TODAY’S FAYRE – Monday 22nd May 2017


“Your lungs fill & spread themselves,
wings of pink blood, and your bones
empty themselves and become hollow.
When you breathe in you’ll lift like a balloon
and your heart is light too & huge,
beating with pure joy, pure helium.
The sun’s white winds blow through you,
there’s nothing above you,
you see the earth now as an oval jewel,
radiant & seablue with love.
It’s only in dreams you can do this.
Waking, your heart is a shaken fist,
a fine dust clogs the air you breathe in;
the sun’s a hot copper weight pressing straight
down on the think pink rind of your skull.
It’s always the moment just before gunshot.
You try & try to rise but you cannot.


Margaret Atwood – poet – 1939 –


President Donald J Trump seems to reel from one crisis to another. He tells us it’s all fake news, but there is a growing fear that the 45th President is not on top of his game with the ‘Comey Syndrome’ and the White House’s relationship with Russian providing very unsatisfactory explanations. However the start to his state visit to Saudi Arabia looks as though it has been an unqualified success with $350 billion of trade and defence ($110 billion) deals being signed between these two nations. President Obama’s stand-off with Saudi Arabia in favour of a nuclear deal with Iran seems to have been redressed by President Trump. This is potentially very good news for jobs and growth in the US. Trump’s speech on the fight against extremism in Saudi Arabia was rather more temperate than many expected.  Like Trump or not, this was a visionary speech, which many of the delegates would have had empathy with and will have done his international stock no harm.  


Also France’s President Macron seems to have attracted nothing but positive international press as he put together his Cabinet; one that M Macron hopes will unite cavernous political divisions that currently prevails in France. He has left a great impression as the person who seems more likely to re-ignite the EU’S appetite to be more expansive and almost certainly more Federal, as Chancellor Merkel’s government starts to look stale. However chickens very quickly came home to roost with Merkel and Schauble telling the ‘bouncy little corporal’ to get back in his box and keeps his grandiose ideas on saving the Euro to himself! President Macron should also remember that he would find his time better spent on domestic issues such as France’s deplorably intransigent labour laws, rather trying to be a hero in the eyes of Germany, which always puts itself before anyone else!


The intensity of the General Election is gathering pace in the wake of the publication of the party manifestos. Despite this Election, conceivably being the most important one since 1945, enthusiasm appears to be waning, as the electorate starts to drown in an amorphous of nebulous policies. My ‘Straight-off-the-bat’ thoughts suggest that Labour’s ambitious plans make no sense financially, though aesthetically, they seem to have attracted more than a little support. ‘Little Timmy’s’ party seems to be a ‘one trick pony.’ Destroy BREXIT at all costs. As for the Conservative party’s efforts, though its manifesto seems to be more tolerant and sympathetic to the less affluent, there are policies that will not sit well with their core supporters and by business. Stopping share-buy-backs and implementing protective restrictions on M&A activity as well as legislating for too much boardroom interference will not be met with euphoric acceptance by business. Nor will adjustments to the ‘triple-lock pension and contributions to care.  The will be rejected by many, though sensible for those who can afford it, in reality. Frankly these policies have been poorly presented.


Global equities were rather volatile within a fairly narrow range last week, though the FTSE 100, despite Sterling flirting with $1.30, ended the week up 0.48%. There was a measurable wobble mid-week, however the S&P 500 ended the five-day run just 0.17% below the Plimsoll line. The wobble was caused by an increasing number of market protagonist being of the opinion that Trump would be bogged down with political controversies and allegations of scandal, which would prevent the government delivering on its election promises to deliver $1 trillion of infrastructure spending.  The NASDAQ was hit even harder but regained some poise at the end of the week. We were also told that 37% of fund managers and analysts, recently polled, felt global equities were over-valued. However the deals agreed with Saudi are likely to benefit companies such as Boeing, Lockheed Martin, United Technologies, Raytheon, Northrop Grumman, General Dynamics, Pratt & Witney, Honeywell and Caterpillar. As we come towards the end of the earnings season, it was interesting to note that Wal-Mart posted better than expected results, resulting in shares adding 1.59% on Friday.  Target added 0.29% ahead on Monday morning’s earnings presentation. The Dollar fell 2% last week against most major currencies thanks to alarms raised against Trump’s Presidency and Brent crude was up 2.2%. Markets may open better today post Trump’s success in Saudi Arabia. The minutes of the FOMC will be posted on Wednesday and their tone may be more dovish than of late.


Despite concerns expressed about US markets, which were still close to record levels, the FTSE was splendidly resilient and briefly attained similar dizzy heights. European bourses eased by just over 1% on the week and Japan’s Nikkei by 1.47% (strength of the Yen). Vodafone’s numbers were encouraging despite a £4 billion loss (mainly incurred in India.) Glaxo has agreed in principle to buy back the 36% of GSK Healthcare from Novartis. BT’s pension black hole has increased to £14 billion, making me and other very nervous. ASDA’s sales did not reflect Wal-Mart’s performance – sales posted Wednesday down 2.8% in last quarter but CEO Sean Clarke insists that progress is being made. It is interesting to note that Amazon has increased in value by 57.4k% at $460 billion – twice the size of Wal-Mart. I was fairly ambivalent to news posted by JP Morgan Chase that provision is being made to post 1000 to Dublin in concert with HSBC posting 1000 people to Paris in the not too distant future.


On the UK economic front inflation rose to 2.7% with wages only rising by 2.4%, which may put pressure on retail sales with less disposable income to go round though last month’s retail sales rallied by 2.3% in comparison to 4% in April 2016. The best news of the week was Lloyds Banking Group finally selling its final 0.89% taxpayer’s stake. The original bail-0ut was £23.4 billion. When Antonio Horta-Osorio arrived 6 years ago he inherited a balance sheet with £200 billion of toxic assets of which HBOS’s share totalled £100 billion. PPI repayments totalled £17 billion – half the entire banking market’s liabilities. Lloyds Banking Group required £100 billion short-term money from the Bank of England.  Hats off to Antonio Horta-Osorio and the team for making the taxpayer a £900 million profit and to Morgan Stanley for slowly and efficiently dribbling out the taxpayer’s stake. Lord Norman Blackwell tells us that the CEO will be staying. Sad to report that 12k redundancies have been made – 7% of the work force.


M&S has floundered in recent years.  It posts numbers on Wednesday. Though food is universally respected it accounts for 55% of turnover – 80% of the profits come from clothing – Hence CEO Steve Rowe must start to turn the business around, aided and abetted by the appointment of Archie Norman as chairman and Jill McDonald from Halfords to help with fashion. However M&S’s clothing and homewares sales are expected to have tumbled more than 3% in the first three months of 2017. Its food business is also expected to post a small decline in underlying sales. Autumn fashions have been presented and the market holds its breath to see if they catch on. Paul Geddes, CEO of Direct Line has had his name submitted to succeed Adam Crozier at ITV.



UK companies posting numbers this week – Monday – Carillion, Tuesday – Home serve, De La Rue, Cranswick, Severn Trent, Shaftesbury, Paragon, Topps Tiles, Wednesday – M&S, Mediclinic, Babcock International, Vedanta Resources, Britvic, Kingfisher, Dixons Carphone, HSS Hire, Thursday – Tate& Lyle, Pets at Home, United Utilities, Halfords, DMGT, Inchcape, Card Factory, L&G, Friday – Intertek, Spectris, Restaurant Group


US companies posting numbers – Monday – Agilent, Target – Tuesday – Take Two, Wednesday Tiffany’s, Thursday – Hormel Foods, Best Buy


Economic data this week – Tuesday UK PSBR, Thursday BBA Mortgage approvals, UK GDP 2nd Quarter estimate


 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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