TODAY’S FAYRE – Wednesday, 20th January 2016
“I have been one acquainted with the night.
I have walked out in rain – and back in rain.
I have outwalked the furthest city light.
I have looked down the saddest city lane.
I have passed by the watchman on his beat
And dropped my eyes, unwilling to explain.
I have stood still and stopped the sound of feet
When far away an interrupted cry
Came over houses from another street,
But not to call me back or say good-bye;
And further still at an unearthly height,
One luminary clock against the sky
Proclaimed the time was neither wrong nor right.
I have been one acquainted with the night.”
Robert Frost – poet – 1874-1963
We all send our good wishes to the 1400 delegates at the WEF jamboree in Davos. We hope you are having a wonderful time. Please come home soon. It is ‘all hands to the pump’ that are required. Your assistance would be greatly appreciated.
Everyone enjoyed yesterday’s relief rally with the FTSE adding 1.68%, the DAX +1.50% and the CAC +1.97%, but no one really believed a word of it, let alone was there any conviction. Some were delighted to take profits and some lived in hope that tomorrow might bring a bit of jam. After the Martin Luther King holiday, investors returned to the Street of Dreams with concerns about global growth, China’s ailing economy and the falling price of crude oil very much on their minds, let alone the quality of the earnings season.
After a brief unsustainable rally, a reality check was staring traders and analysts in the face. All three markets drifted back and but for better than expected results from Bank of America (profits for 4th quarter +10% – share price -0.06% after hours) and Morgan Stanley, which returned to a $908 million profit (share price +0.57% after hours), these markets might well have closed lower than they did. DOW +0.17, S&P +0.05% and the NASDAQ -0.26%. Considering the mood of the market the likes of Apple, Amazon and Netflix put in resilient performances, particularly the latter – up 6% after hours.
Wednesday morning certainly did not bring anything remotely looking like a brave new dawn – far from it. This morning it was Hong Kong that was the focus of attention. The HK$ fell out of bed. There is a real concern about credit. There was talk of a hike in interest rates; so not surprisingly stocks were dumped in large quantities or market makers took prices down. The Hang Seng fell back below 2012 levels and at one point it was down by over 4%. As I write it has rallied a tad to -3.57%. By comparison the Shanghai Composite has only fallen 1.03%. The ASX closed -1.26% and the NIKKEI experienced almost as torrid a session as the Hang Seng, in closing down 3.71%. The Yen has become very strong and with international trade waning the omens look temporarily average, to say the least.
The UK economy – Inflation? – Just! – PPI in December +0.2% posted yesterday, thanks in the main to very high travel costs, though wine and spirits off-set these costs by falling by 1.3%. This data brought Governor Mark Carney to his feet. In a speech he made yesterday in Lincoln, it came as no surprise to hear that any hike in UK base rates remained in the in-tray for the time being. Great news for mortgagees but awful for savers and more to the point for the economy, which is starting to look sluggish. He spoke not unexpectedly of concern about China, falling global growth, faltering wage inflation and a lack of any inflation as reasons for a change in policy. The IMF, amongst other global utterings reconfirmed that UK’s growth would come in at 2.2%.
Though I think Mark Carney has been an excellent governor of the BOE. He has really tightened up on regulation and discipline and made some excellent appointments. However I believe the ‘forward guidance policy’ has been a disaster. Forecasting the future is virtually impossible. There are too many complex political and economic imponderables to really give meaningful guidance. The MPC meetings should by all means update us with inflation, growth and expenditure, but surely forecasting when rates are going to move is for the birds. Frankly I think the idea is unintentionally mischievous and misleading. Nothing I am going to say will change policy, but from now on we should be circumspect and wary. I send the same message to FED chairman Yellen.
This morning the FTSE is set to open down just over 100 points – oils and mining likely to feel the wheels of pain across their backs. WH Smith posted an adequate trading update but JD Wetherspoon guided to the lower end of expectations – stock may be down 5% at the opening and Pets-at- Home with sales up 2.2% were in line with expectation. Today will be a tough one and New York’s reaction this afternoon will be key.
UK Companies posting results this week – Wednesday – PETS-AT-HOME, GENEL, JD WETHERSPOON, WH SMITH Thursday – NCC. ST JAMES’S PLACE, BRITISH LAND, HALFORDS, LAND SECURITIES, SAB MILLER, ROYAL MAIL, MONEYSUPERMARKET, Friday – COMPUTACENTER, CLOSE BROTHERS.
US Companies posting interim results this week Wednesday – GOLDMAN SACHS, VILINX, Thursday – VERIZON, BANK OF NEW YORK MELLON, AMERICAN EXPRESS, STARBUCKS, SCHLUMBERGER, Friday – CITIZENS
Market Commentator – Panmure Gordon & Co