TODAY’S FAYRE – Tuesday 23rd August 2016


“That was a pretty one,

I heard you call

From the unsatisfactory hall

To the unsatisfactory room where

I Played record after record, idly,

Wasting my time at home, that you

Looked so much forward to.


Oliver’s Riverside Blues, it was.

And now I shall,

I suppose, always remember how

The flock of notes those antique negroes blew

Out of Chicago air into

A huge remembering pre-electric horn

The year after I was born

Three decades later made this sudden bridge

From your unsatisfactory age

To my unsatisfactory prime.


Truly, though our element is time,

We are not suited to the long perspectives

Open at each instant of our lives.

They link us to our losses: worse,

They show us what we have as it once was,

Blindingly undiminished, just as though

By acting differently, we could have kept it so.”


      Philip Larkin – poet – 1922-1985    


“I know not what others may choose, but, as for me, give me liberty or give me death! I know of no way of judging the future but by the past. For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth; to know the worst and to provide for it!” – Patrick Henry – US attorney & politician – 1736-1799


Matteo Renzi, Angela Merkel and Francois Hollande looked resplendent in the hazy Italian sunshine standing ‘four-square’ together on a tiny island off Naples yesterday in their quest to unite the EU into deeper and controlled federalism. We wish them well and a bright future. The threat of Federalism is one of the major reasons 17 million people voted to leave the EU in June. If these august national leaders want their dream to come true, they must change their stance and adopt agreed Eurozone policies and not the EU. There is a very distinct difference.


I have received some stick, probably deserved, on twitter in suggesting that Manchester City’s manager, Pep Guardiola had been impatient with Joe Hart, England’s goal keeper. It was pointed out to me very succinctly that no less than three managers – Mancini, Pellegrini and Guardiola had found fault with Hart’s technique! Managers of that quality cannot all be wrong!


Though yesterday was a day of reflection, holiday torpor with a high degree of trader inertia, there was plenty of corporate news to keep market practitioners not only amused but very much on their toes, particularly the M&A arena with drugs and food to the fore.


Dealing with the far-east first, ChemChina agreed to pay $43 billion for Syngenta. Surprisingly the CFIUS nodded their approval for this marriage with almost indecent haste. Shares in both companies were very volatile. Initially the market felt the deal might meet with resistance from the regulator and the Syngenta shares fell sharply but after the necessary support they rallied by 12%. ChinaChem is not unfamiliar with European acquisitions and it also own Pirelli and Karuss Muffei. This is the second large chemical deal that markets have been confronted with. We await the outcome of the proposed acquisition of Monsanto by Germany’s Bayer – a regulatory minefield. These deals follow in the wake of the $150 billion merger between DuPont and DOW Chemical.


Eighteen months ago Pfizer, the world’s largest drug, pharmaceutical and health mogul tried to buy Astra Zeneca for, I think, £55 billion. It failed due to concerns from the Obama administration that the deal was a tax scam, the energetic defensive initiatives of Astra CEO Pascal Soriot and protectionism from Sir Vince Cable. Then the proposed acquisition by Pfizer of Allergan (Botox) in a $150 billion deal fell down. Medivation, a more digestible morsel at $14 billion, announced over the weekend seems likely to go through. Drug pipelines remain an acute problem, with patents running out with indecent haste and the demands for cures increasing in a very competitive environment exacerbated by people living longer. So we expect that there will be plenty of deals of this nature with every biotech which has a chance of success looking vulnerable. Pfizer are paying a 21% premium for Medivation to secure their prostate cancer drug Xtandi. $80 billion are spent every year on cancer drugs and this figure increases by 10% every year.


VW problems just won’t go away with CarTrim, a seat maker for the Golf and Passat and ES Automobilguss (gear box accessories) feeling that VW’s emissions misdemeanour has cost them money; hence they are holding up production for these cars mainly in Wolfsburg, where 27,000 workers are affected. Compensation for loss of earnings is being sought.


Roll on September – the name tags in the school uniforms, back to work and focus on the real economic, corporate and political issues of the day. In terms of market activity we seem to have been drifting aimlessly for some time. Yesterday the FTSE closed down 30 points to 6828 – down about 2% from its recent high. Yesterday it was the mining sector that took a bit of a hit on the back of the Dollar easing, oil falling 3% and commodity prices drifting. The likes of Fresnillo, Randgold and Glencore suffered the most falling by between 3% and 6.5%. This is but a mere bagatelle when one considers the likes of Anglo American have added 400% since January, Randgold has doubled in price in a year, with Fresnillo up 300% in the past year and Glencore 250% since January 2016. These temporary blips are entirely understandable.


Activity on the Street of Dreams yesterday was almost as uninteresting as its peers in Europe with the DOW closing down 0.12% and the S&P 500 by just a smidgen down 0.06%. The NASDAQ finished just above the Plimsoll line – +0.12%. But for the frenetic M&A activity Walls Street might have been struggling for news. However I suppose it has the prospect of shifting through Janet Yellen’s tea leaves and those of other Central banks after speeches in Jackson Hole Wyoming on when the US will hike rates again this year. I say hike – 25 basis points sometime between now and Christmas. Asia was positively sepulchral – ASX had a little life about it and it closed up 0.7% with the NIKKEI easing by 0.6%. Just after lunch the Shanghai Composite was up 0.16% and the Hang Seng was down 0.16%.

Rank Group posted decent numbers despite failing with 888 Holdings to acquire William Hill. Persimmon’s figures were very encouraging post BREXIT with viewings up 17% and sales up 20%. The FTSE was up 36 points at 6864 at 8.40am


Neil Woodford, one of the UK’s most respected investors has scrapped bonuses at his firm, arguing that they are “largely ineffective” in boosting performance. His firm’s 35 staff will get a rise in basic pay and benefits as compensation. Mr Woodford, whose firm has £14bn under management, built a reputation as star stock-picker at Invesco Perpetual. I doubt this move will be a catalyst for other fund managers, many employing numerically more people. However his policy is the correct one, discouraging managers from taking undue risks.


UK companies posting results this week – Tuesday – Rank Group, Persimmon, Kier, Wednesday – Xaar, Costain, Carillion, Hikma Pharmaceutical, Paddy Power Betfair, Glencore, OneSavings Bank, WH Smith, Thursday – STV Group, John Laing Group, PlayTech, Jimmy Choo’s, Friday – Restaurant Group, Lavendon Group, Marshalls, Computacenter   US companies posting interim results this week – Tuesday – Toll Bros, Best Buy, La-Z-Boy, Wednesday – Williams Sanoma, Thursday – Dollar Tree, Tiffany’s, Sears Holdings, Autodesk, Friday – Big Lots

  Economic data being posted this week – Tuesday – BBA Mortgage approvals, US New Home Sales, Wednesday – CBI Realised sales, US GDP, Thursday – US initial Jobless Claims, Germany’s IFO, Friday – UK 2nd quarter GDP estimate. 


David Buik

Market Commentator – Panmure Gordon & Co

+44 (0)20 7886 2775Mobile – 0044 7788 144 877

Panmure Gordon & Co

One New Change | London | EC4M 9AF | United Kingdom

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