TODAY’S FAYRE – Tuesday, 5th January 2016


“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


The last three editors of the FT – Sir Richard Lambert, Andrew Gowers and Lionel Barber – have all been absolutely obsessed about the UK membership of the EU!  Perhaps it is a figment of my imagination, but the bible of financial excellence seems to give editorial credence to an unworthy EU with a decent plug every day of the week, when this undemocratic body has in no way earned the public’s respect or support. Yesterday we were told that a poll the FT had taken has unravelled overwhelming support for continued membership of the EU from economists.  Really?  There are a very fair number of economic luminaries. However I know of a few who are very comfortable with BREXIT.


The FT is in danger of scaremongering. Most of us are uncertain what the PM’s plans are for change.  The Government’s views have not been articulated concisely. Few know what they are voting for. Or are we just being bullied by big business to keep the status quo? At the end of the day the electorate is ‘conservative with a small ‘c’ and is uncomfortable with change. It is uncomfortable with uncertainty.  So the UK will probably remain in the EU.  But the referendum should be debated fully, allowing voters to make informed and measured decisions. Perhaps the ‘BREXIT BRIGADE’ lacks sufficient heavy hitters, though I notice that six new Conservative MPs have put their heads above the parapet in support of the ‘Leave’ campaign. Also news that business management’s support for the EU has dropped by 10% to 64% is an interesting statistic! News of that ilk will start to put extreme pressure on the PM, who will be forced to deliver a plan of radical change rather than just a nebulous discussion document. Uncertainty is an unenviable commodity for a robust economy and for stable markets.


Having had a wonderful diet of ‘smash and grab’ cricket from Ben Stokes, aided and abetted by Johnny Bairstow on the first day of the 2nd test at Newlands in Cape Town, yesterday’s fayre seemed rather a ‘journeyman’ session by comparison. Dropped catches have not helped.  It is hard to pick up the flight of the ball at Newlands against the background of the stands, Table Mountain and the brewery! Hoping for better news today!


They start the year off with a bang! Well, that’s what markets did! – unfortunately for setting a positive mood for the year – WRONG direction and how? China, in posting its 10th month running of falling factory orders sent international markets in to a whirlpool of despair, aided and abetted by an unpleasant spat between Saudi Arabia and Iran, which could escalate. Trading on the Shanghai Composite was halted by the circuit breaker after a 5% fall and closed for the day once it had dropped 6.9% after temporarily re-opening. Germany and France caught a bad dose of frayed nerves with the DAX falling 4% and the CAC 3%.  Losses were felt across the spectrum with financials and industrial stocks badly clattered. The FTSE 100 fell by 2.39% – down 149 points to 6093, with the likes of Glencore, Anglo American and BHP delivering body blows to investors to the tune of between 3-6%. Shire’s investors queried at the prospect of a $47 billion takeover of Baxalta in the current climate – shares just down 0.11%. 38 million was knocked off the value of the FTSE 100 yesterday – the worst start to the year this century.


The Street of Dreams fared little better with the DOW falling by 1.58%, the S&P 500 by 1.53% and the NASDAQ by 2.08%. Again industrials and financials came under the cosh with Amazon, after what must have been a brilliant Christmas, suffered the slings and arrows of outrageous fortune.


This morning the Chinese authorities worked like dervishes to sooth investors’ furrowed brows. The Nikkei closed down 0.42% and the ASX which played catch-up on yesterday, closing down a measurable 1.63%.  Just after lunch the Shanghai Composite and the Hang Seng were easier by 0.5%. The FTSE enjoyed an inevitable ‘dead-cat-bounce’, rallying by 72 points just after 8.00am with oil up 1.5%, mining by an average of 2.5% and banks by 1%. NEXT posted a disappointing trading statement with sales from October through to the end of December up by only 0.4%. Some blame was attached to warm weather. There is an agreed ‘buy-back’ price of £69.92. The shares fell by 4.59% at 6860p. Fenner saw the resignation of its CEO due to ill-health. The chairman will take over pro-tem. Bwin, ahead of its takeover saw revenue up by 5% – shares up 0.5%. Smith & Nephew completed its takeover of Blue Belt Holdings of the US for $275 million.


My diseased-ridden mind has been working overtime, since I read comment in the FT about Sir Nick MacPherson (HM Treasury Perm Secretary) who has announced he is leaving at the end of March after 33 years. His likely successor is John Kingman – ex Rothschild – friend of Robert Peston. Mr Kingman ran the financial side of the Treasury during and after the financial crisis. On balance this would be good news for the domestic finance and banking sectors, as MacPherson although exceptionally bright, had no real experience outside Whitehall. The timing is interesting; he is only 56 and I do wonder whether “HSBC domicile” pressure has been brought to bear, as Wheatley and MacPherson are on their respective bikes in quick succession and recent changes to the bank levy and dropping of banking enquiry looks seriously like appeasement. Call me a cynic, but I may not be a million miles away from the truth! There will be balance if Tracey McDermott is appointed as Martin Wheatley’s successor! It’s called ‘carrot’ at the top and ‘stick’ from behind! Let’s hope Douglas Flint and Stuart Gulliver will buy the bill of goods on offer!


UK Companies posting results this week – Tuesday – NEXT (TS), Wednesday – TOPPS TILES, Thursday – POUNDLAND, M&S, PERSIMMON, SIGNET, RATHBONE


US Companies posting interim results this week – Tuesday – FORD MOTOR COMPANY (sales), – Wednesday – MONSANTO, AUTONATION, Thursday – WALGREEN BOOTS, CONSTELLATION BRANDS, KB HOMES, BED, BATH & BEYOND, RUBY TUESDAY – Friday ACUITY BRANDS


Economic data this week – Tuesday – PMI Construction, Wednesday – UK PMI Composites and Services, Thursday – UK car registrations, US Jobless Claims – Friday – US Non-Farm Payrolls (est: 210K), Unemployment data (Est: 5%) and Consumer Credit, UK Balance of Trade. 


David Buik


Market Commentator – Panmure Gordon & Co 


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