News & Insight • Weekly Newsletters

29 November 2024 | Charlie Todd | William Buckhurst

That Was The Week That Was

MACRO

• Trump is starting where he left off with several tariffs planned on his first day of office. He stated that he would implement an additional 10% on goods from China and 25% on all products from Mexico and Canada, stating that the new tariffs were necessary to clamp down on migrants and illegal drug flows across the border. A Chinese spokesperson commented that economic and trade cooperation between the two countries was mutually beneficial and that “no one will win a trade war or a tariff war”
• Over the weekend he upped the rhetoric against the BRICS (Brazil, Russia, India, China and South Africa) saying that they would face 100% tariffs if they tried to create another reserve currency
• In the US, the core PCE index (the Federal Reserve’s “favoured” inflation measure), rose 0.27% month-on-month, the steepest monthly increase since March. The year-on-year increase was 2.8%
• ECB President Christine Lagarde noted that the EU might be in a better position if it enters talks with the US around potential trade tariffs, as opposed to immediately imposing countermeasures. Lagarde commented in an interview with the FT that “we seem to err more on what I would call a check book strategy” noting that the last time the EU’s strategy was “not to retaliate, but to negotiate”

COMPANY NEWS

Christmas sales have started early on the London Stock Exchange as a number of companies were approached. Direct Line said it had rejected a £3.3bn bid from larger rival Aviva. ITV was in the crosshairs of CVC and an unidentified European broadcaster. Sky News reported that CVC could be interested in the Studios unit with the broadcaster looking at ITV’s broadcasting division. TI Fluid Systems, a car parts manufacturer, recommended a £1bn offer from Canada’s ABC Technologies, which is backed by Apollo Global Management. Macquarie bid £701m for waste-management group Renewi and lastly Fortress Investment Group are wanting to spend £351m to purchase restaurant chain Loungers

Remy Cointreau’s results were poor, but the shares rose 3% potentially pointing to a bottoming in the liquor stocks. Management stated they now see full year revenue declining 15-18% vs the 11.8% forecast decline

Consumers look to be spending less on their pets and not doing as much DIY as both Pets at Home and Kingfisher shares fell by over 10% after issuing profit warnings. Pets at Home increased its overall revenue by 1.9% to £789.1m, however they commented they were operating in “an unusually subdued pet retail market”. Similar story with Kingfisher as quarterly sales were below estimates and expected the near-term market outlook to remain uncertain

Amgen closed down 4.5% having been down as much as 11% in early trading, after publishing data on its experimental obesity drug

Shares in Dicks Sporting Goods finished slightly lower after the company beat expectations and raised guidance. They have a close relationship with Nike

UniCredit are splashing the cash as banking M&A activity picks up on the Continent. Following on from their recent ‘investment’ in the German lender Commerzbank, UniCredit made an unsolicited bid for rival bank Banco BPM. It was reported that it values the rival at €10.5bn. UniCredit CEO Andrea Orcel stated that the bid shouldn’t be a surprise and wouldn’t impact the 2024 dividend or future dividend policy

Grant Isaa, the Financial Director of Cameco, the Canadian uranium specialist, is backing plans to restarting the UK’s Springfield nuclear plant near Preston

BOND CROSS

• China’s long-term (30-year) bond yields have fallen below Japan’s for the first time, as investors bet that the world’s second-biggest economy will become bogged down by the deflation that has long afflicted its neighbour. A rally in long dated government bonds has pushed their yield down from 4% in late 2020 to 2.21%, as Beijing cuts interest rates to boost its flagging economy
• On the flip side, Japan’s long-term bond yields, have risen from below 1% to above 2.27%, as Tokyo normalises monetary policy after decades of deflation
• Closer to home, French 10-year yields now trade at the same level as Greece. A more up-to-date definition of what makes the EU periphery would now presumably include Italy and France, with Spain and Portugal now ‘semi-core’
• Overseas investors (such as Japan) are heavily exposed to France and there is a risk of further selling pressure

CTRL + ALT + DELETE

It was announced in the FT by the City of London Corporation that Smithfield meat market is to close, potentially as soon as 2028. The deal with the traders who run Smithfield and Billingsgate fish market (which will also shut) will see millions of compensation in exchange for not fighting the closure.

The governing body, who controls the market, has also scrapped its £800m plan to move the markets from their central base to Dagenham, closer to the logistics and shipping routes, as building the modern facilities would be too expensive

One by one, London’s markets have succumbed to the pressure to redevelop and moved vendors further out. The City has saved money and the wholesalers will get payouts after decades of competition from bigger suppliers and supermarkets that has squeezed their margins

Sadly, it was a similar underwhelming story from two ‘traditional’ technology companies, Dell and HP, as shares fell by more than 10% on their results

Shares in Dell Technologies finished lower as revenue rose 9.5% to $24.37bn, slightly below consensus estimates. Although some elements outperformed, it was Services & Networking and Client Solutions divisions that disappointed the market, as even some bullish quotes on AI couldn’t get the shares higher

HP’s print was in line but guidance for the next quarter was poor as recent new Microsoft software had not fuelled PC sales as quickly as expected

Elsewhere, CrowdStrike look to have recovered from the outage earlier in the year, but the company guided revenue broadly in line with expectations and Workday results were pretty good, beating most metrics but the company guided to subscription revenue that was slightly below estimates with full year subscription revenue guidance moved to the bottom end of the range. The quarter was the 10^th consecutive of slowing subscriptions

THE WEEK IN HISTORY

1973: US President Nixon signs the Emergency Petroleum Allocation Act, authorising price controls in response to the 1973 oil crisis

2019: US President at the time, Donald Trump, signs two pieces of legislation supporting protesters against the China regime in Hong Kong, further enflaming US-Sino relations

As at 29^th November 2024. Source: InFront