News & Insight • Weekly Newsletters

05 May 2023 | William Buckhurst

That Was The Week That Was

MACRO

• The Coronation of King Charles III and Queen Camilla
• The Federal Reserve put rates up by 0.25% as expected but opened the door to a pause in the tightening cycle. As a reminder, there have been 10 consecutive rate rises but the bond market curve is now expecting cuts before the year is over 
• The non-farm payrolls continued to beat expectations with 250,000 new jobs in the US added in April
• The ECB hiked rates by 0.25% and reiterated more to come but German industrial production fell 3.4% in March, the biggest drop in a year

COMPANY NEWS

• Apple revenue fell for the second straight quarter. Weakness in PC’s and the iPad was propped up by continued strength in iPhones. They announced plans for a $90bn buyback and raised their dividend
• Shell released quarterly earnings well ahead of expectations driven mainly by the trading business and they announced another big ($4bn) share buyback. They also announced an exit of the Cambo oil field – west of Shetland – putting further questions over the future of the British oil and gas sector
• Zimmer Biomet raised its annual sales and profits forecasts amid a sustained recovery in surgical procedures in the US
• Warren Buffett and Charlie Munger hosted the annual Berkshire Hathaway shareholders’ meeting in Omaha, Nebraska – also known as Woodstock for Capitalists. Many things were discussed (Questions: would they rescue banks?/have they finished buying Occidental Petroleum?/is Greg Abel the successor? Answers: not in a hurry to as bank runs are much quicker now, yes but wouldn’t buy it outright, seems so) as figures were better than expected from the conglomerate (operating earnings up 12.6%) as they sold some of the underlying holdings ($13.3bn) and bought back $4.4bn of its own shares 
• Novo Nordisk announced typically strong results but said it had to cut some supply of its obesity drug Wegovy to cope with demand

BANK WATCH

After JPMorgan Chase secured a deal on Tuesday to buy the beleaguered First Republic Bank, Jamie Dimon CEO said, “This part of the crisis is over”. However, US regional banks continued to get hit hard after reports that PacWest had been considering a breakup, capital raise or sale. Western Alliance also had to come out and deny reports that it was also exploring strategic options that included a partial or full sale of the bank with its management commenting that the “story was absolutely false” and that they were considering legal options in response to the story. It was also announced that TD Bank and First Horizon had agreed to scrap their $13.4bn merger after stating that they could not see a clear path to getting regulatory approval with First Horizon shares finishing sharply lower on the news. With roughly 4,500 banks does the US have too many?

Meanwhile in the UK, Virgin Money announced a larger than expected jump in bad loan provisions.

SMALL CAP NEWS

It’s not just in the UK where workers are striking. Videndum (previously known as Vitec) had to announce to the market that revenues would be adversely affected by the US writers’ strike and also “macroeconomic conditions” sending the shares lower. The company makes camera equipment but also video accessories that have been very popular with vloggers – particularly in lock down – and the ongoing need for video calls/meetings

THIS WEEK IN HISTORY

• 1979: KKR completed what is now accepted as the first modern leveraged buyout of a public company, taking over manufacturer Houdaille Industries for $355m
• 2010: The Flash Crash - in a matter of minutes the Dow Jones index lost almost 9% of its value. It transpired that a single selling order of an enormously large amount of E-Mini S&P contracts and subsequent aggressive selling orders executed by high-frequency algorithms triggered the massive decline

IN OTHER NEWS

While only 2,200 guests were  invited to the King’s coronation (compared to the guest list of 8,200 for the late Queen), the event is estimated to cost somewhere between £50-£100m. This said, it is also expected to give a welcome lift of about £1bn to the country’s hospitality sector over the bank holiday weekend

MARKET DATA

 As at 5^th May 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).