TODAY’S FAYRE – Wednesday, 9th March 2016
‘It is a foolish thing,’ said I,
‘to bear with such, and pass it by;
yet so I do, I know not why!’
And at each clash I would surmise
that if I had acted otherwise
I might have saved me many sighs.
But now the only happiness
In looking back that I possess –
Whose lack would leave me comfortless –
Is to remember I refrained
From masteries I might have gained,
And for my tolerance was disdained;
For see, a tomb. And if it were
I had bent and broke, I should not dare
to linger in the shadows there.
Thomas Hardy – poet – 1840 – 1928
Sometimes the law is an ass! Tom Hayes is in jail, found guilty of LIBOR manipulation and will be kicking his heals for 11 years at Her Majesty’s pleasure, though may be out after seven, with good behaviour. Then 6 brokers are found not guilty for their role in the LIBOR fixing trial – we understand these people were associates/friends/colleagues of Mr Hayes. Then we hear that the Court of Appeal has refused Mr Hayes leave of appeal against his conviction. That cannot be quite right! That decision does not sound like British justice at its best!
So it was Governor Mark Carney’s day of reckoning before the Treasury Select Committee yesterday. With Sir Jon Conifer at his elbow (responsible for Financial Stability) he strode into Portcullis House to answer questions from an eclectic bunch of MPs about the effect ‘BREXIT’ might have on the UK’s financial system, whilst at the same time supposedly maintaining the BOE’S neutral stance towards the EU Referendum on 23rd June 2016.
Mr Carney had put his communications department to work the day before, stating that the BOE was ready, willing and able to provide all the liquidity that might be required, were markets to react badly to the threat of BREXIT. Some of us thought this was rather strange implying BREXIT could be disastrous. Those less emotional and more objective, such as Palmore’s Simon French, felt Mr Carney had to flag up this facility by way of saying the BOE was geared up for all eventualities and therefore could not be accused of being caught napping on the job.
Mr Carney chose his words very carefully. Though he never spelt out in words of one syllable that he was for remaining in the EU, those listening to the content of his answers coupled with his body language would have been left in no doubt in which direction Mr Carney would be casting his vote. The Governor made it crystal clear that he felt a ‘Vote Leave’ vote could create turmoil, resulting in a cut back in business activity, with many jobs going to other financial centres in Europe. He also felt that there was a chance that interest rates may have to rise.
In fairness to Mr Carney, he was being a prudent investment banker, which is what he is paid to be. However I think he went a bridge too far, by candidly proffering a negative outlook. He certainly incurred the wrath and indignation of Jacob Rees-Moggs MP, who has an intellectual wit laced with sarcasm, coupled with the bite of a serpent’s tongue, which the Governor did not take too kindly to. The exchanges were raw and in the case of Mr Rees-Moggs not always courteous. Though not guilty as many charged him of officially casting his vote to remain in the EU, it would not be rocket science in guessing the Governor’s preferred route. Interesting to note that in an interview Lord Mervyn King told BBC radio he had yet to make up his mind on the Referendum and also refused to criticise Mark Carney – Alan Greenspan please note how to behave properly!
In response to China’s dreadful trade data the FTSE eased by 57 points to 6125. It was the damage to the mining sector that took the wind out of the FTSE’s sails. I cannot ever remember a session when so many substantial companies took such a big percentage hit in one day – Glencore 18%, Anglo American -15%, Rio and Antofagasta 9% and BHP 8.5%. The other main story to capture the headlines was this unknown predator of Burberry, who has supposedly built a 5% stake. Burberry have been blessed with three exceptional CEOS – Rose Marie Bravo, Angela Ahrendts and more recently Chris Bailey. All three had outstanding qualities. Many thought Mr Bailey not capable of maintain Burberry’s star fashion quality and running the shop. I think he has done it well. With the Far East virtually collapsing as a captive audience, Mr Bailey has done well. In the past year Burberry’s shares have fallen from £19 down to £11 a month ago but have been rallying since – up 6.5% yesterday to £14.68. Who is this spurious predator? We shall know by 22nd March who will have the hand in marriage of the LSE – Deutsche Boerse or the aggressive ICE or will the LSE remain independent. If it does, it won’t be for long – markets are global. However it would be good to see the LSE as the centurion rather than the spear carrier. Inditex posted great numbers with profits up at E2.8 billion. VW was issued with a subpoena by the US DOJ under bank fraud law over emissions issues. Shares may fall by 3%. Russia’s Rusal saw a 53% drop in profits for the 4th quarter. Also E.ON the German utility posted record losses but not as bad as expected – shares may rally by 2%. Prudential does not post its numbers until about 1o.00am this morning. Many will be interested in what Mike Wells, the CEO who took over from the very successful Tidjane Thiam has to say about the future. Shares have fallen 20% since he took over in June 2015 – I hasten to add not his fault. Markets have been tough in fund management, pensions and insurance, but we need good news!
The US equity markets reacted similarly to Europe. Some risk came off the table yesterday with the DOW easing by 0.64% with the S&P losing a more measurable 1.12% with the NASDAQ lacking lustre – -1.26%. It was the energy sector that suffered most, losing 4% yesterday. Some of the big beasts from the tech sector also lost ground – Apple and Intel both lost 1%, Twitter 4% and Alibaba 2.5%. Citigroup also did not fare well on news that investment banking activity had fallen away from expectations – down 3.6%. Apart from Australia it has not been a great session in Asia this AM. The ASX is up 0.49%, though the Shanghai Composite is easier by 2.68%, with the Hang Seng -0.51% and the Nikkei -0.84% at 6.40am.
UK companies posting results this week – Wednesday – DS Smith, G4S, StatPro, Prudential, Lookers, Thursday – Aldermore, Cineworld, Michael Page, Ophir, Marshalls, Robert Walters, Amec, Wm Morrison, Friday – Pace, Old Mutual, Computacenter
US companies posting interim results – Korn/Ferry, Thursday – Dollar General
ECONOMIC DATA – Wednesday – RICS, UK Industrial production and Manufacturing output, Thursday – BOE quarterly bulletin, Friday – UK Trade Balance
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