TODAY’S FAYRE – Thursday 6th October 2016
“Know then thyself, presume not God to scan;
The proper study of mankind is Man.
Placed on this isthmus of a middle state,
A being darkly wise and rudely great:
With too much knowledge for the Sceptic side,
With too much weakness for the Stoic’s pride,
He hangs between; in doubt to act or rest,
In doubt to deem himself a God or Beast,
In doubt his mind or body to prefer;
Born but to die, and reasoning but to err;
Alike in ignorance, his reason such
Whether he thinks too little or too much;
Chaos of thought and passion, all confused;
Still by himself abused, or disabused;
Created half to rise and half to fall;
Great Lord of all things, yet a prey to all;
Sole judge of truth, in endless error hurled;
The glory, jest, and riddle of the world.”
Alexander Pope – poet – 1688-1744
I thought PM May’s speech was brilliant. It had all the hallmarks of Farage, Corbyn, Miliband and even Farron; the difference being that PM May and the Conservatives are in power and the others were/are not. Like many others I was less than convinced that it was ant-business. It was more of a battle cry to stamp out the unacceptable face of capitalism such as the tax dodgers, market riggers and abusers of privilege. However I thought that BCC’s Adam Marshall was right to caution her that business leaders were not ‘pantomime villains’ and that business needs a tad more carrot than stick and how important it was for the government to work with business.
CityUK shocked me by putting out a statement that BREXIT could lead to the loss of 70,000 employees and a loss of £38 billion of revenue. If it was done for effect – so be it. However the level of defeatism from the ‘Remain Lobby’ is unnecessary. If those figures turn out to be fact, then our negotiators, government and business leaders themselves are incompetent. There should be no need for such hysteria at this juncture. Whether I like it or not, the outlook in the next year for business in London is rather more negative than it is in the rest of the country. Much of that sentiment has been perpetuated by the City of London, which seems to have lost heart. As the months flow by, I hope they regain their appetite for challenges that lie ahead.
It even appears that BOE Governor Mark Carney and his team were far too over-zealous and eager to trash the UK economy with over-exaggerated forecast of financial ‘Armageddon!’ It strikes me as a ‘bog-standard’ newspaper reader that Central banks seem to be losing their independence and more and more seem to be influenced by the political climate of the day. The world has enjoyed virtually zero inflation for far too long, courtesy of quantitative easing and very easy monetary policy. World debt is now gargantuan – according to the IMF it stands at $152 trillion. The sooner the world’s Central banks start to put up global interest rates then the sooner this gargantuan level of debt will start to dissipate. Also there will be the possibility of margins for profitability and altogether a more healthy economy. Rumours abound that Mario Draghi may tell markets today that the ECB is thinking of tapering the QE facility by €10 billion a month – welcome news but sadly a mere bagatelle, as it may not be implemented until Q4 in 2017.
And so to reality! Yesterday the Street of Dreams responded to higher oil prices and the hope that tomorrow’s employment data may be positive. The DOW closed +0.62%, the S&P 500 +0.43% and the NASDAQ +0.50%. Constellation Brands, Monsanto and Darden Restaurants posted quite decent numbers but the earnings floodgates do not open until next week. Google let it be known this morning that talks to buy Twitter have faltered and there will be no deal. Twitter shares could fall by 20% this afternoon, having gained that amount on bid gossip. Elliott, the hedge fund titan, is pushing Samsung to split its operation in to two, with quotes in New York and the Far-East. Telecoms were easier by 2% and financials had a bit of a run on the rails adding 1.5%.
In Asia, higher oil prices and a weaker Yen gave markets a modest fillip, though Shanghai remained closed – the ASX closed in positive territory +0.5% as did the NIKKEI and the Hang Seng was up 0.7% towards the close. Samsung had further issues with their Galaxy7 – one caught fire in a US aircraft, but there was no overall damage. Ironically shares have rallied by 10% in the last 2 weeks, with sales going well.
Back here in London yesterday equities experienced a reflective session when the FTSE 100 eased by 41 points. Utilities received a clattering in response to comments made the PM in her speech about rigged energy markets. Tesco initially grabbed the yellow jersey adding 8%. It then eased back and another 2% thanks to concern being expressed that its pension black hole had over doubled from £2.6 billion to £5.9 billion in the last. The sales were really promising. This morning BAE Systems produced a solid set of numbers in its trading statement – up 0.5%. Conversely easyJet suggested in its trading statement that profits for the year may be 25% light much of this drop being down to currency issues, which have cost the carrier £35m in the last 3 months and between £75 and £80 million to the 6 months to the end of September. Shares had some tough treatment meted out – down 7%. Dunelm failed to satisfy its acolytes – down 4.3%.
UK companies posting results this week – Thursday – DFS Furniture, EasyJet, Centamin, Dunelm, Friday – Xpower
US companies posting results – Thursday – Costco, Ruby Tuesday – Friday – Angie’s List Inc
Economic data this week – Thursday – ECB meeting, Friday – RICS & Halifax House prices and US Non-farm payrolls, unemployment
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