Monthly Archives: September 2018

EXCESSIVE DEBT – THE GREATEST THREAT TO ANOTHER FINANCIAL CRISIS

EXCESSIVE DEBT – THE GREATEST THREAT TO ANOTHER FINANCIAL CRISIS

It’s Thursday, it’s such a beautiful day, you couldn’t script it if you tried. Everything in the garden seems rosy, or is it?  Stock markets in the west are either at record high levels or close to.  Conversely, the Shanghai composite has had major issues in the last three years.  At the time of the banking crisis in March 2009, the Shanghai composite stood at 2193.  Today it stands at 2791 up 27% in that period. However, it did reach 5116 on 20th June 2015.  Since that day it is down 45%.  That coincides with China’s GDP which stood at a frothy 10% and is now around 6.7%.  It should not be forgotten that the Chinese authorities tend to be extremely economical with the truth.  Many people challenge the robustness of the banking sector and have expressed concern over a plethora of properties being built all over China – many of them not in use.  It is also thought that the banking sector is restricting loans for those involved in retail.

I hate being an anorak, but sometimes its necessary to illustrate what happened 10 years ago at the time of the financial crisis.  The great God ‘Quantitative Easing’ was introduced.  Like insurance it was a necessary evil.  There was no liquidity in the banks and many people probably don’t realise how close we were to having a moribund banking service with no cash available and no bills paid. The US authorities were forced to put $4.5 trillion into their system and by way of comparison the Bank of England put a total of £475 billion in to the UK banks.  What no one knows is how damaging the removal of QE will be on the world’s economy.  The US has started to taper QE modestly but there is still a long way to go.  As for the UK we are still where we were 10 years ago.  As for the European Union they only started QE in 2015.  However, Mario Draghi the President of the ECB is already talking about cutting back on QE next year.

We need to remind ourselves of who benefitted from QE and who didn’t.  The injection of cash into the banking system provided the missing confidence and this triggered their investment divisions and fund managers in general to back the truck up and fill it up with stocks and shares. On 9th March 2009 the day QE started, most global indices were on their knees. Since that fateful day the following had made gargantuan gains – DJIA +265%, S&P 500 +324%, NASDAQ +517%, FTSE100 + a paucity – 113%, DAX +233%, HANG SENG +117%, NIKKEI +232% and the Shanghai composite +27%. There is no doubt the role of private equity, hedge funds and fund managers has contributed to the frothiness of the market. They have exacerbated the strength of this rally. Immediately after the crisis, the banks were unable to fulfil their full role until they had been recapitalised.

 

 Though this extraordinary rally which does not include the benefit of dividends, has triggered a recovery of the world’s economy it has done so rather anaemically benefitting fewer people than is desirable.  The situation of course was magnified in some countries by the introduction of necessary austerity.  This was particularly the case in the UK where it was felt that Government borrowing had got totally out of hand. George Osborne started the process and Philip Hammond has been more than happy to carry on.

 

 Consequently, the gulf between those that have and those that have not, has widened unacceptably.  It has created huge resentment and significant anger. A large percentage of the population has not enjoyed an increase in remuneration in concert with inflation for a few years; hence the rise of Jeremy Corbyn and John McDonnell with their wacky but attractive alternative to capitalism.  It has attracted those between the age of 18 and 45, who cannot get on the property ladder, appear to have seen no visible help from the May Government and thoroughly dislike her approach. This section of society erroneously seems more than happy to sup the alternative regardless of the consequences.  The fact that Labour’s economic policies have got more holes in it than a sieve and that the maths do not add up for their ambitious programme is a matter of wholesale indifference to this section of society.  Labour’s plans to nationalise certain industries, possibly without compensation, to steal equity from individuals and fund managers, for workers’ participation and a humungous welfare programme likely to cost zillions needs paying for. Higher taxation and borrowing will cover it, but at what cost? The pound is likely to fall out of bed.  Interest rates will have to rise to protect the pound. UK equities without a dollar denomination will fall sharply and most important of all international investors will head for the hills.  We saw similar political behaviour in the US two years ago with the arrival of the Trump band wagon. However, the disenchanted cries for change are slightly different from the Trump voters. There is nothing left wing about Donald Trump’s supporters.

This social divide has very dangerous connotations. Over here in Old Blighty the widening divisions will continue to manifest themselves through the dangerous Brexit negotiations and the threat of the General Election.  A Corbyn Government is a real possibility unless the Tories get hold of the bit and realise that their remit is wider than Brexit, which is driving everyone mad – however important they may be.  The ‘social divide’ is acutely worrying and it needs dealing with – no platitudes just action.

Is the bull market over? Are equities likely to plateau? Could we have a sharp reversal? The latter seems unlikely, due to interest rates remain relatively low, despite the FED’s intervention. Bonds remain for many investors an unattractive alternative asset.  During this recovery process have we learnt anything? Could there be another financial crisis? It couldn’t possibly be dismissed despite global regulatory authorities implementing Draconian measures to stop banks going to the wall.

My big worry about the future is debt. There is far too much of it. In 2007 the global debt stood at $150 trillion. Today global debt sits at circa $250 trillion – up 66%. US debt has ticked up modestly from $50 trillion in 2007 to $70 trillion today, up 40%.  The situation in China is even worse, but it comes from a much lower number – up from $10 trillion to $35 trillion in the last 11 years – up 250%! Personally speaking, I am much more worried about the bond markets than I am about equities but that is purely my opinion. This level of debt is at terrifying levels and I feel sure that the central banks are aware of this explosion and hope that the level of communication between them is fulsome. I have no crystal ball and therefore have no idea when another financial debacle will take place. It could be next year, it could be in a decade’s time or maybe 50 years away!

One thing I am quite sure about is that any financial crash is unlikely to be precipitated by the banking sector. Why? These sectors are heavily regulated and tough stress tests have been implemented by virtually every central bank around the world. I might exclude China and as I have already intimated, the truth is hard to get to. Any subsequent crash is likely to emanate from highly sophisticated technology which could easily bypass the banks as this sector slowly but surely seems to be replacing the role of a bank. Cyber crime is discussed rather glibly. It is a really serious problem and I am not sure that even the most brilliant brains have the natural ability to prevent a very nasty financial crash in the years to come.  What would help is the will of central banks to persuade governments and therefore the consumer and corporate operations to cease borrowing in such a voracious manner. I have no way of knowing but I suspect it will be China that triggers this crisis. The size of its economy will supersede the US before too long. Even though 40% of Chinese people are inclined to save money, they have no control over government or corporate lending. Technology is the ‘key to the kingdom’, but we can be none too sure that the key fits the lock of the problem.  We are all warned! Prenez Garde!

 

David Buik

Communications

Mobile – 07788 144 877

 

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MARKET COMMENT & EUROPEAN OPENING CALLS

Yesterday the Labour party conference came to a crescendo with a barnstorming speech by its undisputed leader, Jeremy Corbyn, for the party faithful. The content of his rhetoric was truly heart-warming and when he is elected PM at the next General Election, it appears that the UK will turn in to Elysium. There is only the small matter of paying for it, which will be difficult as every foreign investor may have fled town with our pensions likely to be worth significantly less.  But, no matter, for Labour, the ‘feel good factor’, will see the country through its travails. 

 

Yesterday in London, investors were in a reflective mood, awaiting comment on the FED and a reaction to Jeremy Corbyn’s radical plans for the future. FTSE 100 +3 at 7511, DAX +0.08% at 12385, CAC +0.60% at 5512 

AA posted very poor results which saw shares -13.6%, BOOHOO saw ½ year profits up 22% shares +9.1%, UNILEVER, still grappling to move head office lock stock and barrel to Holland, which it will struggle to achieve – shares +0.50%

 

 In the New York yesterday the Street of Dreams finished the session on the back foot in response to the FOMC raising rates by 0.25%. DJIA -0.40%, S&P 500 -0.33%, NASDAQ -0.21%.

Yesterday’s expected increase in the FED rate to 2.25% (its highest level for a decade) was the eighth in the current cycle and it would appear, that despite President Trump’s displeasure, it may not be the last one that FED Chairman Jay Powell implements this year. The market is becoming fearful of the fact that dovish hikes are a thing of the past … Markets are finally respecting the Fed. On Tuesday Iran felt the thin end of President Trumps tongue and yesterday at the UN, it was the turn of China, whom the President vilified for allegedly infiltrating and sabotaging the mid-term US election campaign. These allegations were flatly denied. BED, BATH & BEYOND posted inadequate sales and profits and lost 14% in value after hours

 

Asia responded negatively to the FED’s action and this morning the main bourses reacted accordingly – ASX -0.12%, Shanghai -0.39%, Hang Seng -0.45%, Nikkei -0.63%.

 

Bonds – Japan 0.11%, Germany 0.51%, France 0.84%, Spain 1.52%, UK 1.63%, Portugal 1.88%, Italy 2.91%, US 3.05%, Greece 4.00%

 

Cable $1.3154, €/£0.8932, €/$1.1750, $/Y112.73 – Gold $1201.90 – Nymex $72.40, Brent $82.08

 

UK Companies reporting today – 888 Holdings, Petropavlovsk, Saga, Halma, Mitchell & Butlers, Carnival, RPC, Tui Travel, CMC Markets

 

US companies reporting today – ConAgra

 

Economic data – US 2nd quarter GDP estimate

 

Opening calls FTSE -11 at 7500, DAX -44 at 12341, CAC -7 at 5505, DJIA futures +13 at 26398

 

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MARKET ACTIVITY & EUROPEAN OPENING CALLS – 26/9/18

Yesterday – FTSE 100 +49 at 7507, DAX +0.19% at 12375, CAC +0.05% at 5479 – Strong performances from BP. Shell and NEXT, which upped its profit forecast by £10 million to £727m for the year with sales up 6.9% and Directory sales up 16.8% – shares up 7.69% – Mixed performances from other companies reporting yesterday – Cook +6.7%, Card Factory -3.87%, United Utilities -0.84%, AG Barr -0.21% – Unilever’s management gave a poor account of itself with the proposed move of its head office to Holland – no commercial reason – all political.

 

 DJIA -0.19%, S&P 500 -0.13%%, NASDAQ +0.18% – Despite bellicose remarks about Iran at the UN, which brought sniggers of laughter the Street of Dreams, investors have been FED watching – With the Federal Reserve all but certain to raise interest rates on Wednesday, investors may need to brace for sudden, unexpected market volatility as stocks have been underperforming on Fed Days in recent months.

 

This morning – ASX +0.11%, Shanghai +1.27%, Hang Seng +1.63%, Nikkei +0.06% – despite concern on trade tariffs, there was strong evidence of a relief rally or a “dead-cat-bounce”! Oil & techs were in the mix and there was confidence behind the prelisting trading in Haidilao, the Chinese hot-pot chain which starts trading Wednesday following its $963 million IPO.

 

Bonds – Japan 0.12%, Germany 0.54%, France 0.86%, Spain 1.52%, UK 1.63%, Portugal 1.88%, Italy 2.90%, US 3.10%, Greece 4.02%

 

Cable $1.3180, €/£0.8923, €/$1.1764, $/Y112.93 – Gold $1205.90 – Nymex $72.15, Brent $81.81

 

UK Companies reporting today – AA, Boohoo, Mitie, SSP, PZ Cussons, Allergy Therapeutics

 

US companies reporting today – HB Fuller, Bed, Bath & Beyond

 

Economic data – FOMC, UK New Home Sales

 

Opening calls FTSE -2 at 7505, DAX +26 at 12400, CAC +6 at 5485, DJIA futures +58 at 26550

 

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MARKET ACTIVITY & EUROPEAN OPENING CALLS 25/9/18

YESTERDAY – FTSE 100 -31 at 7458, DAX -0.64% at 12350, CAC -0.33% at 5476

1,721.50 GBX +136.50 (8.61%) – 1585p close on Friday.

“European equity markets were lower yesterday due to trade tariff tensions with the latest batch kicking in yesterday, and this dampened the mood. Higher oil prices buoyed BP and Shell; otherwise FTSE may have fallen more. The Chinese government confirmed they will not re-engage in trade talks while the US continues to threaten them with additional tariffs.

The other big news of the day was the proposed merger of Barrick Gold and Randgold

 

YESTERDAY – DJIA -0.68%, S&P 500 -0.35%, NASDAQ +0.08% – Concerns on Deputy Attorney General Rod Rosenstein might be going! Also the damage from the trade spat with China to the world’s economy, if allowed to escalate, may have been underestimated.

 

TODAY – ASX -0.12%, Shanghai -0.76%, Hang Seng -1.62%, Nikkei +0.09% – Trade concerns after the holiday saw markets in HK sharply lower – property and insurance companies.

 

Bonds – Japan 0.12%, Germany 0.51%, France 0.84%, Spain 1.52%, UK 1.61%, Portugal 1.88%, Italy 2.97%, US 3.09%, Greece 4.07%

 

Cable $1.3103, €/£0.8959, €/$1.1741, $/Y112.86 – Gold $1202.80 – Nymex $72.26, Brent $81.45

 

UK Companies reporting today – Card Factory, Manchester United, HIS Markit, AG Barr, Thos Cook, United Utilities, Close Brothers, McCarthy & Stone, Next,

 

US companies reporting today – Jabil, KB Homes, Nike,

 

Opening calls FTSE -10 at 7448, DAX unchanged at 12350, CAC -2 at 5474, DJIA futures +10 at 26572

 

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MARKET ACTIVITY & OPENING CALLS – 24/9/18

INDEX 17/9/18 21/9/18  % gain/loss  
FTSE 100 7304 7490 +2.54%  
XETRA-DAX 12056 12431 +3.11%  
CAC40 5344 5494 +2.81%  
DJIA 26151 26743 +2.26%  
 S&P 500 2903 2929 +0.89%  
NASDAQ 7992 7986 -0.07%  
Hang Seng 27030 27953 +3.41%  
Nikkei 23035 23870 +3.62%  
Shanghai Comp 2671 2797 +4.72%  

 

Last week global stock markets enjoyed some great upbeat trading, apart from the NASDAQ Composite, which saw some sharp reversals early in the week, though the recovery of this index was quite measurable by Friday. Investors were nervous and felt some of these large-cap tech valuations might be a little too frothy, especially if the Trump/China trade spat spills over in to technology. However, it seems that neither party at moment wants to rock Apple’s boat or others that do reciprocal business. The gains this week were strong.  The US economy looks strong, with US 10-year Treasury yields at 3%, suggesting perhaps another two modest FED increases in rates this year. The S&P 500 hit yet another new record, though frothy valuations are a concern. Let’s not forget that 3rd quarter earnings are often very positive. Crude oil is nudging $80 a barrel. The Dollar was strong in the early part of the week, but the Greenback eased back by Friday.

 

Finally, in this weekend’s auction Comcast beat 21st Century for  European pay-TV giant Sky, with a $39 billion against “1st Century’s $32billion. Comcast’s winning bid for Sky This morning SKY share price could bounce from its close at 1585 to circa 1660p (+4.7%) This deal gives Comcast the missing distribution it requires in UK, Europe and Asia.  However, the combination of Walt Disney and the acquired 21st Century assets would make its TV and movie studios a major competitor to Netflix.

Comcast bid £17.28 for Sky shares against Fox’s £15.67.  The offers will be put to shareholders on 11th Oct. The auction’s outcome provides full compensation for Comcast and CEO Brian Roberts, who were beaten by Disney in the tussle earlier this year for Fox’s entertainment assets, including Fox’s 39% stake in Sky.

 

ASIA it was an equinox holiday in Shanghai & Tokyo – ASX -.03%, Shanghai closed, Hang Seng -1.25%, NIKKEI closed _ Trump levied a 10% tax on $200 billion of goods & XI Jinping responded with levies on 5207 goods valued at $60 billion.

 

Bonds – Japan 0.12%, Germany 0.46%, France 0.78%, Spain 1.52%, UK 1.56%, Portugal 1.88%, Italy 2.84%, US 3.07%, Greece 4.05%

 

Cable $1.3079, €/£0.8977, €/$1.1741, $/Y112.58 – Gold $1201.00 – Nymex $71.60, Brent $79.82

 

Opening calls FTSE -27 at 7463, DAX -48 at 12382, CAC -18 at 5476, DJIA futures -80 at 26663

 

75% of retail investors lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

WEEKLY FAYRE

 

WEEKLY FAYRE – Sunday, 23rd September 2018

 

“Because I have loved life, I shall have no sorrow to die.
I have sent up my gladness on wings, to be lost in the blue of the sky.
I have run and leaped with the rain, I have taken the wind to my breast.
My cheeks like a drowsy child to the face of the earth I have pressed.
Because I have loved life, I shall have no sorrow to die.

I have kissed young love on the lips, I have heard his song to the end,
I have struck my hand like a seal in the loyal hand of a friend.
I have known the peace of heaven, the comfort of work done well.
I have longed for death in the darkness and risen alive out of hell.
Because I have loved life, I shall have no sorrow to die.

I gave a share of my soul to the world, when and where my course is run.
I know that another shall finish the task I surely must leave undone.
I know that no flower, nor flint was in vain on the path I trod.
As one looks on a face through a window, through life I have looked on God,
Because I have loved life, I shall have no sorrow to die.” 

 

Amelia Josephine Burr – poet – 1878-1968

 

Whether one agrees with Theresa May’s stance on Europe or criticise her performance as PM in the last two years, one can only admire her stoicism and fortitude post the disastrous EU summit in Salzburg. She has come out with all guns blazing against the disrespectful stance and derisory approach of the EU leaders, who totally ostracised her at the two-day meeting. To be given just 10 minutes to publicly and officially state the UK’s position was an absolute insult.

 

No one needs reminding that the UK chose to serve notice to leave this so-called elite club.  However, both parties bring mutual synergies and benefits to the table, which should require nurturing on an on-going basis – trade (however dismissive the EU is of it, in terms of its importance), employment, security, aviation and the future of the 3 million employed in the UK, which thankfully has been secured. These require a calm and collected approach and ‘joined-up’ thinking! Grand standing and brinkmanship are all very fine, but the very low-grade quality of statesmanship and diplomacy, that has prevailed to date, could trigger a very regrettable outcome to these hostile negotiations.

 

I failed to experience any Sir Vince Cable’s ‘erotic spasms’ which he talked about at last week’s Lib-Dem Conference. I wonder what Jeremy Corbyn will have in store for us at this coming week’s Labour Party Conference – can’t wait! 

 

 

INDEX 17/9/18 21/9/18  % gain/loss  
FTSE 100 7304 7490 +2.54%  
XETRA-DAX 12056 12431 +3.11%  
CAC40 5344 5494 +2.81%  
DJIA 26151 26743 +2.26%  
 S&P 500 2903 2929 +0.89%  
NASDAQ 7992 7986 -0.07%  
Hang Seng 27030 27953 +3.41%  
Nikkei 23035 23870 +3.62%  
Shanghai Comp 2671 2797 +4.72%  

 

 

Last week global stock markets enjoyed some great upbeat trading, apart from the NASDAQ Composite, which saw some sharp reversals early in the week, though the recovery of this index was quite measurable by Friday. Investors were nervous and felt some of these large-cap tech valuations might be a little too frothy, especially if the Trump/China trade spat spills over in to technology. However, it seems that neither party at moment wants to rock Apple’s boat or others that do reciprocal business. The gains this week were strong. It is accepted that the US economy looks strong, with US 10-year Treasury yields at 3%, suggesting perhaps another two modest FED increases in rates this year. The S&P 500 hit yet another new record, though there are a growing number of investors with valuation concerns. Let’s not forget that 3rd quarter earnings are often very positive. Crude oil is nudging $80 a barrel. The Dollar was strong in the early part of the week, but the Greenback eased back by Friday.

 

Asian bourses have experienced an exceptionally torrid time in recent weeks, especially Shanghai and Hong Kong. However, despite President Trump upping the ante on tariffs on goods from China last week to $200 billion, a more conciliatory mood to keep talking than has been the case for some time, evolved – hence a sharp rise in value of the Shanghai Composite and the Hang Seng last week.  The Nikkei has enjoyed a decent ‘run on the rails’ helped by demand for tech stocks and stimulated by a softer Yen.

 

Over here in Old Blighty, most of the week investors were waiting in trepidation for clarification on Brexit, emanating from the Salzburg summit. Suffice to say they did not get it. The Pound was strong on Thursday morning $1.3240 against the Greenback in anticipation.  By Friday hopes were dashed – Cable fell to $1.3075.  However, every cloud has a silver lining – even if only temporary – the 60% Dollar based earnings from FTSE 100 companies provided comfort and a degree of compensation, resulting in the FTSE 100 having two upbeat days and a gain of 2.54% on the week.

 

On the economic front here in the UK, retails sales In August 2018 increased by 0.3%, compared with the previous month, with increases across all sectors except food, clothing and petrol. The last three months of summer from June to August 2018 saw an increase in the quantity bought at 3.4%, with food and household goods stores doing well in the warm weather when compared with the previous summer, while non-store retailing continued to show strong growth. UK inflation data highlighted a real wage squeeze, which continued to deepen, as UK inflation hit a six-month high of 2.7% – the highest since February, with air travel, crude oil and food prices increasing. Friday’s PSBR saw a £2.4 billion increase in borrowing to £6.8 billion, but the net borrowing for the year was £17.8 billion – £7.8 billion down on this time last year.

The corporate news last week had very much a retail flavour to it. It looks as though the CMA is going to have the drains up over the proposed ASDA/Sainsbury merger.  Is there any real benefit to the consumer will be the conundrum? French Connection posted dire numbers and Kingfisher’s Castorama’s progress was discouraging, despite Screwfix’s efforts being positive. Kingfisher’s shares were down 6% on Thursday. Ocado posted an 11.4% increase in revenues for the past trading period, emphasising the positive contribution of France’s Groupe Casino. IG shares took an 8% hit on Wednesday, on its trading update where volumes were clearly being affected by the influence of ESMA. BT is considering appointing Worldpay’s boss Philip Jansen as CEO to replace Gavin Patterson.

Starbuck’s UK-based European operation made a £162million profit and paid £4.5million in tax – but the UK corporation tax rate is 19 per cent. But Starbucks Coffee Company (UK), which has four subsidiaries, said it had paid an effective rate of 25.3 per cent, equal to £13.7million. It’s mind-boggling business structure makes it almost impossible to work out if the correct amount of tax is being paid by Starbucks.

Finally, last night Comcast beat 21st Century in the high-stakes auction of European pay-TV giant Sky, coming out on top with a bid of £30 billion ($39 billion). Comcast’s winning bid for Sky gives it the missing distribution it requires in UK, Europe and Asia. A Combination of Walt Disney and the 21st Century assets makes with its TV and movie studios a major competitor to Netflix.

Comcast bid £17.28 for Sky shares against Fox’s £15.67 offer, which valued Sky at $32 billion. The offers will be put to shareholders on 11th Oct. The auction’s outcome provides full compensation for Comcast and CEO Brian Roberts, who were beaten by Disney in the tussle earlier this year for Fox’s entertainment assets, including Fox’s 39% stake in Sky.

 

UK companies posting results this week – Monday – Pennon, Tuesday – Card Factory, Manchester United, HIS Markit, AG Barr, Thos Cook, United Utilities, Close Brothers, McCarthy & Stone, Next, Wednesday – AA, Boohoo, Mitie, SSP, PZ Cussons, Allergy Therapeutics, Thursday – 888 Holdings, Petropavlovsk, Saga, Halma, Mitchell & Butlers, Carnival, RPC, Tui Travel, CMC Markets, Friday – GAN

 

 

US companies posting results this week – Monday – MaxCyte, Tuesday –, Jabil, KB Homes, Nike, Wednesday – HB Fuller, Bed, Bath & Beyond, Thursday – ConAgra, Friday – Vail Resorts

 

 

Economic data posted this week – Monday – UK CBI Industrial trends, Wednesday – FOMC, UK New Home Sales, Thursday, US 2nd quarter GDP estimate, Friday – UK GDP 2nd quarter estimate, UK Gfk Consumer Confidence

 

 

David Buik

Communications

Mobile – 07788 144 877

 

Financial spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Click here to read the full risk warning.

MARKET ACTIVITY & EUROPEAN OPENING CALLS – 21/9/18

PM May arrived in Salzburg in a positive frame of mind.  I fear she left dejected. The Chequers proposal looks dead in the water. I don’t think I can ever remember a PM of the UK so savagely rejected by an unelected body! Either her advisors Messrs Robbins and Barrow misread the mood of EU negotiators, or Mrs May did not listen to their advice. Back to the drawing board or is it goodnight Vienna and NO DEA!  The FTSE 100 and the Pound seemed surprisingly very relaxed –

 

Markets continued to throw caution to the wind with the FTSE 100 +36 at 7367 with the Pound continuing to march on to £1.3274 – Miners were all the rage and investors took a renewed appetite for insurance, banks and housebuilders. Diageo & Unilever were also popular. Burberry eased by 4%, with analysts underwhelmed by its new fashions. This weekend should see the outcome for SKY – Comcast or 21st Century. One suspects that Comcast will land the spoils but Disney could acquire many of 21st Century assets.

 

DAX +0.88% 12326, CAC +1.07% 5451

 

DJIA +0.95% at 26656, S&P +0.78% at 2931, NASDAQ +0.98% at 8028 – Though Street of Dreams attained record levels thanks to growing convictions about the U.S. economy, it would be folly not to consider the threat of a Beijing-Washington trade spat, which could easily morph into the sort of a bellicosity that could disrupt global economic growth,

 

ASIA this morning joined in the party, with momentum responding to record high on Wall Street– ASX +0.51%, Shanghai +0.98%, Hang Seng +0.83%, NIKKEI +0.88%

 

Bonds – Japan 0.11%, Germany 0.47%, France 0.79%, Spain 1.50%, UK 1.59%, Portugal 1.86%, Italy 2.90%, US 3.07%, Greece 4.03%

 

Cable $1.3274, €/£0.8876, €/$1.1785, $/Y112.72 – Gold $1213.60 – Nymex $70.22, Brent $78.73

 

UK companies posting results today & this week – Friday – SIG, Smiths Group

 

Economic data posted this Friday – UK PSBR, US PMI

 

Opening calls FTSE +20  at 7387, DAX +41 at 12367, CAC +11 at 5462, DJIA futures +67 at 26723

 

75% of retail investors lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

MARKET ACTIVITY & EUROPEAN OPENING CALLS 19/9/18

Marsh McLennan to buy JLT for just short of £5 billion – directors to share £100m – BMW, VW Daimler under investigation for restricting emissions treatment systems.

Tesco will open mini convenient stores called ‘Jack’s’ after Tesco’s founder Jack Cohen

 

FTSE 100 -2 at 7300, DAX +0.51% at 12158, CAC +0.28% 5364 – Top riser on Footsie was utility SSE, up 3.55% to 1,122.50p, while top laggard was GVC Holdings, which dropped 3.49% to 995p.

It came despite revenue rising in the online and European retail segments in the latest half year as it identified further cost savings from its Ladbrokes Coral acquisition. Ocado finished the session up just 0.79% having opened up over 4% on a good trading statement with revenue up 11.5% and goods baskets up 11.4% thanks to Casino

 

DJIA +0.71% at 26246, S&P +0.54% at 2904, NASDAQ +0.76% to 7956, – Abbvie shares take a tumble -2.89% as allegation that the drug company illegally pushed blockbusters – DOW surges 185 points as US-China trade spat barbs are not as bad as feared – AUTOZONE -1.97%, General Mills -7.62%

 

ASIA this morning – ASX +0.46%, Shanghai +0.97%, Hang Seng +1.00%, NIKKEI +1.27%.

 

Bonds – Japan 0.13%, Germany 0.48%, France 0.79%, Spain 1.50%, UK 1.57%, Portugal 1.84%, Italy 2.80%, US 3.05%, Greece 4.04%

 

Cable $1.3147 €/£0.8875, €/$1.1673, $/Y112.30 – Gold $1206.70 – Nymex $69.87, Brent $78.99

 

UK companies posting results today & this week – Wednesday – Babcock International, Kingfisher, Stagecoach, Thursday – French Connection Group, SOCO International, Kier Group, IG Group, Friday – SIG, Smiths Group

 

US companies posting results today & this week – Wednesday – Red Hat, Thursday – Darden Restaurants, Micron Technology, United Natural Foods

 

Economic data posted this week – Wednesday – UK Inflation Data, UK House Prices, US Housing starts, Thursday – UK Retail Sales, US Existing Home Sales, Friday – UK PSBR, US PMI

 

Opening calls FTSE +7 at 7307, DAX +18 at 12176, CAC +6 at 5370, DJIA futures +21 at 26267

 

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MARKET ACTIVITY & EUROPEAN OPENING CALLS

Yesterday – FTSE 100 down 2 at 7302, DAX down 0.23% at 12096, CAC down 0.07% 5348 – A major UK shareholder in Unilever is to vote against the FTSE 100 company’s plans to stop its dual British-Dutch structure and is urging other investors to follow suit. – GVC, IHG, Burberry down 1.5-3%. Centrica, easyJet, RBS & Evraz amongst the gainers in a quiet session

 

DJIA -0.35% at 26062, S&P -0.56% at 2889, NASDAQ -1,43% to 7895, – FEDEX unchanged with results in line & ORACLE -3.6% iCloud sales falling short

Netflix is the biggest faller down 3.9%, followed by Amazon off 3.2%. Apple 2.6%

 

ASIA this morning – ASX -0.44%, Shanghai -0.12%%, Hang Seng -0.72%, NIKKEI +1.52 %. Trade war tariff concerns tariffs on $200 billion to be imposed by Trump administration – NIKKEI continues to blaze the trail to a 7-month high thanks to a lower Yen and demand for tech stocks

 

Bonds – Japan 0.10%, Germany 0.46%, France 0.77%, Spain 1.48%, UK 1.54%, Portugal 1.82%, Italy 2.87%, US 2.99%, Greece 4.00%

 

Cable $1.3154 €/£0.8886, €/$1.1690, $/Y111.93 – Gold $1203.10 – Nymex $68.63, Brent $77.62

 

UK companies posting results today & this week –, Tuesday – Ocado, Spire Healthcare, Faroe Petroleum, Wednesday – Babcock International, Kingfisher, Stagecoach, Thursday – French Connection Group, SOCO International, Kier Group, IG Group, Friday – SIG, Smiths Group

 

 

 

US companies posting results today & this week – Tuesday – Autozone, General Mills, Wednesday – Red Hat, Thursday – Darden Restaurants, Micron Technology, United Natural Foods

 

 

Economic data posted this week – Wednesday – UK Inflation Data, UK House Prices, US Housing starts, Thursday – UK Retail Sales, US Existing Home Sales, Friday – UK PSBR, US PMI

 

 

Opening calls FTSE -39 at 7263, DAX -49 at 12047, CAC -18 at 5330, DJIA futures -24 at 26038

 

75% of retail investors lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

WEEKLY FAYRE

 

TODAY’S FAYRE – Monday, 17th September 2018

 

Tread lightly, she is near

Under the snow,

Speak gently, she can hear

The daisies grow.

 

All her bright golden hair

Tarnished with rust,

She that was young and fair

Fallen to dust.

 

Lily-like, white as snow,

She hardly knew

She was a woman, so

Sweetly she grew.

 

Coffin-board, heavy stone,

Lie on her breast,

I vex my heart alone

She is at rest.

 

Peace, Peace, she cannot hear

Lyre or sonnet,

All my life’s buried here,

Heap earth upon it.

 

Oscar Wilde – playwright & poet – 1854-1900

 

Reams have been written on the tenth anniversary of the Banking and credit crisis. Gordon Brown has never shown ANY sign of ‘mea culpa’, humility or contrition for the measurable damage that he, politicians and soft regulation that contributed to the catastrophic financial crash. However, he does have a point that another financial crash in the years to come cannot be ruled out, if the world continues to be reluctant to cooperate with each other over issues such as trade tariff wars, climate change and cybercrime.

 

In years gone by, had comments attributed to Emily Thornberry in the FT’S Jim Pickard’s article that Labour would not vote in favour of the PM’S Chequers plan and had Governor Carney been have alleged to have said that house prices would fall 35% in there was a ‘NO DEAL’ Brexit scenario, (which he clearly did not say0, markets would have thrown their toys out of their respective prams. The FTSE 100 would have sold off; and the Pound would have disappeared down the plughole! As it happened, the FTSE 100 closed in positive territory on the week – even Friday saw London’s premier index add 0.31%. As for Sterling, it was up a cent on the week to $1.3070. There was some very sloppy reporting by the ‘REMAIN’ obsessed media on Mark Carney’s comments made in his meeting with the Cabinet on Friday. One suspects that his comments were a regurgitation of the Bank Stress tests carried out by the BOE to prove that the recapitalisation of the banks meant it could sustain a 35% drop in property prices, 4% interest rates and a 4.7% drop in GDP in the event of another financial meltdown!

 

 

INDEX 10/9/18 14/9/18  % gain/loss  
FTSE 100 7277 7304 +0.37%  
XETRA-DAX 11950 12124 +1.46%  
CAC40 5250 5352 +1.94%  
DJIA 25992 26154 +0.62%  
 S&P 500 2881 2905 +0.83%  
NASDAQ 7939 8010 +0.89%  
Hang Seng 26922 27286 +1.35%  
Nikkei 22253 23095 +3.8%  
Shanghai Comp 2698 2682 -0.59%  

 

Equities had a decent run on the rails last week, except for the Shanghai Composite, which eased by 0.59% – down 20% YTD. Concerns over the trade spat and the robustness of their banks still hovers over markets like a cumuli nimbus cloud, despite ‘emerging market’ assets rallying a tad last week. There is a school of thought that says President Trump may yield on his hereto draconian stance with China. The S&P 500 is heading towards a new ‘high!’ However, the threat of another rate increase saw the 10-year Treasury yield breach 3%. Oil is only a smidgen short of $80 a barrel. There was, late last week, a warning shot across the bows from Appaloosa Management’s David Tepper, who also owns the Carolina Panthers. He has $14 billion under management.  He believes that the US ‘bull’ market may be coming to an end. He is concerned about the Sino/US trade tariff spat. However there appears to be a small chink of light at the end of the tunnel, in that China has had an invitation to engage in further trade talks. On the economic front, US retail sales were a little softer than expected, but University of Michigan saw industrial production beat forecasts.   The NASDAQ made a small recovery last week with Apple, which announced new initiatives for iPhones and watches leading a qualified charge. The content of the FED’S Beige Book suggested that the US economy was making steady, rather than spectacular progress.

 

Here in Old Blighty, it was the mining sector’s continuing deterioration that took a modest toll on the FTSE 100. Energy stocks bounced on higher oil prices, with BP and Shell to the fore. There were great results from Dunelm and Galliford Try, which saw both share prices make double digit gains.  AB Foods’ Primark also made decent progress, with sales growing by 5.5%. Wm Morrison also posted a decent trading statement. Former Tesco director, Dave Potts, has done a terrific job.  Together with Tesco, they are attempting to make a real fist of keeping the discounters – Aldi and Lidl in their sights.

 

Tesco are expected to make further staff cuts in their large supermarkets and metro stores, with a view to increasing profit margins.  John Lewis posted an apology of a profit of circa £1 million – a drop of 99%. Chairman Charlie Mayfield suggested that BREXIT was a contributing factor. I don’t think so.  I suggest poor management, indifferent technology, an inadequate John Lewis website and a drop in the standard of service were the main reason for the fall in profits. Does John Lewis really need to spend £5m on its Christmas advert; no doubt most of it ending up in Sir Elton John’s coffers.

 

There were plenty of nuggets of corporate news to ruminate over. Blackstone are considering buying properties from Network Rail (5000 properties and viaducts and arches). Debenhams future continues to provide great challenges for the management. Another profits warning did not help this retailer’s cause and the share price fell 10%. Chairman Sir Ian Cheshire said that Debenhams is considering selling its Danish operation Magasin Du Nord for about £200 million. Sports Direct’s Mike Ashley owns 30% of Debenhams and is keeping a close eye on developments. Sports Direct also encountered its own problems last week, with chairman Keith Hellawell being forced to resign, under shareholder pressure.

 

 

CYBG confirmed that the authorities had approved its £1.7 billion takeover of Virgin Money. News filtered that private equity was considering buying RPC Group and its shares subsequently bounced 17%. On Thursday the MPC kept bank rate unchanged at 0.75%. There is little doubt that concern over BREXIT was very much on the committee’s mind. Turkey raised rates to a staggering 24%. On a charitable note, Amazon’s Jeff Bezos has donated $2 billion to philanthropic causes.  Hedge funds are still baying for blood on Carillion – shares down from 64.00 eleven months ago to 14.20 on Friday, with many market observers feeling these hedge funds have unfinished business. ITV (valued at £6.4 billion has apparently entered the race to buy Endemol, valued at £3 million from Apollo/21st Century – the makers of Big Brother, The Fall, Master Chef. Endemol, a Dutch operation has been through a number of hands in recent years – Telefonica, Berlusconi’s Mediaset. It became heavily debt-laden and was taken out of its misery in 2012 by Apollo and 21st Century. Endemol represents another opportunity to take on Netflix and Amazon.

 

UK companies posting results this week – Monday – Gleason, Dairy Crest, Tuesday – Ocado, Spire Healthcare, Faroe Petroleum, Wednesday – Babcock International, Kingfisher, Stagecoach, Thursday – French Connection Group, SOCO International, Kier Group, IG Group, Friday – SIG, Smiths Group

 

US companies posting results this week – Monday – Oracle, FedEx, Tuesday – Autozone, General Mills, Wednesday – Red Hat, Thursday – Darden Restaurants, Micron Technology, United Natural Foods

 

Economic data posted this week – Wednesday – UK Inflation Data, UK House Prices, US Housing starts, Thursday – UK Retail Sales, US Existing Home Sales, Friday – UK PSBR, US PMI

 

 

David Buik

Communications

Mobile – 07788 144 877

 

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