News & Insight • Weekly Newsletters

06 December 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• South Korean President Yoon failed to instal martial law, a move he claimed would prevent the opposition from trying to stop his administration. 190 out of the 300-seat parliament unanimously voted to demand the lifting of martial law with the move reportedly leaving Yoon’s own party blindsided
• Investors raised their bets (futures market suggested an 89% chance) on the prospect of a US rate cut this month, after US non-farm payrolls data showed job growth came in at 227,000, ahead of the 200,000 jobs expected. The November ISM Manufacturing index was 48.4 vs 47.5 expected and up on the prior month’s 46.5 (50 shows no growth so there was continued weakness, but numbers were not as bad as feared)
• Bank of England Governor Andrew Bailey indicated policymakers still believed that four 25bps rate cuts next year was the most likely scenario
• Syrian rebels look to have overthrown President Assad, bringing more uncertainty to the Middle East
• French Prime Minister Michel Barnier formally resigned following a vote of no confidence after he allowed his social security bill to be adopted without a vote. Following the move, both Marine Le Pen’s National Rally and the left-wing block stated that they would support the vote. Following the resignation, Marine Le Pen stated that France could deliver a budget so long as the next prime minister was prepared to narrow the deficit more slowly, noting that the outgoing administration’s plans to bring the budget gap to 3% of economic output by 2029 were not credible

COMPANY NEWS

• The Christmas sale was enough to get one of the deals through as Aviva and Direct Line look to be merging
• Employment lawyers also look to have had an early Christmas as Intel CEO Pat Gelsinger is ‘stepping down’ as the board had lost confidence in his plans to turn around the company. Stellantis CEO Carlos Tavares was also ‘stepping down’. Having previously stated that he would stay until 2026, Stellantis cited strategic differences around how to arrest weakening sales
• Accenture announced the acquisition of German software company AOX for an undisclosed sum
• Brown Forman, the owner of the Jack Daniels brand, rose on results that were not as weak as expected. More importantly, management commented that they expected a return to growth in 2025 and expect performance to accelerate in the short term
• Trading in the athleisure sector has been muted as customers continue to exercise through the inventory that they built up during the pandemic. Frasers Group, previously known as Sports Direct closed down 10.7% after reporting first half results and cutting guidance. The company remained confident in developing and delivering plans for multi-year, sustainable profit growth but consumer confidence had weakened, and recent trading conditions have been tougher than expected
• Things were pretty similar at Footlocker as shares closed down 9% after reporting weak third quarter results and also cutting guidance. Looking at the earnings per share figure, the quarterly $0.33 vs $0.41 expected was poor but the main cut was for the full year guidance, now seeing $1.20-$1.30, down from $1.50-$1.70. Management commented that consumer spending trends softened following the Back-to-School period in August and promotional environment was pronounced
• Watches of Switzerland finished 14% higher on mixed results as the company left full-year guidance unchanged. Management commented that they were “well positioned for a good holiday trading period” after an encouraging start in November
• Meta announced plans to install up to 4GW of nuclear energy capacity in the US by the early 2030s to help power the company's AI capabilities

INDEX REFLEX

There was a final reshuffle of the year in the UKs markets:

• B&M European Value Retail, Frasers Group, Vistry will be relegated from the FTSE 100 to the FTSE 250
• Alliance Witan, St James's Place, Games Workshop will be promoted from the FTSE 250 to the FTSE 100
• PZ Cussons, Close Brothers, Ceres Power and Puretech Health will be relegated from the FTSE 250 to the FTSE Small Cap
• Diversified Energy Co and Ferrexpo will be promoted from the FTSE Small Cap to the FTSE 250
• New entries to the Index: Deliveroo and Oxford Nanopore will join the FTSE 250. Applied Nutrition and Ecora Resources will join the FTSE Small Cap

TECH DOWN UNDER

On Thursday, Australia passed a law banning children under 16 from social networks

Countries including France and some US states have passed laws to restrict access for minors without a parent's permission, but the Australian ban is absolute. A full under-14s ban in Florida is being challenged in court on free speech grounds

It also builds on an existing mood of antagonism between Australia and mostly US-domiciled tech giants. Australia was the first country to make social media platforms pay media outlets royalties for sharing their content and now plans to threaten them with fines for failing to stamp out scams

BITCOIN = GOLD

Although we would expect the Chair of the Federal Reserve to come to the rescue on keeping the Dollar as the reserve currency of the world it was the quotes on Bitcoin that raised a couple of eyebrows:

During a discussion at the DealBook conference he suggested that "People use bitcoin as a speculative asset," Powell told Andrew Ross Sorkin. "It's just like gold, only it's virtual, it's digital. People are not using it as a form of payment or as a store of value. It's highly volatile. It's not a competitor for the dollar, it's really a competitor for gold”. In reaction the price of the ‘gold-like asset’ hit all-time highs of $103,000.

(More importantly he also mentioned the economy “is in remarkably good shape”).

THE WEEK IN HISTORY

1980: The Dow Jones suffers its biggest weekly decline in over a year after several weeks of strong gains following Ronald Reagan's election, as rapidly climbing interest rates and inflation start to take hold

1996: US Federal Reserve Chairman, Alan Greenspan, makes his now infamous “irrational exuberance” speech about stock markets being overvalued.   Greenspan struck a nerve by suggesting that Wall Street was riding a speculative bubble

As at 6^th December 2024. Source: InFront