TODAY’S FAYRE – Sunday 30th October 2016

“Let me take this other glove off
As the vox humana swells,
And the beauteous fields of Eden
Bask beneath the Abbey bells.
Here, where England’s statesmen lie,
Listen to a lady’s cry.

Gracious Lord, oh bomb the Germans.
Spare their women for Thy Sake,
And if that is not too easy
We will pardon Thy Mistake.
But, gracious Lord, whate’er shall be,
Don’t let anyone bomb me.

Keep our Empire undismembered
Guide our Forces by Thy Hand,
Gallant blacks from far Jamaica,
Honduras and Togoland;
Protect them Lord in all their fights,
And, even more, protect the whites.

Think of what our Nation stands for,
Books from Boots and country lanes,
Free speech, free passes, class distinction,
Democracy and proper drains.
Lord, put beneath Thy special care
One-eighty-nine Cadogan Square.

Although dear Lord I am a sinner,
I have done no major crime;
Now I’ll come to Evening Service
Whensoever I have the time.
So, Lord, reserve for me a crown.
And do not let my shares go down.

I will labour for Thy Kingdom,
Help our lads to win the war,
Send white feathers to the cowards
Join the Women’s Army Corps,
Then wash the Steps around Thy Throne
In the Eternal Safety Zone.

Now I feel a little better,
What a treat to hear Thy Word,
Where the bones of leading statesmen,
Have so often been interr’d.
And now, dear Lord, I cannot wait
Because I have a luncheon date.”


Sir John Betjeman – poet laureate- 1906-1984


There was a 9 point gap in the polls in favour of Hillary Rodham-Clinton, as we head towards the last week of this truly abhorrent Presidential election campaign. Donald Trump will be marginally cheered by the fact that the FBI will be taking another look at Mrs Clinton’s private email account for any evidence of classified information.  I fear, though, that Mr Trump may clutching at straws. Maybe the retired folk from Florida may just trigger a glimmer of hope for the former reality TV star and property magnate.


Hopefully we will see the last of Ed Balls on ‘Strictly’ last night. I must say in terms of reinventing himself as TV personality from all areas of life, he has been remarkably successful and all power to his elbow. Personally speaking I just don’t get it! I did not get it with Alastair Campbell and I don’t get it with ED Balls.  Millions of people did and do!


Apart from the Nikkei, which added 1.52% last week on the back of a weaker Yen, most global indices ended the period just marginally below the Plimsoll line in terms of losses. On-going concerns as to the outcome of this very tawdry US Presidential election, a very mixed compendium of US 3rd quarter earnings and some further terrifying jingoistic behaviour by Russia’s Putin have rattled investors’ cage. By the by Putin has played an absolute blinder in comparison to his rather luke-warm, disinterested and anaemia peers – Obama must be singled out for a thoroughly inept performance over the past 8 years for refusing to be engaged in an on-going conversation with Putin, with Merkel, Hollande and Cameron not that far behind in terms of inadequacy.


It is generally thought that FED Chairman Yellen will put rates up by 25 basis points in December. She and her committee will have been greatly encouraged by Friday’s GDP estimate of 2.9% for 2016 posted on Friday – better than expected as was the UK’s 2.3% for the year posted on Thursday, thanks to an eye-catching performance by its service sector. As for the UK, the BOE has been hard to read in the last 2 years as to its interest rate policy. According to Simon French, Panmure’s excellent economist – “There is now only a 22% chance of another cut from circa 65% at the August Inflation report. I assume as Governor Carney doesn’t like zero or negative that this would be a 20bp cut. Different people calculate this in different ways but I use the 1-year ‘Overnight interest rate swap’, rather than the 1 month normally to calculate any change expectations.” He further comments – “In terms of expectations I think with inflation expectations (3% in summer 2017) and GBP where it is, this feels about right.  However I never believed that a November rate cut was, on despite MPC guidance to the contrary, as if they did need to provide further stimulus before the February report.”



We have seen quite a marked climb in yields on government bonds in recent weeks – 10-year gilt yield has rallied from 0.52% to 1.25% in three weeks. Simon French is of the view that “equity market valuations in developed economies are vulnerable to gradual tightening by the Federal Reserve – but this process remains an extraordinary slow one. The case for a rapid breakout of higher yields ignores the divergence trade (ECB, BOE, PBOC, and BOJ) and that structurally deflationary factors compressing prices (ageing demographics, industrial overcapacity, public sector austerity).”  He further says – “There is a bias towards expecting changes to be swift and dramatic but in the case of the fundamental drivers of higher yields, but like Brexit, the transition to the new state will be slow and gradual, punctuated by periods where question marks emerge to challenge the thesis.”


Much of last week was taken up by two issues – the UK bank reporting season with LLOYDS Banking Group, Barclays and RBS providing a very mixed bag of tricks. But for the dreadful performance of the UK banking sector, the FTSE would be some away above the 7k threshold. These three banks have surrendered 26%, 25% and 40% respectively in value in the last year. Apart from another £1 billion provision for PPI, taking LLOYDS total to an eye-watering £17 billion, the results in isolation were not too bad. HM Treasury has already eased out another 1% to the private sector leaving just 8.99% to be disposed of. How lucky were retail investors not to be lumbered with 9% of this bank at around 70p despite a 5% discount. LLOYDS’ shares closed the week at 57p?


Barclays’ shares have rallied quite strongly in the past 5 months from 145p to 191p on Friday (31.7%) as CEO Jes Stanley starts to make his presence felt. Investment banking driven from New York did well and the Bald Eagle continues with its asset disposals and redundancy plans with a degree of competence. Africa has gone as has its stake in Visa Europe. RBS was again dogged with litigation and impairment charges plus the threat of further expensive fines at the hands of the US authorities for Miss-selling US mortgage backed securities. A loss for the quarter of £469 million was posted. At least Tier One capital stood at 15%. RBS failed to sell the 317 branches under the brand of Williams & Glyn. It was required to do so by the end of December. There have been 2 bites of the cherry since those carpet baggers, working under the name of ‘Project Rainbow’ tried an IPO of £1.5 billion, to be followed by an abortive sale to Santander. We understand that Clydesdale has recently made a bid but due diligence will not be completed by the end of December. Hopefully the EU will extend the period. Failure to complete this deal could cost RBS £1.5 billion. HSBC posts in numbers on Monday week. Having offered verbal concessions to Nissan, not surprisingly drug Titans, Astra and Glaxo would like similar guarantees.  I am not sure they will get them as their Dollar earnings are very considerable.


Tesco and Wm Morrison have enjoyed a strong rally in their respective share prices this year – more so than J Sainsbury, which posts numbers on Thursday week. It will be interesting to see how much of a contribution Argos has made. Acolytes of Alphabet were pleased with their earnings.  However Apple posted the first drop in sales for a decade and Amazon alarmed its followers over a slightly worrying festive outlook though the company will be employing 120,000 temporary employees. Nonetheless these three are massive contributors from the US tech sector.  This week we hear from Facebook.  We have seen two large IPOS withdrawn from the UK market as a results of market conditions – The £10 billion regurgitation of Telefonica’s ‘o2’ and the same for a £5 billion sale of Misys. So far this year there have been 49 IPOS. Those from the FTSE all-share have advanced by an average of 14.4% and those from AIM by 14.4% and small-caps by an average of 10%. In the wake of this IPO contraction, apparently Anglo American is considering a spin-off of some South African assets valued at £2 billion.


There has been plenty of speculation about the future tenure of Mark Carney as Governor of Bank of England.  Some politicians and luminaries have aired their views that the Governor has too many strongly held political views which he should maintain a neutral stance over. Though I, like many others, believe that ‘forward guidance’ is an unhelpful tool, whose track record globally is lamentable, I think he is a fine Governor, who has put together a strong team.  Any talk of his resignation or departure before his contract is up, should be greatly discouraged.  Any early exit would send the wrong signals to the rest of the world. FCA CEO Andrew Bailey has quickly come indirectly to the defence of Mark Carney in terms of his downbeat assessment of the UK’S economy by stating quite succinctly that “it’s not all over, yet!”


UK companies posting results this week – Monday – WPP, Senior, Centamin, Tuesday – Standard Chartered Bank, Go-Ahead, Moneysupermarket, BP, Royal Dutch Shell, Shire Pharmaceuticals, Weir Group Wednesday – JD Wetherspoon, Persimmon, Next, Just Eat, OneSavings Bank, Thursday – Inmarsat Wm Morrison, Smith & Nephew, Centrica, Prudential, Tate & Lyle, Randgold, RSA, Friday – Paddy Power Betfair, Informa


US companies posting interim results this week – Monday – Zimmer, Loew’s, Tuesday – Ford (sales), Pfizer, Kellogg, Pitney Bowes, Archers Daniel Midland, Match, Wednesday – Time Warner, Facebook, Thursday – Costco, Cigna, Hyatt Hotels, Kraft Heinz, Metlife



Economic data this week – Monday Chicago PMI, Tuesday – UK manufacturing PMI, US Manufacturing PMI, Wednesday – BRC Shop Price Index, UK PMI Construction, US FOMC statement, Thursday – UK PME Services, Inflation Report, MPC meeting


David Buik

Market Commentator – Panmure Gordon & co
+44 (0)20 7886 2775

Mobile – 0044 7788 144 877

Panmure Gordon & Co

One New Change | London | EC4M 9AF


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