TODAY’S FAYRE

TODAY’S FAYRE – Thursday 6th December 2012

‘Now is the winter of our discontent
Made glorious summer by this sun of York;
And all the clouds that lour'd upon our house
In the deep bosom of the ocean buried.
Now are our brows bound with victorious wreaths;
Our bruised arms hung up for monuments;
Our stern alarums chang'd to merry meetings,
Our dreadful marches to delightful measures.
Grim-visag'd war hath smooth'd his wrinkled front;
And now,--instead of mounting barbed steeds
To fright the souls of fearful adversaries,--
He capers nimbly in a lady's chamber
To the lascivious pleasing of a lute.
But I,--that am not shap'd for sportive tricks,
Nor made to court an amorous looking-glass;
I, that am rudely stamp'd, and want love's majesty
To strut before a wanton ambling nymph;
I, that am curtail'd of this fair proportion,
Cheated of feature by dissembling nature,
Deform'd, unfinish'd, sent before my time
Into this breathing world scarce half made up,
And that so lamely and unfashionable
That dogs bark at me as I halt by them;--
Why, I, in this weak piping time of peace,
Have no delight to pass away the time,
Unless to spy my shadow in the sun,
And descant on mine own deformity.’

“Richard 111”

William Shakespeare – poet & playwright – 1564-1616

The BBC graced Churchill Place with its presence yesterday with an outside broadcast of the Autumn Statement from the trading floor.  We enjoyed the company of Susannah Streeter, Alison Mann, Helen Gray and their cameramen enormously.

I met Tom Newton Dunn, the political editor of The Sun, when reviewing the papers on Sky last night. Tom is a hugely respected voice in Westminster and follows very comfortably in the footsteps of his two predecessors Trevor Kavanagh and George Pascoe-Watson – all three doyens of their profession!

I was hugely saddened to see such a wild performance from the Shadow Chancellor at the despatch box yesterday, when responding to the Chancellor’s Autumn Statement.  Sadly it was woeful and inarticulate. Regardless of political persuasion, no one wants to see a highly intelligent man ramble on without thought co-ordination or structure to his comments. I suspect he was blown away from this year’s surprising borrowing requirement of Pounds 108 billion. He seemed to be beside himself – incandescent with rage – resulting in Mr Balls talking absolute gobbledygook!  Oh dear!

In a strange sort of way the Chancellor’s Autumn Statement was ‘Veni, Vidi, Vici!’ George Osborne was in an impossible situation. With growth around the world collapsing round his ears, he just had to deliver austerity measures to end all austerity measures if the government had any chance of keeping the cost of it increased level of borrowing down. The tarnished reputations of the rating agencies may well hang over Westminster like the Sword of Damocles, but it is far more important to gain the correct reaction from the market.  On the whole the gilt-edge market respected the content of the Statement.  The 10-year yield fell from 1.89% to 1.76% (way below inflation of 2.6%).  The fact that the country has another 6 years of austerity to endure is dispiriting.  The lower forecasts for growth from the OBR from -01% this year to 1.2% next year rising to 2.6% in 2017 look a tad ambitious to me. I suppose the main difference today responding to the dire financial crisis of 2008 in comparison to 1929 is the fact that only 8% of the workforce is unemployed today in comparison to 25% all those years ago. Also what is really galling is that in the foreseeable future we will all have less disposable income.

We can only hope that when the number crunchers have the drains up over the OBR’s net borrowing requirement of Pounds 108 billion for this year, they will either accept the manner in which the figure was collated or they are fans of creative accountancy! Most monosyllabic congenital throwbacks such as me thought the figure should have been nearer to Pounds 130 billion. However maybe some massaging from 4G licences yet to be sold of Pounds 3.5 billion plus about Pounds 11 billion from the asset purchases courtesy of QE and some assistance from the Post Office Pension fund helped to deliver such an encouraging number! Certainly the market will give its final verdict today.  We know that the rating agencies lowered the US’s credit rating a few months ago and it ‘mattered not a jot’, as the Dollar remains the only reserve currency in the world at present.  The reaction to a UK downgrade could be perceived quite differently. What is unequivocal is the government’s resolve to cut debt in the future, regardless of the awful outlook.

On the other side of the coin there was much to admire about the budget.  It was expansionary.  The Pounds 5 billion on infrastructure products was to be commended as was the cut in corporation tax down to 21% in 2014.  London on that basis is a place to do business. The Pounds 3 billion freeze on Welfare was certainly bold, is fair, but may not be perceived that way. The quest to sort out a very flimsy taxation policy is laudable, as was the possible repatriation of unpaid tax from Swiss sources, which may eventually total Pounds 5 billion.

What caught my imagination more than anything else was raising the threshold for tax concessions on capital investment from Pounds 25k to Pounds 250k – now that was imaginative.  Let’s be clear growth is going to come from innovative SMES, not from the public sector or from large corporations. If SMES are not being properly funded by the banks this method has much appeal and let’s hope the wealthy grasp the opportunity of feathering their own nests but also at the same time giving other entrepreneurs the opportunity of creating jobs and wealth.  In closing, it’s going to be a long, slow, tortuous road to recovery!

NEWS IN SHORT

Markets may open cautiously enthusiastic today as there is modest evidence that some Republicans appear to be more accommodative towards agreeing a budget and avoiding the Fiscal Cliff. However, back here in Europe, the picture is far from rosy economically.  The ECB may have some unappetising forecasts on growth to be posted today.   Retail sales posted yesterday were far from impressive and PMI numbers in the UK and Europe were dire. Also this morning there was news of Greece being downgraded yet again to ‘selected default’ – that does not sound good.  Anyway who cares there is a touch of the ‘Eton boating song’ about the resolve of the EU to batten down Greece into the fiscal family! – We’ll all swing together!

Barclays is going to increase its stake in ABSA to 62% and change.

PICC, the Chinese insurance titan will take its IPO bow in HK tomorrow valuing the operation at $3 billion, lower than expected but the largest IPO in HK for 2 years.

Deutsche Bank has been accused of inflating the value of some credit derivatives in 2008 to the tune of $12 billion.  The allegations will be vigorously defended.

Standard Chartered Bank will need to pay another $330 million fine to the US authorities for money laundering from Iran.  This follows the previous fine of $334 million a few months ago.  The news was received calmly in HK.

Daimler will be selling is stake in EADS for E1.6 billion.  France and Germany will each own 12% of the company.

No change is expected in the ECB repo rate today and rates in the UK emanating from the MPC will remain unaltered and a further hold on QE is expected.

Mulberry states that it sees its full year in line as H1 pre-tax profit fell to £10m from £15.6m

EasyJet reports a 12 month load factor to November of 88.7% from 87.5% with 59m passengers from 55m

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