News & Insight • Weekly Newsletters

19 May 2023 | William Buckhurst

That Was The Week That Was

MACRO

• A bumper week for “Fedspeak” as more and more Federal Reserve officials make the case for either a longer pause or even further hikes in interest rates. Bond yields rise; yet stock markets, particularly technology stocks, appear to take the news in their stride
• Mixed data out of China, as industrial output and consumer spending fall short of expectations, fuelling doubts over the strength of China’s post-Covid rebound
• UK wage growth showed little signs of easing as public sector annual earnings growth hit 20-year highs of 5.6%, starting to catch up with private sector earnings still at 7% year-on-year

COMPANY NEWS

• If Squishmallows have so far passed you by – think cabbage patch dolls, but more attractive - you could be missing a trick. Warren Buffett has certainly recognised the potential of this TikTok toy sensation since acquiring its maker Jazwares via its parent company late last year. "Jazwares is a gem,” said Buffett. 100,000 (at $10 each) Squishmallows of himself and Charlie Munger sold out at the annual meeting, re-selling on eBay for up to $450 each
• In other Buffett-related news, Berkshire Hathaway announced that they had sold out of US Bancorp and added to Bank of America, had trimmed Chevron and added to Occidental Petroleum
• Newmont confirmed its takeover of Newcrest for $17.5bn which will also add to its copper offering
• All main divisions for Deere (tractors) were chugging along nicely as they announced their quarterly results
• Vodafone announced very poor numbers and that they are cutting over 10% of the workforce
• Home Depot cut their outlook, predicting their first annual sales decline since 2009
• Siemens released a very good set of numbers and lifted guidance for the second time this year, sending the shares to an all-time high
• JD Sports showed continued growth in sales, whereas Foot Locker announced a profit warning due to weak demand and heavy discounting
• Experian continued to show strong growth but the shares were down perhaps on worries about robustness against AI. As to the impact of this new technology – BT announced by 2030 it would have replaced 11,000 jobs with bots
• Sony announced a 2% share buyback as the company announced a demerger of their financial arm
• Another update from Melrose who hosted their capital markets day (not too many end with a round of applause!) as they provided guidance of their aerospace division and the cash inflection point they see in the business. All eyes on Dowlais this week…

SMALL CAP NEWS

Two disappointing bits of news flow with Apollo pulling out of the deal to buy Wood Group after five bid attempts

One exchange that did go through, however, was the sale of Purplebricks, the estate agent disruptor, for a miserly £1 by its rival, Strike. Once a poster boy for the AIM market and valued at over £800m, the company has had some management reshuffles (ousting founding brothers, Michael and Kenny Bruce) as it failed to take the market share necessary for profitability.  Strike is backed by Sir Charles Dunston of Carphone Warehouse and TalkTalk fame

JAPAN WATCH

Japan’s leading stock market index, TOPIX, reached its highest level since August 1990 but still around 26% below where it was at its peak in 1989. GDP data for the Land of the Rising Sun actually picked up after three quarters of contraction with signs of a pick-up in consumer activity

THIS WEEK IN HISTORY

1864: In the US, the great “Civil War Gold Hoax” causes gold prices to spike 10% overnight. An unknown party tricked two New York City newspapers into printing a false story that President Lincoln planned to conscript 400,000 soldiers for the Union army

1997: Amazon floated its shares on the US stock market at around $400m. 26 years on they are capitalised at $1.13tn. £10,000 invested then would be worth in the region of £2.2m today

IN OTHER NEWS

Dame Sharon White recently survived a confidence vote at the John Lewis Partnership, and pledged the group will remain employee owned; however, there was a recent change with the Partnership parting ways with its ad agency adam&eveDDB – creators of Monty the Penguin, Edgar the Dragon, and the recent skateboard creation – and replacing them with Saatchi & Saatchi. In a nod to Saatchi’s previous political campaign, perhaps “John Lewis isn’t working”?!

MARKET DATA

 As at 19^th May 2023. Source: FactSet

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