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Liontrust Dealer's Blog - 28/09/2012

“Percentages are why I am rich” – Brigitte Bardot, French Actress, born September 28th 1934


  • US markets gain on thin volumes, putting on 0.5% post our departure to close up almost 1%
  • Spain’s 2013 budget release was seen as positive, paving the way for a future bailout request from the ESM, Spain 10yr back below 6% (more on Spain below)
  • Also Italy’s Monti confirmed he won’t preclude a second term as PM (had been rumoured may quit) & were rumours of a Chinese RRR cut
  • Notable negatives including weak durable goods, a downgrade to Spain (Egan Jones) as it revised its budget deficit to 10% from 8.9%.. all ignored
  • Good bit of corporate after the close as well as General Electric raised forecast for sale growth post the close
  • Asia markets stronger on the positive sentiment, though Chinese stimulus hopes tempered by poor data from Japan & Korea
  • Japanese output falls 1.3% from July vs f/c -0.5, South Korean production fell 0.7% vs f/c -0.4%
  • MSCI Asia Pac rose 0.06% with all markets in positive territory bar Japan -0.9% which suffered on worries over falling revenues for Japanese companies operating in China
  • Europe up c 0.35% first thing with the main focus being on today’s Spanish bank recap announcement (press suggesting €60bn)
  • Electrocomponents (-8.8%) profit warn, LSE (-8%) get hit as ESMA publish a report asking for increased capital at clearing houses, Thomas Cook (+9%) rally on in-line numbers
  • We tick down however late morning however as the Spanish bank announcement timetable is shifted to 6pm London time
  • French budget increases taxes on wealthiest 10% of population & big companies
  • Also comments from Monti who said ECB should not impose extra eco conditions on nations using their bond-buying mechanism as the conditions they might impose are causing reluctance to ask for a help
  • France Final Q2 GDP growth remained unchanged as flat QoQ up 0.3% YoY – bang in line with consensus
  • German retail sales grew 0.3% MoM in August, with July number revised downward to -1%
  • EU consumer prices +2.7% for September vs f/c +2.4%, thanks mainly to Spanish inflation
  • Mid-afternoon market begins to sell off, catalysts seem pretty difficult to find...
  •  One rumour is that Spanish bank stress test will say €100bn – €150bn (Spanish banks certainly underperform) also Moody’s may downgrade them post the close link
  • Also occurs around same time as Swedish Industrial Sandvik (1.6%) announce a profit warning
  • However small positive on Reuters story as ECB says if country applies for aid they will automatically allow banks to use the sov bonds as collateral, encouraging Spain to seek bailout
  • Direct Line launch their IPO pricing, 160p – 195p range as rumoured in the press....TWELVE banks involved in the deal...wait for it;
  • Morgan Stanley, Goldman Sachs, UBS, BoAML, Citi, HSBC, BNP Paribas, Commerzbank, Investec, KBW, RBC & Barclays
  • Afternoon US data Personal Spending +0.5% vs f/c +0.5% & Personal Income +0.1% vs f/c +0.2%
  • But big one is a very weak Chicago Purchasing Managers Index print at 49.7 vs 52.8, Deustche cut ISM forecast
  • University of Michigan Confidence also lower than expected at 78.3 vs f/c 79
  • We finish the quarter on a weak note, but due to the equity performance perhaps not unsurprising...anyway one more to go till Christmas!
  • On the day, FSTE -0.65%, Eurostoxx -0.9% & S&P currently -0.65%
  • On the year, FSTE +3%, Eurostoxx +4.95%, S&P +9.9% 

Liontrust Dealer's Roar - 27/09/2012

“It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds”– Samuel Adams, American revolutionary, born 27th Sept 1722 died  2nd Oct 1803


  • US markets fell a small amount post our departure (S&P another 0.04%) but most of the damage done in EU hours, closed -0.57%
  • Eurozone concerns & questions over the effectiveness of QE3 seemed to be main drivers of risk-off mood
  • Housebuilders (-4.7%) weakest sector as New Home Sales data missed forecasts (surprise given strong recent data)
  • Fed’s Evans (who unlike Plosser does vote) calls for more easing if unemployment >7% & inflation <3%, warns of “lost decade”
  • Chinese market bounces violently off 2000 level (3% in 30 mins) thanks to rumours of some market friendly policies from the CSRC (more below)
  • Helps Asia bounce (MSCI Asia Pac +0.8%) & generally puts global markets on a firmer footing
  • Also of note China closed all next week so could be some short covering ahead of that
  • Corporate wise biggest Chinese steel producer Baoshan (+0.6%) suspend production at a factory thanks to lack of demand
  • Ahead of Spanish budget (Oliver Wyman) report on Spanish banks suggests capital shortfall of c€60bn (results tomorrow though)
  • Catalan leader, Artur Mas calls for Catalan fiscal sovereignty
  • European markets small up on the open (but not really buying the China bounce) with results taking centre stage
  • H&M (-5.7%) get punished for a high rating & weak margin, Swatch (-2%) fall as CEO tell Reuters will have to fight to meet targets
  • Colruyt (-5%) falls after poor guidance, Financials (+0.6%) & Miners (+0.8%) both bounce after yesterday’s bloodbath
  • German YoY Import price Index 3.2% vs 2.7% f/c & unemployment rate steady at 6.8%
  • Italian business confidence a shade better 88.3 vs 87.5 f/c & also sells 2022 bond at 5.24% vs 5.82% on 30/08
  • But lower bid-to-cover just weighs on the Euro a tad 1.33 vs 1.46 last time
  • UK Q2 GDP revised up a shade to -0.4% from previous -0.5%, upward revision to construction & industrial production helping
  • Eurozone confidence readings all look weaker than forecast (below)
  • Midday markets up c 0.4%, with ‘safer’ countries outperforming ‘weaker’, sector leading mixed with Heathcare +0.5% & Materials +0.7% top
  • Afternoon US data decidedly shabby..but maybe mitigating circumstances (see below)
  • Q2 GDP revised down to 1.3% from 1.7%, Durable Goods -13.2 vs f/c -5%, Jobless Claims (tad better) +359k vs f/c +375k, Pending Home Sales -2.6% vs f/c 0.3%
  • However we generally ignore it awaiting news from Spanish budget (supposed to hit the tapes at 4pm)
  • Nothing on Spain so far..so have attached a preview
  •  FTSE +0.2%, Eurostoxx +0.34%, Germany +0.2%, Spain -0.15%, S&P currently up 0.44%

Liontust Dealer's Roar - 26/09/2012

The brutalities of progress are called revolutions. When they are over we realize this: that the human race has been roughly handled, but that it has advanced.” – Vitor Hugo, French Author, born 26th Sept 1802 – died May 22 1885


  • Weak move from Wall Street post our departure as S&P falls 1.38% to close down 1.05% (first 1% drop in
    S&P since 20.06)
  • Large volumes on late day sell-off, selling reported to come from real money rather than shorts
  • Led by Fins (-1.53%), Tech (-1.53%), Mats (-1.53%). Defensives Utils (-0.31%), H-Care (-0.05%) outperform
  • Europe worries: no news on Troika with talks of additional aid in German press, S&P cuts E-Z GDP forecast, Monti says he won’t stand for re-election
  • Also Plosser headline saying QE3 won’t be effective & won’t boost employment really didn’t help (more below)
  • All Asian markets down on the day , Japan (-2%) leads the way with Infineon p/w weighing on semi names, MXAP -1.3%
  • ECB’s Asmussen told Die Welt they wouldn’t take part in restructuring of Greek debt
  • Spain’s Rajoy says he’s studying the possibility of asking for a bailout;
  • EU Rehn says Macroeconomic outlook still bleak;
  • But main driver is pushback from Germany/Holland/Finland on ESM-bank recaps (full story below) & problems in Spain;
  • Protests in Madrid ahead of tomorrow’s budget + Catalan president calling for early elections (proxy for regional independence)
  • Though DB head of rates still thinks “It’s not if but when” they ask for a bailout
  • Markets open predictably weak after the overnight session, by 9am FTSE & Eurostoxx both down >1%
  • Lead down unsurprisingly by financials (which by mid afternoon are looking decidedly soggy)
  • French consumer confidence prints at 85 (f/c 86), falling for 3rdmonth in a row thanks to “surging joblessness”
  • Big stories include Shanks (-12.5%) profit warning & story Texas Instruments moving away from smartphones hurts long-term partner Imagination Tech (-9.6%)
  • Italy auctions €9bn of 6m bills @ 1.503% (last 1.585%) but btc quite weak at 1.39 (1.69 last)...10 year spreads rise over bunds for 2ndday in a row
  • German CPI for Sep +2.1%, unchanged from August & bang in line with forecast
  • Midday markets down c 2% in “orderly dealing”, Spain big underperformer -3%, 10 year at 5.95%
  • Afternoon bit of slightly weaker US housing data, New Home Sales for Aug 373k vs 380k survey, -0.3% MoM vs f/c +2.2% (but reading still near 2 yr high to be honest)
  • Around 3pm one desk reported momentum sellers hitting the floor
  • Note for those long house builders, Tony Pidgley sold £7m worth of his Berkeley Group stock yesterday...been a very canny caller of the market in the past
  • Weak markets but those overbought technical’s are getting unwound, FTSE -1.5%, Eurostoxx -1.8%, Spain -3.9% (10yr 6%), S&P currently -0.44%
  • Spain 10 year closes at 6%...as the market push on Rajoy’s string...asking for a bailout this week would be a surprise (most think October/November)

Liontrust Dealer's Roar - 25/09/2012

“Facts and truth really don't have much to do with each other” - William Faulkner, Nobel Prize laureate, Sept 25th 1897 – July 6th 1962


  • Wall Street closes slightly down (S&P -0.22%) exactly where we left it, with very few meaningful new catalyst over the final ½ of the session
  • Tech shares lagged as Apple (-1.2%) only sold 5m iPhone 5s on the first weekend, someway short of 10m hopes (were some supply issues I think)
  • Asian story of the day was a move in JAL (recent IPO), which fell 9% as flights are cancelled thanks to the China-Japan tensions
  • Stocks in the region traded generally mixed on concerns over global growth, Chinese central bank add RMB290bn in reverse repos
  • Chinese Index of leading economic indicators +1.7% in August, MSCI A-P flat, Chinese market -0.33%
  • Europe read from US/Asia session therefore pretty limited but Caterpillar (-2%) lower guidance after hours
  • German press article suggests ECB & Bundesbank are checking the legality of the ECB’s new bond buying program, leans on €
  • Spain sells €4bn of 3-6 month paper @ yield of 1.2% vs 0.95% (Aug 28th) – stated target
  • Italy sells some zero-coupon 2014 @ 2.53% vs 3.06% (Aug 28th)...yields move out over bunds, but driven by bund buying
  • German Gfk Consumer Confidence in line with estimate at 5.9, less pessimistic outlook offsets falling income expectations
  • CNBC say IMF to cut global growth forecasts next month
  • Couple of big placings, Schaefler 10% of Continental (-4%) & Temasek reported to be selling ($6bn) stake in Stan Charts (-3%)
  • European volumes around 35% of 100adv, over the morning trades between -0.15% to +0.3% (pretty dull to be honest)
  • Bloomberg story suggesting ESM to buy bank debt gets financials moving early afternoon
  • US opens up 0.2%, CaseShiller home price data continues to point to rebound in US housing
  • Gordon Brown rings NYSE opening bell
  • Draghi press conference but nothing much exciting hits the tape
  • Afternoon sees chipmaker Infineon (-6%) profit warn, expects Q4 to be down on Q3
  • US consumer confidence prints at 70.3 vs f/c 63.2, seven month high, an “encouraging sign”
  • Richmond Fed Manufacturing at 4 vs f/c -5, rebounds after three negative months
  • Markets finish in a positive frame of mind, led by the financials move
  • FTSE +0.36%, Eurostoxx +0.4%, S&P currently +0.34% 

Liontrust Fund Manager's Blog: Jan Luthman - 25/09/2012

In the UK, there are some encouraging signs – sterling is strengthening, employment enjoyed an upturn in the second quarter, industrial production has bounced back after June’s fall and consumer spending has proved resilient. Indeed, there is talk of a resurgence in consumer spending, driven by declining inflation, improving employment, rising wages and changes in tax thresholds in April 2013.

Liontrust Dealer's Roar - 24/09/2012

“Life's like a movie, write your own ending. Keep believing, keep pretending.” Jim Henson, American creator of The Muppets, September 24th1936 - May 16th 1990


  • US market retreated in final hour as Apple rally fails and bank shares retreated
  • Far Eastern markets generally weaker, although China stages an impressive intra-day turnaround
  • PBOC advisor Song reiterated the Q3 growth forecast of 7.4%, adding that the slowdown may continue
    into 2013
  • Sino-Japanese tensions remain, with a possible delay in the dates of the Chinese Party Conference as a result
  • S&P lowers growth forecasts for China (from 8.0% to 7.5%) and for India (from 6.5% to 5.5%)
  • Der Spiegel reported that EU states are preparing to allow the ESM to leverage its capital in the same way
    as the EFSF
  • Less helpfully, Der Spiegel also reported that preliminary findings from the troika's inspection in Greece point to a Budget gap of EUR20bn
  • In Spain, Economy Minister De Guindos said "Spain will do what it has to do but with no rush"....
  • .....although press reports that PM Rajoy has held secret meeting over the weekend and a bailout request
    is imminent
  • Merkel and Hollande disagree over the timetable for common oversight of European banks
  • Europe opens looking as soggy as the weather....
  • ....which continues a trend as prior to today the Dow Jones index has only managed one up day in the last seventeen Mondays!
  • Ugly German IFO data (business confidence lowest since June 2009), suggesting that stability in the industrial space may still be some way off
  • Statement from Germany says leveraging the ESM to 2 trillion Euros is not realistic
  • The Euro continues to slide and is now trading at the same level as before the ECB meeting ten days ago
  • Volumes across Europe were woeful.....by mid-afternoon, Eurostoxx volume was 26% below the 20DMA
  • FTSE ended the day down by 0.24%, rather better than most of Europe
  • The S&P was down by 0.25%, heading for its seventeenth down Monday from the last eighteen!

Liontrust Dealer's Roar - 21/09/2012

“The path of least resistance is the path of the loser.” H. G. Wells, English science fiction author
(War of the Worlds), September 21st 1866 - August 13th 1946


  • Wall Street closed near its highs for the day, about 30bps higher than where we left it
  • Tensions between China and Japan show signs of easing as next Chinese leader Xi says he will solve the dispute peacefully
  • Markets in the region generally better, but pretty quiet
  • Suggestions of a possible RRR cut over the weekend, following Japan’s policy intervention earlier in the week
  • Big day of futures expiry and index rebalances around Europe
  • Europe follows the small positive lead given by others
  • BoE’s King: sees signs of a modest UK recovery; outlook depends on Eurozone & global growth; UK to see some growth in Q3; no guarantee Eurozone can keep show on the road; may be acceptable for UK to miss deficit targets
  • According to Reuters Spain’s deficit was 4% in H1 and risks overshooting 6.3% 2012 target
  • Spain is reported to prepare a major Economic Reform Program together with the EU which could be announced Thursday, together with a bailout request (FT)
  • Italian government cuts 2012 GDP forecast to -2.4% (from -1.2%) and also cuts 2013 GDP, whilst  upping 2012 & 2013 deficit forecasts
  • Sources report that the  Greek government & Troika talks make some progress but differences remain....
  • ....and other chatter from Greece that PM Samaras is struggling to forge an agreement with his coalition partners over an EUR11.5bn austerity package
  • UK public finance data slightly better than expected and lower than last year for the first time in this fiscal year
  • Greek 10 year yield dropped below 20% for the first time since March.....other peripherals pretty flat
  • FTSE ended the day down by 0.03%, whilst most of Europe was higher, notably Spain which rose by 2.6%, despite a flat bond market
  • The S&P was higher by 0.28% as we tidied our desks and headed off for the weekend 

Liontrust Dealer's Roar - 20/09/2012

“If the highest things are unknowable, then the highest capacity or virtue of man cannot be theoretical wisdom” – Leo Strauss, German Philosopher, born 20th Sept 1899 – died 18th Oct 1973


  • US markets drifted a tad post our departure (S&P -0.14%) in a conviction-less move & despite more positive housing data
  • Consumer discretionary stocks biggest upside +1%, Fins -0.08% & Energy -0.94% names lagged, volumes “ok”
  • US Architecture billing index (leading indicator) above 50 (expansion) for first time in 5 months
  • S&P says Spain rating unlikely to be cut to junk;
  • Crude down 4% as Turkey/Libya/Saudi/Russia in talks to make up Iran oil shortfall & OPEC said no shortage of oil evident
  • Asian markets fall as China HSBC flash manufacturing prints at 47.8, mild improvement (47.6 last time) but still sub 50
  • Number “should have been better”, while the improving trend means no excuse for more easing
  • Japan sees a sharp fall in exports, -6% from last year, while imports also fell -5.4% leaving widest deficit since March. Weakness in global demand cited
  • Chinese VP Xi Jinping says “Japan’s “purchase” of the Diayo Islands is a farce & urged Japan to stop any behaviour that infringes on Chinese sovereignty”
  • Chinese Naval Officers comments “China should be ready for conflict”, MSCI Asia Pac -1.31%
  • ECB’s Noyer says hopes ECB bond buying will have quick impact, would be surprised if needed in a few years
  • Moody’s reaffirm negative outlook on US states
  • EU stalled controversial trade case against Chinese telco companies, top FT article:
  • German FM urges Portugal to continue reforms
  • Newmont Mining CEO tells CNBC Gold could top $2000 in Near Future (talking his own book?!)
  • Markets open pretty weakly thanks to the red overnight Asian session, c -0.8%
  • French PMIs very poor, especially manufacturing (€ gets hit) but German & EC composite look better
  • UK retail sales are weaker than expected, Olympics hurt online segment
  • Hotly anticipated Spanish bond auction goes pretty well, raise €4.8bn btc 2.85, 5.66% but...see below
  • Bit of M&A: as Liberty in for Telenet +13%, BP +0.1% looking to a deal in BP-TNK & Peugeot -3.8% in talks to sell 75% stake in Gefco
  • Midday FTSE hasn’t moved up much Eurostoxx has rallied to only -0.2%
  • Forbes Story: Will Bernanke’s QE3 Work? No, It’s already failed
  • Afternoon US data, Philly Fed better -1.9 vs -4.5 f/c, Leading Economic Indicators bang in line -0.1% as per f/c
  • Markit US Preliminary PMI 51.5 in line with f/c
  • Defensives benefit today (pharma +0.1%, tobaccos +0.6%) , with Cyclicals being sold (miners -1.7%, fins -0.8%)
  • Bit of damage done but overbought conditions are being unwound (RSI on S&P down to 67 now, peaked near 72 last week)
  • FTSE -0.6%, Eurostoxx -0.2%, S&P currently -0.25%
  • Triple witching tomorrow so expect vols to be good & could be some action.

Liontrust Dealer's Roar - 19/09/2012

“Anyone who thinks they're sexy needs their head checked.” Jarvis Cocker, English musician, born September 19th 1963


  • The S&P finished bang in line with the level as we closed yesterday
  • Volumes light once more and defensive orientated stocks lead the way
  • Japan cheered by news that the Bank of Japan are unexpectedly expanding their easing program to Y55tr from Y45tr
  • Tensions continue between China and Japan (see below)
  • European markets open better, but soon give up the gains
  • J-C Juncker (head of Eurozone Finance Ministers) last night said although they were keen for Europe-wide banking supervision they would not rush into it
  • Comments worth noting from German lawmakers saying they want ECB’s planned rules on banks supervision to apply only to systemically-relevant banks
  • Schaeuble and Portugal’s Gaspar due to speak in Berlin after European markets close
  • UK: MPC unanimous on rates and asset-purchase vote. One member saw good case for more QE in September (see below)
  • Germany sold 2y notes with a positive yield for the first time since June 20
  • Deputy PM in Spain said Spain would consider a bailout if it would not require “new sacrifices”
  • A raft of positive housing data from the US provide further evidence of an improving environment (see below)
  • Oil price under renewed pressure, following a big build in crude oil inventory
  • Peripheral yields in Europe fall sharply during the afternoon (eg Spain 10 year yield lower by 20bps)....
  • ....leading to a rally in risk assets
  • FTSE ends the day in positive territory to the tune of 35bps, rather less than most of Europe
  • Meanwhile, the S&P was also trading higher as we closed, by 23bps

Liontrust Dealer's Roar - 18/09/2012

“Anyone who has a continuous smile on his face conceals a toughness that is almost frightening.”
Greta Garbo, Swedish film actress, September 18th 1905 – April 15th 1990


  • US stocks declined post our close on global growth concerns, with defensive stocks outperforming
  • Trading activity was muted with S&P 500 volumes 15% below the year-to-date average
  • Apple shares stronger again on pre-orders for the Iphone 5
  • Interesting move in the oil price a couple of hours after we closed yesterday, falling 4% in a straight line
  • Asian markets almost all lower this morning, primarily as concerns continue over the Chinese economy
  • Japanese companies with presence in China including Nissan Motor (-2.3%) and Honda (-1.5%) declined after anti-Japan protests over a territorial dispute impacted business and disrupted production.
  • European markets inevitably followed and remained lower, despite an encouraging Spanish bond auction
  • Spanish Deputy PM stated that the country was still considering the conditions of a possible bailout
  • 10 year yields in Spain dropped back a little over the morning
  • UK CPI data smack bang in line with forecasts at 2.5% year-on-year and 0.5% month-on-month
  • Marked weakness in European bank stocks today (see below)
  • .....as well as the post QE winners, basic resources, autos and oils, whilst the post QE losers lead the way today (household and food/beverage)
  • The German ZEW investor confidence survey revealed an improvement for the first time in five months
  • Fedex surprise the market with a chunky downgrade to Q2 EPS guidance (now $1.30-1.45 vs previous guidance of $1.67)
  • The US trade deficit for Q2 narrowed by more than had been expected
  • ....and some more better than expected US macro news in the form of a better than expected reading for the National Association of Home Builders Sentiment Index, which hit its highest level in six years (see below)
  • As markets rallied somewhat over the afternoon, volumes started to slow markedly
  • FTSE ended the day down by 0.43%, rather better than most of Europe which was led lower by Italy (-2.29%) and France (-1.15%)
  • Meanwhile the S&P was lower by just 0.13% 

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