News & Insight • Weekly Newsletters

24 February 2023 | William Buckhurst

That Was The Week That Was

MACRO

• Friday marked the anniversary of the Ukrainian war
• The Composite PMI (a broad indication of business activity) increased to 50.2 this month from a final reading of 46.8 in January, marking another strong data point for the US economy
• The incoming Governor of the Bank of Japan indicated that they would continue with their loose monetary policy as they see underlying domestic inflation as being under control
• The PCE deflator, the Fed’s preferred measure of inflation, rose 4.7% year over year in January, up from 4.4% in December – a sign that the Fed may need to keep to its aggressive rate rises
• Sir Keir Starmer announced Labour’s five “missions” for next year’s election. One of these was to make the UK the world’s fastest-growing major economy

COMPANY NEWS

• Rio Tinto admitted to being “quietly confident” in the global outlook as it announced its solid results. Due to underlying commodity prices the company also cut its dividend in half
• Nvidia a company that has used AI tailwinds this year beat expectations and issued positive guidance
• Newmont Mining achieved its guidance (6 million oz) and like other mining companies noted higher operating costs. They also rebased their dividend and admitted to still being in dialogue with Newcrest about merging
• Rolls-Royce - What burning platform? Following the negative comments recently from the new CEO, the company’s trading update was good and, by not mentioning a cash raise, the shares were sent higher
• The slowdown in COVID vaccines caught up with Moderna as it announced $5bn of contracted 2023 deliveries versus $18.4bn in 2022. The company also faces rising costs due to surplus manufacturing

M&A WATCH

Randall & Quilter announced a sale of the 40% it held in Tradesman for $47m – nearly 20% of the market cap.  These proceeds will be used to pay down debt and implied a higher value for the rest of the business.

Barbarians In Aberdeen. The Board of John Wood Group notes the recent speculation and confirms that it has received three proposals from US private equity giant Apollo Global Management regarding a possible cash offer

SMALL CAP

Invinity Energy Systems, the utility-grade energy storage manufacturer raised £21.5m in a placing and subscription of new shares. The proceeds from the proposed placing are expected to provide it with sufficient working capital to the end of June 2024 by which time the company will have launched its next generation Vanadium Flow Battery – one they claim will not degrade as much as a lithium equivalent

TECH WEEK

While Beijing is reining in ChatBot development in China, wary of their inability to censor the replies, US analysts are counting the cost to Google of the success of their AI initiatives. With computing costs of several cents per interaction for AI queries, Morgan Stanley estimate that if half of the 3.3trn Google searches made in 2022 were handled by AI, it could cost Google owner Alphabet $6bn

THIS WEEK IN HISTORY

• 1862: President Abraham Lincoln signs the Legal Tender Act into law, revolutionizing the US monetary system by making paper notes legal tender and creating a national currency for the first time
• 1967: Warren Buffett makes his first ever foray into the insurance sector with an $8.4m investment in National Indemnity Company and National Fire and Marine Insurance Company

IN OTHER NEWS

United. On the eve of the Carabao League Cup Final between Newcastle United and Manchester United it was pleasing to see the building societies of both cities merging. Unlike its footballing namesake, the Manchester Society is the smaller of the two with 11,000 members and £200m in assets – compared to Newcastle’s 345,000 members and £5.3bn

MARKET DATA

 As at 24^th February 2023. Source: FactSet

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