“The fountains mingle with the river,
And the rivers with the ocean;
The winds of heaven mix forever
With a sweet emotion; 

Nothing in the world is single;
All things by a law divine
In another's being mingle-
Why not I with thine?

See, the mountains kiss high heaven,
And the waves clasp one another;
No sister flower could be forgiven
If it disdained its brother; 

And the sunlight clasps the earth,
And the moonbeams kiss the sea; - 
What is all this sweet work worth,
If thou kiss not me?” 

Percy Bysshe Shelley - poet – 1792-1822

 

I was very sad, but not surprised to hear that Sir Andy Murray, in a very emotional and highly-charged interview, given to the press in Australia, all but announced his retirement from tennis sometime this year. I suspect, because of the excruciating pain he suffers from his hip, it will be sooner rather than later.

From a raw and gauche 18-year-old talented schoolboy, Sir Andy, over a 12-year career, developed in to one of the all-time great tennis players the world has ever seen in an era that included Federer, Djokovic and Nadal. To have won three grand slams and two Olympic Gold medals in this company is phenomenal. To have competed against such incredible athletes at the highest level for so long, when he was never as natural an athlete as they were, was utterly amazing, but it eventually took its physical toll.

Sir Andy owes the game nothing and he should take his leave from this relentlessly fierce level of competition, whilst tennis acolytes remember his outstanding feats. Thank you for all the joy you gave to millions of people! (Match in Melbourne yet to be played at the time of writing)

So, we head towards Tuesday, when the vote in the Commons on PM May’s/EU’S BREXIT deal will take place at circa 7.00pm. The market tells us that the PM will lose the vote comprehensively – maybe by as much as 200 votes with Labour ‘hell-bent’ on being artful and duplicitous, hoping to trigger a General Election. The House of Commons looks likely to dismiss the will of the people. However, if the content of Sunday's Times's Tim Shipman's leading article on HOC'S plot to seize control from PM May over BREXIT plays out, then democracy as we know it, should be stripped from The Oxford Dictionary. We've not seen such skulduggery since Oliver Cromwell in 1643! It would appear that Dominic Grieve, Sir Vince Cable and others have pushed duplicity to a new level, in their quest to engineer a peoples’ vote at the very least or to stop BREXIT if they possibly can.

Ironically MPS voted by a resounding margin to hold an ‘in-out’ referendum. They did not like the outcome and it appears they want to pass the buck back to the electorate with another peoples’ vote, or NO BREXIT, remaining in the EU, as the alleged scurrilous plot to throw out the PM suggests. A postponement of Article 50 on 29th March 2019 is a highly controversial possibility, but enthusiasm will be muted in places. It appears there is insufficient appetite for NO DEAL in the HoC and plan B has yet to be decided. What a mess!

INDEX

7th January 2019

11thJanuary 2019

%Loss/Gain

FTSE

6837

6918

+1.18%

XETRA DAX

10789

10887

+0.91%

CAC 40

4743

4781

+0.80%

DJIA

23474

23995

+2.22%

S&P 500

2535

2596

+2.41%

NASDAQ

6757

6971

+3.17%

HANG SENG

26015

26667

+2.50%

SHANGHAI

2528

2553

+0.94%

NIKKEI 225

19944

20359

+2.08%

Equity markets certainly regained some poise last week, though the gains were not as spiked or volatile as was experienced over Christmas and the New Year. Though there has been no fundamental breakthrough with the US/Sino Trade war, patient progress appears to have been made, unless of course President Trump does another U-turn. There appears to be little sign of any agreement on the Government ‘lock-down’ after three weeks of impasse. President Trump, for the time being, seems to have toned down his rhetoric towards FED Chairman Jay Powell. Powell seems to be content to throttle back from his relentless quest to keep raising rates. As Central banks start to taper back on QE, liquidity may become a problem for some global equities. 

Many are of the opinion that ECB’S Mario Draghi may have reconsider his policy to ease back on QE, as some influential countries within the EU stare over the precipice of recession, which as far as Germany, France and Italy are concerned, cannot be ruled out. Industrial output fell in France by 1.3% in November and by 1,9% in Germany. The Italian banking sector is creaking as are some ‘landesbanks’ in Germany. 

The German motor industry is experiencing a torrid time, as have most global auto companies. The 15 main global car manufacturers produce 80% of the 80 million cars that are built assembled and sold every year to date. Apart from Peugeot, whose share price is up 13% in the last year, the others have been given a measurable larruping – GM -16%, Ford -36%, Daimler Chrysler -33%, VW -21%, BMW -19%, Nissan -21%, Toyota -11% and Honda -20%. There has been a fair bit of nonsense spoken about the very sad lay-offs at JLR (4500) and Ford (1000+). Drivel about BREXIT has been given as a primary reason. How about 50% drop in Chinese demand, Trump’s trade spat, inconclusive news on diesel, electric cars coming in to production and frankly bad management, lacking in vision and foresight? The damage caused by indecisions over BREXIT are peripheral.  

Despite steady progress on the Street of Dreams, with some excellent performances from the tech sector, with Netflix to the fore, there were some retail results, which though numerically small, produced a mixed bag – Bed, Bath & Beyond +6%, Costco unchanged and Constellation Brands -12%! The 4th quarter earnings season starts in earnest this week with the banks very much to the fore.

Here in Old Blighty last week it was all about RETAIL. Last Thursday the BRC posted data implying that the recent Christmas sales period was the worst in a decade. Total retail sales showed 0% year-on-year growth during the month, the worst December performance since 2008. Discounted sales appeared not to have been enough to encourage shoppers. A separate report from Barclaycard said consumer spending grew 1.8% year-on-year in December, the lowest rate of growth seen since March 2016. Also, heavy duty business rates are taking their toll.

It also became clear that during 2018 that 1267 shopping units were closed around the country and the outlook is bleak. Not only has the retail culture changed dramatically with people not caring very much about sartorial elegance and being far more interested in wearing jeans bobby socks and sneakers, whilst displaying their designer stubble and Peaky blinder haircuts.  The consumer would far rather spend his/her money on good holidays and going out to pubs, restaurants and bars.

ALDI & LIDL certainly set down their stalls for the future with virtually double-digit sales gains over the Christmas period. Of the large supermarkets ASDA, Tesco and Morrison will have pleased their acolytes. Sainsbury disappointed and will be hopeful that its forthcoming merger with ASDA will iron out existing problems. Waitrose (-1.7%) fell from grace and over Christmas John Lewis sales were up 1%, but there may be no annual bonus for the staff, according to chairman Sir Charlie Mayfield. The winners from the high street were NEXT, Joules, Majestic Wine, Greggs, M&B and Ted Baker.  Amongst the main losers were Halfords, Debenhams, Quiz and Mothercare. M&S remains a conundrum. The sales figures were very average at best with like-for-like food sales -2.1% and clothing -2.4% over the last quarter. However, Chairman Archie Norman and CEO Steve Rowe talk a mean recovery game and the shares in the run up to M&S’S results rallied by 13%.

As a valedictory presentation by Rooney Anand, CEO of Greene King, many, as I was, were pleased to see a decent set of numbers which sent the share price up 4.4%. He has worked tirelessly for 18 years as CEO and it is such a pity that the acquisition of Spirit pubs has taken longer to bed down than many had hoped. Virgin Airlines confirmed the purchase of Flybe for a nominal sum. The businesses could be very synergistic. We shall see.

On the domestic economic front UK GDP numbers caught the eye with Panmure’s Simon French making some salient comments – He observed that Steady UK GDP growth in November - +0.2% MoM. Mixed sector picture with early festive spending driving services activity (+0.3% MoM), weak global demand/ Brexit uncertainty weighing on production (-0.4% MoM) whilst construction output was up +0.6% MoM to an all-time high.’  He went on to say – ‘Striking in this UK GDP data is how ineffective the devaluation in #GBP has been in narrowing the trade deficit. Since #gbp began its decline in Q3 2015 export & import growth have tracked each other, matching the rhythms in global trade rather than the UK's terms of trade.’

UK companies posting results this week – Monday – JD Sport, PageGroup, Tuesday – Hays, HIS Markit, Ashmore, Boohoo, Persimmon, Provident Financial, Wednesday – Bovis Homes, Cineworld, Dunelm, Hochschild Mining, Pearson, Tullow Oil, Thursday – Sage, AB foods, Experian, Rio, SSP, Whitbread, Workspace, Friday - Bakkavor

US companies posting results this week – Monday – Citigroup, Tuesday – JP Morgan, UnitedHealth, Wells Fargo, Delta Airlines, Wednesday – Bank of America Merrill, Bank of New York Mellon, Blackrock, US Bancorp, Goldman Sachs, Comerica, CSX, Alcoa, Thursday – Morgan Stanley, HB Fuller, American Express, Netflix, Friday – Schlumberger, Citizens Bank, State Street, Boston Scientific

Economic data posted this week – Tuesday – US PPI, Wednesday – UK Inflation, UK Housing Loans, UK House Prices, US Beige Book, US Import/Export Price Index, US Retail Sales, Thursday – UK Credit Conditions, US Housing data, Friday – UK Retail sales, US Industrial Production

 

David Buik  

Core Spreads

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

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