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.
This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.
Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position, and/or may perform services or solicit business from, any of the companies or related securities mentioned.
Any prices quoted in our research are as at the previous day’s close.