TODAY’S FAYRE – Sunday, 12th June 2016


“On Waterloo Bridge, where we said our goodbyes,
The weather conditions brought tears to my eyes.
I wipe them away with a black woolly glove,
And try not to notice I’ve fallen in love.


On Waterloo Bridge I’m trying to think:
This is nothing. You’re high on the charm and the drink.
But the juke-box inside me is playing a song
That says something different. And when was it wrong?


On Waterloo Bridge with the wind in my hair
I’m tempted to skip. You’re a fool. I don’t care.
The head does its best but the heart is the boss –
I admit it before I am halfway across.”


Wendy Cope – poet – 1945


First and foremost I must ‘doff my titfer’ to the BBC and Buckingham Palace for an extraordinary day’s broadcasting and pageantry to celebrate HM the Queen’s 90th birthday and ‘Trooping the Colour!’ – just brilliant occasions!  Such a pity that the weather has turned inclement for today’s street parties particularly the one in the Mall for 10,000 people.  They will still make a huge amount of the occasion.


The opening game of Euro 2016 in Le Parc des Princes looked a pretty moderate affair until the Hammers Dimitri Payet rifled home a left-footed pile driver in to the top left hand corner of Romania’s net in 83rd minute– a quality goal to grace any football tournament! The show is well and truly on the road.


So much to contend with next week, markets, ‘damn lies and more damn lies’, political hysteria, the road to ‘BREXIT’, Euro2016 and may I quiver at the thought of it – 5 days of the best flat racing money can buy at ROYAL ASCOT! Hopefully Roger Varin’s ‘Belardo’ will start the meeting winning the Queen Anne Stakes followed up by Kevin Prendergast ‘Atwaad’ hosing up in the St James’s Place Stakes.


I have rarely heard such euphoric comments on England’s performance against Russia on Saturday night in Marseille from the likes of Glen Hoddle, Lee Dixon, ‘Wrighty’ and ‘Crouchy.’ England drew the game 1-1, which if they were a ruthlessly clinical side they would have won with plenty left in the tank. For effort you could not fault England – 100% in that department, but skill and execution 57%. We need to beat Wales with conviction to prevent an unhappy exit. Why are many England fans thugs? – Disgusting provocation or not from the Russians!


We have seen some hysterically led movements and high degrees of volatility in the foreign exchange (Pound), gilts and equities last week.  Much of the fall in the value of the Pound and equities has been conveniently attributed to the threat of BREXIT, with quite a wild swing in the polls in favour of ‘OUT’ (55%-45% circa). The Pound had already fallen 9% since last November due to a threat of higher rates in the US.  This threat attracted funds from the Pound, Euro etc to the Dollar. Also it should not be forgotten that the UK’s economy has been coming off the boil for some months with growth falling from 2.4% in 2016 to 2% and may even drop to 1.8% by the end of the year. So the contribution so far from the threat of BREXIT I would venture to suggest is modest.  As for equities the FTSE 100 dropped 1.6% on the week after nasty reversals on Friday alone (-2%).  This was down to a drop in oil and commodity prices and the fact that equities are starting to look fully valued.  Again Brexit has taken a disproportionate amount of blame, when observers should be looking much more at basic fundamentals.  The S&P 500 eased by 0.38% on the week, though at one point it was within 1% of an all-time high achieved in May 2015.  European stocks fell sharply by an average of 2.39% with the NIKKEI just 0.25% easier. Gold reached a 3-week high adding $2 to $1271 an ounce.


The international bond markets viewed matter slightly differently. The BREXITMANIA brigade believed that US Treasury bond funds attracted about $4.6 billion last week in comparison to $1.9 billion on average in recent weeks.  Ironically 10-year gild yields hit their lowest level for 3000 years – 1.215% – before settling at 1.24% at the end of the week.  That level hardly suggests that rates are going up, despite warnings from Messrs Osborne and Carney. I would like to pay special tribute to Sir Robert Stheeman, the CEO of the Debt Management Office, who over many years has been responsible for issuing the government debt, which he has achieved very deftly saving this country billions in unnecessary interest by his brilliant handling of gilt issuances – an unsung hero!


Figures emanating from the Bank of England earlier in the week told us that £65 billion of Sterling based assets had been moved in to other markets in April and May 2016. I am sure that is the case – prudent hedging by fund managers, but a mere bagatelle in terms of amount.   However it is worth pointing out that £250 billion was removed 2 months before the last General Election in 2015. Now that is measurable.


Whether I like it or not, there is no doubt that equity fund investing has fallen because of uncertainty.  But these investors have been unnecessarily goaded by the authorities, politicians and regulators as to the potential damage of BREXIT – just pure conjecture supposition and hearsay. Last week employment agencies Hays and Michael Page took some tap both falling in excess of 6%. The bearish comments and declining sentiment that became apparent from last week’s poor payroll numbers affected the US banking adversely with JPM, Citi and Wells Fargo losing between 1.2% and 2%.


Now to the fun and games in Portcullis House last week with Mike Ashley and Dominic Chappell leading the charge!  My word that was theatre of the most intoxicating type – the words ‘kill’, ‘premier liar’ and ‘rotten smell’ come to mind! No disrespect to Mr Chappell and his entourage but they are all spear carriers in comparison to Sir Philip Green who is due to make his appearance on Wednesday in front of Frank Field’s and Ian Wright’s respective committees – that is if he shows up having complained bitterly at the lack of impartiality. Sir Philip has questions to answer, as do his advisors. They currently do not come out of this escapade smelling of roses. Did Sir Philip block a potential rescue operation by Mike Ashley, which he strenuously denies? Sir Philip through a spokesman dismissed the idea that a plausible deal was ever on the table. Did Sir Philip offer to give Chappell first offer on Arcadia ex-Top Shop, if the BHS deal went through smoothly? Now that is what the rumour says!  What does he intend to do about the £571 million pension black hole?  Will he ‘divi’ up a couple of hundred million to placate Parliament and those 20k pensioners who feel they have been morally legged over?   I suspect he will need if he wants to deal positively with his severely tarnished reputation. Ministers will certainly want to discuss BHS’S insolvency issues.  Wednesday’s testimony will be a guinea a minute. I’d pay money to be there.



There are other little nuggets of financial news to feast on.  Rio have engaged Goldman Sachs about a possible £8 billion sale of its copper operations.  Shell is serving notice that it may quit its North Sea operations after 45 years.  Finally, as we head towards the EU Referendum vote we understand that the Bank of England and IMF could make further interventions in to the debate just before the vote. This is dangerous territory and will not be appreciated if both august institutions go past their remit and I fear they both might.  It is also felt that the BOE may be forced to cut rates if financial life becomes untenable.  I thought George Osborne thought mortgage rates would have to go up?


UK companies posting numbers – Tuesday – Crest Nicholson, Paragon Entertainment, Wednesday – Oxford Instruments, Thursday – Charles Stanley, Caretech, Poundland, Consort Medical


US companies posting interim results – Wednesday – Korn/Ferry, Jabil Circuits


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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