TODAY’S FAYRE

TODAY’S FAYRE – Tuesday, 23rd February 2016

“Be still, my soul, be still; the arms you bear are brittle, 

Earth and high heaven are fixt of old and founded strong. 

Think rather,– call to thought, if now you grieve a little, 

The days when we had rest, O soul, for they were long.

 

Men loved unkindness then, but lightless in the quarry 

I slept and saw not; tears fell down, I did not mourn; 

Sweat ran and blood sprang out and I was never sorry: 

Then it was well with me, in days ere I was born.

 

Now, and I muse for why and never find the reason, 

I pace the earth, and drink the air, and feel the sun. 

Be still, be still, my soul; it is but for a season: 

Let us endure an hour and see injustice done.

 

Ay, look: high heaven and earth ail from the prime foundation; 

All thoughts to rive the heart are here, and all are vain: 

Horror and scorn and hate and fear and indignation– 

Oh why did I awake? when shall I sleep again?”

 

 AE Housman – poet – 1859 – 1936

 

In the T-20 match in Johannesburg on Sunday England lost their last 7 wickets for 14 runs.  In fairness three of those dismissals were bizarre and unlucky. However take nothing away from ‘AB’S’ and ‘Amla’ contrasting batting prowess – they were sensational – the bludgeon and the stroke maker – but England’s bowling was pitiful. India will be in the driving seat at home hosting the T-20 World Cup finals, but if South Africa can forget the blues of their last visit, you’d have to fancy them to give a very decent account of themselves next month.

 

“The time has come, the Walrus said, to talk of many things – of shoes and ships and ceiling wax and cabbages and kings…! … and BREXIT

 

 Regardless of the differing views over the EU Referendum, I was very much hoping, that despite fever-pitched feelings, good manners, a degree of decorum with honour amongst thieves, might prevail. That sense of political camaraderie didn’t even last 24-hours, before the main dramatis personae – Cameron & Johnson – were casting aspersions on each other’s character coupled with comments of derision from the PM and intellectual contempt from the Mayor of London. This referendum is going to be a bruising battle. I just hope it doesn’t degenerate in to a metaphorical street brawl.

 

I think the PM and government may be slightly disappointed at the lack of big business signatories to remain in the EU. Many companies will not want to be drawn for fear of offending their clients and certainly in the City, there is evidence of gagging, as many financial institutions have been contracts with the government and EU clients.

 

It was inevitable that uncertainty concerning the outcome of the EU referendum would create some seismic waves of uncertainty. There was no disappointment in that department as Sterling fell by 2% against the Dollar – so what? Most currencies fell against the Dollar yesterday, apart from the Yen. Pro-tem, whilst the world is struggling to maintain decent growth, a soft Pound is good for exports. Conversely European equities were on a mission, with the FTSE 100 refusing to be left behind from joining in the prevailing euphoria.

 

This index added 1.5% to 6037. Rising oil prices (+6%) triggered a rally in energy stocks (Shell +3.9%), with miners blazing the trail – Glencore +11%, Rio +8%, BHP +8% and Anglo-American nearly 11%, aided and abetted by a reliable rumour that De Beers, might be eased out of the portfolio. Little concern was expressed by the threat of BREXIT and rightly so – 70% of FTSE 100 earnings are dollar related. Apart from RBS, which reports on Friday and HSBC, which disappointed its acolytes yesterday with a $858 million loss, due a significant increase in provisions for bad debts ($1.4 billion), banks had a good day in London (+2% with Standard Chartered +5.2%). HSBC’S profits were down 1% for the year at circa $18 billion. Their shares close down 0.94%, having been down over 3% at one point. The house building sector, despite good results from Bovis, lost 4%, apparently due to Brexit blues. Home Retail grabbed the yellow jersey courtesy of a left-field bid of £1.4 billion from Steinhoff of South Africa. Best Sainsbury’s sharpens up in the next 2 weeks; though for the supermarket to ‘over-pay’ would be folly.

 

In the small hours BHP posted a massive loss of $5.5 billion, which included right downs and losses incurred through dramatic fall in commodity prices. As expected the dividend was slashed by 75% – the first cut since 1986 and that loss was the first in 16 years.

 

The Street of Dreams added 1.4% on average yesterday thanks to a combination of improving sentiment, higher oil prices and the whiff of more M&A activity, thanks to informed gossip that Honeywell held talks with United Technologies (+4.95%), which has struggled recently with sales due to a strong Dollar, about a possible takeover. Fitbit did not please its acolytes and lost 15% in value after posting results.

 

Asia responded slightly negatively to a dip in oil prices over night, profit taking in bank shares and a strong Yen. The ASX closed and the NIKKEI both closed down 0.4%. Just after lunch the Shanghai Composite was down 0.8% and the Hang Seng by 0.25%. The FTSE 100 had lost 50 points at 5990 at 8.30am. IHG’s news that a special dividend of $1.5 billion was going to shareholders, saw its shares rally by 3.5%. Ladbrokes posted an expected loss but the synergy of a possible merger with Corals attracted attention from punters – +6%. We await Standard Chartered Bank’s results later in the day. A loss of about $800 million is expected. Provisions for bad debts will cause concern. HSBC is seven times as big and is better placed to cope.

 

According Howard Silverblatt at S&P Indices:

 

“Since last Friday almost 90% of the Q4 2015 earnings reported, 67.6% of the issues are beating estimates (the historical rate is two-thirds), but only 36.8% beat As Reported GAAP rule based earnings estimates and less than half, 46.8%, beat sales estimates.

  Explained ‘responsibility’ for any short fall on the cost side includes currency costs and a growing list of special one-time items (never to be repeated, of course). On the income side, helping earnings are the ‘difficult decisions made’ by companies under the heading of cost-cutting (as layoffs and location changes appear to be on the rise).”

As Reported 12-Month earnings per share (EPS) for the S&P 500 has fallen 12.5% from its Q3 2014 high, with 88.5% of companies having reported.

 

U.K. Companies posting results this week – Tuesday – BHP Billiton, Provident Financial, Drax, Persimmon, Standard Chartered Bank, IHG, Ladbrokes, Unite, Croda Wednesday – Petrofac, Barratt Development – Thursday – Lloyds Banking Group, Coats, Countrywide, Kaz Minerals, STV Group, Mondi, RSA, Merlin Entertainment, Serco, BATS, Rentokil,  – Friday – IAG, Rightmove, RBS, William Hill, Pearson

US companies posting interim results -Tuesday – Toll Bros, Wednesday – Target, TJX, Dynergy, Thursday – GAP, Friday – JC Penney

  ECONOMIC DATA – Tuesday – UK BBA Mortgage approvals, Wednesday – US New Homes sales, Thursday – UK GDP estimates, US Initial Jobless Claims

  David Buik

Market Commentator – Panmure Gordon & Co

D +44 (0)20 7886 2775

Mobile – 0044 7788 144 877

Panmure Gordon & Co

One New Change | London | EC4M 9AF | United Kingdom

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