TODAY’S FAYRE – Sunday, 29th January 2017


On afternoons of drowsy calm
We stood in the panelled pew,
Singing one-voiced a Tate-and-Brady psalm
To the tune of “Cambridge New.”

We watched the elms, we watched the rooks,
The clouds upon the breeze,
Between the whiles of glancing at our books,
And swaying like the trees.

So mindless were those outpourings! –
Though I am not aware
That I have gained by subtle thought on things
Since we stood psalming there.”


Thomas Hardy – author & poet – 1840-1928


I thought PM May gave an exemplary account of herself during her visit to Washington to meet President Trump.  She may not have come away with any concrete agreements but she left a very favourable impression, which gives the UK a bit of momentum in dealing with the EU and hopefully some respect which has not been that obvious since last June.  Such a pity that many of the media still refuse to give her the plaudits she richly deserves.


Ever since I saw Natalie Portman appear as a twelve year old in that fantastic thriller “Leon” with Jean Reno, I have been an unabashed fan of this actress’s talent.  How she was ever persuaded to take the role of Jackie Kennedy in “Jackie”, which is a truly dreary and uninteresting adaptation of a historic moment in time, only she and the God Lord know.  Despite some wonderful small cameo parts played by Richard E Grant and Sir John Hurt, this film is a real turkey. Such irony that Sir John Hurt should sadly die on Friday aged 77. He was one of the great actors of the last century, with the most resonate smoke-induced gravelly voice. Who will ever forget ‘A Man for all Seasons’, ‘The Elephant Man’, ‘Midnight Express’ and Alien’, not forgetting his portrayal on television of Quentin Crisp.


I had a job staying awake in ‘Jackie’, despite Natalie Porter being nominated for an ‘Oscar’ as best actress.  It is the story of Jackie Kennedy’s interview with ‘Life’ magazine on the days surrounding and after her husband, John F Kennedy’s assassination. Though Porter looked the part and had Jackie’s voice ‘off pat’, the script was absolutely lifeless.


After watching a riveting Cotswold Chase at Cheltenham on the box won by the Grand National winner ‘Many Clouds’ all NH racing acolytes were devastated to hear that he died of a heart attack shortly afterwards. We all send condolences to Trevor Hemmings, Oliver and Tanya Sherwood and all who looked after him at Rhonehurst.


Considering it was politically and economically momentous week, markets behaved with the utmost resilience and poise. We keep seeing bond yields creeping up consistently reacting against the threat of inflation and a couple of possible rate hikes this year in the US. However we all could have been forgiven for thinking that the erratic behavior of the 45th President of the US could have made markets considerably more volatile than they turned out to be! Last week saw the S&P 500 add 0.99%, with the DOW breaching the 20,000 threshold for the first time in its history. The FTSE finished the week easier by just 0.19%, thanks to Sterling having had its best run for seven months, which of course adversely affected its Dollar earning constituent stocks.  European bourses added an average of 1% and Japan’s Nikkei pushed on by 1.72%, despite the strength of the Yen.


On the economic front UK GDP excelled – up 0.6% in the fourth quarter of 2016, thanks in the main to a really buoyant service sector.  However the threat of higher inflation which could restrict consumer spending, could dampen prospects later this year.  Such is the durability of the UK economy it is rumoured that the BOE may consider upgrading GDP forecast for 2017 from 1.4% to 1.7%. As for the US’S recent GDP reading, it could only be described as a disappointment – a figure of 1.9% was posted on an annualised basis when expectations threw up a figure of 2.2%. In the 8 years of his administration President Obama is the only President in living memory never to post a figure of 3% or higher for a quarter. In fairness that was probably down to the adverse effects of the credit crisis in 2008/9.  However it is fair to say that recent readings of PMIS across the spectrum have looked encouraging.


The earnings season on both sides of the Pond picked up last week. Boeing, General Dynamics, Microsoft, Intel and Johnson & Johnson put in strong performances. However Lockheed Martin and Chevron disappointed. Over hear in Old Blighty there were pleasing efforts from Diageo, WH Smith and Whitbread. Unilever’s effort was lack-lustre and there were real issues with EasyJet and most of all BT. BT’S CEO Gavin Patterson unveiled distasteful allegations of skulduggery in its Italian operations which may have thrown up a loss of £531 million over 10 years.  Shareholders were underwhelmed and vented their spleen by skinning 17% off the value of its stock.  The news was bad enough but the gravity of the situation was exacerbated by a poor outlook for the next 2 years.  Business sales are sluggish and it is possible that there may be profit shortfalls to the tune of £175 million in each of the next 2 years.  EasyJet seems to have had FX issues costing £35 million and costs do not appear to have been kept under control.  Shares fell by 9% during the week. Royal Bank of Scotland deemed it necessary to make a further provision of £3.1 billion against a DOJ’S expected fine for misdemeanours for the miss-selling of mortgage backed securities, making a total provision of £6.7m.  It is dispiriting to think RBS has posted a loss every year since 2009. There was also news from the front that all may not be well with the Cooperative Bank, which could necessitate the BOE intervening, due to a capital shortfall. Unless there is a dramatic change in circumstances, it could be wound up by the end of the year.


On the M&A front Johnson and Johnson announced that it is to buy Swiss biotech titan, Actelion for $30 billion.  The market also eagerly awaits details of Snapchat’s forthcoming $25 billion IPO due in March of this year. On the home front investors were consumed by news that Tesco were going to pay £3.7 billion for Booker, the cash and carry wholesale food provider, which also owns Londis and Budgens. Bookers’ tentacles as a supplier are as far and wide as M&S.  The CMA, with the assistance of influential retail operators such as Lord Rose, chairman of Ocado, will be all over this deal like a bad rash.  Concern was expressed that small shopkeepers will now have their food provided by Tesco. The real issue today is the price war, which Lidl and Aldi started about 4 years ago, when there was no food inflation.  The consumer was the winner but the likes of Tesco, Sainsbury and Morrison were badly damaged. Tesco is trying to redress the balance by remaining competitive with the addition of a wholesale operator. Tesco’s rivals and small shops may not like it but the city certainly did – Tesco +9% and Bookers +14.25%. Finally such is the complexity of the Trident costs of £41 billion, it is possible that Rolls Royce and BAE Systems will be put on a cost saving bonus system for its production.


UK companies posting interim results this week – Monday – Filtronic, Flybe, Conviviality, Tuesday – Carpetright, Ocado, SSE Britvic, Pentair, Wednesday – TalkTalk, Centamin, AG Barr, Thursday – Astra Zeneca, Royal Dutch Shell, Vodafone, Compass, Aberdeen Asset Management, Johnson Matthey,  Friday – Beazley


US companies posting interim results – Monday – Rambus, Tuesday – Pfizer, Apple, Aetna, Zimmer, Xerox, Sprint, Exxon Mobil, Valero Energy, UPS, Mastercard, Nasdaq, Wednesday – Ford, Altria, Metlife, Fidelity, Thursday – Fred’s, Amgen, Philip Morris, Merck, Cigna, CME, Ralph Lauren, Motorola, Friday – Hershey, Weyerhaueser


Economic data posted this week –  Monday – US Pending Home Sales & Personal Income, Tuesday – Gfk Consumer Confidence, UK mortgage applications & lending, Wednesday – BRC shop prices, UK PMI Manufacturing, FOMC meeting, Thursday – UK PMI Construction, BOE Inflation Report & MPC, Friday – UK PMI Non-manufacturing, US PMI Services


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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