Thursday, 13th September 2018

Live markets commentary from


Morning. Hello. Hi there. Hey. This is Markets Live, FT Alphaville's whatever.

K.T. Guten Morgen
Manxish Morning
Soundbuy Morning
K.T. Are we going to discuss the Sultan Erdogan today?

And it's been a long week. How on earth is it only September 13th?


Sure feels like it, Prez.


So, anyway, there's this:

Grouchmonkey Morning all

Recep Tayyip Erdogan decried high interest rates as a “tool of exploitation” on Thursday, triggering a drop in the lira ahead of a critical interest rate decision by Turkey’s central bank.

Mr Erdogan insisted that the bank, which has faced mounting investor doubts about its credibility, was independent. But he said his unorthodox views on the relationship between interest rates and inflation remained unchanged.


“We cannot allow the use of the tool of exploitation that is interest,” he told a meeting of small business owners in Istanbul. “Interest is the cause, inflation is the result.”


Which, I mean, it's a take. It's not a take that'll get you through the LSE entrance exam, but it's a take nevertheless.

Hamster on a Piano GNC strong last few days any roumertrage?
alewis2005 triggering a drop in the liraAnother one? At what point is it worthless?

We have a liveblog up on the various interest rate decisions today, BTW:

Tom Dalgleish Interest rises do cause inflation but often are preceded by the inflation they are designed to defeat

With four bylines and a post every ten minutes or so. Imagine .....

Soundbuy Aye, Greencore a tad lively yesterday and early doors......
VV75 Fevertree down since yesterdays comments

Have some Kit Juckes to preview the day.


Will the ECB be able to navigate a small downward revision to the economic outlook, while maintaining the focus on a slow but orderly exit from exceptional policy measures? Will the UK MPC meeting tell us anything at all? Neither of these is likely to be as significant for markets as the CBRT meeting (at noon). Can they, in the face of President Erdogan’s public opposition to high interest rates, build on the recent very modest recovery in confidence in the Lira? When we get past that, we have US CPI, a US bond auction, a further reaction to the US offer of fresh trade talks with China, and no doubt more focus on the imminent landfall of Florence.


On Turkey .....


A 150bp in the effective rate and a 300bp shift up in the policy corridor would give Turkey monetary policy inappropriate for an economy that appears to be coming to a sudden stop, but may still disappoint TRY traders and unwind some of the last 24 hours’ recovery in risk sentiment.


And the rest .....


The ECB and MPC meetings are likely to be neutral for markets, though a positive tone from the MPC could yet give sterling a bit of a lift. Positioning still supports sterling, but EUR/USD is very range-bound, as indeed are real interest rate differentials at the moment. Europe’s best currency this week is Norwegian krone, maintaining its high-beta status. Although a downgrade to Hurricane Florence has taken oil prices down slightly, and strong employment data have given the AUD a bit of a lift on a risk-on morning, we like NOK longs against either EUR or AUD.


Greencore .... sorry, nothing new.

Greencore Group PLC (GNC:LSE): Last: 195.80, up 4 (+2.09%), High: 201.60, Low: 190.55, Volume: 3.44m

There was a rumour about interest earlier in the year that spread far and wide, but didn't shake out anything so was generally considered to be dead on arrival.


In terms of today's gain, I'd note the very dull reason of Morrison numbers.

WM Morrison Supermarkets PLC (MRW:LSE): Last: 262.55, down 3.25 (-1.22%), High: 269.75, Low: 256.70, Volume: 9.17m
1 bid at 2 Morning all - SOS 47p really?

As Morrison accounts for about 5% of Greencore sales.

Shinshin Always puzzled by these "our economy is different" dictator types. They must be above avg intelligence to have made it to the top of the greasy pole in the first place. So how come they never believe the presentation about Venezuela, and Zimbabwe, and Yugoslavia and etc. It's almost like they have ulterior motives.
1 bid at 2 PRSM another one.

Morrison Q2 LFL sales ex-fuel of +6.3%


(@1 bid at 2: please, please, please don't talk in tickers. It's irritating.)

jaws gm

Retail LFL at +2.5% and wholesale LFL contribution of +3.8%, all of which is decent. H1 PBT was within £1m of consensus at £193m and the 2p special was much as expected.


In short, they're decent numbers. But decent numbers were already in the price.


Here's SocGen (again).


[W]hen we look closer at the P&L we see disappointing margin trends, with 1.0bp erosion in the EBIT margin despite particularly strong top-line momentum (+4.9% 1H LFL ex fuel, +6.3% in 2Q). This poor margin trend can be explained by the speeding up of wholesale supplies to McColl’s and increased investment in store-pick and the new Erith CFC for Another symptom of this pressure is the incremental net profit from wholesale, services, interest and online at only £4.0m (£46m achieved so far vs the group’s £75-125m medium term target range).


We do not expect any significant change in consensus at this stage. We continue to think the stock is overvalued, not least given the poor EBIT margin trend in 1H after an already poor FY17/18 at -7.0bp. Morrisons is trading at 21x 2019e P/E vs 20x for Tesco (which should benefit from stronger potential to improve margins in the next two years) and 16x for Sainsbury’s.


Sorry, momentarily distracted by this .... interesting .... RT interview of who happened to have gone on a trip to Salisbury.

1 bid at 2 Apologies BE - can I claim my prize for the Footasylum short call then?
jaws BE anything from in Oxford Biomedica today please ? OXB

"our friends had been suggesting for long time that we visit this wonderful town"


Uh huh?


They were there to see the "famous Salisbury Cathedral" apparently.


But ... "we got wet [and] took the nearest train and came back" to London.

1 bid at 2 @VV75 re Fevertree the way someone was selling 8k clips into the market yesterday with no care in the world about market order - really makes me think how this rmr was started.
Soundbuy Highest spire in the UK, why not?

Cool, cool. Nothing to worry about.


Okay, what next?

TheManwithaLongChin You'd think Russians wouldn't be so perturbed by the mild British winter

may as well hit requests, since there's nothing much else this morning.

Oxford BioMedica PLC (OXB:LSE): Last: 860.19, up 46.89 (+5.77%), High: 876.50, Low: 815.00, Volume: 82.19k
Hamster on a Piano yesterdays tobacco squeeze?

Interims. They're fine, both at the pipeline and the expansion stuff.


Co talking about bringing in partners for proprietary programmes.


And seeking to "allocate appropriate value enhancing investment", rather than "modest investment". Which .... is that positive?


Here's Jefferies.


Importantly, the Phase I/II study of AXO-Lenti-PD is on track to commence by YE18E, conducted by partner Axovant (AXON, $2, Hold), with regulatory filings and manufacture of sufficient supplies for the study completed. No other pipeline updates. Finally, OXB has signed a lease on a new facility in Oxford, in keeping with the previously announced expansion to double bioprocessing capacity to enable OXB to target 25-30% of the global lentiviral vector bioprocessing market, which OXB estimates will be $800m in 2026E. Recall, we forecast $100m peak Lenti manufacturing Revenues ex-CAR-T.

Flaneur Do the John Lewis numbers tell us the middle class are feeling the pinch?

And Peel Hunt.


The H1 results show OXB is on track to meet our FY2018 gross
income forecasts, and EBITDA swung positive to the tune of
£12m this half. New investment in capacity announced today
will target 25-30% of the expected $800m global lentiviral
vector opportunity in 2026, fully funded by the March equity
placing. OXB offers a rare way to gain non-binary yet pure-play
exposure to the gene and cell therapy revolution. Reiterate Buy.


Yeah, we'll see.

alewis2005 Haven't the middle class been feeling the pinch for the last ten years?
alewis2005 squeezed middle etc

E-cigs! Sure! Good idea.


So yesterday afternoon was fun.

1 bid at 2 to add Burberry must be feeling the pinch?
jaws BE Thank you for OXB info.

To recap, FDA put out a press release saying they were considering a ban on all flavoured vapour pipes unless they can be kept out of the hands of the kids.


And told the top-five manufacturers, which are 97% of the market, to find a fix inside 90 days.

Flaneur e-cigs - Make them really huge so kids hands cant manage them?Youre welcome.

Now, the top five manufacturers are four giant multinational cigarette manufacturers plus a curious US startup called Juul.


Which has been very heavily criticised for its marketing strategy.


As per .....


And through this rather aggressive approach, it's captured the US market to a degree that vaping over there is often called Juul-ing,


Course, tobacco stocks sold off in first instance when the FDA doc dropped. But then they rallied hard when analysts said, "this'll probably kill Juul. That's good."


Jefferies spelled out the argument better than anyone yesterday.


Anything that slows down Juul market share is a positive and this is what we think we will see in all possible outcomes around the '60 day' action. Very best case is Juul flavours are removed from the market and the majors remain. Next best case is all flavoured products are removed from the market. For us, also a positive. While all names would take a volume hit, the biggest impact is likely to be on Juul, and it may also mean for the time being focus goes back to the old model of just cigarettes (and smokeless) which is perfectly robust still (a point that is often overlooked or misunderstood with all this Juul paranoia). Third best case is no flavoured products are removed from the market but in such a scenario the FDA needs to be completely convinced youth access is minimal. Without the support of youth, Juul will be going head to head with big tobacco to capture adult smokers. Where do you communicate with the majority of adult smokers? It is your traditional distribution channels, i.e. your gas stations and convenience stores. The majors dominate this space and also have power of retailers (with regards to shelf space) due to their reliance on cigarette profits. Juul would need to offer significant incentives in our view (very expensive) to get fair share of shelf space.

Xanthine @Flaneur - print Facebook logos on them so kids think they are only for the old people

Course, this has a backdrop of health regulators sending out completely diametrically opposed messages about vaping.


As per Morgan Stanley.

Tom Dalgleish Are other liquids vapable?

On one hand, the FDA reiterated its long-term commitment to lowering nicotine levels in combustible cigarettes to non- or minimally addictive levels, but is now retrenching on its actions to promote greater availability of lower risk alternative products, on which its plan is dependent.


Notably, the FDA indicated that "while we remain committed to advancing policies that promote the potential of e-cigarettes to help adult smokers move away from combustible cigarettes ...


.... we won't allow the current trends in youth access and use to continue, even if it means putting limits in place that reduce adult uptake of these products." Second, the FDA is considering changing the PMTA submission deadline after extending it by four years last July from August 2018 to August 2022. This make it difficult for e-cig manufacturers to comply with the PMTA requirements given they were working towards the 2022 deadline. Overall, we believe the FDA is sending mixed messages as today's proposed measures would likely conflict with its ability to execute on its nicotine reduction agenda and shift smokers down the continuum of risk.


Highly probable relative lower risk vs sketchy evidence of specific efficacy. Usual story.


Anyway, have a US market share chart.


1 bid at 2 it really is dull out there...

Slow comments today. I'll blame that on lack of news rather than the much higher probability that you're all bored.


John Lewis mentioned, and a lesson in the rule of small numbers.

wayneJ Morning

Adjusted PBT down 98.8% to £1.2m.

wayneJ Any thoughts on the iPhones and Apple event, BE? (other than 'Bah, humbug')
1 bid at 2 has the internet finally taken the high street out BE?

On sales up +1.6% yoy to £5.49bn-ish.

wayneJ I noted several times it was mentioned that they were Apple designed processors - was not clear if they meant on top of an ARM design or something completely left field?
jaws BOE rate watch soon
Tom Dalgleish 1B2 did you short your own recommendation on Footasylum
Flaneur Can it be long until the iPhone Juul?

Readthrough for the listed peers is John Lewis & Partners, the department store bit. Here's Barclays to summarise the statement there.


The company noted a squeeze to GMs due to a highly promotional market and a sales mix shift towards electronics and away from big-ticket items in Home. In addition, JL profits were impacted by costs of new shops and higher IT costs as the company continues to invest in its store base. Gross sales at Waitrose increased +2.1% yoy to £3,393.2m (LFL +2.6%), while EBIT declined -12.2% yoy to £96.4m. The company said that although Waitrose profits declined during the half, they have seen a “marked improvement” in LFLs between Q1 and Q2, and have made progress in rebuilding the GM; they also stated that Waitrose is on track for profit growth for the full year. The company also incurred additional central costs, in particular as a result of investment in higher cyber security and data protection. On the outlook for 2018/19, the company stated: “With the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, forecasting is particularly difficult but we continue to expect full year profits to be substantially lower than last year for the Partnership as a whole. We expect profit growth in Waitrose & Partners will be offset by the continuing margin pressure in John Lewis & Partners and by incremental costs of investment.

Marks and Spencer Group PLC (MKS:LSE): Last: 284.00, down 9.3 (-3.17%), High: 292.60, Low: 283.81, Volume: 2.42m
Next PLC (NXT:LSE): Last: 5,414, down 54 (-0.99%), High: 5,454, Low: 5,414, Volume: 93.61k

Oh, and speaking of ......

Tom Dalgleish Wayne are smartphones on a reduced processor like ARM?
Debenhams PLC (DEB:LSE): Last: 12.01, down 1.39 (-10.37%), High: 13.32, Low: 11.78, Volume: 6.91m
A. M. @Flaneur: perhaps a juul be paired over bluetoothed to one's phone (for better data harvesting user-experience).

Sports Direct bounced by the Panel into sticking out a statement post close last night, saying that of course they're not really going to buy Debs.

Lemmy wayneJ: the eSim spells the end of physical sim cards
wayneJ Yes - the Apple A12 processor is based on an ARM core; Arm has about 99% of the handset mkt for CPUs and an increasing % of GPUs for mobile
wayneJ @Lemmy - agreed
1 bid at 2 @tomdalgleish yes but covered on the first gap down. Didn't expect it to go so quickly again.

Meaning it's now boxed out for six months, ignoring the usual whitewashes.

Tom Dalgleish 1B2 how did you sniff it out?
wayneJ @BE - does that allow Debs to offer to merge with HoF?

Frankly, this feels like overkill by the Panel. Simon Bentley, the exiting Sports Direct non-exec, said at the AGM that the idea "had been discussed" ......

wayneJ More extraordinary was the resignations ahead of announcing the votes for directors? (re SPD)

................ as it was at every level. It was a throwaway statement of the obvious. Anyone reading that as a statement of intent needs their head examined.

wayneJ And talking about interest rates any comments on the weekly Albert?

Perhaps the Panel's would've been better employed by finding out if other statements made from people familiar with companies during yesterday's session gave the correct impression to the market.

hornblower why would anyone buy Debs with average 20 year leases and £300m+ of debt

Bloody Apple? Sure. Bloody Apple.

wayneJ Albert has a great quote about the lack of acknowledgement of failures (by Peter Fisher)

We have three new phones. They might be incrementally better than the previous phones and they'll cost (1) a lot, (2) a ridiculous amount, and (3) bloody hell.


Only real surprise versus what was leaked pre the event was dual-sims in all three handsets.

1 bid at 2 i think if you haven't got dynamic pricing Tom the internet will take over.
VV75 I miss my old Nokia 8210

Suggesting a shift to e-sim only in future models.

wayneJ Has Apple gone into the (Nokia) Vertu Cobra Signature territory?
Tom Dalgleish I was reading about pre-packs. How do they give the acquirer priority in signing with the landlords?

Potentially good news for STMicro, which was supplier of the e-sim widget in the last Apple Watch.


Though at somewhere between 50 cents and $1 a unit it's not exactly worth much. Brokers talking about potential for 1-2% on 2019 and 2020 consensus, assuming it's confirmed to be STM hardware.

wayneJ IF DEB went into a pre-pack would the 6 month ban on SPD still apply?

Otherwise, we have the depth sensing camera thing going into all models

Tom Dalgleish 1B2 interesting but I find that effect to be slow and not a reason for a big profit miss
chopper bear @wayne no i do not believe so

Having previously been iPhone X only. That's positive for STM, AMS and, by several degrees of separation, maybe IQE as well.

IQE PLC (IQE:LSE): Last: 81.15, down 3 (-3.57%), High: 85.00, Low: 80.00, Volume: 3.77m

But was widely anticipated already.

Flaneur You know your stuff on tech, eh BE?"Mind of an athlete, body of a librarian" etc..
Penny unch! :-)
1 bid at 2 the high street should become a market place again, then it could be competitive on price with the internet.

Analysts seem more excited about the watch, bizarrely.

wayneJ Does IQE have a cap mkts day at perhaps 9am on the 21st....? I am sure the mkt will be delighted at explanations on the accounting. And the compare and contrast with Finisar (where Apple appears to also have a relationship)

It is equipped with a bigger screen and thinner body. The new Apple Watch Series 4 features narrow boarder design on display, allowing the watch’s viewing area to be 30% larger than previous generation, while its new LTPO technology also improves power efficiency continuously to keep the battery life.


This is Nomura, BTW.

wayneJ But that is because most analysts don't understand that proper ECGs are 12 lead ECGs for a reason

Apart from its existing heart sensor, the new watch equips with new electrical heart sensor, which will be able to support ECG [electrocardiogram] function [the ECG app will be coming later this year].


The new S4 chip in the series 4 watch is 2x faster than the previous generation and speaker is 50% louder. It also features fall detection with new accelerometer and gyroscope. For pricing, the GPS version starts from USD399 and GPS + cellular version starts from USD499 (vs. USD329/399 for series 3).

wayneJ (Break news on Turkey btw)

The "speaker is 50% louder"? On a watch? Piss right off with that nonsense.

wayneJ (And MPC)

Anyway, they're buying USI on watch optimism.

Tom Dalgleish With narcissism goes hypochondria I assume

For iPhone supply chain, we suggest further accumulation on dips for
Largan (3008 TT, Buy), Catcher (2474 TT, Buy), Chipbond (6147 TT,
Buy), Luxshare (002475 CH, Buy), and ZDT (4958 TT, Buy). For Catcher
and Chipbond, the two concentrating on LCD iPhone XR, the positive
catalysts may be on hold for a few weeks until the design and production
issues are resolved.

wayneJ The problem I had was whether the people most likely to suffer falls are the least likely to be leading edge technology users, and will have poor eyesight and arthritis in their fingers etc

The Monetary Policy Committee (the Committee) has decided to increase the policy rate (one week repo auction rate) from 17.75 percent to 24 percent.

Tom Dalgleish @Flaneur u ever tried working out in a library?
wayneJ I am not sure there was any comment on 'design and production issues' - I actually wonder if it was more a deliberate plan by Apple re the XR

Buy EM. Show of strength by CBRT. Won't be cowed by the not unrealistic threat of being tortured.

wayneJ And remember for the 'ECG' you have to put your other hand on the device to create the 2-lead connection; the rhythm monitoring is in many ways more interesting as it is continuous
Tom Dalgleish mission creep always was the iPhone's mission

And that'll do for today's garbage session. Apologies it was garbage. Circumstances outside my control.

wayneJ (But what do I know - I am sure that Phillips et al are just tricking docs with 12 lead ECGs and all the gel they squirt over u to ensure good connection is just for fun. )
Tom Dalgleish the hour positively flew

Go here for more stuff: ... Domino's, Kaz, Grainger, that kind of thing.


Ta for sticking with us. Back tomorrow. Afternoon all.

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