News & Insight • Weekly Newsletters

07 July 2023 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• Mixed US jobs data showing some positive news on Thursday surrounding private sector hires; but the US Department of Labor’s closely watched employment report on Friday showed the economy created 209,000 jobs in June, fewer than 225,000 forecast
• The ECB released its latest survey showing consumer inflation expectations were continuing to decline. Following a drop in the previous month, the monthly survey for May showed that expectations for inflation over the next year fell from 4.1% to 3.9% while expectations for three years forward remained unchanged at 2.5%
• Meanwhile, ECB Governing Council member Joachim Nagel stated that rates would need to rise further but that it was not yet clear how far rates would need to rise

COMPANY NEWS

• AstraZeneca closed the week down after releasing trial data for its lung cancer drug Datopotamab. Analysts noted the lack of the phrase “clinically meaningful” in the release along with presence of deaths related to the trial were concerns and that the results may lead to a reassessment as to whether the drug would be the first line therapy hoped although it was still expected to secure approval
• Not all things are equal in ‘chip’ world – Samsung announced a profit warning this week as Q2 earnings dropped 96% YoY, a reflection of the global decline in both phone and computer sales and the knock on effect to the semi-conductor chip market
• Putting the riots to one side it isn’t looking too great for French supermarket chain, Casino, as competing rescue packages for the business both indicated that current equity investors would be left with next to nothing. Casino published details of the two separate plans, one from Xavier Niel and the other from Czech financier Daniel Kretinsky, with the first offering to inject an equity portion of only €450m with the latter proposal providing €1.35bn of equity
• Hunting finished sharply higher on the week after issuing a first half trading update. The company stated that performance has been ahead of expectations with revenue and operating profit above targets set at the start of the year
• Currys shares fell as it cut its dividend alongside other initiatives to preserve cash as it remains cautious on the demand outlook. It was also noted that smart speaker sales had reduced dramatically
• Exxon Mobil closed down on the week after stating that lower natural gas prices and refining margins would reduce second quarter earnings by around $4bn compared to the previous quarter

SMALL CAP NEWS

The UK small cap market is cheap and getting cheaper and restoring confidence is the name of the game. Sadly, the poorly named Restore plc did nothing of the sort with a large profit warning. The company has two divisions; Digital & Information Management, and Secure Lifecycle Services, and are renowned for storing and/or shredding data and files. The business continues to deliver revenue growth in Records Management (70% of group profits) but has seen continued weakness in its Technology business – like a few peers such as Kin & Carta we wrote about last month. This is due to a contraction in IT hardware investment, with a further reduction in demand for bulk digital scanning, and a significant reduction in the price of recycled shredded paper. It was also announced that Charles Bligh will step down as CEO by mutual consent and will be replaced. It is worth remembering that Restore rejected a bid from Marlowe two years ago at three times the current value of the company

THIS WEEK IN HISTORY

1923: Benjamin Graham, often considered the “father of value investing” and one of the biggest influencers on Warren Buffett, starts his investment firm Graham Corporation

1932: At 41.22 points, the Dow Jones Industrial Average hits its lowest point of the Great Depression, giving up more than 90% its value from its previous peak.  It would take the Dow roughly 25 years to make new inflation-adjusted all-time highs in 1954

IN OTHER NEWS - MUSK WATCH

In our occasional ‘Musk Watch’, the on-going clash between Elon and Mark Zuckerberg which last week saw an alleged invitation from the former to the latter to join him in a cage fight, appears to actually be happening according to Dana White of Ultimate Fighting Championship, who is helping to arrange the event. Following decent Tesla manufacturing numbers over the weekend, progress has perhaps been encouraged by Zuckerberg’s launch this week of Twitter lookalike “Threads”, which notched up more than 30 million downloads on its first day. Twitter CEO Linda Yaccarino said: “We’re often imitated — but the Twitter community can never be duplicated”, Musk said: “Competition is fine, cheating is not”, Zuckerberg said: “This is as good of a start as we could have hoped for”

MARKET DATA

 As at 7^th July 2023. Source: FactSet

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