News & Insight • Weekly Newsletters

08 November 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• Despite opinion polls showing a last-minute bounce in support for Kamala Harris, Donald Trump secured a decisive victory in the US election. He swept several key battleground states and won a commanding lead in the national popular vote. He becomes the first former president to return to the White House in more than 130 years and, at 78, the oldest person elected to America's highest office
• The Chinese announced their stimulus plans for the economy, deploying $1.4 Trillion to reinvigorate the country's prospects. The market wanted the figure to be a little higher and therefore Chinese linked stocks fell back
• The US Federal Reserve and the Old Lady (Bank of England) matched a 0.25% rate cut. The American central bank seemed to be more confident of further cuts and Chairman Powell, hit back at speculation that his post might be in jeopardy under a Trump administration. BoE Governor Andrew Bailey stated that “we need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much” while indicating that it would stay above the 2% target until May
• German Chancellor Olaf Scholz ended the German coalition with the Greens and FDP late after he sacked Finance Minister Christian Lindner and rejected opposition party demands to hold a no confidence vote early next week, which would lead to elections in January. It was reported that Scholz’s current plan is to have an election in March by deliberately losing a confidence vote on 15^th January

COMPANY NEWS

• SONY, the Japanese conglomerate, made sweet music (and pictures) as the market reacted positively to out performance in their three main sectors – music, gaming and movies – with the latter recovering from the American writer's strike
• Results from other Japanese exporters were poor but better than expected. Nintendo shares rallied 5.8% despite a guidance cut. Fast Retailing (Uniqlo) shares moved up 2.6% after reporting disappointing October sales which were negatively impacted by warm weather and Toyota produced results in line with expectations
• Vistry announced a further write down to their profitability particularly in the South region, sending the shares down 15%. Profit warnings tend to come in threes
• Further developments surrounding AstraZeneca’s business in China led the shares materially lower as it was revealed their local President Leon Wang was cooperating with authorities in an investigation due to sales tactics for its oncology drugs over the last two years
• Novo Nordisk shares have drifted 25% lower since their all-time highs at the end of June. Third quarter results were reassuring as Wegovy (obesity) sales beat expectations and Ozempic (diabetes) sales were slightly below. Novo narrowed its full year guidance, and said sales growth in 2025 would be in the high teens
• Marks & Spencer had better results than Sainsbury’s as shares closed up after reporting first half results as pre-tax profit was £407.8m versus £359.3m expected as revenue increased 5.7% to £6.48bn, in line with consensus. Food underperformance was offset by clothing. M&S management commented that Budget changes would cost the business an extra £120m. Sainsbury’s missed expectations whilst maintaining full year guidance and the cost of the Budget was £140m. In a separate announcement JD Wetherspoon also noted the changes would cost them around £60m
• Shares in Arm finished 4% higher as results were higher than forecast across the board and maintained guidance
• Palantir had excellent results, moving 23.5% higher with revenues growing 30% above consensus estimates. The company gave upgraded guidance and stated that growth in the business was accelerating as they meet “unwavering” demand for the US driven AI revolution

HOT CHOCOLATE NEWS

Nestle has been a difficult investment over recent years but perhaps the final straw is new changes to their Quality Street chocolate range which means that you may be in for a shock this Christmas. Perhaps in a nod to Novo Nordisk’s blockbuster weight-loss drugs, the “Purple One” and the “Orange Crunch” have shed a few pounds and will now be notably smaller. It may be all too much to take, particularly after Nestle dropped the iconic foil wrapping a few years back.

Meanwhile, Marks & Spencer, a much better investment after years in the doldrums, steps up to the plate. M&S’s popular mini-bites, beloved by an office birthday celebration, will now be available as a wide selection in a sharing tub, raising difficult questions over what to hand round after Christmas lunch. Nestle vs M&S?

TRUMP TRADE

In reaction to the change of colour from blue to red in the White House, bond yields rose due to increased spending, equities rallied as animal spirits returned to Wall St (sectors mentioned later), gold went lower and Bitcoin hit all-time highs.

The latter was a clear election target for President Trump due to the young demographic. The cryptocurrency hit $80,000 as he recorded victories in all seven swing states, paving the way to more supportive policies for digital assets and probably less regulation.

Whilst the dollar strengthened against the international basket of currencies, the stock market also reacted with its interpretation of the winners and losers under the new administration. The banking sector rose sharply as interest rates are expected to remain “higher for longer” which will help net interest margin – Wells Fargo gaining 13% for example – but also because of an assumed benefit to investment banking, particularly M&A where the regulators have been heavy handed in blocking deals. In a similar vein biotech companies also reacted positively. Other deemed beneficiaries were those linked to infrastructure spend and the “reshoring” or “reindustrialisation” themes such as railroad companies and heavy machinery providers ie Caterpillar Inc.

On the other hand, there were a few sectors that went lower. The main one was pharma due to the worries that Robert F Kennedy Jr (who endorsed Trump late on) would have a position looking after the Department of Health. His stance is known to be against vaccinations. There will of course be more clarity in due course…

THE WEEK IN HISTORY

1842: First US design patent for typefaces and borders is issued to George Bruce of New York City

2001: After 15 years of negotiations, China's membership of the World Trade Organization was approved, and the following day Taiwan's membership was approved