Does The US Know China Holds The Cards?

By Heather D'Alton Dec 14, 2005

*** GUS dumps Burberry

*** The pressure's now on Constellation

*** Abbey targeted by the FSA...is the US Treasury Secretary crazy?...50-year gilts issued today...and more          

-------------------   – Retailer GUS announced plans to dump its 66% stake in luxury goods group Burberry...and is now contemplating doing the same to Argos Retail Group.

– The news was not quite what the analysts had spotted in their crystal balls: GUS had been expected to spin off its consumer credit data business Experian first. Yet who can blame them for hanging on to Experian for as long as possible, particularly as the UK retail environment is showing no sign of recovery. Moreover, the business reported its third year of double-digit sales and profit growth.

– GUS meantime also reported a 10% rise in underlying profits and a 3% hike in turnover. Despite this, its shares fell 3% yesterday – to close as a top FTSE loser.

– Only retailers Next and Sainsbury's shares fell more yesterday – both down more than 3% as they traded ex- dividend. The blue chip index fell 11 points, to close at 4,971, while the FTSE 250 gained 0.2% to trade at 7,019 – a one-month high for the index.

– Potential Allied Domecq bidder Constellation Brands has been told by the Takeover Panel to put up or shut up by 29 June. Yesterday Allied's shares inched 0.1% up.

– So why the pressure on Constellation? Well, because more than three and a half weeks ago the group made noises about outbidding rival Pernod Ricard, the French group that has already launched a 679p per share bid. Since then...not a word. But will Constellation have enough time to put together a decent offer?

– Abbey National was fined £800,000 by the Financial Services Authority yesterday, following a series of mishandled complaints from some 5,000 customers regarding endowment mortgages. So should we be pointing the finger at the group's new owner, Spanish bank Santander? On the contrary, the FSA's Clive Briault said yesterday, had Santander not 'acted immediately', Abbey's fines for complaints between 2001 and 2003 would undoubtedly have been considerably heftier.

– And the UK economy slowed to 0.5% for the first quarter of the year, according to the Office for National Statistics. This is down from their preliminary calculations, which put GDP at 0.6%. The downward revision follows a further fall in the output of manufacturing industries.

– 'To hit Mr Brown's forecast now [of 3% to 3.5% for the year], quarterly growth would have to average around 1% in the remaining three quarters which looks very unlikely,' Capital Economics' Jonathan Loynes said yesterday.      

-------------------    – Why is US Treasury Secretary John Snow crazy to attack China, calling the country a 'manipulative trade partner'? Because firstly, China holds all the cards, says Mike Shedlock in Whisky & Gunpowder. Secondly, China knows it's holding all the cards...and thirdly, the US may not be smart enough to realise China holds all the cards. Moreover, did the US complain about the yuan peg when the dollar rose for nearly seven years? Not likely.

– The government today issues a 50-year gilt – the first of its kind, says David Scammell, manager of the Schroder Gilt & Fixed Interest Fund. Why will these gilts be well received? Because as pension deficits continue to grow, schemes will move increasingly out of equities and into long-dated bonds so as to 'plug the pensions gap'. Moreover, this is surely just the start of the government's issuance of ultra long-dated bonds... 

– Global commodities have surged over the past couple of years...but it seems that the agricultural commodities sector has been left behind, we note in the latest MoneyWeek. What does this mean for investors? It means that there are gains to be made from commodities such as coffee, bearing in mind that the Germans and Swiss consume around 50 times as much coffee as the Chinese, even though there are sixteen times more Chinese than Germans. All in all, 'soft commodities look a solid long-term bet', we note.

Published in Stock markets | More articles by Heather D'Alton

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