News & Insight Weekly Newsletters

27 January 2023 | William Buckhurst

That Was The Week That Was

MACRO

  • US fourth quarter GDP came in at a very robust 2.9% year-on-year
  • The PCE core inflation index, a key indicator for the Federal Reserve, continued to show a slowing in the rate of inflation, coming in at 4.4%

COMPANY NEWS

  • Microsoft reported its lowest revenue growth in six years, but Azure cloud revenues are still $51bn, growing 35%. They also mentioned that “The next wave of computing is being born”; “The age of AI is upon us....
  • ASML issued another very healthy statement, slightly ahead of consensus, highlighting a record backlog again despite a weaker outlook for semi-conductors
  • Both Visa and American Express beat expectations as cross-border spend picked up
  • Diageo reported lower than expected free cash flow but still increased their interim dividend by 5%
  • LVMH reported a second straight record year of revenue growth
  • Union Pacific released slightly disappointing statements showing some costs inflation and a softening in demand
  • Tesla reported better-than-expected earnings but showed falling margins and poor free cash flow
  • Chevron announced a massive $75bn buyback which might have ruffled a few feathers in the White House
  • Toyota announced that its CEO, Akio Toyoda, the grandson of the founder, will step down, handing over to Koji Sato, the boss of its luxury car unit

RE-OPENING TIMES

Regional v International.  Flybe announced on Saturday it had ceased trading and all flights had been cancelled. This was in sharp contrast to Easyjet which showed much stronger than usual bookings over the winter. Holidays and air travel do not appear to be being impacted by the cost-of-living crisis. The airliner is anticipating 50% growth for their holidays business compared with a year earlier, well above the 30% year-on-year growth they had previously forecast

INTERESTING ELSEWHERE

An extraordinary start to the premiership of Tufan Erginbilgic, the former BP executive who replaced Warren East as chief executive of Rolls-Royce by telling staff it is a “burning platform” and must transform to survive. “We underperform every key competitor out there,” Erginbilgic said in an address at Rolls-Royce’s UK manufacturing site at Derby. “Every investment we make, we destroy value.”

SMALL CAP

Following on from Diageo (mentioned earlier) there were several other results in the hospitality sector to drink through with JD Wetherspoon, announcing good like-for-like sales growth of 18% in the last quarter of 2022 perhaps due to the World Cup. Elsewhere Fever-Tree group revenue increased by 11% to £344.3m which was below consensus due to UK revenue falling 2%. They also mentioned ongoing cost pressures, particularly in glass, where it has a £20m headwind this year

THIS WEEK IN HISTORY

1950: India formerly becomes an independent state, no longer under British rule

2011: Toyota says it will recall around 2.3m vehicles in the US to fix potentially faulty accelerator pedals. The action came on top of the ongoing recall of some 4.2m vehicles over "pedal entrapment" risks

THAT WAS THE WINTER THAT WAS

Unusually warm weather in the US. The US normally pulls natural gas from storage sites at this time of year.  New data shows that in the first week of January, however, 11bn cubic feet of extra gas was put back underground instead. The number of gas-weighted heating degree days – a measure of energy demand – has been running 25% lower than normal in January according to the Energy Information Administration (EIA). Shale production is at record levels and natural gas prices are at their lowest point since the peak of the pandemic

IN OTHER NEWS

The number of new cars made in the UK has dropped to its lowest level for 66 years as the Society of Motor Manufacturers warn the country is not doing enough to attract manufacturers.

Following the current trend, Justin Bieber has apparently sold his music catalogue for $200m to Blackstone-backed IP fund, Hipgnosis. Oh Baby!

MARKET DATA

% returns

1 Week

1 Month

1 Year

5 Years

UK Equities (% return)

0.21

3.97

1.83

1.18

World Equities (% return)

2.15

7.37

-5.89

29.42

10 Year US Treasury Yield (%)

3.51

3.84

1.81

2.66

GBP / USD (fx rate)

1.24

1.21

1.35

1.42

As at 27th January 2023. Source: Financial Express

 

 

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