While concerns over the economy’s shock contraction in the fourth quarter of 2010 have been eased this week by survey evidence from the purchasing managers showing ongoing robust manufacturing activity in January and a bounce back in services and construction activity, the fact is that if consumers significantly rein in their spending this will markedly hold back growth this year.

We see the deal as being very positive. 1) The acquisition is significantly enhancing to earnings and has been transacted at just 5x prospective earnings reflecting the fact
that the distributor does not control the brand. 2) The existing local management
under the leadership of Luc Clement, who will be appointed as Head of European
franchising, are being retained within the business. 3) The acquisition will enable the
company to roll out company owned larger format stores based on its successful
Westfield concept in the company’s most developed European markets.

– EU Leaders meet this weekend to flesh out discussions on the stability fund – market has seemingly priced in a positive resolution.
– Market seems to be pricing in following:
* EFSF able to disburse full E440b (rather than c.E250b currently) due to additional guarantees.
* Ability for stability fund to help countries buy back debt allowing Greece to potentially reduce debt burden.
* Reduction in debt costs for Ireland (5.8%) and Greece (5%) allowing greater fiscal flexibility.
* Potential for EFSF to provide credit lines direct to countries and providing Portugal with stability funds.
* Tougher fiscal policy rules set for Eurozone.
– Considering that EU Banks rallied 11% from January lows, outperforming the market by 7.5% we think alot of the potential announcements priced in.
– In particular with the sector on 8x 2012 EPS and 1.1x TBV facing downgrades across Southern Europe, higher wholesale funding costs and higher capital requirements we believe the valuations are not as attractive as they initially appear and would be wary of being dragged into the current rally.

Number Number Current
of share Option of Sale total
options price shares price resultant
Name exercised (pence) sold Date (pence) shareholding
Warren East
CEO 290,000 03.02.11 574.69 714,279*
——– ——— ——– ————-
Tim Score
CFO 197,250 03.02.11 581.50 86,053*
——– ——— ——– ————-
Tudor 2,091 335.0p 2,091 03.02.11 577.50 736,045*
Brown 189,860 580.11
President

House prices can be volatile not only from month to month but from survey to survey. Indeed., the Halifax data contrast with the Nationwide reporting that house prices fell 0.1% month-on-month in January. With the exception of December when prices rose by 0.4%, house prices have been falling or flat very month since May 2010 on the Nationwide measure. Consequently, house prices fell 1.1% year-on-year in January, which was the first annual drop since August 2009.

It is notable that just as private sales led car sales in the second half of 2009 and the early months of 2010 while the car scrappage scheme was in place, they are now seeing by far the greatest softness. This reflects the serious pressure that households are under. Indeed, private car sales were down 20.8% year-on-year in January at 51,570 units.

So fed up is Pursuit that it has asked the Financial Services Authority to investigate whether its share price, 22¾p better at 365¾p yesterday on confirmation of a joint venture with the National Nuclear Laboratory, has been manipulated.

FT editor Lionel Barber’s Monday night lecture on journalistic ethics continues to raise eyebrows – and the odd hackle.

Broadly, he suggested other newspapers had been seduced by the dark side while he was pretty in pink. It seems not everyone agrees with him. A word on the ethics and conflicts of interest at work within FT towers reaches me.The issue is why the FT’s pocket battleship columnist Martin Wolf was allowed to join the Independent Commission on Banking. It’s all too much for at least one banking chief exec. “Lionel should never have allowed it,” he says. “It is a horrible conflict. It drives me crazy. We have had to give him confidential document after confidential document.”