News & Insight • Weekly Newsletters

30 August 2024 | Charlie Todd | William Buckhurst

That Was The Week That Was

MACRO

• A revised US GDP report was better than expected, with the worlds largest economy rising by 3.0% against expectations for 2.8%. This led the Dollar higher against the basket of currencies but also dampened recession expectations. Shares rose in reaction to the print.
• The Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) index held steady at 2.5% in the year to July. This compared with economists’ expectations of a 2.6% rise and June’s figure of 2.5%.
• German and Spanish inflation fell more than expected in August, boosting the chances of more European Central Bank interest rate cuts. The harmonised annual inflation rate for Germany’s economy, the Eurozone's largest, declined to a three-year low of 2% from 2.6% in July.
• Oil heads higher as Middle East tensions rise.

COMPANY NEWS

• Share prices in the liquor market have been weak of late but there were signs that that sector may have found a floor as shares in Pernod Ricard finished 2% higher after reporting full year results. Full year recurring operating income declined 6.9% y/y to €3.12bn vs €3.11bn expected – ie less worse. The company confirmed its medium-term guidance. Separately, China announced that it would not impose temporary tariffs on EU brandy for the moment, with Remy Cointreau also finishing 2% higher on the back of the news
• It was reported that the Netherlands was set to limit ASML’s ability to repair and maintain its semiconductor equipment in China and that Prime Minister Dick Schoof was not likely to renew certain ASML licenses when they expire at the end of the year
• PDD Holdings, the owner of Temu, closed the week sharply lower after reporting second quarter results. 2Q adj. net income was 34.43bn yuan vs 30.1bn expected with revenue of 97.06bn yuan below consensus estimates. Management stated that “profitability will also likely be impacted as we continue to invest resolutely” and that competition was here to stay, and that high revenue growth was not sustainable
• GSK closed up on the week after it was announced that the Delaware Supreme Court was to review a lower state court decision related to ongoing Zantac litigation
• Ryanair shares were higher after CEO Michael O’Leary noted that the softening in ticket prices has slowed following his comments in July of “materially lower” fares over the summer period
• We have mentioned the US consumer being under pressure and this will lead to the market uncovering the best and worse retailers. The aptly named Best Buy rose 14.1% after reporting second quarter results. Earnings per share were $1.34 vs $1.16 expected with revenue of $9.29bn broadly in line with consensus estimates. On the other hand, shares in Dollar General fell 32.2% after reporting second quarter results. Its earnings per share were $1.70 vs $1.79 expected with net sales of $10.21bn below consensus estimates

AI WORLD

• Nvidia results were very good, beating expectations across the board but the shares fell in reaction. Earnings per share were $0.68 vs $0.64 expected with revenue of $30.04bn above consensus estimates. Data Centre revenue, led by the large capex spend from the likes of Amazon, Microsoft, Alphabet and Meta was $26.3bn vs $25.08bn expected. The only negative against consensus was the company guidance to gross margin of 74.5-75.5% vs 75% expected due to delays on their next iteration of semiconductor chip called Blackwell. Management announced a new $50bn share buyback while commenting that Hopper demand remains strong and the anticipation for Blackwell was incredible – already shipping samples to customers
• In other news fellow AI themed investment, Super Micro Computer, was targeted by renowned short-selling firm Hindenburg. It stated that an investigation into the company revealed “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” Super Micro announced in 2020 that it had resolved an investigation by US regulators into its accounting and disclosures for fiscal years 2014-2017 by correcting its statements and paying a penalty

THIS WEEK IN HISTORY

• 1930: Warren Buffett is born in Omaha, Nebraska. A few days ago, and therefore three days before the Sage’s 94^th birthday, Berkshire Hathway reached a market capitalization of $1 trillion.
• 1986: Hunt Brothers, one of the largest privately held oil companies in the United States, declares bankruptcy

MARKET DATA

As of 30^th August 2024. Source: InFront

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