TODAY’S FAYRE – Thursday, 11th February 2016

 

A thing of beauty is a joy for ever:

Its lovliness increases; it will never

Pass into nothingness; but still will keep

A bower quiet for us, and a sleep

Full of sweet dreams, and health, and quiet breathing.

Therefore, on every morrow, are we wreathing

A flowery band to bind us to the earth,

Spite of despondence, of the inhuman dearth

Of noble natures, of the gloomy days,

Of all the unhealthy and o’er-darkn’d ways

Made for our searching: yes, in spite of all,

Some shape of beauty moves away the pall

From our dark spirits. Such the sun, the moon,

Trees old and young, sprouting a shady boon

For simple sheep; and such are daffodils

With the green world they live in; and clear rills

That for themselves a cooling covert make

‘Gainst the hot season; the mid-forest brake,

Rich with a sprinkling of fair musk-rose blooms:

And such too is the grandeur of the dooms

We have imagined for the mighty dead;

An endless fountain of immortal drink,

Pouring unto us from the heaven’s brink.”

 

John Keats – poet – 1792-1821

 

“Great minds discuss ideas, average minds discuss events and small minds discuss people.” – Eleanor Roosevelt – First Lady USA – 1884-1962

 

FED Chairman Janet Yellen is hardly known for her presentational skills and I accept that her 2-day ‘Humphrey Hawkins’ testimony to Congress was always going to be a political and economic minefield, but, dear God in Heaven, the market was given exactly what it didn’t require in the current climate of doom and despondency – a nervous, nebulous, non-committal critique of the state of the US and global economies.  It was a classic recipe to send investors scurrying to the hills.  Sadly these mountains may not be alive with the sound of music! Admittedly it isn’t quite ‘tin-hat-time’ but M/S Yellen’s rhetoric did little to sooth frayed nerves.  However as my very sound colleague, Simon French put it very succinctly to me – It is not the FED chairman’s job to buoy up flagging equity markets!”

 

 

Anyway the nub of her comments suggested a very cautious approach to current monetary policies. Rate hikes are not off the agenda but they remain in the in-tray pro-tem. She expressed concern about China, falling global growth, the strength of the Greenback and oil prices – no surprise there! She was less than positive that the US economy was firing off six cylinders but she reiterated that wage inflation, retail buoyancy and employment data were on the whole positive. However, though she never said as much, she cannot have been doing backward summersaults at last month’s job creation – just 151k, but it was January and the weather has been inclement. Also it is not clear whether constitutionally the US could ever adopt negative rates unless Congress approves it. Also M/S Yellen seemed preoccupied over an unofficial leak to the press a year ago, which she could not comment on.  She seemed rattled by the very aggressive questioning. All in all, maybe she is of the feeling that the US economy is coming off the boil. It was far from rebel-rousing testimony.

 

Panmure Chief Economist Simon French makes the following poignant comments –

 

“It is worth remembering that these testimonies are the view (like Carney at Treasury Select Committee) of the Governor/Chairman rather than the whole committee; therefore policy signals are exceedingly poorly received as committee members feel that they are being constrained.

 

This is not an excuse for M/S Yellen’s poor communication skills but surely we have learnt none of the lessons of pre-2008 if we want the Greenspan ‘Put’ to come back every time the equity market has a wobble?

 

 

The Street of Dreams waited with bated breath and in anticipation and sent stocks north, only to be disappointed, after having had time to reflect. So the DOW surrendered all its gains – circa 100 points and the S&P and NASDAQ just kept their noises above the Plimsoll line. At the close the DOW was down 0.62%, the S&P 500 up 0.02% and the NASDAQ up 0.35%. For equities to have cracked on with unabashed joy, the FED chairman had to present a ‘gung-ho’ approach and she was nowhere near stepping up to the plate! Cisco posted good numbers and potentially a $15 billion buy back – shares up 7.7% after hours.  Amazon may also have a $5 billion share buy-back which saw the shares rally by 1.7%.

 

 

It wasn’t a pretty picture in Asia where the Hang Seng played catch up in easing by 3.9%.  The NIKKEI closed down 2.3% and the ASX closed in positive territory. Australia’s approach to Rio’s results was more positive than London’s.

 

And so to London – “Fear knocked at the door; Faith answered; no one was there!” – Not this time.  As I write at 8.48am the FTSE 100 is down 155 points at 5514. To put a little colour on proceedings – Rio down 6%, Glencore 5%, Henderson 4%, Tate & Lyle 5%. IMPS are flat – flight to quality.  There were OK results from Thos Cook, Enterprise Inns with Shire due at noon. Banks were clattered – Barclays -4.5%.  Oils were 2.5% light and cumuli nimbus clouds of doom have settled over all European bourses. That positive rally for the banking sector yesterday is quietly dissipating. The DAX is down 2.3%

 

 

U.K. earnings this week – 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 – Thursday – CONAGRA, CBS

 

 

Economic data this week –Thursday – US JOBLESS CLAIMS, Friday – UK CONSTRUCTION, US RETAIL SALES

 

David Buik

 

Market Commentator – Panmure Gordon & Co 

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