TODAY’S FAYRE – Wednesday, 10th February 2016
“When I have fears that I may cease to be
Before my pen has glean’d my teeming brain,
Before high-piled books, in charactery,
Hold like rich garners the full ripen’d grain;
When I behold, upon the night’s starr’d face,
Huge cloudy symbols of a high romance,
And think that I may never live to trace
Their shadows, with the magic hand of chance;
And when I feel, fair creature of an hour,
That I shall never look upon thee more,
Never have relish in the faery power
Of unreflecting love;–then on the shore
Of the wide world I stand alone, and think
Till love and fame to nothingness do sink.”
John Keats – poet – 1795-1821
Despite being 74 years of age Bernie Sanders trounced Hillary Clinton in the New Hampshire primary – admittedly it was his own backyard. However it was fascinating to behold that Mr Sanders attracted significant support from the fairer sex! There must be a strong message there. Mrs Clinton will surely not receive the Democrat nomination without one hell of a battle!
South Africa’s 23-year old wicketkeeper batsman, Quintin de Koch hit an imperious 135 against England in the 3rd ODI. His style of batting was certainly reminiscent of Adam Gilchrist in his heyday, though perhaps more stylish, as South Africa made light work in reaching England’s total of 318 with seven wickets and 3.4 overs in hand!
Equity markets were in a bad place as I set off for home last night, in the hope of catching the first episode of the new series of ‘Happy Valley.’ The European session had been exactly a rout, as it had been the day before or yesterday in Japan. However the degree of indecisiveness of market traders in London was of deep concern. There were few nuggets of comfort and very few pegs of hope to hang one’s cap on! Dealers had cricked necks from constantly looking over their shoulders to see how US futures were performing. They bounced around rather less gracefully than a prima ballerina dancing a ‘pas-de-deux.’
So at the end of yesterday’s session the FTSE 100 closed 57 points lower at 5632. Banks, as has been well chronicled, were still in the dog house with mining stocks and the insurance sector there to comfort them. It was left to telecoms, retail and the likes of Wolseley and Diageo to bring a bit of sunshine to the proceedings. Some banks will do well to maintain their dividends as the pressure on capital requirements increases as will the level of impairment charges on non-performing loans to emerging economies and the energy sector. Before too long one cannot rule out the possibility of bank equity being converted in to capital to meet regulatory requirements. Though Deutsche Banks’s John Cryan swears that the bank is rock-solid, banking is a sector that investors are not currently deeply and irrevocably in love with. The FTSE 250 was amazingly resilient up until the turn of the year. However once sentiment turns really negative the lack of comparative liquidity in this index eventually takes its toll. Share values in the 250 have fallen over 10% since 1st January. Though the UK trade gap widened by £1.9 billion in January to £125 billion, there was good news on the UK business front where activity was at its most potent for 6 months. Also BRC sales were up by 3.3% in January. Retail stocks sat up and took some nourishment, but few took a blind bit of notice, with sentiment overall remaining lousy!
When the Street of Dreams started the session it went sharply in to reverse with banks and healthcare stocks left ‘hanging in rags,’ However there was hope that FED Chairman Janet Yellen might bring a bit of positive colour to the proceedings when she delivers her 2-day Humphrey Hawkins lecture to Congress starting tonight. Will interest rates continue to be slowly hiked, as previously indicated? Is the US economy more robust than we think? How concerned is the US about the global road map in terms of falling growth and stock market gloom? M/S Yellen must not waffle at these lectures. Bold statements and actions are a pre-requisite. In fact a positive statement will suffice. Banks and healthcare suffered yesterday. Walt Disney posted better than expected numbers beating the street with EPS $1.63 against expectations of $1.45 a share. That was not the case for the other media giant, Viacom, which badly missed and saw it shares larruped by 21%! Google/Alphabet CEO $199 million bonus warmed to cockles of Wall Street’s heart. If the profits are made no one should have a problem with this emolument. But PAY YOUR TAX!
Shanghai and Hong Kong are still closed for New Year celebrations. The Nikkei had another dreadful session thanks to a strong Yen ($/Y114.20) – closed down 2.3%. Also a negative interest rate is not popular if the government refuses to deal with its ailing economy, like spending money on infrastructure, thus creating employment and wealth. The ASX closed down 1.27% despite some remarkable numbers from CBA whose profits were up 4%. This bank has less than 2% of its lending into commodities and energy – amazing. This morning there were encouraging results from Heineken and Carlsberg, the latter cutting their loss to DKR 1.7 bn. Maersk posted saw profits sharply lower than last year with lower freight charges. ARM posted a stellar 17% increase in 4th quarter profits with final dividend up by 25%. ARM is more than just Apple. It does chips for smartphones and also automative chips in car equipment. Tullow posted a loss of $1.03 billion with a 27% drop in revenues to $1.6 billion. Shares have fallen from £16 a year ago to £1.60 today. There will be concerns over banking covenants being met. The FTSE is expected to be up 20 points at the opening.
U.K. earnings this week – 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 – Wednesday – HUMANA, TWITTER, EXPEDIA, ZYNGA, Thursday – CONAGRA, CBS
Economic data this week – 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