News & Insight • Weekly Newsletters

26 January 2024 | William Buckhurst | Charlie Todd

That Was The Week that Was

MACRO

• As expected, the ECB left interest rates unchanged on Thursday, with the main deposit rate held at 4.0%. The ECB stated that it would set policy at sufficiently restrictive levels for as long was needed with the current level of rates needed to make a substantial contribution to reaching 2% inflation
• Chinese equity markets enjoyed a rare positive week after authorities injected liquidity into markets and the People’s Bank of China (PBC) said that it would lower the reserve ratio requirement
• US fourth-quarter GDP growth came in at 3.3% quarter-on-quarter annualised, well above the 2% consensus
• Inflation in Japan – as measured by Tokyo Core CPI – slowed below the central bank's 2% target to the lowest rate in nearly two years suggesting there is little chance of an end to Japan’s ultra-loose monetary policy

COMPANY NEWS

• Visa’s quarterly numbers showed net revenue increased 9% year over year on a constant-currency basis, down from the low-double-digit growth Visa experienced most of last year. Payment volume in the quarter increased 8%, and transactions were up 9%
• IBM shares rose as it surpassed estimates on the top and bottom lines and ended 2023 with significantly higher free cash flow at $11bn. AI-related orders doubled in the quarter
• Is the EV market dead? Tesla, one of the most successful in the sector, had a disappointing print, missing both on earnings and revenue and offered poor 2024 guidance
• United Rentals, the lessors of construction equipment, surpassed expectations, leading to share price gains for both it and its main UK listed rival Ashtead Group
• It was an excellent time for large European companies with LVMH, SAP and ASML announcing better than expected results. LVMH reported good quarterly figures and the shares were up strongly, showing sales growth of 10% and above expectations. SAP, which has disappointed for some time, mentioned AI growth and ASML announced a tripling of their order book in three months and expressed confidence for 2025 and beyond
• Freeport-McMoran beat expectations due to stronger than expected copper extraction and higher prices for the metal miner
• Sony, the Japanese tech conglomerate, decided to pull out of its merger with the Indian company, Zee, sending the latter’s share price materially lower
• Archer Midland Daniels is one of the largest food processing and trading companies in the world. It is known to be particularly private, so it was a shock to the market to see the CFO put on leave and an announcement made about irregular payments
• Netflix had great numbers and are making real strides in keeping customers who used to share passwords; but they also signed a $5bn 10-year deal with WWE Raw. One market observer suggested it was a clever partnership due to the scripted nature of the “sport”

MAGNIFICENT 7

Although we greatly admire many of these businesses, we (only half-jokingly) observe that in the original 1960’s film only three of the Magnificent Seven survived. Netflix and Tesla (both above) were the first of the seven to report their quarterly earnings and, following a fall in its share price, Tesla is now a smaller market cap than Berkshire Hathaway. “Great Eight”, anyone? With upwards share price movements already this year, Microsoft is the largest company over the pond and became the second (after Apple) to have a market capitalisation of over $3 trillion – greater than the market cap of all the largest 350 UK stocks!

All eyes this week on the Microsoft and Alphabet numbers (Tuesday after the market closes – “after hours”). Closely followed by Apple, META (Facebook, Instagram etc) and Amazon (Thursday, after hours). NVIDIA report later in February

LASERS

In what can only be described as something you saw in the James Bond film, Goldfinger – Q branch, also known as the UK-listed company Qinetic – have been designing lasers. The Times announced that the DragonFire weapon system is the result of a £100m joint investment by the company, MoD and British industry partners MBD and Leonardo. Trials in the Hebrides show that the laser-directed energy weapon (LDEW) system uses an intense beam of light to burn holes in its target, described as “welding metal at range”

THIS WEEK IN HISTORY

1989: in a sign of what is to come for the telecoms sector, AT&T reports its first annual loss in 103 years after the company writes down the value on its obsolete telephone network equipment

1995: The Japanese Nikkei index falls more than 1,000 points following the Hanshin (or Kobe) Earthquake. The resulting decline was the leading factor in the 232-year-old Barings bank failure triggered by rogue trader Nick Leeson’s losses on Japanese derivative bets

MARKET DATA

As at 26^th January. Source: InFront

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