Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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May 2, 2024

Fed eases $ liquidity, but rate cuts must wait

Macro

The Jay Powell presser typically had something for everyone, although there were no rate cuts. He stumbled on whether they had considered rate increases, eventually denying they had. But the fact that he had to say that rate rises were off the table demonstrates how much the rate outlook has changed. Last year, markets were expecting rate cuts to have begun by now. 

The consensus view is that the date of the first cut has slipped into Q4 unless something breaks first. 

It will be interesting to see if any other central bank will dare cut before the Fed. Canada has suggested that it might consider such a move. Attention will now focus on the BoE decision-makers next week. 

The Fed also revealed that it was slowing the rate of its balance sheet contraction, positive for dollar liquidity. This pushed the DXY lower, providing relief for the Yen, which strengthened. It also sent precious metals higher. 

Oil prices fell sharply, with Brent now trading in the low $80s. 

UK Companies

Shell has announced a $3.5bn share buyback.  

Yesterday, we saw a proposed PE offer for Alfa Financial Markets, which, if completed, could be worth c. £600m.  

Argentex, the FX provider, had FY results which cited adverse market conditions experienced during 2023, continuing into the first quarter of 2024. It is focusing on repositioning and restructuring the business for profitable growth and wants to raise additional capital to accelerate its progression into Alternative Banking. 

Chrysalis, the growth equity investment trust, reported it is cautiously optimistic about a rebound in market activity, which could lead to opportunities to realise significant liquidity for the Company. In addition, the process around the “likely disposal” announced in December 2023 continues, and it hopes to be able to update the market in the coming months. It reports seeing “signs of life” in the trade sale market for the type of assets it owns. 

Smiths News, the distributor of newspapers and magazines, reported an operating profit of £18.8m and £4.2m of free cash flow. 74% of its publisher revenue streams are secured until 2029, and it has refinanced its debt to implement its revised capital allocation policy. It has reported a marginal easing of inflationary pressures on consumer spending and is progressing with new organic profit streams. 

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