TODAY’S FAYRE – Sunday, 3rd December 2017
“The darkness crumbles away
It is the same old druid Time as ever,
Only a live thing leaps my hand,
A queer sardonic rat,
As I pull the parapet’s poppy
To stick behind my ear.
Droll rat, they would shoot you if they knew
Your cosmopolitan sympathies,
Now you have touched this English hand
You will do the same to a German
Soon, no doubt, if it be your pleasure
To cross the sleeping green between.
It seems you inwardly grin as you pass
Strong eyes, fine limbs, haughty athletes,
Less chanced than you for life,
Bonds to the whims of murder,
Sprawled in the bowels of the earth,
The torn fields of France.
What do you see in our eyes
At the shrieking iron and flame
Hurled through still heavens?
What quaver -what heart aghast?
Poppies whose roots are in men’s veins be
Drop, and are ever dropping;
But mine in my ear is safe,
Just a little white with the dust.”
Isaac Rosenberg – poet & author – 1890-1918
I think it is fair to say that last week global politics were far more intriguing and interesting than global equity or bond markets. It had been eerily quiet on the shores of North Korea, when unsurprisingly Kim Jong Un probably became exasperated at the tirade of goading abuse from President Trump’s lashing tongue. I make light of the situation with my marginally trite comments. However it was no laughing matter when an ICBM was blasted in to the Japan Sea. Me thinks President Un is trying the world’s patience. Whether further sanctions will stop this despot from behaving in a dangerously erratic manner remains to be seen. One suspects that the POTUS might just have more pressing domestic issues to attend to, which might just put the N Korean tyrant’s bellicose behaviour on the backburner for a few weeks, though nothing should be ruled out. Lt Gen Michael Flynn’s guilty plea on lying about engaging with Russia around the time of the Presidential election could well cause acute embarrassment to Jared Kuchner, President Trump’s son-in-law, but also to the Commander-in-Chief himself!
Then of course there were plenty of chuntering emanating from the EU and the UK about the divorce settlement with an irritating, but very possibly a deal-breaking side show, concerning the borders of Ireland and NI, which could derail the process. Needless to say Donald Tusk lost no opportunity to fetch out his wooden spoon and stir the pot of prevailing uncertainty. Also, though he was probably misquoted, Michel Barnier made some ill-considered comments about the UK’s lack of commitment to fight terrorism. Through the gloom, a feeling that a ‘soft’ BREXIT is likely be negotiated manifested itself. The time to start to add trade talks to the agenda is running out. I think PM May has decided, that in the light of the precarious position, she finds her Government in, it would be better to bend over backwards to placate the EU and force their hand to start negotiate. I certainly wouldn’t hold my breath that there will be a happy outcome, but the foreign exchange market has taken Cable up to $1.35 – a far cry from $1.20 where it stood in August 2016. The recent strength of Sterling suggests a plausible barometer for agreement. However the hardliners are massing their troops if they perceive the PM is bending over too far. The EU has adopted an intransigent attitude in response to feeling jilted and left at the altar. These negotiations are excruciatingly complex. Hence we can only hope that a touch of goodwill and a modicum of good sense will prevail. The more protracted these negotiations become, the more irascible they will become. I am very confident that though we are likely to feel a little pain initially, in the long term the pain will turn in to gain. The nation has never been so divided; so it would be very constructive for the rhetoric to be less cantankerous with greater accommodation all the way round from ALL PARTIES – ‘LEAVERS’, ‘REMAINERS’, ‘POLITICIANS’, ‘THE MEDIA’ and ‘BUREAUCRATS!’
Here in Old Blighty Morgan Stanley warned of the dangers of a Corbyn ‘hard-left-leaning’ administration and the damage it could do to the economy. Jeremy Corbyn concurred that Labour was a danger but he believes his party will lead the country into a ‘Valhalla’ of milk and honey and not into a vortex of economic despair! It is my measured opinion that Lloyd Blankfein of Goldman Sachs should be more worried about the threat of a financially irresponsible Labour administration, rather than carp on about ‘BREXIT’, especially as Goldman has made MILLIONS of Dollars out of this country both in the private sector as well as the government.
Finally there is the Damian Green ‘computer’ issue for the PM to tidy up when she returns from the Middle East. One cannot help feeling that the police have behaved in a less proprietary manner. Also is ordinary pornography on a computer a crime? I suppose beauty is in the eye of the beholder!
There is little doubt that these political machinations took some moderate toll on global equity markets last week. There is also the added factor that many of these indices look flushed, top heavy and over-valued. Early in the week US markets hit records – the DOW breaching 24k – with the others continuing to flirt with them. The GOP’s plans to reduce taxation – both corporation and personal, which could add a further $1 trillion to the US’S borrowing requirements, were coming to fruition even though the margin of success in the Senate was slim. It was the Flynn issue that sent New York’s main indices in to reverse on Friday. Sterling’s strength continued to take the cream off the FTSE. The rest of the European markets were starting to suffer from indigestion and Tokyo’s NIKKEI benefitted from Yen weakness. At the same time a few cumuli nimbus clouds are starting to form quite aggressively over the bond market, especially the junk variety, which has all the hallmarks of a bubble, desperate to be lanced.
So the week and the month ended as follows – the week – S&P +1.25%, FTSE -1.47%, European bourses -0.79%, Nikkei +1.19%. In the month of November the main indices closed as follows – DOW +3.2%, S&P 500+2.6%, NASDAQ +1.6%, Nikkei +0.7%, FTSE -3.1%, DAX -3.5%, CAC -2.6%, Hang Seng +1.8%, Shanghai Composite -1.4%. Gold rallied by $6 to $1281 an ounce. Crude Oil rallied by 1.6% on the week to $63.63 a barrel. The unregulated Bitcoin market kept speculators on their toes with some wild swings of between 18-21% up and down, ranging between $9000 and $11.400. This is not a market for the faint-hearted. 2 years ago the Bitcoin price stood at circa $400!
In the US last week it was retail and banking stocks that captured the imagination with the likes of Target, L-Brands, Kohl’s, Foot Locker, JC Penney and Macy’s making huge daily gains of between 6-8%. The NASDAQ’s big 5 component stocks which have increased in value by an average of 35% so far this year- Apple, Microsoft, Alphabet, Facebook and Amazon – saw some froth skimmed off the top in the latter part of last week. Another 25 basis point hike in the FED rate is expected at the 12th December meeting, though low inflation continues to prevail, which may restrict any further increases unless the status quo alters.
There were 3 main stories that grabbed headlines in the UK last week. Firstly the unpleasant spat between the LSE and its 5% shareholder Sir Christopher Hohn’s Children’s Trust, with some surprising intervention from Mark Carney, which saw Xavier Rolet leave his position as CEO with immediate effect. A meeting called by on 19th December by Hohn will decide whether Donald Brydon the chairman remains in situ until 2019. I hope not. The LSE needs a new chairman and permanent CEO (Warren or not) before it loses credibility. I hope someone with an international reputation, such Douglas Flint will be appointed chairman to get the show back on the road. The share price remains firm at about £38, which suggests the market expects that a predator waits in the wings – NYSE, CME? Who know? RBS served notice to close 259 branches making nearly 700 people redundant. Technology was the convenient excuse. I think it was cost cutting! Surely bank managers are essential assets for this service industry. Finally Palmer & Harvey went into liquidation, which could put 2500 on the street. Apparently the main tobacco titans especially Japan Tobacco International were alleged to have offered little or no hope!
UK Companies posting numbers this week – Monday – McColl’s, GW Pharma, Character Group, Lonmin, Tuesday – IG Group, Collagen, McBride, Wednesday – RWS, Mulberry, Carillion, Stagecoach Numis Securities, Thursday – DS Smith, Capita, HSS Hire, Friday – Berkeley Group
US companies posting interim results this week – Tuesday – Toll Bros, Autozone, Wednesday – Brown-Forman, H&R Block, Fred’s, Korn/Ferry, Thursday – Vail Resorts, Dollar General, Ciena, Friday – Johnson Outdoors
Economic data due this coming week – Monday – UK PMI Construction, US Factory orders, Tuesday – UK car registrations, UK PMI Services, US ISM Non-Manufacturing, Wednesday – US Mortgage applications, Thursday – US Consumer Credit, Friday – UK industrial production & Construction output, UK trade balance, NIESR GDP, US Non-farm payrolls and employment data.
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