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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October 9, 2023

What does MBS do next?

Macro & Overnight

Last week’s US oil market data analysis of falling gasoline production and rising inventories implied a 12-13% fall in gasoline consumption in the US in September, which equates to about 1m barrels per day. It is little wonder oil prices fell so sharply.

However, on the supply side, the atrocities in Israel over the weekend have caused a spike in oil prices overnight as the world waits to see the geopolitical consequences of the terrorist attacks in Southern Israel and its consequences for the Arab-Israeli peace process. Much rests on the reaction of Saudi Arabia.

The dollar and gold have both firmed up.

US FOMC minutes are due on Wednesday, with inflation data released on Thursday.

China reports its trade data on Friday.

Some UK Company News

Impax Asset Management updated Q4 AUM totalled £37.4 billion, representing a decrease of 5.8% and an increase of 4.8% over the year.

Warnings from Croda that customers have reduced their ingredient inventories in beauty care and Mind Gym, which reported that its clients are deferring training and commitment to new spending. 

Metro Bank’s capital raise substantially wipes out equity holders, leaving Spaldy Investments the controlling 53% shareholder. This move illustrates the riskiness of investing in regulated banks, as Credit Suisse bond holders discovered in March. Metro is also raising substantial new debt capital and haircutting part of its debt obligations by 40% in a complex restructuring necessitated by the PRA’s refusal to grant Metro permission to implement proprietary risk controls on its UK mortgage assets last month. Some of its new bonds will carry a 12% coupon, and Metro still has to sell £3bn of its mortgage book. While these moves have steadied the ship, the fear remains of how Metro can grow out of this hole via double-digit loan growth in the current deteriorating credit environment. This sequence of events might make one think that someone doesn’t want Metro to make the step from challenger bank to high street lender. Maybe I am just too cynical? 

Prognosticator 

 

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