News & Insight • Weekly Newsletters

17 March 2023 | William Buckhurst

That Was The Week That Was

MACRO

• At the UK Budget, the Office for Budget Responsibility (OBR) says that the UK will avoid a technical recession this year and inflation will fall to 2.9%
• US CPI came in in-line with expectations (6% year-on-year) but still elevated and the services element still stubbornly high (core prices rose by 0.5%, an acceleration from 0.4% last month)
• French inflation was revised upwards in February to 7.3%
• Argentina’s inflation rate topped 100% for the first time in three decades

COMPANY NEWS

• Prudential showed slightly lower new business numbers than expected, but operating profits were higher
• Inditex (owner of Zara) posted strong profit growth. It has been expanding in the United States and downsizing in China, which in 2019 was its second-biggest single market after Spain, delivering 8% of the group's pre-tax profit  
• Halma continued to shows its resilience as it reported pre-tax profit 13.8% ahead of last year
• On the back of a “prudent approach” to guidance Adobe defied tough macro conditions and beat estimates

BANK WATCH

Going backwards to go forwards. In a week in which we lost the revolutionary high jumper Dick Fosbury (inventor of the “Fosbury Flop”) there were some parallels in the banking sector particularly at Credit Suisse who secured a lifeline from the Swiss central bank of up to £44.5bn to stabilise the business and fund day-to-day operations after shares flopped. Ulrich Körner, CEO of the beleaguered bank, claimed the loans: “demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation”. Things escalated in the latter part of the week and rumours circulated that the bank would be taken over by its long-term Swiss rival, UBS.

UK STOCK MARKET

Congratulations to all of those that were shortlisted and won awards at the plc awards 2022 gala on Thursday evening. In no particular order the winners were; Britvic plc (best investor communication), Coats Group plc (transaction), Kainos Group plc (growth business), Hostelworld Group plc (tech business), Spire Healthcare Group plc (transformation), Richard Staveley (fund manager), Centamin plc (breakthrough), Kevin Lyons-Tarr (CEO), Haleon plc (new company) and Telecom Plus plc (company)

TECH WEEK

2023 talking point, Chat GPT, had indirectly “predicted” a crash this week – perhaps they were talking about the Cheltenham Festival?! - but there was also time to focus on the strength of the Artificial Intelligence (AI) trade which has continued to be strong this year after AMD, the semiconductor company, announced robust demand for its new chips and Microsoft mentioned that GPT 4 – the latest iteration from OpenAI - would be going into its Office suite.

THIS WEEK IN HISTORY

• 1907: the New York Stock Exchange goes into drastic decline. The subsequent public panic leads to runs on banks. These runs lead to large-scale liquidations of call loans, or loans used to finance stock market purchases. As a result, thousands of businesses fail
• 1998: Paramount Global shares jump as Titanic overtakes Star Wars to become the highest grossing film ever

IN OTHER NEWS

Randal Quarles, a former Vice Chair at the Fed, acknowledged the Silicon Valley Bank (SVB) meltdown raised the issue of how regulators can manage the impact of social media exacerbating events such as bank runs: “You had this perfect flow of imperfect information that really increased the speed and intensity of this run”

Elsewhere, Art Cashin, the director of floor operations at UBS told CNBC on Friday “we are on the edge of what we were doing back when Lehman got into trouble. They (investors) were buying credit default swaps and they were buying out-of-the-money options, then compounding it by spreading the word”

MARKET DATA

 As at 17^th March 2023. Source: FactSet

This publication has been produced by Vermeer Investment Management Limited (VIM) trading as Vermeer Partners. It is provided for information purposes only. VIM makes no express or implied warranties and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. VIM will not treat unauthorised recipients of this publication as its clients. Prices shown are indicative and VIM is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. Without limiting any of the foregoing and to the extent permitted by law, in no event shall VIM, nor any of its officers, directors, partners, or employees, have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or its contents. Other than disclosures relating to VIM, the information contained in this publication has been obtained from sources that VIM believes to be reliable, but VIM does not represent or warrant that it is accurate or complete. VIM is not responsible for, and makes no warranties whatsoever as to, the content of any third-party website referred to herein or accessed via a hyperlink in this publication and such information is not incorporated by reference. The views in this publication are those of the author(s) and are subject to change. VIM has no obligation to update its opinions or the information in this publication. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the client who receives it. Any securities discussed herein may not be suitable for all investors. VIM recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. This material has been issued and approved for distribution in the UK by VIM. ©2023 Vermeer Investment Management Limited. All rights reserved. No part of this publication may be reproduced or redistributed in any manner without the prior written permission of VIM. VIM is authorised and regulated by the Financial Conduct Authority (FRN: 710280) and is incorporated in England and Wales (company number: 09081916).