TODAY’S FAYRE – Thursday, 14th September 2017
“The morning sun shows like a pillar
Of fire through smoke on frosty days.
As on a faulty snap, it cannot
Make out my features in the haze.
The distant trees will hardly see me
Until the sun at last can break
Out of the fog, and flash triumphant
Upon the meadows by the lake.
A passer-by in mist receding
Is recognized when he has passed.
You walk on hoarfrost-covered pathways
As though on mats of plaited bast.
The frost is covered up in gooseflesh,
The air is false like painted cheeks,
The earth is shivering, and sick of
Breathing potato-stalks for weeks.”
Boris Pasternak – poet & author– 1890-1960
Sir Peter Hall, who died recently at the age of 86, having suffered from dementia since 2011, is generally acknowledged to be the father of National Theatre, which he put together with the assistance of Kenneth Tynan, the doyen of theatre critics of the day and our most celebrated actor Laurence Olivier. He was a man of complete artistic creativity, which he developed whilst at Cambridge. Not only was he a leading light behind that National Theatre but he also directed opera at Glyndebourne and the Royal Opera House, as well as directing many films. Over the years he worked with Sir Trevor Nunn and was married first to the delectable Leslie Caron – she of ‘Gigi’ fame – and to the opera diva Maria Ewing.
Chancellor Hammond has informed the City that he will help craft a “bespoke deal” for the UK financial services sector in Brexit negotiations, as industry voices continue to call for greater clarity on the details of any proposed transitional period. In his speech to the UK Finance Annual Dinner at Mansion House last night, Hammond set out his plans for a transition period after March 2019, “during which the UK and the EU 27 will retain access to each other’s markets, and will operate a harmonised customs arrangement.” This news will please the ‘soft’ BREXIT brigade, but his ideas may not get a smooth passage from some whilst Juncker and Barnier adopt such an obstreperous attitude to negotiations and possible trade deals.
Yesterday did not see US equity markets at their best, as investors in beautiful downtown Manhattan ruminated over the possible introduction of Treasury Secretary Mnuchin’s much vaunted taxation cuts. Congress will prove to be no push over with these imaginative cuts. The main US indices closed as follows – DOW -0.18%, S&P +0.08%, NASDAQ +0.09%. Chevron, Dupont, Verizon and GE shone through in quiet almost anaemic session. Caterpillar, Pfizer and Apple found few friends as they all drifted by an average of 1%. Asian bourses were mostly flat on Thursday after the release of slightly disappointing Chinese data. Markets watched with interest the rise in U.S. Treasury yields overnight following tax reform headlines out of Washington, although the dollar’s advance paused. Industrial Production, investment in fixed asset investment and retail sales came up a little short in China today.
London’s market was a dull affair as the FTSE 100 drifted by 21 points to 7379. Halfords appointed Graham Stapleton from Dixons Carphone to replace Jill McDonald as CEO of Halfords. Dunelm saw a small drop in sales (-2.4%) but the outlook was very positive as revenues rose by 8.5%, resulting in the shares adding 9% on the day.
I think the market always feared that Apple would not be delivering its new ‘all singing and dancing’ iPhoneX in time. Tim Cook eluded gently to it some weeks ago. Apple’s shares went mildly in to reverse but are unchanged over the last month. Ironically Softbank which bought ARM Holdings saw its share price rise by 0.34% today. However, IQE (-6%), Imagination (-4.8%), and Laird (-0.3%) – all key suppliers to Apple, mainly chips – have fallen in price due to supply concerns, as their chip production levels fall. I suspect these reverses are temporary as Apple’s support seems very strong and the expectations for iPhoneX are almost stratospheric. However Swatch (-3%) and Richemont (-1.4%) may be a different kettle of fish. The iPhone could damage long term sales from these two companies – who needs a watch and an iPhone unless it’s a Rolex.
Many like me would have been very disappointed that Culture Secretary Karen Bradley referred 21st Century’s bid for the remaining 61% of Sky to the CMA against the findings of Ofcom and the fact that even the EU waved it through. Who is getting to the Culture Secretary? This deal has nothing to do with politics and there is stench of professional jealousy in the air from the competition. Murdoch does not have to be liked. Sky has created thousands of jobs and has provided entertainment for millions. He has also saved many newspapers. If corporate governance issues can be agreed, this deal should be allowed to go through. Shares closed all but unchanged but the day before fell from 950p to 937p.
There was further good news on the UK’s employment data yesterday – UK unemployment fell by 75,000 in the three months to July, bringing the jobless rate down to 4.3% from 4.4% in the previous quarter. The rate stands at its lowest since 1975, but a squeeze on real incomes continues, according to the ONS. Wages in the period were 2.1% up on a year earlier, little changed from the previous months’ growth rates. Inflation hitting 2.9% in August, wages are failing to keep up. In real terms, wages have fallen by 0.4% over the last year.
Sports Direct seems to be under the corporate governance cosh again. Two influential Parliamentary select committees are contacting Sports Direct boss Mike Ashley over concerns that the retailer’s Hermes drivers are underpaid. Amazon is also be challenged for failing to cooperate fully in tackling a multibillion-Pound fraud that is putting scores of small companies out of business. Some foreign companies are alleged to be selling goods on Amazon and eBay thus evading tax on a third of it sales. According to the Times this could amount to £1.5 billion of lost revenue to HMRC.
EU car sales for June to August inclusive were up 4.5%. However it was Japanese car makers that excelled in the EU in August – Nissan +17%, Toyota+17% – both up despite tariffs. BMW only up 2.4% and VW 2.7% but Fiat grew by 9.4%! Wm Morrison posted numbers for the half year – like for like sales grew by 3% including fuel (1.4% last year). EX fuel 2.6% – Turnover was up 4.8% and profit before tax was up 12.7% to £177m (£157m last year). For the last 6 months NEXT posted numbers thus – NEXT Brand full price sales1 in the first half were down -1.2% and total sales2 (including markdown) were down -2.3% on last year. Group profit before tax was down -9.5% and Earnings Per Share (EPS) were down -6.2%. The first half has seen a marked divergence of performance between our Retail and Directory businesses, with sales and profits down in Retail (-8.3%) but moving forward in Directory (+5.7%). The FTSE 100 is expected to open virtually flat.
UK Companies posting, results this week –Thursday – NEXT, Booker, Ophir Energy, Haynes Publishing Wm Morrison, SQS Software, Friday – JD Wetherspoon, Investec
US companies posting interim results this week – Thursday – Cisco Systems, Oracle
Economic data due this week – Thursday – UK Retail Sales, MPC Meeting, US CPI and Initial Jobless Claims, Friday – BOE Quarterly bulletin.
Market Commentator – Panmure Gordon & Co
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