News & Insight • Weekly Newsletters

26 May 2023 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• US debt ceiling talks (arguments) continue
• Although the UK’s year-on-year inflation figure fell from 10.1% to 8.7% last month, core prices actually rose from 6.2% to 6.8%
• As the IMF predicted that the UK will escape a recession this year, Germany is now in one. Revised figures showed that Europe’s largest economy contracted by 0.3% in the first quarter of 2023, compared with the previous three months, when it shrank by 0.5%
• In the US, the Federal Reserve released minutes of their last meeting showing that officials were split on whether further rate hikes are warranted

COMPANY NEWS

• Nvidia shares rocketed as it forecast revenues of $11bn for the next quarter – more than 50% higher than Wall Street estimates. The shares added $250bn in market cap as the company cemented itself front and centre of the AI investment universe
• In contrast, Snowflake, another “new” tech company dropped its guidance sending its shares lower
• Pfizer released positive trial data on Danuglipron, its new weight loss pills
• Dowlais (pronounced Dow-lice), the recent spin out from Melrose, reported a strong set of numbers and mentioned there are still improvements to come
• Another set of positive results from Ryanair as demand and pricing continue to be strong. Perhaps they will be opening some new European routes from Newcastle?
• M&A activity in the oil sector as Chevron announced a $7.6bn acquisition of US shale producer PDC Energy
• JP Morgan investor day – their base assumption is there will be a mild recession in the US which will take unemployment to 5.1%, but say they are reserved up to 5.8% unemployment. They continue to forecast 17% return on tangible common equity (ROTCE) through the cycle which is higher than most other banks. They have outlined new investment of $17bn with the majority into new technology

SMALL CAP NEWS

There is an old adage that profit warnings come in threes and Kin & Carta (previously known as St. Ives) will be trying to make sure this doesn’t happen as they announced their second. The UK based tech consultant that helps companies with the digital transformation warned that its market was more cautious than they initially expected with new work being delayed and as a result expect sales to be flat. Holders will be hoping the “sell in May and come back on St Leger day” doesn’t come through either!

AI WATCH

It may have been the first time an AI-generated image moved markets as reported by Bloomberg. The picture — a reported explosion near the Pentagon — first appeared on Facebook on Monday, quickly spreading to Twitter and various other sites. The markets fell slightly on the back of this, the Dow Jones falling around 80 points although recovering minutes later once experts called out the image as a fake. Gary Gensler, the SEC’s chairman, said that bad actors could use this technology to “exploit the fragility of financial systems”

THIS WEEK IN HISTORY

1896: The Dow Jones Industrial Average is first published. Its 12 initial members are the great industrial giants of the time: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, US Leather, and US Rubber. The index's value that day: 40.94

2002: Netflix goes public. At the time, Netflix’s business model involved mailing its 600,000 subscribers DVDs in small envelopes. Its market cap was around $300m at the time of its IPO. Today, Netflix has a market cap of more than $160bn

IN OTHER NEWS

Not only have pasta prices doubled in UK supermarkets, but now Italian pasta prices have shown a dramatic rise of 17.5% in March and 16.5% in April, double domestic inflation rates. This has led to the Italian government calling an emergency meeting to deal with the soaring cost of an iconic food staple and asking consumers to “pasta strike”

MARKET DATA

 As at 26^th May 2023. Source: FactSet

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