News & Insight • Weekly Newsletters

31 January 2025 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• The Federal Reserve left interest rates unchanged at 4.25-4.5% on a unanimous basis, even with President Trump putting pressure on them to cut. The Fed sees unemployment as having stabilised at a low level, and that inflation is somewhat elevated and removed a reference regarding “progress” towards the 2% target from its official statement
• The European Central Bank announced another 25bp cut in interest rates to 2.75%, the fifth time it has cut rates since the beginning of this easing cycle. The ECB noted “domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay…but wage growth is moderating as expected.” The ECB sees the way for further interest rate cuts in 2025. The 6-month Euribor swap rate is at 2.59% indicating further reductions to come over the course of the next six monthsGerman Economy Minister Robert Habeck commented that Germany has been systematically underinvesting, which has resulted in Germany being “stuck in stagnation”. Germany’s GDP forecast for 2025 growth was cut to just 0.3%. In contrast Spanish economic growth is forecast to be 3.2% in 2024, after fourth quarter data showed growth of 0.8%
• Former Bank of Japan board member Makoto Sakurai commented that wage hikes and sustained price rises give the Bank of Japan the scope to raise interest rates steadily and could move to 0.75% as early as June, on the way to 1.5%

COMPANY NEWS

• Global stocks responded to news that a Chinese AI developer called DeepSeek had released an App that had quickly become the most downloaded on Apple, amid suggestions it had cost less and required less power than previous iterations. Previous AI ‘winners’ were hit hard, but META and Apple rose
• ASML announced quarterly profits up 32% over the year and sales up 28%, as net bookings reached €7.1bn way ahead of €4bn estimate. It reiterated its guidance for 2025 sales to be between €30bn to €35bn, with a gross margin between 51% and 53%. Fellow European tech company, SAP Group, highlighted an increase in revenue guidance to €37.5bn helped by €21.8bn of cloud sales
• Intel reported slightly better quarterly results helped by gross margin. Interim CEO Michelle Holthaus described the results as a step in the right direction as revenue, gross margin and earnings were above guidance and noting Intel CPU’s power 7/10 PC’s
• Reports suggesting Diageo planned to sell off the whole of its Guinness brand just before the Six Nations or its 32% stake in the LVMH owned drinks business proved unfounded, but it did sell its Guinness business in Ghana
• Shares of Fevertree surged 24%, after announcing a strategic partnership with brewer Molson Coors, who will take an 8% stake in the company at a cost of $88m
• Exxon Mobil shares fell slightly on results that showed weakness in its refining and chemicals business but beat profit estimates with higher oil and gas production. Demand for fuel globally has lagged expectations. Other majors (Chevron and Shell) were also hurt by the weaker market
• IBM shares rose over 12%, after reporting nearly $13bn in free cash flow, which beat expectations, and suggested that 2025 revenue growth will be over 5%
• LVMH reported decent results but didn’t match elevated expectations post Richemont’s print. Bernard Arnault was seriously considering increasing its US production
• Sony rallied to close up 3.54% following the appointment of Hiroki Totoki as CEO from 1 April 2025
• Danaher shares declined 10% after the company reported in line results but issued a 3% outlook statement that disappointed analysts. Thermo Fisher on the other hand beat expectations, and gave decent guidance as all four end markets returned to growth

TRANSFER WINDOW

We have commented on the number of companies transferring their listing across the pond to gain a higher multiple. In the sporting world it seems like the largest transfer was probably in Formula One as Sir Lewis Hamilton moved to Ferrari in search of his 8^th world title there was still some action in the football world with Miguel Almiron following some London listings to America.

Pete Hackleton, of Saffery, reports “The January transfer window is never as busy as the summer, but the right signings at this stage of the season can make all the difference.  The Profit and Sustainability Rules (PSR) are restricting many clubs’ ability to spend, but given each league place makes £2.2m of difference to a clubs broadcasting income, and the importance of staying in the Premier League, it is unsurprising many clubs decide to take a chance at this time of year.”

4 OF THE MAG 7……

…reported results:

Microsoft shares fell by 6%, despite announcing results ahead of expectations. Revenues of $69.6bn were up 13% from a year ago. CEO Satya Nadella commented on the call about its capital expenditure plans and defended their decisions to invest so heavily. Microsoft Cloud revenues exceeded $40bn and AI-related revenues rose to an annualized rate of $13bn. Azure revenue growth slowed to 31%, LinkedIn revenue grew 9% and Xbox gaming revenue was impacted by hardware sales. Company cash flow was $6.5bn, negatively impacted by spending

Tesla reported a sharp decline in profit for 2024, with net income plummeting over 70% to $2.3bn. Despite an uptick in sales, which saw a 2% increase in the fourth quarter to $25.7bn from $25.2bn in 2023, the profit dropped. Elon Musk himself was optimistic about the future, stating: "2025 is going to be a pivotal year for Tesla". He also commented on Tesla's 2026 timeline for rolling out a completely self-driving car: "This is not some far-off, mythical situation"

META shares closed at an all-time high on the back of its quarterly results. Like Microsoft, the analyst call focused on capital expenditure plans. Mark Zuckerberg confirmed plans to spend $65bn and believes that investment in infrastructure is a major advantage

Apple shares were unchanged as Chinese sales weakness was offset by reassuring guidance. Apple’s earnings per share of $2.4 beat expectations and revenues were broadly in line.  Service revenues grew 14% and exceeded $26bn and are expected to grow at a low double digit rate in the second quarter. On the conference call CEO Tim Cook noted that iPhone 16 models are selling better in markets where Apple Intelligence is available

THE WEEK IN HISTORY

2001: All NYSE-listed stocks were switched from a fractional to a decimal trading system and all NASDAQ stocks followed suit a few months later. The conversion to decimal trading significantly reduced bid-offer spreads

2003: AOL Time Warner announces a net loss for 2002 of $98.7bn, the largest loss ever reported by a company. The loss was a result of write downs from AOL and Time Warner’s merger in 2000