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Liontrust Dealer's Blog - 21/12/2012

When we hang the capitalists they will sell us the rope we use.” -  Joseph Vissarionovich Stalin, former Premier of the Soviet Union, born 21st Dec 1878 – died 5th March 1953





  • US stocks initially traded sideways post our departure before pushing on into the bell, with the S&P adding a further 0.53% to come to rest +0.55%
  • Busy eco calendar, with most data coming in better than expected, but fiscal cliff remained the focus...
  • To that end most of the action overnight has come post the US close as the “plan B” deal got pulled by House Republican Leaders as
  • “it did not have sufficient support from our members to pass” i.e. Boehner could not even get the backing of his own party on the bill
  • He added it “was up to the President to work with Senator Reid..to avert the fiscal cliff”...market suddenly got very jittery
  • Just after midnight, S&P future traded down 3.4%, but steadied up to rest c -1.4% in Asian trading
  • Asian markets predictably all weaker, with precious metals & oil joining the party, bar the Philippines
  • Where S&P upgrade their credit outlook from “stable” to “positive” causing some hope the country may become investment grade (>BB+) in 2013
  • Samsung (-4.1%) a feature in the region reversing some of their recent gain (stock is 20% of the Korean market & up 42% YTD)
  • Story that EU regulators are poised to accuse the giant of rule breaking by filing patent lawsuits against rival Apple
  • Euro markets all open on the back foot for the first time in a while, early UK macro GfK consumer confidence prints lower than expected
  • Not much out stock wise but Arcelomittal (-2.5%) fall after a writedown in Europe thanks to the weakening economy
  • Also Aviva (-0.35%) sell their US Life operations for $1.8bn, more money & earlier than expected
  • Mid-morning more UK macro, Q3 GDP final revision down to +0.9% from +1% previously
  • Q3 current account deficit is 3.3% & fiscal deficit £17.5bn in Nov, up from £16.3m a year ago (& £16bn consensus)
  • Capital Economics note suggesting 2012 is finishing on a pretty weak note, “we expect that stagnation to continue in 2013”
  • Sweden slash 2013 growth forecast from 2.7% (made in September) to 1.1%, blaming weaker Euro outlook +US fiscal policy
  • By midday we’re -0.6% in the UK, with Europe about the same having got through Index Futures expiry
  • Afternoon US macro looks pretty good, Durable Goods +0.7% vs f/c +0.3%, Cap Goods Orders +2.7% vs f/c +0%
  • University of Michigan Confidence later on though a tad weaker +72.9 vs f/c +75
  • US markets open down c1%, so about 50bps better than the future had indicated
  • Late on chatter that Monti will resign “according to a person familiar with the situation”, in line with expectations
  • By the close Europe -0.3% as US data helps us recover, S&P’s has given up the early gains however to sit -1.4%
  • Merry Christmas to our readers..back in the New Year!

Liontrust Dealer's Blog - 20/12/2012

“Being spokesman for a generation is the worst job I ever had”. Billy Bragg, English musician and
left-wing activist, born December 20th 1957




  • US stocks closed on their lows of the day as investor concerns over the political brinkmanship in Washington
  • Market sentiment (and most commentators) seem to point towards a deal, but public posturing taken at face value would suggest otherwise
  • Asian markets took their lead from the US and opened lower, although most rallied throughout the session
  • Japan was weak, despite a further JPY10tr added to the asset purchase program by the Bank of Japan
  • Investors were disappointed by the absence of an inflation target, which market gossip had suggested was possible
  • Hong Kong market moved higher on talk of a large buy program
  • In South Korea, Park Geun Hye won the presidential election, narrowly defeating Moon Jae In
  • UK retail sales for November were weaker than expected, but there was a small upgrade to the
    October number
  • Copper price fell for the sixth consecutive day, with stockpiles in Europe at their highest level since March 2010
  • German PPI data much as expected
  • European markets open a little weaker
  • As expected, the Italian senate approved the 2013 budget bill,
  • Peugeot announced that they have reached a EUR11.5bn refinancing deal with their creditor banks
  • A raft of macro data out in the US, with the latest Q3 GDP estimate revised up to 3.1%
  • The latest jobless claims number was bang in line with forecast
  • Gold price hit its lowest level since the end of August, trading as low as $1,650 and is testing its long-term uptrend that dates back to 2008
  • Latest Philadelphia Fed Factory Index considerably stronger than expected....
  • ....as was the latest home sales data and house price index (see below)
  • FTSE ended a quiet day down by 0.05% and European markets were similarly dull
  • The S&P meanwhile was almost exactly unchanged on the day

Liontrust Dealer's Blog - 19/12/2012

“Whatever else may divide us, Europe is our common home; a common fate has linked us through
the centuries, and it continues to link us today” - Leonid Brezhnev, Russian Statesman, born
19th Dec 1906 – died 10th Nov 1982




  • US markets continue to push on post our departure, S&P adding another 0.4% to close >1% up for the second day in a row
  • Volumes noticeably good as well, NYSE 16% better than the average over last three months
  • All down to fiscal cliff progress as Boehner & Obama are getting into the teeth of the negotiation (more below)
  • & other +ve’s including Chinese property market rebound, BOJ easing expectations & Italian political stability
  • Also some M&A news as Nielsen agree to acquire Arbitron (+25%) a radio measurement firm for $1.3bn
  • After-hours Oracle (+1%) Q2 beat, Q3 guidance in line but “gaining share against SAP in Europe”
  • Asia highlight continues to be the stellar performance of Japan up another +2.4% overnight
  • BOJ start 2 day meeting today & hope is we get some stimulus announcement tomorrow (so watch for a disappointment)
  • Their Exports falling for the six month in a row (& trade deficit up) was largely ignored (& -4.1 was better than -5.5 expected)
  • Most of the other markets are up c50bps on the US tailwind & World Bank raising East Asian growth outlook (7.9% from 7.6%, China 8.4% vs 8.1%)
  • Desks reporting clients are better to buy, but one firm think the rally is getting long in the tooth & wouldn’t be adding to longs
  • Headline European news comes from S&P who raise Greece’s credit rating by six notches (to B-) post the recent buyback
  • & Berlusconi who says there is no rush for Italian elections & the vote should be pushed back 1 or 2 weeks (his opinion polls are very low at the moment)
  • Markets open up c30bps with all sectors (bar Autos) making it into positive territory, led mainly by the banks
  • UBS are fined $1.5b for manipulating Libor rates but the stock still trades up 2% (was pretty well flagged I think)
  • Bid of action in speciality pharma as Lundbeck (-15%) profit warn & bid rumours surface for Stada Arzneimittel (+5%)
  • Elsewhere Bunzl (-4.3%) as weakness in the US operations drag on underlying growth & Merck (-2%) on Stimuvax news
  • Macro wise German IFO looks fine with beats in business climate/expectations & a miss in current assessment (vs forecast, more below)
  • Italian Industrial Orders are flat for October (f/c +1%) & the BOE minutes reveal 9-0 vote for no change..
  • ..The MPC expect a weak economy, stick inflation as per the November Inflation Report
  • By midday most markets are up c0.4% but peripheral Europe leads the way (Spain +1.5%, Italy +1%, Greece +2.6%)
  • Afternoon US macro: Housing Starts 861k (f/c 872k), Building Permits 899k (f/c 875k), Mortgage Applications -12.3%
  • S&P opens higher but gets hit on headline suggesting Obama would veto Boehner’s “plan B” (sounds like largely expected however)
  • Day closes round about where it started. FTSE +0.4%, SXXP +0.42% & SPX is currently -0.12%

Liontrust Dealer's Blog - 18/12/2012

“The people who cast the votes don’t decide an election, the people who count the votes do” Joseph Stalin, former Premier of the Soviet Union, December 18th 1878 - March 5th 1953




  • S&P moves higher post our close on rising hopes of a deal to avert the fiscal cliff....
  • ....nothing concrete yet, but it appears that the various protagonists are beginning to share ropes and carabinas
  • Asia also strong, led by Japan reacting positively to Abe’s crushing victory in the election
  • The Yen was weak ahead of the key Bank of Japan meeting later this week
  • China was flat following news that foreign direct investment fell for the 12th time in 13 months....
  • ....despite the commerce ministry signalling a further recovery on 2013
  • Sweden cut rates by 25bps to 1% which was expected
  • Spanish bad loans ratio rose to a record 11.23% in Oct from 10.71% in September
  • UK inflation: CPI remains as expected up at 2.7%, buoyed by utility and food prices
  • Bond auctions: Spain sold maximum target of €3.52b 3 & 6Mo bills, total bid to cover 2.72x and Greece raised some 1.3 billion Euros in a new three-month treasury bill auction
  • Europe opened up about 25bps and drifted better
  • In mid morning the German deputy economy minister said that they are considering cutting their 2013 growth forecast from 1%
  • A gauge of confidence among home builders in the US rose in December to the highest level since April 2006
  • Markets traded in a very narrow range for most of the day....
  • ....FTSE, for example, traded in a range of just 7 points between midday and 3.30!
  • Samsung announced that they are to drop their lawsuits against Apple in Europe
  • Telecom stocks weak again today, following on from the Dutch auction generated weakness yesterday
  • Euro strong once again today, moving up through $1.3225
  • FTSE ended the day up by 0.4%, with Europe also stronger, led by Spain (+1.6%)
  • The S&P was higher by almost three-quarters of one per cent as we closed

Liontrust Dealer's Blog - 17/12/2012

"The most important of my discoveries have been suggested to me by my failures"– Humphrey Davy, English chemist & inventor, born 17th Dec 1778 – died 29th May 1829



  • US markets continued to dribble off post our departure with the S&P coming to rest -0.27% a further -0.15% decline
  • Continued lack of progress on the fiscal cliff, House Speaker John Boehner said he was back off to Ohio for the weekend after talks remained deadlocked
  • But he has offered to raise income taxes for those on $1m+ a year in exchange for overhaul of fed entailment programs (first time offered a tax rise)
  • Apple (-3.8%) clobbered on broker downgrade (Citigroup)..spec the iPhone5 Chinese sales might not cut the mustard
  • Weak CPI data also mentioned by some commentators as reason for the drift (IP & MP were both strong though so I don’t buy it)
  • Main story overnight came from Japan, where the LDP humiliate Noda’s incumbent DPJ & retain their partnership with the New Komeito Party
  • Gives them c325 seats in the Diet (out of 480) & a massive majority on a platform of lower taxes, smaller government & a more assertive military
  • Mr Abe likely to force the BOJ to inflate their balance sheet aggressively in “unlimited” fashion, Yen (v$) breaks 84 (big resistance) for first time this year
  • Nikkei +0.95%, but other markets in the region fall (HSI -0.4%, Kospi -0.6%, Taiex -0.88%) as the Apple supply chain is weaker
  • China (+0.45%) manages another positive day (great price action post Friday’s +4.3% move) as they scrap the QFII $1bn limit for SWF’s & Central Banks
  • Elsewhere India cut their FY2013 growth forecasts to 5.9% from 7.85% previously (but in line with economists’)
  • Europe opens weaker, but it’s a relatively quiet start. Few macro stories include
  • Governor of Bank of Italy said they don’t need a bond buying program under “current conditions”
  • Bersani (Secretary of Democratic party) says Monti would be better suited to running the country in a secondary role
  • Rightmove reporting UK house prices -3.3% MoM (1.4% YoY) with London asking prices -4% falling most in 5 years
  • Stock wise Telco’s get hit at KPN (-15%) pays a huge amount for their Dutch 4G licence, €1.3bn (€500m estimated), slashing their divi in the process
  • Aggreko profit warn on their 2013 guidance (declining military orders & potential for Japanese contracts in the International Power Projects division). Stock clubbed -22%
  • H&M advance (+3.4%) followings some decent November sales. Santader (-1.2%) pay a 25% premium for the minority stake in Banesto they don’t own (in shares mind you)
  • Early afternoon a pretty weak looking Empire Manufacturing number hits the tapes (-8.1 vs -1 forecast) also
  • US Existing Home Sales -1.7% for Nov (-0.1% in Oct) but Barcap don’t think US is in recession (more below)
  • US markets look through it though & rally from the off, with US reporting suggesting it’s due to weekend optimism over a fiscal cliff deal (hmm!)
  • Late on Draghi makes statement to ECON committee, warns economic weakness will continue but not too
    much new;
  • FSTE -0.16%, Eurostoxx -0.16%, S&P is currently +0.8%

Liontrust Dealer's Blog - 14/12/2012

“Nothing in the world can one imagine beforehand, not the least thing, everything is made up of so many unique particulars that cannot be forseen.” Michel de Nostredame, better known as Nostrodamus, French apothecary and seer, December 14th 1503 - July 2nd 1566




  • The S&P was unable to post a seventh consecutive up day as fiscal cliff uncertainties mount
  • Boehner accused the White House of not being serious over spending cuts
  • Asian markets appeared likely to follow the lead until China burst into life, driven by a number of factors
  • The HSBC flash manufacturing PMI rose further in December to 50.9 after jumping to 50.5 in November from 49.5 in October
  • The head of the Hong Kong Monetary authority said that China may relax or abolish a rule that requires Renminbi Qualified Foreign Institutional Investor funds to invest mostly in bonds from the current 80% level
  • A government think tank suggested that the Central Bank reduce financing costs for companies by cutting benchmark lending interest rates and trimming the amount that banks must set aside as reserves
  • ....which all propelled the Chinese market up by more than 4%
  • Japan’s Tankan report was disappointing and the market was quiet ahead of this weekend’s election
  • The Yen was weak once more as people anticipate aggressive easing initiated by Abe
  • S&P changed its outlook on the UK’s AAA rating to negative from stable, citing weak growth and a worsening debt profile....
  • ....and Fitch put the chances of a French sovereign downgrade at slightly more than 50%
  • Eurozone manufacturing PMI slightly up on last month, but still below forecast and in contraction....
  • ....and services PMI also shows improvement
  • European markets opened flat and churned in narrow ranges either side of unchanged
  • US CPI numbers for November were slightly lower than forecast
  • ....whilst manufacturing and industrial production numbers were both substantially stronger than expected
  • Sharp late move up for the Euro against the $........watch the news wires over the weekend!
  • FTSE ended a torpid day was down by 0.13%, whilst European markets were similarly dull, but generally a tad higher
  • Meanwhile, the S&P was lower by 0.31% as we sloped off for the weekend
  • Finally, one of the more puzzling headlines that I have seen of late.... Yorkshire will host the start of the Tour de France in 2014, race organisers have confirmed....whatever next? Have a nice weekend!

Liontrust Dealer's Blog - 13/12/2012

"The Federal Reserve is not currently forecasting a recession." (January 10th 2008) Ben Shalom Bernanke, Chairman of the US Federal Reserve, born December 13th 1953




  • US stocks pared gains on concerns over the fiscal cliff, despite additional policy easing by the Fed....
  • ....but the S&P still managed to record its sixth straight rise
  • Boehner stated that the Obama plan cannot pass the House or the Senate and that serious differences remain
  • The Fed announced plans to buy in $45bn in treasuries, beginning in January, in addition to the monthly $40bn in mortgage debt purchases
  • They indicated that rates will remain low so long as unemployment remains above 6.5%
  • They predicted that inflation will be less than 2.5% over the next two years
  • Asia traded higher in early trading led by Japan, following renewed Yen weakness, which is at an 8 month low
  • This drove the shares of Japanese exporters higher
  • China slipped back due to profit taking ahead of this weekend’s central economic work meeting
  • EU Finance Ministers agreed to put the ECB in charge of all EZ lenders by March 2014, which pPaves the way for the €500b ESM fund to provide direct bailouts  to banks 
  • Renault successfully placed their remaining 6.5% stake in Volvo (although the shares drifted below the placing price in afternoon trading)
  • Europe opens slightly lower and drifts over the course of the morning
  • Spain sold €2.02b paper in 3 tranches, good demand;  Italy sold €3.5b of new 2015 BTPs and €729m of 2026 paper
  • Berlusconi said would stand aside if Monti agrees to stand as part of  a Center-Right coalition of “moderates”
  • The Swiss National Bank maintained its €1.20 ceiling cap, and also kept rates unchanged at zero
  • Macro data from the US was solid, particularly the initial jobless claims number for last week and retail sales
  • Deutsche Bank warn of negative impact on Q4, characterised by a “difficult” environment
  • US macro news helps the markets to rally as the afternoon wears on
  • Rumours circulate of UBS facing fines of more than $1bn in LIBOR probes,
  • .....and that, coupled with the following headlines, took the shine off markets....
  • ....as did a CBS News report that BP are searching for a possible Deepwater Horizon leak
  • FTSE ended the day lower by 0.27%, with most of Europe similarly down, although Spain and Italy closed higher
  • Wall Street, in its pursuit of a seventh successive up day for the S&P, was struggling, lower by 0.23%

Liontrust Dealer's Blog - 12/12/2012

“It is widely held that too much wine will dull a man's desire. Indeed it will in a dull man”- John Osborne, English Playwright, born Dec 12th 1929 – died Dec 24th 1994




  • US bourses trade sideways post our departure before dipping into the close c 0.3%, no clear driver but
  • Beohner & Reid both say they are hopeful that an agreement on the fiscal cliff can be reached while
  • Obama notes he is optimistic & is increasing gains in support from Republicans, but maybe a struggle before Christmas
  • As senate majority leader Mitch McConells tells reporters “I think we’re basically out of time”
  • Texas Instruments +4% help semis as revenues stabilise (despite trimmed earnings guidance)
  • After hours Dupont (+2.5%) as EPS is at higher end of recently lowered guidance
  • FOMC minutes suggest “additional asset purchases would likely be appropriate next year” (expected, more below) as Twist comes to an end
  • Though meeting doesn’t conclude till today, so still awaiting announcement
  • Asian markets have a nice bounce on QE4 hopes, with a Chinese Economic Work Meeting next week fuelling more stimulus hopes
  • Japan’s machinery orders rose for the first time in three months, but the rise misses estimates +2.6% (f/c +3%)
  • North Korea launched long range rocket in defiance of international sanctions, but it had no market impact
  • Big corporate stories first off are Inditex (+0.2% #’s a touch light), Travis Perkins (-2.5% on track to meet consensus but lfl’s lower)
  • Euro eco: German CPI in line 1.9% (f/c 1.9%), French weaker -0.2% (f/c 0%), Eurozone industrial production pretty poor -1.4% (f/c 0%)
  • UK unemployment steady at 7.8%, but jobless claims fall 3k vs f/c of 7k increase
  • Spanish housing transactions +12.8% YoY in October +0.9% growth YoY in September helps IBEX outperform (closed +0.8%)
  • Strong Italian 1 year auction, €6.5bn bang on target but av. yield down to 1.456% vs 1.76% in Nov & btc up to 1.94 x from 1.76% (Monti who?)
  • Greece announces results of their buyback as investors tendered €31.9bn, with wap to be 33.8% of face value (10 yr at lowest levels since March)
  • However none of this really moves the dial... by midday markets area trading around unchanged/small up
  • PM US Eco: MBA Mortgate Applications +6% last week (no f/c) as average 30yr mortgage at record lows of 3.47% (data starts in 1999)
  • Import prices -0.9% (f/c -0.5%) for November but nothing else to report to be honest
  • US markets have put on 0.15% since the open, Europe on the day +0.05% with UK better..up 0.35% (miners & oils o/perform)
  • Eyes down for the FOMC..

Liontrust Dealers Roar - 11/12/2012

“The luck of having talent is not enough; one must also have a talent for luck” - Hector Berlioz, French composer, born 11th Dec 1803 – died March 8th 1869




  • US market loses a small amount of ground post our departure (S&P -10bp) but still closes in positive territory
  • Wait & see mode ahead of some agreement in DC & this week’s FOMC meeting, Citi see cause for optimism
  • MacDonald’s (+1.1%) as their global comps for Nov are +2.4% vs cons -0.1%
  • Sector wise Materials +0.67%, Industrial +0.4%, Consumer Disn -0.55%, Telco’s -0.4%
  • Post US close Monti allays some fears, stating there would not be a policy vacuum without him in power
  • & this morning FT reports he may run in the elections or possibly stay on as president;
  • Asian markets mixed as Chinese New Loan data misses estimates (522.9bn vs 550bn)
  • HSBC agree a $1.92bn settlement with US on money laundering (like Stan y’day) but this is $0.4bn more than their provision
  • US government place £7.6bn holding in AIG at 2.6% discount to close
  • BOJ said to adopt further easing of policy next week (from “sources”)
  • European markets open in a relatively quiet drifty mood, focus on stock specifics
  • Tullow (-8%) announce another dry well, Thyssenkrupp (+5.6%) say disposal of Steel Americas is “fully on track” & rally despite poor numbers
  • KBC (-5%) reopen after halt yesterday following completion of a capital raise
  • Mid-morning a firework sets off, German Zew Expectation of Economic Growth +6.9 versus
    forecast -11.9 (more below)
  • Spanish bill auction well covered, sell €3.89bn of 12/18 mo vs forecast €2.5 – €3.5bn target
  • So markets up by 0.7% at midday as Eurostoxx makes fresh highs
  • Afternoon US data mixed, wholesale inventories better 0.6% vs f/c 0.4% but
  • NFIB small business optimism 87.5 vs 92.5 as “fiscal policy concerns weigh” + “Sandy”
  • While trade gap -$42.2b (better the -$42.7b f/c) but Deutsche “concerned” over export data
  • Couple of traders point out key level near for Eurostoxx future
  • ...will we have momentum to push through into year end?
  • FTSE +0.06%, Eurostoxx +0.34%, S&P +0.77%

Samantha Gleave, Cashflow Solution: Tesco cashback on cards?

Last month James Inglis-Jones highlighted European equities as the most attractive of the developed markets, trading on a smoothed earnings multiple of about 12x. We think that elevated valuations in the US (normalised P/Es of over 20x) are likely to act as a restraint on European equities enjoying a significant re-rating, so we believe the best strategy to take advantage of the value on offer is to invest in companies that can grow their earnings in a self-sustaining way and generate returns for shareholders through dividends and share buy-backs. 

The single most important determinant of a company’s ability to generate these sources of return is cashflow – the exclusive focus of our investment process. Analysis of normalised cash flow yields across the globe again shows Europe to be the most attractive developed region on a normalised five year cash flow yield approaching 6%. Furthermore, by focusing on those companies that are committed to returning cash to shareholders we are able to access returns that substantially exceed this market average.

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