News & Insight • Weekly Newsletters

06 September 2024 | William Buckhurst | Charlie Todd

That was The Week That Was

MACRO

A slew of US data dented market confidence and potentially the expectations of a “soft” landing. The August US payrolls report brought unwelcome news, indicating a more pronounced slowdown in the labour market with job gains reaching only 142,000, lower than the market forecast of 165,000. Additionally, last month's already weak figure of 114,000 was adjusted down to a mere 89,000.

Earlier in the week the US ISM Manufacturing index was 47.2 vs 47.5 expected and up slightly on the prior month but still the index’s fifth consecutive month of contraction. The report noted that “there’s no doubt that the interest rate reductions that will probably come in September are going to help” but it was unsure they were going to help in the short term.

July JOLTS (Job Openings and Labor Turnover Survey) data showed job openings of 7.67m vs 8.1m expected, down on the revised lower prior month figure and their lowest level since the beginning of 2021. Data showed that layoffs increased to 1.76m, the highest since March 2023, led by the leisure and hospitality sector.

Closer to home, 60% of the votes in the German regional elections went to the extremities of the far left or far right.

COMPANY NEWS

• The market is particularly nervous at the moment trying to digest the macro data and sadly the subpoena to Nvidia and results from Broadcom (numbers in line but guidance was below expectations) didn’t help matters. It was reported that the US Justice Department had sent subpoenas seeking evidence that it violated antitrust laws. Officials are concerned they are making it more difficult to switch to other suppliers
• Further weakness in the US retail space as shares in Dicks Sporting Goods and Dollar Tree fell 5% and 22% respectively post their latest trading updates
• Ashtead Group, the construction equipment company, had in line results with rental revenue growth still forecast to be 5-8%
• Watches Of Switzerland shares rose as the company said they were trading in line and the expected cut to guidance didn’t come
• Barratt Developments shares fell as full year pre-tax profit declined 56% with revenue falling 22% to £4.17bn whilst guiding to full year home completions including JVs of 13,000-13,500, below the 14,055 consensus estimate which won’t go down well with the current Government. Vistry however was more upbeat (and the shares followed suit) with profits up and they delighted holders with further share buy-backs
• Ashtead Technology, the UK sub-sea equipment company, had some excellent numbers with double digit organic growth; however, with the shares having done so well since coming to the AIM market, being on a richer valuation compared to some of its peers and potentially financing future deals with equity raises, the shares fell
• Rightmove closed up after it was reported that it had drawn takeover interest from Australian real estate firm REA Group, which is owned by News Corp (Rupert Murdoch). It stated that it was considering a possible offer for Rightmove but weirdly noted that it hasn’t approached the company or had any talks over a bid

THE TRAGIC SYMPHONY

Late on Friday, Sir Simon Rattle conducted Mahler’s Sixth Symphony (known as the ‘Tragic’) at the BBC Proms and there were sadly some synergies in the AIM market. The hammer blows (which represent Mahler’s dreadful milestones) were Next 15 Group (communication services) and Invinity Energy Systems (battery storage) as the shares fell 48% and 42% respectively.

Next15 has released an unscheduled trading stating that Mach49 – which is owned by Next15 – has been notified that its contract with its largest customer will now end three years early leading to material downgrades (including the $167m outstanding). Additionally, management is flagging weakness due to a reduction in spending by its tech customers and public sector clients as a result of the earlier-than-expected UK general election.

Invinity called out a similar tune due to orders taking more time and delays in the manufacturing of its next generation machine.

In all this doom, Mahler composed the work when he was relatively happy. Back to the cowbells and the melody of the Alma theme then…

THE WEEK IN HISTORY

1998: Google is incorporated, given $100,000 from Andy Bechtolsheim, co-founder of Sun Microsystems, to launch the company

2008: The US government seizes control of mortgage finance companies Fannie Mae and Freddie Mac