News & Insight • Weekly Newsletters

17 November 2023 | William Buckhurst | Charlie Todd

That Was the Week That Was

MACRO

• A surprise return to the front-line for David Cameron as he is appointed Foreign Secretary. The last member of the House of Lords to serve in one of the great offices of state was Lord Carrington who was Margaret Thatcher’s foreign secretary from 1979-1982
• The pace of US CPI growth moderated sharply as new data showed that consumer prices rose 3.2% in the year to October – so called “shelter” (rent) inflation, which has been stubbornly slow to ease, decelerated significantly, rising 0.3% after being up 0.6% a month earlier
• But in a continuing sign of the US consumer’s relative resilience, US retails sales fell less than expected in October - down 0.1% on the month compared to economists’ forecasts of -0.3%
• It was a different story in the UK, however, where retail sales declined by 0.3% whereas they had been expected to rise by 0.3%
• UK CPI came in at a much slower rate of growth at 4.6% - which means that UK Prime Minister, Rishi Sunak, will achieve his target of halving the rate of inflation by the end of the year from the 10.7% average in the last quarter of 2022

COMPANY NEWS

• The two main winners in the pharmaceutical sector this year traded blows as Novo Nordisk formally presented their cardio-vascular trial – getting a standing ovation in the process – while Eli Lilly received early approval for Zepbound, their weight loss drug, from the FDA
• Phoenix Group issued a trading update further highlighting their ability to grow the dividend over the long term: they pointed to a stock of cash available for equity shareholders of over £12bn (market cap: £4.6bn), relative to an annual dividend cost of c.£500m
• Cisco announced a decent set of results but the guidance was underwhelming sending the shares lower. Management believe that the slowdown of new product orders was due to customers focusing on installing and implementing current products
• Siemens had excellent fourth quarter results that beat expectations. Comparable revenue growth in the period was 10% vs 6% expected with Digital Industries, Mobility and Smart Infrastructure all better than forecast
• Three bastions of industrial manufacturing announced trading updates as both Halma and Melrose continued to beat analyst numbers and upped their guidance. Spirax-Sarco let the team down slightly as the steam experts called revenue to the lower end of expectations
• Both Target and Walmart reported this week and although the numbers were solid both suggested that the US consumer - contrary to official retail sales data - is starting to come under some pressure
• Sanofi has hired advisors to start preparations for the spin off of its consumer health division 

SMALL CAP M&A

The asset management company Montanaro reported that European small cap equities are now on the largest price/earnings multiple discount to the market in twenty years. Obviously, Mars, one of the largest US private companies, thought the UK market looked attractive too as it bid for the confectionery business Hotel Chocolat at a 160% premium to the listed price.

Elsewhere City Pub Company was approached by its larger rival, Youngs, in a £162m recommended offer. Cheers!

AI WORLD

The Financial Times reported that analysts hope artificial intelligence can reveal what is not said on earnings calls. The idea that audio recordings could provide tips on executives’ true emotions has caught the attention of some of the world’s largest investors. Many funds already use algorithms to trawl through transcripts of earnings calls and company presentations to glean signals from executives’ choice of words — a field known as “Natural Language Processing” or NLP. Now they are trying to find further messages in the way those words are spoken

THIS WEEK IN HISTORY

2001: Burlington Industries, once the largest textile maker in the US, files for Chapter 11 bankruptcy protection as it failed to stave off competition from cheaper Asian imports

MARKET DATA

As at 17^th November 2023. Source: InFront

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