TODAY’S FAYRE – Thursday, 12th January 2017

 

“All the world’s a stage,

And all the men and women merely players;

They have their exits and their entrances,

And one man in his time plays many parts,

His acts being seven ages. At first, the infant,

Mewling and puking in the nurse’s arms.

Then the whining schoolboy, with his satchel

And shining morning face, creeping like snail

Unwillingly to school. And then the lover,

Sighing like furnace, with a woeful ballad

Made to his mistress’ eyebrow. Then a soldier,

Full of strange oaths and bearded like the pard,

Jealous in honor, sudden and quick in quarrel,

Seeking the bubble reputation Even in the cannon’s mouth.

And then the justice, In fair round belly with good capon lined,

With eyes severe and beard of formal cut,

Full of wise saws and modern instances;

And so he plays his part. The sixth age shifts

Into the lean and slippered pantaloon,

With spectacles on nose and pouch on side;

His youthful hose, well saved, a world too wide

For his shrunk shank, and his big manly voice,

Turning again toward childish treble, pipes

And whistles in his sound. Last scene of all,

That ends this strange eventful history,

Is second childishness and mere oblivion,

Sans teeth, sans eyes, sans taste, sans everything.”

 

William Shakespeare – poet & playwright – 1564-1616

 

The Trump press conference – a guinea a minute! However you would be forgiven for thinking that it was just a pantomime! I was dumfounded! The way President-Elect Trump batted away allegations of an extreme salacious nature beggared belief. Absolutely astonishing how ‘he ducked and dived’ and ‘bobbed and weaved.’ As for the poor CNN reporter, Trump was never going to do anything, but chew him up and spit him out!

 

Just nine days to go before it is no longer a charade; it is for real! From a business perspective the prospects for financial markets and business look quite rosy. Yesterday the Street of Dreams finished above the Plimsoll line. Corporation tax cuts from 35% to 15% over two years and $1 trillion infrastructure spending programme has a resonance about it. The Greenback is a strong as an ox. China, regardless of its relationship with the US will be obliged to continue to buying Dollar assets/Treasuries as the Dollar is the main world reserve currency, as will most other economies.

 

Yesterday, in the wake of BOE Chief Economist Andy Haldane candid comments about the varied/poor forecasting records, it was encouraging to hear Governor Mark Carney eating a tasty morsel of humble pie damping down negative prospects for UK growth and its economy at yesterday TSC meeting chaired by Andrew Tyrie. Mr Carney went on to say that in his opinion ‘the financial stability issues are greater on the continent (EU) than they are for the UK. The scale of immediate risks around BREXIT has gone down in the UK.’ He reiterated that the UK exported £26 billion of financial services annually to the EU against importing £3 billion. Companies across the EU were hugely reliant on loans from City of London. Consequently in conjunction with comments made the day before yesterday by HSBC’S chairman Douglas Flint and the LSE’S Xavier Rolet to the Treasury Select committee, Mr Carney reiterated that it was in everyone’s interest to accommodate each other. So perhaps a little extra time negotiating might prove fruitful for all.

 

Yesterday was the 12th day of gains for the FTSE 100 – +15 at 7290. It was down largely to Sainsbury and Morrison blazing the trail for retail and further positive performances by the mining sector. Across the pond the Street of Dreams kept its poise, finishing the day about 0.2% above the Plimsoll line. Energy and tech shares (Facebook Microsoft and Apple) were popular. Drugs, in response to Trump’s comments were on the back foot with Bristol Myers Squibb down 5.3% and Pfizer -1.8%. It is interesting to note that Astra Zeneca was down 1% this morning with GSK just easier by 0.66%.          

 

There has been a huge slew of earnings today, dominated by the retail sector, with M&S and Tesco to the fore. There have also been great sales numbers from JD Sports (+7%). ASOS did well (sales +36% in the last 4 months) but expectations were very high. These shares have added 65% in value in the last year, but down 1.8% today so far.            AB Foods, in terms of sugar and sweeteners did OK, but an 11% increase in sales for Primark was inadequate for the shares to crack on – down 3.5%. As for AO World investors feel their sights are set too high. Panmure’s Michael Stewart has been fearful about its prospects for some time and has had a ‘SELL’ recommendation for some time – down 7% today. Hilton Foods, a company very much liked by Panmure’s Peter Smedley had a blip yesterday with its shares falling ahead of numbers today.   However sanity was restored today – up 4.29%.

 

Now for the heavy brigade – TESCO & M&S!        Tesco posted like for like group sales        for 13 weeks to 26th November up 1.5% and 1.8% for the UK. Market analysts, though very pleased with Dave Lewis and his management team’s efforts, which have seen the share price up 30% in the last year, are down 2% today. Analysts perceived that the contribution made by Europe and overseas operations was disappointing. M&S surprised its detractors and acolytes by the increase sales number. In the 13 weeks to 31st December, total sales were as follows – food +5.6% and general merchandising +3.1%. However on a like for like basis food was up 0.6% and merchandising (clothes) up by 2.3% – the first increase for 2 years. Also in January of 2016 when Marc Bolland left sales were down 5.8%. So, well done to Steve Rowe and the team! M&S has only made £1 billion profit twice – in 1997 and 2007. This year, if a profit of £660 million were to be achieved; that would be a huge result.            M&S shares have fallen 22.3% in the last year – up 3% this morning at 350.5p. This past Christmas quarter has seen the retail therapists have a real run at the shopping arcades. However if inflation starts to bite, has retail seen its best days of this current year?       

 

 

UK companies posting interim results this week – Thursday – Tesco, M&S, Debenhams, AB Foods, Premier Oil, ASOS, AO World, Henderson Group, Dunelm, SuperGroup, Barratt Development, Hilton Foods, Mothercare, Booker, Hays,  Friday – SIG

 

US companies posting interim results – Wednesday – KB Homes, Thursday – Delta Airlines, Friday – Blackrock, JP Morgan Chase, Wells Fargo, Bank of America

 

Economic data posted this week – Thursday – RICS House prices, Friday, BOE Credit Conditions, US Retail, US Business inventories

 

 

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

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