TODAY’S FAYRE – Monday, 8th January 2018
“Bright star, would I were steadfast as thou art! –
Not in lone splendour hung aloft the night,
And watching, with eternal lids apart,
Like Nature’s patient sleepless Eremite,
The moving waters at their priestlike task
Of pure ablution round earth’s human shores,
Or gazing on the new soft fallen mask
Of snow upon the mountains and the moors –
No -yet still steadfast, still unchangeable,
Pillowed upon my fair love’s ripening breast,
To feel for ever its soft fall and swell,
Awake for ever in a sweet unrest,
Still, still to hear her tender-taken breath,
And so live ever -or else swoon to death.”
John Keats – poet – 1795-1821
Taking nothing away from Australia’s merciless performance, but England just capitulated at the SCG this morning – all out for 180 losing by an innings and 123 runs to an altogether superior outfit. Quite a pathetic effort!
It is understandable why Christopher Plummer and Michelle Williams were nominated for Global Globe awards for their respective performances in Ridley Scott’s film ‘All the Money in the World’, which incidentally they did not win. This movie tells the story of the kidnapping of Paul Getty junior in Italy for $17 million back in 1973. Both portrayals were very much the highlight of what was a very boring and unconvincing script. It should have been a very exciting film. Sadly it backfired like a damp squib. Kevin Spacey, regardless of his misdemeanours, would surely have been badly miscast as J-PG. Remembering John Paul Getty’s image as I do, Plummer looked the part and portrayed the perception of the richest and most parsimonious man in the world at that time exquisitely. Well done to Gary Oldman for winning best actor in ‘Darkest Hour.’
It has been another quite astonishing week for investors, considering the amount of corporate news was very limited. President Trump was at his most vociferous if not particularly loquacious, in exchanging jingoistic rhetoric with Kim Jong Un before the year was a week old. As if that was not sufficient, then came Martin Wolff’s embarrassing tome – ‘Fury & Fire’ – about a dysfunctional White House, which attracted a wave of abusive and dismissive invective from the President on ‘twitter.’ Despite all this embarrassing infantile behaviour, markets feel that the US economy is in good shape and all three indices burgeoned their way to new record with the DOW breaching the 25k threshold and the S&P the 2700 threshold with a bit to spare during the 4-day week.
It is interesting to note that in the last year the DOW has risen from circa 20k to 25k, with Boeing being responsible on its own for 900points in that period. 5 out of the 30 stocks have been responsible for most of the 5k points – Apple, Goldman, Caterpillar, JP Morgan and Boeing. Friday’s Non-farm payroll data was adequate – However in the last year of Obama’s Presidency, job creation was greater than under Trump in the first year of his stewardship. In passing Friday’s payroll and employment data was as follows – No-Farm payrolls created only 148k jobs in December against expectations of 190k, but the unemployment rate stayed at 4.1%. The hourly earnings rate was up 0.3% to 2.5% on an annualised – hardly stunning but constant.
Next week sees the start of the first quarter’s earnings season, which gets under way with Wells Fargo, JP Morgan and Blackrock posting significant numbers on Friday. The way bank shares have performed in the last 3 months, the market deserves some fairly stellar results. We shall see! Investors and punters alike seem to refuse to accept that equity and bond markets may be in a huge bubble, which could burst! Valuations are really rather frothy. However until there is a clear message that rates will rise aggressively, with QE being tapered with a degree of urgency, it is hard to see more than a mildly healthy correction in the first quarter. The quality of this current earnings season will tell us a great deal. The FED has told us to expect another two rate hikes this year and one in 2019.
Asian markets fared well last week too, though Tokyo was shut for much of the week. However the NIKKEI returned with a flourish adding 3.5% in value on Thursday to its highest level for 25 years. China is only expected to grow officially by 6.5% per annum, but the rest of Asia looks set fair. Those that know about these matters concerning stock picking tell me that in 2018 Tencent, Baidu & Alibaba will be all the rage!
Relatively speaking the UK and the EU were still on holiday politically, though not entirely from an economic perspective. There was good data on hourly productivity with November providing the sharpest rise since 2011. Manufacturing and the service sector were not entirely negative, but still the UK languishes behind the EU in some areas, but comparisons are often dangerous, though it does appear that Europe may have selected another gear in terms of growth, whereas the UK seems to be plodding its own weary path, thanks to uncertainty over BREXIT negotiations. Certainly many of the economists and teenage scribblers are determined that the UK is set fair on a rocky path in to the house of economic bondage. As an observer of life, I am not sure that I subscribe to that theory.
At the end of this past week equity bourses were on particularly good terms with themselves with perhaps the FTSE’S performance being the least impressive thanks to the strength of Sterling – up just up 0.47%, with the S&P 500 being all but on fire scooping up 2.27% in the same period with European bourses being not that far behind with 2.17% added value there for all to see. The Nikkei added a whopping 4.17%, thanks to positive vibes about the resurgence of Japan’s economy. The fact that country of the ‘Rising Sun’ is hopelessly over-borrowed has hardly seen an eyebrow of concern raised.
In London most of the main news came from the retail sector. We had unexpected good news from NEXT, which posted a 13.6% increase in its Directory sales in the last trading period, though high street sales fell by 6.4% – overall +1.5% – shares up 6% on the week. Unfortunately Debenhams posted a disastrous profits warning – £55-65 million for the year against estimates of £82 million – shares down 17% on Thursday. This news will have damaged Mike Ashley’s 20% holding in Debenhams and could precipitate a cheaper sales of Newcastle United to Amanda Staveley’s consortium for a price nearer £240 million than the £300 million demanded. House of Fraser looks as if sales data from their front will not be good. Carillion suffered as a result of a regulatory investigation – down 5% on the week. Tesco will post a trading statement this week on Thursday with like for like sales over Christmas and the New Year likely to have increased by 2.5%. Morrison’s effort may not have been that effervescent, out on Tuesday, but not bad with estimated sales coming in at 1.7% including Amazon. M&S post numbers on Thursday as well. Food sales will be flat but general merchandising may be up 1%. As for Sainsbury’s effort on Wednesday is likely to disappoint with sales only up 1%, with Argos perhaps not as buoyant as usual. Boohoo on Thursday and ASOS on 25th January are not expected to disappoint. Sales from Mothercare and New Look (withdrawal of credit insurance) are unlikely to smell of the most exquisite roses!
It is always fantastic to see a really professional boutique take on the big boys in their back garden. Such was the case last week with Robey Warshaw, the M&A advisor run by Sir Simon Robey (ex-Lazard) and Simon Warshaw (ex-UBS). This company was involved in the Softbank/Arm Holdings, Liberty Global/Vodafone and Reckitt Benckiser/Mead Johnson merger deals. We understand that £63 million of largesse was spread amongst about 18 employees. Finally the initial introduction of futures contract for Bitcoin did not immediately steady the ship, though a couple of days ago the price rallied sharply from $11k to circa $15k. This market is not for the faint hearted.
UK Companies posting results this week – Monday – Micro Focus, AO World, Tuesday – Games Workshop, Centamin, Morrison, Persimmon, Ferrexpo, SafeStore, Wednesday – SuperGroup, Quiz, Taylor Wimpey, J Sainsbury, Tullow Oil, Ted Baker, Foxton’s, InterServe, Cineworld, GoCompare, PageGroup, Thursday – Boohoo, Fenner, M&S, Barratt Development, Hays, Moss Bros, Mothercare, Premier Oil, Spire, Tesco, Booker, Rathbones, Ultra Electronics, Friday – Bovis Homes, TP Icap, Countrywide
US companies posting results this week – Monday – American Eagle Outfitters, Tuesday – Simply Good Foods, Wednesday – Lennar, KB Homes, Thursday – Delta Airlines, Friday – JP Morgan Chase, Wells Fargo, Blackrock
Economic data posted this week – Monday – US Consumer Confidence, US Consumer Credit, Wednesday – UK Industrial Production, Manufacturing and Construction, NIESR GDP estimate, UK Trade Balance, Thursday – BOE UK Credit Conditions, US PPI, Friday – US CPI, US Retail Sales
Market Commentator – Panmure Gordon & Co
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