US non-farm payrolls (Nov) – 08/12 – Last month’s October jobs report was the first one this year when the headline number came in below market expectations, though not by enough to raise concerns over the resilience of the US economy. Unlike September, when US jobs surged by 297k, jobs growth slowed in October to 150k, while the unemployment rate ticked higher to 3.9%, in a sign that the US economy is now starting to slow in a manner that will please the US central bank. Combined with a similarly weak ADP report the same week, where jobs growth slowed to 113k, and a softer ISM services survey yields have slipped back significantly from their October peaks, as well as being below the levels they were a month ago in a sign that the market thinks that rate hikes are done and has now moved on to when to expect rate cuts. This is the next challenge for the US central bank who will be keen to continue to push the higher for longer rates mantra. It’s also worth noting that JOLTS job openings are still at elevated levels of 9.55m, and weekly jobless claims continue to trend at around 210k which means the Fed still has plenty of leeway to push back on current market pricing on rate cuts. Expectations are for 200k jobs to be added in November; however, it should also be remembered that a lot of additional hiring takes place in the weeks leading up to Thanksgiving and the Christmas period so we’re unlikely to see any evidence of cracking in the US labour market this side of 2024.
Services PMIs (Nov) – 05/12 – While manufacturing activity in Europe appears to be bottoming out, the same can’t be said for the services sector which on the basis of recent inflation data is experiencing sticky levels of inflation, which is prompting a continued hawkish narrative from the ECB despite rising evidence that the bloc is already in contraction and possible recession as well. Recent data from the French economy showed economic activity contracted in Q3 and there has been little evidence of an improvement in Q4. The recent flash PMIs showed that services activity remained stuck in the low 45’s, although economic activity does appear to be improving, edging higher to 48.7. The UK economy appears to be more resilient where was saw a recovery into expansion territory in the recent flash numbers to 50.5. The main concern is that the resilience shown by the likes of Spain and Italy as their tourism season winds down appears to have gone after Italy fell sharply in October to 47.7, while Spain was steady at 51.1.
RBA rate decision – 05/12 – Back in November the RBA took the decision diverge from its peers and hike rates again, by 25bps to 4.35%, after 5 months of keeping it at 4.10%. In a sign that this could well be the last hike the guidance was tweaked from “further monetary tightening may be required” to “whether monetary tightening may be required” which at the time sent the Australian dollar sharply lower, although the recent weakness in the US dollar has seen the Aussie recover since then. Despite increasing evidence that inflation is slowing in the global economy the RBA clearly felt it necessary to close the gap on its peers when it comes to rate policy, in a sign that perhaps they are concerned about domestic price pressures. That said we are already seeing the economic numbers in China starting to respond to the piecemeal measures by authorities there to stimulate the economy, although the improvements have been fairly modest. We also saw another upside surprise in headline CPI, while Q2 GDP came in at 0.4%, above forecasts of 0.2% to the economy continues to remain resilient. No changes to policy are expected this week, however some ex-RBA staffers have suggested that we could see another rate hike if wages growth continues to remain strong.
China Trade (Nov) – 07/12 – The recent set of Chinese Q3 GDP numbers pointed to a modest pickup in economic activity over the quarter in a sign that we are starting to see an improvement in the underlying numbers underpinning the Chinese economy. The recent October trade numbers helped to support the idea of a modest improvement however they don’t change the fact that the economy still has some way to go when it comes to domestic demand which has remained subdued over the last 6 months. In October Chinese import data broke a run of 10 consecutive negative months by rising 3% in a sign that perhaps domestic demand is returning, beating forecasts of a 5% decline. Slightly more worrying was a bigger than expected decline in exports which fell -6.4%, the 6th month in a row they’ve been lower, and a worrying portend that global demand remains weak, and unlikely to pick up soon.
Bank of Canada rate decision – 06/12 – Not expecting any changes to monetary policy here with the central bank forecast to keep rates unchanged at 5%. The last 3-months have seen no growth in the economy at all while the October jobs report saw a rise of 17.5k jobs, all of these were part time positions. On full time employment we saw the first decline in jobs growth since May with a decline of -3.3k, while unemployment rose from 5.5% to 5.7% and the highest level since January 2021. We’re also starting to see inflationary pressure continue to subside with core CPI on the median slipping from 3.9% to 3.6% in October.
Balfour Beatty Q3 23 – 07/12 – Has struggled for gains this year even as the shares hit their highest levels since June 2008 back in May this year. In |August the shares took a bit of a tumble despite reporting a 9% rise in H1 revenue to £4.5bn, and an increase in underlying pre-tax profit to £97m. The weakness appeared to have been driven by concerns over the order book which declined again in Q2 and is now £1bn lower than it was at the end of last year at £16.4bn. We also saw lower margins in support services weighing on profitability, along with disappointment that full year guidance was left unchanged. The cancellation of Birmingham to Manchester leg of HS2 also haven’t helped given that Balfour Beatty is a key contractor there as well, although this is likely to be offset with the company getting a slice of any east-west road and rail links improvements across the Pennines.
Frasers Group H1 24 – 07/12 – Has seen some decent share price gains in what has been a challenging year for UK retailers. When the company reported its full year numbers for 2023 back in July, the Sports Direct owner reported a 15.8% increase in revenues to £5.56bn despite gross margins slowing modestly to 42.6% from 43.8% the year previously. Sports retail performed particularly well with a 16.7% rise in revenues, however there was also strong growth in “Premium Lifestyle” helped by the opening of new Flannels stores. With the addition of Gieves and Hawkes and Amara Living management expect further strong growth in this area. The company has also made further strategic investments in the likes of Boohoo and ASOS over the past 6 months as well as already owning stakes in the likes of AO World and Currys. Operating costs were one of the main reasons for the slide in gross margins as they rose to £1.93bn, however profits on property sales helped to offset the hit here. Reported profits after tax rose to £501.3m. For full year 2024 Frasers Group said it expects to see adjusted profits before tax to be in the range of between £500m and £550m.
Broadcom Q4 23 – 07/12 – Has spent most of this year making new record highs, coming to within touching distance of $1,000 a share back in November, after breaking above the previous record highs at $925 set in October. At its previous set of numbers Broadcom reported Q3 revenues of $8.88bn, while profits rose to $10.54c a share, with chip sales accounting for $6.94bn of that figure. In the aftermath of those results the shares dipped a little, after the chip maker projected Q4 revenue of $9.27bn, which while a record, prompted some profit taking. Nonetheless the dip proved to be short-lived as optimism over AI related sales saw buyers come back in. Not even a delay in completing its $70bn merger with VMWare saw the shine come off the shares, with the deal finally completing last month when Chinese regulators finally approved the deal subject to conditions. Full year revenues are expected to come in at $35.8bn and profits of $42.13 a share. Semiconductor sales are forecast to rise to $27.79bn, up from $25.8bn.
DocuSign Q3 24 – 07/12 – Slipped below $40 a share at the end of October and the lowest levels since November 2018, as despite an improving revenue and profits outlook, the shares have continued to struggle. We’ve seen a modest rebound since then, however the shares have remained well below their September peaks of $53. In September when the company reported its Q2 numbers the shares fell sharply despite seeing an 11% increase in revenues to $687.7m, comfortably beating its Q1 guidance, with profits coming in at 72c a share. Just like they did in Q2, management upgraded their guidance projecting Q3 revenues of $687m to $691m, as well as raising their full year forecast to between $2.73bn and $2.74bn. Q3 profits are forecast to come in at 63c a share, up from 57c a share.
GameStop Q3 24 – 06/12 – It’s been a slow drift lower for GameStop shares over the past 6 months, after hitting a 7-month high back in June. The summer positivity came about after the gaming company posted a surprise quarterly profit at the end of last year, helped by a $4.5m boost from the sale of some digital assets. There has been success in cutting costs as well as withdrawing from non-core markets, however they have been hampered by some poor decisions, the partnership with failed crypto exchange FTX, as well as experimenting with NFT at around the same time the bottom fell out of that market. The company returned to a loss of 14c a share in Q1, or $50.5m, while net sales fell short at $1.24bn. For Q2 there was a slight improvement on last year with revenues rising to $1.16bn, while losses narrowed to 0.03c a share. Over the last few days we’ve seen the share price surge after option traders bought a load of cheap call options with $20 and above strike prices, in anticipation of a decent set of Q3 numbers. For Q3 expectations are for revenues to come in unchanged at $1.18bn while losses are expected to come in at 0.08c a share.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.5% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.