Good morning and welcome to Markets Live – Take Two

Sorry — my fault

Explanation: we have an “end session” button at our end. I clicked it by accident. There used to be a safety catch on it — but no with new ML. Will have to get that fixed…

where were we?

we are talking about the economy

and how Bolton ignores economic data

Yep

And how he buys when things kick off in the middle east

while we are talking about the economy

Throg — er, yes

we should quickly start another interest rate competition

MPC meets on Thursday

Consensus is for 50bps

but the whisper numbers is now 100bps

and that’s what I am going for

whoa

Paul?

Well, I would be surprised at a further full point — but then ive been wrong the last couple of times

Looking as tho we are approaching to ZIRP, eh

actually when’s the next Fed meeting

Jan 28th

but as there are already at ZIRP

or almost there

what the market will want to hear about is quantitative easing

and if they start market purchases of Treasurys

sure

HeliBen

OK

let’s get to some stock specific stuff

OK

I was going to look at the retailers

but before we do

Tate & Lyle very weak this morning

off 26.25p at 395p

a fall of just over 6%

apparently 2009 sweetener contracting has been
completed

and it does not look great

fixed contracts are said to be up 1-2c per lb, below the 3.5c increase the industry had been trying to get

on top of that

Harbinger, the US hedge fund run by Philip Falcone

the man who was labelled the midas of misery by the UK press

for shorting HBOS

has been selling down

from 19% to 13.9%

and if Harbinger are facing redemptions there could be further heavy selling

Hmmm

but I shoudl also mentioned that Tate shares had a good run on Friday

on the back of a really odd story

apparently a Russian investor acting through a broker

wanted to buy £100m stake in Tate

apparently the order got pulled

not sure why

perhaps the funds were not in place

That sounds very odd. Thought most Russians were cash-strapped all of a sudden

me too

worth monitoring though

sure!

Let’s get back to these retailers

well, there have been some positive noises this morning

and share price moves

now, the Xmas reporting season gets underway this week

Next and Debs tomorrow

and M&S on Weds

now, here’s the important bit

the mood among analysts has changed

instead of this being the worst Xmas in living memory

it looks like there was a last minute spending spree

which seems to have saved a number of retailers

now that does not mean things will be great

but in means trading is going to be in line with expectations

which admitedly are low

and there could be something in this view

Why?

well, the FSA in recent years has been on the case of retailers

every year, before Xmas it reminds them of their responsibility to keep the market informed of any deterioration in trading

put more bluntly: if you have to issue a profits warning do it as early as possible

all of which means the profit warnings tend to come early in January. dragging the sector down, while better Christmas trading statements tend to follow later on, often pulling the sector back up again.

so take the example of M&S

it has not brought forward its trading statement

so, one can probably assume that it will be in line with expectations

now these expectations might have been lowered in recent weeks

good points

and the divi could be cut but

the statement could be in line and prompt a rally

in fact this is precisely what happened last year

retailers had a big rally in third week of Jan

OK

We should look at analysts comment on this

but before we get to that

worth noting that the results out from Liberty International this morning

were not too bad

here’s the trading statement

Sales for the first 10 months of the year were ahead of comparative trading levels. Although November’s trading reflected the general retailing slow down, sales in December exceeded expectations and almost matched last year’s record Christmas as the store cleared its stocks in preparation for a widely anticipated major renovation during January 2009 which will see two-thirds of the building redesigned, re-merchandised and unveiled in February 2009. Trading was also helped by Liberty’s newly-launched e-commerce business which exceeded expectations and showed particularly significant growth in December.

hmmm

as you say

not too bad

analyst comment?

here’s how one broker summed it up to his clients this morning

There was a last minute spending spree of some sort but this was skewed towards the low ticket end and those who had maintained pricing power. An interesting stat is that book market had a great last week meaning only 2% down for the full month. John Lewis was flat LFL in the last week.

It also appears that Next has a strong response in the start of the sales. The retailers will start to report this week, profit warnings may just be avoided because of the final flurry, but the outlook still remains grim.

this from Nick Bubb at Pali

In the short term there may be some relief that worst fears about Xmas spending weren’t realised, but the long-term outlook for non-food retailers is so grim, given what is happening to unemployment and the housing market and sterling, that on a 12 month view we can’t recommend the purchase of any non-food retailer that we currently cover…but for those keen to hear how we will follow up our successful tip for WH Smith in 2008, we have scoured the list of those stocks we don’t formally cover and we can see the case for Game Group (not rated) at 127p, though it may be a bumpy ride

. More news on Game after next week’s Xmas update. Carphone Warehouse (not rated) too could eventually recover from c90p. But for the rest of the General Retailers, stay short is the best bet (particularly M&S and Home).

As for the Food Retailers, they will be much more defensive and the PE premiums that investors are willing to pay for safety may well increase, so we remain neutral on the sector

and here’s Philip Dorgan at Panmure Gordon

Retail Christmas Trading Updates
‘Tis the season to be jolly
We think that investors need to retain a sense of perspective as retailers
update on Christmas trading. In the general retail sector, the numbers will be
poor and there will be downgrades to consensus earnings forecasts. However,
we believe that many share prices are already discounting the bad news.
Conversely, the food retailers’ updates will look good, but this will be as good
as it gets in terms of sales and share prices.

In December we published a report on the Retail Sector which, as we enter the
Christmas trading update period is worth summarising.For the general retailers, the last 12 months have been bad AND its going to get worse, with Christmas trading set to be dire. We have downgraded forecasts for 2009/10 by 62% since December 2007 and share prices have fallen by 70%.

However…at some point the recession will end and…share prices will move ahead of the fact.

ALSO..those that survive will face LESS competition and have better prospects. We
believe that investors need to differentiate between the temporary effects of the worst
consumer recession for over 30 years and the permanent, structural problems facing
individual companies.

We DIDN’T call the end of the downgrade cycle and our Sells still outnumber our Buys BUT, we do think that NOW is the time to buy the survivors and we upgraded our recommendations accordingly.

Conversely, for the food retailers, its been good, but…its going to get WORSE. In 2008, they were inflation junkies and they are going to go cold turkey in 2009.

We think that the £48 a week that the average household spends on food is going to
come down, as the recession hits ordinary working families HARD. Therefore, we think that the combination of lower inflation and trading down will lead to LFL sales also going DOWN. We think by 5%. Profits will therefore fall and with the sector now more operationally geared than in the last recession (lower margins, higher rent bills), which means that the downside risk is greater.

Overall, therefore, we think that investors will need to retain a sense of perspective as
retailers update on Christmas trading. In the general retail sector, the numbers will be
poor and there will be downgrades to consensus earnings forecasts. However, we believe that, taking a 12 month view, many share prices are already discounting the bad news.Anyone who expects a ‘good’ Christmas for sales and margins needs to get out more.
Conversely, the food retailers will look good, but this will be as good as it gets in terms of sales and share prices.

oh and this from Investec

Next and Debenhams are expected to report tomorrow (Tuesday 6th January),
Marks & Spencer on Wednesday 7th January. Of these, we see the greatest
downside risk to forecasts at the latter. We remain Buyers of Next with a price
target of 1300p, we expect possible equity raising measures at Debenhams,
which should be supported given its relative trading strength, and continuing
forecast pressures at M&S, which we expect to underperform

We are Buyers of Next with a price target of 1300p. Next would normally report
for the period to 24th December, which given the likely significance of the post
Christmas Sale this year could be misleading. However, the company has also
in recent years given a likely forecast range to include the effect of the Sale. We
expect that Next’s full price trading stance into the peak will have put it at a
disadvantage and that LFL sales could have fallen by c10% in the pre-
Christmas period, after recording -4.4% in Q3. Assuming Next has recovered
some ground post-Christmas, there is still a good chance it will achieve our
overall H2 LFL sales forecast of -7%. However, we acknowledge some risk to
margin (H2 forecast +30bp) from an increase in the proportion of discount sales.
Our full year PBT forecast is £432m (EPS 163.5p) vs consensus at c£415m.

Debenhams (Hold) is believed to have fared the best of the three, with a clear
trading strategy, a planned increase in promotions and a continuing
improvement in the sales mix. Our forecast assumes H1 LFLs (to end February)
of -5%. At the prelims the LFL run-rate was -4.2% and gross margins were up
50bp, but we had expected this gain to be reinvested in additional promotions.
We believe our 2008/9 forecast of £92m (EPS 7.4p) looks underpinned. Press
indications that the company may take advantage of its relatively good
performance to raise equity finance look well-founded to us, and although the
sector outlook remains very difficult we expect management will be able to
attract backing despite this. Once the balance sheet has been strengthened,
there will be scope for a re-rating in the shares, in our view.

Debenhams (Hold) is believed to have fared the best of the three, with a clear
trading strategy, a planned increase in promotions and a continuing
improvement in the sales mix. Our forecast assumes H1 LFLs (to end February)
of -5%. At the prelims the LFL run-rate was -4.2% and gross margins were up
50bp, but we had expected this gain to be reinvested in additional promotions.
We believe our 2008/9 forecast of £92m (EPS 7.4p) looks underpinned. Press
indications that the company may take advantage of its relatively good
performance to raise equity finance look well-founded to us, and although the
sector outlook remains very difficult we expect management will be able to
attract backing despite this. Once the balance sheet has been strengthened,
there will be scope for a re-rating in the shares, in our view.

thanks for all that

This cheery start to the new year hasn’t included our glorious banks, has it?

Not in a meaningful way.

Meaning they are headed down again?

Yes, most are

But we’ve seen a notable rally in Standard Chartered – and i’m not quite sure why.

Price is up 50p at 920p.

This is despite James Eden slapping an underperform rating on StanChart – also got a hefty price cut from Deutsche.

Eden at BNP Paribas

And Jason Napier at Deutsche

Will paste the Deutsche summary

It’s not all bad news, but it’s still more bad than good. A torrid 2008 takes UK bank P/B’s to half the 1990′s trough and a fifth of the 03-07 average. In 2 of the last 3 recessions, stocks troughed at start of the downturn, with bear market rallies of 125% of peak to trough real declines. Official rates near zero confers significant benefits on households resetting to SVR. But without government help, lower corporate lending offsets these factors in our view, with unemployment driving loan loss and capital fears. We are cautious on Lloyds TSB in particular, HSBC and RBS to a lesser extent, and Buyers of Barclays.

Good news (1): Valuation, bear market rallies. The UK banks erased 12 years of absolute gains in 2008, bringing the sector P/B ratio to 0.37x, half the early 1990’s trough and a fifth of the recent average despite substantially improved capital ratios. In the recessions of the early 1980s and 1990s bank shares bottomed a quarter before the recession began and prompted real price rallies of ~125% the peak to trough price decline. In the early 1970s, however, shares troughed a year later in the cycle.

Good news (2): Mortgage borrowers benefit significantly from the SVR reset. UK mortgage-borrowers will benefit substantially from resets to bank standard variable rates (SVR) as interest rates fall further. With SVR at 4.4% now, the average borrower household adds 3% to income net of tax and 13% to disposable income on reset. If UK rates fall another 1.5% as we forecast and SVR rates follow, these benefits rise to 13% and 36% respectively.

Bad news (1): Balance sheet fears not gone yet. Though risk asset losses will likely be substantially lower following the reclassification of £76bn of holdings so far (and more to follow, we believe) P&L hits will continue in 2009, in our view. In addition, procyclicality of Basel 2 and sharply lower profits (we see Lloyds TSB and RBS as roughly breakeven in 2009) we expect will call capital adequacy into question in 1H09 in particular.

Bad news (2) Corporate lending troubled, more important to the economy. Most pivotal for 2009, however, is the impact on corporate profitability and unemployment of a sharp reduction in the availability of business debt and a 6% YoY decline in nominal GDP growth. With HBOS’ December 2008 profit warning suggesting that corporate loan losses may already be running ahead of 1992 peaks, the economy set to slow and commercial property prices to fall further in our view, we see significant downside risks to consensus earnings expectations.

Cutting earnings forecasts, too early to overweight the sector; risks. Notwithstanding the positive factors above, we remain cautious, reducing 2009 EPS forecasts for Barclays, HSBC, RBS and StanChart by 12% (Barclays) to 72% (RBS). Our target prices, derived by sum of the parts valuation, are also amended in each case. We are Sellers of Lloyds TSB, and see greater risks around HSBC and RBS of our Holds. Barclays is our only Buy. We see higher than expected loan losses as the key sector downside risk. Key upside risks relate to a sharp improvement in sector sentiment driven by a resumption of corporate lending volumes, likely linked to government assistance.

Actually, just digging into the Deutsche note, there’s another chunk on the sort of credit losses facing banks over 2009.

2009: bank performance to be dominated by credit risk. In 2008 banking sector balance sheets dominated the headlines, with banks facing funding or capital shortfalls underperforming sharply, and the outperformers being those banks that avoided pitfalls. We expect a similar phenomenon in 2009, with credit risk dominating performance. We expect the worst performers to be those that suffer capital or earnings damage from their credit portfolios, and the outperformers to be those few that avoid the worst of the loan losses.

Will the banks manage a painful, but orderly work-out? One piece of good news in the sector is that the liquidity situation is improving. Banks are still growing loans too quickly, in our view, and we expect growth to decelerate further. But the advent of government-guaranteed debt issuance over the last few weeks of Q4 has re-opened the debt markets for banks, allowing issuance to return to pre-September levels. Whilst this does not eliminate the problem (the debt is still there), the funding strain has shifted from bank balance sheets to government (and by extension taxpayer) balance sheets
.
But credit losses still look to be an overwhelming problem. Even if the liquidity problems are being transferred from banks to governments, we still see major earnings risks. In this report we focus on potential loan losses, updating the analysis of our 5 September report. We now think that bad debt charges could approach 3x normalised, or 210bp. We calculate that this would drive a further 85% downgrade to sector earnings on average, and leave more than one in three banks in loss-making territory. We also see potential losses plus pro-cyclicality of capital charges in corporate loan books
as putting capital ratios at further risk at some banks, especially RBS, HSBC, Commerzbank and Erste Bank.

Is inflation a possible escape route? Although the strain of funding the world’s debt is shifting from commercial banks to governments and central banks, the debt is still there. In the end, we suspect that moving the debt around will not provide a long-run solution, which increases the likelihood that the policy makers could resort to inflation to reduce the real value of debt. Whilst this could just create a new crisis in the future, inflation is good for borrowers in the short run, and by extension the banks. This could be an alternative escape route (and a possible source of bank outperformance versus the wider market), albeit this looks more likely to us in the US than in Europe.

Top-down price objective for the sector of 0.5x price to tangible book value. We think that the banks will remain in the downcycle until either the debt mountain has been written down or policy makers can inject sufficient inflation into the system to bring the debt overhang down to an acceptable level. We see little chance of this in 2009. We also see further earnings risk and / or capital risk at Lloyds TSB, RBS, HSBC, Commerzbank and Erste Bank, and these represent the key large-capitalisation banks on which we would be particularly cautious. We have very few top picks, reflecting our negative outlook. But the improvement in bank funding gives us some optimism that some banks will be able to outperform. Our top picks are UBS and Société Générale.

thanks for that

nice and bearish

probably enough for the FSA to extend the short selling ban

which must expire v soon

16th Jan seems to ring a bell

yeah, think you are right

Italians have already extended theirs

Shorts banned in Italy

actually I have some more stuff on our glorious banking sector

from RBS

they are underweight the sector and a seller of Lloyds

No one likes Lloyds anymore

Toxic, post HBOS

The debate between Govt led recapitalisation & funding guarantees vs the lack
of new lending activity continues, with the w/e press & PM interview
reporting that by end of January the UK Gvt will decide on its next step of
action on what extra help to give the banks. This comes after another sharp
fall in mortgage approvals (Nov = 29,000) and Friday’s downbeat BoE credit
conditions survey that warned of further new lending tightening across all
principal loan products over the coming quarter. Reiterate u/w domestic UK
banks, Sell Lloyds.

Detail:
- According to FT, Gvt options include:
a) offering cheaper funding guarantees or
b) buying up “toxic assets”.
c) Nor can further capital injections be ruled out.
Interestingly, there is no mention of the Q408 debate of regulators allowing
the banks to run with lower capital ratios (we see this as missing the point
that capital markets implicitly set required capital ratios, not regulators
(the widespread S&P rating downgrades at the end of Dec reinforced this
view).

Banking crisis history suggests that the missing (& probably painful) link in
the Gvt’s actions is somehow enforcing a clear & consistent valuation of
banks’ assets ie quantifying the value of embedded bad debts still to be
recognised. This could be achieved by buying or guaranteeing UK banks’ bad
assets. Successfully executed, this would allow funding & lending confidence
to return to the remaining “good” banking system – especially if accompanied
by strong capital ratios, lengthened funding guarantees, and further monetary
& fiscal stimulus. UBS and Citigroup are recent bad asset bail out models
that could be used. The big uncertainty though is who should carry the pain
of the next round of bad debts that would be crystallised: UK Gvt rhetoric to
date bodes uncomfortably for the domestic UK banks, particularly given the
thorny political issue that a large proportion of the bad debts would likely
come from non UK asset exposures.

hmm

thanks for that

where to now?

some RAW

oooh, Raw

it is not that RAW

still walking around

very much alive

but it could become RAW soon

apparently, there a couple of big deals out there

unfortunately, we don’t know what they are at the moment

but fingers crossed, we will

until that happens

there is a buzz around in a little biofuels stock called D1 Oils

rumours of a bid

but this needs to be treated with extreme caution

this company has a toxic track record

and if I mention the name Karl Watkins

well, I don’t need to say much more

also have been keeping an eye on Rio Tinto

some RAW coming from Down Under this morning

apparently Rio is set give some clarity of assets sales, when its files full year results on Feb 12

picked this up from the Australian this morning

RIO is putting together a new list of assets for sale and is believed to be assessing the merits of a USD2bn dividend reinvestment plan. RIO will release its full-year results on February 12 and investors are expecting clarity on how it plans to rebuild the company, including details of the operational spending savings on specific projects.

There is also an expectation that it will give details of the broadened list of assets it plans to sell. Assets expected to be included on the sale list include its 76% stake in Coal & Allied and its Pacific Coal business. RIO is also reportedly believed to be looking at selling its Gove alumina refinery, which could fetch up to USD5.3bn and a 68% stake in ERA. Other options include reducing its 80% stake in QAL Alumina Refinery to 50% and selling its 30 per cent stake in the Escondida copper mine in Chile

ta for all that

anything else??

Intercontinental Hotels

made further gains

on Friday, Malaysian billionaire Quek leng Chen declared a 3% holding

which raised bid hopes, predictably

this guy is a big player in the casino world

he also owns a 25% stake in Rank

and Thistle Hotels

now at the same time

there was actually some real M&A action in the hotel sector

well sort of real

Starwood in the US signed a confidentially agreement with Sam Zell’s Equity Investment Group

Now that could mean he is about to increase his holding

or bid

but that looks an outside bet

as Zell has issues elsewhere at the moment

Like the chicago tribune

nd LA Times

anyway, here’s a note from Evolution Securities

EVO TAKE – Long-term investors are showing an interest in hotel shares, Starwood’s (not researched) share price has risen 30% in the past week, IHG only 6%. We expect IHG to rally further and this will present a selling opportunity for institutional investors. Trading will continue to deteriorate and the share price will not be able to sustain a rally against this backdrop.

DETAILS – Hong Leong of Malaysia (owns Thistle Hotels and 24% of Rank (Buy, TP 120p)) declared a 3% stake in IHG on 2 January (Ellerman Corp (Barclay Brothers) own 10%). On the same day Starwood announced that it had signed a confidentiality agreement with Sam Zell’s Equity Investment Group. EIG has an 8% stake in Starwood.

VALUATION AND RECOMMENDATION – A further increase in IHG’s share price is likely to result from these signs of interest in IHG and Starwood and long term investors may wish to build a position. However we believe the rally will be short-lived and that the share price will not bottom out until trading news does – not expected until the end of 2009 at the earliest. Even though IHG has been badly de-rated, we retain our Reduce recommendation. It is too early to call the bottom with trading deteriorating at an increasing pace, forecasts still declining and no signs of a recovery in asset prices. Our 485p target price is based on 80% of book value for the owned assets and 6.0x EBITDA for franchised/management contracts. The time to buy IHG shares is when occupancy trends return positive – which could still be a year away.

ta

Good point below from Curious Geroge

we were just coming to the Toxic Pub Company

or Punch Taverns as it used to be called before the Crunch

yeah, changed its name

biggest faller in the FTSE 250 this morning

off another 3.35p at 55.25p

David Einhorn of Greenlight Capital

cut his holding last week

hand his fingers burnt in that

cut his holding from 32m to 19.7m

Which is 7.4%

Punch has also sent letters to 500 pub owners

asking them if they want to buy their houses

apparently demand has been good

okay

LIBOR time — briefly

*DJ 3-Month USD Libor Fixed At 1.42125%, Vs 1.4125% Friday

DJ 3-Month Sterling Libor Fixed At 2.6475%, Vs 2.705% Friday

DJ 3-Month Euro Libor Fixed At 2.81375%, Vs 2.84875% Friday

an. 5 (Bloomberg) — The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans in dollars was little changed, near the lowest level since June 8, 2004, according to data from the British Bankers’ Association.
The rate rose one basis point to 1.42 percent today, the first increase in five days, the BBA said.
The Libor-OIS spread, a measure of cash scarcity, widened two basis points to 124 basis points.
For Related News: For Top Stories:{TOP GO>}

We should mention what is happening currency wise

GBK not too bad today.

Nor is the dollar

$ trding at 93.3 against the Yen

GBK v $ at 145

GBK v Euro at 1.064

a recovery of sorts for the GBK

three month brent at $52

Okay — before we go

Got any prediction stuff for 2009 Neil

Not your own predictions — professional stuff

I have and they are both pretty gloomy

Citigroup saying the FTSE 100 will go nowhere

and Saxo Bank

well, they think it could hit 2,950

which is about as low as if i have seen

although Morgan Stanley say it could hit 2,500 in a bear case sceanario

which has a 35% probability of happening

have you got that note?

trying to get

but I have the stuff from Citi

Resilience becomes recession. Risk assets hammered. Risk-free assets soar.
The pain of the last 12 months is seen across economic growth forecasts, risk
asset markets and corporate profitability. The outlook for economies in 2009 is
bleak but markets are factoring in much of this bad news already. We view the
best way to be positioned is in large-cap, strong balance sheets companies that
offer resilience in the face of the gloom. We stick with our core mantra of long
growth/short leverage. There is pressure building for the recovery/reflation
trade. We view it as too soon to fully back this.

2008 – the 3Ds — UK markets down a third, the worst year since 1974. De-rating,
Deleveraging and Darling intervening

2009 – another 3Ds? — Deflation, Depression, Debt. The market fears all three.
We forecast the first two will be avoided and that investors should avoid the third.

Profits to collapse — We expect UK profits will fall c45% peak to trough, with
2009 the worst year. Dividends will be under pressure and could fall by 15%.

Markets already know — The market is pricing much of this in already and risk
assets are offering value to the long term. Short term to remain challenging.

2009 and 2010 targets — We set a 2009 FTSE 100 target of 4600 and 6000 for
2010, we expect recovery to be fully priced in during 2010.

Defence — Strong balance sheets, size and market-leading positions are set to be
key strategies at the start of this year as bad news increases

and while we wait for Saxo

The James Eden bank note has arrived

So what is he tipping this year?

well has gone bearish on everything

European banks, UK banks

Stan Chart, Barclays

okay — will some will take a contrary view on that

Downgrade Standard Chartered to Underperform (from Neutral)

After a sharp de-rating predicated, in part, on capital raising fears, Standard
Chartered then executed a “model” GBP1.8bn rights issue in November/December
with 97% shareholder support, while continuing to experience only limited impact from
market turmoil. Standard Chartered has outperformed European Banks by 67% (and
HSBC by 47%) through to year-end since we upgraded to Neutral on 28 October
2008). Ahead of a likely global recession in 2009, a deserved relative share price
recovery has now been slightly overdone. The stock trades on 1.6x tangible NAV
(2009e) compared to a sector average of 0.9x. We downgrade back to Underperform.

Downgrade Barclays to Neutral (from Outperform)

We upgraded Barclays to Outperform (see “Enough Punishment?” 19 November)
following its share price collapse in the aftermath of its hugely unpopular capital
raising, where existing shareholders’ pre-emption rights were subverted and Barclays
locked into expensive, 14%-coupon RCIs for the next ten years with Middle Eastern
investors. Barclays’ share price has rebounded 20% in absolute terms, outperforming
European Banks by 16% since our upgrade. However, with limited visibility on the
outlook for investment banking earnings, (Barcap represents 37% of u/l 2009e Group
PBT), we see less scope for further outperformance and downgrade back to Neutral

Underweight Banks ; underweight UK Banks

We retain our underweight stance on the European banking sector. Whereas,
consensus expectations remain unrealistically high in other sectors, downside risk for
banks remains high in an environment where structurally lower returns on equity will
struggle to match cost of equity. The UK banks sub-sector remains particularly
vulnerable given still relatively elevated valuations (HSBC and Standard Chartered)
and UK domestic banks’ exposure to the rapidly deteriorating UK macro environment

Thnks for that

Right — we are done

Thanks for joining us today — adn sorry about the interruption earlier

Was totally my fault. Nothing to do with IT

We will be back tomorrow at 11am

But thanks for all your comments

And, if you hadnt read it, here is some lunchtime reading…

Lucy Kellaway

Also this in the NYT

and this – some technical comment from Redburn Partners. The message – remain bullish. Everyone thinks the market has gone too far so it will probably continue, especially as no has any stock

Very nice seeing Dow above 9000, S&P above 918 and Nasdaq above 1600.
These are all the key early December highs, key short term resistance
levels. These moves do make the patterns in equity indices look more and
more like big bottom patterns, after a historic bear market. These
bottom patterns show up across most markets in the world, but none have
quite yet cleared the early November highs that we need to be broken to
confirm the pattern properly. (Mexico sort of has.)

The main problem for us is that the rally over the Christmas / New Year
period has, of coure, been on very low volume. More worrying also is
that there is no leadership.. Very few stocks making relative highs.
There have been more price highs than lows in the S&P 1500 for the last
3 day running, so at least the breadth is ok, but still too early for us
to be clearly bullish.

We are a lot more bullish than most people would expect of trend
followers though. Partly on the basis that there are very few real bulls
around, cash levels are high, and there is a chance we sort of held at
key long term support on the S&P at 768 (touching 741 but not really
staying below 768). We are buyers to 1007, but need a big stop loss (and
reverse) at 768.

We’re hoping that we’re going to see some volume and some leadership
emerge this week. There are some 3m rel highs in the old global
growthies (CAT, Billiton, Rautaruukki) but we can’t really say there are
any clear chart buys in this area yet.. We also think it’s a bit
unlikely that global growthies are going to lead another bull market for
a while (we’re still in recession, just not in depression) but it is of
course possible. We would prefer financials to be the new leader, after
all they have had a 2-4 year bear market, but so far there are very few
financial buys. XBD rel chart on page 5 looks slightly ecouraging
though?

Bottom line – we are bullish short term, but don’t yet know what stocks
to buy.More tomorrow.. Sorry for short comments today – very behind shcedule!
Top 200 chart packs available for UK, US, Pan Europe, Global – v good
way to catch up on recent moves, and to put last years moves into a
longer term context..

On that note….

Seeya