The mouse that can still roar
Source: Yahoo images

Disney (DIS US) shares have been under pressure during the last week despite full theme parks and a remunerative roster – and pipeline – of films.  Share watchers were concerned about the continued pressure on the company’s cable division where ‘cord cutting’ (the decision by subscribers to eschew traditional cable TV channel distribution in favour of the new-fangled internet streaming way of watching your favourite shows) continued to hurt revenues in this part of the business. However – just like the company’s hero Mickey Mouse – it has a plan.  In a surprise move Disney announced that they were withdrawing their famous cartoons, films and TV series from streaming supremo Netflix and starting their own streaming service for paying customers from early 2018.  Judging by some early analysis and social media polling this new service could prove to be both popular and much more remunerative to Disney than their current content payment from Netflix.  Sounds like a good reason to dust down a few vintage Mickey Mouse cartoons – or some of their more recent content output – purely in the name of research, of course! CIO Dynamic Opportunities Fund

Central Banks Part 2: Bundesverfassungsgericht Nine say….er…..nein….kannsein
Source: Google Stock Images

The ECB is another central bank faced with the challenge of appearing to know what it is doing according to its minutes, of which the latest batch are due out tomorrow. Mario Draghi made a rod for his own back at the end of June by talking up the prospects of reflation which the FX market, not unreasonably, concluded  had implications for future monetary policy. He has been pedalling hard since to dampen expectations  but these minutes may re-open speculation of tightening by the turn of the year.  However, interest rate changes are much less likely than in the US. Mr Draghi’s  real problem is the ECBs jumbo QE programme and how to get off the escalator that it has become. Recently the ECB has been buying a disproportionate amount of French and Italian bonds, which could be simply explained by a shortage of German bunds but is widely suspected of being politically motivated to help the governments in Paris and Rome through utilising the Bundesbank’s fire power. This is playing into the hands of recalcitrant German litigators who claim that the ECB is promoting financial transfers in breach of its mandate. Yesterday the Bundesverfassungsgericht (German Constitutional Court) handed the litigators a moral victory in its latest judgement (helpfully with an English translation): ‘’In the view of the Senate, significant reasons indicate that the ECB decisions governing the asset purchase programme violate the prohibition of monetary financing and exceed the monetary policy mandate of the European Central Bank, thus encroaching upon the competences of the Member States.’’ However, the Court has referred the matter to the European Court of Justice, which has previously ruled that the ECB can effectively do whatever it likes. An unfettered Mr Draghi may yet be able to persuade the FX market that the euro is nearing the end of its current bull run, which may even have a knock-on effect in strengthening the pound against the dollar. Chief Economist

Central Banks Part 3: rate hikes ‘r’ not us
Source: Thomson Reuters

Sterling weakened against the USD yesterday when the latest economic data was released here in the UK. The UK’s key measure of inflation was unchanged in July, as falling fuel prices offset a rise in the cost of food, clothing and household goods.  Consumer Prices Index (CPI) inflation remained at 2.6%, the figures showed.  However, July’s Retail Prices Index (RPI) measure, rose from 3.5% to 3.6%. This may look like an over-reaction to some relatively unchanged numbers but it comes a year after the first post-referendum plunge in sterling. It certainly gets Mark Carney and his MPC colleagues off the hook for some time ahead, even if the CPI does creep higher later in the year as the second plunge in sterling works its way through. It also shows that as long as Brexit headwinds continue and economic data here is outperformed by Europe, with Interest rates and monetary policy expected to stay looser for longer than elsewhere the pound looks like it is in for a tough time. Head of Daniel Stewart FX

By Alastair Winter

Chief Economist at Daniel Stewart