Markets live chat transcript for the chat ending at 12:12 on 12 Sep 2007. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: Good morning and welcome to Markets Live – FT Alphaville’s daily markets commentary.
PM: Neil Hume is with me
PM: But he’s busy discussing Arsenl with Tony Tassell, one of our news editors
PM: ZZzzzzzzzzzzzzzzzzzzzzzzzzz
PM: Do get your comments up early — so we have some time to think of smart arse answers
PM: While we waiting I can tell yo that the FTSE 100 is off 16.5 at 6264.2
NH: morning. sorry i’m late got problems with our terrible email system
PM: Actually — he’s late cos he was discussing Arsenal
PM: Anyway — the Bank of England is the headline news this morning
NH: that’s not true
NH: its the email system. drives me mad
NH: its so random. one it works, the next its doesn’t
PM: 
Just noticed the comment about you having your chin strap on too tight
NH: the picture does me know favours
PM: No favours that is
PM:
NH: quite why they decided to snap me with my head a 45 degrees I have no idea
PM: Anyway, the BoE!
PM: People are chewing over this letter that has just been sent by Mervyn King at the Bank of England to the Treasury select committee.
NH: my email works. amazing!
NH: Hmm. Merv will not swerve, it seems.
NH: Playing hardball.
PM: Lovely prose though
PM: I am conscioius that in sending you this statement I am taking a snapshot of a fast moving situation with a long exposure camera.
NH: Gorgeous writing
PM: conscious — my misspelling
PM: Dont want him on the phone
NH: This seems a key quote
NH: Injections of liquidity in normal money market operations against high
quality collateral are unlikely by themselves to bring down the LIBOR spreads that
reflect a need for banks collectively to finance the expansion of their balance sheets. To
do that, general injections of liquidity against a wider range of collateral would be
necessary. But unless they were made available at an appropriate penalty rate, they
would encourage in future the very risk-taking that has led us to where we are.
PM: Read – Moral Hazard.
NH: And then this:
NH: If risk continues to be under-priced, the next period of turmoil will be on an even bigger scale. The current turmoil, which has at its heart the earlier under-pricing of risk, has disturbed the unusual serenity of recent years, but, managed properly, it should not threaten our long-run economic stability.
PM: So the banks can burn – for now.
PM: 
PM: let’s got to the question below
PM: Yonathan — is that an uptodate libor??
PM: Think that is yesterday’s fig
PM: Right — but what about C&C??? makers of Magner’s irish Cider
PM: Rumours of interest from SAB??
NH: been in touch with the company’s 
this morning
NH: and they say there is nothing in it
NH: had no approach
PM: That’s the fell collar
PM: felt collar even
PM: got to try and get it together
NH: nonetheless shares up e0.27 at 6.17
NH: probably a dead cat bounce
NH: C&C has been a horror story in recent months
NH: couple of big profit warnings have decimated the share price
NH: down 48% in three months
PM: Blinking eck
PM: We should say that we continue to believe that the object of SAB’s desire is still Scottish & Newcastle
NH: yep
PM: Which brings us to Michiel’s question below on Carlsberg
NH: the view we are taking is that given the speculation and the comments made by various senior directors at Carlsberg the Takeover Panel would defo have been in touch with its advisers
PM: And so the absence of a statement indicates nothing is happening
NH: FOR THE MOMENT
NH: remember Carlsberg’s new CEO does not take the helm until the start of Oct
PM: Good point
PM: And an interesting point from rahodeb below on C&C — 
NH: Yonathon check the date on the Libor quote - its the 11th
PM: He’s just said that!
PM: Sorry — Yonathon — we have a delay on the system from our end — typing wise
PM: So we have a few secs to stop libels being printed
NH: just had some raw market info
PM: This is good
PM: RAW — but entertaining
NH: concerns BAE Systems which is the biggest riser in the ftSE 100 at the moment
NH: the story is this
NH: BAE’s IR have been hitting the phones this morning
PM:
NH: they have been checking email addresses and contact names
NH: fund managers have also been callled
PM: V funny — The BAe Telegraph
NH: now there were rumours last week that BAE was poised to announced a eurofighter deal worth £20bn with Saudi arabia
PM: Tomorrow is the start of Ramadam — and the suggestion is that the company will want to get the news out quick
NH: should also point out the other factor driving BAE shares this morning is that company is in talks with the US DoD over a deal to supply 10,000 trucks
PM: The bulls — citing the charts — on this one are talking about the price breaking out of 478 and running as high as 570p
PM: But we should repeat — this is RAW market chatter
NH: very RAW
PM: Funny tho — just the sort of thing BAe’s IR would do — ring round to check contact details
PM: When you look at the company’s PR generally over the past few years
PM: Well…..
NH: you know they won an award recently
PM: Actually, you are right — didnt they hire a woman called Charlotte Lamkins (spell?) recently?
PM: From Bell Pottinger
NH: think they did
PM: Oh, I meant to tell you – some people are reading us and actually taking our advice.
NH: Wot? That sounds a bit dangerous.
NH: Who’s taking our advice?
PM: Warren Buffett, it seems.
NH: Buffett? Yeah right.
PM: No seriously.
PM: Given all the danger signs we’ve posted on China.
PM: Saying it’s a mega bubble – the bursting of which will bring this great bull market to a close.
PM: Well the Great Man – the Sage of Omaha – has been cashing out.
PM: Cashing out of China that.
PM: I think it was your statement this week – that you agreed with me on China – saying the Shanghai market stank.
PM: I think that just tipped him.
NH: Have you got any evidence for this???
PM: Yeah – it’s in an SEC filing overnight.
NH: Oh yeah?
PM: It is.!
PM: Look he’s sold 93m shares in PetroChina – taken $136n off the table
PM: The stock has doubled so far this year — and Buffett is taking his profits
PM: That said, he’s still got 2bn shares in the thing – just under 10 per cent.
NH: So he’s got a way to go.
NH: Wasn’t there some stink about PetroChina earlier this year?
PM: Yes, it’s linked in some way to Sudan – and there was a shareholder motion at the Berkshire Hathaway AGM to get Buffett to sell out.
PM: Supporting a corrupt regime, etc. But the resolution was rejected.
PM:
PM: Anyway — let’s get back to the London market
PM: What’s going on? What has caught your eye?
NH: Its pay day at Ashmore, the emerging markets fund manager
PM: Certainly is. News this morning of a big share placing by a non-executive director and a number of employees
NH: they are looking to offload 26.5m shares – that’s 3.4 per cent of the company through Goldman Sachs and UBS
NH: announcement was made alongside figures, which look OK
NH: not a huge surprise that some employees are looking to sell
NH: Ashmore has performed well since it floated at 170p last October
PM: So is this a sign the employees are nervous about the outlook for emerging market?
NH: well, in this morning’s results statement the company sound pretty confident
NH: say the recent meltdown has been triggered by events in the US and emerging markets have not been hit as hard
NH: seem to be pretty relaxed about the debt market as they claim their investments are long term
PM: Who do we think the non-executive director selling is??
NH: dunno but the non-exec’s are Michael Benson – he is chairman
NH: the others are Nick Land and Jon Moulton
PM: Jon Moulton, the Alchemy guy??
NH: Yep
PM: and how have Ashmore shares taken news of the placing
NH: not very well, off 13.75p at 241p – that’s a fall of 5.4%
PM:
PM: Just a quick bit of news forwarded by Andy Slade — news editor…
PM: (Bloomberg) — The European Central Bank loaned banks an additional 75 billion euros ($104 billion) for three months to reduce the cost of longer-term credit in money markets.
PM: So, while Mervyn King is sitting with his arms folded, the ECB has its cheque book open again
NH: the difference in the stance being taken by the ECB to that of the BoE is really quite striking
PM: Hmm. back to individual stocks….
PM:
PM: We had better look at ITV
NH: yes, Michael Grade has unveiled his long-awaited strategic plan this morning
NH: and it has proved to be something of damp squibb if the share price is any guide
PM: What’s it doing — the stock
NH: down 1.8p at 110.8p
PM: Pretty muted reaction then?
NH: I think the review is what most people expected
PM: So what’s Mr Grade’s vision for the company?
PM: Glancing at the statement….
PM: one of the most important things he saying is that ITV must be self funding
PM: Sorry — it is self funding
PM: ITV should be able to hold dividend, apparently
PM: That is despite Grade planning to increase in-house production from 54% to 75%
PM: ITV will develop it external content sales
PM: this all sounds pretty basic
NH: it does
PM: any news on current trading??
NH: Yep and the picture is mixed
NH: Looks slightly better in 3Q with ITV1 sales +2% vs previous target +1% though this is boosted by World Cup Rugby and Formula 1
NH: Figures for year to Oct, at -6%, which is not brilliant
PM: Broker comment?
NH: this is Lorna Tilban at Numis
NH: Michael Grade has released his long-awaited review and provided a trading update. We find the review coherent and eminently sensible and are pleased to note that it is self-funding, enabling ITV to hold its dividend. Encouragingly, advertising continues to firm. We had built a c.£20m cushion into our forecasts, but believe there is scope to upgrade our below consensus estimates this morning; we don’t expect a material move in consensus. We are firm supporters of the ITV turnaround, but believe this is largely discounted in the price.
NH: Trading: At the interims in August, ITV stated that ITV1 NAR was up +1% in Q3 while ITV plc NAR (including Multichannel) was up +4%. These growth forecasts have been revised upwards to +2% and +5%, respectively this morning.
NH: Forecasts: We left our forecasts unchanged at the interims pending the outcome of this review, with a c.+2pt improvement in NAR (from -9% to -7%) acting as a £20m cushion should ITV decide to increase investment. However, this morning ITV has stated that its new strategy is ‘self-funding’ and also that acquisitions/investments will be paid for by disposals of non-core assets. We therefore expect to raise our bottom-end forecasts (2007 £235m/4.2p, 2008 £255m/4.5p) though we do not expect a material change in consensus forecasts. We are supportive of the strategy, though on >20x 2008 EPS believe this is largely captured in the current share price.
PM: This is from Investec Securities
PM:
Overall, at first glance, this looks positive with some more punchy revenue
growth plans, but only £20m new programme spend for ITV2 and the suggestion
that overall programme spend of c. £1bn will not rise.
