COMMENT: Market takes a pause on the wall of worry

`For every black cloud worrying a British investor there is a silver lining to console his optimistic colleague on Wall Street'

Those who believe in the old adage that bull markets have to climb a wall of worry must conclude that London has yet to reach the top. Yesterday the Footsie shrugged off Friday night's Wall Street wobble, the biggest one day fall in Tokyo this year and a rash of stocks going ex-dividend to retain its composure..

There are plenty of doomsters around to keep the climb going starting with Merrill Lynch whose latest survey shows institutional investors worrying about interest rates still heading upwards, economic activity declining in a year's time and world stock markets falling over the next three months.

As a result, they are shunning equities, putting more cash aside than at any time since 1991 and heading into the perceived safe haven of gilts. For the contrarian investor, it is as good a reason for the bull market to continue its stampede as Alan Greenspan's famously mis-timed "irrational exuberance" remarks when the Dow languished, in relative terms, at 6,000.

For every black cloud worrying a British investor, however, there is a silver lining to console his optimistic colleague on Wall Street. Over there, despite Friday's jitters, professional investors have bought into the dangerous belief that there's been what stock market analysts call a paradigm shift - in other words that this time things will be different.

It rarely is, and the fact that mutual funds' cash piles are at their lowest level for 20 years, that everyone is saying the economic cycle is dead and are running scared of being out of the market while it powers ahead is the strongest sign yet that it's going to end in tears on Wall Street.

The bond market knows it and has been heading the wrong way for some time now. It would be surprising if retail sales figures on Wednesday did not confirm all the recent data pointing to a strengthening economy and, if so, it is a racing certainty that the Fed's Open Market Committee will nudge interest rates higher either at its meeting next week or at the end of September.

So where should the smart money be heading? In Europe profits growth looks set to accelerate, especially from the export sector benefiting from its unaccustomed competitiveness, interest rates look likely to remain low and no-one thinks the stock markets are going anywhere. It is hard to think of a more propitious backdrop.

Not a pretty Pitcher at United Utilities

The chart at the bottom of this page shows why Sir Desmond Pitcher's time is up at United Utilities. When things are going right, the City can be the most wonderfully tolerant of places, blind to even the most extravagant examples of empire building by domineering executive chairmen. When things are going wrong, as they are in the North West, then share price underperformance of the sort Sir Des has presided over, is more than enough excuse to don the black cap.

The group's recently-departed chief executive, Brian Staples, recognised this and resolved that if United Utilities was to restore its stock market rating then it had better get rid of Sir Des. Unfortunately for the Staples camp, Sir Des got his retaliation in first, ousting his opponent while the balance of power on the United Utilities board still rested in his favour.

As so often happens, however, Sir Des emerged victorious from the struggle only to discover that he too had been fatally wounded. Far from clearing the air, the departure of yet another chief executive has merely heightened the atmosphere of crisis surrounding the boardroom.

Were Sir Des the sort who goes quietly then he would be picking up the watch, the vote of thanks and gold medal for utility services at today's unscheduled board meeting in Warrington. His determination to stand firm in the face of overwhelmingly opposition from institutional shareholders makes a more ignominious departure inevitably, if not today then certainly this side of Christmas.

If the group has any sense it will revert to a combination of non-executive chairman and chief executive. The chairman will have to come from the outside since the only two credible internal candidates - Sir Peter Middleton and Sir Dick Evans - have full time jobs at BZW and British Aerospace respectively.

Even then, the company will not be out of the woods. The chief executive's job also presents a problem since, in the rush to get rid of Mr Staples, the best replacement Sir Des could come up with at short notice was someone who only intends to serve out another two years himself.

It is not a happy picture. Mixing water and electricity was always asking for trouble as Sir Des's vision of the multi-utility has shown. His legacy could prove just as awkward.

Cockburn's port of call ...

Bill Cockburn is a canny Scotsman but there is a just an outside danger that he could find himself in between a rock and a hard place. If the British Telecom-MCI merger does not go ahead then the job that he is quitting W H Smith to take up also disappears into the ether.

The job in question, managing director of BT's domestic telephone business, will only exist if Concert - the name given to the grand transatlantic telecoms merger with MCI - proceeds and gives Sir Peter Bonfield a wider international role to play.

Michael Hepher, who used to have the managing director's job at BT, soon found that the organisation was not big enough to accommodate him after Sir Peter arrived as chief executive.

Without Concert, where do Mr Cockburn and, for that matter, BT go? Well, Mr Cockburn has almost certainly burnt his boats at W H Smith even though he remains there until the end of September while the search for a new chief executive trundles along. Mr Cockburn's management style did not make him many friends at the bookseller and there will be few tears shed at his departure.

As four internal candidates at WH Smith jockey for the top job the talk now is of a break-up with the US business, Waterstone's and the Virgin Our Price chain split off from the core high street chain.

If Concert does not proceed - and we are told there are some institutions who do not not want it at any price - then BT has some serious thinking to do. Should it too do the splits and demerge into a transmission network on the one hand and a trading business on the other? Or should it use its cash to buy direct into the local US telecoms market, which is where everyone says the real money is?

BT is under intense pressure to amend the terms of the MCI merger. MCI is sticking to its line that their agreement prevents renegotiation. Perhaps Mr Cockburn should try and help out. Otherwise he could become the first managing director of BT to receive a pay-off before he even started the job.

14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
Detail of the dress made entirely of loom bands
ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Technical BA - Banking - Bristol - £400pd

£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...

Account Management Strategy Manager

£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice