News & Insight • Weekly Newsletters

18 October 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• Encouraging UK inflation data as year-on-year CPI fell more than expected to 1.7%.  The first reading below the Bank of England’s 2% target in three years opens the door to more rate cuts this year
• There was a continued surge in US economic data as US retail sales growth came in at 0.4% for the month of September and the Atlanta Fed raised its gross domestic product growth estimate for the third quarter to a 3.4% annualized rate from the previous 3.2% pace. The US economy had grown at a 3.0% pace in the April-June quarter
• China’s economy grew by 4.6% in the year to the third quarter, faster than expected, but the slowest pace since early 2023 and below the government’s target of 5%. Prices also fell, marking the sixth straight quarter of deflation
• With Germany on the brink of a recession and inflation tumbling across the Eurozone, the ECB followed a reduction in the cost of borrowing at its previous meeting in September with a further 0.25% cut in its key deposit rate to 3.25%

COMPANY NEWS

• ASML reported quarterly results that show that the company continues to grow revenues at around 12% while maintaining margins of 50.8%; however, net bookings for the quarter were materially below expectations (€2.6bn vs €5.4bn). Intel is thought to be ASML's third-largest customer, after TSMC and Samsung, and so should represent between 10%-20% of ASML's revenue. In early September, Intel announced a capital expenditure cut of 20% and, although there is not a full breakdown, it has likely affected ASML's orders 
• TSMC also announced their results which were better than expected, sending the shares 10% higher. Quarterly profit was 54% higher and the company gave positive guidance due to the continued demand for AI chips
• The world’s largest luxury conglomerate, LVMH, reported a drop in sales (3%) for the first time since the pandemic. The wine and spirits division was particular weak with cosmetics pretty solid. Salvatore Ferragamo reported an even steeper sales decline
• The new CEO at Nestle lowered guidance to around 2% organic sales growth (from 4% at the start of the year)
• Whitbread reported total revenues flat at £1.57bn in the six months to 29 August, while profit before tax fell by 22% to £309m. Sales at UK hotels fell by 1% year on year in the six weeks to 10^th October as business and leisure travel weakened; but the company said it was expanding its cost-cutting “growth plan” to save £50m a year on average until 2030, from a previously announced £40m to £50m
• The reporting season always starts with financials and after good prints from JP Morgan and Wells Fargo late last week it was up to the others to match them.  American Express reported third-quarter profit above Wall Street estimates but shares fell nearly 5% due to lower fee growth, even as the credit card giant raised its profit forecast for 2024. Bank of America closed up 1%, Goldman Sachs shares were flat and Citigroup finished 5% lower despite all three results beat expectations due to increased trading revenues
• Netflix shares went higher on results as they reported 5mn new customers and good cashflow from higher margins allowing them to up guidance

GOLDEN WEEK

Gold raced past the $2,700 mark for the first time on Friday, extending a rally driven by expectations of further monetary policy easing and safe haven demand due to uncertainty about the US presidential elections (Trump might try to devalue to the dollar again), fiscal deficit concerns and Middle Eastern conflicts.

Central banks around the world have been increasing their gold reserves, particularly since Russia's invasion of Ukraine in 2022. But gold’s latest rally has been surprising given that real yields in the US have risen over the last few weeks on the back of stronger US economic data.

Meanwhile, the price of Bitcoin has also risen, back close to its recent high of $70,000.

TRUMP THAT

Gerald Shvartsman who invested in the company that took former President Donald Trump’s social media company public was sentenced to 22 months in prison on Wednesday for insider trading related to the deal.

Gerald Shvartsman earned at least $4.6m from trading on private information related to the merger between Digital World Acquisition Corp. and Trump Media & Technology Group (DJT).

As the betting market odds on Trump winning the election tumbled, Trump Media has had a volatile week. After a long rally that saw shares roughly triple in value then fall sharply, the stock took an 8% nosedive on Tuesday afternoon but rallied Wednesday, increasing 13% on the day.

THE WEEK IN HISTORY

• 1857 The US Treasury halts redemption of paper for gold as the “Western Blizzard” panic of 1857 is in full swing. The loss of confidence causes additional panic around the world as fears of the crisis spreading continue. Markets as far away as London and Paris sell off significantly
• 1987 The first modern-day global financial crisis unfolded on October 19, a day known as “Black Monday,” when the Dow Jones Industrial Average dropped 22.6% in a day

As at 18^th October 2024. Source: InFront