TODAY’S FAYRE – Tuesday 18th October 2016
“When I have fears that I may cease to be
Before my pen has gleaned my teeming brain,
Before high-pilèd books, in charactery,
Hold like rich garners the full ripened grain;
When I behold, upon the night’s starred face,
Huge cloudy symbols of a high romance,
And think that I may never live to trace
Their shadows with the magic hand of chance;
And when I feel, fair creature of an hour,
That I shall never look upon thee more,
Never have relish in the faery power
Of unreflecting love—then on the shore
Of the wide world I stand alone, and think
Till love and fame to nothingness do sink.”
John Keats – poet –1795-1821
Fred Karno would love to have included the Clinton/Trump act in his circus in the early years of the 20th Century. All that has been missing from his type of production is the odd custard pie. I suppose we might see one of those on Wednesday night at the final Presidential debate. It is hard to imagine that this kind of democratic process is happening in one of the most powerful countries in the world. So this time Trump says drug tests should be taken by both candidates. Whatever next?
It was another rough and tumble day in the corridors of power in Westminster and in the City of London. The rumour mongers were attempting to drive a wedge between Chancellor Hammond and ‘hard Brexit’ members. I hope and don’t think it is working. Perhaps the idea that was being mooted by the Cabinet that the City should maintain membership of the single market at a cost of €7 billion a year to the EU was the trigger point. I suspect that it was just a topic of conversation. I also don’t believe there is a real spat between Mark Carney and the PM. The PM is a canny politician and I suspect she was playing to the gallery in Birmingham, when showing sympathy over low interest rates for savers. After all Mrs May and the government have it in their power to withdraw the independence of the Bank of England. I very much doubt Mr Carney has met Mrs May officially in the past week and if there were an issue I suspect the Governor would have been summoned to No: 10.
Nick Clegg, I am sure, is passionate about the EU and it is generally accepted that he is knowledgeable on the subject having spent years there as a bureaucrat. However in imploring the PM to be more open to Parliament about BREXIT negotiations, he must surely be careful not to be subversive in his tactics. The people have spoken – OUT! Also the former DPM was being a little on the hysterical side over inflation issues. He was suffering from amnesia in forgetting that we will be able to unhinge from the draconian and draining membership of CAP and fishing! That will be worth a few bob!
Lord William Hague’s article in the Telegraph on Central banks being justifiably in focus is a worthy read. Quantitative Easing was an essential ingredient for recovery in 2008/9 but now there is a school of thought that the world needs to be weaned off it sooner rather than later as it does need to be taken off the drip feed from near enough zero interest rates. It may be heretic behaviour to say so but there’s nothing like a bit of inflation and a proper interest rate structure to trigger greater corporate profitability. Though the MPC has little appetite to increase rates, the gilt market is providing this venerable committee every opportunity to think again. 10-year gilt yields have rallied from 0.52% to 1.15% in a matter of weeks. That is a measurable percentage increase. Today the ONS announced 1% increase inflation in September up from 0.6% the month before. Most of the rise in inflation was due to the biggest monthly jump in clothing prices since 2010 and a rise in fuel costs, which had been falling a year earlier. This news reflects the gilt market’s behaviour.
Yesterday the FTSE 100 yielded just under 1% with the oil sector being the recipient of some profit taking. Also Pearson did not impress its acolytes with a decent update. Pearson shares fell by 8.4%. Rosneft, the world’s largest publicly-traded oil company, and two other investors on Saturday bought 98% of Essar Oil’s 20 million-tonne-per-annum refinery, associated port and fuel retail network for $13 billion. Rosneft will be in the driver’s seat with 49% stake.India’s debt-laden Essar Group confirmed on Saturday that it has agreed to sell a 98 percent interest in its Essar Oil unit to a consortium led by Russia’s Rosneft, giving the energy giant a gateway into the world’s fastest growing fuel market. The deal will see Rosneft, along with its partners Trafigura and United Capital Partners (UCP), pay $10.9 billion for Essar’s refining and retail assets. Separately, $2 billion will be paid toward the acquisition of the Vadinar port in the western state of Gujarat, along with certain import and export facilities. Again Russia in the driving seat over key energy issues! Many of you will recall Essar had a very unhappy time after being successfully floated on the LSE.
The US markets drifted by an average 0.28%. Again oil stocks and transport were under the cosh. However Bank of America posted marginally better than expected results and after hours Netflix knocked ‘em dead by 370,000 net new subs in the U.S. – that was great – but 3.2 million internationally, crushing expectations!
Today Asia girded up its loins thanks to slightly dovish comments from the FED’S Fischer and a softer Dollar. Most of the indices finished in positive territory. The ASX and Nikkei closed up 0.4% with the Shanghai composite +1.4% and the Hang Seng +1.5%. This effort put London and Europe in good heart. At the time of writing the FTSE is up 60 points at 7009, having at one time nudged 7025 – Mining +2.5%, oil +1.5%. Keep an eye on HSBC – its increases slowly on a regular basis – up 1.5%. Retail took a hammering and I am not sure it is is entirely fair. Burberry, based on a 17% drop in the Pound saw its shares rally in the last month by 24% until today’s statement. 2nd quarter earnings were OK, but the half year figures were a little disappointing – down 8% today. ASOS was much the same despite retails sales for the year increasing by 26%. The bar was set high and investors vented their spleen – down 7.69%. it was confirmed that Sir John Kingman, the Treasury mandarin will shortly take up his appointment as chairman of Legal & General. William Hill called off its merger talks with Canada’s Amaya. BoyleSports have officially complained to the CMA that Ladbrokes’ and Coral’s sale of 359 betting shops to Betfred (337 for £55m) and Stan James (37 shops for £500k) as they bid a higher price.
UK companies posting results this week – Tuesday – ASOS, Bellway, Hays, Burberry, BHP Billiton, Evraz, Wednesday – Rio Tinto, Travis Perkins, Reckitt Benckiser, Rentokil Initial, Thursday – LSE, Segro, Friday – Acacia Mining, IHG, Computacenter, Dechra Pharmaceuticals US companies posting interim results this week –Tuesday – Philip Morris, Johnson & Johnson, Blackrock, UnitedHealth, Intel, Yahoo!, Goldman Sachs, Wednesday – Reynolds American, Halliburton, Morgan Stanley, BJ Restaurants, American Express, eBay, Xilinx, Mattel, Thursday – American Airlines, Walgreen Boots Alliance, Pulte, PayPal, Schlumberger, Microsoft, Friday – GE, Honeywell, McDonald’s Economic data this week –Tuesday – US CPI, PPI data and NAHB Housing, Wednesday – UK Unemployment, US Oil inventories, Thursday – CBI Industrial expectations, ECB press conference
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