TODAY’S FAYRE – Sunday, 24th January 2016


Looking up at the stars, I know quite well
That, for all they care, I can go to hell,
But on earth indifference is the least
We have to dread from man or beast. 
How should we like it were stars to burn
With a passion for us we could not return?
If equal affection cannot be,
Let the more loving one be me. 
Admirer as I think I am
Of stars that do not give a damn,
I cannot, now I see them, say
I missed one terribly all day. 
Were all stars to disappear or die,
I should learn to look at an empty sky
And feel its total dark sublime,
Though this might take me a little time.

WH Auden – poet – 1907-1973


 I felt extremely privileged to be at the Festival Hall last night to hear the 38 year old Maltese born Tenor, Joseph Calleja in concert, singing a selection of Verdi arias interspersed with an array of overtures played by the Philharmonia Orchestra, enthusiastically though sensitively conducted by Ramon Tebar. What a splendid evening! Joseph Calleja has all the attributes to vie with all the greats – Domingo, Pavarotti, Carreras, Bjorling and Bergonzi. He has presence, the charm, the looks and above all else the most fantastic bel canto tenor voice, with a massive range which one could ever wish to hear! Mr Calleja had a slight cold last night so was probably only firing off 5 cylinders, but what a performance!


So the highly acclaimed Adam McKay film “The Big Short” has hit the cinemas with a bang with wonderful accreditations and plaudits. How the public love to bash bank traders – understandably in some quarters! The film, based on Michael Lewis’s informative book on the financial crash, has been turned almost in to a comic turn. I hope Mr McKay and the film’s stars such as Brad Pitt and Christian Bale cry all the way to the bank having made millions. What I don’t need is a lecture in morality and regulatory controls from director McKay. I can go to Governments and the SEC and FCA for that. Just get on at what you excel at – artistic direction!


The pictures from the WEF Davos jamboree were a brilliant illustration of opulence. Such a pity that for the 45th year running nothing of any consequence came out of this 4 day networking session! – At £27k a pop per person and I understand that some corporate annual memberships cost £250k! PM Cameron really did attempt to rally the ‘IN’ troops in Davos, even persuading the hugely respected Mme Lagarde to throw her ‘two cents worth’ of support in to the ring. Unless David Cameron can persuade the EU to rescind all the EU’s Court Of Human Rights’ powers, the PM has a fight on his hands.


So hard-nosed punters took stock mid-week on the Street of Dreams and decided that equities looked unrealistically oversold, and put their buying boots on and in the process painfully closed out some bear market traders. Their action took place despite continued ham-fisted open market support by the PBOC in China to underpin the value of the Shanghai Composite and the Shenzen with little evidence of success (+0.10% in the last 2 days). Then on Thursday against a backdrop of the Swiss Alps, the ECB president Mario Draghi gave us another dose of ‘whatever it takes’, which triggered another bonanza bear squeeze rally. However I doubt we shall hear anything official from the ECB until the March meeting, unless markets fall out of bed. The other major imponderable left in abeyance is the damage the Yuan carry trade with other currencies has on emerging market economies. 


Though I am not a prophet of doom, it seems inconceivable that the carnage, contagion and volatility is all over at a stroke from a remark. There will be tricky weeks to follow at best. So the rally started on Thursday, aided and abetted by an improvement on the oil price of almost 5% over 2 days from $27.5 a barrel to $32. To put some colour on the proceedings the FTSE rallied from a low of 5645 on Wednesday to 5900 at the close of business on Friday – up 4.5% representing about £120 billion in value. Call me an old cynic, but AGAIN, without anyone really understanding the overall ramifications, governments and Central banks have to revert to QE to fix, in the case of the EU, a broken economy. 


Like many other ageing geriatrics I am fearful about the increased level of debt that will manifest itself. It is terrifying. Little prospect of either governments, or companies and more to the point the consumer either being able to service the gargantuan levels of debt, let alone repay it. Last week Sterling sank like a stone once BOE Governor Mark Carney made it crystal clear that rates would not be increased in the foreseeable future against a weakening background of global economic growth or any measurable inflation. Also the idea that the FED’S Janet Yellen may have another three 25 basis point hikes in the pipeline for the US economy this year, may require a rethink and a visit to the ‘in tray.’


By the end of last week most indices managed to impair their losses from their ‘highs’ in 2015. The FTSE 100 cut its loss it’s from 20% down to 17.1% and the loss from the start of the year from 7.5% to 6%, having gained 1.65% last week, thanks to a measurable ‘Draghi/oil’ rally of over 3% on Thursday and Friday. The S&P 500 added 0.95%, European indices rose by an average of 2.7% and the NIKKEI was down only 1.1%, despite nearly a 6% gain on Friday.


Mining stocks were again not the flavour of the week and despite the FTSE gaining 2% on Friday, Anglo American eased back by 8.6% ahead of this Thursday’s update and BHP (-5.4%) and Glencore (-4.5%) did not fare very much better. Royal Dutch Shell added 5.3%, thanks to the bounce in oil. Dixon Carphone was 4.6% to the good ahead of Tuesday’s trading statement. In the US Twitter continued its fall from grace and American Express was hit hard after less than good numbers – down 12%. This week, as you can see below is a very big earnings week in the US, providing a clear barometer as to the outlook for the US economy.


After all the froth of the Draghi intervention has calmed down, it will be interesting to see how markets settle down to day-to-day business this coming week. Sir Andrew Witty, Glaxo’s CEO has a fight on his hands against Och-Ziff Capital on this drug titan’s future plans. Tesco may have to see to its debt mountain and Sainsbury will be asked not pay up for Home Retail. And finally post the Google Tax settlement of £131 million over the past 10 years will that open the floodgates for HMRC to settle with other multi-nationals? In fairness to George Osborne, at least a decent start has been made, which is more than can be said for most British governments over the last 50 years. If full taxation is required then the laws have to be changed. One cannot blame companies for delivering the best shareholder value possible. Also to keep business in the UK, we need to make the terms attractive for them to remain here.


U.K. earnings this week – Monday – Petra Diamonds, Tuesday – PZ Cussons, easjJet, Marston’s, Crest Nicholson, Dixon Carphone, PurpleBricks, Wednesday – Antofagasta, Britvic, Paragon, Aberdeen Asset Management, Sage Group, Thursday – Anglo-American, 3iii, RPC, First Group, Diageo, SSP, SSE, Lonmin, DMGT, Kaz Group, Friday – Sky, AB Barr, Vedanta Resources


US Earnings posted this week – Monday – McDonald’s Halliburton, DR Horton, Tuesday – 3Ms, Freeport-McMoRan, Proctor & Gamble, Johnson & Johnson, Lockheed Martin, AT&T, Apple, Wednesday – PayPal, Boeing, BIOGEN IDEC, Texas Instruments, Facebook, Thursday- Ford, Caterpillar, Pulte, Baker Hughes, Microsoft, Visa, Raytheon, Hershey, Bristol Myers Squibb, Friday – Colgate-Palmolive, Chevron, AbbVie, Honeywell, MasterCard


Economic data this week – Tuesday – US House Price Index, Wednesday – FOMC, BBA mortgage applications & bank lending, Thursday – UK preliminary GDP




David Buik


Market Commentator – Panmure Gordon & Co


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