“A thing of beauty is a joy for ever:
Its loveliness increases; it will never 
Pass into nothingness; but still will keep 
A bower quiet for us, and a sleep 
Full of sweet dreams, and health, and quiet breathing. 
Therefore, on every morrow, are we wreathing 
A flowery band to bind us to the earth, 
Spite of despondence, of the inhuman dearth 
Of noble natures, of the gloomy days, 
Of all the unhealthy and o'er-darkn'd ways 
Made for our searching: yes, in spite of all, 
Some shape of beauty moves away the pall 
From our dark spirits. Such the sun, the moon, 
Trees old and young, sprouting a shady boon 
For simple sheep; and such are daffodils 
With the green world they live in; and clear rills 
That for themselves a cooling covert make 
'Gainst the hot season; the mid-forest brake, 
Rich with a sprinkling of fair musk-rose blooms: 
And such too is the grandeur of the dooms 
We have imagined for the mighty dead.”

John Keats – poet – 1795-1821


I imagine there wasn’t a dry eye at Ascot last Saturday, as ‘Waiting Patiently’, who won the Ascot Cup, seeing ‘Cue Card’ off with not that much to spare, as he was led into the winners’ enclosure by the connections of his trainer, Malcolm Jefferson, who recently gave up the unequal struggles in battling for his life against cancer. The Norton handler had only been buried the day before. Unless the ground comes up ‘bottomless’, I doubt he will run at Cheltenham in the Gold Cup or the Ryanair.  If it chucks it down, it would be a brave person to not give this gelding some serious consideration.


Though many of the ladies were clad in black with a strong political message, the BAFTA awards was a glittering occasion with Gary Oldman justifiably winning best actor for ‘Darkest Hour’ with ‘Three Billboards..’ winning a fair few major awards including best film and Frances McDormand indisputably best actress. I could not understand why ‘Shape of Water’ starring Sally Hawkins did so well – such a weird subject! It was not for me!

In the US, the bank sector tends to post its numbers at the start of each earning season, whereas here in the UK it is towards the end of the cycle. In the case of European banks there is no set pattern. US banks posted better than expected numbers apart from revenue from investment banking, with Morgan Stanley proving to be the exception.  Trading disappointed, due to a lack of volatility, low interest rates, the threat of a bond bubble bursting and concern 0ver rising interest rates.  Well, volatility certainly returned with a vengeance in January. European banks have performed indifferently. Away from the US it has been a very bad month for banks.  Deutsche and Credit Suisse are still under-water and UBS is not exactly firing on all cylinders.  Societe Generale’s share price is near enough where it was a month ago and BNP Paribas’s is slightly lower. Also, there is a strong school of thought that believes the European banking system is not as robust as it should be. In fact, if the EU negotiations go to ‘hell and a handcart’ many acolytes are of the opinion, that EU banks, away from those working out of London, may find that their balance sheets are not strong enough to step in to the breach and pick up the cudgel from London.


The UK’s banking sector posts its results this week.  Apart from the headline numbers, which could read well, there will be a few metaphorical cans of worms to deal with.  Significant write downs of maybe £1.25 billion may be recorded associated with the collapse of Carillion.  RBS has had shocking press over its handling of SMES at the time of the banking crisis and the FSA has come under attack for its perceived poor handling and lack of protection of these clients.  It also waits its fine from the US, which could be as much as $6 billion. Lloyds Banking will be watched carefully for its dividend policy – will it be increased from 3p a share to 4.5p. Will Barclays’ US investment banking operation have been less profitable than the year before as others have been? HSBC sets the ball rolling on Tuesday. Stuart Gulliver will be retiring as CEO and John Flint will replace him.  70% of its business emanates from Asia.  How is HSBC’S UK operation doing?  Will Paris have a major presence in the future? It strikes me that, since US banks have got their act together more quickly, in terms of recovery and regulation post the financial crisis, the door for competing for business has been slammed on others, leaving US banks in an unassailable position. Their power seems to have been enhanced by problems at Deutsche and UBS in recent years. A decade has passed since the banking crisis and the sector is nowhere near commanding the public respect.  Everyone was keen to blame casino banking! It paled in to insignificance in comparison to poor credit judgement and issues such as PPI which cost £30 billion.




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Was last week the lull before the storm, encapsulating more disruption and exacerbated volatility?  No one can be quite sure. Last year volatility played no role to speak of in financial markets.  Towards the end of the year we saw bond yields creep up slowly in response to the US’S forward guidance on a gradual increase in interest rates. The week was one of consolidation, as most global indices regained their poise (see table above), apart from Shanghai (-0.8%). So far 80% of S&P 500 companies have posted results – 75% have beaten profit expectations and 78% sales expectations. Last week there were good numbers from Cisco and decent efforts from Kraft Heinz, Metlife and Coca-Cola. So, the fundamentals are still in place, though in the US data on inflation caused a few furrowed brows and retail sales were flat. The weather has been austere and the internet sales rule OK – ask Amazon, Alibaba and Baidu. Oil rallied to $65+ a barrel as did gold $1350 an ounce.


This side of the ‘Pond’ there were some decent earnings – Airbus and Schneider Electric especially, though Nestle slightly disappointed. It was a relatively quiet week for large cap ‘earnings’ but the news flow was fast and furious. Despite strength of the Pound ($1.40.5 at the end of the week on inflationary concerns) the FTSE 100 had a decent week with mining stocks, especially those with South African interests, blazing the trail. It looks as though that 21st Century Fox will have to up the ante for Sky above the current 1085p threshold.  BT lost out in terms of market share on the distribution coverage of sport to Sky.  There was also a message to BT, which has already spent £5 billion on sport in recent years. Concentrate your efforts on broadband quality! Galliford Try surrendered 19% of its value in the wake of the Carillion crisis. Standard Aberdeen were rocked back on the heels in seeing £109 billion of funds withdrawn by Lloyds Banking Group courtesy of Scottish Widows. Barclays PLC was further indicted by the SFO to answer allegations, in connection with an irregular loan facility, offered to Qatar for taking an $11 billion stake. John Varley former CEO and three former directors have already been charged with similar allegations. This further charge may not serve a useful purpose.  The bank was undoubtedly saved by the deal and sufficient charges have already been proffered.  The Melrose/GKN takeover battle continues to rage.  The Government continue to look for assurances on security and shareholders of GKN insist the price is inadequate. Finally, the steel industry and the miss-selling of pensions was headline news and is not going away and many others may reason to be concerned about other sectors. And as an addendum the Sunday Times tells us that Sir Philip Green is seriously thinking of selling his Arcadia Group to Chinese textile operation Shandog Ruyl. Arcadia has 2800 outlets and 26,000 employees.


UK companies posting results this week – Monday – Reckitt Benckiser, Fidessa, MJ Gleeson, Tuesday – HSBC, BHP Billiton, Intercontinental Hotels, Tristel, Dunelm, Wednesday – Glencore, Metro Bank, Barratt Development, FirstGroup, Hochschild Mining, Thursday – Anglo-American, Centrica, Go-Ahead, TBC Bank, , BAE Systems, BATS, Hays, Northgate, Kaz Mining, Intu, Serco, RSA. Rathbones, Moneysupermarket. Lloyds Banking Group, Barclays, Safestore, Friday – RBS, Pearson, IAG, Standard Life Aberdeen, Rightmove, William Hill


US companies posting results this week – Tuesday – Walmart, Home Depot, MGM Resorts, Wednesday – Dynergy, Wendy’s, Thursday – Hormel Foods, HWP, BJ Restaurants


Economic data posted this week – Monday – Rightmove UK House prices, Tuesday – CBI Industrial trends, Germany’s ZEW, Wednesday – UK Labour statistics and PSBR, UK PMI Manufacturing & Services, US PMI Manufacturing & Services, US Existing Home Sales, US FOMC minutes, Thursday – 2nd UK GDP estimate


David Buik

Core Spreads

Core Spreads is financial trading as it should be. No noise – just tight spreads on thousands of markets.

uk forex awards 2017