TODAY’S FAYRE – Sunday, 25th September 2016

 

Time present and time past

Are both perhaps present in time future

And time future contained in time past.

If all time is eternally present

All time is unredeemable.

What might have been is an abstraction

Remaining a perpetual possibility

Only in a world of speculation.

What might have been and what has been

Point to one end, which is always present.

Footfalls echo in the memory

Down the passage which we did not take

Towards the door we never opened

Into the rose-garden.

My words echo Thus, in your mind.  

But to what purpose

Disturbing the dust on a bowl of rose-leaves I do not know.

 

TS. Eliot – poet & playwright – 1888-1965

 

What a wonderful city Amsterdam is! It is cosmopolitan, friendly, quaint and characteristically beautiful around its canal system. There are 1400 bridges across the canals. Amsterdam has a population of 800,000 and there are 800,000 bicycles. Unlike the UK, few of the bikes are close to being top of the range for two reasons. Firstly, the atmosphere around this city is friendly and unambiguously lacking in aggression. They tend to ride their bikes rather than aim them like weapons, as many cyclists do in London. And secondly one bike in eight is stolen every year. 

 

I was also greatly taken with Strasbourg – a city of beauty, history and culture. Also the home of the European Court of Human Rights and the EU Parliament – so often in recent times the amphitheatre of many of Nigel Farage’s amusing and vigorous tirades against Messrs Barroso Juncker and Van Rompuy! My ‘bete-Noir’ is the European Court of Justice, which thankfully still struts its stuff in Luxembourg.

 

So Jeremy Corbyn won the Labour leadership beauty contest with a thumping majority – 61.2% of the votes cast. I would describe that as an emphatic victory. However I fear the Labour party may have tossed itself into the long grass of political oblivion. This result is not good for this country, which needs an active and effective opposition party to make the government of the day accountable. Or are many of the young starting to have a real voice in forcing Labour to lurch permanently and dangerously to the left?

 

Last Saturday week I read The Times’s Patrick Hosking’s rather gloomy but well-presented article on the outlook for global equities, aided and abetted by one of the most respected market bears, Ian Harnett, with added comments from one of the markets’ raging bulls, Hargreaves Lansdown’s Mark Dampier, who on this occasion, seemed to be suffering from post-prandial neurosis in terms of maintaining his upbeat mood of the past few months. Not that anyone cares, but you could have added me as an endorsement to that rather murky outlook

 

 

Since I set off hot foot on my river cruise last Saturday week, the FTSE has added 2.97% (just 31 points from the ‘HIGH’ this year of 6941), the DOW a rather modest 1.37%, European stocks were up by an average of 2.34% and the Nikkei a somewhat parsimonious 1.42%. I suppose in hindsight FED chairman Janet Yellen was always going to prevaricate, yet again, over a possible hike in rates. I suspect any hike will take place in December as November is all consuming with the Presidential election. Add the BOJ’S rather accommodating adjustment to monetary policy and not surprisingly global bourses fell over themselves in selecting another gear, without a care in the world. Let’s be candid! QE is the only game in town and ‘let the devil take the hindmost’ when the day of reckoning posts its invoice for professional services rendered. It may be gargantuan!

The FTSE 100’s extra special week was given added momentum thanks to further confirmation from many august bodies and some official manufacturing data that there was no, if not very little evidence, that BREXIT has damaged the UK’s economy. Even the Bank of England’s Kirstin Forbes admits that the BOE’s official negative outlook was rather more heavy-handed than it needed to have been. I purred like a Cheshire cat when I heard on Thursday that the SMMT posted data that confirmed that UK car manufacturing achieved a 14 year high in August as exports drove demand. Output increased 9.1% to 109,004 units in August compared with the same month in 2015. This Thursday’s Consumer Confidence data is likely to tell us that the shopper has not in any way lost its appetite to spend money, which in many cases it cannot afford! I hasten to add that BREXITEERS should not be smug! They must remain humble as economic cumuli economic clouds of financial concern look to be gathering in the distance.

 

As Patrick Hosking quite rightly reminded investors; most global indices had little to recommend themselves going forward. Forget BREXIT! The outlook for global GDP is not very encouraging. Corporate profits are unlikely to make a quantum leap forward this quarter and have investors finally rumbled that quantitative easing on loose monetary policy may only have limited use?

 

Most of the leading corporate stories last week that gained traction emanated from Wall Street. It transpired that the records of Yahoo! may have been hacked. As many as 500m customers may have been affected. I suspect we will hear more about this but Yahoo’s share price only came down 3%, Despite Mark Zuckerberg’s philanthropy in giving $3 billion to health development, it appears that Facebook may have overstated the value of its advertising revenue. Again the market seemed remarkably ambivalent, with Facebook’s share price easing by a very modest 1.15%. Apple’s rumoured £1.5 billion bid for McLaren has been denied. Microsoft announced a $40 billion share buy-back. It was further announced that Exxon Mobil was being investigated as to the valuation of its oil assets. Wells Fargo CEO John Stumpe was under pressure to resign last week. Two former Wells Fargo employees have filed a class action in California seeking $2.6 billion or more for workers who tried to meet aggressive sales quotas over many years, without engaging in fraud and were later demoted, forced to resign or fired. Ironically Wells Fargo share price closed up a smidgen, though it is down over 35% since its recent high of $55.97 in November 2015.

 

It has transpired that Twitter may have been the subject of takeover talks with that insatiable predator Google/Salesforce.com, which may be prepared to pay $16 billion to put another high profile social media titan in its portfolio. The Co-founder Jack Dorsey returned to Twitter’s fold, when the company’s platform was stagnating. It now only has 31 million users. However he and his co-founder Evan Williams look as if they might clean up. Twitter’s shares were up 21% on Friday in response to the potential M&A activity. However the shares have fallen nearly 40% in just under a year. In January 2014 Twitter’s shares stood at $69! – On Friday just $22.62!

 

Though UK markets girded up their loins last week with general gains across the board, investors could be forgiven for thinking this rally could be a false dawn. Oil fell 1% on the week, gold was relatively static and bond yields almost moribund. I am told trading conditions felt unreal, lacking in conviction. This week J Sainsbury posts a trading update. Whether CEO Mr Coupe has a spring in his heel to the same degree Morrison’s did 2 weeks ago remains to be seen. We will be eagerly awaiting to hear what contribution Argos will make to the bottom line and also whether the supermarket price war is adversely affecting its performance.

 

A slew of investment bankers including Barclays, UBS and Morgan Stanley aspire to bring the £10 billion IPO of a regurgitated 02 to the London market on the arm of its current owner Telefonica perhaps as early as the first quarter of 2017. It will be interesting to see what sort of an appetite investors have for yet another mobile operator in such a crowded market space. It will be no doubt down to pricing and market conditions. Tesco updates the market on 5th October. There is growing concern that Tesco’s pension black hole has doubled in recent years to £5 billion. Admittedly Tesco is a cash cow and could deal with it but at what price to shareholders? No doubt all will be revealed by CEO Dave Lewis then. Apparently the appointment of Emma Walmsley to succeed Sir Andrew Witty at GSK has not been universally well received. Many wanted an external candidate. HarbourVest’s aggressive takeover approach for SVG Group will be very well defended by Lynn Fordham’s team. This will be one to watch.

 

Ladies and Gentlemen – eyes down for a full house this coming week!

 

  UK companies posting results this week – Monday – Gemfields, MJ Gleeson, Carnival, Tuesday – AG Barr, Close Brothers, Card Factory, HIS Markit, Boohoo, United Utilities (TS), Thos Cook (TS), Mediclinic (TS), Wednesday – J Sainsbury (TS), PZ Cussons, Smiths Group, AA, Petropavlovsk, Thursday – Euromoney, Vernalis, Merlin Entertainment, Imperial Brands, DMGT, WS Atkins. Friday – Trinity Mirror (TS)

 

US companies posting results this week – Monday – Vail Resorts, Tuesday MaxCyte, Nike, Wednesday Pepsico, ConAgra, Costco.

 

Economic data this week – Monday – UK BBA mortgage applications, US New Homes, Tuesday – UK GfK Consumer Confidence, UK final GDP, Thursday – UK Consumer Confidence, US GDP and US goods trade balance, Friday – US Chicago PMI

 

 

 

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

 

David Buik

Market Commentator

 

D +44 (0)20 7886 2775

Panmure Gordon & Co  One New Change | London | EC4M 9AF | United Kingdom www.panmure.com

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