEI -1.9% – does not paint a realistic picture of what happened or the level of volatility. Foreign exchange markets were also highly active with the Dollar gaining against most currencies on the week. 10-year global sovereign bonds also saw yields rise measurably – US treasuries, Bunds, Gilts and most all Greek bonds rose sharply. Gracious me! Merkel and her German cronies continue to play hard ball, despite the fact Greece cannot deliver austerity and growth at the stroke of a pen!

In London, mining stocks looked vulnerable with Anglo American not guaranteed to maintain its dividend and Glencore sliding 2% and 3% respectively. Poor demand in China saw iron ore prices fall below $40 a ton for the first time since 2009. BP and Royal Dutch Shell have been in a better place in their time and Whitbread, flagged up by Anna Barnfather at Panmure as a ‘sell’ a few weeks ago lost 2.9%. Banks, apart from Standard Chartered managed keep their cool, post the stress test results. Sports Direct was the subject of a Goldman’s downgrade and fell 2.1% – 25% though, this year! We look forward to their update next Thursday. Sage demanded the ‘yellow jersey’ on Friday adding 5.2%. On the Street of Dreams on Friday there were some retail stragglers – GAP -3.3% and Barnes & Noble -21%. Canadian Pacific surrendered 4% towards the end of the week.


As we head towards Christmas, the corporate news flow looks to be thinning out. No doubt the challenges will continue to appear like unexpected mushrooms, though geopolitical events may be more influential. The Sunday papers (Sunday Times) have confirmed that executive pensions at HSBC must be cut due to shareholder pressure, in the knowledge that EBA is likely to confirm that the UK must come in to line over bonuses. It was good to see that our major 19 insurers will pass the PRA regulatory requirements in the event of major crisis. It is also possible that Home Retail could be broken up, with private equity looking to run the ruler over Homebase in a £1 billion deal. The Sunday Telegraph tells us that Tata may sell its Scunthorpe steel works to Greybull and Endless, possibly saving 5000 jobs. As a results of the Ladbrokes/Coral merger, Betfred could pick up 500 shops to satisfy the Competition regulators. I must confess Betfred has disappointed the betting public with the indifferent fayre offered by its acquisition of the Tote, which it picked up for a song. It should have been a massive marketing springboard. I believe it should never have been sold to another bookmaker.

UK companies posting results this week – GW Pharmaceuticals, Tuesday – Hornby, Wednesday – Stagecoach, Focusrite, Ashtead, Carillion, Thursday – Sports Direct, Micro-Focus, John Wood Group, Centrica, Photo-Me, Marshalls, Darty, Whitbread (TS), Ocado (TS), Go-Ahead (TS), Tui Travel (TS), Friday – Bellway (TS), MJ Gleeson (TS).

US companies posting interim results – Monday Vail Resorts, H&R Block, Tuesday – Autozone, Toll Brothers, Costco, Krispy Kreme,Wednesday – Korn/Ferry, Men’s Wearhouse


Economic Data – Tuesday – EU GDP, UK Industrial production and manufacturing output, BRC sales, Thursday – BOE MPC meeting UK trade Data


David Buik


Market Commentator – Panmure Gordon & Co


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