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Liontrust Dealer's Blog - 31/01/2012

“It’s not the sentiments of men which make history, but their actions.” Norman Mailer, American writer, January 31st 1923 - November 10th 2007


·         US traded sideways post our departure, but drifted late to close near the lows for the day

·         Little of interest in the latest FOMC meeting minutes released last night, with similar tone to the December meeting

·         Bank of Japan deputy governor said that they may increase asset buying further if needed

·         Asian markets mixed, as investors take stock following the weak US GDP number

·         German unemployment declined in January for the first time in eleven months

·         Lots of corporate numbers released today in Europe....winners are Ericsson and Fortum on strong quarterly numbers....

·         ....losers are Astrazeneca, Santandar  and UPM-Kymmene on disappointing figures

·         Europe opens lower, led down by Spain and Greece, which both see the end of short sale bans tonight....

·         ....although expectations are for extensions of some form

·         Spain hit by evidence published in El Pais today that PM Rajoy and other top politicians have been receiving “bungs” for contracts between 1990 and 2008

·         Russian GDP growth for 2012 missed the expected 3.6% rise, coming in at 3.4%

·         German inflation data came in marginally below expectations

·         During the afternoon Italy caught the eye outperforming as people switch their shorts over to Spain (possibly)

·         US weekly jobless data show a surprisingly large rise in initial claims and the continuing claims number also higher than expected....

·         ....and US personal incomes were much stronger than expected due to a one-off dividend spike caused by tax planning

·         Chicago PMI comes in at 55.6, comfortably ahead of the expected 50.5 reading....

·         ....all of which helped to turn an expected small decline in early US trading into a small gain

·         But it couldn’t quite hold onto those PMI gains & weakened into the bell

·         S&P -0.3%, FTSE -0.7% (Shell & Astra weigh), Eurostoxx -0.24% (Italy +0.85%)

·         Euro PMI’s, Non-Farm Payroll & University of Michigan tomorrow to round off the week

Liontrust Dealer's Blog - 30/01/2013

“If we can boondoggle ourselves out of this depression, that word is going to be enshrined in the hearts of the American people for years to come.” – Franklin Roosevelt, 32nd US President,
born 30th Jan – 12th Apr 1945


  • So after a day’s breather the S&P continued its relentless march north, putting on 0.18% post our departure to close up 0.51%
  • Reversed all of the prior day’s gains, ignoring the very weak looking consumer confidence data..normally well correlated to S&P direction (see below)
  • Main driver was stock specifics; Dr Horton helped Housebuilders (+3%), Valero helped Refiners (+6.5%), Eli Lily & Pfizer helped Pharmas (+3.2%)
  • Also move in US 10 year back below 2% called as an equity allocation trade, despite a strong $5bn 5y auction. Amazon +8% post the close on #’s.
  • Asian markets closed almost exclusively in positive territory (bar Malaysia), led higher by Japan (+2%) on better earnings (Yahoo Japan +17%)
  • Plus comments from BOJ candidate Iwata on doubling asset purchases. Taiwan +0.4% on plans to allow higher mainland investment.
  • Overnight ECB’s Asmussen says Spain & Greece “have a lot of difficulties ahead” while FT reports a EU wide financial tax would raise €30bn
  • European markets open around unchanged, the main focus of the morning being a large profit warning from oil services firm Saipem (-35%)
  • Chatter enhanced as BOAML placed 10m shares yesterday morning @ €30.65. Buyers have lost €105m (in total) in 24 hours with stock now at c €20.. Yikes..
  • Other biggies included Imperial Tobacco (-4%) a bit weaker on #’s despite low expectations, Roche -1.4% on inline numbers & Nordea +3%/Swedbank +10% both better
  • Macro main focus today however, we kick off with weaker Spanish GDP -0.7% vs f/c -0.6% for Q4 & Italian business confidence 88.2 vs f/c 89.5
  • But Italy get away €3.5bn of 10yr bonds (target €2.5 - €3.5) at 4.17%, lowest since 2010. Also results of ECB’s latest 3m Repo...€3.7bn
  • Takes away concern that the recent 3y LTRO  repayment (€127bn) had been switched into short term funding..bullish for financials
  • Early afternoon we’re -0.2% coming in the Q4 US GDP release. Market expecting +1.1% growth..actual number is -0.1%!
  • Looked bad but underneath the data was actually encouraging, driven down by inventory & govt defence spending, though we do sell off another 0.3%
  • Also out was the US ADP employment change, +192k vs f/c +165k, prompts Goldman to up their Non-Farm Payroll estimate ahead of Friday
  • Latter part of the afternoon market recovers some of the snap post GDP sell off, with on a headline in Rio -0.7% (halting work at a mine) hitting the tape
  • & an interesting story from Zimbabwe where the government were down to their last £138 after paying civil servant last week!
  • So a small down day, FTSE -0.25%, Eurostoxx -0.6% & S&P is currently only -0.04%
  • Eyes down for the FOMC, preview below

Liontrust Dealer's Blog - 29/01/2013

“I still have my feet on the ground. I just wear better shoes.” Oprah Winfrey, US chat show host and media proprietor, born January 29th 1954


  • The S&P closed narrowly lower, breaking its long sequence of eight consecutive up-days (the longest winning run for eight years)
  • The weaker than expected pending home sales data was the primary factor
  • Asian markets generally better, buoyed by the US durable good order data
  • The Japanese markets trades to its highest level since the earthquake in the early part of 2011
  • Australia, up for a ninth day in a row, benefitted from business sentiment rising the most in a decade
  • China’s Academy of Social Sciences has upped their 2013 growth forecast (see below)
  • With no fresh catalyst and a lack of macro data this morning Europe opens flat
  • Latest Italian bond auction done at the lowest rate since March 2010 with EUR8.5bn raised, but only 6 months bills, so market focussed on tomorrow’s 4 year and 9 year auctions
  • German consumer confidence numbers bang in line with expectations
  • In UK, profit taking in banks (not helped by media reports that US authorities will pursue criminal charges as part of any LIBOR settlement)..
  • ....and a downgrade to BT from BofA Merrill Lynch see them as the laggards....
  • ....with the miners in robust health, as is 3i on news of a new
    strategic shareholder
  • Something of a rare event with S&P UPGRADING Austria to stable
    from negative
  • The latest S&P CaseShiller housing data was in line with market forecasts, continuing to show the revival in the market
  • ....but the latest US consumer confidence numbers for January were disappointing, coming in at 58.6 against an expected reading of 64.0, which is the lowest reading since late 2011 (see below)
  • ....which resulted in the S&P giving up its gains and heading into negative territory, but the fall proved short-lived
  • FTSE ploughs relentless higher over the afternoon, closing higher by 0.71%
  • ....at which level the FTSE 100 14 day relative strength indicator stands at 83.92, a level not seen during the last fifteen years
  • Europe also managed to rally into positive territory in afternoon trading, with the exception of Italy and Spain, both down a little
  • Meanwhile the S&P was higher by 0.35% as we closed in Europe

Lionrtust Dealer's Blog - 28/01/2013

“It's disrespectful to tell the French in the morning that you're going to reduce the debt, in the evening that you're not going to make any savings, and the next morning, after thinking about it, that you're going to spend more.” - Nicolas Sarkozy, 23rd President of the French Republic,
born 28th Jan 1955


  • So it’s 8 up days in a row, the S&P adds 0.29% post our departure to close up 0.54%, through resistance at 1500
  • Driven mainly by earnings, Proctor & Gamble, Microsoft, Haiburton, Starbucks all better on numbers
  • Apple still weak (-2.4%) briefly slipping to # 2 largest company globally
    behind Exxon
  • Also better sentiment from Europe (German IFO, more LTRO cash handed back than f/c, Draghi +ve at Davos)
  • Asian markets generally better dragged up by a very strong China (+2.5%)...rises on back of Chinese Industrial Profits +17%, 4th monthly gain.
  • Japan (-0.9%) but on earnings this time (Yen flat) as Fanuc (-7%) & Advantest (-5.3%) both miss estimates.
  • Abe says they’re trying to defeat deflation rather than weaken the Yen! Europe digests weekend headlines first thing;
  • Kim Jong Un vowing “high-profile” retaliation against US & allies after increased UN sanctions
  • ECB’s Coene says that the “ideal situation would be for the OMT never to be used” & a race to the bottom is a “very difficult situation”
  • Wall Street J says European Blue Chips are bracing themselves for billons of write-downs this year as recent acquisition done at optimistic levels
  • European markets open around flat with Italy (+1%) the outperformer led by the banks (+0.5%) as Monte de Paschi (+0.6%) receive aid from the Bank of Italy
  • Also extremely interesting German bill auction, they sell €2bn 12m paper at a +ve yield of 0.1319%, the first non-negative since last June
  • Italian consumer optimism for Jan falls to 84.6, lowest in more than 15 years, from 85.7 in December
  • Corporate wise relatively quiet, Ryanair -2% despite +4% upgrades, Easyjet -1% as chairman steps down, Travel & Leisure weaker generally
  • Premier Foods -8.5% as CEO steps down, Home Retail -7% as Morgan Stan –ve on the sector (-1.2%)
  • Pre US open Caterpillar #’s hit the tape: predict a H2 2013 rebound after a weaker Q1, stock +2%
  • US Durable Goods orders for December look very good print at +4.6% vs f/c +2%, but GS nudge down their Q4 tracking estimate (more below)
  • Day rounds off with a pretty weak looking December Pending Home Sales number -4.3% vs f/c +0.1%, but it’s a very volatile series “trend is still up”
  • Markets ended the day much as they opened, FTSE +0.16%,
    Eurostoxx -0.06%, S&P is currently down -0.08%..will it last!

Liontrust Dealer's Blog - 25/01/2013

“I pick my favourite quotations and store them in my mind as ready armour, offensive or defensive, amid the struggle of this turbulent existence”
- Robert Burns, Scottish Poet, Jan 25th 1759 – July 21st 1796


  • Wall street falls post our departure (S&P -0.4%) but the S&P clings onto a 0.01 point gain
  • Seventh up day in a row, the first 7-day positive sequence since 2006
  • All this in the face of the indices largest constituent, Apple, falling 12% - equivalent to 6 index points
  • Some support for the recovery trade from global PMI’s but once again “it was tough to pinpoint a catalyst” for the rally
  • Also several technical indicators now flashing red, as Richard has pointed out last couple of days
  • Asian markets were best described as mixed with the Nikkei (+2.8%) standing out like a sore thumb
  • Move was thanks to a CPI print of -0.01%, miles away from the new leaderships +2% target..
  • ..sent the USDJPY crashing through 90 helped by comments from the deputy Eco minister that USDJPY at 100 wouldn’t be a problem
  • European markets opened in small negative territory but early comments from the IMF’s Largarde
  • ..”The ECB has a little room to tweak rates if needed “ soon got us into +ve territory
  • German data also helps with the IFO surveys all beating expectation (though good ZEW the other day so maybe not a surprise)
  • We discovered Q4 in the UK had been pretty dismal, with GDP -0.3% vs forecasts of -0.1%
  • Olympics effect wearing off plus North Sea Oil maintenance work  the culprits (the latter causing a 10.2% fall in Oil & Gas output)
  • Mid-morning ECB announced that €137bn of their LTRO capital had been handed back (vs forecasts of €100bn) leading EU banks higher
  • Though the market awaits to see which banks have done the handing!
  • Stock wise movers included Bayer +4.8%, Pirelli -3.3% as brokers changed their views on the companies
  • Nokia -7% also continued their tumble post weak #’s yesterday & Anglo American -0.5% after production update
  • Only afternoon US data point was 3pm New Home Sales @
    369k vs 385k forecast,
  • US market opened up as Proctor & Gamble +3.6% on better numbers & raised forecasts (like Unilever few days ago)
  • Afternoon we’re back at unchanged but then spike into the close, no idea why!
  • Will the US make it 8 up days in a row?! Last happened 2004.
  • FTSE 0.3%, Eurostoxx +0.2%, S&P currently +0.28% @ 1499

Jamie Clark, Macro-Thematic: The pound in your pocket will be devalued further

To misquote Harold Wilson, this blog is a brief treatment of why we believe the pound in your pocket will be devalued further and how we are positioned to capture this outcome.

It’s worth revisiting the recent path of Sterling and the underlying drivers. Between 2007 and 2008 the pound fell by over 30% against a basket of major currencies. At root, this realignment was caused by the UK economy’s over-exposure to a distressed banking sector and the Bank of England’s (BoE) panicked charge to monetary accommodation.As the violent, early stages of the banking crisis abated, Sterling stabilised against major currencies. In fact, as the chart shows, the post-crisis period is characterised by the comparative stability of a well-defined trading range.

Liontrust Dealer's Blog - 24/01/2013

“Nothing is over until we decided it is! Was it over when the Germans bombed Pearl Harbour? Hell, no!” John Belushi, American comedian, January 24th 1949 - March 5th 1982


  • Wall Street closed slightly above the level where we left it....
  • ....although Apple fell by 10% after hours on the slowest Q1 profit growth since 2003 and disappointing Q2 guidance)
  • House of Representatives agreed to extend the debt limit until May 19th
  • Japan rallied, but otherwise Far Eastern markets reversed following North Korea threatening to conduct a nuclear weapons test “targeted” at the US
  • HSBC flash PMI was encouraging, coming in at 51.9, a two year high (see below)
  • The Nikkei was better, led by exporters, after the Yen fell for the first time in four days as exports fell more than expected
  • European markets open lower, not helped by very weak PMI numbers from France....
  • ....but a good set of the same numbers from Germany helped markets to rally
  • ....and the Eurozone PMI was also reassuring to risk asset fans (see below)
  • Italian retail sales numbers for November were worse than had been expected
  • Nokia in focus with Q4 sales and margin solid, but no dividend and weaker cashflow sees stock drift 5% lower
  • Latest US jobless claims data was very encouraging, with the initial claims number being the lowest print since January 2008
  • £ took a hit against the $ and Euro ahead of tomorrow’s GDP numbers....hitting a four month low against the $ and an eleven month low against the Euro (see below)
  • ....which spurred FTSE higher, given the high percentage of earnings derived overseas
  • The S&P climbed above 1,500 for the first time since 2007
  • FTSE trading into short term technically overbought territory (see below)....
  • ....nonetheless, it closed up by almost 1.1%, whilst the remainder of Europe was also stronger, but to a lesser extent
  • Meanwhile the S&P was higher by 0.45% as we headed off

Liontrust Dealers Blog - 23/01/2013

“Television: a medium. So called because it’s neither rare nor well done” Ernie Kovacs, American comedian, January 19th 1919 - January 13th 1962


  • Wall Street rallied post our departure to close higher by 0.44%
  • Post the close, a number of earnings releases from tech stocks, led by IBM (+4.1%) and Google (+5%)
  • Tokyo very weak on further consideration of the announcements from the Bank of Japan yesterday as the Yen strengthened for the third consecutive day
  • Far Eastern markets mixed (Taiwan, Hong Kong, Korea and the Philippines lower.....China, Singapore, Malaysia, Thailand and Indonesia higher)
  • European markets open slightly better, but cannot hold onto gains for long, except London which trades at its highest level since May 2008
  • Unilever the stand-out performer in London following very impressive final results, with the shares trading more than 3% higher
  • Overnight, Draghi suggested that the worst of the sovereign debt crisis may
    be over
  • PM David Cameron announced, as expected, an “in/out” referendum on EU membership by the end of 2017 if he is re-elected....
  • ....to the predictable chagrin of the French and Germans
  • MPC minutes were released, showing an 8-1 majority for no change to asset purchases
  • UK jobless claims fell by just over 12,000, against an anticipated rise of 500....
  • ....and the rate of unemployment also saw a drop to 7.7%, against an anticipated unchanged 7.8% rate
  • Bank of Spain revealed that the recession deepened in Q412, with GDP contracting by 0.6% against -0.3% in Q3
  • The great and the good descend on Davos for the World Economic Forum which begins today
  • European sovereign yields a little lower (no bond auctions in Europe today)
  • Mixed bag of US earnings pre market opening, with decent numbers from McDonalds, but misses from luxury leather goods company Coach and defence contractor General Dynamics
  • The IMF cut their forecast for global GDP growth for 2013 to 3.5% from 3.6% and at the same time cut their forecast for 2014....
  • ....and they forecast another year of recession in Europe for 2013, now predicting GDP contraction of 0.2% against their previous estimate of 0.2% growth
  • Highlights on a quiet day of US macro news are the latest House vote on the debt ceiling (before Wall Street closes)....
  • ....and Apple results to be released after the closing bell tonight
  • FTSE ended the day higher by 0.3%, whilst most of Europe was down on
    the day
  • The S&P was down by less than 0.1% as we closed

Liontrust Dealer's Blog - 22/01/2013

“There is no comparison between that which is lost by not succeeding and that which is lost by not trying.” Francis Bacon, English philosopher and statesman, January 22nd 1651 - April 9th 1626


  • No Wall Street action yesterday with markets close for Martin Luther King Day
  • Main news overnight was in Japan with the Bank of Japan pronouncements following their two day meeting....
  • ....which delivered at the headline level, but (as is often the case) the devil is in the detail (see below)
  • It was not enough to sustain the Nikkei rally, which having traded up by as much as 1% ended the day lower by 0.35%
  • Other Far Eastern markets mixed, but generally weaker
  • With no new catalyst Europe opens quietly, but is soon heading south, with various Germany orientated factors cited....
  • ....rumours, hotly denied, that Jens Weidmann, President of the Bundesbank, had resigned....
  • ....rumours in the German press of a bank break-up simulation....
  • ....rumours of a capital raising/earnings miss at Deutsche Bank
  • All of which led to the heaviest volume in Dax futures so far this year, with the index trading lower by almost 1.5% at its intra-day low
  • But some German macro data then precipitated a rally as the latest Zew survey came in better than expected....
  • ....current situation 7.1 against a forecast of 6.2, but more significantly, future expectations reading was 31.5 against an anticipated number of 12
  • The latest Spanish bond auction went well, maintaining the recent run of decent demand
  • EU FinMins gave the green light to the latest EUR9.2billion tranche of aid to Greece
  • Equities continued to rally, helped by European peripheral yields falling sharply in early afternoon trading...
  • ....which may have come about as a result of someone having an early heads-up on the following headline....
  • Weak January Richmond Fed manufacturing number (-12 against an expectation of +5)....
  • ....that was followed by a couple of slightly disappointing US existing home sales numbers for December, accompanied by downward revisions to November’s numbers as well
  • FTSE ended the day down a fraction, whilst most of Europe was also weaker, but well off the lows
  • Spain ended the day higher by 0.48%
  • The S&P was also trading close to flat, down by just 0.1% as we shut up shop for the day

Liontrust Dealer's Blog - 21/01/2013

“The older you get the stronger the wind gets and it’s always in your face.” Jack Nicklaus, American golfer (winner of 18 majors), Born January 21st 1940


  • US equities pushed on higher post our European close to finish on the best level of the session with the Dow and S&P setting new five-year highs....
  • ....as the VIX index hit a five year low
  • Investment banks saw a few positive results including Morgan Stanley +7.9% and State Street +5.9%....
  • ....while credit card issuers took a hit on Capital One earnings -7.5%, Amex closed -1.6%
  • Asian markets mixed, while Japan was sharply lower ahead of the Bank of Japan’s two day policy meeting
  • Markets are expecting asset purchases to be expanded by Yen 10 trillion
  • Today EU FinMins hold a regular meeting in Brussels. Talks expected to focus on how ESM aid to banks may be disbursed
  • Dow Jones reports they may also announce a new Eurogroup chairman as soon as today, with Dutch FinMin Dijsselbloem the frontrunner
  • Merkel's Coalition suffered a regional defeat in Lower Saxony as the left-leaning opposition won a one-seat majority
  • Europe opens higher, although the stand out performer is Richemont, whose shares fall on a very disappointing trading statement
  • Weekend press speculation that the PPI bill for banks is set to grow appears to have little or no impact on their shares in early trading
  • Volumes in Europe light, with the US holiday and poor weather in Northern Europe blamed
  • Peripheral yields in Europe crept gradually higher over the course of the trading day....
  • .....whilst currency markets were predictably quiet
  • Metal prices (precious and base) were quiet as well
  • FTSE ended a quiet day higher by 0.43%

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