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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February 16, 2024

UK in recession & is the US slowing?

Macro

The UK GDP data for Q4 shows that the economy was in recession during the second half of 2023. The question now is, does this matter as far as markets are concerned? The answer lies in the data revisions and the recovery rate we see in 2024 as interest rates decline.

Overnight US retail sales data were weaker than expected, while today, UK retail sales came in stronger after a weaker-than-expected showing in December.

Indications are growing that the US economy is weakening from the unsustainably high levels of growth recorded in H2 last year.

Rates look set to fall, but it remains to be seen if the Bank of England MPC would dare cut UK rates without a direct lead from the Fed. The relatively becalmed $/£ rate suggests it is unlikely.

UK Company News

XP Power reports that there is likely to be a shortfall in revenue in 2024, leaving the outlook for 2024 significantly below market expectations. Temporarily soft demand conditions and destocking have impacted the Healthcare and Industrial Technology sectors. It sees an ongoing cyclical slowdown in the Semiconductor Manufacturing Equipment sector. XPP has a net debt of £112.7m but indicates it remains within its debt covenants. Additionally, it has identified some capitalised product development costs that need to be amortised or impaired, adding £4 million to costs. 

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