News & Insight • Weekly Newsletters
26 July 2024 | Charlie Todd | William Buckhurst
That Was the Week That Was
MACRO
- The Peoples Bank of China cut interest rates after weak GDP figures. Investors were not impressed and in reaction both the onshore and offshore markets fell. This negativity also impacted the commodity market
- Eurozone PMI (Purchasing Managers Index) fell to 50.1% in July from 50.9% pointing to near stagnation of the private sector in the block
- Indian authorities are planning to spend more on infrastructure, but it will be interesting to see whether this ends up in locations that decided to join forces with Modi. Indices were higher (even with an announced new tax on stocks and shares)
COMPANY NEWS
- Alphabet’s results were pretty good, but the focus of the market was surprisingly not on Google Cloud but on its subsidiary YouTube following comments by Netflix and Spotify. These numbers came in slightly light leading the shares 5% lower – all other metrics were either in line or ahead (revenue of $84.74bn v $84.19bn expected for example). They even earmarked another $5bn for Waymo, their self-driving technology company
- Are the pandemic savings coming to an end? Ryanair numbers were poor, and the shares fell by 17.2%. Q1 profit after tax declined 46% to €360m vs €512m expected with revenue falling 0.5% to €3.63bn. For full clarity, its rival easyJet had better numbers and their shares climbed
- Even the mighty fall. LVMH’s shares fell 4% after reporting results. Revenue declined 1.4% to €41.67bn, slightly below consensus estimates. Management commented that Chinese consumers were purchasing goods notably in Japan
- Thermo Fisher Scientific is a high-quality company, and this was on show was it announced its quarterly results. Earnings per share were $5.37 vs $5.12 expected with revenue of $10.54bn in line
- The renaissance of Unilever under Hein Schumacher continues. Results were excellent with earnings per share coming in far higher than expectations and with the margin also increasing the shares followed suit.
- NatWest Group is the best performing large cap UK stock this year and following their latest print the shares were up 7%. The bank that was involved in Farage-gate is looking better than its French and Germany rivals too and Deutsche Bank closed down 8.3% after reporting second quarter results. Q2 pre-tax profit declined 71% to €411m vs €489.1m expected whilst also pausing its share buyback. BNP Paribas drifted slightly lower on its results which were pretty good too
- Taylor Swift isn’t going to be happy as her labels share price fell by 23.5% on results. Universal Music’s metrics were pretty good (revenue rising 8.7% year on year to €2.93bn) however streaming subscription growth slowed to 7%, much lower than expected with ad-supported streaming growth also below consensus with management citing pressure on subscriber trends
- Do not miss expectations in this market. Sadly, both Dexcom (glucose monitoring) and Edwards Lifesciences (medical innovator) found out the hard way with shares falling 41% and 31% respectively. Dexcom cut full year guidance whereas Edwards sales declined 9.4% to $1.39bn, below consensus estimates. They also guided to Q2 sales that were slightly below consensus
AUTO v AERO
The automotive sector is also having a tough time. Tesla announced mixed results and the share price fell 12%, (due to their adjusted profits coming in shy of consensus) Porsche closed down 5.1% after cutting guidance (blaming a lack of aluminium in the supply chain), General Motors finished 6.4% lower even with a pretty good print after net sales rose 7.2% to $47.97bn, above consensus estimates and shares in Stellantis finished 8.7% lower after reporting first half results. Operating income declined 40% year on year to €8.46bn vs €8.94bn expected.
In contrast, other than Boeing, things are rosy in the Aerospace sector. Recently de-merged GE Aerospace closed up 5.6% after reporting second quarter results beating earnings estimates by 20%. Free cash flow in the quarter increased 17% to $1.10bn vs $967.5m expected as the company increased its full year guidance. Management commented that demand signals were strong and that utilisation of aircraft equipped with GE engines “could not be higher” and that the challenge was not one of demand but supply. Elsewhere Lockheed Martin’s shares reacted in a similar way (up 5.8%) after reporting second quarter results. Q2 earnings per share were $6.85 vs $6.46 expected with net sales rising 8.6% to $18.12bn, above consensus estimates.
THIS WEEK IN HISTORY
1877: The first US municipal railroad, Cincinnati Southern, begins operations
1971: Wells Fargo launches the world's first stock-index fund with $6m from the pension fund of Samsonite Corp
MARKET DATA
% returns |
1 Week |
1 Month |
1 Year |
5 Years |
UK Equities (% return) |
1.25 |
1.42 |
8.18 |
10.14 |
World Equities (% return) |
-1.65 |
0.16 |
15.48 |
56.27 |
10 Year US Treasury Yield (%) |
4.24 |
4.39 |
3.90 |
0.59 |
GBP / USD (fx rate) |
1.29 |
1.26 |
1.28 |
1.22 |
As at 26th July 2024. Source: InFront
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