Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

<< Back to Market PROGnosis archive

April 11, 2024

The UK keeps calm and carries on

Macro

Yesterday’s core and headline inflation numbers were higher than expected, stifling hopes of a Fed rate cut in June. A growing number of commentators suggest that the US will not cut rates this year.

US10-yr Treasury yields moved decisively above the 4.5% level, last seen in November last year.

Oil prices have eased, but the DXY has strengthened, now above the 105 handle, and sterling has weakened against the dollar.

Meanwhile, in March, inflation in China was a barely perceptible 0.1%, well below the expected 0.5%.

With the ECB rate decision later, performance dispersion among the three largest economies is increasing, suggesting increased scope for FX volatility.

UK Companies

Centaur Media received an early-stage bid approach yesterday and Lok’nStore has recommended an offer from Shurgard today, valuing it at £378m.

DarkTrace now expects FY 2024 revenue growth of at least 25.5% while also increasing its expectation for Adjusted EBITDA margin, up 2% points, to at least 23.0%.

Dominos Pizza has completed its acquisition of the largest subfranchise operator in Ireland.

Foresight reported that assets under management decreased modestly despite challenging market conditions, but previous guidance was maintained.

Mears revenues were up 14%, with cash conversion at 123% of EBITDA following its repurchase of 11.0% of its issued share capital. Further, it anticipates another strong trading result in FY24. Mears, which upgraded market expectations in January, said that its net cash position provides the opportunity to pursue a number of options to deliver shareholder value.

XPS, the pensions consultant, identified further regulatory tailwinds from the new General Code of Practice (effective end of March 2024) and the new Funding Code of Practice (likely effective September 2024), which will impact its defined benefit clients and drive demand. It is confident of achieving full-year results ahead of its previously upgraded expectations.

While the macro backdrop of deferred dollar rate cuts is unhelpful, UK equities are getting on with things, retiring equity through share buybacks (See Mears above) and recycling capital via M&A activity (Centaur and Lok’nStore). This might not be the dream scenario, but it enhances the returns that will come when liquidity eventually finds its way back to this small part of the global financial village. 

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.