TODAY’S FAYRE

TODAY’S FAYRE – Thursday 6thApril 2017

In a solitude of the sea

Deep from human vanity,

And the Pride of Life that planned her, stilly couches she.

 

Steel chambers, late the pyres

Of her salamandrine fires,

Cold currents thrid, and turn to rhythmic tidal lyres.

 

Over the mirrors meant

To glass the opulent

The sea-worm crawls — grotesque, slimed, dumb, indifferent.

 

Jewels in joy designed

To ravish the sensuous mind

Lie lightless, all their sparkles bleared and black and blind.

 

Dim moon-eyed fishes near

Gaze at the gilded gear

And query: “What does this vaingloriousness down here?” …

 

Well: while was fashioning

This creature of cleaving wing,

The Immanent Will that stirs and urges everything

 

Prepared a sinister mate

For her — so gaily great —

A Shape of Ice, for the time far and dissociate.

 

And as the smart ship grew

In stature, grace, and hue,

In shadowy silent distance grew the Iceberg too.

 

Alien they seemed to be;

No mortal eye could see

The intimate welding of their later history,

 

Or sign that they were bent

By paths coincident

On being anon twin halves of one august event,

 

Till the Spinner of the Years

Said “Now!” And each one hears,

And consummation comes, and jars two hemispheres.”

 

 Thomas Hardy – author & poet – 1840-1928

 

Is the UN a ‘toothless tiger’ or an utter waste of space? How many more atrocities must the world witness before action is taken? The latest gas attack in Syria by the Assad’s barbaric regime is beyond comprehension. However if Russia and China refuse to condemn, let alone take action, because of their respective political expediency and gain, then there is little the UN can do! Maybe President Trump had a point that the UN was beginning to look like an anachronism!

 

I listened to the high-octane rhetoric from UK Ambassador to the UN Matthew Rycroft and his US counterpart Nikki Haley, neither of whom pulled any punches in their stark and unambiguous statements in condemning the horrendous butchery in Syria. As M Hiley put it to Russia ‘How many deaths are required for you to act?’ I feel their powers of oratory fell on deaf ears!

 

President Trump’s meeting with China’s Xi is probably more ‘key’ than it was originally set out to be. The North Korean and Syrian crises has upped the tempo and if Xi is to be used as a go-between over these issues there may well have to be a quid-pro-quo – in other wards concessions over trade and the US potential isolationist stance.

 

Nigel Farage indulged himself in the most vituperative manner in the European Parliament yesterday referring to the EC behaviour being akin to the Mafia. This did not go down well with MEPS nor did the fact that Guy Verhofstadt’s comment that ‘some UK Tories were involved in a catfight, ruining young peoples’ lives’ did not go down well with me either. Unless both sides get hold of the ‘political bit’ these negotiations are going to end in tears before they have even started!

 

We waited for the FOMC minutes last night and we more or less received what we expected. There was a strong hint that the FED would like to start lightening the load of its balance sheet, which includes assets totalling circa $4 trillion, much of it mortgage backed securities. The idea is to start running down the balance sheet size by not renewing some of these purchases. This would have the effect of slightly tightening monetary policy unofficially without the FED having to always put up rates officially. If the main borrower or purchaser of assets is going to take more of a back seat, then yields are likely to rise. Markets reacted logically with the main US indices responding as follows including YTD performances – DOW: 20,648 -0.20% +4.48% S&P: 2,352 -0.31% +5.09%, NASDAQ: 5,418 -0.40% +11.41% VIX: 12.89 +9.33% -8.19%.

 

Clearly if the cost of borrowing goes up it could have an adverse effect on corporate profits – such are the fine margins these days. On the corporate front, Akzo Nobel, which has the remnants of Courtaulds and ICI in its portfolio, bought for £8 billion in 2006 is fighting a rear-guard action to stave off the overtures of the US’S PPG. Akzo’s Tom Buchner said the takeover would cost thousands of jobs and concern was also expressed for the 53k ICI pensioners and the 25k Courtaulds’ elderly. The main shareholders Causeway Capital, Columbia Threadneedle and VEB will want a full explanation why this deal should not be consummated.

 

The ECB’S Mario Draghi speaks at 9.30am and don’t be surprised if he provides food for thought to do the same thing next year. At present the EU economy is performing better than it has done for years. Whether that is a temporary phenomenon, time will tell but Draghi won’t want to rock the boat for the time being. I do wish that Mark Carney’s MPC would adopt the same policy as the FED intends to. At least the procedure would at least start to wean the UK off quantitative easing in an orderly manner. I suspect that ahead of BREXIT, Mr Carney and his cohorts will adopt a very conservative stance.

 

On the domestic front, yesterday the FTSE added 9 points to 9331 in an uneventful session. Unilever’s Paul Polman continues to come out with a new fighting plan to stave off any unwanted predators. The company is to target 20% underlying pre-restructuring operating margin by 2020; combining foods and refreshment, whilst at the same time offloading some of its best known brands including Flora margarine and Stork butter, as well as make an extra €2 billion in cost savings, following a recent review of the business. Lloyds Banking Group announced the closure of another 100 branches out of a total of 1950, part of the 9000 redundancy plan of CEO Antonio Horta Osario. Technology rules OK – too much as far as I am concerned. Relationship banking has gone in a puff of smoke! RBS and HSBC are of course undergoing similar plans.

 

The Coop announced an unacceptable loss of £132 million, its first annual loss since 2013 after declaring that its stake in Co-operative Bank is worth nothing. It reduced the value of its 20% stake in Co-operative Bank from $185m to zero, reflecting the bank’s continuing problems. I think it is fair to say the party is over. The Coop Bank, currently 35% owned by 12 US hedge fund, will have to break up the bank in to a ‘good’ and ‘bad’ bank, as it is unlikely to meet the BOE’S capital requirements, even though it is expected to meet a £400 million loan repayment. Metro Bank, OneSavings and Virgin Money have had their hats thrown in to the ring as potential buyers of the good bank’s assets – none have officially commented. Cerebus and others are looking closely at the bad bank’s toxic assets at a knockdown price.

 

Asia followed New York’s behavioral antics today – NIKKEI: 18,858 -1.47% -2.73%, HANG SENG: 24,253 -0.58% +10.23%, CHINA: 3,506 +0.09% +5.98%, ASX: 5,848 -0.48% +3.23%.  The FTSE 100 is currently following suit – down 62 at 7269. This looks like a natural correction. Sentiment has taken banks Pharmaceuticals and oil stocks down circa 1%, but the market seems very calm.

 

UK companies posting results this week – Wednesday – Thursday – easyJet, Homeserve, Mothercare, Friday – AFI Development. 

US companies posting results this week – Wednesday, Walgreen Boots Alliance, Yum China Holdings, Thursday – L-Brands, Fred’s, Constellation Brands, Ruby Tuesday

 

Economic data out this week – Wednesday – UK PMI Services, US ADP Employment data Thursday – US Initial Jobless Claims, Friday – UK industrial Production, Manufacturing and Construction, UK Trade Balance, US Non-Farm Payrolls and employment data

 

 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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