News & Insight • Weekly Newsletters

18 August 2023 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• China’s woes persist post the pandemic as the second largest economy suffers from property bankruptcies - Evergrande this week. In reaction the renminbi continues to fall. The Peoples Bank of China is under pressure to bolster growth and injected $104bn of short term liquidity into the banking system
• UK CPI dropped to its lowest point since February 2022, with a 6.8% rise, however core inflation and basic pay remain stubbornly high

COMPANY NEWS

• Marks & Spencer announced a strong trading update that was better than expected sending shares materially higher. Like for like food was up 11% and clothing 6%
• Solid results from Walmart as sales growth in the quarter was 6.4% (against 4% expected) and increased their full year guidance due to their value proposition
• Target had a mixed set of figures, with earnings above expectations but revenue and guidance below consensus. Management remained cautious
• The US health sector was rattled following reports that a key insurer in California would no longer be using CVS Health’s pharmacy benefit manager. Blue Shield California, one of the largest insurers in the state, indicated that it would drop CVS’s Caremark unit as its main PBM (pharmacy benefit management) and would instead work with a group of companies, mainly Amazon and Mark Cuban’s Cost Plus Drug Company, to streamline the system Americans use to pay for drugs
• Cisco, one of the tech darlings in 2000s, had a good set of numbers as revenue increased 16% year on year
• Sea Ltd, the far eastern consumer internet company, has decided to go for growth over profits as the quarterly results missed expectation
• Carlsberg had better than expected results and uplifted forward guidance
• BAE Systems announced it has agreed to purchase the aerospace division of Ball Corporation for $5.6bn which is a supplier to both civil and military space missions. One might remember that Rexam (UK listed can manufacturer) was previously bought by Ball
• Shares in Adyen, the Dutch payment processor, fell by a third, as results were poor mainly due to increased costs

SMALL CAP NEWS

The backdrop for green hydrogen continues to improve with Germany recently doubling its 2030 green hydrogen target to 10GW. This is a positive for ITM Power who have 324MW of orders in Germany and recently opened a new facility in Frankfurt. Closer to home it’s clearly a busy time in Sheffield as the company announced a Heads of Terms agreement for the sale of its Motive Fuels Ltd business (hydrogen refuelling stations) followed by its results. The latter were better than expected with revenue and cash management clearly pleasing the market. One could argue that there is plenty of growth still to be achieved but new CEO, Dennis Schulz (ex-Linde), is halfway through his year review and seems to be getting there. They also announced a new (bigger) electrolyser module – called Poseidon – which they describe as a game changer. Viel Glück!

IN OTHER NEWS

On the eve of the Women’s Football World Cup Final, FIFA’s president, Gianni Infantino, has urged women’s football to “pick the right battles” in the fight for equal pay. The women’s prize pot is $110m, three times higher than the previous tournament but only a quarter of the men’s $440m handed out in Qatar. Infantino is hoping for parity by the 2026/2027 competitions. “But actually, this World Cup generated over $750m in revenues, and so we broke even. We generated the second-highest income of any sport, besides of course the men’s World Cup, at a global stage”.

THIS WEEK IN HISTORY

1920: The Nineteenth Amendment was ratified after Tennessee—by just one vote—became the 36th state to approve it, capping the 72-year fight to win women the right to vote in the United States

1969: The Woodstock Music and Art Fair, near Bethel, New York, comes to close. It attracted 400,000 rock fans

MARKET DATA

 As at 18^th August 2023. Source: FactSet

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