News & Insight • Weekly Newsletters
19 July 2024 | William Buckhurst | Charlie Todd
That Was The Week That Was
MACRO
- President Biden withdraws from his re-election campaign and endorses Kamala Harris, the current vice-president. Uncertainty around the leader of the free world had continued to surround US politics
- Federal Reserve Chairman Jerome Powell stated that recent quarterly economic data had provided greater confidence that inflation was moving back to target. He noted that “we didn’t gain any additional confidence in the first quarter but the three readings in the second quarter, including the one from last week, do add somewhat to confidence”
- As expected, the European Central Bank left interest rates unchanged with the deposit rate held at 3.75%
COMPANY NEWS
- Not a good week for the tech sector. A major computer failure affecting 8.5m devices was due to a CrowdStrike update which sent out corrupted software. This also influenced Microsoft and followed a sell-off in the semiconductor sector due to comments from both President Biden and Trump. It was reported the Biden administration had informed allies that it was considering using the most severe trade restrictions available if companies such as Tokyo Electron and Netherlands based ASML continued to give China access to advanced semiconductor technology. Former President Trump also commented in an interview that Taiwan “should pay” for US protection against the Chinese military. Taiwan is a key country for companies such as Nvidia, AMD and Broadcom
- Reports indicated Google owner, Alphabet was in discussions to buy Wiz that could be worth as much as $23bn in what would be its largest ever acquisition. Wiz connects cloud storage providers such as Amazon’s AWS and Microsoft’s Azure and scans data stored there for security risks. Wiz was valued at $12bn in May
- Netflix had very good numbers but were caught up with the negative noise mentioned above. Subscription growth in the quarter was 8.05mn vs 4.9mn expected, with all regions seeing better than forecast subs growth while margins of 27.2% were above consensus estimates and guidance was also excellent
- Burberry had a large profit warning and shares dropped. Retail sales in the first quarter were £458mn vs £491.1mn expected, with retail revenue 20%, well below consensus estimates. They also announced the slowdown in trading experienced in 1Q24 had continued into July and if these trends were to continue, it was likely to report a first half operating loss. CEO Jonathan Akeroyd was stepping down with immediate effect with Joshua Schulman taking over
- It is tough in the retail sector at the moment and watch company, Swatch was no different with shares falling 10%. Operating profit in the first half of the year declined 70% year on year to CHF204mn vs CHF500.2mn. The company noted the decline in sales was triggered by a sharp drop in demand for luxury goods in China. Hugo Boss results were very similar but fortunately, Richemont’s print was in line putting an end to further selling pressure on the luxury goods sector
- US banks continue to report Q2 earnings figures with Bank of America top of the pops this week due to its investment banking division, followed by Morgan Stanley, again helped by deal activity
- ABB drifted lower as they commented that comparable orders remains on par with prior year levels, supported by strong improvements in Electrification and Process Automation but that this was offset by weakness in Machine Automation and E-Mobility
- After losing their chequebook for several years it is rumoured that Rio Tinto are looking to buy the copper assets of Teck, the Canadian mining company
- Ocado first half results were better than the market was expecting – one broker had even downgraded them before the print. The company left its full year guidance for Tech Solutions revenue growth of 15-20% unchanged with Retail margins still forecast to be around 2.5% while it increased its underlying cash flow improvement guidance by £50mn to £150mn
- The shares of Trustpilot, the London listed, Danish headquartered review site, slid lower after private equity group Vitruvian Partners sold over half their stake – roughly 3% of the company
TRIMMING OBESITY
We have mentioned the positive performance from both US based Eli Lilly and Denmark’s Novo Nordisk endlessly, the latter reached 7.5% of the entire European market recently. However, we have seen competitors catching up, with Amgen earlier in the year and Roche reporting positive trial data this week. It stated that its oral GLP-1 receptor agonist CT-996 demonstrated clinically meaningful weight loss after four weeks of treatment in a phase 1 trial as the drug showed weight loss of 7.3% compared to the 1.2% loss seen in the placebo. Roche noted that the data supported a once daily oral dosing regimen, and that safety and tolerability profile was consistent with other oral GLP-1s with no unexpected safety signals and that it would advance the drug to phase 2 trials. The release of the data caused other stocks in the obesity space to sell off.
THIS WEEK IN HISTORY
1933: As Wall Street begins to digest the implications of President Franklin D. Roosevelt's "New Deal" -- including the Glass-Steagall Act, enacted just over one month earlier -- the Dow Jones suffers its ninth-worst daily percentage loss, dropping 7.8%. Many argue the that the removal of the Glass-Steagall Act was one of the reasons for the Financial Crisis in 2008/9
MARKET DATA
% returns |
1 Week |
1 Month |
1 Year |
5 Years |
UK Equities (% return) |
-0.43 |
-0.22 |
7.75 |
9.15 |
World Equities (% return) |
-2.08 |
0.94 |
16.80 |
59.00 |
10 Year US Treasury Yield (%) |
4.19 |
4.24 |
3.79 |
2.06 |
GBP / USD (fx rate) |
1.30 |
1.27 |
1.29 |
1.25 |
As at 19th July 2024. Source: InFront
This publication has been produced by Vermeer Investment Management Limited (VIM) trading as Vermeer Partners. It is provided for information purposes only. VIM makes no express or implied warranties and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. VIM will not treat unauthorised recipients of this publication as its clients. Prices shown are indicative and VIM is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. Without limiting any of the foregoing and to the extent permitted by law, in no event shall VIM, nor any of its officers, directors, partners, or employees, have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or its contents. Other than disclosures relating to VIM, the information contained in this publication has been obtained from sources that VIM believes to be reliable, but VIM does not represent or warrant that it is accurate or complete. VIM is not responsible for, and makes no warranties whatsoever as to, the content of any third-party website referred to herein or accessed via a hyperlink in this publication and such information is not incorporated by reference. The views in this publication are those of the author(s) and are subject to change. VIM has no obligation to update its opinions or the information in this publication. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the client who receives it. Any securities discussed herein may not be suitable for all investors. VIM recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. This material has been issued and approved for distribution in the UK by VIM. ©2024 Vermeer Investment Management Limited. All rights reserved. No part of this publication may be reproduced or redistributed in any manner without the prior written permission of VIM. VIM is authorised and regulated by the Financial Conduct Authority (FRN: 710280) and is incorporated in England and Wales (company number: 09081916).