News & Insight • Weekly Newsletters

12 July 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• A sense of unease continues to surround US politics following further stumbles and missteps from President Biden as well as a botched assassination attempt on ex-President Trump
• The latest US CPI release in the US showed inflation coming in at 3.0% year-on-year vs. 3.1% expected. It is the second month in a row that the headline number has come in very slightly lower than expected.
• According to LSEG data, the odds of a September cut rose to 92% in the immediate aftermath of the CPI release, compared with 72% beforehand
• Sterling strengthened as the UK economy returned to growth in May after a poor month in April when activity flatlined. Figures from the Office for National Statistics (ONS) show gross domestic product (GDP) rose by 0.4% month-on-month, twice what economists had forecast
• After 58 years of hurt, English football…. still didn’t come home!

COMPANY NEWS

Q2 reporting season commenced in the US and as usual it was the banking sector that went first

• JP Morgan reported a record profit as it logged its best deal making advisory quarter since 2022. Citigroup warned costs for the year may be at the high end of its forecasts and Wells Fargo dropped after its net interest income (difference between loans and deposits) missed and it warned cost-cutting efforts started to slow
• Pepsi had muted second quarter results. Although profits were broadly in line with consensus estimates, organic year-on-year revenue growth in the period was 1.9% vs 2.9% expected. The company also tweaked its full year guidance, now seeing organic revenue growth “of 4%” for the year, down from “at least 4%”
• BP issued a quarterly update with a $1-2bn write-down sending shares lower. In a similar announcement to that from Shell, BP stated that it was reviewing a German refining facility and stating it planned to scale back its refining operations in the country due to high costs and declining demand
• BHP announced it would suspend its nickel operations in Western Australia due to oversupply of the market
• UK housebuilders have been under the spotlight since the election result and there was no let up as Crest Nicholson received another takeover offer from rival Bellway. Crest Nicholson stated that it was minded recommending the £720m offer unanimously (after having already rejected two previous bids) with Bellway now having until 8th August to make a firm offer
• Shares in the insurance company Hiscox moved higher following reports that it could be a takeover target. It has apparently attracted takeover interest from firms including Japan’s Sompo and Generali in Italy with the report noting that a deal could depend on the potential divestment of c.$900m premium US operation
• Another decent print from the oil services company Hunting with strong order book momentum and margins increasing
• ITM Power, the hydrogen electrolysis specialists, announced their largest deal ever - a 500MW capacity reservation with a global industrial customer. Although light on detail, it showed good pipeline progress

BAND BACK TOGETHER

With Axel Foley returning to our screens alongside Detective Billy Rosewood it was slightly eery that the ex-management of Melrose have got the band back together and, after some pertaining, called their business Rosebank. The team consists of two of the three original Melrose Industries co-founders and four other members of its senior management team and will look to recreate the same successful ‘Buy, Improve, Sell’ business model. Although recreating over £6bn of shareholder value will be a tough ask, the shares rose from 250p at IPO (having raised £50m) to finish the week at 675p. Hopefully no bananas in the tailpipe!

THIS WEEK IN HISTORY

1986: the Federal National Mortgage Association (“Fannie Mae”) issued the first stripped mortgage-backed securities to enable purchase of interest-only or principal-only bonds. This financial engineering provided investors a pure bet on the direction of interest rates. When rates rise, interest-only strips follow suit as principal-only strips fall

1998: as inflation in the country was skyrocketing, and capital rapidly leaving the country, Russia secures an $11bn financial aid package from the International Monetary Fund (IMF) in an effort to halt its financial crisis

MARKET DATA

 As at 12^th July 2024. Source: InFront

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