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Liontrust Dealer's Roar - 31/08/2012

“Don't taunt the alligator until after you've crossed the creek.” Dan Rather, former news anchor for CBS evening news, born August 31st 1931


  • Wall Street closed almost unchanged (a tad lower) from where it was trading as Europe shut up shop yesterday
  • All eyes (and ears!) focused on Fed chairman Bernanke’s speech today at Jackson Hole
  • Expectations of any significant pronouncements from Bernanke have waned significantly over the past couple of days
  • ......and with the MSCI reweighting taking effect as markets close today, volumes expected to be woeful across Europe
  • Far East generally weaker overnight
  • Japanese industrial production data very weak for July (-1.2% vs exp +1.7%)
  • Similar story in Korea (-1.6% vs exp -0.9%)
  • European markets open higher in thin volume
  • Italian unemployment data for July better than expected (10.7% vs exp 10.9%)
  • The Nationwide UK house price survey for August showed a very surprising 1.3% rise (see below)
  • Retail sales in Germany for July much weaker than forecast
  • Despite government yields widening further equities move higher.....
  • ....Spanish 10 year yield 11bps wider at 6.65%, yet the equity market higher by more than 2.3% by lunchtime......odd
  • Only reason I saw that would seem to hold water is possible short covering just in case Bernanke did make a startlingly stimulative statement
  • The Euro gains on news that a German government official says that Merkel favours a strong Bundesbank influence in the ECB
  • Purchasing managers survey from Milwaukee was very weak (42.9 vs exp 49)
  • News of a strong earthquake in the Philippines (7.9) and a tsunami warning (later rescinded) fail to halt market momentum
  • And finally Bernanke spoke........
  • ....and said precisely what everyone had been expecting: dovish in tone and light on content (see below)
  • ....which was enough to disappoint markets and risk assets sold off
  • The remaining macro data from the US was slightly on the weak side: Chicago PMI and University of Michigan confidence survey
  • Divergence between bonds and equities more pronounced as the day progressed
  • Big pick-up in volume towards the close as a result of the MSCI re-balance......would treat late day moves today with a degree of caution
  • FTSE ended the day down by 0.14%, whilst European markets were up by about 1% (although Spain was higher by almost 3% and Italy by more than 2%)
  • An amazing move in Spain, given that the yield on their 10 year govvies widened by almost 30bps today!
  • The S&P was also in positive territory, up by 0.79%
  • All eyes now turn to the monthly ECB meeting next Thursday......have a good weekend

Liontrust Dealer's Roar - 30/08/2012

“Happiness is good health and a bad memory” – Ingrid Bergman, Swedish actress, born August 29th 1906 – died August 29th 1982


  • US equities traded sides post our departure in “extremely quiet trading” as traders wait for some high profile events over the next few weeks
  • EU’s Van Rompey expresses that he fully endorses the ECB proposal for buying bonds
  • 93% of oil output from Gulf of Mexico is shut as Hurricane Isaac hits Louisiana while G7 urges IEA to “stand ready” to release more supply as rising oil prices pose risk to global economy
  • However IEA head says no need for SPR release at the moment
  • Lexmark rally 14% as they cut 1700 jobs, close unprofitable factory & put Inkjet biz up for sale
  • Asia “treads water” ahead of Jackson Hole, continued weakness in Iron Ore driven by Chinese destocking
  • Couple of big placings, CN Everbright (waste management) & Galaxy (casino’s)
  • China says payment defaults may worsen, Chinese market lowest close for three years
  • Overnight headlines include;
  • Spain’s Catalonia region seeks €5bn from Spain Regions financial facility;
  • Clegg calls for temporary wealth tax on richest
  • Handelsblatt says Greek PM made an excellent impression with EU’s Juncker
  • Draghi announces he won’t attend Jackson Hole due to “workload” (was out yesterday actually), easing expectations QEIII is set to be announced on Friday.
  • Monti says blocking ECB could be “Own Goal” for Germany, Italy PM says Italy doesn’t need aid at the moment
  • Markets open a tad weaker. Couple of profit warnings in Europe from Bouygues -10%, as competition hurts their profits & L’Oreal  -4.4% who disappointed on margins. Mid-morning markets down c 0.5% led by miners
  • Italy sells €9m 181-day bills at 1.585% vs 2.45% on July 27th, Danish GDP -0.5% vs -0.2% estimated. Volumes running at just 55% of the last 3-months, which have already been pretty dire
  • Italian retail sales print at +0.4% for June vs -0.2% expected, German CPI +2.2% vs +2% forecast
  • Joy Global -4.5% (US mining equipment) miss numbers, weighs on some EU names (Fenner for example)
  • US GDP for Q2 prints at 1.7% QoQ, same as expected. Personal consumption prints stronger +1.7% vs +1.5% forecast
  • US Housing data continues to beat expectations, today Pending Home Sales +2.4% vs +1%
  • Late afternoon story as NY Think Tank report circulates in FX market suggesting “No QE & None on the table post Jackson Hole”..didn’t see report & equities unmoved but $ catches a bid
  • In the end vols lower than yesterday, FTSE100 -0.56% (miners weigh), FTSE250 +0.1%, Eurostoxx -0.12%, S&P +0.1%
  • Another quiet one, Beige Book out in a bit. 

Liontrust Dealer's Roar - 28/08/2012

“I don’t think I am any good. If I thought I was any good, I wouldn’t be” Sir John Betjeman, English Poet Laureate, August 28th 1906 – May 19th 1984


  • Yesterday, no surprise due to the UK bank holiday, another low-volume trading session. In Europe volumes in cash equities 60% below the 20d average
  • Even news of China’s massive 8 trillion yuan stimulus boost announced over the weekend has little impact
  • Nokia the stand-out mover, Here an ongoing short-squeeze ahead of the cut-off date next Friday for the yearly index rebalancing in EuroStoxx50 and expectations the company will benefit from Samsung’s setback in court case with Apple.
  • A choppy day session in the US, with the S&P ending the day a tad lower on the lowest volume day since July 3rd
  • Mixed messages from Fed members: Chicago’s Evans says: Fed is “well past the threshold” for more accommodation......
  • ....Cleveland’s Pianalto backs more stimulus as long as the costs are manageable....
  • .....and Dallas’s Fisher reiterated his opposition for further easing....
  • ....so a yes, a maybe and a no, which goes a long way to explaining why Bernanke’s speech on Friday is so important
  • Tech stocks outperformed, led by Apple following the Samsung patent infringement ruling
  • Asian markets generally easier after Japan’s government downgraded economic prospects and on weaker commodity prices
  • European markets followed suit at the opening
  • Latest treasury bill auction in Spain passed off without any undue alarm....
  • ....helped by GDP being in line with expectations....
  • ....although the latest ECB data on Spanish bank deposit data showed a 5% decline in July
  • News that Mario Draghi does not intend to visit Jackson Hole (was due to speak) owing to his large workload over the coming days....make of that what you will!
  • The iron ore price continues to plummet (lowest level since late 2009) as concerns remain over weakening Chinese demand and high steel inventories
  • Market lose upward momentum on comment from Fitch that the US’s AAA rating at risk of downgrade by 1H 2013
  • Mixed bag of US macro data, with consumer confidence well below expectations, but house price data and Richmond Fed all very healthy
  • FTSE ended almost completely flat, down 0.02%
  • Europe was rather weaker and the S&P was down by 0.06%. Thrilling stuff!

Liontrust Dealer's Roar - 24/08/12

“Whoever stands by a just cause cannot possibly be called a terrorist” Yasser Arafat, Chairman of
the Palestine Liberation Organisation, joint winner of the 1994 Nobel Peace Prize, August 24th 1929
– November 11th 2004


  • US market fell away post our departure, led by tech stocks
  • Hewlett Packard finished down 8% and Dell was weak again
  • Lots of focus on the fall in the iron ore price, which fell below $100, which hit the mining names in Australia (eg Rio -4%)
  • ....and, in turn, hit steel futures prices in Shanghai and, inevitably, commodity stocks
  • Asia traded lower again, on the usual global growth concerns and ongoing uncertainty over Greece ahead of today’s Merkel/Samaras meeting
  • New York Times report that the Chinese economy is besieged by a build-up of unsold goods:
  • Statement overnight from Merkel and Hollande which said that Greece should not expect leeway on the bailout agreement unless it sticks to reform targets
  • Reports that the German Deputy Finance Minister Thomas Steffen is leading a study on the economic impact of a Greek exit from the Euro
  • Europe opens lower in desperately thin trading
  • UK Q2 GDP came in at -0.5%, better than the initial estimate of -0.7%, but all  may not quite been as rosy as first glance suggests (see below)
  • Market tried to bounce on the back of it....
  • ....and also tried to rally on comments from German Finance minister Schaeuble that he doesn’t see the ECB breaching its mandate in its efforts to stabilize the Euro area
  • ....and tried to rise on a PBOC official saying that China has room to cut the RRR
  • ....but all to no avail and by lunchtime the UK and Europe were trading at their lows of the day, not helped by the peripheral Euro govvies widening again (eg, Spain 10 year back above 6.4%)
  • Despite a strong headline number, the durable goods data from the US was disappointing (see below)
  • The UK market was woken from its Friday torpor by the following headline: 15:04 *CVC SAID TO HAVE EXPLORED BID FOR U.K. RETAILER MARKS & SPENCER
  • ......which saw their shares rocket higher by as much as 8.2%, but they settled back to close higher by 4.26%
  • The market caught a bid on news that Bernanke sees “scope for further action” by Fed for growth....
  • ....and the ECB said to be exploring establishing yield bans targets in a bond buying program as part of options being discussed at working groups
  • FTSE closed absolutely unchanged to the nearest 1/100thof a point! Never seen that before........
  • European markets were typically up small and the S&P was higher by just under 50bps 

Liontrust Dealer's Roar - 23/08/12

“We are taught to consume. And that's what we do. But if we realized that there really is no reason to consume, that it's just a mind set, that it's just an addiction, then we wouldn't be out there stepping on people's hands climbing the corporate ladder of success”River Phoenix, American actor, born 23rd August 1970 – died 31st October 1993


  • US markets rally from our close as dovish FOMC minutes hit the tapes, S&P put on +0.35%
  • FOMC members said more accommodation would “likely be warranted fairly soon” (more below)
  • Thoughts are we get some action at the September meeting
  • After hours HP fall a short 5% as they guide down FY EPS target (having met Q3 numbers)
  • Congressional Budget Office (bipartisan) says US will likely go into recession next year if Congress cannot agree on the budget before automatic cuts kick in (the ‘fiscal cliff’)..another incentive to act one thinks
  • Asian markets contend with worst Chinese HSBC PMI (includes mid/small co’s) reading since November 2011, printing at 47.8 well down from last month. But last night PBOC said would not rule out further
    monetary stimulus
  • & of course everyone was really focused on FOMC minutes. So Asia all up, Hang Seng +1.2% standout
  • Australia’s Resources & Energy Ministers said the resources boom is over
  • Pre market greetings from Citi Economist Willem Buiter who says still 90% chance of Greek exit in next 12-18 months, but conceivably as early as September/October (more below)
  • Nothing really out of Samaras/Juncker meeting but any decision on extension to austerity not likely before October
  • Story in Die Welt about ECB eyeing secret yield caps for Sovereign bonds, though no decisions as yet
  • Markets open up between 0.25% & 0.5% recovering some of yesterday’s losses led by commodities +1.1%
  • German macro data mainly in line, Q2 GDP prints at 0.3% QoQ (1% YoY), but trade data looks better with Q2 Exports +2.5% (vs forecast +1.2%) & Imports +2.1% (v forecast +1%).
  • Interesting Swiss Watch data. China weak but good growth in France & Italy! (more below)
  • Eurozone PMI data prints better than expected across the board, but still below 50 signaling contraction.
  • Main results Diageo (+1%, pretty solid), Ahold (-3%, weak margins in Dutch division), Petropavlovsk (-14%, suffers as high interest payments hurt profits), WH Smith (+5%, #’s at top end)
  • Early afternoon markets start to move into negative territory as headlines hit
  • Bullard: QE3 Odds Not as High as Markets’ Perception in Summer
  • Bullard: Fed Can’t Take Gigantic Action Based on Muddling Data
  • US new home sales data; U.S. New Home Sales 372k vs est 365k    MOM 3.6% vs est 4.3%; Goldman don’t move their Q3 GDP tracking estimate (+2.3%).
  • Afternoon move reported to be driven by technical trading as the Eurostoxx breaks recent support at 2450, triggering stops to the downside though “not convinced this move lower persists” was the comment
  • Late headlines suggest Spain’s banks unlikely to receive funding before end September & decision not expected before 12thSeptember..doesn’t really move the dial, though Spanish bonds tighten (weirdly imo)
  • Markets end mainly down bar FTSE +0.04%, France -0.8%, Italy -1.4%, Spain -0.8%, Germany -1%, S&P currently -0.5%
  • Gotta love it: 

Liontrust Dealer's Roar - 22/08/12

“You learn far more from negative leadership than from positive leadership. Because you learn how not to do it. And, therefore, you learn how to do it”. Norman Schwarzkopf, US army general, who commanded Operation Desert Storm, born August 22nd 1934


  • A down day for the US market finally materialises, as the S&P gives up early gains to end down by 0.35% (having traded 60bps higher)
  • After hours disappointing numbers released by Dell
  • Asia traded lower as investors were discouraged by the fall on Wall Street (and tech names took a beating post Dell)....
  • ....and by an unexpectedly large Japanese trade deficit, mainly due to very weak exports (-8.1% y-o-y v exp -2.9%)
  • The deputy governor of the Bank of Japan suggests that “China is entering the danger zone” and given China’s ageing demographics (akin to Japan) “a financial crisis seems more likely”
  • The focus in Europe turns to Greece with Samaras expected to ask euro-area finance ministers for an extension to the austerity program
  • European markets follow the Wall Street lead, opening lower in very thin trading once again
  • Details of the impending Spanish “bad” bank to be known in a month or so, rather than this week
  • Bloomberg reporting that Spain will miss budget targets both this year and next
  • RBS and Commerzbank are the latest banks to come under the scrutiny of the Fed regarding their dealings with Iran
  • In early afternoon trading Jean-Claude Juncker, head of the Eurogroup, announced that no decision will be taken on Greek aid before October (see below)
  • This sentiment was reiterated by Angela Merkel, who said that Greece “must wait for Troika report”
  • US housing data for July in line with market expectations
  • Peripheral 10 year government yields rose over the course of the afternoon
  • FTSE ended a weak day lower by 1.42%, with Europe also weak, led down by Spain, which was 2.7% lower
  • The S&P meanwhile was 0.37% lower, ahead of the FOMC minutes that are released at 19.00
  • Finally, quote of the day from Greek leader Samaras: *SAMARAS SAYS 'GUARANTEES PERSONALLY' REPAYMENT OF GREECE RESCUE FUNDS

Liontrust Dealer's Roar - 21/08/2012

“The man who won't loan money isn't going to have many friends - or need them” – Wilt Chamberlain, NBA superstar (scored 100 points in a single game), born 21st August 1936 – died 12 October 1999


  • The US market moved small up post our departure with the S&P finishing exactly flat on the day
  • Europe had been stronger first off thanks to Der Spiegel yield capping story, but before US open the Bundesbank had done their best to quash any enthusiasm.
  • Apple moved to $623.14 market cap making them the most valuable company in history.
  • Best Buy named new CEO but stock fell 10% after breakdown of talks with founder Richard Schulze ‘left the future of his pursuit of the company in question’.
  • CEO of Caterpillar says global eco outlook is more uncertain now that at the start of the crisis in late 2008
  • Near term RRR cut in China now seen as “unlikely” as house prices start rising again but overnight...
  • ...PBOC conducted 220bn yuan of reverse repo operations
  • ...Chongqing announced plans to invest 1.5trln yuan to bolster vehicle, ethylene & electronic industries
  • Sees Chinese market rise 0.5%, bouncing off 2100 level (not had a good run the SHCOMP)
  • Elsewhere Asia generally better, though Korea, HK & the Nikkei all small down
  • Europe opens to a couple more headlines. Jorg Asmussen (German member of ECB executive board) backs Draghi plan for mass purchases of Club Med debt, at odds with his own Bundesbank.
  • While a “source” from the Budesbank told a paper that there was no justification for capping yields.
  • Alongside move in Asia former helps markets to rally first thing (10:15 SXXP up 0.4%), led by financials & basic materials
  • Ahead of Juncker visit to Greece tomorrow, Germany’s Barthle says ‘small concessions’ are possible
  • UK reveals public sector deficit in June of £600m, versus forecast of a surplus of £2.2bn as corporate tax receipts “plunged”, partly due to the closure of the Elgin gas facility in the North Sea.
  • Spanish bond auction goes well, sells €4.51bn, more than the €3.5bn - €4.5bn planned of 12/18 month money. 1 year yield dropped to 3.07% from 3.918% back in July. 18mth went to 3.335% from 4.242% in July.
  • Bid to covers were 1.91 on the 1 year, down from 2.2 & 3.98 on the 18mnth up from 3.98%
  • Midday markets generally better, main mover Italy +1.5% now UP on the year
  • Bob Janjuah puts out latest strat piece, warning of a impending fall & Statestreet echo his thoughts.
  • No US data however market opens stronger, taking out March 2012 high & helping Europe over the afternoon (more below), looks like a technical move more than anything
  • As another low volume day draws to the close some pretty strong finishes. FTSE up 0.6%, France up 0.9%, Germany 0.8%, Italy +2.4%, Spain +1% & S&P is currently +0.14%
  • Greece tomorrow! 

Liontrust Dealer's Roar - 20/08/12

“When one gets in bed with government, one must expect the diseases it spreads.” Ron Paul, US politician, born August 20th 1935


  • The US market gained a little ground between our close and the end of their trading day
  • This brought to an end a sixth consecutive week of gains in the US....
  • ....following on from the tenth positive week for the Eurostoxx 600 index (see below)
  • ....but low volumes across the globe (see below)
  • Asia generally weaker overnight, on paltry volume, not helped by many markets in the region being closed (India, Indonesia, Malaysia, Philippines, Singapore)
  • Concerns in China that authorities will hold off from easing monetary policy after property prices rebound
  • Major news story over the weekend was a story in Der Spiegel suggesting that the ECB is considering capping yields of euro area sovereign debt by pleading unlimited bond purchases....
  • Meanwhile the Germans appear unwilling to give an inch:
  • ....and these headlines this morning seemed to confirm their view:
  • Press suggestions that Greece will need EUR14 billion over the next two years against the Troika’s estimate of EUR11.5 billion

  • Gloomy news from the UK housing market with the Rightmove price index showing a decline of 2.4% and from the high street (see below)

  • European markets open very sotto voce

  • Suggestions in the Spanish media that a full bailout is imminent spurs their bond market higher (10 year yield falls by more than 25bps)

  • Quiet day for macro data

  • Markets drifted off in the afternoon on further consideration of the Bundesbank’s comments

  • FTSE ended down by 0.4%, with the rest of Europe also lower, led by Spain (-1.23%) and Italy (-1.01%)

  • Meanwhile, the S&P was lower by 0.3% as we shut up shop

Liontrust Dealer's Roar - 17/08/12

“An ounce of performance is worth pounds of promises” Mae West, American actress, born 17th August 1892 – died 22 Nov 1980


  • US markets push on post our close to finish near session highs in more “quiet, summer trading”
  • Rally put down to comments from Merkel reiterating support for ECB’s plan to tackle debt crisis
  • Cisco rally short 10% on better numbers & dividend hike, new 3-month high
  • US Housing permits rising to a 4-year high also helps sentiment. S&P breaks out, closing at 1415
  • Hilsenrath in WSJ: Fed ‘Hawks’ Weigh In Against More Action;
  • Asia a tad mixed, Japan, Hong Kong, Australia up, China, Korea, Taiwan all down. Tech helped by Cisco
  • Luxury brands rally hard on story China might lower tax rate for imports (Prada +3%, Samsonite +4.4%)
  • Europe opens to calls from Finnish foreign minister urging Euro leaders to prepare for Euro breakup;
  • Fuchs say Germany facing growth risks from ECB bond buying
  • BDO UK retail sales suggest Olympic distraction drove significantly weaker big ticket item sales
  • But John Lewis report fashion boost thanks to London 2012 merchandise
  • Today’s Steven Finns: Rank Group +5.5%, Swiss Life +3% both rally on better #’s, Renewable names rally on bid spec
  • Today’s Kevin Petersons: Valiant-6%, Ratos -5%, Pennon -0.3% all miss expectations
  • Option expiry today, drives market higher (especially Midcaps) mid morning, newsflow light
  • Spanish bank’s bad loans reach highest on record 9.42% of total lending in June up from 8.95% in May but..
  • ....Ibex standout market in Europe by midday +1.9% on “aggressive short covering”
  • Eurozone export data for June 10.5bn vs forecast of 5bn driven by Germany selling to emerging markets
  • Leading candidate in Dutch election (12/09) says he won’t feel “bound by EU’s budget deficits”
  • Afternoon sees US consumer confidence print at 73.6 in August vs 72.2 consensus (more below)
  • Late afternoon action as Chemring +32% confirm a preliminary approach from Carlyle Group
  • FTSE closes towards best levels of session +0.35%, Eurostoxx +0.55%, Spain +1.9%, S&P currently +0.07%
  • Check out the UK midcap as well, rallied into the expiry at 10:30 & never looked back +1%

Liontrust Dealer's Roar - 16/08/12

“No matter who you are, no matter what you did, no matter where you've come from, you can always change, become a better version of yourself.” Madonna Louise Ciccone, American pop singer/songwriter, born August 16th 1958


  • The S&P closed almost exactly where it was when we closed yesterday on woefully thin volume
  • John Deere (tractors) very weak post numbers, Abercrombie & Fitch (clothes) up 9% on an earnings and revenue beat
  • After hours: Cisco +5% on better earnings, Applied Materials -3% on poor guidance
  • Asia moves higher on expectations of policy stimulus in China, thanks to Premier Wen Jiabao stating that easing inflation provides room for adjusting policy
  • Direct foreign investment during July in China fell to the lowest level in two years
  • Nikkei very strong overnight on a strong move in the USD/JPY, which is likely to give their exporters a much needed boost
  • Surprise, surprise..........a quiet opening in Europe!
  • Eurozone CPI bang in line with forecasts
  • UK July retail sales were better than expected and were accompanied by significant upward revisions to June’s numbers (see below)
  • Today’s Sir Alex Fergusons: African Barrick (in talks with China National Gold on stake), Hikma (excellent interim numbers),
  • Today’s Arsene Wengers: William Demant (poor H1 numbers), Telekom Austria (guidance cut), Balfour Beatty (broker downgrade post results), NCC (weak on poor Swedish construction),Lonmin (CEO in hospital and bearish note from Goldman Sachs)
  • Wal-Mart release solid numbers for Q2 and revise FY guidance higher
  • US jobless figures much as expected, housing starts and building permits a mixed bag, but net little or
    no impact
  • Early afternoon rumours of a think tank report which suggests that there are plans for major Spanish bond market intervention once Madrid agrees a program.....
  • ....which propelled the Spanish market to its highs for the day and peripheral bond yields to fall
  • Philadelphia Fed survey slightly weaker than expected (-7.1 v exp -5.0), in negative territory for the fourth month in a row
  • Reports from South Africa of police opening fire on striking miners
  • Risk of Hong Kong market being closed tomorrow on account of a severe typhoon in the area
  • FTSE ended the day up by 0.03%, Europe was in better fettle, led by Spain which was higher by just over 4%
  • The S&P was higher by 0.35%

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