Signs of a bear market rally
Macro & Overnight
US markets were up again overnight. Featuring an update from Netflix saying they have restarted subs growth again (shares up 14%) and news that Intel subsidiary, Mobileye IPO is going ahead at a much reduced valuation (nearly half of estimates from about 9 months ago).
In the UK, we have breached double-digit RPI, clocking in at 10.1% for September, with food costs as the main culprit.
Today is a big day for Keir Starmer. He faces the nearest thing ever seen to an open political goal. PM questions today should be compelling to learn how to justify a 180-degree turn on every policy our PM (in name) stood for in the space of a week. Suggestions from cabinet members that banks and oil companies are at risk of windfall taxes highlight this point.
Meanwhile, the Bank is reinstating its bond selling (QT) programme at the short end of the market while also retaining its option to buy at the long end. To QT or not, QT remains the question. However, for now at least, gilt yields are easing and sterling remains steady.
ASOS updated with the comments that it is very difficult to predict consumer demand patterns for the upcoming year. Within the UK, ASOS expects a decline in the apparel market. They also highlighted several write-offs to reposition for the new business model. Critically ASOS also announced the renegotiation of its debt, and the shares have rallied this morning.
Various asset management companies updated investors today. Man Grp, AUM fell in difficult markets, Liontrust net outflows of £2.2 billion for the six months ended 30 September 2022, Quilter resilient gross and net flows for third quarter 2022 in a volatile market environment, and Rathbone a resilient quarter, with annualised discretionary and managed net organic growth of 3.3%. In what has been a very tricky time to manage financial assets, these major asset managers have done relatively well, to a greater or lesser degree.
In manufacturing to support the steel industry, RHI Magnesita reported it was comfortably on track to meet analyst consensus expectations for EBITA in the 2022 financial year. The upside from recent M&A activity should offset its 2023 downside trading risks.
In manufacturing to support the semiconductor and electronics industries, Spectris reported that it continued to see strong demand for its products and services, underpinning expectations for high single-digit organic sales growth for the whole year. Orders remain ahead of revenue, even compared to their strong performance last year.
Equity markets are responding positively to inline results and guidance, indicating that portfolios have been negatively positioned—classic signs of a bear market rally.
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