TODAY’S FAYRE – Monday, 2nd October 2017
“Stop all the clocks, cut off the telephone,
Prevent the dog from barking with a juicy bone,
Silence the pianos and with muffled drum
Bring out the coffin, let the mourners come.
Let aeroplanes circle moaning overhead
Scribbling on the sky the message He Is Dead,
Put crepe bows round the white necks of the public doves,
Let the traffic policemen wear black cotton gloves.
He was my North, my South, my East and West,
My working week and my Sunday rest,
My noon, my midnight, my talk, my song;
I thought that love would last for ever: I was wrong.
The stars are not wanted now: put out every one;
Pack up the moon and dismantle the sun;
Pour away the ocean and sweep up the wood.
For nothing now can ever come to any good.”
WH Auden – poet – 1907-1973
After the disastrous outcome to the UK General Election in June, I send my good wishes to PM May and the Conservative party for their annual conference in Manchester. From what I can see, Mrs May and her Cabinet do not have a single friend in the written or visual media and they will have to work miracles to regain the confidence of a sufficiently influential majority of voters. This looks like a task of Herculean proportions. It might help if Foreign Secretary Boris Johnson, however laudable his views are on a hard Brexit, could at least try and show some support for the PM and unite behind the party. Otherwise the Tories will be ‘brown bread’ if an election were forced upon the country in the near future. Channel 4’s Sunday night documentary on Boris Johnson was unhelpful in the extreme. Fortunately few front line politicians or commentators contributed to Gary Gibbons’s embarrassing yarn!
The media, for reasons best known to itself, seem to have some besotted love affair with ‘Gramps Corbyn.’ Every time I hear him, I recall the dark days of the 70s with strikes, rampant inflation over 20% and a dole queue that stretches from London to Timbuctoo, which created a level of hatred and bile, I thought and hoped I might never see again. Sadly I am now confident that I will.
Though the Catalonia independence referendum did not receive official sanction from the Spanish government, there is no need for excessive violence from the police such as has been seen with over 800 people hurt. It is not surprising that Catalonia wants independence. It contributes the lion’s share of wealth and growth to the Spanish economy. Catalonia is sick and tired of supporting the incompetence of some other parts of Spain, in the same manner that some EU member states are frustrated by constantly having to underwrite those countries within the EU, which underperform economically! It’s a perfectly natural human reaction. Not surprisingly the result of this unofficial referendum found in favour of Catalonian independence.
Last week was a very strange, but interesting one, in terms of market behaviour and activity. The obsessively ‘remain’ press salivated at the news that the UK had fallen to the bottom of the G7 pile in terms of GDP, which dropped on an annualised basis from 1.7% to 1.5%, with a 0.2% drop in the services sector – normally the strength of our economy. This news coincided with data that London house prices dropped by 0.6% in the third quarter though nationally they increased by 2.2%. It was interesting to note that the ONS underestimated household incomes over many years resulting in their savings rising in the first quarter of a 50-year low of 1.7% to 3.8%.
Nonetheless, those hell-bent on being subversive towards the BREXIT goal, will continue to enjoy a cathartic attitude attempting to derail the process between now and 29th March 2017. However despite a rather terrifying Labour Conference economic manifesto, the content of which would provide every possibility of triggering a deep-seated recession, if the contents were adopted in full, markets felt the return of a Labour government wasn’t an immediate possibility. BOE Governor Mark Carney made more than veiled threats in his 20th anniversary speech of Bank of England independence that interest rates will rise slowly and cautiously, due to inflation nudging 3% and a blip in wage inflation to 3% in the last three months. Provided the Pound does not fall much more than where it is now, many are less than convinced that inflation may not have peaked by the end of the year. Notwithstanding this prognosis, the FTSE girded up its loins and added 0.85% on the week with much of the gain due to a drop in Sterling on the week, which fell just under 1%.
Even though jingoistic tub thumping by North Korea and the US continued to prevail, President Trump’s hopes of persuading Congress to agree to taxation cuts kept equity markets calm, as the S&P 500 added 0.57% last week. The FED will have been disappointed that the PCE price index, the FED’s favoured measurement for inflation only rose 1.3% in the year to August. However 71% of CME’S FED watch contributors still believe there will be a rate hike in December. US GDP is estimated to increase by 2.3% in 2018. Oil hit its highest level of 26 months to $59, but has drifted since to $56.80. Gold is $21 lower since last Monday at $1276 an ounce. The banking and energy sector both had positive weeks.
Here in Old Blighty house builders rallied to the cause, which should be endorsed by government plans to increase the supply and finance for affordable home. ITV was popular. Carillion had another tawdry week with no fairy godfather on the horizon. Having risen by 45% in two sessions over a week ago, they fell back by 16% on Friday. Card Factory’s numbers failed to pass muster as market makers vented their spleen on the share price – down 17%. Imagination Technology found a buyer in the Chinese backed Canyon Bridge subject to Government approval. The price is at a 47% premium to the existing share price.
Tesco posts numbers on Wednesday and it is hoped that this supermarket titan will start paying dividends probably small) as sales (possibly up 2.5% on a like for like basis for the 2nd quarter) and profits hopefully improve. However the pension black hole may have increased to £5.5 billion. Tesco contributes £270 million per annum to the pot. Monarch, the travel holiday airline is digging deep to save its licence. Though it has cash in the bank the outlook in the winter months is not good. If the CAA were to revoke the licence 100,000 passengers could be stranded in the weeks to come.
As furore breaks out in Brussels over clearing and the responsibility of derivative settlements, which in unfortunate circumstances could leave £20 trillion traded between UK and EU having legal ownership complications, the US and others have warned the EU not to tamper with the system because of the need for puerile restitution. It is interesting to note that Deutsche Bank CEO John Cryan has been given 6 months to turn the fortunes of Deutsche Bank around. Deutsche’s share price has fallen 47% since he took over just over 2 years ago.
Japanese manufacturing reached a 10-year high in today’s Tankan survey. Asian markets looked positive – ASX +1.10%, Shanghai +0.29%, HS +0.48%, Nikkei +0.10% at the time of writing. The FTSE 100 is expected to open just 8 points to the good.
UK companies posting results this week –Monday – James Halstead, DMGT, Tuesday – Revolution Bars, Greggs, Electrocomponents, St Ives, Ferguson, Blancco, Wednesday – Tesco Topps Tiles, Thursday – Ferrexpo, DFS Furniture, Merlin Entertainment, Friday – Abbey
US companies posting interim results this week – Tuesday – Lennar, Ford Motor (sales), Wednesday – PepsiCo, Thursday – Constellation Brands, Yum China Holdings, Costco
Economic data – Monday – UK PMI Manufacturing, US ISM Construction Spending & Manufacturing, US New Orders, Tuesday – UK PMI Construction, Wednesday – BRC Shop Prices, UK PMI Services, UD ADP Employment Index, Thursday – New Car registrations, US factory Orders, US Initial Jobless Claims, Friday – US Non-Farm Payrolls (+175k) & employment data (4.4%).
Market Commentator – Panmure Gordon & Co
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