News & Insight • Weekly Newsletters

03 November 2023 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• The Bank of England announced another pause in the movement of the base rate, keeping it at 5.25%. Due to the Committee’s meeting calendar, it will remain so for the next six week. The Governor – Andrew Bailey – also suggested rates will be higher for longer
• Large falls in the yields in both Treasuries and Gilts (US and UK Government debt) markets on both sides of the Atlantic lead equities higher
• The US jobs report (non-farm payrolls) was weaker than expected – adding just 150,000 jobs – leading to the market believing that rate rises had done their job and cooled the economy

COMPANY NEWS

• Apple announced their Q4 numbers which were impressive bar the weakness in sales in China and further sogginess in Mac and iPad retailing. However, with $89.5bn in revenue - $43.8bn from iPhones and $22.3bn from services – they were able to buy back another $25bn of shares ($93bn for the whole year!)
• Samsung reported a 262% quarterly increase in profit, because of improved chip sales – good news for the sector which has suffered from an oversupply in recent times. However, show stopping Nvidia may have to cancel US$5bn of orders from China to comply with the latest export restrictions imposed by the US
• AMD announced solid quarterly results, but the market loved the news that their new chip, MI300X, is a real competitor to Nvidia’s and will hopefully generate $400m of sales next quarter and $2bn next year
• The growth of Novo-Nordisk continued after reporting third quarter results. After already preannouncing results and raising guidance, the company reported Q3 EBIT growth of 33% to DKK26.91bn vs DKK25.42bn expected with overall sales of DKK58.73bn above consensus estimates. Novo’s insulin competitor, Eli Lilly, also had a positive print
• WeWork, once the darling property start-up valued at US$47bn, this week was reportedly going to file for bankruptcy as it defaulted on c.US$95mn of interest payments. In recent years it has struggled with both the impact of lockdown and rising interest rates and has been described as “a company groaning with debt”. In reaction, Helical Bar plc renegotiated the lease with WeWork in one of their buildings near Old St, London
• Shell and BP both reported decent numbers and large share buy backs, but it was the former that came out on top as earnings beat expectations. BP, however, did not quite match the markets thoughts as some of their renewable investments are failing to deliver
• Toyota announced all-time-high quarterly earnings, lifting its forecast for record earnings in the full fiscal year, expanding on an earlier outlook that already called for record-level profits. They did, however, downgrade the electric vehicle sales number, particularly in China
• Orsted’s share price fell by (another) quarter as it cancelled two big offshore wind farms in the US at an impairment charge of more than £3bn
• Estee Lauder’s share price also plummeted (by its biggest ever decline – 19%) as the company cut its earnings per share by 35% due to declines in travel spend and Chinese growth
• Strong numbers from the uranium miner, Cameco, in both earnings and revenue led management to up guidance. Britain's competition regulator also cleared the company and Brookfield Renewable Partners' $7.9bn deal to acquire nuclear power plant equipment maker Westinghouse Electric

AI WATCH

As reported last week, Rishi Sunak hosted 28 governments at the first ever global AI summit this week.  Whilst outcomes are still a little vague, he successfully gained agreement from both Washington and Beijing to collaborate on AI risk management.  Whilst Chinese scientists called for an international regulatory body to “focus on the existential risks” of AI, the White House Chief of Staff noted of the President that “if he had not already been concerned about what could go wrong with AI before that movie [Mission Impossible – Dead Reckoning], he saw plenty more to worry about.” Thank you, Tom Cruise!

SMALL CAP NEWS

Theme Park providers, Six Flags and Cedar Fair announced their intention to merge which may have ramifications for Accesso Technology who count the companies as some of their biggest clients (both in the top five). Although Accesso was founded in 2000, and entering bankruptcy soon after, they have made some interesting acquisitions over the past decade – Taos in 2013 and Ingresso in 2017 – and now serve 1,000 venues across the world, providing ticketing, point of sale, virtual queuing, distribution and guest experience management solutions for theme park providers. They also work with Merlin (Legoland, Sea World and Alton Towers etc) and Palace Entertainment

THIS WEEK IN HISTORY

1907: a boat organised by J. Pierpont Morgan arrives in New York from London with $7m worth of gold, which helps calms markets after the 1907 stock market panic triggered by the bankruptcy of two US brokerage firms

2015: billionaire hedge fund manager, Xu Xiang - known as China's Warren Buffett - is arrested for allegedly manipulating the stock market during the 2015 Chinese stock market turbulence

MARKET DATA

As at 3^rd November 2023. Source: InFront

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