News & Insight • Weekly Newsletters

24 March 2023 | William Buckhurst

That Was The Week That Was

MACRO

• UK inflation numbers for February surprised on the upside. Markets were expecting a drop in the annual rate to below 10% for the first time since August 2022. But a surge in food prices helped lift inflation to 10.4%, up from 10.1% in January
• The Bank of England raised rates by 0.25% to 4.25% with Governor, Andrew Bailey, remarkably suggesting to businesses that they don’t put up prices as this will only add to the pain
• In the US, the Federal Reserve hiked rates by 0.25% and, while Fed officials said they wouldn’t cut before year-end, the market took a different view as bond yields fell
• Gold hit $2,000 multiple times due to bank worries

COMPANY NEWS

• Nike shares fell as they reported that gross margins were likely to fall, even though they raised their full-year sales forecast to “high single digits,” up from a prior outlook for “mid-single-digit” gains
• Vistry, in contrast to other UK housebuilders, reported that forward sales have nudged up a bit compared with the same period last year
• Sanofi announced very positive trial results for its asthma drug Dupixent used to treat smokers who contract lung cancer
• Like many of its clients, Accenture announced a head count reduction of 19,000 on slowdown fears whilst reporting solid revenue growth

TECH WEEK

Silicon Valley icon Gordon Moore died this week. A co-founder of Intel, but his true fame is of the law named after him. Moore’s Law is the observation that the number of transistors in an integrated circuit doubles over a certain period. In 1965, he forecast the components would double every year for the next decade. Since then, it’s been about two years. There are plenty of copy-cats but a particularly favourite is Eroom's law - deliberately written as Moore's Law spelled backwards - it states that the cost of developing a new drug roughly doubles every nine years.

BANK WEEK

Warren Buffett has reportedly been in talks with the Biden administration to support debt challenged regional banks. Buffett, worth an estimated US$102bn, has a history of stepping in and making timely investments in the sector – most notably US$5bn to Goldman Sachs in 2008

As the dust settles on the Credit Suisse/UBS deal, the regulator’s decision to cancel $17bn of the bank’s debt (AT1s – a mezzanine level of debt) has led to protests from those investors most affected. Other reacted more pragmatically – Jeff Grundlach, the billionaire bond fund manager said: “Put on your big boy pants and look in the mirror, learn how to manage risk!”

SMALL CAP NEWS

Good Finking? One area that has clearly been looking at itself in the mirror is the UK small cap market and the brokers that operate in that area. With very little IPOs/deal flow of late it was interesting to see two City broking bastions in Finncap and Cenkos announcing an all-share merger.

THIS WEEK IN HISTORY

1954: The gold market in London reopens for the first time since 1929. Gold prices were $35 an ounce

1988: Apple sends shock waves through Silicon Valley as they file a lawsuit against Microsoft. The lawsuit alleged that Microsoft stole graphic design elements from Apple’s user interface for Windows 2.03

IN OTHER NEWS

New research has found that almost two-thirds (62%) of UK asset managers have admitted to still using fax machines, as antiquated technology remains the backbone of many of their operations.

The population in Beijing declined for the first time since 2003 - falling from 21.88m in 2021 to 21.84m in 2022

MARKET DATA

 As at 24^th March 2023. Source: FactSet

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