News & Insight • Weekly Newsletters

15 November 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• US economic data released this week was mixed. October producer price inflation (PPI) was as expected and 2.4% year on year. Core PPI (key metric) was above consensus estimates. Jobless claims were slightly lower than the prior week
• US inflation data released was in line with expectations – are analysts finally getting the hang of this inflation?! October CPI was 0.2% month-on-month with year-on-year CPI of 2.6%
• US stocks erased more than half of their post-election gains as ‘Trump trades’ lost steam amid an assumption that the Federal Reserve will slow the pace of rate cuts. The market is now pricing in a 56% chance the Fed will deliver a 0.25% reduction at its December meeting
• UK data continues to be underwhelming. GDP ‘growth’ continues to hover around zero (+0.1%). The unemployment rate increased more than expected to 4.3% vs 4.1%; but weekly earnings increased 4.3% vs 3.9% expected. In her Mansion House speech, Chancellor Reeves thinks the pathway to growth is reforming the structures of state pensions and encouraging more risk (away from the actuarial liability matching of buying Gilts). Bank of England Chief Economist Huw Pill stated that UK wages were growing too quickly.
• Europe’s largest economy will go to the polls on the 23^rd February as the German coalition collapsed. In the German political process, there should be a confidence vote on 16^th December. President Frank-Walter Steinmeier will then have 21 days to dissolve the Bundestag

COMPANY NEWS

Shares in Siemens finished higher as both profit and margins (15.5%) came in above consensus. The company guided to revenue growth of 3-7% as analysts described the results as solid amid macro challenges. Its listed subsidiary Siemens Energy rose 19% after reporting full year results and updating mid-term guidance

• Spirax Group showed some signs of life in their print
• Burberry may be merging with Moncler as it tries to put shareholders out of their misery. Results were poor as revenue declined 22%. The company guided to full year wholesale revenue declines of 35%, down on the prior guide for a 30% decline as new CEO Joshua Schulman stated that he would refocus the company on outerwear – shareholders have already grabbed their coat
• Volex are looking to take advantage of the recent profit warning by launching bids for TT Electronics (rejected)
• Disney beat consensus as both the Experiences and Entertainment divisions beat expectations with Sports revenue slightly below expectations. More pleasingly, Disney+ looks to be turning profitable
• Animal spirits are back on Wall St and gambling firm, Flutter Entertainment, had better than expected results with every metric better than the Street was predicting
• Bayer shares reached a near 20-year low after reporting underwhelming results as the company cut its full year guidance. Shares declined sharply after management commented that they expect a muted outlook next year
• Home Depot had good results that were better than expected as they traded around the recent Hurricane. Management commented that as the weather normalised, they saw better engagement across seasonal goods and certain outdoor projects
• It was reported that activist investor Elliott Management had taken a stake in Honeywell worth over $5bn and was pushing to break up the business
• Shopify closed up 20.8% in one day as revenue increased 26% year-on-year.  Subscription revenue also increased 26%

TECH WEEK

Nvidia will report third-quarter results this week after the US market closes on Wednesday. Analysts expect the chipmaker to deliver 84% year-on-year revenue growth to $33.28bn and profits of $17.45bn (up from $9.24bn a year ago). Investors will also be watching for updates on Nvidia's Blackwell AI chip shipments. However, analysts have warned supply constraints could result in the bigger upward revisions happening later in the year. Nvidia has said it expects to ship several billion dollars’ worth of Blackwell revenue during the January quarter as production ramps up

UNHEALTHY MARKET

There are some that are saying Trump wants to go after the pharma sector due to them delaying the Covid vaccine at the latter stages of his first Presidency. He has nominated RFK Jr. as the US Health Secretary. He may (as well as some of the other nominations) get blocked in the process but stocks in the pharmaceutical sector have already reacted. Known for his anti-vaccine stance, companies such as US firm, Moderna, German BioNTech and UK’s GSK have sold off. This was in combination with some negative headlines and underwhelming results in the sector

Pfizer derives a large percentage of its revenues from vaccines and is exploring the sale of its hospital drugs unit to private equity firms and other pharma companies

Amgen finished lower after a Cantor analyst spotted bone-risk data from an early-stage trial of the company’s obesity asset MariTide if you unhid certain extended excel tabs

AbbVie shares collapsed after announcing a key drug aimed at treating schizophrenia had failed its trial. This was particularly galling as it had spent $8.7bn on its acquisition of Cereval Therapeutics for the drug. In reaction, shares in Bristol Myers Squibb rose as its own schizophrenia drug passed its tests in late September

Humana and Cigna are no longer pursuing a merger. Cigna stated that it remained committed to its established M&A criteria. Cigna management also confirmed that the majority of the proceeds from the sale of its Medicare businesses would be used for share buybacks

AstraZeneca had in line results. Product sales and Alliance revenue were slightly higher than forecast as the company increased its full year guidance

THE WEEK IN HISTORY

1928: Disney released Steamboat Willie, the first animated film with sound to feature Mickey Mouse. The huge success of the cartoon helped make Mickey an iconic character and led to Disney’s dominance in the animated market. In the same week, 1957, Walt Disney IPO’d at $13.88. Accounting for six share-splits since then, one dollar invested then would be worth around $3,000 today, not including dividends

2001: American economist Milton Friedman, who was a leading proponent of monetarism and won the 1976 Nobel Prize for Economics, died at the age of 94

As at 15^th November 2024. Source: InFront