News & Insight • Weekly Newsletters

16 August 2024 | William Buckhurst

That Was The Week That Was

MACRO

• UK inflation nudged up by less than expected. CPI figures for July showed an increase in the targeted measure of inflation to 2.2% from 2.0% in June. Importantly though, the rebound was less than consensus which was for a slightly greater rise to 2.3%
• US CPI fell to 2.9% in July, the first time headline CPI has fallen below 3% since March 2021
• US retail sales leapt by 1% in July, the most in 18 months and far above economists’ forecasts for a 0.3% increase
• Japanese Prime Minister Kishida announced that he would step down. Market sentiment was also boosted by the release of Japanese Q2 figures which beat expectations, whilst the Yen remained reasonably stable

COMPANY NEWS

• Nike shares have been disappointing, but the share graph resembled the famous tick after Bill Ackman’s Pershing Square announced a stake in the company
• It turns out the UBS takeover of Credit Suisse was a very good deal for the former after they reported quarterly profit before tax was $2.21bn (above expectations), were well positioned to meet financial targets, and that they had entered into discussions with regulators over plans to overhaul rules around capital and liquidity
• BT announced that Patrick Drahi’s Altice had sold its stake in the business to Indian firm Bharti Global. It was confirmed that Bharti had reached an agreement to acquire a c.24.5% interest in BT from Altice UK with 9.99% to be acquired via Bharti Televentures UK imminently with the remaining 14.51% in due course
• Crest Nicholson announced that Bellway have walked away from the proposed takeover, sending shares lower
• Shares in Flutter Entertainment, the owner of Betfair, Paddy Power and Fan Duel, finished 10% higher after reporting results that were above expectations with revenue of $3.6bn also above consensus estimates. Average monthly players totalled 14.3 million as Flutter increased its full year guidance. Management noted that performance benefited from positive sports results
• ITM Power, the electrolyser specialists, announced they are open for business as the turnaround by the CEO Dennis Schulz has been completed. Whilst a legacy £15m disagreement is due to be sorted in the coming months they declared that the sales pipeline had multiplied by 25x in 18 months. Roll up, roll up…

SHOPPING LIST

Ed Sheeran has bought a 1.4% stake in Ipswich Town Football Club ahead of the new Premier League season, but we thought we would use his tour (although there was a Perfect Duet during Taylor Swift’s ERAS Wembley performance) to mention the retail results which showed the Shape Of… the consumer was still strong but the DIY market is still sending Shivers to holders of Home Depot shares.

They finished 1.2% higher after reporting Q2 results with earnings per share $4.67 vs $4.52 expected. The company cut its full year guidance, now seeing earnings declining 3%, down on the prior 1% guide. Management commented that there was weaker spend across home improvement projects. More positively the Photograph of Walmart results topped market expectations, and Walmart US comps increased 4.2%, ahead of the 3.4% consensus. Outside of the US, the company continues to see healthy momentum.

Starbucks holders were much Happier as it hired Chipotle’s CEO Brian Niccol as its new Chairman and CEO. It stated that current CEO Laxman Narasimhan, who was hired in March 2023, would be stepping down immediately. Niccol joined Chipotle as CEO in 2018 having previously led Taco Bell and led the business through a stellar period of performance. Shares in Chipotle took a Dive by 7.5%

Kellanova, the spin-off of Kellogg’s snacks division which owns Bad Habit brands such as Pringles and Pop Tarts, confirmed reports that it had agreed to be acquired by Mars in the largest deal of the year ($35.9bn). All Kellanova’s brands, assets and operations would be included in the transaction with the deal helping diversify Mars’s chocolate heavy portfolio away from cocoa (and pet food).

On Holding, famous for its running shoes, closed up after reporting second quarter results as net sales rose 28% to CHF567.7m, slightly above consensus estimates. The company left its full year guidance unchanged, expecting 30% sales growth and margins of 16.0-16.5%.

REAL ASSETS

UK infrastructure investors received a boost this week as Hong Kong billionaire Li Ka-Shing’s CK Infrastructure bought 32 wind farms from Aviva Investors. Despite the UK announcing its so-called Electricity Generator Levy in the autumn of 2022 - imposing a 45% charge on electricity sold at an average price of more than £75 per megawatt hour - UK infrastructure assets are still seen as an attractive place to invest, and a new government has done little so far to dent that enthusiasm. CK Infrastructure already owns UK Power Networks, the main electricity distributor in London and the south-east, and has substantial stakes in Northumbrian Water and Northern Gas Networks. It will also pursue a secondary listing in London with shares expected to start trading shortly

THIS WEEK IN HISTORY

1971: In a nationally televised address, President Nixon announced a 90-day freeze of “all prices and wages in the US”. With US inflation hovering around 7%, Nixon worried that the economy was overheating and so he began implementing price controls throughout the economy. However, the freeze would not work. By 1975 inflation was running at over 11% and, after a slight drop in the late 70s, hits 13% and 12% in 1980 and 1981

2004:  Google finally held its highly anticipated IPO in 2004, six years after it was founded. The company had already become a search juggernaut by that time, and IPO shares were priced at $85 per share for a valuation of $23bn.

MARKET DATA

As of 16^th August 2024. Source: InFront

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