MARKET’S REACTION TO MACRON

Last night and this morning there was a fanfare of metaphorical trumpets to greet Emmanuel Macron as the new ‘Little Corporal’ to take up residence at the Elysee Palace this coming Sunday. Depending on your age group, as a ‘matinee idol eat your heart out, Clark Gable, Paul Newman or Ryan Gosling! ’We were told Macron offered hope rather than hatred. I hope so. However in our heart of hearts we all know that nothing has changed or will change despite a crushing victory over Le Pen 66-34%’. France remains deeply divided coupled with 11.5% of the votes cast either blank or soiled. Macron will know he is in a battle if he cannot get his new party – ‘en marche’ or a coalition cobbled together in the June legislative elections. I suspect it will be ‘plus can change!’ Many have tried before him. France is the most conservative country in the world and it loathes change.

 

Such was the expectation that Macron would win that the CAC rallied by 7% and the DAX by 8% in the last two weeks prior to the election. After the news of his victory the Euro hardly moved a cent (E1.0971). French bond yields eased by a few notches. However during the morning and early afternoon the relief gains the CAC and DAX had made were surrendered and now they stand in negative territory – -0.78% and -0.14% respectively. 

 

Macron and Merkel will start to feel very confident as their strut their stuff around the world stage. Macron will be keen to make his mark as a European by showing dissent and opposition to BREXIT. He knows full well that unemployment in France is 9.6% with Germany’s at 3.9% and UK’S at 4.7%.  So he will need to set his stall down internationally before he deals with France’s perennial issues.  Clearing and repatriation of banking are in his sights.  He was in the UK a month ago and his spin has not gone unnoticed over the ‘clearing’ service the last week. There will be waves but London will remain unbowed. 

 

President Elect Macron is in danger of being Chancellor Merkel’s poodle. So he needs to show his colours right off the bat as EU innovator.  The EU remains very fragmented – the Franco/German juggernaut, the rest of the EU and the UK. The possibilities of uniting the EU for a protracted period of time are remote – so first impressions will be vital. It is interesting to note that the new President feels that immigration and security will just disappear over the yardarm at the drop of a hat!

TODAY’S FAYRE

TODAY’S FAYRE – Sunday 8th May 2017

 

“Go from me, summer friends, and tarry not: 
I am no summer friend, but wintry cold,
 
A silly sheep benighted from the fold,
 
A sluggard with a thorn-choked garden plot.
 
Take counsel, sever from my lot your lot,
 
Dwell in your pleasant places, hoard your gold;
 
Lest you with me should shiver on the wold,
 
Athirst and hungering on a barren spot.
 
For I have hedged me with a thorny hedge,
 
I live alone, I look to die alone:
 
Yet sometimes, when a wind sighs through the sedge,
 
Ghosts of my buried years, and friends come back,
 
My heart goes sighing after swallows flown
 
On sometime summer’s unreturning track.
 

 

Christina Rossetti – poet – 1830-1894

 

 

So the war of words between the EU and the UK continues apace.  On Friday the question of domicile for international clearing for business conducted in Europe was raised with gusto. The EU served notice that it planned to domicile back to Paris or Frankfurt all clearing business conducted in Euros on bonds, options, futures, IRS, inflation, credit default swaps. There is also Repo, spot FX, forwards and options, which are cleared through CLS to consider.   This is easier said than done for a number of reasons. Firstly the potential merger between Deutsche Boerse and the LSE which collapsed in a heap thanks to a ridiculous regulatory issue involving and Italian bond trading platform and almost certainly political skulduggery ahead of BREXIT, has muddied the waters. There were clearing issues attached to this deal, due to its ownership of LCH.  The EU, of course, knows how effective ‘London Clearing House’ and others are in conducting this very sophisticated clearing operation. Daily clearing turnover amounts to £800 billion. Clearing, with LCH somewhere to the fore, is in essence, the largest insurance market in the world. Instruments and payments cleared through LCH and other clearing house are guaranteed in terms of counterparty.

 

The EU legitimately has the perfect right to repatriate all clearing deals in Euros – unquestionably.  HOWEVER a large number of them have Dollars, Yen and Sterling as counterparties on IRSs and other instruments.  I think the US, UK and Japan would baulk at the prospect of a break-up, Why break up a solid proven, well run system, that ticks all the boxes from a regulatory and guarantee perspective, just for the sake of political revenge or restitution against the UK by the EU.  That is pretty small minded stuff.  I could see it happening, but again I think the US would be the overall beneficiary of any break-up of the system. The disruption would be massive. 80,000 jobs could be vulnerable. As the Chairman of the Treasury Select Committee, Andrew Tyrie, put it so succinctly ‘why indulge in needless self-harm?’ I know for a fact that Central banks are in constant touch with all the major clearing houses, such is the enormity of importance attached to global clearing for the smoothing running and regulation of all markets. Disruption could be an unnecessary and possibly dangerous distraction

After PM May’s onslaught at the EU, in response to the briefing by Juncker and his troops against the U.K. Government and the PM in particular, most normal level- headed people would have ‘drawn stumps’ and/or called a temporary halt to hostilities. But oh no! This obsessive and deeply moderate President of the European Commission had to continue to draw metaphorical blood in suggesting that the English language was diminishing in popularity as a result of notice being served by the U.K. to leave.  So long as he is part of the EU team, these negotiations might not even get out of the blocks.

In the grand scheme the U.K. does 40% of its trade with the EU, with the EU doing 10% of its trade with the UK. Nonetheless I do not understand why the EU wants to cut off its nose to spite its face. I just hope the EU’S intolerant attitude does not result in cooperation over security and defence being withheld. Perhaps the EU has an attitude, as Rhett Butler said in ‘Gone with the Wind’ – ‘I don’t give a damn!’ The relationship has been damaged – I hope not irrevocably. Frankly I am much more interested in what EU business, industry and commerce make of this unfortunate breakdown in relationships and what influence they can bring to bear rather than the wretched European politicians and bureaucrats. In the immortal words of Michael Winner – ‘Calm down, dear!’ Tusk, I think, has seen the potential danger of impasse! I would like to put these early skirmishes down to opening negotiation salvos, but bad blood is seeping in!

Apart from that truculent Luxembourger’s puerile outburst against ‘Grand Bretagne’, there were a fair few other political issues to ruminate over last week, headed by the final touches from ‘The Little Corporal Mark 2’ who goes under the pseudonym of Emmanuel Macron or ‘teacher’s pet’, if you prefer, to his French Presidential campaign. Mme Le Pen seems to have had her wings clipped sufficiently by the entire French press, France’s banks, with a final interjection conveniently coming from President Barack Obama, with Uncle Tom Cobleigh and all jumping on the bandwagon. At least this time Obama’s endorsement will be well received. Then, against the odds, it looks as though Congress will rescind the Obamacare bill. You have to hand it to Trump, he’s like a dog with a bone and it’s a brave person to bet against Trump getting a fair chunk of his proposed legislation on tax cuts and infrastructure spending through. Labour and UKIP were savaged at the local elections last Thursday, which may be pointer to 8th June General election, but a ‘seven week’ campaign is dangerous with many a banana skin out there to slip up on. Just for a week North Korean antics took a back seat, but few doubt it will not be too long before Kim Jong Un grabs the headlines again.

 

On the economic front US non-farm payrolls created 210k jobs in April against the rather disappointing figure of 98k in March.  Unemployment fell to 4.4% with hourly earnings coming in at 3.2%, against GDP average of 2.41%. This news may provide the final piece of the jigsaw puzzle in persuading the FED to raise rates by 25 basis points in June.  Here in the UK PMI data in construction and manufacturing were all positive, though the service sector, especially retail, was not quite so ebullient – more about that on Thursday with the Inflation report. I think we can more or less take it as read that rates in the UK will be on hold for the time being, with so much uncertainty. Today and Monday will be interesting.  We are told that all dealing rooms will be manned tonight to measure Macron’s big or modest win.  I cannot think why.  I suppose a big Macron ‘win’ will strengthen the Euro, with Macron supporting the onslaught against the UK. It may also give French banks some momentum, but the ‘Little Corporal’ will achieve very little with so many divided political factions and the fact that France is very conservative with a small ‘c’ and in essence the French loathe change!

 

Personally speaking I would be much more worried/interested in the correlation between the sharp drop in commodity prices and crude oil and the Chinese economy.  The drop in oil (Brent -4.7% last week) is almost certainly down to US fracking and OPEC not holding the line on production. However the drop in copper, gold and iron ore may require vigilance in the months to come.  At the end of last week, the S&P 500 had gained 0.33%, with the FTSE adding 1.30% in value thanks to banks and economic data. European bourses were smiling at the prospect of a left-centre government -1.78%.  Japan’s NIKKEI was closed for much of the week – down 0.56%.

 

On the corporate front in the UK, NEXT had a sales shocker – store sales down 8.1% with the Directory +3%; so did J Sainsbury – both operations saw their respective share prices down over 5%. NEXT’s shares have fallen 50% in the last 18 months. Conversely Wm Morrison did well with 9 week sales up 3.4%.  HSBC and Royal Dutch Shell pleased their acolytes.  Archie Norman was appointed chairman of M&S to succeed Robert Swannell.  This was an inspired choice based on the huge success Mr Norman had at ASDA and at ITV in the last 7 years. Elliott Advisors and their supporters are coming to the end of their tether in attempting to persuade Akzo Nobel accompanied by Dulux, to fall in to the arms of PPG in a £22 billion deal. This situation is likely to become hostile. Imagination served notice to Apple for compensation either in a friendly way or through the courts for pulling the plug on their relationship without notice. Imagination’s shares lost 60% a few weeks ago.  If there is any compensation it may have to be the courts as Apple is hardly known as a philanthropic society. After two faux-pas over whistle-blowing and supporting his brother-in-law against KKR, Barclays CEO Jes Staley is on a ‘yellow card.’ One more mistake and shareholders will be obliged to have him removed.

 

 

 

UK companies posting numbers this week – Monday – Centrica, Tuesday – AON, William Hill, Hiscox, Wednesday – TalkTalk, Vertu, Compass, Barratt Development, ITV, National Express, Thursday – BT, SuperGroup, Amex Foster Wheeler,  Mondi, Coca-Cola HBC, Vedanta Resources, Beazley, Aldermore

 

US companies posting numbers – Monday – Tyson foods, Tuesday – Allergan, Hertz, Marriott, Liberty Media, Walt Disney, NVidia, Wednesday – Dean Foods, Wendy’s, Thursday – Kohl’s, Nordstrom, Friday – JC Penney

 

Economic data this week – Tuesday – BRC sales monitor, Wednesday – NIESR GDP estimate, US FED budget balance, Thursday – BOE Inflation Report, RICS Housing, UK Manufacturing, Friday – US Retail Sales

 

 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​

TODAY’S FAYRE

TODAY’S FAYRE – Thursday 4th May 2017

 

“Where sunless rivers weep

Their waves into the deep,

She sleeps a charmed sleep:

Awake her not.

 

Led by a single star,

She came from very far

To seek where shadows are

Her pleasant lot.

 

She left the rosy morn,

She left the fields of corn,

For twilight cold and lorn

And water springs.

 

Through sleep, as through a veil,

She sees the sky look pale,

And hears the nightingale

That sadly sings.

 

Rest, rest, a perfect rest

Shed over brow and breast;

Her face is toward the west,

The purple land.

 

She cannot see the grain

Ripening on hill and plain;

She cannot feel the rain

Upon her hand.

 

Rest, rest, for evermore

Upon a mossy shore;

Rest, rest at the heart’s core

Till time shall cease:

 

Sleep that no pain shall wake;

Night that no morn shall break

Till joy shall overtake

Her perfect peace. “

 

Christina Rossetti – poet – 1830-1894

 

The ‘Remain’ press, the visual media and opposition political parties were almost universal in their condemnation of Theresa May’s very sharp rebuke to those politicians and bureaucrats in Brussels and elsewhere in the EU who had briefed against the PM post that eventful dinner at No:10 on the sensitive exit negotiations, that had yet to start. I think she was spot on. On no occasion did Messrs Juncker or his side-kick Selmayr attempt to deny the allegations or damn up the leaks. So the record needed setting straight, even if there was some election political capital to be made out of her interjection.

These negotiations were always going to be tricky and tough at best; so spoiling and subversive tactics were bound to be counter-productive, whichever party adopts them. I fail to understand why the visual media never bothered to challenge Brussels’s ludicrous divorce settlement of €100 billion. They just took that figure as fact! To my certain knowledge the EU has NEVER posted an audited set of accounts in the past 20 years; so why should anyone take any settlement figure as Gospel. Nor for that matter has HMRC or DWP posted audited accounts for many years.

 

Of course the EU wants to discourage other members from leaving; so its strategy of prevent defection by bandying around fictitious inflated numbers is understandable. However its high time respect returned to the diplomatic and negotiating table. Otherwise there will be no deal for many years and that would be disastrous for all concerned. In two words – GROW UP!

 

Yesterday the FTSE fell by 15 points to 7234. J Sainsbury grabbed most of the headlines with a poor sales performance, despite a major contribution from Argos – shares down 5.7%. Also after 7 successful years Adam Crozier is leaving as CEO of ITV. When he and Archie Norman assumed the helm at this ailing broadcaster, the share price was 56 pence – 207p yesterday. The business model is unrecognisable. ITV no longer relies entirely on advertising for its revenue. It makes quality programmes for its self and others through its production company. The shares dipped 1.75% yesterday. Whether Crozier is going as he feels he’s done all he can remains conjecture. Others think he feels uncomfortable as John Malone of Liberty Media breathes down his neck as an unwanted predator. I think he is smart to leave whatever the reason. It is very easy to become stale. Ask Sir John Rose of Rolls Royce!!? It was also great to see CEO Stephen Kelly post encouraging numbers for Sage Group

 

On the Street of Dreams it was all about attempting to digest the rather hawkish approach of the FED. Though there was no change in the FED rate it seems very unlikely that another hike of 25 basis points in June can be avoided despite the perceived slow-down in growth. Kraft Heinz did not please its acolytes in terms of sales but profits were decent – shares up +0.16%. As for Facebook the numbers were block buster, though the shares travelled and arrived – down 2.5% after hours to £148.01, but their value has increased by 29% this year. Sales were up 50% to $8 billion for the last quarter with net income coming in at $3.1 billion. The staggering piece of data is the 17% increase in users to 1.94 billion. Mobile advertising revenue was up 85%. EPS came in a$1.04 (up 73 cents from last year). Facebook will be employing another 3,000 people to check the quality of input. New York based markets closed as follows plus YTD achievements –DOW: 20,957 +0.04% +6.048%, S&P:2,388   -0.13% +6.669%  NASDAQ: 5,625 -0.34% +15.658%. Asian markets had little to cheer about with Tokyo closed – NIKKEI: 19,445 CLOSED +1.733% HANG SENG: 24,571- 0.50% +11.706% CHINA: 3,419 +0.20% +3. 306% ASX: 5,893 -0.30% +3.646%.

 

There were a slew of earnings in London this AM starting with HSBC. Pre-tax profits fell by 19% to $5.01 billion – better than expected for the last quarter. Mark Tucker – ex Prudential and AIA – will replace Douglas Flint as chairman and CEO Stuart Gulliver will be leaving in 2018. Tier One capital came in at a very healthy level of 14.3%. The bank completed a $1 billion share buy-back. Insurance sales were up 17% and assets under management by 13%. The market bought the story and shares were up 3.1% and over 50% in the last year! Royal Dutch Shell proved what a good acquisition BG Group was and thanks to an increase in crude oil prices profits increased from $1.5 billion this time last year to $3.5 billion this past quarter. A tasty dividend of $3.9 billion will be paid. Share buy backs are now on the cards in 2018. Shares were up 2.3% on the day and 19% in the last year. Wm Morrison’s trading statement – like for like sales up 3.4% – proved what an average effort by Sainsbury yesterday. Next’s trading statement was rather dire with retail sales down 8.1% and the Directory sales up 3.3% – net down 3% for the last quarter. NEXT shares are down 5.2%. 18 months ago these shares stood at 7700p!

 

UK companies posting numbers this week – Thursday – Royal Dutch Shell, HSBC, G4S, RSA, Wm Morrison, NEXT, Imagination, Friday – IAG, Millennium & Copthorne, Smurfit Kappa, McCarthy & Stone

 

 US companies posting numbers –Thursday – Hyatt Hotels, Viacom, Kellogg, CBS, Zynga, Shake Shack, Motorola, Friday – Revlon, Cigna

 

Economic data this week – Thursday – BOE Mortgage approvals & lending, US Factory orders, US Initial Jobless Claims, Friday – US Non-Farm Payrolls, Employment data.

 

 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

TODAY’S FAYRE

TODAY’S FAYRE – Tuesday 2nd May 2017

 

“Where sunless rivers weep

Their waves into the deep,

She sleeps a charmed sleep:

Awake her not. Led by a single star,

She came from very far

To seek where shadows are

Her pleasant lot.

 

She left the rosy morn,

She left the fields of corn,

For twilight cold and lorn

And water springs.

Through sleep, as through a veil,

She sees the sky look pale,

And hears the nightingale

That sadly sings.

 

Rest, rest, a perfect rest

Shed over brow and breast;

Her face is toward the west,

The purple land.

She cannot see the grain

Ripening on hill and plain;

She cannot feel the rain

Upon her hand.

 

Rest, rest, for evermore

Upon a mossy shore;

Rest, rest at the heart’s core

Till time shall cease:

Sleep that no pain shall wake;

Night that no morn shall break

Till joy shall overtake

Her perfect peace.”

  

Christina Rossetti – poet – 1830-1894

 

The idea that Tony Blair could return as a ‘matinee idol’ to the top political stage, as ‘the return of the prodigal son, is not realistic or plausible in the wake of the toxic sentiment he left behind over the Iraq war. However in conjunction with heavyweights like Ken Clarke, the Lords Heseltine and Mandelson, he has every right to stand tall in his contempt of BREXIT. His passion on the subject, if you are that way inclined, is worth hearing – but not for me!  I suspect that in the next year or so he will be very vociferous on this sensitive issue.

Whether the reports on the dinner hosted by PM May for J-C Juncker and Michel Barnier were accurate or whether the level of the European Commission’s President’s contempt was exaggerated, for sure any evidence of ‘entente-cordial’ was not that obvious. This is a big week for the EU. A small win for M Macron would be perceived as damaging. France seems horribly split on whether it should remain in the EU! The UK Government must keep its cool against the onslaught from the heavy artillery in Brussels, Strasbourg, Berlin, Paris, Warsaw, Rome, Lisbon, Madrid and pretty much anywhere else in Europe you can think of! Nil desperandum!  

 

London and the rest of Europe enjoyed a May-Day Bank holiday yesterday, but New York did not indulge in such trifling matters. They were there, though activity was limited as Europe was looking for ‘rays’ not of a political or financial nature! The S&P 500 technology index, the best performing major group this year, gained 0.9%, with big tech names including Microsoft, Alphabet and Facebook reaching fresh records. Netflix Inc. shares also hit a new all-time high of $157.70, and closed up 2.1%. It was the same with shares of Amazon.com Inc. which closed up 2.5% at a record $948.43, after hitting an all-time high of $954.40 in the session. Jeff Bezos, the CEO is a whisker short of eclipsing the Mexican Bill Gates as the richest man in the world. President Trump is threatening to break up the big banks. I suspect that is ‘just ‘huffing & puffing’ in regards to deregulation. The US Secretary of the Treasury Steve Mnuchin said that economic growth of 3% is achievable in the next two years as the Trump administration sets out to dramatically cut taxes. Consumer spending was unchanged in March, while personal income climbed 0.2%. US markets closed as follows accompanied by YTD performance – DOW: 20,913 +0.13% +5.823%, S&P: 2,388 +0.19% +6.693% NASDAQ: 5,629 +0.83% +15.75% (Another record close). The FOMC is likely to leave rates unchanged this week. The FED would have been looking for slightly more robust data to have recommended a hike. Non-Farm payrolls will be posted on Friday. We expect 180k jobs to have been created with unemployment to remain at 4.5%.

 

Asian markets were mixed though there was life in Tokyo thanks to a weaker Yen (+0.69%). Shanghai and the Hang Seng were light by a quarter per-cent thanks in the main to sluggish economic data. In London BP posted much improved results with profits almost trebled on this time last year to $1.449 billion from $497 million courtesy of the price of oil rising from an average of $34 last year to $52 a barrel this first quarter and the end of the Deep Water Horizon $40 billion nightmare – just $4.4 billion this quarter. The dividend was maintained.

 

Marks & Spencer and Ocado are rumoured to be agreeing a surprise tie-up that could result in the high street stalwart finally launching an online grocery delivery service after years of resistance to the industry-wide trend. At last I think M&S CEO Steve Rowe is starting to realise that M&S influence in fashion on the high street is diminishing by the day. Ocado’s shares have jumped like the proverbial grilse by 8.9%.

 

Lord Lupton, former founder of Greenhill and deputy Chairman of Barings International has been appointed chairman of Lloyds Banking Group’s non-ring-fenced operations. His knowledge of investment and international banking could be invaluable.

 

Finally I was not surprised to see the EU flexing its muscles over the €850 billion daily clearing turnover through LCH and the LSE, with a view to re-routing it to the hinterland of Europe. This is not the first time the EU has started its jingoistic warnings and won’t be the last. I must remind it, that though it can impose legislation post 2019, it might be illegal for them to do so before. Apart from EU business much of London’s clearing business has nothing to do with the EU. It is felt that as many as 80k jobs could be affected. In the City we are all getting very tired of EU politicians and bureaucrats metaphorically constantly using their hob-nailed boots to bully, rather than sitting down and talking. The beneficiary won’t be the EU; it will be New York – such folly to behave in such a puerile manner!

 

UK companies posting numbers this week – Tuesday – Aberdeen Asset Management, Oxford Instruments, BP, Shire Pharmaceuticals, Wednesday – J Sainsbury, Sage, Focusrite, Imperial Brands, Paddy Power Betfair, JD WETHERSPOON, Intu Properties, Direct Line, Carillion, eSure, Centamin, OneSavings Bank, Thursday – Royal Dutch Shell, HSBC, Friday – IAG, Millennium & Copthorne, Smurfit Kappa, McCarthy & Stone

 

 

US companies posting numbers – Tuesday – Aetna, Altria, Coach, Pfizer, Mastercard, Pitney-Bowes, Ford (sales), Conoco-Phillips, Denny’s, Apple, FMC, Wednesday – Humana, Sprint, Groupon, Yum Brands!, Time Warner, Kraft Heinz, Metlife, Facebook, Tesla, Thursday – Hyatt Hotels, Viacom, Kellogg, CBS, Zynga, Shake Shack, Motorola, Friday – Revlon, Cigna

 

Economic data this week – Tuesday – UK PMI Construction, Wednesday – UK PMI Service Sector, US ISM Non-Manufacturing, FOMC statement – Thursday – BOE Mortgage approvals & lending, US Factory orders, US Initial Jobless Claims, Friday – US Non-Farm Payrolls, Employment data.

 

 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 ​

TODAY’S FAYRE

TODAY’S FAYRE – Monday 1st May 2017

 

“Winter is cold-hearted 
Spring is yea and nay,
 
Autumn is a weather-cock
 
Blown every way:
 
Summer days for me
 
When every leaf is on its tree;
 

When Robin’s not a beggar, 
And Jenny Wren’s a bride,
 
And larks hang singing, singing, singing,
 
Over the wheat-fields wide,
 
And anchored lilies ride,
 
And the pendulum spider
 
Swings from side to side,
 

And blue-black beetles transact business, 
And gnats fly in a host,
 
And furry caterpillars hasten
 
That no time be lost,
 
And moths grow fat and thrive,
 
And ladybirds arrive.
 

Before green apples blush, 
Before green nuts embrown,
 
Why, one day in the country
 
Is worth a month in town;
 
Is worth a day and a year
 
Of the dusty, musty, lag-last fashion
 
That days drone elsewhere.

 

Christina Rossetti – poet – 1830-1894

 

My colleague Simon French made a very poignant comment to me on Thursday about the deteriorating behaviour in the House of Commons and on the ‘hustings’, with particular reference to the treatment of Jeremy Corbyn. Few would argue that his credentials are far from being perfect to hand him the keys of Number: 10 on the morning of 9th of June.  However as Simon put it, he is due some courtesy over some very regulation questions and challenges on policy. The opposition might not agree with his policies on nurses, NHS, taxation, education, defence and foreign policy. I don’t on most of them.  However Mr Corbyn is entitled to raise these issues and have them debated.  He should be treated with courtesy and respect and not as a congenital throwback not worthy of anything more than contempt.  This ‘Yah-boo-sucks’ derision culture has gone too far.  If political parties and foes, opposed to his ideas think he is misguided, then tell him and debate with him and his colleagues in a measured and respectful manner.

 

Talk by Juncker of Galaxies and bad food at No: 10, by Merkel of delusions and of a lack of realism by Barnier is insolent jingoistic nonsense, totally lacking in courtesy and diplomatic prowess.  Who the hell does the EU think it is to dictate inflexible terms for negotiation?  The UK had a democratic referendum that voted to leave the EU.  The UK served the required notice of two years. The EU must accept that the UK will and cannot be dictated to on unrealistic terms.

 

All reasonable people accept that the EU is on the back foot with a compendium of danger in France, Germany, Italy and Greece all posing electoral difficulties – hence a tough aggressive stance. Both sides want to agree that nationals should be allowed to stay in the country of their choice – 3 million in UK and one million UK passport holders in the EU. Of course there has to be a divorce settlement.  However it would be diplomatic madness and political suicide for the UK to agree those two issues and leave itself dangerously exposed over no resolution in trade talks.  The UK government would be on a hiding to nothing.  It really would be better to have no deal than such an insane exposure which could deliver the UK into penury.  The EU needs to think again or both sides will be forced to head-off into a severe economic downturn, cutting off their noses to spite their faces.  Otherwise EEA and WTO beckons? Call me old fashion but it’s the arrogance and/or naivety of the EU that bemuses me.

 

What a splendid fellow Anthony Joshua is. Not only is he a magnificent boxer, who entertained fight fans on Saturday night, but he is also a real credit to his sport. He is absolutely delightful and like millions of others I took great pleasure in hearing what he had to say about his life. He came across as humility personified. Perhaps some highly paid athletes who kick a bit of synthetic leather about for a few million quid a year should sit up, read, mark, learn and inwardly digest! Just in passing the pre-fight-commentary on the night was about as awful as anything I have ever been audibly subjected to!

 

Markets had a huge amount of news to digest and contend with starting with the first 100 days of Donald Trump’s unorthodox presidency, frothed up in recent days by yet another failed but provocative North Korean missile launch. Then of course the stand-off between the EU and the UK over divorce settlement and trade talks. This issue will have considerable ramifications in the ensuing two years. Then it appears that the UK’s economy is coming off the boil.  The ONS posted only a 0.3% increase in GDP for the first quarter against a 0.7% for the last quarter of 2016.  Inflation is on the march and could reach 2.7% by August.  Imports are more expensive and wage inflation is stagnant resulting in people having less disposable income.  This not good for growth as a result of stifled consumer expenditure.  However by the end of the year, conditions may have improved a little as the Pound starts to look a little stronger with the political climate in Europe possibly starting to look rather more volatile than the EU would like. Last week, despite these imponderables the S&P 500 closed up 1.58%, the FTSE by 1.26% and European bourses by an average of 2.36% (risk-off dissipating, resulting in European bourses attracting funds which normally would be heading for the US). The Nikkei enjoyed a 3.09% rally courtesy of a softer Yen.

 

This coming week there is a slew of earnings to ruminate over on both sides of the Pond.  BP’s profits, posted on Tuesday, are expected to have doubled from $1.26 billion from $532 in 2016 and Royal Dutch Shell, due on Wednesday, from $1.55bn to $3.05bn – The price of oil in the 1st quarter of 2016 was $34 a barrel having dipped at one point to $28 a barrel. In the first quarter of 2017 oil averaged $54 a barrel. Chevron and Exxon Mobil posted strong results last week. Shell is starting to feel the real benefit of the £47 billion acquisition of BG Group and BP starting to flourish from its recovery from the $40 billion plus cost of Deepwater Horizon. J Sainsbury’s efforts may not be anything to write home about – with sales possibly flat to down 1.5% despite the contribution made by the £1.4 billion purchase of Argos. In fairness some analysts disagree and think the news will be better. We may hear more about a joint venture between M&S and Ocado. M&S certainly need some good news as their fashions remain so dowdy. The Coop Bank will hopefully find some more money from their existing hedge fund managers to meet the BOE’s capital requirements to carry on trading. This bank is unlikely to be sold in the current climate at an attractive price. Barclays’ results last week were good, but investors concerned themselves with Jes Staley’s future as CEO and unfairly took the share price by 5%. In fairness corporate and investment banking continued to make a disproportionate amount of the profit – £1.3 billion out of £1.6 billion. On Friday RBS returned to profit but this operation is nowhere near out of the woods. Again news of Chancellor Hammond’s plans to take this bank out of the taxpayers’ control will be eagerly awaited after the election, were the Tories to win. Rumour has it that Saudi Arabia’s IPO of 5% of Aramco (valued at circa £65 billion) could be shared by the LSE and HK rather than New York.

 

UK companies posting numbers this week – Tuesday – Aberdeen Asset Management, Oxford Instruments, BP, Shire Pharmaceuticals, Wednesday – J Sainsbury, Sage, Focusrite, Imperial Brands, Paddy Power Betfair, JD WETHERSPOON, Intu Properties, Direct Line, Carillion, eSure, Centamin, OneSavings Bank, Thursday – Royal Dutch Shell, HSBC, Friday – IAG, Millennium & Copthorne, Smurfit Kappa, McCarthy & Stone

 

 

US companies posting numbers – Tuesday – Aetna, Altria, Coach, Pfizer, Mastercard, Pitney-Bowes, Ford (sales), Conoco-Phillips, Denny’s, Apple, FMC, Wednesday – Humana, Sprint, Groupon, Yum Brands!, Time Warner, Kraft Heinz, Metlife, Facebook, Tesla, Thursday – Hyatt Hotels, Viacom, Kellogg, CBS, Zynga, Shake Shack, Motorola, Friday – Revlon, Cigna

 

Economic data this week – Tuesday – UK PMI Construction, Wednesday – UK PMI Service Sector, US ISM Non-Manufacturing, FOMC statement – Thursday – BOE Mortgage approvals & lending, US Factory orders, US Initial Jobless Claims, Friday – US Non-Farm Payrolls, Employment data.

 

 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​

TODAY’S FAYRE

TODAY’S FAYRE – Friday 28th April 2017

 

“The first blossom was the best blossom
For the child who never had seen an orchard;
For the youth whom whisky had led astray
The morning after was the first day.

The first apple was the best apple
For Adam before he heard the sentence;
When the flaming sword endorsed the Fall
The trees were his to plant for all.

The first ocean was the best ocean
For the child from streets of doubt and litter;
For the youth for whom the skies unfurled
His first love was his first world.

But the first verdict seemed the worst verdict
When Adam and Ever were expelled from Eden;
Yet when the bitter gates clanged to
The sky beyond was just as blue.

For the next ocean is the first ocean
And the last ocean is the first ocean
And, however often the sun may rise,
A new thing dawns upon our eyes.

For the last blossom is the first blossom
And the first blossom is the best blossom
And when from Eden we take our way
The morning after is the first day.”

 

 

Louis MacNeice – poet & playwright – 1907-1963

 

One of the great hidden secrets of London and part of its indubitable charm is the CHELSEA PHYSIC GARDEN, tucked next to the Royal Hospital in Chelsea. The blossom and colours are a sight for sore eyes in April through to June. Entrance is far from a pittance but a visit is a great experience and there is a splendid picnic-styled lunch to be enjoyed! Just down the road is the Army Museum, which has just been revamped in brand-new premises – an inspired piece of modern architecture.  This incredible labour of love is also a must for anyone from four to a hundred! So much to engage with for not just those who are military minded but also for those who have a voracious appetite for knowledge.

 

The Spectator sponsored debates on political issues are always good value. Wednesday offering on the French Presidential Election, brilliantly hosted by Chairman Andrew Neil proved to be no exception to the rule. Though the result seems to be a ‘no-brainer slam-dunk’ win for Macron, the contributors and speakers seemed in little doubt that Emmanuel Macron would achieve very little, as he is an establishment candidate with ‘En Marche’, a new party with rather woolly watered-down Hollande policies. However come 2020 M Marine Le Pen was more than a live candidate to land the spoils for the Elysee Palace.  There is a school of thought, which believes she is not quite ready to be France’s first female President of the 5th Republic this time around!

 

It may not be pistols at 25 paces but it’s certainly handbags at five paces!  Maybe I should not make light of the infantile jingoistic rhetoric and demands that EU leaders such as Juncker, Verhofstadt, Timmermans and Barnier are making on the UK, when they won’t even sit down and negotiate officially with the UK until the end of May.  Clearly the dinner that PM May hosted at No:10 with Juncker and Barnier on Wednesday was a decidedly moderate affair, despite the official communique that it was constructive.  Yesterday was the first occasion I have seen the PM irritated.

 

Of course the EU has to defend its position as it threatens to crumble, but EU Head Honchos are stretching matters a bridge too far.  I was highly amused that Merkel came out with all guns blazing for Macron.  Frankly it is none of her business and it just goes to show that the EU is hell bent on Federalism. The German Chancellor is far from done and dusted in October’s German Election, though Shultz, were he to win, is an even more unattractive prospect for the UK. Finally I think all of us – ‘Remainers or Leavers’ – would be obliged if the EU stayed out of our sovereign affairs by suggesting a merger between Ireland and the North would be acceptable to the most undemocratic union in the Western World. Let battle commence! The EU thinks it holds all the aces – wrong! They need the UK for trade and business – SO GROW UP! Stop demanding before negotiations start!  Of course it will be tough but the conversations will made easier by those who keep a civil tongue in their head. It doesn’t have to be ‘dog-eat-dog’ but if that is what the EU wants, so be it!

 

Despite the fact that Wall Street was somewhat underwhelmed by President Trump’s over-ambitious tax cutting plans, which many think will struggle to get through Congress, the NASDAQ breached its all-time records and would probably have pushed on even further thanks to stunningly stellar results from Amazon and Alphabet after hours. Alphabet posted EPS of $7.73 against estimations of $7.39 a share on revenues of $24.7 billion ($20.26 billion last year) with ad revenues up 18.8%. Most component companies from Android to Jump to YouTube seem to blaze the trail. Many, understandably, believe there is a moral obligation for Alphabet to help clean up the fake news and the threat of criminal behaviour. Shares were up 4% after hours.  In the case of Amazon, Jeff Bezos socked it to his acolytes yet again – EPS was $1.48 against expectations of $1.14 on revenues of $35.7 billion (EST: $35.3 b an) with sales up 23%. Web sales for small businesses to iCloud increased by 42% to $3.66 billion. A net-profit of $724 million was posted. On the domestic front Amazon will be opening a new warehouse in Warrington, which will create 1200 new jobs and the relationship with Wm Morrison is proving lucrative. Ford slightly missed – -1.2%, with Microsoft posting a solid effort -0.31%. Intel’s chip business sales were disappointing – shares down 3.5%. Raytheon looked chipper – +0.64%.  New York markets closed as follows – DOW -0.03%, S&P +0.06%, NASDAQ +0.39%.

 

Yesterday in London the FTSE 100 finished down 51 points at 7237. The Strength of Sterling did not help mining oil and drugs. The good news came from Lloyds Banking Group whose profits doubled at £1.3 billion. It appears that the show is back on the road. PPI costs were down to £350 million and Tier One Capital remained very strong at 14.5%. The shares rose by 1.6% yesterday to 68.54%. This morning Lloyds announced that the Government’s shareholding in Lloyds Banking Group has been reduced by another 1%. It is now down to 0.89%, having been at 43% at its peak. WPP is always a decent barometer of economic activity and yesterday sir Martin Sorrell announced at 17% increase in revenues to £3.6 billion. The last quarter of 2016 had been very flat but activity had started to pick up and the outlook for he second half of the year was encouraging. U.S. and Chinese markets had been very disappointing.  These numbers were better than Publicis overall.

 

This morning UBS started the ball rolling by announcing a 79% increase in 1st quarter profits, most of it attributable to fund and wealth management success. Barclays posted a pre-tax profit of £1.68 billion – net £190 million, thanks to impairment one off charge of £884 million on its African bank. Tier One Capital came in at 12.5%. Corporate and international banking was responsible for £1.356 billion of profit. There was a £290 million charge for the Libor fine. Non-performing assets on the balance sheet have been cut by £5 billion. There are two outstanding issues to be resolved – the 2008 funding for Qatar’s increased stake in Barclays. Then of course CEO Jes Staley’s role in the whistle-blowing misdemeanour. Most reasonable people hope that he will just have his wrists slapped rather than lose his job. The improvement in Barclays’ welfare has been measurable and this should be acknowledged. Shares have risen from174p a year ago to 224p before the opening.  They are expected to rally by 2%.

 

Finally to RBS – a quarterly profit at last of ££259 million – the first quarterly one since 2015 – and against a loss this time last year of £893 million. There was a £557 million provision for restructuring. RBS has posted billions of Pounds of losses since 2008. We still don’t know how much the DOJ will fine RBS for miss-selling – circa $5 billion? RBS had an operating profit of £1.3 billion and net lending increased by £3.37 billion. Tier One Capital was strong at 14.5%. The taxpayer still owns 73% of this bank – breakeven 503p – current price 253p. These shares have rallied from 148p in July of last year. We look forward to Philip Hammond putting some more meat on the bone over taking a loss on this bank. Again shares should rise by 2% at the opening. Progress has been made but RBS is far from out of the woods despite the positive efforts by Sir Howard Davies’s and Ross McEwan’s team.

 

 

 

UK companies posting numbers this week – Friday – Barclays, RBS, Rotork, Hastings – 2nd May BP, 3rd May Royal Dutch Shell, 4th May HSBC

 

 

US companies posting numbers – Friday – General Motors, Goodyear, Exxon Mobil, Chevron, Colgate-Palmolive, Weyerhaeuser

 

 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​

 

MARKET UPDATE – ITS BEEN LIKE PULLING TEETH!

Equity markets are achingly boring today, despite the DOW, S&P 500 and the NASDAQ flirting with new records (DOW currently up 58 points) – NASDAQ broke the 46-year-old record yesterday. Treasury Secretary Steve Mnuchin is expected to post tax cut ideas for dissemination today or tomorrow, which are now virtually expected rather than hoped for. Let’s hope he does not disappoint the market place. Even though jets from US and South Korea have been on bombing exercises, equities have been calm and tranquil with no trader moving uncomfortably or nervously from one cheek of their backside to the other.

 

Towards the close the FTSE 100 is up 20 points at 7293. Oils are a little better with BP leading the charge – up 1.2%. Pharmas were disappointing with GSK down 1.9%, despite reasonable numbers at noon. Astra reports tomorrow. Banks have kept their poise with Lloyds, Barclays and RBS posting their findings tomorrow and Friday. Metro Bank fell short of expectation – down 1.5%. Boohoo did well but punters took the shares down initially by 8%. Fortunately they have rallied – down 2.57%. Standard Chartered Bank seems back on an even keel thanks to influence from Bill Winters. Four years ago the shares were at 1600p – now 758p – up 4%. The LSE posted great numbers – up 1.1%. Many like me expect to another predator to knock on the door – CME would be a good fit. GKN was down 1.67%, slightly missing expectations.

TODAY’S FAYRE – Tuesday 25thApril 2017

 

“I found a ball of grass among the hay

And progged it as I passed and went away;

And when I looked I fancied something stirred,

And turned again and hoped to catch the bird —

When out an old mouse bolted in the wheats

With all her young ones hanging at her teats;

She looked so odd and so grotesque to me,

I ran and wondered what the thing could be,

And pushed the knapweed bunches where I stood;

Then the mouse hurried from the craking brood.

The young ones squeaked, and as I went away

She found her nest again among the hay.

The water o’er the pebbles scarce could run

And broad old cesspools glittered in the sun!”

 

John Clare – poet – 1793-1864

 

“Their Finest” is a terrific film and it really captured my imagination. I am not a great fan of Bill Nighy. However as an aging and eccentric actor (Ambrose) he was superb in this delightful film, which had everything – humour, action and sorrow.   Gemma Arterton stole the show giving such a beautifully sensitive performance as a Welsh girl from Ebbw Vale, ably supported by Sam Claflin, sporting a rather sarcastic dry disposition, as her co-script writer. In 1940, with London being hammered in the Blitz and with the country’s morale at stake, Catrin (Gemma Arterton), an untried screenwriter, and a makeshift cast and crew, work under fire to make a film to lift the nation’s flagging spirits; and inspire America to join the war. This film was such a heart-warming experience. In passing, does critic Camilla Long of the Sunday Times, ever like anything she sees? Life seems so miserable for her!

It’s all getting rather silly this rhetoric between the EU and the UK. The EU won’t even start negotiations officially until the end of May, which is ludicrous. The latest missile to come from Brussels, certain to damage relations, is that the UK must pay its full dues until the end of 2020! Why? Then I read with considerable alarm, as well as incredulity that France’s SNCF wants a piece of HS2’s action. I don’t care how good Alstom and other French rail manufacturers are, I think any contract awards should be dependent on whether France and M Macron are going to tone down their jingoistic rhetoric and stop being so tiresome over BREXIT negotiations! I am sure Canada’s ‘Bombadier’ would love the contract, as would some of their workers here in Derby! And if Bombadier cannot meet the specifications, then we’ll find a friend, who can – not difficult!

 

Despite the temperature around the Korean peninsula rising, requiring an unscheduled meeting of advisors at the White House today and despite China’s warning to Kim Jong Un, US markets headed towards record levels with the NASDAQ, which started trading in 1971, achieving that goal, as it breached the 6k threshold. We wait with awe and trepidation for Trump’s tax cut plans, which should receive a brief outline from Treasury Secretary Mnuchin in the next day or so, which should include plans for corporate tax cuts down from 35% to 15% in the next 2 years. The market has quite a serious element of expectation premium, which investors expect to be turned in to reality, assuming Congress is in the mood to play ball. This would be a tremendous fillip for business.

 

Notwithstanding that key element for progress, MacDonald’s posted great numbers with sales over-all up over 4% on the day. The company put improved results down to ‘Big-Macs’ and its breakfast meals. I think it may be down to disposable income falling. It is interesting to note that restaurant visits in the US dropped by 2.16% in 2016, with MCD filling some of the breach with affordable food. MCD’S shares were up over 5% on the day and have risen by 8.4% in the last year. Caterpillar also posted decent numbers, but the shares travelled and arrived – down 0.4%. Lockheed Martin slightly missed – down 2.2%. Texas Instruments pleased their acolytes – +1.5%. The tech sector that had a bit of spring sunshine in its heel, included Apple +0.6%, Facebook +1%, eBay +2.3%, Microsoft (reporting today) +0.4%, Alibaba +0.5% and Alphabet +1.1%. Yesterday New York markets closed as follows including year to date performances – DOW: 20,996 +1.12% +6.24%, S&P: 2,388 +0.61% +6.69% NASDAQ: 5,548 +0.73 +14.075% (46 year high inception 1971). In Asia markets attempted to follow the upbeat sentiment in New York – NIKKEI 19,256 +0.96% +0.788%, HANG SENG: 24,628 +0.71% +11.896% CHINA: 3,453 +0.37% +4.298% ASX: 5,916 +0.75% +4.45%.

 

London and Europe enjoyed rather nondescript sessions yesterday, having blazed the trail on Monday. The FTSE 100 lost 11 points at 7275. Whitbread’s CEO Alison Brittain would not have been very enamoured with the market’s reception for Whitbread’s latest set of numbers. For the first time in a decade Costa coffee saw a fall in sales (-0.8%), which considering the competition form independents on the high street is hardly surprising and despite those Costa units being open for more than a year, experiencing sales up by 2%. Analysts were not placated by the fact that Premier Inns had ambitious plans to build up the number of hotel beds by 3800 in the next year to add to the circa 68k they already have. Cost saving of £150m had been made and profits were up 6.2%. It was the outlook and ONS’s data which said retail sales had fallen 1.8% in March that rattled analysts’ cage – shared down 7%. Bernard Arnault, France’s richest entrepreneur announced plans to tighten the family’s grip on LVMH by paying €12 billion for the remaining stake in Christian Dior. It is extraordinary that luxury brands still have an amazing premium attached to them.

 

There have been a slew of earnings this morning. Banco Santander posted results slightly better than expectations. There were solid efforts from GKN. GSK reports later in the morning as does Standard Chartered Bank, which reports at 9.30am. The LSE saw revenue up 19% and profits by 17% in the last quarter, despite no deal being consummated with Deutsche Boerse. Bahoo’s results were good but expectations were very high. The shares initially fell an unnecessary 8%, but are down only 2.5% as I write. As an on-line retailer, Boohoo has been outstanding.

 

UK companies posting numbers this week – Wednesday – LSE, GKN, Croda International, Standard Chartered Bank, Proactis Holdings, Glaxo SmithKline, Boohoo, Metro Bank, Tullow Oil Thursday – Persimmon, Jardine, Lloyd Thompson, Cobham, Aggreko, Harvey Nash, Travis Perkins, C4X Discovery, Lloyds Banking Group (TS), Weir Group, Schroders, Astra Zeneca, WPP, Kaz Minerals, Howden Joinery, Friday – Barclays, RBS, Rotork, Hastings – 2nd May BP, 3rd May Royal Dutch Shell, 4th May HSBC

 

US companies posting numbers – Wednesday – Nasdaq, PepsiCo, Boeing, Twitter, Procter & Gamble, Hershey, General Dynamics, PayPal, Amgen, United Technology, Thursday – Ford, Raytheon, Zimmer, Bristol Myers Squibb, Mead Johnson, CME, KKR, AbbVie, Intel, Microsoft, Amazon, Starbucks

 

 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 ​

MARKET UPDATE – PERHAPS A DEGREE IN NON-FERROUS WELDING MIGHT BE MORE APPROPRIATE

As for Mme Le Pen; according to those who know about these things, she will be destroyed at the polls in 2 weeks. France is an extremely conservative country with a small ‘c’ and its dislike of change knows no bounds. The Front Nationale’s ticket is unabashedly an immigration and anti-EU ticket. I don’t think she will win, but whilst France fails to get a grip on immigration and security issues, Le Pen will grow in popularity and stature. Anyone who thinks that Macron is a serious reformer, desperate for change delude themselves. It will be ‘play it again-Sam!’ He will have massive problems getting any legislative programme through with so many different parties. He is just very easy on the eye with a modern ‘Ryan Gosling’ appeal! Macron himself will feel a bit of a Blair ‘third way’ ticket and I suspect the majority that seem to want change will see very little. A bullet dodged – but only for a while!

 

The Euro has rallied – up 1.5% against the Pound, but Sterling has done OK against the Greenback. But as for equities; well we expected a relief rally, but what has happened today is off the scale and almost beyond comprehension. I think I might attempt a degree in ‘non-ferrous welding’, such is my understanding of equity behaviour.

 

So the world and his wife expects ‘come-to-bed-eyes’ Macron to know ’em dead on 8th June and we know that growth in the EU has picked up. However for the DAX only 30 stocks – to be up 3% at 2.45pm is beyond comprehension as is the 40 stocks in the CAC which has posted a gain of 3.9%, having been up 4.5% at one time.

 

The FTSE 100 has held its own adding 125 points to 7241, with banks, oils, mining and drugs blazing the trail. Despite Sterling looking a tad better against the Dollar, Greenback related stocks have not yielded. Banks are up significantly with Barclays grabbing the ‘yellow jersey’ – up 5%, with the others up an average of about 3% ahead of results at the end of this week and early next week. BP is 1.5% to the good with RD Shell outshining its cousin – up 2%. Both are off their best levels. Astra shone through the drug gloom – +1.9% with GSK and Shire better by an average of 1%. The only dampener was the utility sector, thanks to the Government’s incomprehensible policy on pegging energy prices – Centrica down 5% and SSE -3.5%. National Grid and DRAX were both slightly above the Plimsoll line – both +0.5%.

 

The DOW opened the session 1% to the good and what pleased me above all else was the fact that the FTSE 250 broke the intra-day record nudging 19581. It is now at 19575. This index is a real barometer of UK economic activity and endorses the brilliant news on manufacturing and exports, posted by the CBI today, some of this good news is down to a weak Pound So all you ‘Doubting Thomases! – Hope springs eternal.

FRENCH ELECTION UPDATE – THE EUPHORIA MAY BE OVER-PLAYED!

Simon French, Chief Economist of Panmure Gordon & Co clarifies the situation in the French Election in saying that ‘the dynamics in round 2 are totally different to the Trump/Clinton and Brexit/Remain elections, where pollsters posted a 2-4% gap. The latest polling suggests Le Pen is 24bp behind. She will need to hoover up a mass of socialist votes from Melenchon and Hamon to have any chance – not an easy task with Fillon, Melenchon and Hamon ‘nailing their respective flags to the Marcon mast!’ While she may get a few of the disenchanted, she is unlikely to get as many as she would require under a run-off vs Fillon who was more of a Thatcherite in outlook.’

 

As I have already said France loathes change.  There may be a huge amount of ‘huffing and puffing’, but little it terms of radical change will be achieved. Simon French goes on to say ‘As for the UK, Macron is a slight negative regarding Brexit as he is a Europhile who wants to do “more Europe”. I wouldn’t overstate the impact as it was already going to be a tough gig for the UK to get a credible trade deal. For equities and GBP the “safe haven story” of the UK is slightly diluted by Macron, but again it is not seismic.’

 

At 8.35am the FTSE is up 125 points (+1.4%), the DAX 250 points and the CAC 200 – astonishing!  Expect some sort of a pull-back soon.  This rally seems unjustified.