China Trade and CPI (Aug) – 07/09 and 09/09 – Over the past few weeks China has taken several measures to help boost the economic prospects for its economy and has continued to do so on a piecemeal basis. From easing overseas travel restrictions to modest cuts to lending rates, concern has increased about the prospects for the Chinese economy. In July, the economy slipped into deflation after headline CPI fell from 0.2% in June to -0.3%. PPI, which has been in deflation since the end of last year improved slightly but still declined by -4.4%. This didn’t come across as a surprise given how poor the July trade numbers were. Markets had been expecting some poor numbers so expectations were low, however we still managed to see a surprise in that they were even worse than expected. The last 2 months of Q2 saw sharp declines in exports, with a -12.4% fall in June. There was little let-up in the July numbers with a bigger than expected decline of -14.5%, the worst performance since February 2020, with global demand remaining weak. Imports have been little better, with negative numbers every month this year, and July was no different with a decline of -12.4%, an even worse performance from June’s -6.8%, with all sectors of the economy showing weakness. As we look toward the August numbers, expectations are already low given the relatively low levels of support put forward by Chinese policymakers this past month and the concerns over the real estate sector. Expectations are for exports to decline by -7.8% and imports to decline by -8.8%.
Services PMIs (Aug) – 05/09 – For most of this year it has been notable that services PMIs have managed to offset the weakness in manufacturing PMIs in the form of keeping economies afloat. The strength of the services sector has been a major factor behind the hawkishness of central banks in their efforts to contain inflation with prices in this sector proving to be much stickier than other areas of the economy. This thinking appears to be starting to shift after some poor flash PMI numbers a couple of weeks ago. These numbers saw after a sharp slide in services sector activity in both France and Germany during August to 46.7 and 47.3, with Italy and Spain also set to show a similar slowdown. The UK also saw a slide to 48.7, in a sign that higher prices were finally starting to constrain consumer spending. These numbers could well be the final piece of the puzzle when it comes to whether the ECB decides to pause its rate hiking cycle, even as August inflation saw an unwelcome tick higher.
RBA rate meeting – 05/09 – With China’s economy continuing to show little sign of improving the prospect of more rate hikes from the RBA seems a remote prospect. With rates at 4.10% and the RBA leaving rates unchanged at the last meeting, this week is set to see more of the same. August PMIs have slipped into contraction territory and the unemployment rate at 3.7% the RBA will be nervous about further tightening at a time when the last employment report saw 24.2k full time jobs lost. When part time roles are included that was a net loss of -14.6k jobs lost in July, although those losses were off the back of 107k new jobs added over May and June. Expectations are for no change to the current 4.10%.
Bank of Canada rate meeting – 06/09 – Since the Bank of Canada last raised rates back in June, the headline rate has remained at 5%. At the last set of jobs numbers, the Canadian economy saw a net decline of -6.4k jobs, with most of those jobs lost being part-time in nature. The unemployment rate edged up to 5.5% and the highest level since January 2022. With wage growth at 5% and the economy growing at 0.3% in June the increase in rates is slowly acting as a brake on the Canadian economy with consumer spending slowing to stall speed over the last couple of months. With the central bank saying that inflation is unlikely to return to target until 2025, no changes are expected to the 5% base rate.
Darktrace FY23 – 06/09 – When Darktrace reported back in July the shares surged higher after the company reported that it expected to see a 31% increase in full year revenue, while saying that the 396 new customers added in Q4 should see total customers rise to 8,799, a rise of 18.3%. The last 12 months saw the shares hit a record low at the start of the year, after short seller Quintessential Capital Management expressing scepticism over the validity of its financial statements, while also taking an active short position. To combat these accusations Darktrace contracted Ernst & Young to review its finances to draw a line through the unwelcome speculation over its accounting practices. In July the company announced that the review had been completed and that nothing in any of its previous financial statements remained unchanged, and that the financial statements accurately reflected the firm’s financial position. The move higher in the share price is currently finding it difficult to overcome the 400p level which also equates to the highs of the year, as well as the November 2022 highs at 415p. Full year revenue is expected to come in at $544m an increase of 31%. On guidance Darktrace said it expects margins for this year to match those of 2022 and for 2024 to come in around 22%.
Barratt Developments FY23 – 06/09 – Despite a difficult economic backdrop, the Barratt Developments share price has managed to recover from the 6-year lows it fell to in October of last year in the aftermath of the spike in UK gilt yields prompted by the market response to some of the measures in Kwarteng budget and the ensuing meltdown in the LDI market. Despite gilt yields moving back, and above the levels seen at the end of last year, we’ve seen modest gains in the share price despite reporting a drop in forward sales in Q4, back in July. Completions were down from 17,908 a year ago to 17,206, with adjusted profit before tax expected to be in line with expectations. Private reservations were 0.55 down from 0.81 in 2022, although they have still recovered from the levels they were at the end of last year. With interest rates set to remain high, and the end of “Help to Buy” the risk is that looking ahead, forward bookings may well struggle to match the levels seen over the last few years.
Ashtead Q1 24 – 05/09 – Has been one of the better performers on the FTSE100 this year, Ashtead’s exposure to the US market ensuring that it has benefitted from the resilience of the US economy, through its US subsidiary Sunbelt. When the company reported its Q4 and full year numbers back in June the shares slipped back. Increased rental revenue has helped boost revenues and profits, with Q4 revenue rising from $1.87bn a year ago to $2.13bn. Full year revenues rose by 24% to $9.67bn, helping to boost pre-tax profits by 30% $2.15bn. For Q1 revenues are expected to rise to $2.65bn, with Sunbelt US expected to contribute $2.27bn of that, with operating margins expected to remain steady at 30%. Net profit is expected to increase to $476m.
GameStop Q2 24 – 06/09 – The last two earnings reports have seen decent gains in the GameStop share price, however on both occasions these spikes proved to be the top of the moves higher with the share price now close to its lowest levels this year. It would appear that the higher rate environment is blunting risk appetite to these so-called meme stocks and its not hard to see why. While the company posted a surprise profit in Q4, it slipped back to a loss in Q1 of -$0.14c a share and is expected to see a similar loss in Q2 as well. Q1 revenues came in at $1.24bn, with hardware and accessories making up over half of that total at $726m. For Q2 revenues are expected to come in at $1.14bn, although inventories should reduce to $600m. Same store sales are expected to decline by 0.1%.
DocuSign Q2 24 – 07/09 – DocuSign shares have had a disappointing time of it year to date, its shares slightly lower year to date, despite generally seeing their recent quarterly numbers coming in better than expected. They haven’t really recovered from the weak guidance it issued at the end of last year when it gave weak guidance for Q1. When DocuSign reported in June, revenues came in comfortably ahead of expectations at $661.4m, while profits came in at $0.72c a share, sending the shares sharply higher initially, but the gains didn’t last, even as guidance was upgraded for Q2 revenue of $675m to $679m, while full year revenue forecast was raised to between $2.71bn to $2.73bn.
Source: FX STREET