Market Prognosis

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

October 13, 2023

Inflation porridge

Macro & Overnight

China’s CPI recorded no change last month, while the US equivalent measure remained resilient at 3.7%, unchanged from the previous month. Both outcomes were taken negatively by investors, with fears of higher rates in the US and fears of a deflationary recession in China.

China’s economy is struggling to recover and has excess capacity for which it is trying to stimulate demand. Meanwhile, the US spends vast sums on reshoring previously outsourced activities to China and other lower-cost Asian economies, creating debt-driven deficits and stubborn inflationary pressures.

China’s inflation porridge is too cold, the USA’s is too hot. Such is the state of a fracturing global economy.

UK Company News

It is a typically quiet Friday for UK company news.

Avon Protection updated that its H2 was stronger than H1, with order book growth and higher underlying earnings. Full-year performance aligns with expectations, with a stronger H2 reflecting good strategic progress.

Avon Protection will be a classic textbook corporate strategy case study of how not to do things. Its shift from specialist rubber manufacturer serving multiple sectors into focusing on serving defence sector customers has been a disaster. Today, it provides military helmets, body armour and specialist breathing equipment. Its share price has fallen from a 2021 high of over £45 to £7 today, demonstrating the cost of losing a premium rating for quality from stock market investors and pundits. Today’s news is welcome, but given its customer base and two hot wars starting in two years, it would be difficult to imagine things worsening for them. 

Prognosticator

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