News & Insight • Weekly Newsletters

13 December 2024 | William Buckhurst

That Was The Week That Was

MACRO

The UK continues to trend around zero with a 0.1% fall in GDP for October (following a similar figure for September). The country is now officially on recession watch

US CPI inflation data was in line with expectations sending shares higher. November CPI was 0.3% month-on-month with the annual figure of 2.7% also in line with consensus estimates

The ECB lowered interest rates by 0.25% for the fourth time this year, taking the main deposit rate to 3%. The rhetoric was that further cuts in the New Year seemed probable

Chinese bond yields hit record lows (high prices) and stock markets fell after party leaders pledged lower interest rates and “vigorous” efforts to boost domestic consumption. President Xi Jinping and senior party leaders vowed to increase China’s fiscal deficit and issue more “ultra-long” special bonds. The party meeting followed China’s change to its “moderately loose” monetary policy stance from its current position of “prudent”, boosting commodity prices along the way

COMPANY NEWS

SpaceX, the rocket and satellite maker founded by Elon Musk, was valued at $350bn making it the world’s largest private company, after employees sold some shares. It is proving to be a rather good time for Mr Musk as his various stakes in Tesla, SpaceX and X (previously known as Twitter) has made him the first person to be worth $400bn

Siemens shares were flat following the company’s Investor Day, which revealed new higher targets

Omnicom is to buy Interpublic in a $13bn deal to create a marketing giant which will be the industry leader

Winners and losers in the AI race. Broadcom shares moved around 25% higher after it reported in line results. However, CEO Hock Tan, then issued a positive forecast around its SAM (serviceable addressable market) and noting a ‘massive opportunity’ in AI semiconductor infrastructure. On the flip side, Adobe fell over 13% on their disappointing results as forecast revenue growth was lower than expected and Oracle couldn’t quite match the market’s lofty expectations and fell 8%

Costco shares were flat after quarterly results that showed same store sales growth of 5.2%. The company ended the quarter with 77.4m paid memberships, up 7.6%. Like Walmart, these shares have performed very well but on certain metrics look fully priced

There have been a few positive notes from Alphabet recently. Its subsidiary Waymo (driverless cars) is gaining market share, it owns 8% of SpaceX (see above for details) and announced a breakthrough in quantum computing. It noted its computer called Willow needed five minutes to solve a problem that would normally take computers around 10 septillion (24 zeros!) years

Ashtead closed down 14% after issuing a profit warning and cutting its guidance to sales growth of 3-5%, from 5-8% due to the tough US trading conditions. They have cut capex guidance and increased free cash flow forecasts. Management also announced a proposal to move its primary listing to the US. Ferguson, already listed in the States and chaired by ex-Ashtead CEO Geoff Drabble, also fell due to the tough US environment

CHRISTMAS SHOPPING

Perhaps just in the Vermeer office, but as December comes around the sales for chocolate, wrapping paper and boosts for those with colds help Jermyn Street’s economy. It was also interesting to note buying activity in the stock market action in the same sectors:

It was reported that Mondelez (owns Cadbury amongst others) was considering an acquisition of Hershey, having walked away from a potential deal in 2016 after seeing a $23bn bid rejected. It looks improbable as Hershey’s enterprise value is now at $45bn plus 80% of the voting rights are owned by the Hershey Trust.

After recent paper deals it was also reported that Apollo backed Novolex to was to purchase Pactiv Evergreen for $3.22bn in the packaging sector

The Wall Street Journal reported that Walgreens is in talks to sell itself to private equity company Sycamore Partners, after its shares had fallen 70% this year.

END OF AN ‘ERAS’

Probably the only time Taylor Swift and Sir David McMurtry, the founder of UK listed company Renishaw, have been in the same sentence but sadly Sir David passed away as Taylor Swift’s “The Eras Tour” officially finished.

The nearly two-year long tour – an astonishing 149 concerts across five continents – was record breaking. It grossed an unprecedented $2bn in sales, and this does not consider merchandise sales, the film she did, the book she wrote and tickets selling in the secondary market. We look forward to receiving detailed analysis on the economic effect that Ms. Swift alone has had on global GDP. In March this year, Nomura calculated that, so far, the tour had boosted nominal US retail sales by around 0.03% and lifted real GDP by roughly 0.02%. They went on to say that it likely accounted for only 0.5% of annual nominal consumption growth last year.

Sir David was an entrepreneurial engineer with a particular interest in furthering design – his ownership of intellectual property is infamous. Having started his career at Bristol Aeroplane Company, which was then bought by Rolls-Royce, Sir David founded the measurement company, Renishaw with his ex-colleague John Deer in 1973.

As well as growing Renishaw into a FTSE 250 Company, Sir David was knighted in 2001 ‘for services to design and innovation’. More recently he had turned his focus to electric vehicles, under the McMurtry Automation banner, setting about reviving the fan car technology first pioneered in the ‘70s

Interim Chair David Grant said: "David was a uniquely talented engineer and his curiosity and drive helped to create a globally respected engineering company. His legacy will live on through the culture of innovation he helped to create in Renishaw.”

THE WEEK IN HISTORY

1941: At 7:48am local time, Pearl Harbour is attacked by Japan. The stock market was closed on the day of the attack, but the next day when the Dow Jones Industrial Average opened it fell 3.49% to 112.53

2017: Bitcoin enjoys the start of a manic week rising from $13,000 to almost $20,000 before falling back to close to the $2,000 level by the end of the following year. It is over $100,000 today

As at 13^th December 2024. Source: InFront & Vermeer Partners