TODAY’S FAYRE – Sunday, 28th February 2016


“Once a dream did weave a shade
O’er my angel-guarded bed,
That an emmet lost its way
Where on grass methought I lay.

Troubled, wildered, and forlorn,
Dark, benighted, travel-worn,
Over many a tangle spray,
All heart-broke, I heard her say:

‘Oh my children! do they cry,
Do they hear their father sigh?
Now they look abroad to see,
Now return and weep for me.’

Pitying, I dropped a tear:
But I saw a glow-worm near,
Who replied, ‘What wailing wight
Calls the watchman of the night? 


‘I am set to light the ground,
While the beetle goes his round:
Follow now the beetle’s hum;
Little wanderer, hie thee home!” 


 William Blake – painter & poet – 1840 – 1928


Ever since I saw the 1955 film of ‘Guys & Dolls’ based on Damon Runyan’s book, starring Marlon Brando, Frank Sinatra, Jean Simmons and Stubby Kaye, I have always attempted to take in every stage production of it in London. I particularly enjoyed the National Theatre’s effort starring Ian Charleson, Julia McKenzie and Bob Hoskins in 1982. Even though the current Chichester Festival Theatre’s production at the Savoy Theatre does not have such as star-studded cast, Sophie Thompson, David Haig and Jamie Parker make a real fist of producing brilliant entertainment with a vibrant, enthusiastic, amusing and dramatic spectacle – a huge evening thoroughly enjoyed by all!


Though the vagaries of the oil market proved to be the matinee idol for global equities’ theatre of dreams last week, banking results from HSBC, Standard Chartered, Lloyds Banking Group and RBS plus the plight of the London Stock Exchange made valiant attempts to grab the headlines in London last week. The level of volatility was seismic in the last 5 days with the net result for each bourse’s performance having little bearing to reality. Huge companies gained and lost massive percentages throughout the week – almost unprecedented even during the times of the 2008/9 financial crisis and the Iraq war going back to 2003. It is understandable that mining companies from such a trashed level should post double-digit changes in the hope that post the ‘kitchen-sinking’ of their results, there was some possibility of recovery in the air. However when it happens to large banks and it did in terms of Standard Chartered, no one can be surprised that the odd eyebrow was ‘cocked’ in surprise and concern in the process. 


To summarise, the S&P last week added 1.9% in value with the FTSE grabbing a very meaningful 2.45%, with European bourses adding an average of 2.5%, with Japan settling for 1.39% gain, despite concern over Abenomics and a strong Yen, which was unhelpful. The Shanghai Composite had a shocker, losing 6.5% on Wednesday, but closing only 3.4% down on the week.  As previously stated oil was demonstrably volatile and over influential on equity prices. Brent crude eventually finished the week up 8.8%. The Dollar was always in the driving seat and gold, having touched $1260 an ounce finished the week down to $1221 an ounce on Friday night.


IMHO, despite tough warnings of the potential danger to the UK’S economy in the event of BREXIT flagged up by George Osborne at the G-20 meeting in Shanghai, the fall in Sterling’s value in the past 2 weeks attributed to BREXIT is greatly over-stated – in fact much of it is twaddle. The Dollar is strong period. It is the only mature economy that threatens to increase interest rates in 2016. Inflation is almost consequential at 1.7% in the US, though Friday’s reading of US GDP grew at an annualised rate of 1% in the fourth quarter. In the case of the U.K. GDP grew at an annualised rate of 1.9%, a fair bit lower than the original estimate of 2.3%. 


Just to put a little more meat on the bone on the four main UK banks that reported annual results, both their results and investors/the public’s feelings towards them understandably attracted very mixed emotions.  All four banks and Barclays had roller coaster rides in terms of the performance of their share prices. By Wednesday, apart from Lloyds and HSBC, the rest were down at one point by almost double digit percentages. So for the sector, with the exception of RBS, to end last week’s 5 day trading period in positive territory was miraculous. I hasten to add that the sector’s performance in the last 3 months has been pitiful at best. 


5-day performance from 22nd February to 26th February – RBS -8.4%, HSBC +5.9%, Lloyds +15%, Standard Chartered +1.2%, Barclays +4.1%.


Cost cutting and PPI provisions and impairment charges were high on many of the agendas. HSBC’s chairman Douglas Flint will be standing down this year and CEO Stuart Gulliver next year. The woes of Bill Winters, CEO of Standard Chartered Bank, seem to get worse. So with excessive exposure to emerging markets, cutting back the balance sheet and making 15k redundancies seems a sensible though very painful remedy. Lloyds Banking Group’s shareholders were bought off by two generous dividends in the circumstances, much to the chagrin of the taxpayer who still owns 9% of the bank. PPI claims for the year were £4 billion and still the senior management backed the truck up for massively increased emolument! In fairness I suppose the share price has recovered, but the PPI claims for the last few years are disgraceful – I think £15 billion! Barclays Bank posts numbers next Tuesday and Chairman John Macfarlane and new CEO Jas Staley will be under the cosh to unveil the banks plans going forward and the roll New York will or will not play in investments banking. Investors also want updating on the ugly litigious spat between the banks and Amanda Staveley and the manner that capital was raised for the bank in Abu Dhabi and Qatar in 2008. 


On the question of emoluments, thus was also the case also for RBS’S Ross McEwan, whose package doubled in size to an alleged £3.8 million, despite RBS incurring losses for 8 consecutive years. Last year’s efforts included a £2 billion provision for US mortgage misdemeanours and PPI claims. Though Lloyds Banking Group is within a couple of pence from break even, RBS remains well and truly under water. Shares closed on Friday at 227p with break even at 502p! It seems very unlikely that the taxpayer will ever be fully recompensed in terms of the £45 billion bail-out. The banking sector will only be for brave investors for the next few months. I have no idea if it is just circumstantial, but I notice Lord Mervyn King is having his book serialised in the Telegraph, warning that the World awaits another crash, as in his opinion, regulators and banks have failed to grasp the nettle over necessary reform. Interesting thoughts, but I sincerely hope that Lord King does not pop up on the world stage with monotonous regularity like Greenspan, pontificating on the world’s economy and how he would put it right! 


Finally, suffice to say that I am devastated that the LSE’s overall control may fall in to German hands in a £20 billion merger with Deutsche Boerse. I am a progressive and I do understand free markets and greater penetration. Like thousands of others we must remember that that there is no such deal as a joint venture. Once we allow control to leave London, the LSE is on a slippery slope and the party is over. London is the financial centre of the universe. However effective the Deutsche Boerse is as an exchange, Frankfurt is a Mickey Mouse financial centre by comparison – BREXIT or no BREXIT. Good sense must be allowed to prevail. I can see Messrs Cameron & Osborne smiling like Cheshire cats, due to their pro-EU stance, but this deal is not for passionate UK nationalists or City of London operators. Xavier Rolet has done an outstanding job as LSE CEO. Everyone knows he has political aspirations to stand in the next French presidential elections, but there is no need for him to hand control to Frankfurt with such indecent haste. There are plenty of candidates to run this very successful service to the world of global investors. I am sure that chairman elect Donald Brydon and Carsten Kengeter, CEO elect and former head of UBS investment bank are pillars of financial society, but nothing will persuade me that the proposed deal is anything but the beginning of the end for the heritage and influence of the LSE – a tragedy! 





UK companies posting results this week – Monday – Keller Group, Photo-Me, Bunzl, Hiscox, Jupiter Fund Management, Tuesday – Barclays, Direct Line, Just Eat, Taylor Wimpey, Tullett Prebon, Greggs, Fresnillo, Moneysupermarket, Glencore, Ashtead – Wednesday – ITV, Dignity, Intertek, Stagecoach, Thursday – Whitbread, CRH, Admiral, Inmarsat, Denel Energy, Shawbrook, Travis Perkins, Friday – LSE, WPP


US companies posting interim results – Saturday – Berkshire Hathaway, Monday – Taser, Tuesday – Autozone, Dollar Tree, Ford Motor (sales) Wednesday – Brown Forman, Abercrombie & Fitch, Thursday – Rite Aid, Stage Stores, Ciena, Barnes & Noble, Kroger, Smith & Wesson, H&R Block, Friday – Big Lots.

ECONOMIC DATA – Monday – UK money supply and mortgage approvals, US Chicago PMI, Tuesday – UK PMI, Wednesday – US PPI and Oil inventories, UK PMI construction, Thursday – UK PMI services, US Initial Jobless Claims, Friday – UK CPI inflation estimates , US Non-Farm Payrolls & employment data. 


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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