TODAY’S FAYRE – Wednesday, 24th February 2016

You did not come,
And marching Time drew on, and wore me numb.
Yet less for loss of your dear presence there
Than that I thus found lacking in your make
That high compassion which can overbear
Reluctance for pure lovingkindness’ sake
Grieved I, when, as the hope-hour stroked its sum,
You did not come.

You love not me,
And love alone can lend you loyalty;
-I know and knew it. But, unto the store
Of human deeds divine in all but name,
Was it not worth a little hour or more
To add yet this: Once you, a woman, came
To soothe a time-torn man; even though it be
You love not me.”



Thomas Hardy – author & poet – 1840 – 1928




It would appear that the price of oil is becoming the unhealthy barometer of global equity markets. It is all but omnipotent. It was the catalyst in Europe yesterday, which saw the FTSE 100 yield 75 points to 5962.  New York quickly adopted a similar stance as the DOW shed 1,145, the S&P 500 1.25% and the NASDAQ 1.47%. I think I is worth pointing out in what was a fairly nondescript session that JP Morgan Chase has set aside a further $500 million impairment contingency for loans to energy companies.  JPM’S shares fell by 4.2%.  Don’t tell me that JPM is the only bank exposed to his sector!  



In Asia this morning the ASX was down 2.1% at the time of writing and the NIKKEI was 0.85% easier, much of the loss attributable to a very strong Yen.  The Shanghai was just up 0.21% and the Hang Seng however was down 1.36% despite the HK government posting a healthy $4 billion budget surplus. European bourses are expected to open lower – FTSE -12, DAX -36 and CAC -20 at 6.45am.



I want to spend this brief missive discussing the recent machinations of the LSE and the proposed merger with Deutsche Bourse, which if successful would leave London as the junior partner – 46% to Frankfurt’s 54% – approximate valuation – LSE £9 billion and DB £12 billion – Annual revenue LSE £1.28 billion DB E2.4 billion. This is the third time that these two distinguished bourses have tried to climb in to the sack together – the last time there was any possibility of a deal, it was thwarted by OMX in 2006.



It’s worth looking at the case history of the LSE. When Dame Clara Furse was appointed CEO by Eric Cruickshank back in 2001, the LSE was virtually omnipotent and its share price was about 250p. For the next eight years Dame Clara was courted by every predator in the world – Deutsche Bourse, Euronext, NYSE, NASDAQ, OMX and a consortium from the Middle East.  She rebuffed every one of them. The LSE’s share price was also ramped up to 1800p in 2008. She handed over the reins in May 2009 to Xavier Rolet. Coinciding with the credit crisis and the collapse in stock market prices at the time, the LSE’S share price plummeted to 410p!




What happened during Dame Clara’s tenure?  The first job she had to do was to persuade Sir Brian Williamson of LIFFE to sell her the futures exchange to compliment the cash business.  The culture of trading had changed dramatically and the LSE could become marginalised without derivatives. She was parsimonious and LIFFE was sold to Euronext, who eventually sold it on to ICE. The empress had no clothes and was exposed to the vagaries of European competition.



Whilst she was commercially flirting with all and sundry and the only half decent deal Dame Clara completed on behalf of the LSE was the acquisition of Boursa Italia – OK but hardly stupendous. However during this eight year period the LSE failed to bring the world to London or take London to the rest of the world.  The LSE was also expensive with its charges, resulting in other platforms  setting up in competition – Chi-X, BATS and Project Turquoise to name but a few. The LSE share of daily turnover dropped to about 40%. It was not a great scene. No longer was London necessarily first choice for many overseas IPOS.



Then enter stage left Xavier Rolet as CEO.  He has been a revelation.  He is a good communicator. The Russell Index, Cadel and Univista are now in place with a vibrant and well-regulated AIM market. Rolet has sharpened up the quality of technology and the LSE is considered very competitive for IPOS both domestically and on an international basis.  The LSE’s show is very much back on the road. The share price of 2649p (+14.5% after the M&A chatter).



I am all for greater global market penetration and competition.  However I am going to have trouble getting my head around Germany’s Deutsche Bourse being the senior party, as London is the financial centre of the world. Brexit or no Brexit, London does not want to drown in Brussels of Frankfurt bureaucracy. Once Germany gets hold of even a miniscule percentage of control, expression and innovation would not be the two words that come immediately to mind. Long term I fear the LSE’s goose would be cooked.  Thanks, but no thanks.  Carry on Xavier Rolet – brilliant!








U.K. Companies posting results this week – 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 – Wednesday – Target, TJX, Dynergy, Thursday – GAP, Friday – JC Penney


ECONOMIC DATA – 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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