News & Insight • Weekly Newsletters

07 October 2022 | William Buckhurst

That Was The Week That Was

MACRO

• Markets rallied earlier in the week as poor economic news fuelled speculation of a “Fed pivot”
• In the US, the closely watched Job Openings and Labour Turnover Survey (JOLTS) showed around 1mn fewer jobs available in the US, while the ISM Manufacturing PMI was weaker (50.9%)
• However, a stronger Services PMI (56.7%) and an unexpectedly robust US jobs report (263,000 new jobs in August) fuelled concerns that the Federal Reserve will continue to increase rates aggressively
• UK house prices fell for the second time in three months in September as the annual rate of growth slowed to 9.9% higher than a year ago
• OPEC, the oil cartel backed by Saudi Arabia and Russia, announced that they would cut oil production by 2 million barrels a day

COMPANY NEWS

• Shell provided an update on third quarter performance and revealed that margins on its refining business had fallen sharply
• Diageo reiterated guidance with organic net sales growth across all regions
• Tesla closed the week down after stating that it had delivered 343,830 cars worldwide vs 358,000 expected and commented that “as our production volumes continue to grow, it is becoming increasingly challenging to secure vehicle transportation capacity at a reasonable cost during these peak logistics weeks.”
• Advanced Micro Devices (AMD) and Samsung, two of the world’s largest chipmakers and bellwethers of international consumer confidence, confirmed falling demand for semiconductors

SMALL CAP NEWS

Hard hats on. A trading update from Watkin Jones - the developer, builder and third-party manager of new homes for rent - sent the shares 30% lower as they highlighted the squeeze in margin that the construction industry is having to deal with by announcing underlying operating profit to be 10% below expectations

THIS WEEK IN HISTORY

• 1957: global markets fall sharply in response to the successful Soviet lunch of Sputnik 1, the world’s first artificial satellite

IN OTHER NEWS

Terry Smith this week, colourful as ever, on pension fund liabilities:

“You might think I am just another commentator who spots the problem after the event. However, in 2003 when I was chief executive of Collins Stewart we acquired what was then Tullett Liberty, now TP-ICAP, the interdealer broker. The acquisition came with a pension fund that had a deficit, with roughly £64 of assets for every £100 of estimated liabilities. We too faced the siren call of investment advisers who suggested liability-matching investments in bonds. What did we do?

The pension fund trustees fired the investment adviser and moved to a strategy of investing only in 20 high-quality equities. The adviser said it was “the most dangerous investment strategy he had ever seen a pension fund adopt”. The chair of the trustees memorably retorted: “In contrast to the strategy you are recommending, it is in danger of making money.”

MARKET DATA

As at 7^th October 2022. Source: Financial Express

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