Markets live chat transcript for the chat ending at 12:12 on 5 Nov 2009. Participants in this chat were: Neil Hume, FT (NH) Miles Johnson, FT (MJ)
NH:
and time for Markets Live
NH:
FT Alphaville’s daily markets discussion
NH:
lots to talk about this morning
NH:
what seems like half of Europe has reported results or a trading statement
NH:
and we also have the MPC statement
NH:
when we get to find out if the BoE starts up the printing presses again
NH:
the plan is to stay on air for the announcement
NH:
and have a quick discussion
NH:
it must be quick because I have a lunch with some market makers at the Gaucho in Broadgate
NH:
and it will take me around 20mins to walk there
NH:
you try getting that one through expenses
NH:
I didn’t even bother getting a receipt
NH:
for that one we took to the Citigroup drinkslast night
NH:
let’s get straight down to business
NH:
Miles, what’s the market doing?
MJ:
well, it started really weak
MJ:
following Wall Street’s re-tracement overnight
MJ:
but then rallied following the factory output news
MJ:
which was pretty positive
MJ:
British manufacturing output rose faster than expected in September, and at its fastest monthly pace since July 2002, rebounding from August’s sharp drop,
official data showed on Thursday.
MJ:
the FTSE 100 is now down just 21.5 points at 5,086
NH:
what we going for from the BoE then?
NH:
rates on hold obviously
NH:
another £25bn fired off from the HEIDELBERG presses?
MJ:
I am going for a pause
NH:
I don’t they really want to buy any more of the gilt market
NH:
here’s a little primer from a friendly broker
NH:
Today will be a bigger day than most are crediting for ahead of the BOE’s
announcement. A majority of economists surveyed by Reuters last week
expected the central bank to lift its asset purchase target at this month’s
meeting.
- Of those expecting the target to be raised, half favoured a £25bn increase
and half a £50bn increase, leaving the median forecast for an increase to 200
bn, versus today’s £175bn. However, uncertainty is high ahead of the
announcement and this week’s better-than-expected U.K. manufacturing and
services PMI data have raised market doubt further.
NH:
- Expect some form of further monetary loosening, either through an increase of
the asset target or the introduction of some new measure - most likely a
change to reserve remunerations - or both, to ensure that the recovery is
not hampered by tight credit conditions. However, the outcome remains highly
uncertain. There’s a strong case that they don’t extend it given that
the recent GDP reading has widely been rebuffed as a statistical anamoly which
will be revised away.
NH:
- GBP extended its pull back to send Cable in to 1.6470 and EUR-GBP moved in to
0.9000. There is evidence of pre-BoE positioning amid expectations that its
quantitative easing programme will be expanded. The Times MPC said that seven
out of its nine members believe that the program should be extended, with
four voting for £25bn, one called for a £30bn rise and the other two voted
for no change. Kaletsky believes that the Bank must encourage banks to stop
hoarding reserves and by continuing to renumerate banks at 0.5% is a mistake. –
NH:
Market expectations are high ahead of the decision and we can not rule out a
‘buy on the fact’ move as sterling shorts cover positions if the BoE deliver
a move as expected. The accompanying statement will be pivotal, especially
after the GDP weakness, but some market insiders are already calling for
upward revisions, perhaps leaving sterling fortunes in the hands of market
risk. Today’s equity market downturn in Asia after late Wall Street losses is
a negative lead early on, but movement is likely to remain slow in to the
decision.
MJ:
and what about the ECB?
MJ:
they have a statement too today
NH:
not really an ECB watcher to be honest
MJ:
Obvously everyone expects rates to be held
MJ:
And then for clues about the liquidity measures
NH:
Mokney that’s very amusing
NH:
Brazil man appears at own funeral
NH:
(FatDaz are you opening drinks still on tonight?)
NH:
not sure on Voda at the moment
MJ:
which one of the numerous result statement do we want to start with?
NH:
what about the one that proved the biggest disappointment
NH:
Cable & Wireless it is then
NH:
been weeks of speculation about the company demerging its corporate and international arms
NH:
we have that news today, but also a surprise
NH:
a socking great cut to guidance
MJ:
aren’t they the company that provides our internet service?
MJ:
and our data warehouse
NH:
the less said about that the better
MJ:
So we are completly objective on this one then
MJ:
the shares have taken a bit of whack
MJ:
Down 10.3p at 137.6p - 7 per cent drop
MJ:
what’s gone wrong then?
NH:
well, ironically it is the guidance from the International business that’s done the damage
NH:
guidance was cut at CWI from $935mn to $880-900m
NH:
driven by a poor performance in
NH:
and analysts are also sceptical the demerger will ever happen
NH:
because of pension fund issues
NH:
cash generation was pretty poor – just £19m
NH:
are the trustees really going to allow a demerger
NH:
on the back of that performance
NH:
particularly if you are talking about demerging the cash cow international business
NH:
there’s some good comment on all of this
NH:
analysts have long expressed concerns about cash generation at C&W
NH:
and its corporate business
NH:
and of course its renumeration schemes
NH:
which basically give John Pluthero loads of dosh if he can get the share price up
NH:
well he doesn’t have much skin in the game so it does matter
MJ:
an asymmetric bet then
NH:
here’s Morgan Stanley
NH:
Quick Comment: C&W delivered a poor set of results
this morning. Revenues were 3% lower than we forecast,
EBITDA at £463mn was in-line with our and consensus
expectations, but guidance was cut at CWI from $935mn
to $880-900mn driven by poor Caribbean trading. Note
that the new guidance includes a $40mn positive from
Maldives, so the underlying guidance cut is much
worse - $85mn at the mid point or around 8% of
sales in H2. Offsetting this, the company preannounced
its FY10 dividend of 9.5p (6.4% yield). C&W also agreed
an interim pension funding plan with the Trustees
comprising payments of £10mn in Oct 2009, £20mn in
Oct 2010 and £45mn in April 2011. The next full
actuarial valuation is due in March 2010. The IAS 19
deficit is £305mn.
NH:
International: Local currency
revenue growth rates were weak at Caribbean -10%
(weak tourist numbers and falling GDP), Panama -9%
(delay in government spending), with Macau at -1%
(relaxation of visa restrictions) and Monaco & Islands
+3% steady.
NH:
Worldwide: Management reclassified
exceptionals into capex – this lowers the base FCF from
which analysts tend to extrapolate FY11. IP, Data and
Hosting growth, pro forma, thus appears to be only 5%.
Management increased its THUS synergy targets in
2011/12, with an extra saving of £10mn in EBITDA and
£4mn in capital expenditure identified, but these are very
long dated.
Demerger. The company says it will give further details
at the end of the month. We question whether the
pension trustees can agree a demerger given CWW
cash generation in H1 was only £19mn. Will there be
an escrow required, or a liability on CWI? What is
the impact of FTSE exclusion?
Stock view: Our mark-to-market analysis gives two
potential outcomes for C&W shares at 125p or 190p. We
would anticipate the stock moving towards the lower end
of this range on these results.
NH:
H1 results are weak, with a particularly poor performance in Caribbean. CWI
EBITDA outlook has been cut by 8-10% underlying, as cost savings fail to
offset topline pressure. Other CWI assets and Worldwide are faring better, but
at best are only inline with forecasts. We see downgrades of 10%+ to EPS. The
demerger is “now underway”, but in the absence of a trade buyer, we struggle
to see the value created by such a move. Shares likely to weaken on this.
NH:
who are still a buyer
NH:
Headline guidance strong, underlying is light
Headline FY EBITDA guidance moves from £1025m to £989-1002m vs DBe
£971m but includes £27m additional from first time consolidation of Maldives
and GBP at $1.50 which is worth c.£40m. Underlying new guidance
is therefore £922-935m, which is c£40m or 4% light of DB due to trading in
the Caribbean. We suspect however that this is an overly pessimistic view
on CWI as non-USD forex within CWI have actually improved. Reassuringly
Worldwide guidance reiterated.
Buy on weakness
Stock is down -5% to 140p which where it was ahead of recent run. We
view that as an attractive entry point now ahead of demerger story and
gearing into economic improvement. Buy. TP 210p
MJ:
strikes me that the whole reason for this demerger
MJ:
is to get the share price up
NH:
well, funny you should say that because
NH:
the shares have underperformed this year
NH:
before today’s fall they were off 5.4% in the year to data, according to my Reuters system
NH:
Right a little bit of RAW
RAW is market chatter - information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
NH:
shares moving this morning
MJ:
More Tesco bid rumours?
MJ:
Who was pushing that one earlier this week?
NH:
they said Tesco should take advantage of the weak Ahold price
NH:
and apart from the cost savings it would generate
NH:
they would also get a US business
MJ:
There is talk of Metro doing a placing
NH:
actually, Tesco shares don’t seem to have ruffled by these rumours
NH:
biggest riser in the FTSE 100
Tesco (TSCO:LSE): Last: 417.15, up 8.15 (+1.99%), High: 417.90, Low: 406.35, Volume: 9.12m
NH:
I have some more RAW Miles
NH:
and you won’t like this one bit
NH:
given the fantasy short position in BA
NH:
and the looming results
MJ:
I don’t like the sound of this…
NH:
The board of BA will discuss tomorrow whether to reach an initial merger agreement with IBLA, reports El Economista. The accord would pave the way for the merger to be completed by the second quarter of 2010. A memorandum of understanding would include the newco’s headquarters to be in Madrid, IBLA naming the chairman and BA the managing director and a 55% BA/45% IBLA merger split. DJN reported last night that IBLA has hired JPM to help it close a planned merger with BA.
NH:
how’s the short position looking?
MJ:
But that was the intention
British Airways (BAY:LSE): Last: 186.80, down 5 (-2.61%), High: 191.00, Low: 185.90, Volume: 2.91m
NH:
and there was another report yesterday
NH:
which I will just get
MJ:
The one in Cinco Dias?
NH:
MADRID (Dow Jones)–Spanish airline Iberia Lineas Aereas de Espana SA
(IBLA.MC) has hired JP Morgan Chase (JPM) to help it close a planned merger
with British Airways PLC (BAY.LN), according to people familiar with the
situation.
The hire is likely to add fresh blood to a negotiation process that has been
dragging for more than a year, these people said. Morgan Stanley (MS) is also
advising Iberia. BA, in turn, is advised by Swiss bank UBS AG (UBS).
JP Morgan, headed in Spain by Enrique Casanueva, is a trusted adviser of
Antonio Vazquez, who was recently appointed chairman of Iberia. JP Morgan
helped Vazquez negotiate a merger agreement with Imperial Tobacco Group PLC
(ITY) when he headed Spanish tobacco giant Altadis SA.
NH:
A JP Morgan spokeswoman declined to comment. Morgan Stanley didn’t
immediately return a call seeking comment.
Executives at Iberia and BA have said they hope to announce a merger
agreement before the end of the year. However, as important as the merger talks
are, they’ve been eclipsed with real-world problems at both carriers.
: A drop in air traffic and particularly in business travel has led both BA and
Iberia to report losses in recent quarters, forcing them to make additional
staff and cost cuts. Both are also battling with unions that are staging or
threatening strike action.
An Iberia spokesman declined to comment. A spokesman at BA also declined to
comment.
BA on Friday will publish fiscal first-half results–expected to be among its
worst ever–and may give an update on the merger talks.
NH:
all set up nicely for tomorrow Miles
NH:
I think you should close the position
MJ:
As I said at the start of the week - if we blow up, we should blow up in style
MJ:
Away from such things
MJ:
There has been a bit of noise in Kradbury this morning
NH:
Yes, some people were getting excited earlier about the idea Kraft was to announce a formal hostile offer
NH:
the terms of which would have be the same as the indicative proposal
NH:
which is worth around 723p now
NH:
can probably provide an update
MJ:
Same terms would be a big blow
NH:
(Taxloss - i bottled it!)
MJ:
To some of the folk out there expecting an offer nearer 850p
MJ:
this appears to be down to some people misreading press reports
NH:
Yes. The Cadbury board apparently had a meeting last night to discuss the Kraft figures.
NH:
This was interpreted by some as being a meeting to weigh up a formal hostile offer.
NH:
Which clearly has not come.
MJ:
I gather that “people familiar with the matter” are dropping hints
MJ:
that Monday is still the likely day for an offer
MJ:
Which isn’t very suprising
NH:
Ah yes, “familiar people”.
MJ:
Looks like it could be a busy weekend for both sides though
NH:
The shares are down again today.
NH:
and as we keep can saying
NH:
where is all the M&A that was supposed to follow
MJ:
Funny that. That came up at those drinks last night
MJ:
View was that European CEOs still don’t have the bottle to do anything big
NH:
that seems to be the view
NH:
they would rather pay up
NH:
but apparently M&A and the market
NH:
have a pretty close correlation
NH:
when the market peaks, so do deal
NH:
obvious when you think about it
MJ:
Shareholders will let CEOs do deals at the top
NH:
not everyone agrees with the view, of course
NH:
Sascha Levitt of Deutsche says M&A is about to make a come back
NH:
M&A is coming – prepare to ride to the wave
Following two years of below-normal levels of merger and acquisition (M&A) activity in
Europe, we believe the conditions are in place for deals to return to the fore as a major
driver of returns: Public markets are well and truly open for financing, low organic
growth should spur expansion by acquisition, rising equity markets and sub-peak
valuations make stock an attractive acquisition currency, and confidence is returning to
boardrooms and executive offices.
NH:
We have assembled our company research analysts’ top potential targets, based on
strategic considerations, and overlaid the results with proprietary CROCI, financial,
options and governance screens to assemble our thematic basket.
MJ:
I wouldn’tmind having a look at that basket
NH:
nor would I. Don’t have the full note at the moment
NH:
it is, they really have
NH:
even though the ship is still without a skipper
NH:
ad revs are flat in the fourth quarter
NH:
which is a big upgrade from the 0.3% the market was expecting
MJ:
is this the John and Edward factor at work from the X Factor?
MJ:
Or jedward, as I gather they are known as
NH:
did you see there Queen number last week
MJ:
I like to think I have better things to do on a Saturday evening
NH:
very amusing as was there take on Ricky Martin
MJ:
X Factor seems to be killing Strictly in the ratings
MJ:
Simon Cowell saves the day
NH:
and there are some significant upgrades coming through on the back of this morning’s statement
NH:
EPS forecasts for the current fiscal year could move up to 1.5p from 0.7p
NH:
and for the year after 2.2p from 1.8p
MJ:
so, just the 23 times perspective earnings then
NH:
ITV is one pricey recovery stock
NH:
ITV (BUY, 95p FV) - ITV have pre-released their IMS this morning (was due out
Nov 17th). This looks very good for the stock - Ad revenues for the group are
now expected to be flat, compared with the c.-3% implied when they gave an
Update last month (and which itself was much better than what the market had
forecast).
This would now suggest FY09 will be down c. 10% compared with our 11% fall
(which would be ahead of consensus). The improving run rate (Oct -3%Nov -1%,
Dec +4%) and easy comps in 1H10F (-15%) are also likely to lead to people
upping their FY10F forecasts, so consensus upgrades seem inevitable. Note Dec
is the first positive month is a long period.
NH:
The pension deficit rose on an IAS19 basis from £558m to £655m. Note this is
before the £75m – 100m reduction measures ITV is undertaking. The increase
looks to be driven by a change in the discount rate. Negotiations are continuing
with pension trustees.
ITV has also repaid £75m of the 2013 £125m bond with the proceeds from the
convertible. Net-net this could lead to a £2-3m+ saving on interest charges (c.
1% - 2% of Adjusted FY10F PBT).
This is very good news for ITV – the first positive month in a long time and a
much better advertising performance. We think there will be significant
consensus upgrades. FY10F Adjusted eps for consensus is 1.6p vs. Liberum
estimates of 2.9p (we forecast 3% ad growth for ITV for FY10F). We expect
consensus to come much closer to our number
NH:
UK TV market forecast to be down 12% for the full year now, and ITV has been 1-1.5% better, so -10.5% to -11%. Consensus around -12% to -13%. Strong
improvement in 4Q - ITV NAR flat, Oct and Nov -3%, with Dec actually up 4%.
SOCI a point better than last reported over the summer, with ITV1 ex STV at -6%
due to the strength of peak time, particularly X Factor.
ITV digital impacts up 10% and we know that ITV2 is now stronger than Channel 4
for 16-34.
Repaid £75m of the £125m 2013 repayment following the successful convertible.
Cash generation remains strong - would expect net debt to end at £600-650m this
year compared to £728m at the half year.
ITV Studios flat, with external up and internal down - encouraging particulalry we
think in US; this is in line with our full year but stronger mix.
Itv.com revenues up 45% vs our 22% full year forecast - video streams trebled
yoy.
Only negative is pension deficit widened to £655m at 30/9 due to lower discount
rate. Not a major concern for us.
NH:
Numbers: Consensus 2009-2011E is 0.7p, 1.8p and 4p. Adjusting 2009
advertising upward and keeping 2010 flat for ITV NAR and then up 4% 2011
(consensus) would lead to 1.5p, 2.2p and 5p respectively.
Momentum in both advertising and audience performance (particularly peak time) should give encouragement on the negotiations into 2010 and the advertising outlook. As regards the competition Five and Channel 4 are both likely to struggle in negotiations due to on screen performance, so the view that ITV can continue to outperform the overall ad market for 2010 looks more credible. Balance sheet measures are coming through strongly, and there is early evidence that itv.com
may start to genuinely deliver some profitability. Main issue is that the ad outlook
for 2010 is still not easy, but the prospects of getting to 5p in 2011 should sustain
interest in the shares
ITV (ITV:LSE): Last: 47.38, up 2.85 (+6.40%), High: 48.47, Low: 45.33, Volume: 23.20m
NH:
the latest Albert Edwards has landed in my inbox
NH:
well, there’s a lot of personal reflections this week
NH:
Albert has brought a bread maker
NH:
after seeing one in action
NH:
James Montier has one
MJ:
Well, if has Montier has one…
NH:
he has started spinning
NH:
he’s not becoming a felt
MJ:
Anyway, not to be a party pooper
MJ:
but what does this all have to do with markets?
NH:
But I have also got a break maker
NH:
can make a loaf in two hours
NH:
so when you wake up you can smell the wonderful aroma of freshly baked bread in the kitchen
NH:
One can almost see the stirrings of cyclical discontent within the market. Risk trades are looking increasingly vulnerable and correlations are beginning to break down. Investors should focus on the nominal quantities, which continue to wither on the vine.
NH:
OK, I know I’m getting old. Yet last weekend I managed two new life changing events. Having visited James Montier on his gardening leave a few months back, I got very excited about his bread-maker. In a fit of me too consumerism I had to have one of those and last weekend I lovingly gave birth to my first ever home-made loaf. Bread will never be the same.
NH:
That very same day I had new experience number two as my wife, Rowan, dragged me off to my very first spin class. Now that might not sound much to my finely honed, Adonis-like readers. But I had not ever done any exercise in the 30 years since leaving school, except briefly in the run-up to my wedding just over a year ago. My body was indeed a temple but to the moob god. (For those non-English readers, the word moob has nothing to do with flabby male chests. The word was invented in 1985 meaning a sagging economy. It is boom spelt backwards)
MJ:
but… what has he got to say about the market?
NH:
we will get there in a minute
NH:
Now, I have to admit that I’ve been working in finance since the very start of the long bull market in 1982. It’s been fun and I’ve met many very interesting people over the years. But there are an awful lot of puffed-up toucans in this business, strutting around and fluffing themselves up so as to appear incredibly self-important.
We all know that Warren Buffet is not one of those. The investment guru’s foray into
railroads this week has attracted much attention. The FT’s Lex column called it one
almighty bet on the US economic recovery. Funnily enough I was looking at railroad
traffic earlier in the week. It was notable, I thought, that on a seasonally adjusted basis, there is very clear evidence that the cycle is stalling out (see chart below).
NH:
While I’m on the subject of gurus, I’ve come to the very sorry conclusion that many sell-side strategists purport to be financial gurus, yet strangely move from job to job as their employers
find them to be empty vessels. There are very few in this business I would wrap my arms around, kiss on both cheeks and embrace as a true guru.
One of the very few is my former colleague Peter Tasker. He is one of the foremost authorities on Japan as well as being a best-selling author of Japanese fiction – link. Anyway a MUST read is his sage like comments in the Financial Times Insight column (see China rushes towards a Japan-style bubble, 2 Nov). He compares the universal group-think on the Chinese situation now, with Japan two decades ago – what you think you see is decidedly not what
you will get – link. If I serve no other purpose this week, flagging up Peter’s insights is a true honour. The fact that Peter’s analysis totally concurs with my colleague Dylan Grice’s recent thoughts on China (link) is surely just a coincidence.
NH:
there’s not really much market stuff in there
NH:
just some amusing reflections
MJ:
I do like them though
NH:
as the QE tension builds
NH:
shall we head to small cap corner
MJ:
For a spot of light relief
MJ:
A sterling plan I say
NH:
Looking into to much Miles?
MJ:
More frothy oil play stuff I’m afraid
NH:
Which one now? I hope its not a certain company we are not going to talk about anymore.
MJ:
Not them, but one that sounds a bit like them
MJ:
people got excited yesterday about a big Sinochem acquisition after this story came out
MJ:
SinoChem, China’s biggest chemicals trader, plans to buy an overseas oil field before the end of this year to expand its exploration business, said a company official.
The company has been in talks since the start of the year, Lai Haokui, a vice president at Sinochem Petroleum Exploration & Production Co., said today, declining to give a value of the potential acquisition. The deal is in the hundreds of million of U.S. dollars, National Business Daily cited Lai as saying.
MJ:
Sinochem, as some readers will recall
MJ:
bought Emerald Energy for $878m back in August
MJ:
Emerald owns an interest in Gulfsands’ main asset in north-east Syria
NH:
So people rejigged the theory that it would make sense for Sinochem to buy Gulfsands now it has Emerald?
MJ:
Then this came out this morning
MJ:
BEIJING, Nov 5 (Reuters) - China’s Sinochem Corp is near a $320 million deal to buy an independent oil firm in Kazakhstan, industry sources told Reuters on Thursday, deepening Chinese state investment in the central Asian nation’s oil sector.
“The deal will be concluded soon,” said one source familiar with the talks, adding that the target firm is currently producing about 4,000 barrels per day of oil.
The deal, which has won Kazakh government approval, follows a $939 million investment by China’s sovereign wealth fund for a 11 percent stake in Kazakhstan’s No. 2 oil producer.
MJ:
Which is being interpreted by some
MJ:
as scuppering the idea Sinochem are sniffing around Gulfsand
MJ:
I don’t think it is conclusive myself
MJ:
FSA fines UBS £8 million for failing to prevent employees carrying out unauthorised transactions with customer money
The Financial Services Authority (FSA) today fined UBS AG (UBS) £8 million for systems and controls failures that enabled four employees to carry out unauthorised transactions involving customer money on at least 39 accounts.
The unauthorised activity, which took place between January 2006 and December 2007 at UBS’ London-based wealth management business, only came to light when a whistleblower raised concerns internally.
Upon further investigation, it was discovered that UBS employees had taken part in the trading of foreign exchange and precious metals using customer money without authorisation and allocated losses to customers’ accounts. An internal UBS investigation estimated that as many as 50 unauthorised transactions a day were taking place at the operation’s peak.
NH:
looks like no bid coming
NH:
I have some more stuff for Small Cap corner
NH:
which i wrote about this morning
NH:
they may have found a lot of oil
NH:
but it is very early days
NH:
and they need a partner to help develop
Gold Oil - little resources play, with assets in Peru, Colombia and Cuba. Not for the faint-hearted.
Gold Oil (GOO:LSE): Last: 4.25, up 0.32 (+8.14%), High: 5.30, Low: 4.25, Volume: 6.77m
NH:
talk a big seller been cleared out there
Phytopharm (PYM:LSE): Last: 15.50, no change, Volume: 148.00k
NH:
and it could be a target
NH:
talk that the trial in Korea has gone really well
NH:
and it will be rolled out shorly
NH:
and something called Pursuit Dynamics
NH:
which has a new cheif executive
NH:
Many companies you look at might be a mile wide and a few feet deep…others half a mile deep. PDX is ten miles wide and ten miles deep
NH:
that’s the sort of thing he has been saying to investors in recent meetings
NH:
anyway the talk in the market is that have started trials with a big brewer
NH:
and that the brewer, which is believe to be Heinken
Pursuit Dynamics (PDX:LSE): Last: 128.00, down 0.75 (-0.58%), High: 128.00, Low: 128.00, Volume: 17.25k
MJ:
Right - I am feeling this pre-BoE tension bad… Tracy looks very excited as well.
MJ:
We should take a snap shot of the markets
NH:
and a euro buys 0.8989p
NH:
logging on to the BoE website
MJ:
best to get there early
NH:
here’s yesterday’s news from DSG
NH:
Nov. 4 (Bloomberg) — DSG International Plc, Europe’s second-largest electronics retailer, will start free delivery of televisions and washing machines as part of a service-led counterattack against supermarkets and online retailers.
Goods will be delivered for no charge “if you can wait for a time that suits us,” Services Director Sebastian James said in an interview at DSG’s Newark warehouse in Nottinghamshire, central England. He declined to give a timeframe. The retailer currently charges a minimum 9.95 pounds ($16.21) for delivery.
DSG has lost money for two consecutive years as customers have turned to supermarkets such as Tesco Plc, which this month reported “double-digit” growth in sales of electrical products. Competition is set to increase, with U.S. giant Best Buy Co. planning five “big box” stores by spring next year, and John Lewis Partnership Plc opening smaller “home” stores
DSG International (DSGI:LSE): Last: 30.38, down 0.94 (-3.00%), High: 31.47, Low: 30.30, Volume: 4.25m
NH:
RTRS-BANK OF ENGLAND SAYS RAISES QUANTITATIVE EASING TOTAL BY 25 BLN STG TO 200 BLN STG
12:00 05Nov09 RTRS-BANK OF ENGLAND HOLDS KEY UK INTEREST RATE AT 0.5 PCT
NH:
looking for statement
NH:
he Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to continue with its programme of asset purchases financed by the issuance of central bank reserves and to increase its size by £25 billion to £200 billion.
The world economy has shown signs of recovery, with a number of emerging market economies experiencing a strong rebound in growth, although global activity as a whole remains significantly depressed. Asset prices have risen internationally since the spring, reflecting both the gradual improvement in the economic climate and accommodative monetary policies. And banks’ funding conditions have improved, though financial conditions remain fragile.
NH:
n the United Kingdom, output has fallen by almost 6% since the start of 2008. Households have reduced their spending substantially and business investment has fallen especially sharply. GDP continued to fall in the third quarter. A number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident.
CPI inflation fell to 1.1% in September, having been 5.2% a year earlier. Inflation is likely to rise sharply to above the 2% target in the near term, reflecting higher petrol price inflation and the reversal of last year’s reduction in VAT.
NH:
The medium-term prospects for output and inflation continue to be determined by the balance between two opposing sets of forces. On the one hand, there is a considerable stimulus still working through from the substantial easing in monetary and fiscal policy. The Bank’s asset purchases have helped to boost asset prices and improve access to capital markets. The sterling effective exchange rate lies around a quarter below its mid-2007 level, improving the competitiveness of UK producers. On the other hand, the need for banks to continue the process of balance sheet repair is likely to limit the availability of credit. And high levels of debt will weigh on spending. On balance, the Committee believes that the prospect is for a slow recovery in the level of economic activity, so that a substantial margin of under-utilised resources persists. That will continue to bear down on inflation for some time to come, offset in the short run by the impact of the past depreciation of sterling.
In the light of the Committee’s latest Inflation Report projections and in order to keep inflation on track to meet the 2% inflation target over the medium term, the Committee judged that maintaining Bank Rate at 0.5% was appropriate. The Committee also agreed that it should extend its programme of purchases of government and corporate debt by £25 billion to a total of £200 billion, financed by the issuance of central bank reserves. The Committee expects the announced programme to take three months to complete. The scale of the programme will be kept under review.
NH:
The Committee’s latest inflation and output projections will appear in the Inflation Report to be published at 10.30am on Wednesday 11 November.
The minutes of the meeting will be published at 9.30am on Wednesday 18 November.
Following today’s meeting of the MPC, the Governor and the Chancellor exchanged letters about the expansion of the Asset Purchase Facility. Those letters can be accessed using the links below in the notes to editors
NH:
let’s go through that
NH:
any change to what they are buying?
NH:
off 28 points at 5,078
MJ:
have you seen this inflation thing?
MJ:
Inflation is likely to rise sharply to above the 2% target in the near term, reflecting higher petrol price inflation and the reversal of last year’s reduction in VAT.
NH:
but that has no stopped more QE
NH:
clearly they don’t believe it has inflationary consequences
NH:
and are more worried by output gaps
NH:
but good to see the Bank
NH:
QE is about targeting asset prices
MJ:
PhilA makes the point about the return of VAT to 17.5 per cent
NH:
right some currency market reaction
NH:
and a euro buys 0.8953
NH:
10-year yield up to 3.864%
MJ:
I have to admit, this makes me feel uneasy
NH:
because they seem to want inflation
MJ:
inflation is usually much easier to create then to stamp out
MJ:
the tightening could be brutal
NH:
i must dash to my lunch
NH:
just been sent something
NH:
some bears are having a good day
NH:
Cable & Wireless has today announced plans to demerge and also cut its full-year earnings guidance. The short base has tripled over the past week from 0.5% to 1.7%, a change of + 219%. Active utilization is low at 7% so there is considerable scope for further short selling.
MJ:
Thank you for joining us
MJ:
And thanks for the comments
MJ:
Same time, same place tomorrow
NH:
for those looking at the Vedanta results
NH:
there’s seems to be some interesting stuff being said on funding
NH:
Total funding to FY12 is USD13.3Bn and sources of funding (USD4Bn
project finance and USD6Bn cash) total USD 10Bn, leaving further funding
requirement of USD 3.3Bn.
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