News & Insight • Weekly Newsletters

22 November 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• October existing home sales in the US increased 3.4% month-on-month vs. 2.9% expected with the prior month revised lower, taking sales to an annualised rate of 3.96m with growth helped by a slight decline in mortgage rates, which fell to a two-year low in September but are now rising back towards 7%
• US initial jobless claims for the week ending 16^th November were 213,000 vs 220,000 expected and down on the prior week with continuing claims of 1.91m slightly above consensus estimates
• Bad news for the Chancellor as UK inflation data came in higher than expected at 0.6% month on month (0.5% was forecast) and year on year consumer prices rising 2.3% with the majority being blamed on energy prices. This will make government debt potentially more expensive and by the looks of things this is also rising – in October the difference between public sector spending and income was £17.4bn (£1.6bn higher than last year)
• Japanese Finance Minister, Katsunoba Kato, reconfirmed that the country would support the Yen from any excessive moves

COMPANY NEWS

• Nestle set out plans under the new CEO to focus on its top-growing brands and spin off its water business, while aiming to cut $2.8bn in costs by 2027
• Tesla (like Bitcoin) has been on a tear since the election of Trump. The shares moved higher again after reports suggested the incoming President would cut back restrictions on self-driving cars in America. When shares of Tesla head higher, sadly Uber and Lyft react in the opposite fashion
• Melrose was up strongly as it confirmed its full year guidance even with the issues in the aerospace sector. Management also mentioned that free cash flow from 2025 will be good
• Shares in Halma finished higher as revenue rose 13% to £1.07bn, as the company stated it expected to deliver good organic growth, supported by good order intake
• Deere closed up after reporting fourth quarter results. Those new to the market would have been slightly confused as the company missed on pretty much every metric but the guidance was better than feared
• We have mentioned the risk to American companies that trade in China if President Trump restarts a tariff war. Starbucks look to being proactive as it was reported that it was looking at selling a stake in its Chinese business, potentially introducing local partners
• Sony have traded well since their decent results and that optimism has fed through to the board room as it announced its intention to buy Kadokawa, the company that owns the Elden Ring franchise
• Shares in PDD Holdings fell as it continued the recent trend of Chinese tech names printing underwhelming results. The owner of ecommerce apps Pinduoduo and Temu reported a 44% increase in sales and a 61% net income rise; however, this was not good enough and shares fell 9%. Management blamed intense competition

TECH WEEK

The largest UK listed technology company, Sage, came up trumps, closing up 18% on results as operating profit, revenue and free cash flow were all above consensus as recurring sales growth accelerated.

CEO, Steve Hare, attributed the success to the acquisition of new customers and existing ones investing in more products and services. North America became the fastest-growing region where the company’s Intacct business saw very strong demand from the non-profit, construction and real estate sectors.

The CEO said: “Our high pace of innovation continues, as we enhance existing products and expand key cloud solutions throughout our markets. The Sage Network platform is enabling us to accelerate the delivery of new services, and we’ve made good progress with Sage Copilot, our generative AI-based digital assistant, now available with selected products across our portfolio.”

TALES FROM RETAIL

UK politics lost a bastion this week as a key player in New Labour, Lord Prescott passed away. Nicknamed ‘Two Jags’ (or ‘Two Jabs’!) his death coincided with probably his favourite brand (Jaguar) starting an advertising campaign without displaying a car but also some other retail heavyweights reporting.

JD Sports looked to have forgotten how to punch as shares fell 15.5% after issuing a trading update. Sales growth was 5.4% while gross margins increased to 48.1% but management stated that it had seen softer demand towards the back end of the quarter due to unseasonable weather. On the other hand, Games Workshop landed a knockout trading update as they upgraded revenue expectations from £235.6m to over £260m. Shares follow suit by rising 15%.

Over the pond it still seems like the consumer is under pressure. Walmart look to have duck and weaved their way through trading and mentioned that 75% of their customers have a household income of over $100,000. Shares were up 4% as they beat consensus on most metrics. Sadly Lowes weren’t boxing clever and Target’s shares were counted out by dropping 21% after issuing a profit warning as it lost market share and were noticeably poorer than its peers.

Perhaps they should look to ‘re-connect’ with their customers like Lord Prescott did!

THE WEEK IN HISTORY

1923: Inflation in Germany hits its peak, the exchange rate for the US Dollar to the German Mark reached 1:4.2 trillion. The inflation rate in Germany was 3,250,000% per month and prices were doubling every 2 days

1963: JFK is assassinated. US stock exchanges would close within 30 minutes of the news but not before the Dow Jones Index sank 21.16 points, or 2.89%

As at 22^nd November 2024. Source: InFront