POLITICAL SHENANIGANS – NEVER SEEN ANYTHING LIKE IT IN 56 YEARS – MARKETS REMAIN CALM!

 

I know I am older than God, but I can never remember political shenanigans of this nature in all the 56 years I have been working in the City. Yesterday it was too hot to be ‘out and about’, so I watched the Trump/Putin press conference on TV.  I must admit, my eyes were out on stalks, listening to President Trump dismiss evidence on Russian interference in the 2016 US election from the FBI, CIA and the DOJ with utter contempt, all but accusing them of being perpetrators of ‘fake Nooze!” – Incredible! There is clearly no diploma coming POTUS’S way for statesmanship. The indignation expressed by both Democrat and Republican luminaries – particularly those in the twilight zone – was, to say the least, stark and blisteringly critical. I don’t think we have heard the last from Robert Meuller.

 

President Trump might just be starting to tread on very thin ice. I respectfully suggest to POTUS that Russia is not the West’s ally. President Putin, despite the current huge red herring – alias the World Cup – is a despot. We are a million miles away from the Gorbachev era. I salute Mr Trump for opening a dialogue with Russia; Barack Obama abrogated his responsibilities in failing to do so for eight years and boy, has the West paid the price. However, to expect anything apart diplomatic cordiality from this meeting, could be folly!

 

As for PM May’s Chequers blue-print for a BREXIT agreement; it seems to be in tatters already, ripped to pieces by ‘remainers’ and ‘leavers’ alike. Four amendments proposed by Jacob Rees—Mogg MP to a key piece of the PM’S BREXIT legislation were tabled and agreed, but the Government only had a majority of three for the EU withdrawal Bill and had Sir Vince Cable and ‘Little Timmy’ bothered to vote…. Who knows? What is so depressing is the lack of leadership. The House of Commons is like a kindergarten playground as member just squabble in a totally rudderless manner. The divisions are at an intolerable level. Labour seem even worse than the Government. The EU must be laughing like hyenas. Such is the lack of cohesive thought process. As the days roll by it is distinctly possible that we are heading for a ‘NO DEAL’ scenario, which is a dangerous ploy. 18 months ago, I would have relished the prospect. But that time has passed; we are running out of time to stand up to the relentless bullying from the EU. That desperate June 2016 General Election put the government’s negotiating stance to the sword. Time, I think for pragmatism, though there is little evidence of a will to acquiesce.

 

Despite all this political tomfoolery, markets remain relatively stable. Wall Street had its mind in neutral yesterday as most people in beautiful downtown Manhattan were on Putin/Trump watch. Energy stocks were slightly under the cosh as crude oil drifted down to $72 for Brent and $68 on Nymex. After hours Netflix posted numbers.  The shares were larruped – down 14% though admittedly they are up 146% on the last year. New member numbers fell short at 5.8m (EST 6.15m) making a total of $130m subscribers. A record profits of $384 million was posted up from $66 million last time. EPS came in at 85 cents with operating margins of 11.8% against expectations of 12%.  This is surely a temporary setback.

 

What these numbers do highlight is a possible lack of content, which may have restricted new members joining. I think it is becoming clearer that Comcast will end up with SKY for $26 billion, giving this joint venture greater world penetration for sport and news.   I also believe that 21st Century’s assets will fall in to bed with Disney, who are desperate to take on Netflix and will be able to do so because of incredible content from Universal and Disney, who together will make maybe 75% of films and TV dramas. The earning season should be good in the US, though investors approach to bank results which were good, has been cautious. Bank of America’s shares were up initially by 2% but closed even higher by 4.8%, in contrast to JPM, Citi and Wells Fargo

 

In typical French/EU style of protectionism, France is having the drains up over the Tesco/Carrefour deal and the mega Auchan/Casino/ Schiever/Metro deal to be known as Horizon.  I have no time for protectionism – charge what the traffic will bear.

 

In Asia markets mainly had a ‘monkey on their back’, apart from Tokyo in response to New York and trade tariff threats – Shanghai -0.65%, Hang Seng -1.25% and Nikkei +0.44%.

 

The FTSE 100 was down 60 points yesterday thanks to IMF lowering growth for UK to 1.4% for 2018 and oil stocks falling with miners. Today the FTSE 100 is up a cautious 13 points at 7614. BHP & Rio posted decent updates. TalkTalk though still half its share price since October 2017 added 3.3%. Petropavlovsk has bee slaughtered in the past 5-years down from £42 to £7.47 today, with a neutral trading statement. Galliford Try was up 2.5%.

 

David Buik

Core Spreads

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