Monthly Archives: April 2016

HOW ABOUT THESE ODDS FOR SUNDAY TIMES BUSINESS EDITOR?

Sunday Times Business editor – BECKY BARROW – 6/4, JAMES QUINN – 9/4 JAMES ASHTON – 3/1 IAIN DEY – 5/1 JEREMY WARNER – 6/1 RUTH SUNDERLAND 6/1 NILS PRATLEY – 8/1, BEN MARLOW, JAMES MOORE – 16/1

 

These are purely suggestions

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TODAY’S FAYRE

TODAY’S FAYRE – Friday, 29th April 2016

 

The orchards half the way

From home to Ludlow fair

Flowered on the first of May

In Mays when I was there;

And seen from stile or turning

The plume of smoke would show

Where fires were burning

That went out long ago.

 

The plum broke forth in green

The pear stood high and snowed,

My friends and I between

Would take the Ludlow road;

Dressed to the nines and drinking

And light in heart and limb,

And each chap thinking

The fair was held for him.

 

Between the trees in flower

New friends at fairtime tread

The way where Ludlow tower

Stands planted on the dead.

Our thoughts, a long while after,

They think, our words they say;

Theirs now’s the laughter,

The fair, the first of May.

 

Ay, yonder lads are yet

The fools that we were then;

For oh, the sons we get

Are still the sons of men.

The sumless tale of sorrow

Is all unrolled in vain

May comes tomorrow

And Ludlow fair again.”

 

 

A.E. Housman – poet – 1859-1936

 

 

 

We were out late last night but could not wait to watch the final episode of ‘Line of Duty’, which had been recorded.  And was it worth waiting for! WOW! – Such a finale! Even though Keeley Hawes was murdered in the penultimate episode, Adrian Dunbar, Martin Compston, Craig Parkinson and Vicky McClure all put in memorable performances to bring this fantastic ‘cops & robbers’ drama to a breathtakingly exciting and violent ending (won’t spoil it for those who have yet to view it). Bring on the next series!

 

 

It looks as though PM Cameron will go to any lengths to stay in the EU.  Two weeks ago it was Lord Ashdown and Lord Kinnock who shared the call centre with the PM.  Yesterday it was Lord Brendon Barber (of TUC fame) at the Caterpillar plant (thank you to my friend, Barack) and soon it is going to be Jeremy Corbyn who will share the hustings with the first Lord of the Treasury!  Whoever next?

 

 

So GB cyclist fails drug test! When will it stop – if ever!

 

 

Yesterday was yet another confused sessions for markets.  Dealers were all agreed that Japan’s BOJ let the side down with no action taken re increased stimulus packages and sentiments were mixed about the FED’s comments, suggesting a June hike was still on the agenda.  The market’s intelligentsia felt these comments were dovish, as if one looked at the PCE yesterday afternoon within the GDP data, which was in isolation very disappointing coming in at 0.5% for the first quarter. In fact they felt that the dataset was the worst possible combination – weak growth and rising inflation.  ‘Thickies’ like me saw the message as slightly ‘hawkish.’ Anyway equity geeks were certainly confused and yesterday the Street of Dreams took some risk off the table leaving the DOW down 1.17%, the S&P 500 lower by 0.92% and the NASDAQ off 1.19%.

 

 

Ironically all the stock price action happened after hours, apart from Ford, whose results were initially well received – shares up 3.8% but after hours were taken down to +0.21%. Altria pleased quietly +1.04%. However after the bell, Linkedin powered forward with much better than expected results – +15%.  Amazon more than beat the hangman with stellar numbers +12%.  So there is still some light at the end of the tunnel with a few focused companies performing with aplomb. Bombardier concluded a $5 billion deal to build some C-Series aircraft for Delta Airlines. Carl Icahn popped his head above the parapet and told the world he was lightening up on Apple shares due to huge pressure from Asia with cheaper models. Apple shares were down 3.8% but recovered some poise after hours.

 

 

What amazes me is that there is still plenty of appetite for global and cross-border M&A activity with news or confirmation of forthcoming deals in the pipeline.  Comcast is to pay $3.8 billion for animator & movie maker Dreamworld. Abbott Laboratories is to pay a gargantuan $25 billion for St Jude, the leading heart device maker. Coming up on the rails we hear that Sanofi-Aventis has gone hostile to acquire the oncologist drug maker Medivation for $9.3 billion. By any standards these are major deals.

 

 

The FTSE 100 had a flat day adding just 2 points to 6322.  Lloyds Banking Group grabbed most of the serious headlines with net profits halving to a net £654 million, after one off provisions including shelling out £790 million to buy back high interest bonds from customers.  The underlying profits were down 6% at £2.05 billion.  The shares were down 1.07% at 69.25p – still below breakeven at circa 73p. Fat cat pay was still high profile conversation with Sir Martin Sorrell unrepentant of his £70 million bonus – ‘I built the company up from scratch!’ The only way to cut his bonus is to mutilate WPP’S share price! Shire and Bunzl executives have been added to the rebuked list which already includes BP, Reckitt, Anglo-American et all!  The Credit Suisse AGM today is likely to reject remuneration for Tidjane Thiam’s management team. I suspect that Sir Philip Green is starting to feel very uncomfortable.  Though legally he has done nothing wrong, it is strange that he has no moral conscience – or little – as to the plight of 11k BHS workers – though in fairness the Dominic Chappell dynasty pulled the trigger for BHS’S demise.

 

 

Asia was left to contemplate what the NIKKEI might have done (closed for a public holiday). At the time of writing the ASX was up 0.39%, with the Hang Seng easier by 1.35% and the Shanghai Composite down 0.31%. Over the weekend rumours abound that taxation packages will be introduced with view to stimulating manufacturing output and industrial production.  

 

 

This morning IAG posted better than expected results – a profit of £155m for the first quarter against expectations of £145m. RBS, ahead of today’s results admitted that it was likely to miss the sale deadline date of Williams & Glyn Bank (branches Santander failed to pick up).  The delay may cost RBS £50 million a month. RBS posted an operating profit of £421m for the quarter, BUT there was a cumulative loss of £968m for restructuring & impairment costs and £1.19bn went to UK government. Tier one capital at 14.6% was good. Loans increased by 15% and personal banking income was up 9%. It’s a long tortuous road ahead – hence the share price of 244.8p – breakeven 503p! It will be like pulling teeth for George Osborne – desperate to get rid of this turbulent noose around the Treasury’s neck!

 

 

UK companies posting results –Friday – ASTRA ZENECA, RBS, AON. IAG

US companies posting interim results – Friday – CHEVRON, EXXON MOBIL


Economic Data – Friday EU unemployment.

 

 
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

MARKET UPDATE

The market’s reaction to rather less dovish FOMC comments than might have been expected, having left the possibility of two hikes this year on the table, the first not ruled out for June, took me by surprise. The DOW and S&P closed above the Plimsoll line and the NASDAQ just below it, courtesy of the larruping Twitter took. I suppose it’s fair to say that Kuroda-san’s level of inertia in keeping BOJ’S stimulus and rate policy unchanged did rattle the NIKKEI’s cage – down 3.6%, much of the fall contributed by a strong Yen.

 

The FTSE 100 didn’t like the uncertainty of the day’s news from Washington and Tokyo, in particular the latter. Guesswork of 1.2% GDP for Japan was probably held in derision with many hoping that more stimulus packages would be thrown at the problem, thanks to Abe-san refusing to reflate the economy through infrastructure projects. To add fuel to the fire the earnings season has been no great shakes though after hours Facebook posted a 9.9% increase in its share price, thanks to a 52% increase in revenues in the last quarter. EPS came in at 77 cents and Facebook’s stock will be split. Half an hour ago the FTSE 100 was down 90 points but it has regained some poise and is currently down 50 points at 6269 at 11.35am.

 

Mining has fared quite well (+1.5% on average) as has the oil sector down just 0.5% thanks to a strong crude oil price. Drugs were down 2%. The market was underwhelmed by Lloyds Banking Group’s results and took the stock down by 4% – now down only 1.8% to 68p – still 5p below breakeven. A profit of £2.05 billion was posted (down 6%) – Lending up 2% across key customer segments, incl: SME net lending up 5% y-on-y. On line banking numbers have increased from 11.5million to 12 million. There were no extra provisions made for PPI.  The fact that the market was poor contributed to the negative reaction to the share price. Tier One Capital came in at a generous 13%. Aggreko was unchanged as was Home Retail and Harvey Nash failed to please its acolytes – down 5%.  DOW futures are set to fall 125 points.

TODAY’S FAYRE – EU REFERENDUM DEBATE

TODAY’S FAYRE – Tuesday, 26th April 2016

 

Let us go then, you and me,

When the evening is spread out against the sky

Like a patient etherized upon a table;

Let us go, through certain half-deserted streets,

The muttering retreats

Of restless nights in one-night cheap hotels

And sawdust restaurants with oyster-shells:

Streets that follow like a tedious argument

Of insidious intent

To lead you to an overwhelming question…

Oh, do not ask, “What is it?”

Let us go and make our visit.

 

In the room the women come and go

Talking of Michelangelo.

 

The yellow fog that rubs its back upon the window-panes,

The yellow smoke that rubs its muzzle on the window-panes,

Licked its tongue into the corners of the evening,

Lingered upon the pools that stand in drains,

Let fall upon its back the soot that falls from chimneys,

Slipped by the terrace, made a sudden leap,

And seeing that it was a soft October night,

Curled once about the house, and fell asleep.”

 

 

 

TS Eliot – poet & author – 1888-1965

 

 

I was in tears for almost an hour yesterday listening to Radio 5-live posting the findings on the 14 counts of the jury’s 2-year hearing from the Hillsborough disaster in April 1989.  The South Yorkshire police, Sheffield Wednesday FC and some emergency services did not come out of this tragedy too well. Justice at last for the grieving families and Liverpool FC.  I thought Adrian Chiles handled the occasion with great sensitivity.

 

 

 

Last night The Spectator hosted a debate on the EU Referendum, sponsored by Rathbones at the London Palladium to a packed audience of 2,200 enthralled delegates. I must confess that I must ‘doff my titfer’ to Andrew Neil, the ‘Speccy’ Chairman who was the mediator for this glittering occasion.  In my humble opinion, Andrew has no peer in the realm in that capacity and last night he was on top of his game in bringing the debate to an animated crescendo! The ‘Vote Leave’ element won the vote by a wide margin, not necessarily because of content, but because the speeches by, in particular by Daniel Hannan, the Conservative MEP, Nigel Farage and Kate Hoey were so much more engaging and passionate. Hannan was on top of his game – what an orator! –  And if there were to be a ‘BREXIT’, what a huge talent he would be in the House of Commons, though I suspect he would be very much a maverick and thus, his own man. Nigel Farage was in barnstorming form and Kate Hoey, though not entirely gaff free, spoke from the heart for working class voters.

 

 

The ‘Remain’ speakers were Nick Clegg, Liz Kendall and Chuka Umunna.  The former deputy PM seemed to have ‘a monkey on his back’ last night and was very unconvincing with his Luke-warm, though impassioned arguments, only offering ‘doom & gloom’ if the UK left the EU.  There was no talk of heading for Valhalla! Liz Kendall started very well with her opening speech but sadly there was no depth to her argument and I am afraid to say Mr Umunna was very ‘lightweight’ in his presentation. Nonetheless it was a splendid occasion and grateful thanks to editor, Fraser Nelson and his colleagues for such an innovative and well-run occasion.

 

 

As was stated earlier in the week the week’s share dealing path would be decided this week by earnings and Central bank meetings in Washington and Tokyo and this morning financial life has panned out that way! Though trading was cautious yesterday, the FTSE ended the session 23 points to the good at 6284, largely due to a 10% spurt by Standard Chartered Bank, which posted results suggesting that Bill Winters and his team are starting to get their act together.  This has been a frustrating period for HSBC’s cousin. However this bank is beginning to focus on core business, whilst attempting to sell $20 billion of emerging market debt. Alison Brittain (EX Lloyds Bank) posted Whitbread’s numbers as CEO.  The results were better than expected but the shares only ended the day up 1%, as I suspect investors were marginally concerned that Whitbread has increased its debt for expansion plans. With the economy off the boil, one must trust their judgement that its brand will continue expanding. 

 

 

 

On the Street of Dreams, despite higher oil prices, there were still FOMC imponderables to consider and more dispiriting earnings from the likes of Twitter (-12%) and Procter & Gamble (-2.3%) to digest.  So unsurprisingly the DOW ended the session up just 0.07%, with the S&P 500 struggling to stay above the Plimsoll line +0.19%. The NASDAQ closed down -0.15%. The FOMC is expected to leave rates where they are at today’s meeting.  Few are convinced with the global economic vagaries under scrutiny, that a June hike is still unlikely.

 

 

But yesterday was always going to be about APPLE! The interesting dynamic is how the US tech sector is now a growing point of concern. For the first time in 13 years (51 quarters) Apple posted a 13% drop in revenues for the quarter to $50.56 billion. iPhone sales make up 60% of the revenue. Year on year sales were down 16% with China down 26% year on year. By the end of 2018 Apple is expected to have a cash mountain of $250 billion. EPS was $1.90 against expectations of $2. Profits slipped from $13.5 billion to $10.5 billion. What seemed to disturb investors most was no new toys until the autumn. When the bar is set high, expectations are huge.  Apple shares have fallen 20% in the last year and fell 7.9% yesterday after the bell.  

 

 

This morning Jes Staley, Barclays new CEO posted a mixed bag of numbers.  Profits were down from £1.06 billion to £793m – down 25%.  Impairment charges particularly to energy companies were up from £386million to £446 million. Tier One Capital was satisfactory at 11.3%.  Investment banking, especially bond business was up 46%, despite plans to make 1200 redundancies in that division, with corporate lending up 4%.  Wealth management was down 2% and high street banking appeared to make little progress. PPI claims are down 11% to £5.04 billion. Barclays share price has fallen 41% in the last year from 263p to 173p. This bank still plans to have cut 30,000 jobs by the end of 2018. The bonus pool is expected to be cut by 12%. At -0.34%.  The FTSE may open down 20 points.

 

 

Asian bourses are waiting on Janet and Kuroda and tended to be lack-lustre – The Nikkei closed down 0.36% and the ASX was lower by 0.63%.  The Shanghai Composite was just below the Plimsoll line at lunch and the Hang Seng lingered

 

 

UK companies posting results – Wednesday – HENDERSON, BARCLAYS, HOME RETAIL, AMEC FOSTER, GLAXO SMITHKLINE, LSE, ANTOFAGASTA, Thursday – LLOYDS BANKING GROUP, TAYLOR WIMPEY, HARVEY NASH, AGGREKO, Friday – ASTRA ZENECA, RBS, AON

US companies posting interim results – Wednesday – BGC, BOEING, UNITED TECHNOLOGIES, BOSTON SCIENTIFIC, BAKER HUGHES, GOODYEAR, PLAYPAL, FACEBOOK, DOLBY, Thursday – FORD, ZIMMER, CME, UPS, BRISTOL MYERS SQUIBB, ABBVIE, DUPONT, ALTRIA, AMGEN, GROUPON, LINKEDIN, PIXELWORKS, Friday – CHEVRON, EXXON MOBIL


Economic Data – Wednesday – UK preliminary GDP, FOMC, Thursday – US Initial Jobless Claims, Friday EU unemployment.

 

 
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

 

TODAY’S FAYRE

TODAY’S FAYRE – Tuesday, 26th April 2016

 

To these I turn, in these I trust—

Brother Lead and Sister Steel.

To his blind power I make appeal,

I guard her beauty clean from rust.

 

He spins and burns and loves the air,

And splits a skull to win my praise;

But up the nobly marching days

She glitters naked, cold and fair.

 

Sweet Sister, grant your soldier this:

That in good fury he may feel

The body where he sets his heel

Quail from your downward darting kiss.”

 

 

Siegfried Sassoon – poet & soldier – 1886-1967

 

 

Well it looks as though Leicester City will deservedly won the Premiership, with Spurs slipping up against WBA at White Hart Lane last night when drawing 1-1. It’s mathematically possible for Spurs to win if the ‘Foxes’ capitulate in the home run and few think they will. It will be an amazing achievement and I much look forward ironically to Claudio Ranieri coming to Stamford Bridge on 7th May 2016 with his head held very high in front of the Chelsea crowd. This will be a poignant moment for the Italian, who was summarily and probably unreasonably dismissed by Abramovich pre the Halcyon days of Jose Mourinho.

 

The media have certainly gone hunting for Sir Philip Green, baying for his financial blood. Though there are issues over the £571 million pension hole in BHS, there is no getting way from the fact that when the £1 sale sign for BHS went up, the alarm bells should have been ringing. WHY? BHS had been unprofitable for years.  Secondly, which the pundits forget, is that BHS was NOT a public quoted company and even though his behaviour may have been distasteful, Sir Philip is entitled to squirrel away what he sees appropriate, provided it is LEGAL.  If the system is flawed and we know it is, then the requisite legislation should be enacted.

 

Finally Dominic Chappell and his colleagues did not have to buy it.  It looks as though they were well short of experience in the lethal world of retail. It also appears that Mr Chappell may not have behaved with the utmost probity in milking a few million quid for the benefit of his family and himself. I have no idea who Mr Chappell’s advisors were but perhaps the quality of the advice to buy this 88 year old brand was a little short of the mark.

 

This week started inauspiciously with the FTSE 100 losing 49 points to 6260.  Mining and oil stocks retreated in to their respective shells. Today should be much more interesting as the UK earning season goes in to overdrive starting today with results from BP, Standard Chartered Bank, Whitbread and BATS. It also comes to life across the pond with a slew of companies eager to post their numbers. The first quarter efforts in the US have not been great, though banks results were less awful than expected. Xerox let the side down yesterday with its stock falling by over 13% post its results.

 

Dispiriting earnings, a softer Dollar and oil prices put the mockers on any possible rally taking place in US markets yesterday, with the DOW closing down 0.15%, with the S&P 500 easier by 0.18% and the NASDAQ by 0.21%. The downbeat mood was carried across the Pacific to Asia, where there was little positive news to smile about unless you were French – more of that down the page. At the time of writing the ASX is down 0.35%, the Shanghai Composite is easier by 0.30%, the Hang Seng by 0.68% and finally the NIKKEI by 0.46%. Japan was the recipient of a body blow in learning today that it had lost out to France’s DCNS a defence contract for 12 submarines for the Australian navy valued at $40 billion. The Japanese bidders were Mitsubishi Heavy Industries and Kawasaki and from Germany’s ThyssenKrupp.  Lockheed Martin or Raytheon will provide the weapons for these submarines.

 

Though Tata Steel would rather sell its steel empire as one job lot, it may be forced to consider doing it piece-meal.  Stuart Wilkie, Sir Terry Matthews, Sanjeev Gupta and Greybull Capital may all want a piece of the action. As Leslie Crowther said all those years ago – ‘C’mon down if the price is right!’ Though Tata operation in Port Talbot has become less of a loss making concern, the whole steel industry remains fraught with international dangers, with the UK government threatening to put its hand in its pocket for political expediency.

 

BP this morning posted a 1st quarter loss of $485 million, calculating oil at $34 a barrel.  This time last year there was a profit of $2 billion +.  The most important issue is that BP maintained its dividend yield of 8.24%.  If the shareholders are getting their loot, I maintain Bob Dudley deserves his bonus for basically saving the company. This morning the FTSE is expected to open up 15 points to the good.

UK companies posting results – Tuesday – BP, BATS, STANDARD CHARTERED BANK, WHITBREAD, FOCUSRITE, PENRAIR, Wednesday – HENDERSON, BARCLAYS, HOME RETAIL, AMEC FOSTER, GLAXO SMITHKLINE, LSE, ANTOFAGASTA, Thursday – LLOYDS BANKING GROUP, TAYLOR WIMPEY, HARVEY NASH, AGGREKO, Friday – ASTRA ZENECA, RBS, AON

US companies posting interim results – Tuesday – WHIRLPOOL, 3MS, eBAY, T-MOBILE (US), CORNING, FREEPORT MCMORAN, LOCKHEED MARTIN, HERSHEY, THOMSON-REUTERS, REYNOLDS AMERICAN, PROCTER & GAMBLE, JETBLUE, TWITTER, APPLE, AT&T, Wednesday – BGC, BOEING, UNITED TECHNOLOGIES, BOSTON SCIENTIFIC, BAKER HUGHES, GOODYEAR, PLAYPAL, FACEBOOK, DOLBY, Thursday – FORD, ZIMMER, CME, UPS, BRISTOL MYERS SQUIBB, ABBVIE, DUPONT, ALTRIA, AMGEN, GROUPON, LINKEDIN, PIXELWORKS, Friday – CHEVRON, EXXON MOBIL


Economic Data – Tuesday – US Consumer Confidence, Wednesday – UK preliminary GDP, FOMC, Thursday – US Initial Jobless Claims, Friday EU unemployment.

 

 –
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

KING OF GOWNS & BLOUSES HAS BEEN UNFAIRLY PILLORIED

‘KING OF GOWNS & BLOUSES HAS BEEN UNFAIRLY PILLORIED!”

 

Going back to 2004, it was more or less accepted that Sir Philip Green was ‘King of Gowns & Blouses’, having taken control of Arcadia, having previously added BHS to his portfolio in 2000. He had also enjoyed some success working with the likes of Sir Tom Hunter, ‘ducking and diving’ in retail’s backyard.

 

2004 was the defining year. He had a pop at M&S at £4 a share, but was outwitted and out manoeuvred by CEO Lord Rose and chairman Lord Myners. Admittedly at the time the share price had also got a bit rich for many peoples’ blood. So Arcadia and BHS went from strength to strength, resulting in Sir Philip and Lady Tina purportedly squirrelling away £2 billion in Monaco perfectly legally. Many who pay their taxes won’t have enjoyed this tilt at HMRC. Nonetheless Sir Philip will have been well advised.

 

As the years went by it became clear that retail at the lower end of the market became very competitive with virtually non-existent inflation. If retail operators are not competitive and are no longer fashion leaders they will come down with a bump – so it transpired with Woolworth, which went down shedding 27000 jobs in 2008/9 from 800 units. That was horrible but in the circumstances unavoidable.

 

So when Sir Philip Green put BHS up for sale for £1 plus the pension liability of £571 million in 2014, the writing was on the wall. Sir Philip never has been particularly philanthropic when it comes to business, nor is he anything but as hard as nails professionally. The warning lights were on. Dominic Chappell and his cohorts did not have to buy the operation. They seemed quite short of experience.

 

I have not been party to the exchanges between bankers, owners and Sports Direct’s Mike Ashley. All I can surmise is that Ashley will have been unhappy with the pension liability. Also it appears that the banking covenant was fort by £60 million. There are no flies on Ashley. He clearly felt uncomfortable as the ‘white knight in shining armour!’ In comes the liquidator. Let’s see if it can be sold off and let’s hope that comments made by Malcolm Weir of PPF to the effect that the pension scheme is protected – to what degree is speculation. Sir Philip has received bad press for this. I am less than sure that it is warranted.

EARLY MARKET SIRMISHES

Concern over China’s growing ‘debt-mountain’ and Japan’s inability to face reality in terms of its sluggish economy, gargantuan debt, its strong Yen and ludicrous stimuli facilities saw Asian markets lower. These facts were aided and abetted by lower commodity prices and oil dropping 1%. It was ANZAC day; so Australian markets were closed.

So perhaps it was unreasonable to expect the FTSE 100 to open in positive territory, contrary to early estimations.

 

Investors lost no opportunity to take more profits on mining and oil stocks, taking the FTSE 100 down 33 points to 6277 at 10.30am.  In the back of punters’ minds will be the memory of an inauspicious end to the 2nd quarter earnings posted last week. Microsoft lost 7.17% and Alphabet -5.3%.  I doubt Janet Yellen and her cohorts on the FOMC will find much meat to put through the slicer to justify a rate hike either on Wednesday or June.

 

Mining stocks shed an average of 3% and oils 2%.  Banks ahead of this week’s earnings, which I doubt will want shareholders to indulge in gleeful backward summersaults, were looking rather dreary – Standard Chartered -2.75% (tomorrow), HSBC -1.5% (next week), Lloyds -0.5% (Wednesday), Barclays unch (Thursday) and RBS -0.25% (Friday).  Keep an eye out for increased capital costs, PPI claims, regulatory fines and increased impairment charges particularly in the energy sector. RBS may post a loss of £950 million for the 1st quarter, up from £446m last year.   

TODAY’S FAYRE

TODAY’S FAYRE – Sunday, 24th April 2016

 

From Clee to heaven the beacon burns,

The shires have seen it plain,

From north and south the sign returns

And beacons burn again.

 

Look left, look right, the hills are bright;

The dales are light between,

Because ‘tis fifty years to-night

That God has saved the Queen.

 

Now, when the flame they watch not towers

About the soil they trod,

Lads, we’ll remember friends of ours

Who shared the work with God.

 

To skies that knit their heartstrings right,

To fields that bred them brave,

The saviours come not home to-night;

Themselves they could not save.

 

It dawns in Asia, tombstones show

And Shropshire names are read;

And the Nile spills his overflow

Beside the Severn’s dead.

 

We pledge in peace by farm and town

The Queen they served in war,

And fire the beacons up and down

The land they perished for.

 

‘God save the Queen’ we living sing,

From height to height ‘tis heard;

And with the rest your voices ring

Lads of the Fifty-Third.

 

O God will save her, fear you not:

Be you the men you’ve been,

Get you the sons your fathers got

And God will save the Queen.”

 

 

AE Housman – poet – 1859-1936

 

The Cameron/Obama Circus held Friday’s West-end production in the ‘Big Top’ across the road from No: 10. It was a beautifully orchestrated affair by the two ringmasters and their advisors from the Foreign Office and State Department. Their senior officials clearly wrote the script! (Back of the queue? – not an American expression!). Incidentally, in passing, does President Obama realise that about 20% of overseas investment in the US comes from the UK and US fund managers invest billion in UK stock market industry and commerce.  Is he going to ‘throw the baby out with the bath water?’ – I doubt it!

 

The presentation was masterful as both world leaders have very good interpersonal skills. The rhetoric was high class; the content was fearful, threatening and extremely worrying. In the case of President Obama, his speech and its content was not what one would associate with a special friend or relationship. If that is the best we can do for a best friend, I suspect in the future we must look elsewhere. 

 

In fairness, if I were David Cameron, I would be preening myself like a peacock! – Job done! However the fight is far from over, as many like me, don’t like being threatened by playground bullies! In the event of BREXIT, the U.K. is sent to the back of the queue/line-up for a trade deal with the US, so be it. As it now stands TTIP is a lousy trade agreement stacked in favour of the US, which so far has taken three years to negotiate and it is still not done. Any agreement that takes that long is a very average one. Also when a push comes to a shove, pragmatism will rule OK. The U.K. should not feel marginalised. 

 

I am hugely pro-United States but confess to being a tad disappointed with President Obama’s attitude to the UK in the last 8 years. He was Luke-warm about Libya and recently severely criticised David Cameron. He did not appear to be supportive over Syria until the situation was getting out of hand. What has concerned me more than anything is his refusal to engage with President Putin – despot or not. There must always be a dialogue between Russia and the West. 

 

President Obama has been visceral in his treatment of BP, and also relatively uncooperative over extradition procedure.  He blatantly had the bust of Winston Churchill removed from his office. There is little evidence of committed friendship. If the truth be told I am far from convinced that he cares too much for Old Blighty. We must hope that we have more cordiality with his successor. A good relationship with the United States is a prerequisite in the dangerous world we live in. 

 

What saddens me is that Mr Obama fails to understand that the EU is a basket case and may not even exist in 10 years. The U.K. will never be a leader in the EU – one vote for each country. Why should we be dragged down by the economic incompetence of others? Why should the UK be part of a political union heading towards federalism?  The US may well want the UK is the same playpen, making it easier to manipulate. I think Mr Cameron and President Obama may have underestimated the resolve to rid ourselves from this turbulent dream, which is becoming a nightmare.  Finally why would Mr Obama ask us to swallow the EU, allowing our courts to be over-ruled, when hell has a better chance of freezing over than the President EVER countenancing that idea back across the pond?

 

The gloves are now off and BREXIT need to post some supporting credible data in repudiation of the Government’s rather fanciful numbers sooner rather than later!

Those were my views and not those of Panmure Gordon & Co

 

Last week too much time was spent waiting for the Obama visit by obsessive onlookers like me, rather than concentrating the mind on the relevant global financial agenda. If the truth be told many bourses have done well to keep their heads above water. Perhaps in the case of the DAX and the CAC there was a degree of protection to be had from the fact that there are only 30 and 40’stocks respectively in each index and that surely is not an accurate barometer of economic activity. Certainly the visceral treatment meted out to VW, which posted a loss 0f $4.3 billion and liabilities for its duplicitous behaviour of €14 billion, seemed to do very little to damage the DAX.  

 

However on Friday what many had feared was starting to happen – other auto companies admitting to defects in their vehicles. Such was the case for Fiat Chrysler, which will be recalling 1.1 million cars for possible brake defects. In Japan suffice to say that Mitsubishi Motors lost 40% in value in three days, thanks to inaccurate and misleading mileage data. Who else will appear out of the woodwork? In passing General Motors’ numbers did not sizzle last Thursday and a few cocked-eyebrows will have appeared at CEO Mary Barra’s one-off share award valued at $29 million – alright for some!  More about executive pay later in this missive.

 

The main global indices at the end of last week looked as follows – S&P +0.17%, FTSE -0.53%, European stocks +1.60% and the Nikkei +4.30%. US earnings season saw some disappointing efforts from the likes of Alphabet, IBM, Microsoft, Caterpillar and Starbucks, though McDonald’s, Honeywell and GE bucked the rather anaemic trend. European stocks really bounced out of the traps, mainly due to a continuing aggressive QE policy, despite an unattractive spat between German Finance Minister Schauble and ECB’S Mario Draghi over monetary policy, with the former whinging about low to negative interest rate policy. Oil saw a decent rally taking crude above $43 threshold.  Mining stocks made an encouraging start to the week, but by Friday it was felt that iron ore prices had little left in the tank.

 

The US earning floodgates really open next week – see below and in the UK the bank earning season will be of real interest.  Since the major sell off from the UKFI of Lloyds Banking shares precipitated by a special dividend, its share price has made no progress. Banks are not a vogue sector, though gains from over-sold positions, have been made in the last 2 weeks. Low interest rates, the increasing cost of capital, rising impairment charges connected with non-performing loans to the energy sector may see impairments increase and there may be little sign of a drop in PPI claims. The Chancellor will want to see some improvement in RBS’S performance, with results posted on Friday, as he would hope to sell much of the taxpayer’s stake by the end of the Parliament. Barclays’ Jes Stayley at his first full results presentation since becoming CEO, is expected to have thrown all the skeletons out of the cupboard, thus creating a more appetising looking balance sheet. However the already forecasted cut in dividend will not be well received. 

 

A final comment on executive pay! I think there is a real difference between entrepreneurial remuneration and that of a manager of large businesses. I have no quarrel with Sir Martin Sorrell – done it all. Sir Richard Branson and all his brouhaha – not bothered; private company; as a maverick he can do as he likes! However in concert with angry shareholders I do care about general executive pay. So the likes of Kapoor (Reckitt), Gulliver (HSBC), Cutifani (Anglo), Ornskov (Shire), the directors of BP excluding Bob Dudley, I do care and object.  Why excluding Dudley? He’s a special case. He saved BP from virtual extinction. 

 

It is not looking good for BHS, with Mike Ashley looking as if he is out of the game. No doubt all will be revealed next week. Ending on a good note it appears, according to the Sunday Times that Tata Steel, especially in Port Talbot is becoming less of a loss making concern.

 

UK companies posting results – Monday – GVC GROUP, Tuesday – BP, BATS, STANDARD CHARTERED BANK, WHITBREAD, FOCUSRITE, PENRAIR, Wednesday – HENDERSON, BARCLAYS, HOME RETAIL, AMEC FOSTER, GLAXO SMITHKLINE, LSE, ANTOFAGASTA, Thursday – LLOYDS BANKING GROUP, TAYLOR WIMPEY, HARVEY NASH, AGGREKO, Friday – ASTRA ZENECA, RBS, AON

US companies posting interim results – Monday – XEROX, Tuesday – WHIRLPOOL, 3MS, eBAY, T-MOBILE (US), CORNING, FREEPORT MCMORAN, LOCKHEED MARTIN, HERSHEY, THOMSON-REUTERS, REYNOLDS AMERICAN, PROCTER & GAMBLE, JETBLUE, TWITTER, APPLE, AT&T, Wednesday – BGC, BOEING, UNITED TECHNOLOGIES, BOSTON SCIENTIFIC, BAKER HUGHES, GOODYEAR, PLAYPAL, FACEBOOK, DOLBY, Thursday – FORD, ZIMMER, CME, UPS, BRISTOL MYERS SQUIBB, ABBVIE, DUPONT, ALTRIA, AMGEN, GROUPON, LINKEDIN, PIXELWORKS, Friday – CHEVRON, EXXON MOBIL


Economic Data – Monday – UK Consumer Confidence, BBA Mortgage approvals, Tuesday – US Consumer Confidence, Wednesday – UK preliminary GDP, FOMC, Thursday – US Initial Jobless Claims, Friday EU unemployment.

 

 –
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

 

 

TODAY’S FAYRE

TODAY’S FAYRE – Sunday, 24th April 2016

 

From Clee to heaven the beacon burns,

The shires have seen it plain,

From north and south the sign returns

And beacons burn again.

 

Look left, look right, the hills are bright;

The dales are light between,

Because ‘tis fifty years to-night

That God has saved the Queen.

 

Now, when the flame they watch not towers

About the soil they trod,

Lads, we’ll remember friends of ours

Who shared the work with God.

 

To skies that knit their heartstrings right,

To fields that bred them brave,

The saviours come not home to-night;

Themselves they could not save.

 

It dawns in Asia, tombstones show

And Shropshire names are read;

And the Nile spills his overflow

Beside the Severn’s dead.

 

We pledge in peace by farm and town

The Queen they served in war,

And fire the beacons up and down

The land they perished for.

 

‘God save the Queen’ we living sing,

From height to height ‘tis heard;

And with the rest your voices ring

Lads of the Fifty-Third.

 

O God will save her, fear you not:

Be you the men you’ve been,

Get you the sons your fathers got

And God will save the Queen.”

 

 

AE Housman – poet – 1859-1936

 

The Cameron/Obama Circus held Friday’s West-end production in the ‘Big Top’ across the road from No: 10. It was a beautifully orchestrated affair by the two ringmasters and their advisors from the Foreign Office and State Department. Their senior officials clearly wrote the script! (Back of the queue? – not an American expression!). Incidentally, in passing, does President Obama realise that about 20% of overseas investment in the US comes from the UK and US fund managers invest billion in UK stock market industry and commerce.  Is he going to ‘throw the baby out with the bath water?’ – I doubt it!

 

The presentation was masterful as both world leaders have very good interpersonal skills. The rhetoric was high class; the content was fearful, threatening and extremely worrying. In the case of President Obama, his speech and its content was not what one would associate with a special friend or relationship. If that is the best we can do for a best friend, I suspect in the future we must look elsewhere. 

 

In fairness, if I were David Cameron, I would be preening myself like a peacock! – Job done! However the fight is far from over, as many like me, don’t like being threatened by playground bullies! In the event of BREXIT, the U.K. is sent to the back of the queue/line-up for a trade deal with the US, so be it. As it now stands TTIP is a lousy trade agreement stacked in favour of the US, which so far has taken three years to negotiate and it is still not done. Any agreement that takes that long is a very average one. Also when a push comes to a shove, pragmatism will rule OK. The U.K. should not feel marginalised. 

 

I am hugely pro-United States but confess to being a tad disappointed with President Obama’s attitude to the UK in the last 8 years. He was Luke-warm about Libya and recently severely criticised David Cameron. He did not appear to be supportive over Syria until the situation was getting out of hand. What has concerned me more than anything is his refusal to engage with President Putin – despot or not. There must always be a dialogue between Russia and the West. 

 

President Obama has been visceral in his treatment of BP, and also relatively uncooperative over extradition procedure.  He blatantly had the bust of Winston Churchill removed from his office. There is little evidence of committed friendship. If the truth be told I am far from convinced that he cares too much for Old Blighty. We must hope that we have more cordiality with his successor. A good relationship with the United States is a prerequisite in the dangerous world we live in. 

 

What saddens me is that Mr Obama fails to understand that the EU is a basket case and may not even exist in 10 years. The U.K. will never be a leader in the EU – one vote for each country. Why should we be dragged down by the economic incompetence of others? Why should the UK be part of a political union heading towards federalism?  The US may well want the UK is the same playpen, making it easier to manipulate. I think Mr Cameron and President Obama may have underestimated the resolve to rid ourselves from this turbulent dream, which is becoming a nightmare.  Finally why would Mr Obama ask us to swallow the EU, allowing our courts to be over-ruled, when hell has a better chance of freezing over than the President EVER countenancing that idea back across the pond?

 

The gloves are now off and BREXIT need to post some supporting credible data in repudiation of the Government’s rather fanciful numbers sooner rather than later!

 

Last week too much time was spent waiting for the Obama visit by obsessive onlookers like me, rather than concentrating the mind on the relevant global financial agenda. If the truth be told many bourses have done well to keep their heads above water. Perhaps in the case of the DAX and the CAC there was a degree of protection to be had from the fact that there are only 30 and 40’stocks respectively in each index and that surely is not an accurate barometer of economic activity. Certainly the visceral treatment meted out to VW, which posted a loss 0f $4.3 billion and liabilities for its duplicitous behaviour of €14 billion, seemed to do very little to damage the DAX.  

 

However on Friday what many had feared was starting to happen – other auto companies admitting to defects in their vehicles. Such was the case for Fiat Chrysler, which will be recalling 1.1 million cars for possible brake defects. In Japan suffice to say that Mitsubishi Motors lost 40% in value in three days, thanks to inaccurate and misleading mileage data. Who else will appear out of the woodwork? In passing General Motors’ numbers did not sizzle last Thursday and a few cocked-eyebrows will have appeared at CEO Mary Barra’s one-off share award valued at $29 million – alright for some!  More about executive pay later in this missive.

 

The main global indices at the end of last week looked as follows – S&P +0.17%, FTSE -0.53%, European stocks +1.60% and the Nikkei +4.30%. US earnings season saw some disappointing efforts from the likes of Alphabet, IBM, Microsoft, Caterpillar and Starbucks, though McDonald’s, Honeywell and GE bucked the rather anaemic trend. European stocks really bounced out of the traps, mainly due to a continuing aggressive QE policy, despite an unattractive spat between German Finance Minister Schauble and ECB’S Mario Draghi over monetary policy, with the former whinging about low to negative interest rate policy. Oil saw a decent rally taking crude above $43 threshold.  Mining stocks made an encouraging start to the week, but by Friday it was felt that iron ore prices had little left in the tank.

 

The US earning floodgates really open next week – see below and in the UK the bank earning season will be of real interest.  Since the major sell off from the UKFI of Lloyds Banking shares precipitated by a special dividend, its share price has made no progress. Banks are not a vogue sector, though gains from over-sold positions, have been made in the last 2 weeks. Low interest rates, the increasing cost of capital, rising impairment charges connected with non-performing loans to the energy sector may see impairments increase and there may be little sign of a drop in PPI claims. The Chancellor will want to see some improvement in RBS’S performance, with results posted on Friday, as he would hope to sell much of the taxpayer’s stake by the end of the Parliament. Barclays’ Jes Stayley at his first full results presentation since becoming CEO, is expected to have thrown all the skeletons out of the cupboard, thus creating a more appetising looking balance sheet. However the already forecasted cut in dividend will not be well received. 

 

A final comment on executive pay! I think there is a real difference between entrepreneurial remuneration and that of a manager of large businesses. I have no quarrel with Sir Martin Sorrell – done it all. Sir Richard Branson and all his brouhaha – not bothered; private company; as a maverick he can do as he likes! However in concert with angry shareholders I do care about general executive pay. So the likes of Kapoor (Reckitt), Gulliver (HSBC), Cutifani (Anglo), Ornskov (Shire), the directors of BP excluding Bob Dudley, I do care and object.  Why excluding Dudley? He’s a special case. He saved BP from virtual extinction. 

 

It is not looking good for BHS, with Mike Ashley looking as if he is out of the game. No doubt all will be revealed next week. Ending on a good note it appears, according to the Sunday Times that Tata Steel, especially in Port Talbot is becoming less of a loss making concern.

 

UK companies posting results – Monday – GVC GROUP, Tuesday – BP, BATS, STANDARD CHARTERED BANK, WHITBREAD, FOCUSRITE, PENRAIR, Wednesday – HENDERSON, BARCLAYS, HOME RETAIL, AMEC FOSTER, GLAXO SMITHKLINE, LSE, ANTOFAGASTA, Thursday – LLOYDS BANKING GROUP, TAYLOR WIMPEY, HARVEY NASH, AGGREKO, Friday – ASTRA ZENECA, RBS, AON

US companies posting interim results – Monday – XEROX, Tuesday – WHIRLPOOL, 3MS, eBAY, T-MOBILE (US), CORNING, FREEPORT MCMORAN, LOCKHEED MARTIN, HERSHEY, THOMSON-REUTERS, REYNOLDS AMERICAN, PROCTER & GAMBLE, JETBLUE, TWITTER, APPLE, AT&T, Wednesday – BGC, BOEING, UNITED TECHNOLOGIES, BOSTON SCIENTIFIC, BAKER HUGHES, GOODYEAR, PLAYPAL, FACEBOOK, DOLBY, Thursday – FORD, ZIMMER, CME, UPS, BRISTOL MYERS SQUIBB, ABBVIE, DUPONT, ALTRIA, AMGEN, GROUPON, LINKEDIN, PIXELWORKS, Friday – CHEVRON, EXXON MOBIL


Economic Data – Monday – UK Consumer Confidence, BBA Mortgage approvals, Tuesday – US Consumer Confidence, Wednesday – UK preliminary GDP, FOMC, Thursday – US Initial Jobless Claims, Friday EU unemployment.

 

 –
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

RBS – HOW MUCH LONGER MUST THE TAXPAYER CARRY THIS DEBT?

ROYAL BANK OF SCOTLAND – How much longer must the taxpayer/Government carry this gargantuan debt of £45 billion?

 

 

Many investors, particularly those with diseased-ridden minds working overtime, will have noticed that RBS’s share price has rattled up from 207p on 7th April 2016 to 253p yesterday – up 22.2%.  However RBS’S share price is still a country mile away from the taxpayer/UKFI from getting its money back (£45 billion) – 504p being the break-even price. It will not have escaped many peoples’ notice that until the last week the banking sector has not exactly been vogue. To add to the gloom, European banks are in a dire state of disrepair and probably need capital injections across the region to the tune of E300 billion.

 

UK banks report early next month and results have not make overly pretty reading – continued low interest rates; cost of capital becoming penal; PPI claims refusing to go away and the threat of higher impairment charges, particularly to the energy and oil sector, where non-performing loans must be increasing.

 

There is still another 4 years for this parliament to run, but Chancellor Osborne will be keen to sell RBS down before the next election, particularly as cutting the UK deficit and its borrowing requirement is proving to be a task of Herculean proportions. In allowing and probably encouraging Lloyds Banking Group to pay a special dividend in February, huge inroads have been made in clearing the Black Horse’s debt, very ably orchestrated by Morgan Stanley.

 

I suspect, that in the hope that Ross McEwan and his colleagues have been tidying up RBS’S balance sheet, whilst continuing to dispose of non-core assets, this bank will be coming in to remission. Assuming that the management’s efforts have been relative successful, few would be surprised if, after the disposal of William & Glyns Bank (the branches that were supposed to be bought by the Coop), UKFI will be under instruction to start selling off RBS’S shares.   RBS may well be instructed to pay a special dividend, thus precipitating the disposal of this gargantuan debt. The market will need to be on good terms with itself.  But the challenge will be met by Goldman Sachs and NM Rothschild with relish – Just think about those fees! The mind boggles! It may well be worth keeping a beady eye on this bank, which has been a real basket case!