TODAY’S FAYRE – Wednesday, 25th May 2016


“Can the bald lie? The nature of the skin says not:

it’s newborn-pale, erection-tender stuff,

every thought visible,—pure knowledge,

mind in action—shining through the skull.

I saw one, a woman, hairless absolute, cleaning.

She mopped the green floor, dusted bookshelves,

all cloth and concentration, Queen of the moon.

You can tell, with the bald, that the air

speaks to them differently, touches their heads

with exquisite expression. As she danced

her laundry dance with the motes, everything

she ever knew skittered under her scalp.

It was clear just from the texture of her head,

she was about to raise her arms to the sky;

I covered my ears as she prepared to sing, roar,

to let the big win resonate in the little room.”


Jo Shapcott – poet – 1954-


 I would like to go ‘off piste’ today in terms of commenting on the political fragility of some of the key component countries within the European Union. Many of these countries look as if they are about to implode or keel over at the drop of a hat. Germany has never looked more politically unstable with Angela Merkel currently looking like she could easily be thrown out of office in September 2017 unless there is a dramatic improvement in the immigration crisis and that looks highly unlikely.


Francois Hollande is conceivably the most unpopular President France has ever had (personal popularity down to 17%). Could he be succeeded by Le Pen, Sarkozy or even Juppe at the next election in April/May 2017 – the mind boggles? Italy’s Matteo Renzi could be tossed out in a moment of Italian frenzy!  Don’t laugh he might be replaced by the Italian comedian Bepe Grillo. You think that is funny? I certainly don’t. Spain’s Rajoya still cannot form a government. Portugal’s Antonio Costa still has no overall majority and nor does the Belgian Government which was without an elected government for 589 days going back to 2010. Finally Greece; PM Tspiras governs on a knife edge and could be hurled in to ignominy in one vote, despite a deal being cobbled together last night with the EU and IMF, allowing another €5 billion loan to be made with little prospect of it ever being paid back!


 Just to finish this rant off, anyone who is not quite deeply concerned about Europe’s banking sector needs to wake up and smell the coffee! If any of my followers have looked at the recent share price charts on banks I have distributed may understand what I am driving at. From Germany, to Italy, to Spain and to Portugal, the outlook is unappetising. The European banking sector could be short of as much as €300 billion of necessary extra capital. In that kind of climate do major international banks really want to head for Frankfurt or Paris rather than stay in a proven centre for international business such as London – BREXIT or no? Think again! Just as an illustration just look at Germany’s Deutsche Bank down 44.6% in the last year and Italy’s UniCredit – down 40% in the same period. Interesting to note that Deutsche’s debt rating was downgraded a notch by Moody’s to Baa2.


So back to reality, realising that my concerns will only fall on deaf ears! Equity geeks had a great day yesterday and I really am trying to get my head around the new found euphoria. Yes, I get the learning to live with a 25 basis point US FED rate hike in June or July, though the FED’S James Bullard was less than convincing on growth prospects, conceding that GDP was currently running at a rate of about 1.6% and that Consumer sales in recent quarters were insufficient to set the world on fire. The Labour market, inflation and wages were very much on track to precipitate a hike, but I wonder! Oil prices were flirting with the $50 threshold price and the Dollar itself was having a terrific run on the rails.


However I was less than convinced that the Street of Dreams should purr like a Cheshire cat as the DOW added 1.22%, the S&P 500 1.37% and the NASDAQ a very handsome 2%. Banks blazed the trail at the prospect of higher rates with the likes of JP Morgan and Citigroup adding 1.5%. 3Ms had a decent run on the rails – up 1.5% and Microsoft scrapped for the yellow jersey adding over 3%, which gave credence to the NASDAQ’s performance. Apple grabbed 1.47% in value, which was not unhelpful. Also Alphabet added 2.2% whilst cocking a snoock at the French authorities raiding their offices for allegations of tax irregularities. Not surprisingly Monsanto turned down Bayer’s $62 billion bid. However the door has been opened for talks suggesting if Bayer significantly improved the bid, ‘Turkey could be talked!’ There is still of course global regulators to deal with!


London enjoyed the almost the same level of euphoria for similar reasons to the Street of Dreams. Just add the fact that ‘REMAIN’S’ poll lead over ‘LEAVE’ widened which gave solace to those with faint hearts, who have recently had their cages savagely rattled by Messrs Osborne, Carney, Lagarde & Co.’ That coterie of luminaries sounds like a firm of undertakers, don’t you think. Jacob Rees-Mogg was certainly not included amongst the scaredy-cats as he ripped in to Governor Carney for allowing himself to become politically embroiled in BREXIT, which The Treasury Select Committee member felt was beyond his brief. Mr Carney was having none of it. The Governor, very definitely, has a duty of care to Government and therefore is caught between a rock and a hard place. Personally I feel some of Mr Carney’s language was a tad intemperate and a tiny bit inflammatory. Beauty is in the eye of the beholder. Chancellor Osborne also posted less than encouraging budget deficit and borrowing requirements. Borrowing for April 2016 was at least down on last year. The FTSE 100 closed up 82 points at 6219. Banks played the matinee idol role, added between 2% and 4.8%. Tesco was the outstanding performer adding 6.8%.


Switzerland’s BSI had a tough time of it in Singapore with a $100 million penalty handed out over a scandal at a Malaysian state fund. The EU eventually waved through the AB InBev/SAB Miller merger. Greg Tufnell former boss of Mothercare has teamed up with a Portuguese consortium headed by Maria Soares Bento (owner of supermarket chain) and look a warm order to buy BHS. Today at the TSC we hear from Grant Thornton and Chappell’s lawyers in regard to the advice given to the forlorn entrepreneur, who bought BHS for £1. The Hinckley nuclear power deal looks a dead duck as there is little possibility of any deal being consummated or power station being built until 2025. The 12 largest investment banks have seen deal revenue drop by 25% in the first quarter such is the level of uncertainty over cross border M&A activity.


There were some good results on Dixons Carphone and Zoopla this morning, but all eyes were on M&S’s final results. Profits were up 4.8% to £689 million – a far cry from £1 billion in 2007. Revenues were up a smidgen to 2.4% to £10.6 billion. Costs were disappointingly high. Food sales for the year were adequate – +0.2% LFL. However clothing fashions remain dowdy – Clothing & merchandising sales were DOWN 2.9% LFL – Total UK -1.1% LFL – Not pretty reading. £150 million has been returned to shareholders and the dividend was slightly increased. Investors were underwhelmed – shares down 6.5% at 8.10am.

In Asia the ASX closed up 1.5% and the NIKKEI by the same amount with the US’s hallmark of temporary joy. At lunch the Hang Seng had risen like the proverbial grilse – +2.6% and the Shanghai Composite was down 0.2%. At 8.10am the FTSE 100 was up 40 points at 6259.


UK companies posting results this week – Wednesday – M&S, Babcock International, Pennon, Intertek, Dixons Carphone, Shaftesbury, Thursday – United Utilities, PayPoint, Imagination Technology Group, Tate & Lyle, DMGT, Friday – Bodycote


US companies posting results this week – Wednesday – Tiffany’s, Tilly’s, Williams-Sanoma, Thursday – Dollar Tree, Dollar General, Abercrombie & Fitch, Fred’s, Sears, Chico’s FAS, Friday – Big Lots


Economic diary for the coming week – Thursday – US initial Jobless Claims, Friday US GDP price index.


David Buik

Market Commentator – Panmure Gordon & Co

+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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