TODAY’S FAYRE – Tuesday, 9th February 2016
“O World! O Life! O Time!
On whose last steps I climb,
Trembling at that where
I had stood before;
When will return the glory of your prime?
No more -Oh, never more!
Out of the day and night
A joy has taken flight:
Fresh spring, and summer, and winter hoar
Move my faint heart with grief, but with delight
No more -Oh, never more!”
“Good-night? ah! no; the hour is ill
Which severs those it should unite;
Let us remain together still,
Then it will be good night.
How can I call the lone night good,
Though thy sweet wishes wing its flight?
Be it not said, thought, understood —
Then it will be — good night.
To hearts which near each other move
From evening close to morning light,
The night is good; because, my love,
They never say good-night.”
Percy Bysshe Shelley – poet – 1792-1822
I use every opportunity I can to switch on the television to watch New Zealand play ODIS! Their captain Brendon McCullum is an inspiration as a batsman, a fielder, a one-time-wicketkeeper and most of all as a captain. Yesterday 242 seemed nothing like enough to beat Australia in the 2nd match, but McCullum cajoled and inspired the Black Cats to win the game comprehensively and take an unassailable 2-0 lead to win the series. This was ‘Boys’ Own’ stuff! Sadly he will not be playing one-day-cricket after the T-20 World Cup. What a way to end a career!
How long is it going to be before I smile, say ‘good morning!’ with a spring in my heel? Investor sentiment is dire. Their fraternity is not in a good place. The world’s economy has dipped, but with employment remaining fairly robust in many parts of the mature world, it does not feel like a recession is on the way. Perhaps it is folly or trusting providence too much to say so – But it feels as if ‘The Fat Lady has almost got to her feet!” As Simon French and I stated last week, it is not so much the damage inflicted on mining and energy that bothered us, it is the deteriorating state of the banking sector globally that is a real concern.
On top of those catastrophic declines in bank shares since the start of the year, many of those constituents took a further larruping yesterday – Deutsche Bank -9.5% (back at 1992 levels), Morgan Stanley -6.9%, Goldman Sachs -6.1%, Citigroup -5.4%, Barclays 5.3%, RBS 4.6% and Lloyds -3.5%. Increased capital requirements will weigh heavily on bank share prices. Increased impairment charges on loans to emerging markets and the energy sector are visceral. The persistence of low interest rates and poor yields for bonds continues to cut margins of profitability. I find it hard to believe that the Central banks and the regulators are not aware of the problems that could manifest themselves. A few words of comfort or reassurance might help alleviate the worry. The falling price of oil and commodities is one thing; banks are a totally different kettle of fish. Prenez garde!
Since the business climate has changed dramatically in China and Asia in general, it seems unlikely that HSBC CEO Stuart Gulliver and Chairman Douglas Flint will make any hasty or injudicious decision to sling the bank’s hook and set off, hot foot for Hong Kong. On this occasion the grass is almost certainly not greener on the other side. Regulatory requirements have eased a tad and the bank levy looks as though it will not be quite so onerous for HSBC as what appeared to be the case 10 months ago. So the runes in the sand tell us that HSBC is going nowhere for the time being! This is good news!
Yesterday global equity markets resembled Passchendaele reincarnated! Initially China chose yesterday as a splendid day to bury bad news – a $99 billion fall in their currency reserves – it was the Chinese New Year holiday! Europe was unhappy at yet another ham-fisted announcement. The FTSE surrendered 2.7% and the DAX and CAC both over 3%. New York was also underwhelmed. Despite a late rally in energy stocks, the DOW ended the session down 1.10%, with the S&P -1.42% and the NASDAQ down by 1.82%. The banks, as expressed above, bore the brunt of the fall-out and the likes of Amazon – -2.8% and Facebook -4.2% added to the toxicity of the cocktail.
Some London registered companies seemed to be the recipients of unreasonably harsh treatment – Informa down 4%, when an economy such as we have suggests this company should be in demand. WPP was 5% easier with ITV walloped by 8% on fears of falling advertising revenues, which were unsubstantiated. ARM was another casualty losing 6.4% with Worldpay looking for the yellow jersey having yielded 8.6% in value. Mining stocks were calm with Anglo American picking up 3.5% and Glencore remaining flat. This morning there were satisfactory results from Tui (-2.5%), good numbers from Redrow (+1.5%) and a neutral effort from ICAP, who seem certain that the merger of separate business with Tullett Prebon will happen. At 9.25am the FTSE has been bobbing around either side of the Plimsoll line and as I write it is up 30 at 5720, thanks to a less negative approach from the Street of Dreams – futures initially down 150 points is now down only 25 points.
So that we in the UK ‘keep our peckers up’, Panmure’s Chief Economist tells us that UK Business activity expanded at its fastest rate for 6 months in the Regional PMIs released yesterday. This is a reminder that the domestic picture remains resilient with good forward order book growth. The North/ South divide however continues to grow with the Scottish and North East regions only marginally in expansion territory (51) compared to the UK overall at 56.1.
He also passed on news that BRC retail sales (UK) bounced back strongly in January with 2.6% like-for-like growth – up from 0.1% in December. Big ticket items sales (furniture & home ware) point to UK households broadly unaffected by current financial market turbulence.
U.K. earnings this week – Tuesday – TUI, REDROW, ICAP, Wednesday – TULLOW, GW PHARMACEUTICALS, ARM HOLDINGS, DUNELM, BELLWAY, WS ATKINS, Thursday – SHIRE, ASHMORE, RIO TINTO, PENNON, SAB MILLER (TS), C&W COMMS (TS), IMPERIAL TOBACCO (TS), THOS COOK (TS), ENTERPRISE INNS (TS), Friday – ROLLS ROYCE, MONITISE
US Earnings posted this week – Tuesday – VIACOM, Wednesday – HUMANA, TWITTER, EXPEDIA, ZYNGA, Thursday – CONAGRA, CBS
Economic data this week – Tuesday – BRC RETAIL SALES, UK TRADE BALANCES, Wednesday – RICS HOUSE PRICES, UK INDUSTRIAL PRODUCTION, US FEDERAL BUDGET, Thursday – US JOBLESS CLAIMS, Friday – UK CONSTRUCTION, US RETAIL SALES
Market Commentator – Panmure Gordon & Co