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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December 15, 2022

Rates rises in line, China manufacturing weak

Macro & Overnight

The Fed rate decision of a 50bp increase was as expected. However, the commentary was relatively hawkish.

China’s manufacturing data came in weaker than expected.

Today should see the ECB and BOE follow the Fed with a 50bp hike. It will be a case of both trying to “keep up with the Jones’s” at the Fed.

Inflation is moving from goods to services, and this trend will likely continue in the coming months, acting as a brake on inflation’s decline.

Oil prices rose for the third straight day. Brent is back above $80, at the low end of the YTD range.

UK Company News

Electrical retailer Currys revealed strong UK performance with increased gross margins and cost discipline. . However, international has had a challenging period. It faces short-term pressures from a disrupted market with competitors with excess stock. Group FY profits are being guided to 15% lower than previously expected.

Drax, the energy supplier, is guiding profits slightly above the top of the range. It remains on track for net debt to be significantly below 2x EBITDA by the end of 2022. Over 99% of its generation is now from renewables, biomass, pumped storage and hydro. YTD, Drax generated 20% of UK renewables at peak demand and 11% in total. 

Oil services supplier Hunting has continued with a series of upgrades. While its 2022 trading remains in line with market expectations, its order book now approaches c.$500m. As a result, its 2023 profit guidance is raised by c7-12%. Titan continues to report steady sales across North America. South America remains a source of new business, with “drilling and completion activity accelerating as unconventional resources are developed, coupled with the continued migration of clients to new technology.”

RWS, the provider of technology-enabled language, content and intellectual property services, added new customers in all divisions across multiple end markets, including aerospace, automotive, education, energy storage, financial services, IT consulting, manufacturing, medical device, natural gas, pharmaceutical, software and telecommunications. Additionally, it improved cash generation. The company’s outlook aligns with market expectations, and CAPEX and investments align with plans presented at the recent capital markets day.

STV, the Scottish broadcaster, expects ad revenue to be down c.2% for 2022. However, STV Studios continues to make excellent progress, with over 30 new commissions secured this year. This division continues to grow strongly. 

Zotefoams cellular materials technology supplier, saw solid trading during October and November from Polyolefin Foams and High-Performance Products. The group expects FY profits to be ahead of current market expectations.

Prognosticator 

 

 

 

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