TODAY’S FAYRE – Monday, 19th November 2018
“Remember me when I am gone away,
Gone far away into the silent land;
When you can no more hold me by the hand,
Nor I half turn to go yet turning stay.
Remember me when no more day by day
You tell me of our future that you plann’d:
Only remember me; you understand
It will be late to counsel then or pray.
Yet if you should forget me for a while
And afterwards remember, do not grieve:
For if the darkness and corruption leave
A vestige of the thoughts that once I had,
Better by far you should forget and smile
Than that you should remember and be sad.”
Christina Rossetti – poet – 1830-1894
You may disapprove of her plans to extricate the UK from the EU in delivering BREXIT, but you must admire the Prime Minister for her tenacity, doggedness and stubbornness! She is relentless in her quest to achieve what she believes is the right deal for the UK’s economy. As the expression goes in terms of horseracing parlance – she gets four miles in a bog and stays forever!
However, those qualities may not be enough to satisfy many, particularly those who believe that the terms of the BREXIT negotiations are so watered down, the UK may well be better off staying exactly where it is. Before heading for Brussels next week, Mrs May MUST listen to her Cabinet and Parliament’s concerns. She must be prepared to go back and properly represent these concerns, however exasperated Merkel and other negotiators are!
However, it is my measured and humble opinion that it is now too late to toss the PM in to the long grass. The time to be forceful with a totally different plan has long passed. After the election and 1st June 2017, the EU has always been in the driving seat. However, getting angry because you have been outmanoeuvred by the EU, forceful as it has been in its negotiations, will serve little useful purpose.
I think the country should get behind Mrs May and make the best of a very bad job, provided she heeds the concerns. Let’s see if there is a conversation to be had with Messrs Leadsom, Gove et all on a few fundamental alterations, which might be submitted to the EU, but holding one’s breath might be folly. Messrs Merkel and Macron are no longer our friends; that is clear, but we must attempt to continue to cultivate them as trading partners and hopefully defence allies.
I suspect that over the months and years to come, a few careful and resolute ‘nip & tucks’ can be made to the ‘transition period’ intransigence on N Ireland, the single market and the customs union. That is diplomacy. It’s been like that for hundreds of years and there is unlikely to be much change to that pattern of negotiation. Throwing Mrs May to the wolves at this juncture in the current political cycle would be insane. Once a modified deal is done, I suspect she would love to head for the walking hills with husband Philip PDQ. The hard Brexiteers will achieve nothing with a vote of no confidence. If successful, the country would just be thrown in to a vortex of uncertainty which could lead to unnecessary economic despair for another two years and a change in government that may not be good for business prosperity.
Dominic Raab, the former Brexit Secretary, writing in the Sunday Times, is unequivocal in telling the PM that she must stand up to the Brussels bullies and toughen up, or Britain faces disaster. These comments will provide added resolve to those malevolently plotting her downfall with a ‘no confidence’ vote. Mr Raab is right; surrendering virtually permanent sovereignty to the ECJ, by having no end date to temporary single markets and customs union arrangements, would be totally unacceptable.
||YEAR TO DATE
When looking at the performance of the main global indices for the last week, it tells you very little in isolation. The DAX and CAC only have 30 and 40 constituent stocks respectively. The uncertainty over BREXIT caused them to shed 2%+ last week, whereas the FTSE was only down 1.3% thanks to the gyrations of the Pound against the Dollar, as 60% of the constituent stocks are Dollar earners. Had that not been the case the damage may well have been greater, such was the level of despair expressed by both sides of the BREXIT argument. Both were clearly unhappy at the uncertainty that is likely to prevail for another 2 years. The proposals set out on Thursday were perceived as being truly dreadful. In fact, it might be fair to say that what the EU and UK negotiators agreed in principle was hated by ‘Remainers’ and ‘Leavers’ alike.
Apart from the US, which initially benefitted from the Trump tax cuts, it has been a very discouraging year for global equities. Why? Concerns over bloated valuations, the threat of higher interest rates and an uncomfortable threat of trade war damage. Shanghai and Hong Kong have fallen sharply due to these worries and the situation for them has been exacerbated by concern about their banking system, the trade spat with the US and falling growth – down to 6.7% from 6.9% last year. In 2010 it was 10.6%. Many economists take these current official levels with a pinch of salt. As you can see from the above tables, reverses have been sharp in Asia. In Europe, BREXIT is blamed for everything including the weather! However, Italy is in deep economic trouble and Germany’s and France’s economies are not quite as robust as many have made them out to be. Germany’s car industry has had a few setbacks and in the case of President Macron, he is having problems with fresh labour legislation and is deeply unpopular.
The FTSE 100 is down 8% year to date and but for the foreign exchange trade-off, it might well be lower. Banks, telecoms and some mining stocks have dragged London’s leading index down. Couple them with BREXIT woes and the adverse effect has been easy to understand.
On the Street of Dreams, after a very dispiriting start to the week, the three main indices regained some poise on Thursday and Friday, driven by revived interest in tech stocks, especially Apple and Amazon. However, these indices finished the 5-day trading period down between 1% and 2%. Apart from the usual Trump media frenzy and the most appalling human tragedy in Northern California, where these infernos of forest fires have to date cost at least 70 lives and possibly more, it was retail which caught investors’ eyes.
Walmart posted numbers on Thursday that topped analysts’ expectations and raised its forecast for the full year heading into the holiday season – Thanksgiving (22/11/18) and Black Friday (23/11/18). Walmart shares ended the day down nearly 2%, but the stock is up more than 10 percent from a year ago, bringing Walmart’s market cap to roughly $291.5 billion. Earnings per share: $1.08, adjusted, vs. $1.01 expected. Revenue: $124.89 billion vs. $125.55 billion expected. Same-store sales: up 3.4% in the U.S. vs. growth of 3.1% expected.
Here in Old Blighty a surprisingly stable inflation rate of 2.4% for October was posted with clothes and food prices lower than expected. Unemployment in the same month rose a pip to 4.1% with the loss of 21000 jobs – some to retail and others to changes in universal credit arrangements. Retail sales were down 0.5% last month. Any thoughts of an MPC rate rise can remain in the in-tray, whilst BREXIT issues remain unresolved to anyone’s satisfaction. It will be interesting to see what sort of momentum will be behind ‘Black Friday’ on 23rd November. I fear the ‘High Street’ will have a very average Christmas. On the earnings front last week, Vodafone saw some measurable improvements. Premier Food have started hoarding food to be sure it is not caught short by a NO DEAL on Brexit. Flybe is up for sale and there were disappointing efforts from Royal Mail and Aston Martin, after its recent IPO.
Johnston Press has finally put up the ‘red flag.’ CEO David King has put the company in to administration. Its shares – 2.5p on Friday (share capital valued at £3m) down from 400p in 2104 – will not be quoted on Monday. It is hoped that a new holding company will be able to sell or save such brands as Yorkshire Post and the Scotsman and many local papers. The ‘i’ may be sold to DMGT. Debt of around £220 million is unsustainable. Some pensions may be adversely affected. It seems that Johnston Press did not grasp the digital and social media world quickly enough.
UK companies posting results this week – Tuesday – Compass Group, CYBG, easyJet, AO World, Entertainment One, Halma, Homeserve, Electrocomponents, Telecom Plus, Aveva, Wednesday – Countryside Properties, Marston’s. Babcock International, SSP Group, Sage Group, United Utilities, TalkTalk, Johnson Matthey, Thursday – M&B, Euromoney International, Mitie, Mothercare, Centrica, Hill & Smith, Keller Group, Rotork, Majestic Wines, CMC Markets, Severn Trent
US companies posting results this week – Monday – Urban Outfitters, Tuesday – Target, L-Brands, Kohl’s, Best Buy, Campbell Soups, Barnes & Noble, TJX, Ross Stores, BJ Wholesale, Foot Locker, Gap, Autodesk, Wednesday – Deere & Co,
Economic data posted this week – Monday – RightMove house prices, Tuesday – CBI Industrial trends, US Housing starts, Wednesday – UK PSBR, US Durable Gods, Friday – US PMI services and manufacturing
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