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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November 1, 2022

Oil profits too tempting to ignore

Macro & Overnight

The Dow was lower for the first time in six sessions, while US Treasury yields nudged higher ahead of the Fed’s rate decision tomorrow.

The big banks are long of $13bn of Twitter debt at a valuation none of them wanted to pay. Meanwhile Musk is moving fast and breaking things as the new Chief Twit slashes costs and seeks new revenue opportunities.

UK house prices fell by 0.9% in October, according to Nationwide.

Investec’s Nathan Piper warns about the UK Government’s plans to extend the Energy Profits Levy. If implemented, it would increase the UK North Sea tax take from 40% last year to 70% until 2028 (vs 25% UK corporate tax). The UK government needs sources of revenue to fund interest rate rises and its Energy Prices Bill. However, unpredictable tax changes will impact UK North Sea investment, increasing reliance on imports. Increasing imports via US LNG, the current solution involves about 7-8 times the emissions from UK North Sea domestic gas production. The environmentally concerned media will probably continue to focus on the PM’s decision whether to go to COP27.

UK Company News

BP is the latest oil major to run the gauntlet of condemnation for its financial success. In the words of its CEO, the company continues to perform while transforming. It remains focused on helping to solve the energy trilemma – secure, affordable and lower carbon energy- and is providing the oil and gas the world needs today – while simultaneously investing to accelerate the energy transition. BP remains committed to using 60% of surplus cash flow for share buybacks and intends to allocate the remaining 40% to strengthen the balance sheet. BP’s base case of a $60 per barrel Brent oil price, it continues to expect to be able to deliver share buybacks of around $4.0 billion per annum and have the capacity for an annual increase in the dividend per ordinary share of about 4% through 2025. We wait to see what Mr Hunt and Mr Sunak think about that.


IWG, the flexible office supplier, says that demand for hybrid working solutions continues to grow as businesses seek to reduce their real estate costs and respond to the needs of their employees. It reports strong visibility over its forward revenues and successful cost mitigation. IWG remains cautiously optimistic about the outlook for the full year, with adjusted EBITDA expected to be towards the lower end of the range of market estimates.


West End landlord Shaftesbury says thaoccupiers continue to report trading revenues, on average, above 2019 levels and demand for space remains good across all uses, reflected in return to pre-Covid occupancy levels and growth in rental values. However, valuers have reported an outward shift in commercial valuation yields due to the impact on investment market sentiment of globally-rising rates and the deterioration in the macroeconomic outlook. The headwinds for commercial property currently exceed the tailwinds.


In the world of hospitality, pizza vendor Fulham Shore reported inline results and outlook, albeit in very tough conditions. Following Pizza Express’s steps, you will soon be able to find their Franca Manca branded pizzas from the chiller cabinet at Tesco.  


Inter-dealer broker ICAP cited the ongoing US dollar strengthening as a meaningful tailwind to its results. About 60% of the Group’s revenue (and approximately 40% of costs) are US dollar denominated. The Group continues to trade in line with the Board’s expectations.


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