No6's Financial Markets Thread

[ecoface]

Most important news today?

 

Can you update us on Monday after we know the results of this meeting?

 

[No6]

Can you update us on Monday after we know the results of this meeting?

 

I'll certainly post something on here once the commucapitalists decide what they are going to do next.

[No6]

Big week coming up on the spending cuts in the UK. Announcement to be made on Wednesday which may well affect many UK listed companies, so will explore some of these issues as the week goes on.

 

Deep cuts must be made, Osborne says

 

LONDON (SHARECAST) - Spending cuts will make Britain stronger and must be enacted, chancellor George Osborne has said ahead of next week’s spending review.

 

He said that the cabinet was united on the need to scale back the deficit.

 

‘We were on the brink of bankruptcy,’ he said in an interview with the BBC.

 

‘If we are going to have growth and jobs in the future, we have got to move this country into a place where people can invest with confidence.’

 

Part of the savings will come from a crackdown on welfare fraud, Osborne said. He also said that banks will have to pay more tax to help balance the books. Details of government plans to save £83bn over four years will be outlined next week.

 

http://www.sharecast.com/cgi-bin/sharecast...tory_id=3753652

 

Meanwhile, over in the USA.

 

US budget deficit falls to $1.3tr

 

The US budget deficit fell to $1.3 trillion (£813bn) in the year to 30 September, US Congress estimates say.

 

The deficit, which comes after the end of the US financial year, represented 8.9% of GDP and was £122bn less than the 2009 level.

 

However it is the second highest since the end of World War II.

 

The data "underscored the administration's commitment" to cutting the massive deficit, the government said.

 

But Treasury Secretary Timothy Geithner warned that "we still have a long way to go to repair the damage to the economy and address the long-term deficits caused by the crisis."

 

http://www.bbc.co.uk/news/business-11556037

[No6]

It will be interesting to see how a number of support services companies get through this week given their Government contracts, the likes of Capita, Serco, Qinetiq, etc. The share price of some may go south or bounce big time if the feeling is that the cutbacks will not affect them as much or are already well priced in. Given the backtracking on defense in the last few days, it will be interesting to see if the defense contractors start to move up.

 

LONDON (MarketWatch) — Aerospace and defense stocks will be in focus Tuesday as the U.K. coalition government unveils a package of much-debated cuts to the sector in its long-awaited strategic defense and security review.

 

Which programs might be slashed has been the subject of intense speculation throughout the summer, with two new aircraft carriers for the Navy and a multi-billion pound armored-vehicle program particularly at risk.

 

The outcome of the review, which looks at planned spending over the next four years, will be announced by Prime Minister David Cameron on Tuesday, a mere 24 hours before the government’s £80 billion comprehensive spending review.

 

http://www.marketwatch.com/story/defense-i...nk=MW_news_stmp

[No6]

Some big earnings numbers due this week in the US.

 

NEW YORK (MarketWatch) — Should the U.S. stock market extend its October climb next week during the crush of the third-quarter earnings season, it will likely have to do so without the financial sector.

 

The coming week has 11 Dow components and 109 S&P 500 companies scheduled to announce results, including high-flying tech company Apple Inc.

 

Apple earnings highlight a busy schedule of financial results as so-called earnings season gets in full swing.

 

“If the market is operating in a logical way, what should be pushing it up is the realization that third-quarter earnings will surprise on the upside,” said David Kelly, chief market strategist at J.P. Morgan Funds.

 

http://www.marketwatch.com/story/us-stock-...ught-2010-10-16

[No6]

What will Apple do with its $46billion, yes billion, cash hoard?

 

Apple Inc Faces Pressure To Spend $46 Billion Cash Hoard

 

Barron’s this weekend took aim at Apple, Inc. (NASDAQ:AAPL) and their huge $46 billion cash hoard.

 

Bernstein Research hardware analyst Toni Sacconaghi, stated in an open letter to the CEO of Apple Steve Jobs that he should declare his intentions for the company’s $46 billion cash hoard.

 

Sacconaghi contended that $46 billion, which amounts to about $49 a share, appeared “excessive by almost any measure.” What’s more, Sacconaghi said he forecasted that Apple will generate another $20 billion in cash by the end of its next fiscal year in September 2011. He said he also estimated that it takes about $10 billion a year in operating capital for Apple to run its business. In the past, Steve Jobs has not been acquisition oriented, but that could change now that the cash pile is so huge.

 

http://www.timesoftheinternet.com/briefs/a...ion-cash-hoard/

[jerpy]

What will Apple do with its $46billion, yes billion, cash hoard?

 

Se the expected slaughter of revenue and earnings estimates came in, but iPad business was a huge miss 4.17m shipments against 4.7 million expectedand! Lurking issues? Shares went down 7% after-hours.

[No6]

Se the expected slaughter of revenue and earnings estimates came in, but iPad business was a huge miss 4.17m shipments against 4.7 million expectedand! Lurking issues? Shares went down 7% after-hours.

 

Lurking issues? The numbers were good but the market expected more - greedy more. They have $46billion to spend! They could buy many FTSE 100 companies outright and have change. A case of the good news already being in the price for now I think.

 

From ADVFN.

 

Apple's fourth quarter sales hit $20.3bn as sales of iPhones and iPads soared. Profits rose by 70% to $4.3bn with earnings of $4.64, well above forecasts of $4.10. The tech group shipped 14.1m iPhones, along with 9m iPods and nearly 4m Macs. Apple sold 4.19m iPads last quarter,

 

But shares in the tech group wobbled as it forecast earnings of about $4.80 a share in the current quarter, below current estimates. Revenue this quarter will be about $23bn.

[No6]

Mentioned the UK bookmakers earlier on this thread and soon Betfair comes to the market as well as the Government propostion to sell off The Tote at some stage in the future. Betfair looks expensive to me compared to Ladbrokes and William Hill, but it wouldn't surprise me if initially it became a darling of the stockmarket for a while.

 

Betfair Shares To Launch At Around £14?

 

City sources claim Betfair shares will be priced close to the £14 mark when they come to the stock market, which will value the online betting exchange company at approximately £1.5 billion.

 

A launch price of £14 per share will see the company trading at 23 times earnings, a level more than double that of rival operators such as William Hill and Ladbrokes. Some analysts have questioned whether such a price is sustainable, suggesting the company may have reached a glass ceiling with regards to growth. The company has dismissed suggestions that the flotation is an attempt to cash in at the height of the market, arguing that the increased transparency that public companies require will be an advantage in increasing share in certain international markets, and pointing out that only a relatively small number of shares are being offered, the rest being retained by current investors.

 

http://www.eatmystack.co.uk/527/betfair-sh...h-at-around-14/

[No6]

More of the same for China in the next five year plan?

 

http://www.china-briefing.com/news/2010/10...f-the-same.html

[jerpy]

More of the same for China in the next five year plan?

 

http://www.china-briefing.com/news/2010/10...f-the-same.html

Looks like their interest rates, the austerity review and dow slide should spank the ftse tomorrow?

 

Going with the flow myself and opened a SUK2 today for 2nd time this year.

[No6]

Looks like their interest rates, the austerity review and dow slide should spank the ftse tomorrow?

 

Going with the flow myself and opened a SUK2 today for 2nd time this year.

 

Big day in the UK today. Much may well depend on how the markets react to the spending cuts, usually they tend to like these, but this time around with doubts about whether the private sector can pick up the slack the response may be different. I think the recent run on the FTSE looks stretched, so events may well suit the market to take some of the froth out, not sure how long this will last though, could be a couple of hundred points, 5400 (approx)is a support level that needs to be broken for the current upward trend to be seen as broken. Also, shouldn't forget that Mervyn King made a "sober" speech last night that indicates no quick fix.

[No6]

This is how the morning has opened according to Sharecast.

 

LONDON (ShareCast) - An overnight slump on Wall Street has made for a muted start as investors wait for minutes from the Bank of England’s last policy meeting and the government’s spending review.

 

The coalition's Comprehensive Spending Review is fully expected to be a bloodbath, but the City will want clear evidence that cuts will be made swiftly to slash the record budget deficit. Any wishy-washy tactics won’t be tolerated.

 

================

 

Wednesday newspaper round-up

 

Six million public servants will be put on notice today that one in twelve will lose their jobs as George Osborne takes the axe to vast swaths of the State.

 

A day after David Cameron unveiled the deepest cuts to Britain’s defence budget for 30 years — including 42,000 job losses among civilians and servicemen — the Chancellor will lay out the full extent of his austerity drive. Mr Osborne will say that the £83 billion spending cuts over four years offer “a hard road to a better Britain, the Times reports.

 

Half a million public sector workers are to lose their jobs as a result of the comprehensive review of government spending, official documents have disclosed. Danny Alexander, the Chief Secretary to the Treasury, unwittingly disclosed the full scale of the expected redundancies when he was photographed yesterday reading confidential briefing papers. The documents showed that the independent Office for Budget Responsibility is likely to forecast 500,000 public sector workers will lose their jobs because of the cuts, the biggest in public spending since the Second World War, the Telegraph adds.

 

Britain's defence industry faces a "long period of continuous pressure" after the Government announced an 8% cut in the defence budget over the next four years. While flagship programmes including the two aircraft carriers being built for the Royal Navy and the A400M transport plane will go ahead, 42,000 jobs in the services and Ministry of Defence will be cut, and an increasing amount of kit will be bought "off-the-shelf" from abroad, the Telegraph reports.

 

Britain's economy is set for a "sluggish" recovery dogged by "dismal" prospects for consumer spending, economists are warning. In the run-up to today's publication of the Government's Comprehensive Spending Review, which is set to slash tens of billions of pounds from public spending, the influential National Institute of Economic and Social Research (NIESR) cautioned yesterday that the "heady" 1.2% growth in the second quarter was just "a flash in the pan", the Independent reports.

 

Mervyn King warned last night that the world could be heading for a “disastrous collapse in activity” because of rising protectionist pressures. The Governor of the Bank of England said that Western economies such as Britain needed to “rebalance” towards greater exports and higher savings. Hopes for a smooth adjustment, though, could be confounded by worsening political tensions. Addressing the Black Country Chamber of Commerce in the West Midlands, Mr King painted the global political backdrop in stark terms, the Times reports.

[No6]

UK borrowing at record £16.2bn in September.

 

The government borrowed a record £16.2bn to plug the gap in the public finances in September, figures from the Office for National Statistics show.

 

It is the highest borrowing figure for September on record, and is unexpectedly up from the £14.8bn borrowed in September last year.

 

The UK's total net debt is also the highest to date, at 57.2% of GDP.

 

The figures come as the government prepares drastic cuts to spending in order to reduce borrowing.

 

So far this financial year, the government has borrowed a total of £73.5bn - lower than the £77.4bn that had been borrowed by this time last year, when annual borrowing eventually hit a record £154.6bn.

 

In its last report, the Office for Budget Responsibility said it expected borrowing to total £149bn this financial year.

 

http://www.bbc.co.uk/news/business-11582479

 

 

[No6]

Going with the flow myself and opened a SUK2 today for 2nd time this year.

 

You might be a little early, trend still looks down for now though, although the FTSE does look stretched on the upside. SUK2 chart below. I think if this was the FTSE, bears would be coming out with their going to hell, etc, etc, quotes.

 

[No6]

So far the market seems to have taken the spending review in its stride. Companies who tend to rely on Government contracts like Capita have hardly moved. One did, Eaga, which has the Warm Front contract, at one stage was down by about 15-20% because Osborne said that this was to be phased out. Is this a good example of how the market can overeact? Only time will tell, but what the market seems to have ignored is that warm front is absorbed into the new Green Deal scheme and this has been on the cards for months.

 

Relief at scale of green economy cuts.

 

http://www.ft.com/cms/s/0/5c7ced3a-dc50-11...144feabdc0.html

 

The Warm Front programme, which provides insulation and energy efficiency, will be scaled back and the new "green deal" will target the most vulnerable to tackle fuel poverty.

 

http://www.independent.co.uk/news/uk/polit...nk-2111807.html

[jerpy]

You might be a little early, trend still looks down for now though, although the FTSE does look stretched on the upside. SUK2 chart below. I think if this was the FTSE, bears would be coming out with their going to hell, etc, etc, quotes.

 

 

You're right. No point fighting it.

[No6]

I'm always fascinated by the market when it overreacts to events and a good example today (maybe) is Eaga which I mentioned above. The Governments decision to cutback and phase out the Warm Front scheme has resulted in its share price being slaughted, down around 24% on the day. Now, this is a company on a p/e of 7.3 before today and which has fallen a lot over the last 6 months on fears over the Warm Front scheme, but here's an interesting stat that I found from one report. It looks like this scheme provides only around 20% of the profits for the company, so does that justify a 50%+ fall in the share price over the last 6 months, especially when the P/E is hardly demanding and it is not dependant on that one scheme? The scheme itself continues for 2 more years and then you have the Green Deal and I suspect Eaga will pick up business there. I could understand the share price fall if it wiped out profits or put them at a loss or in a position like Connaught, but that doesn't appear to be the case. Be interesting to see how this develops going forward.

 

Shares in British energy efficiency specialist Eaga, which runs the Warm Front programme, drop 10 percent after the British government announces it will scrap the scheme, which provides grants to help people in fuel poverty. Seems to me that the market has massively overreacted to losing only 20% of profits, or am I missing something?

 

'Eaga shares are tanking because of the phasing out of the Warm Front scheme, because the uncertainty over what will replace it gives little reason for investors to buy the share,' says Henry Carver at KBC Peel Hunt.

 

'However, although it accounts for 50 percent of Eaga's revenues, margins are only 2 percent, so it generates less than 20 percent of profit, and the company should benefit from the drive towards energy efficiency generally,' he adds.

 

http://www.lse.co.uk/FinanceNews.asp?Artic...heme_phased_out

[No6]

Back door tax on business yesterday.

 

Fury over £1bn green stealth tax in spending review

 

Businesses have condemned an "appalling" £1bn a year green stealth tax that will add 11pc to the energy bills of British companies.

 

About 5,000 large and medium-sized companies with bills of more than £500,000 per year will be hit by the new tax.

 

George Osborne, the Chancellor, did not mention the levy in his spending cuts speech. But the details were buried in Treasury documents setting out how money will be raised to pay down the deficit.

 

http://www.telegraph.co.uk/finance/newsbys...ing-review.html

[jerpy]

By the look of EAGA's performance today, I would say there is a broader concern of how the company will downsize to reflect a reduced business model. Whilst it may have been a low margin element of the business, it was probably one of those "bread and butter" volume situations. Take away a big chunk of business, the model may no longer be efficient?

[No6]

By the look of EAGA's performance today, I would say there is a broader concern of how the company will downsize to reflect a reduced business model. Whilst it may have been a low margin element of the business, it was probably one of those "bread and butter" volume situations. Take away a big chunk of business, the model may no longer be efficient?

 

Very difficult to say, but it should be remembered that the warm front contract hasn't ended, for the next two years it is funded at £200million which was lower than market expectations, then it effectively becomes rebranded as the Green Deal. In fact, the Green Deal will be open to more people as it will turn into a loan, repayments will come from the savings from insulation, this has been known for some time, so the market can hardly say they were surprised. I think Eaga will be in the driving seat for the Green Deal, but it is 2 years down the road. In the meantime the market has jumped all over the reduced warm front funding, but the share price had already fallen heavily and the question is how much was already in the price before the falls post budget/spending review? What I find interesting is that other than the reduced funding for the next two years, nothing here is new, I doubt whether Eaga is the next Connaught unless there is something hidden in the accounts, but there has been no talk of that at all.

 

Whether Eaga is a bargain at these prices I don't know, it is always a danger to catch a falling knife andd the short sellers may well be having a field day right now. I shall be watching it because there is a disconnect between what is being said by the politicians and what the markets want to believe. Who knows which ones to believe - maybe neither of them.

 

The market has chosen to ignore the comments below from just a few weeks ago.

 

Mr Huhne, the Energy and Climate Change Secretary, said: "The Green Deal is a massive new business opportunity which has the potential to support up to a quarter of a million jobs as part of our third industrial revolution. Insulation installers and the supply chain all stand to benefit from this long overdue energy makeover.

 

"Energy efficiency is a no brainer. We need to tap in to this huge market to save people money on fuel bills, save carbon and help the economic recovery."

 

http://www.thisishampshire.net/news/840526...boost_for_jobs/

 

Thursday 16 September 2010

 

Mr Speaker: Order. We are talking about help for vulnerable people in meeting their energy bills, so we have to stick to that.

 

Emily Thornberry (Islington South and Finsbury) (Lab): I am sure the Secretary of State agrees that if we are to move to a green economy, we have to do so in a way that is fair, so can he confirm that he is making representations to the Treasury to keep the Warm Front scheme which, as he knows, is a successful scheme that has helped 2 million of the most vulnerable fuel poor?

 

Chris Huhne: As the hon. Lady knows, the Warm Front scheme has played a very important part in ensuring that there has been an improvement in energy efficiency for many of the people who are most vulnerable to fuel poverty. We will ensure that there continues to be a commitment that the scheme will continue but, as she will know from previous questions, our key focus-the key instrument-in dealing with fuel poverty and energy efficiency will be the green deal. A very important part of the green deal will be tackling fuel poverty and, over time, it will gradually take on a more important role and the Warm Front scheme will take on a lesser one.

 

http://www.publications.parliament.uk/pa/c...100916-0001.htm

 

Found the company statement.

 

Eaga plc

 

20 October 2010

 

Eaga plc

 

Comprehensive Spending Review

 

Eaga notes the statements included as part of the Government's Comprehensive Spending Review earlier today which confirmed the departmental spending budget for the Department of Energy and Climate Change ("DECC"). This statement confirmed that the Warm Front Scheme would be phased out as part of the transition to "Green Deal".

 

The subsequent press release from DECC outlined a smaller, targeted Warm Front programme. Funding for the Warm Front programme for the 2010/2011 fiscal year is currently GBP345m and the statement today confirmed a budget of GBP110 million in 2011/2012 and GBP100 million in 2012/2013 which is materially lower than our expectations. Eaga will be discussing with DECC the operational arrangements for the Warm Front scheme for this period and will be considering the likely resultant impact on Eaga's performance.

 

The announcement also confirmed the Government's ongoing commitment to the issue of climate change with specific commitments to the Green Deal and Renewable Heat Incentive programmes, together with a new obligation on the energy companies to provide greater help to the most vulnerable fuel poor households. The statement also confirms that Feed In Tariffs for renewable generation will be refocused on the most cost-effective technologies, such changes will be implemented at the first scheduled review date unless higher than expected deployment requires an early review. These areas represent significant opportunities which Eaga is pursuing.

 

- Ends -

 

http://online.wsj.com/article/BT-CO-20101020-711225.html

[No6]

African Barrick Gold up so far today despite numbers being down. Support looks to be around 535-545.

 

LONDON (SHARECAST) - African Barrick Gold’s profit fell 8% during the third quarter and revenue dipped 1% following a decline in production at the Tanzania-focused gold miner.

 

Net income dropped to $40m during the three months to 30 September from $43m a year ago and sales of $209m were lower than the $211m reported in 2009.

 

Profit for the nine months is still up 87% though at $139m and revenue 35% better at $633m.

 

The company, which recently slashed production forecasts at its Buzwagi operation following a huge fuel theft, blamed the quarterly drop in revenue on a 23% slump in production to 164,996 ounces of gold.

 

Today’s numbers would have been worse but for a 29% increase in the average realised gold price to $1,233 an ounce. Output for the nine months was up 4% at 521,204 ounces.

 

http://www.sharecast.com/cgi-bin/sharecast...tory_id=3767055

[No6]

With Betfair coming to the market with quite a high prospective P/E, William Hill P/E around 8 got a good write up today, recovery seen in process. The bookies might still be a bit of a gamble though.

 

William Hill's shares galloped ahead like the legendary Kauto Star, who may yet give the bookie a huge public relations fillip by winning an historic fifth straight King George VI chase at Kempton Park on Boxing Day.

 

=========================

 

But, all the same, these shares are hardly overpriced at just 8.9 times forecast full-year earnings and are cheaper than Ladbrokes at 9.4 times, although the prospective yield (4.64 per cent) is not as good as the latter's 5.19 per cent.

 

It has not been plain sailing for William Hill in recent years, but we like what Mr Topping is doing and, on this sort of rating, the shares offer value even against a slightly uncertain political and regulatory backdrop. As such we would be willing to place a bet on the shares doing well from here. Buy.

 

http://www.independent.co.uk/news/business...rs-2113306.html

[No6]

Wonder what this might do to Vodafone's share price?

 

LONDON (ShareCast) - Vodafone has been given a 30-day deadline to pay a $2.5bn tax bill the Indian authorities say it owes following the acquisition of Hutchison Whampoa assets three years ago.

 

The mobile phone giant is appealing against the decision, claiming the $11bn deal is not subject to taxation as it was struck between two offshore entities.

 

British firm Vodafone bought the Indian telecoms assets of Hong Kong conglomerate Hutchison Whampoa in 2007.

 

"Vodafone strongly disagrees with the tax calculation," the company said in a statement after receiving its first formal tax demand from the Indian tax department.

 

"The tax authority is attempting to interpret Indian law as it has never been interpreted for the past 50 years, and this interpretation also goes against internationally recognised tax norms."

 

http://www.digitallook.com/cgi-bin/dlmedia...tory_id=3769413

[jerpy]

With Betfair coming to the market with quite a high prospective P/E, William Hill P/E around 8 got a good write up today, recovery seen in process. The bookies might still be a bit of a gamble though.

 

What amazes me is the F.O.B.T returns are not greater for many bookmakers, did hear some time back there were restrictions on numbers? However you would have to be seriously deluded to realise in the long run the house will always win - they are a computer for crying out. Wonder what growth opportunities remain, remember it being a big thing in growth numbers the last time I studied bookmaker plays.