TODAY’S FAYRE

TODAY’S FAYRE – Friday 7th December 2012

‘This royal throne of kings, this sceptred isle,
This earth of majesty, this seat of Mars,
This other Eden, demi-paradise,
This fortress built by Nature for herself
Against infection and the hand of war,
This happy breed of men, this little world,
This precious stone set in the silver sea,
Which serves it in the office of a wall
Or as a moat defensive to a house,
Against the envy of less happier lands,
This blessed plot, this earth, this realm, this England.’

“Richard 11”

William Shakespeare – poet & playwright – 1564-1616

Yesterday Ed Balls gave his propensity to stammer as the reason why, when under pressure, he delivered a surprisingly inadequate response to the Chancellor’s autumn statement in the Commons yesterday and subsequently refused to apologise for it. There may be some truth in that, though in the past his intellect and cogent thought process has always seen him through, even though many of his political ideas are misguided.

However whilst on the subject of stammering, Mr Balls, in his capacity as Secretary of State for Education in the last Government channelled substantial government grants in the direction of the Michael Palin Centre for Stammering Children – a really worthy therapy centre that gets splendid results from those who suffer terribly from speech impediment.  Last year, on a personal basis, Mr Balls ran the marathon and donated 50% of his sponsorship to the centre – top effort!

Alistair Cook’s 23^rd century, made yesterday in the 3^rd Test match against India – a record for an Englishman in test cricket – was also the 7^th 150 made, equalling Colin Cowdrey’s record.  One wonders how many centuries this Essex run machine will make before he puts his Gray-Nicholls in his bag for the last time! – He’s only 27!

Much of the early part of yesterday was spent getting the drains up and looking through the small print of the Autumn Statement.  Just 2 quick observations to make; firstly the gilt-edge market seems to have accepted the draconian contents for austerity, which may be far more important than the rating agencies’ interpretations.  Secondly there is likely to be a backlash after the next election on families’ pension, pay and benefits, emanating from the Pounds 27 billion ‘black-hole’ in the budget! There was also news from Starbucks that it has agreed to pay Pounds 10 million corporation tax per annum for the next 2 years to show good faith. That is a serious gesture since this coffee magnate has not broken the law.  It will be interesting to see if Mrs Margaret Hodge has one drop of graciousness in her make up.  I somehow doubt it!

Moving on there was bigger fish to fry, though equity markets virtually dismissed the downbeat news from Greece, the ECB and the MPC as irrelevant! Greece’s official unemployment reached 26% and youth unemployment reached a staggering 56.4% and the Greek government and the Troika continues to have the temerity to tell us that against a back ground of such appallingly painful austerity growth can be delivered.  That is a terminological in-exactitude or two men in a white coat need to march the proponents of this theory away for therapy!  Yesterday the ECB not surprisingly lowered its growth forecast for the EU to -0.5% in 2012, -0.3% in 2013 and +1% in 2014 – hardly appetising! There was no change in the repo rate from 0.75% and QE remains on hold for the time being, though Mario Draghi sounded like an LPG that had got stuck – ‘We will do whatever it takes!’  No change in policy for the MPC with rates remaining at 0.5% and QE on hold at Pounds 375 billion for the time being.

Harry Reid the Senate leader for the Democrats sounded marginally more conciliatory than in previous weeks over finding the ‘Key to the Kingdom’ to avoid tipping over the fiscal cliff, though any agreement before January seems unlikely.  It would be great if Congress could have its spat behind locked doors rather than air its dirty linen in front of the media. More progress could be made in finding a solution to such a complex issue.  Apple is still in reluctant litigation with Samsung in attempting to prevent 25 Samsung products being sold in the US.  If successful that would be damaging to Apple. US Bancorp was downgraded by Moody’s to A1.  JP Morgan Chase may see its bonus pool lowered by 2%. Last June 26,000 employees earned an average of $220k each – nice work if you can get it!

The Street of Dreams was suffering from inertia yesterday, though the three main indices finished just above the Plimsoll line.  Dealers and observers were probably pre-occupied with today’s Non-Farm Payrolls due out at 1.30pm GMT.  It is expected that 85k jobs will have been created in November, though the unemployment rate of 7.9% is likely to be maintained.  These figures are always subject to adjustment and the effects from Hurricane Sandy, the volatility of the financial sector and the fiscal cliff could continue to provide distortions. Also it should not be forgotten that the pre-election number for N-FP seemed just too good to be true – the word ‘massaged’ rolls off the tongue! There are many who believe that the US could deliver 2.7% growth in the 3^rd quarter.  In Asia this morning, the NIKKEI lost just 0.1% and the Hang Seng gained +0.1%, though the Shanghai Composite put on an eye-catching 1.6% this Friday. PICC the Chinese Insurance titan made a stellar IPO debut today.  It was 17.5 times over-subscribed and there was a premium on the issue price of just over 5% towards the close. Prada posted record profits, which were announced in HK

Equities seem very reluctant to surrender any value as we ahead for Christmas, however dire the economic data is. Yesterday the FTSE 100 added 9 points to 5901. Rolls Royce had a setback due to corruption allegations in the Far-East.  Suez’s share price was trashed due to a profits warning. Rumours abounded as to whether Hector Sants, formerly CEO of the FSA, would join Barclays or would opt to go to Deloitte’s.

Berkeley Group announces H1 pre-tax profit gained 40.7% from £142.2m on revenues of £686m from £405m and states it is to invest £202m in land in H1. Bellway states that market conditions have remained largely unchanged.

The celebrated stock market historian makes the following observations in regards to Christmas rallies in recent time –

December was once a lacklustre month for UK investors. Shares rose just 55 per cent of the time from the 1930s to the 1980s, below average when compared with other months.

But December’s profitability significantly improved in recent years. Since 1989, the stock market rose 21 times versus just two declines.  One of the two was a drop of just a half of a per cent.

Despite a positive trend for the full month, investors are often disappointed during its first-half. Shares fell in 15 of the last 21 years from December 4-12.  Happily, profit prospects soon improve. UK shares rose in 19 of the last 21 years from December 13 to month-end, the so-called Father Christmas rally. Well over half of those gains were the equivalent of at least 200 points on today’s FTSE 100.

In the last 10 years shares rallied from December 13-31 in nine out of 10 tries.

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