TODAY’S FAYRE – Markets, banks & BP

TODAY’S FAYRE – Tuesday, 2nd February 2016


“My soul is dark – Oh! quickly string

The harp I yet can brook to hear;

And let thy gentle fingers fling

Its melting murmurs o’er mine ear.

If in this heart a hope be dear,

That sound shall charm it forth again:

If in these eyes there lurk a tear,

‘Twill flow, and cease to burn my brain.


But bid the strain be wild and deep,

Nor let thy notes of joy be first:

I tell thee, minstrel, I must weep,

Or else this heavy heart will burst;

For it hath been by sorrow nursed,

And ached in sleepless silence, long;

And now ’tis doomed to know the worst,

And break at once – or yield to song.”


 George Gordon, Lord Byron – poet – 1788-1824


Maybe there is life after death! Ted Cruz (28%) won the Iowa caucus for the GOP nomination race, beating Donald Trump (24%) and Marco Rubio (23%). If Trump does not win New Hampshire a week today 9th February, he may, with a bit of luck, have run his race. However New England is his political backyard. Also, as I write it is not beyond the bounds of possibility that Bernie Sanders could beat Hillary Rodham-Clinton for the Democratic nomination. As I write it was heading towards a dead-heat in Iowa. How refreshing it would be if a new broom swept through US politics in Washington. Fresh faces, new ideas and the end of two dynasties that may be about to outstay their welcome, was an appetising prospect. Also some of Trump’s ideas would take most peoples’ breath away. We need to remember that away from the US coast-line, the voters are fairly solid Republican and probably to the right of centre!


Bill Gates appeared as Kirsty Young’s guest on Radio-4’s ‘Desert Island Discs’ last week. It seems extraordinary that he left Harvard at 19 years of age and set up Microsoft with Paul Allen in 1974 – What a remarkable and obsessive individual! He is purportedly worth $70 billion, but I have to confess I did not care for his choice in music at all!


Just a word on Sir Terry Wogan!  He has left a gaping hole as a standard bearer of all that is decent about the society we live in! -Beautiful manners, great humour and a wonderful demeanour- RIP


Oil came off the boil quite sharply yesterday and that kicked most international bourses in to touch for yesterday’s session, with the FTSE 100 easing by 23 points to 6060, though investor reaction to BT’S acquisition of EE and its results plus those of Ryanair certainly passed muster with the market.  In New York the Street of Dreams suffered from an acute attack of inertia, which saw the DOW close -0.10%, the S&P -0.04%, with the NASDAQ just above the Plimsoll line +0.14%. It was after hours that Wall Street lit up with a set of stonking numbers from Alphabet (Google). Sales were up 18% and revenue 14%.  You Tube sales were up 25% and the improvement in the Android service was measurable. Alphabet’s shares bounced out of the traps by 9% after hours, before settling up 4.22%. This news now makes Alphabet the largest US company, valued at $570 billion with Apple standing at $535 billion. Twitter’s shares jumped 6.6% on a possible private equity acquisition. However many market observers believe that Twitter may end up in Apple’s or possibly Google’s portfolio.


What a week for banks!  Last week it was the woes of Deutsche Bank, RBS, Lloyds Banking Group and Barclays.  This week it will be a loss of CHF 790 million for Credit Suisse due to be posted on Thursday, under the Tidjane Thiam’s watch and speculation as to who will buy Williams & Glyn from RBS – Secure Trust or Santander or maybe BBVA.  This morning Sergio Ermotti, UBS’S CEO posted a 79% increase in annual profits to CHF 6.9 billion. 4th quarter profit was CHF949 million with tier One capital ratio of 14.5%, with a 13.7% return on equity. NAB’S IPO of Clydesdale Bank/Yorkshire Bank has been temporarily postponed until tomorrow.  Shares are expected to be issued at 180p valuing the bank at £1.6 billion with NAB retaining a 75% stake. The reason for the postponement follows a request from one of the credit rating agencies for certain information that may affect Clydesdale’s credit rating. The outcome of this assessment could be a near term downgrade of the short- and/or long-term deposit rating or the placing of such rating on credit watch with negative implications. This one assumes is for the protection of the consumer/customer.



This morning the Chinese authorities pumped some money in to the systems ahead of the holiday and the Shanghai Composite closed up 2.25%. The Hang Seng was down 0.75% and the NIKKEI by 0.62%. The ASX was 1% easier. European stocks threatened to offer little positive content and they did not disappoint with the FTSE 100 down 70 points at 5976 at 9.15am. Though Ocado pleased its acolytes with a 14% increase in profits, despite a slightly disappointing reaction to the fact that no international client has yet been officially identified – shares were up 3%. Sainsbury’s confirmed it has offered £1.3bn to win control of Argos owner Home Retail Group. After revealing earlier this month that an approach last year was rejected, the supermarket giant has offered the equivalent of 161.3p a share for the retailer. The offer represents a 63% premium to Home Retail’s share price on 4th January. Home Retail’s shares are up 0.8% at 153p – suggesting there is work still to be done.




However it was energy and in particular BP that proved to be the villain of the plot. I suppose the writing was on the wall when CEO Bob Dudley announced management changes ahead of today’s numbers, with Lamar McKay appointed Dudley’s deputy and Bernard Looney to replace McKay as ‘Upstream CEO’. BP shares were trolleyed by 6.4% at 343.5p. The shares are down 21% in the last year. BP’S results were poor. A clean profit for the last quarter of $196 million (EST: $800m) was down 91% from $2.2 billion a year ago. The profit for the year was down over 50% to $5.9 billion. A dividend of 10 cents will be paid. There was a further impairment charge of $400m for Deepwater Horizon. There was a little chink of light at the end of the tunnel with the joint venture with Rosneft, which posted a profit of $235 million – down 50% but encouraging. Bob Dudley deserves huge credit for maintaining a decent relationship with President Putin, which may well have helped keep some sort of a lid over UK/US/EU’s spat with Russia. Is BP a possible takeover target? BP has a share capital value of £62 billion. No one, not even Exxon Mobil, would have the appetite to buy BP. Add a premium and one is talking £100 billion. Also I doubt the UK government would allow it, anyway.


U.K. earnings this week – Tuesday – St Modwen, Ocado, BP, Wednesday – Foxtons, Hargreaves Lansdown, GSK, Severn Trent, Johnson Matthey, IAG, Thursday – Royal Dutch Shell, Astra Zeneca, Smith & Nephew, Bellway, Vodafone, Compass Group, Friday – BG Group, Aon



US Earnings posted this week – Tuesday – Dow Chemicals, Exxon Mobil, Pfizer, Wednesday – Merck, Marathon, Thursday – Yum! Brands, Philip Morris, Boston Scientific, Metlife, Cigna, Marsh McLennan, Friday – Tyson Foods, Weyerhaeuser, Moody’s.



Economic data this week – Wednesday – ADP Employment Index, Thursday – Inflation Report & MPC Meeting, US Jobless Claims, Friday – Non-Farm Payrolls,



David Buik


Market Commentator – Panmure Gordon & Co 


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