News & Insight • Weekly Newsletters

16 February 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• Both the UK and Japan entered technical recessions as both major economies reported a second consecutive quarter of negative GDP growth
• Two damaging by-election defeats for the Conservatives to Labour in Kingswood and Wellingborough point towards a general election defeat, but the turnout was poor
• The US CPI print for January came in hotter than expected as services inflation came in at an annual rate of 3.1%, more than the 2.9% expected. The ‘core’ was also higher than expected
• In a speech on Thursday, Federal Reserve Vice Chair for Supervision, Michael Barr, said "We need to see continued good data before we can begin the process of reducing the federal funds rate", adding he backed the "careful approach" to cutting rates advocated by Chair Jerome Powell and other Fed policymakers
• More people around the world will vote this year than ever before. It was Indonesia this week who look to have elected Prabowo Subianto, a former army general. The world seems to be heading right with the UK to the left

COMPANY NEWS

• Coca Cola’s fourth quarter results showed earnings in line with expectations and revenues slightly above estimates. The company guided to full-year revenue growth of 6-7% with earnings forecast to grow 4-5% and management commented that they have around $6bn remaining on their share buyback programme
• Sony announced a mixed set of results with music, film and finance offsetting more weakness in their gaming division (dropping guidance for PS5 sales from 25m to 21m). They also announced that the financing arm of the business would be listed separately
• Cisco had good numbers but the guidance was disappointing sending the shares lower. Slightly under pressure, the company then mentioned they were starting a joint venture with AI specialists, Nvidia
• 5, 5, 5 for Heineken, with shares declining by 5% as price increases of 5% failed to offset volume falls by 5%
• Deere, the agriculture specialists had a decent print but poor future guidance sending the shares lower
• Occidental Petroleum beat profit estimates due to strong US production. This followed news that Diamondback Energy confirmed reports that it had agreed to acquire privately held Permian operator Endeavor Energy Resources for $26bn
• Natwest Group – which is still 35% owned by the UK Government – had their best results for 26 years, announcing a pre-tax profit of £6.2bn. Their 2024 guidance was slightly below expectations. They also named Paul Thwaite as replacement for Dame Alison Rose (her departure was on the back of Farage-gate)
• Close Brothers Group shares fell dramatically after the group suspended their dividend. The shares have been under pressure since the FCA announced they were looking into motor finance
• Its was always going to be difficult to beat ARM’s post-market move last week (up 57%) but Lyft did try only for the results to be marred by a typo – the EBITDA expansion was sadly 50bps rather than the printed 500bps! Lyft’s rival UBER announced a $7bn buy back – offsetting the amount of share rewards to the employees

GAMING WEEK

Following failed attempts to build its own gaming division, Disney acquired a $1.5bn stake in privately-held Epic Games, maker of the popular computer game Fortnite. The Disney-Epic deal will allow the two companies to create a huge Disney universe where gamers will interact with characters and stories from Disney, Pixar, Marvel, Star Wars and Avatar. Highlighting the extent to which private valuations have fallen, Disney’s 9% stake is believed to value Epic at around $22.5bn, sharply down from the $31.5bn valuation when it raised funding from Sony Group and the privately-owned holding company behind Lego Group in April 2022

BUFFETT WATCH

Warren Buffett’s holding company Berkshire Hathaway sold off about 1% of its stake in Apple in the last quarter of 2023, the company revealed in new SEC filings. They added to their positions in Chevron and Occidental Petroleum 

INVESTMENT TRUST WATCH

Further corporate activity in the alternative income / REIT space as Tritax Big Box REIT reached an agreement to take over UK Commercial Property REIT in an all-share offer, creating the UK’s fourth- largest REIT with a combined £4bn market capitalisation

THIS WEEK IN HISTORY

1873: US Congress passes the Coinage Act of 1873, abolishing bimetallism and placing the country on the gold standard

1989: The Soviet military occupation of Afghanistan ends as the last Soviet troops cross the Soviet-Afghan border

MARKET DATA

 As at 16^th February 2024. Source: InFront

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