News & Insight • Weekly Newsletters

03 February 2023 | William Buckhurst

That Was The Week That Was

MACRO

• In the US, the Federal Reserve announced a rate hike of 0.25%, its smallest hike in almost a year. Risk assets rallied, and bond yields fell, on the back of what were interpreted as more dovish comments by Chairman Powell
• In the UK, the Bank of England raised rates by 0.5% to 4% but indicated rates may have peaked which also triggered a fall in bond yields
• Even more hawkish comments from ECB President Christine Lagarde couldn’t prevent European bond yields falling too
• The UK’s main index hit an all-time high of 7906, surpassing its previous peak in May 2018

COMPANY NEWS

A very busy week for quarterly results:

• Amazon reported better than expected sales, but slower growth in its AWS division (20% from 40% annual growth) although it was encouraging that advertising revenue continued to improve sharply
• Apple blamed sickness for supply chain issues that resulted in a decline in quarterly revenues for the first time in three and a half years. The services business continued to thrive however
• Alphabet showed that its Google advertising revenue fell 4% last quarter, only the second quarterly contraction in its history
• Shell posted an annual profit record of $40bn, while launching a $4bn buyback. Exxon Mobil eclipsed that posting a $56bn profit for 2022 and setting not only a company record but a western oil industry high
• Novo Nordisk once again beat forecasts on quarterly profits and sales and announced a $4bn buyback
• Keyence issued another set of record-beating sales and profit last quarter, as revenue grew 25% year-on-year
• Sony's video game division experienced its best quarter since launching the PlayStation 5. Sales revenue for the Game & Network Services Segment of Sony clocked in at ¥1246.5bn, a 53% year-on-year increase, while operating profit came in at ¥116bn, a 25% year-on-year increase. The group upped its profit forecasts for 2023
• As well as warning that the UK was falling behind its European peers with regards to R&D, Sanofi suggested it will grow at a moderate pace this year
• Bristol Myers Squibb and Merck both beat analysts’ expectations on earnings but revenues was negatively impacted by declines in sales of their cancer drug, Revlimid and its Covid-19 antiviral, Lagevrio respectively
• Thermo Fisher reported a 7% jump in revenues, driven by acquisitions, while earnings fell slightly as costs rose. Covid-19 testing revenue fell 16% to $370m during the quarter
• Valuation losses for the Adani Group, the Indian conglomerate escalated to $100bn as the business (and its subsidiaries) came under attack from a report by short seller, Hindenburg Research

RE-OPENING TIMES

Queen of the Skies. The last Boeing 747 to ever be built has changed hands in front of thousands of people who wanted to say goodbye to the iconic wide body plane. Customers, suppliers, celebrities, as well as employees — including the original staff known as the "Incredibles" who built the first 747 — gathered to deliver the plane to Atlas Air Worldwide, the largest operator of the iconic plane.

SMALL CAP

News flow was also plentiful with the smaller companies. ITM Power had their update, with new CEO, Dennis Schulz outlining a new strategy whilst announcing two large electrolyser sales to RWE (via Linde).

Trident Royalty announced General Motors had signed a $650m deal and 10-year off-take agreement with Thackar Pass – Trident holds a 60% interest in a gross revenue royalty over the entirety of the largest lithium deposit in the States

THIS WEEK IN HISTORY

1929: One day after the Federal Reserve attempted to slow down what it saw as an overheating stock market by banning loans to stock market speculators, National City Bank of New York (now Citigroup) blatantly defied the Fed and announced it would be making $25m in loans to stock market speculators

2003: Just two years after the two companies announced an $160bn merger, AOL and Time Warner announced a net loss of $98.7bn, at the time the largest annual loss of any public company in history

ENERGY WEEK

In a week that Shell’s record results were greeted with a muted share price reaction, there has been much commentary surrounding the discount that European oil majors trade at relative to their US peers. The S&P 500 Energy sector was up 53% in 2022, while Europe’s Stoxx 600 energy sector only managed 18%. Political risks such as windfall taxes have not helped but perhaps there are wider concerns surrounding their emphasis on investing in new, perceived lower return clean energy projects.  This week BP’s CEO, Bernard Looney, told the Wall Street Journal that he has been disappointed in the returns from some of his renewable investments and plans to pursue a narrower green energy strategy going forward

IN OTHER NEWS

“Every day, those brokers come in here. They get their bagels, sandwiches, doughnuts, coffee, cigarettes … and every day, they’re out there on the sidewalk, pushing and shoving on a door that is clearly marked ‘pull.’” — The owner of a Wall Street deli deflects a question about whether he ever asks his customers for stock tips (credit: The New York Times)

MARKET DATA

As at 3^rd February 2023. Source: Financial Express

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