The Truss Rate Premium Legacy
Macro & Overnight
We have further to go on this earnings season, but so far, so good. US and Asian markets were strong overnight, with the US rally helped by better than expected bank earnings and a resurgent NASDAQ up over 3%. This evening we hear from: Goldman Sachs, Johnson & Johnson, United Airlines and Netflix.
Trussonomics is dead, but its chief ideologue remains in office for now, mainly due to her value as a human shield for her new boss at No. 11. The UK political U-turn on economic policy is complete, and sterling is back to pre-Truss levels, and gilt yields are falling from mini-budget panic levels. Good news, but not yet definitively.
Meanwhile, the BoE has delayed its gilt sale programme, as yields remain fragile. Mortgage rates continue to rise, while rate moves will have impaired other rate-sensitive assets. Other bodies may join LDI and float to the surface.
With the government taking a more balanced approach to fiscal policy, the pressure on rate rises can start to ease. However, we will still likely get a full 100bp rise in early November as Bailey drives home his authority. But the terminal interest rate now has a five-handle, not a six-handle. The Truss premium for UK yields will be her legacy.
UK Company News
Japanese tech investor, Softbank has sold its THG stake at a substantial loss. Panmure Gordon has approached listed broker Finn Cap in an attempt to affect a merger. Panmure hasn’t commented. Holiday operator Jet 2 has ordered more aircraft. MoneySupermarket has raised guidance helped by people trying to save on their outgoings, despite declining energy switching revenues. PageGroup has a new CEO designate. EV motor supplier Saietta gave an upbeat update but pointed to slightly lower growth in the short term as the company re-assesses priorities to more lucrative longer-term projects. Sosander is bucking the trend in online fashion showing H1 rev +72% and 6 months of profitability. Fintech Wise delivered a strong Q2 with a 50% y/y increase in transaction volumes. Brick producer Ibstock provided reassuring noises in the building sector, while car dealer Lookers did so in the auto space. Tech specialist FD Tech ( formerly First Derivatives) delivered strong results with raised guidance for the FY.
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