TODAY’S FAYRE – from Hall to Luther to the FED to markets

TODAY’S FAYRE – Thursday, 17th December 2015

 

“Safe in their alabaster chambers,

Untouched by morning and untouched by noon,

Sleep the meek members of the resurrection,

Rafter of satin, and roof of stone.

 

Light laughs the breeze in her castle of sunshine;

Babbles the bee in a stolid ear;

Pipe the sweet birds in ignorant cadences, —

Ah, what sagacity perished here!

 

Grand go the years in the crescent above them;

Worlds scoop their arcs, and firmaments row,

Diadems drop and Doges surrender,

Soundless as dots on a disk of snow.”

 

Emily Dickinson – poet – 1830-1886

 

As an avid listener to BBC’s ‘Sports Report’ on ‘5-live’ since the days when Eamonn Andrews first hosted the programme at 5 O’clock on a Saturday night back in the early 50’s, no programme would ever have been complete without a Stuart Hall poetic and literary report on some very average and nondescript game in the North West such as Bolton Wanderers and Blackburn Rovers.  I have never known a match reporter bring a game to life in the manner Hall did.

 

However setting that aside, I was absolutely outraged that Hall was released from prison yesterday after 2-years – half his sentence – for sexual crimes against girls of very tender years.  I know Hall will be 86 next week and is no longer a threat or danger to society, but he needed to fully pay for those iniquitous crimes!

 

‘Luther’ – Idris Elba is back with a vengeance as the sardonic detective – riveting viewing! Elba has so much presence and aura about him. In fact I have started to watch ‘The Wire’ again. Extraordinary that both Idris Elba and Dominic West both started to hit the ‘high spots’ as actors in this Baltimore based detective series.

 

Are these the final days of the second ‘Mourinho Dynasty’? It’s hard to believe that 5 months ago Chelsea FC were at the pinnacle of football society.

 

So the ‘day of reckoning’ arrived and bless her cotton socks, FED Chairman Yellen didn’t ‘bottle it’ and she delivered the 25 basis point increase in the FED rate – the first adjustment since 29th June 2006. Mind you, God help the markets had she not done so! It is not even worth contemplating. It was also reassuring that there were no dissenting voices in the camp. The vote was unanimous. I would admit to being not the brightest pin in the box, but for over 25 years I have battled with ‘FED geek talk’ from Greenspan to Bernanke to Yellen, in an attempt to decipher the content of FED statements and minutes. Progress has been painfully slow. Anyway in the tea leaves this time I read that any further increases will be measured and probably slow. M/S Yellen is insistent on avoiding any violent reaction to changes in the fortunes of the US economy – both positive and negative. So all being well there may be a further four 25 basis point hikes in 2016 and a further 1% in 2017. The FED’s goal is 3.5% by about 2020. She won’t get there, but those are her best laid plans. The FED is adopting a tightening policy, whereas everyone else, with the exception of the UK, is easing with aggression.

 

 

Just to bang the final nail in the coffin, I am over ‘forward guidance.’ With so many economic and political imponderables, we are heading in to ‘Hans Christian Anderson’ fairy tale land. Finally what is interesting is the fact that since the Fed’s GDP forecast was increased 10bp to 2.4% for 2016, while staying unchanged in 2017 at 2.2% and 2% in 2018, we can make the argument that for every unit the Fed funds rate rises, the US economy is achieving a higher rate of growth. In other words, the economy is working harder for less! Apart from employment data greater credence and importance will be attached to inflation and wage inflation in deciding any further moves in interest rates.

 

What really mattered was the reaction of the Street of Dreams. Dealers embraced the FED’s cautious approach and consequently all three markets selected another gear. The DOW added 1.28%, the S&P 500 1.45% and the NASDAQ eclipsed the other two by grabbing average gains of 1.52%. Gains were made across the spectrum with even energy stocks enjoying the relief rally. Let punters enjoy the Santa Rally. Nothing has changed. We are still seeing to many buy backs with AIG announcing a $3 billion initiative and GE will hand back $26 billion through dividends and stock repurchases in 2016 as the company rewards shareholders after tilting the business back toward manufacturing and away from finance. Punters are beginning to see through this ruse to deliver better shareholder value.

 

 

Keep an eye on Amazon. It is increasing its share of U.S. online spending during the holiday season, even as Wal-Mart Stores Inc., Target Corp. and other rivals seek to attract consumers with promotional sales and free deliveries. Amazon took in 39.3% of e-commerce spending from November 1st to December. 6th, up from 37.9% during the same period a year earlier, according to Slice Intelligence, which gathers data through e-mail receipts of 3.5 million shoppers.

 

After the FED announcement the Dollar strengthened against most major currencies. This will leave the market worrying about China’s stance in wanting to continue lowering the value of the Yuan. Not surprisingly Asia took a ride on Asia’s coattails, enjoying a relief rally. At the close the ASX was up a very encouraging 1.46% and the Nikkei +1.59%. At lunch the Shanghai Composite was up 1.81% and the Hang Seng was +0.73%.

 

FED expectations took the FTSE 100 comfortably above the 6000 threshold yesterday – up 43 points at 6061. The real move took place on Monday, but there is a feeling that Santa is making his presence felt. AstraZeneca confirmed that it agreed to buy a 55% stake in Acerta Pharma BV for $4 billion that will give the U.K. drugmaker a potential blockbuster medicine for blood cancers as well as diseases in which the body attacks itself. Shares were up 1.6% at the opening. There were good numbers from Dixons Carphone and SuperGroup. This morning the FTSE 100 opened up +93 at 6154. Banks +2%, mining, mining +2% and oil +1% led the charge. Purplebricks made a very somnolent start in its IPO on AIM. Shares were issued at 100p and were only up 0.5% in early skirmishes.

 

UK companies posting results this week – Thursday – Premier Farnell, Friday – Carnival, Trinity Mirror

 

US companies posting interim results this week – Thursday – Oracle, Red Hat, AAR, Friday – Lennar, Darden Restaurants 

 

David Buik

 

Market Commentator – Panmure Gordon & Co 

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