China calmer

Macro & Overnight

Chinese authorities have moved to contain the unrest reported over the weekend. The mood brightened in Asian markets with encouraging Covid case updates and speculation restrictions could be relaxed. China is also reportedly looking into improving vaccination levels among the over-60 age groups.

Apple, down 3%, vulnerable to news from China and iPhone production volumes, is now in dispute with Chief Twit, Elon Musk, over advertising and Twitter’s access to the AppStore.

FOMC member comments reminded markets that the Fed has more work on rates that might have to remain higher for longer. This talk nudged up treasury yields.

As the US $ remains weaker, the relative strength of Sterling and softer UK yields has tempted the BoE to begin to sell off the gilts it bought in the Truss-induced LDI panic of 8 weeks ago.

Oil prices are volatile ahead of the OPEC meeting this weekend, the ongoing EU debate on a Russian oil price cap, and the unfolding events in China. Brent crude and European gas prices are up c2% today.

UK Company News

AstraZeneca is to acquire Neogene Therapeutics, a clinical-stage biotechnology company involved in next-generation T-cell receptor cancer therapies, for up to $320m. This is a positive for UK-listed life sciences investor Syncona, a Neogene shareholder. 

Low-cost carrier easyJet reported a record Q4 EBITDAR of GBP674 million, still resulting in a headline loss before tax of GBP178 million. With operational performance in Q4 reportedly better than Q4 2019, the company has seen a more than 50% YoY increase in fuel costs YTD. H2 early bookings look positive, with strong 2023 Easter ticket sales.  

Software supplier GB Group’s H1 growth in revenue was in line with guidance. The company is expecting second-half weighted revenues, which have so far been in line with its expectations despite macroeconomic pressures and cryptocurrency difficulties among its customers. 

FX asset manager Record reported H1 solid revenue and profit growth. The company grew management and performance fees, underpinned by outperformance across all products. Record is a beneficiary of less coordinated global FX policies and a management team looking to diversify away from its carry trade origins. 

Active Ops, the management process automation provider, grew H1 recurring revenues with maintained gross margins. It has won significant new business over the period from existing and new customers. Although cash conversion was negative in the period due to seasonality, the company has GBP11.0m cash (c 25% of its market cap). The company is firmly on target to be run-rate EBITDA positive for the FY. 

Replacement window vendor Safestyle warned that economic uncertainty had harmed demand levels in a trading period that under-pinned installation volume expectations for the last months of the financial year. 

Low-cost product distributor Supreme’s trading performance from vaping underpins its growth aspirations. With a positive start to H2, the company now expects to trade ahead of expectations for FY 2023. 

Drinks flavourings supplier Treatt reported revenue growth of 13% in H1, in line with expectations lowered in August. As the company consolidates, most of its UK production has transitioned to the new UK facility, which will double capacity in due course. 

Prognosticator

On This Day ...

… in 1596, King Phillip of Spain devalued its currency after a period of high inflation caused by the influx of gold from South America. This event probably lost Spain its 1066 And All That title of Top Nation.