TODAY’S FAYRE – Friday, 2nd September 2016
“I must go down to the seas again, to the lonely sea and the sky,
And all I ask is a tall ship and a star to steer her by;
And the wheel’s kick and the wind’s song and the white sail’s shaking,
And a grey mist on the sea’s face, and a grey dawn breaking.
I must go down to the seas again, for the call of the running tide
Is a wild call and a clear call that may not be denied;
And all I ask is a windy day with the white clouds flying,
And the flung spray and the blown spume, and the sea-gulls crying.
I must go down to the seas again, to the vagrant gypsy life,
To the gull’s way and the whale’s way where the wind’s like a whetted knife;
And all I ask is a merry yarn from a laughing fellow-rover,
And quiet sleep and a sweet dream when the long trick’s over.”
John Masefield – poet laureate – 1878 –1967
With something over £1 billion spent in the transfer market since the start of the season and the closing of the transfer window yesterday, one could be forgiven for suggesting that the football leisure industry has taken leave of its senses. The money that Sky and BT have poured in to the game means that players are now earning ridiculous sums of money with loyalty no longer a respected requirement. You’ll all be pleased that these levels of remuneration leave most bankers in the shade! We just have to live with that anomaly – pure madness – but it looks as if the game will become polarised within say 15 clubs with others unable to compete.
I am much looking forward to Saturday week – Fulham v Birmingham City. Humble Fulham have brought in 14 players since the summer – most on loan with the largest price tag of £3.8 million. Though now second in the Championship, I hope paucity of these acquisitions don’t expose their mediocrity.
So Ed Balls, looking to maintain his brand and re-fill the family coffers with speaking engagements, lecturing at Harvard plus fees from other lucrative ventures, takes to the floor in ‘SCD’ tomorrow. Such a pity he is not trying to get the Labour party back on its feet and prevent it from running around like a headless chicken – Oh yes I know too much of a centrist! I notice that BBC’S Naga Munchetty is a tasty 12/1 to finish top lady in ‘Strictly.’ She ticks all the boxes for me – personality + – so I shall be stepping in to the betting ring for a modest wager!
So the holiday period is all but over. However I am starting to feel decidedly uncomfortable at how equity markets are remaining almost serenely calm. Corporate profitability seems to be under the cosh again with average P/E ratios rising to 17.3 times, which is plenty rich enough for most peoples’ blood. The Street of Dreams seems to think that Hillary Rodham-Clinton is a ‘slam-dunk’ as the 46th President of the US. I am far from certain that were she to land the spoils, that she would be that inspirational as a standard bearer for business. Yesterday the US posted some pretty moderate manufacturing data, which will dampen Mme Yellen’s enthusiasm, hopes and dreams of raising rates modestly before the end of the year. Yet, yesterday the Street of Dreams closed its session virtually flat, despite the biggest weekly drop in oil prices for eight months. One can only surmise two thoughts; firstly Wall Street must have great expectations for a +200k Non-Farm payroll number at 1.30pm today and secondly and most significantly, global equity markets, apart from the US, remain underpinned by QE – hence lulled in to a sense of false security.
Looking at a little of the nitty-gritty from yesterday’s trading, punters enjoyed quite a keen appetite for gaming stocks, triggered by a clampdown on corruption in Macau, which provided a platform for the associated companies, resulting in investors enthusiastically picking up the bit. Unsurprisingly, Wynn Resources and Las Vegas Sands both added 5% with MGM trotting behind gaining 2%. Other stocks that purred yesterday included Hewlett-Packard +3.2% and Charter Communications +4.5%. Ahead of next week’s iPhone7 presentation Apple added 0.6%.
I would love to have been a fly on the wall at Wednesday’s Chequers meeting, hosted by the PM. Clearly the PM will have her mitts on the tiller when negotiations are finalised with the EU, but how will the ‘negotiation-pie’ be split up between FCO’S Boris Johnson, David Davis and Dr Liam Fox? It appears that the three of them need to mend some personal fences. When will Article 50 be invoked? No doubt all will be revealed around party conference season. Anyway, it was good to see contrary to the ‘REMAIN’ and Establishment’s insistence, there is life in the UK economy, as was illustrated by very decent manufacturing data – far better than most could possibly have hoped for. The Pound rallied accordingly to $1.3233. I know ‘one swallow does not make a summer!’ However this was encouraging news for those of us who have taken stick for our BREXIT convictions. Construction data due at 9.30am this morning is also expected to be positive. I accept that it will only be fair to judge the UK’s performance perhaps in 6 months’ time. These trade negotiations will be a minefield of superficial intransigence. However pragmatism will win the day. Also, lest we forget, ‘faint hear never won fair lady!’
Yesterday the FTSE made a vain attempt to indulge in a ‘bear-squeeze-rally’ on the back of a strong performance from banks and the mining sector. This rally had no legs at all and the FTSE 100 ended the session yesterday down 0.5% at 6745. Berkeley Group said sayonara to the main index and in the same breath it welcomed Polymetal, the Russian based miner. Needless to say BP and Shell lost some glitter on the back of lower oil prices. It was interesting to note that Russia has agreed to be involved in talks with OPEC. GKN rose 4.8% on the back of bid talk and rumour.
Asia, like the rest of the world was waiting for August’s US employment data, which is expected to confirm that 205k jobs were created, with unemployment at 4.9% likely to remain unchanged. The ASX closed 0.8% down thanks to drifting oil and commodity prices and the NIKKEI finished the session near enough flat. Just after lunch the Shanghai Composite was up 0.13% and the Hang Seng was 0.37% to the good. At the time of writing (8.40am) the FTSE is up 25 points having opened up at that level. McCarthy & Stone disappointed – down 11.5%! Go-Ahead pleased its acolytes – up 4%. Ryanair announced an impressive 96% load factor for August – shares +0.4%.
London is reported to have lost its grip as the leading global FX trading centre, thanks to increased activity in the Renminbi, which saw Asia’s share of the market increase from 15% to 21%. London’s share dropped from 41% in 2013 to 37.1% and New York supposedly has 19% market share. Also some senior commentators think that the BREXIT decision and trading misdemeanours by banks such as HSBC and Barclays have exacerbated the situation. I am not so sure about those transgressions. I also believe that London remains a superb trading centre. I think that perhaps a loss of risk appetite and draconian regulation may be nearer the mark for London’s falling revenues.
UK companies posting results this week – Friday – Go-Ahead Group
Economic data this week – Friday – UK PMI Construction Spending, US Trade Balance, US Non-farm payrolls & employment data
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