Week ahead: US Nonfarm Payrolls, PMIs and Raspberry Pi results

US Nonfarm Payrolls (Mar) – 04/04 – The last three payrolls’ reports have shown that the US economy remains in fairly decent shape, with a slight improvement on the slowdown seen in January, with the number of jobs being added rising to 151k, from a revised 143k. The surge in hiring that we saw at the end of last year was always likely to see a slowdown after the 227k and 256k numbers seen in November and December. We haven’t as yet seen any significant movement in the jobless claims numbers either which have remained steady in the mid 220k’s for the last 4 weeks. Looking at the ADP report there does appear to be a modest slowdown, having seen this number slip to 77k in February, as uncertainty about trade policy prompts a slowdown in some sectors of the private sector. Talk of big cuts in Federal jobs haven’t, as yet manifested themselves in the headline numbers but that doesn’t mean they won’t in the coming months and we are seeing a sharp slowdown in US consumer confidence which could well temper spending across the economy. With the Fed holding rates at its last meeting and inflation remaining steady the March payrolls would have to be particularly poor to alter the markets thinking of when the Fed looks to cut again.  With the effects of tariffs yet to be felt the likelihood of this week’s jobs numbers altering the calculus around the next rate cut is expected to be low.               

EU flash CPI (Mar) – 01/04 – Inflation across the EU has been on an upward track since slowing to 1.8% back in October, and although we’ve seen it slow to 2.3% in February, down from to 2.5% in January, there is a concern about whether it can continue to come down to the ECB’s 2% target, especially if the recent change in Germany’s debt brake does prompt prices to start pushing higher again. This concern was articulated by ECB Governing council member Robert Holzmann, along with the impact of US trade policy. That said Holzmann is one of the more hawkish members of the ECB so he would be naturally cautious given that the ECB as a whole has stated that monetary policy is not meaningfully restrictive. On the more dovish side Mario Centeno the Portuguese governing council member has called for a further cut in April citing weak growth and an expectation that inflation is likely to slow further. Core prices have continued to remain on the sticky side, remaining steady at 2.6% in February and it is here that the ECB is likely to be more concerned. On the plus side we have seen a slowing in oil prices which should act as a drag on the headline number, while gas prices should also remain subdued as we head into summer.             

UK Services and Manufacturing PMI (Mar) – 01/04 and 03/04 – Depending on whether you are a glass half full or glass half empty type of person last week’s flash PMIs had something for everyone. As far as Germany and France are concerned the manufacturing numbers came in slightly better than forecasts at 48.9 and 48.3 respectively, prompting optimism that the sector might be on the cusp of a recovery. There’s always a however, as services in Germany saw a bigger than expected slowdown from 51.1 to 50.2, against an expectation of an improvement. Services activity in France did improve from 45.3 but was still lacklustre at 46.6. The UK also had a similar story to tell with a significant improvement in services to 53.2, from 51, however manufacturing slid sharply to 44.6, well below forecasts of 47.3. With construction also weak, in February it also collapsed to 44.6 suggesting that Q1 is likely to be another weak quarter for the UK economy and that the services rebound is merely serving to act as “lipstick on a pig” when it comes to the underlying strength of the UK economy.         

Serica Energy FY 24 - 01/04 – Another UK oil and gas company that has seen its share price slide as a consequence of the UK’s disastrous energy policies. In 2024 the shares fell almost 40%, and have barely recovered off the lows we saw in September of last year. In 2023 the company turned in an operating profit of £321m, a sharp fall on the £476m seen in 2022. Total revenue also declined to £633m from £812m despite an increase in crude oil sales to £265m. This improvement wasn’t enough to offset a sharp decline in gas sales revenue to £347m from £690m. As we look towards this year’s full year numbers, we need to look back at how the company was doing at its last trading update back in September when it reported a sharp drop in H1 production output to 43,700 boepd, down from 49,350 in the same period in 2023. Operating costs were also slightly higher at $19/boe, although H1 revenues were slightly higher at $462m. Due to unplanned downtime on the company’s Triton hub full year average production is expected to come in at the low end of 41-46,000 boepd guidance range, and full year capex to be around $260m. Cash tax paid in H1 was $72m as these small UK oil and gas companies feel the full force of the government’s 78% windfall tax. Against such a backdrop it's perhaps not surprising that Serica along with EnQuest have taken steps to explore a possible merger in an attempt to diversify their operations and other possible synergies.    

Raspberry Pi FY 24 – 02/04 – Having IPOd at 280p in June last year Raspberry Pi shares have made some solid gains since then and stood out as the only success story of 2024, in a year which was a poor year for UK IPOs. In December the shares shot sharply higher, peaking at 775p in February this year but have since slipped back to around 500p. What appears to have prompted these sharp movements isn’t entirely clear although reports that US investment group SW Investment Management has been a big buyer may have helped with the surge in December. In H1 the company was able to post a 61% increase in revenue to $144m, and a 44% increase in gross profits, with margins slipping slightly to 23.8% from 26.1%. The company’s Pi 5 single board computer which launched at the end of October sold 1.1m units in the first half of the calendar year, while in the trading update in January the company reported it expects adjusted EBITDA of not less than $36m in full year 2024. Product launches in H2 included Pico 2, and the Compute Module 5 in November, with more than 20 new products released throughout the year, as well as announcing a long-term strategic partnership with SECO.