TODAY’S FAYRE – Thursday, 4th February 2016


 Dark Spirit of the desart rude

That o’er this awful solitude,

Each tangled and untrodden wood,

Each dark and silent glen below,

Where sunlight’s gleamings never glow,

Whilst jetty, musical and still,

In darkness speeds the mountain rill;

That o’er yon broken peaks sublime,

Wild shapes that mock the scythe of time,

And the pure Ellan’s foamy course,

Wavest thy wand of magic force;

Art thou yon sooty and fearful fowl

That flaps its wing o’er the leafless oak

That o’er the dismal scene doth scowl

And mocketh music with its croak?


I’ve sought thee where day’s beams decay

On the peak of the lonely hill,

I’ve sought thee where they melt away

By the wave of the pebbly rill;

I’ve strained to catch thy murky form

Bestride the rapid and gloomy storm;

Thy red and sullen eyeball’s glare

Has shot, in a dream, thro’ the midnight air

But never did thy shape express

Such an emphatic gloominess.”


 Percy Bysshe Shelley – poet – 1792-1822


I never much cared for the Leonardo di Caprio film – ‘Wolf of Wall Street.’ Though it had some points to make, the production pushed on in to the realms of ‘Walter Mitty.’  However, ‘The Big Short’, based on Michael Lewis’s best seller is another matter altogether. For the layman that perhaps may not have grasped the machinations or the intricacies of sub-prime lending, resulting in the collapse of the global banking system, thus triggering the worst recession since 1929, this film is a must. Forget the excellent performances of Steve Carell, Christian Bale and Brad Pitt, the co-producer. To all intents and purposes they are irrelevant. It was the content that made this film so compelling.

If anyone was ever in any doubt as to whether Alan Greenspan was the architect of the collapse of the financial system, this film will put your mind at rest.  The role and behaviour of the FED, leading to the crisis, together with the US Treasury, Freddie Mac, Fannie Mae, the Wall Street investment banks, the mortgage companies, hedge funds and the regional banks was beyond any comprehension. Negligent is probably far too kind a description. There are other adjectives that come to mind but I will leave it to everyone’s imagination. Collectively they had not a clue as to what was unfolding before their very eyes and if they did, little was done to stop the financial madness that ensued. It was an absolute disgrace and I am truly amazed that the US economy and many others have recovered so robustly – or have they?


It was another incredibly erratic session yesterday. There was a further dose of ‘doom and gloom’ which prevailed in Asia and Europe.  Investors had reacted adversely to another sharp drop in oil prices.  Initially those who hoped that Street of Dreams would put a drop of positive spin on the proceedings were disappointed as the US announced some quite shabby ISM data for the service sector, which resulted in the DOW shedding 150 points.  Then oil started to rally – almost 8% over the last 24 hours, much of the rally due to rumours that Russia was prepared to sit down with OPEC and discuss cutting production. There was no foundation to this rumour, but it suited the market to promulgate it.  The current correlation between oil and equities beggars belief. They almost sing from the same hymn sheet. New York felt obliged to pick up the cudgel, which it did with some relish. Then very positive ADP employment data gave the markets some breathing space and a little momentum. This number could augur well for Non-Farm Payroll data on Friday, though the inclement weather the US has suffered may bring a little toll with it.  



The DOW ended the day up 1.13%, with the S&P poking its nose in to positive territory – +0.50%.  The NASDAQ closed down 0.28%, thanks in the main to profit taking in Alphabet after a terrific run on the rails – down 4%. Alphabet/Google flip-flopped with Apple (+2%), surrendering pole position the largest US company to its iPhone peer.  Banks enjoyed a torrid time as they have in Europe, with the likes of Citibank and Bank of America both easing by 18% and JP Morgan Chase by 9.7% in value in the last month. The US banking sector has fallen by 12% in the last month.  There is little doubt that the parlous state of the bond market with little in the way of commercial yields available plus the ridiculous prevarication by the FED in raising rates in December exacerbated the sector’s sell off!


In London yesterday energy, mining and banks were always under the cosh with the FTSE 100 losing 84 points to 5837. Lloyds Banking Group lost 3% in value and then hosed out 1700 jobs. On a bright note, ‘hats off!’ to NAB and its advisors for the well-executed IPO of Clydesdale/Yorkshire Bank yesterday. Shares were issued at 180p and closed at 190.75 last night. In essence this bank was given away at a level that attracted investors.  It was important that they were not disappointed.  There was no evidence of avarice and greed. This morning we have had a slew of important earnings. Royal Dutch Shell saw an 80% drop in earnings and is making 10,000 redundancies, presumably to make room for the BG Group deal. Amazing how Threadneedle Street & Canary Wharf loves seeing financial blood running in the gutter! – Up 3%. Compass posted an upbeat trading statement – +3%.  There was an air of disappointment re Astra Zeneca – down 2% and Vodafone’s figures, though not good, were better than expected. C’mom Mr Colao get with the beat – be all things to all men in media! Buy a media operation; you can afford it. Rolls Royce was up 1.5% today.  We hope that ahead of Friday week’s figures Warren East, the CEO talks about scrapping the dividend this year (£400m) and talks about a £1 billion rights issue to steady the ship. Mr East is more than up to the task.


Asia enjoyed a happier session today as we head towards the Chinese New Year holiday next week.  The rise in oil prices and improved investment sentiment kept most markets in positive territory except the NIKKEI – down 0.87%.  The ASX closed up 2.1% and as we head to the close the Shanghai Composite was up 1.5% and the Hang Seng was 1% to the good. Foxconn or a Japanese consortium should finalise the future and takeover of Sharp – up 12% today.


This morning we eagerly await the content of the BOE Inflation Report ahead of the MPC meeting. We expect Mark Carney to put rates on hold indefinitely due to global uncertainty. Less talk on forward guidance would be seen as very constructive.  Inflation is expected to rise later in the year to 1% – hmmm… The BOE is also expected to lower growth targets, but only marginally to 2.3%.

At 8.53am the FTSE 100 was up 70 points at 5900


 U.K. earnings this week – Thursday – Royal Dutch Shell, Astra Zeneca, Smith & Nephew, Vodafone, Compass Group, Friday – BG Group, Aon



US Earnings posted this week – Thursday – Yum! Brands, Philip Morris, Boston Scientific, Metlife, Cigna, Marsh McLennan, Friday – Tyson Foods, Weyerhaeuser, Moody’s.



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



David Buik


Market Commentator – Panmure Gordon & Co 


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