Market Activity


It’s been a busy week so far for corporate earnings

Market Activity

It’s been a busy week so far for corporate earnings

May 8, 2024

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In UK equity markets today Informa jumped as the B2B events, publishing and data group lifted its share buyback programme by 50% and announced a strong operating performance for the first four months of the year, with revenues, profits and cash flow expected to reach the upper end of guidance.

The company said it has raised its 2024 share repurchase programme by a further £160m to £500m.

AstraZeneca was in the black after announcing the withdrawal of its COVID-19 vaccine worldwide just months after admitting it can cause a rare and potentially dangerous side effect.

OSB Group surged as it said its financial and operational performance in the first quarter was stable and underlying net interest margin was on track to meet full-year guidance.

Pub group JD Wetherspoon rallied after saying it expects full-year profits to be towards the top of market expectations as it reported a 5.2% jump in like-for-like third-quarter sales, boosted by sales of traditional ales and Guinness.

British Gas owner Centrica was trading higher after an upgrade to ‘buy’ at UBS.

On the downside, Direct Line fell even as the insurer reported a large rise in first-quarter written premiums as it hammered consumers with price hikes.

Over in the US Disney reported fiscal second-quarter earnings Tuesday that beat analyst estimates after narrowing streaming losses.

However, shares of the company sank 10% as it missed revenue estimates for the fourth consecutive quarter and guided toward a softer third quarter for experiences.

Disney’s total segment operating income jumped 17% as the company’s entertainment streaming applications, Disney+ and Hulu, turned a profit in the quarter for the first time. When combined with ESPN+, the streaming businesses lost $18 million in the quarter, much narrower than the $659 million loss the division reported a year earlier.

Entertainment streaming revenue (excluding ESPN+) rose 13% in the quarter to $5.64 billion, and operating income was $47 million after a loss of $587 million a year prior. Disney credited increased Disney+subscribers and higher average revenue per user for the gains.

Disney+ Core subscribers increased by more than 6million in the second quarter to 117.6 million global customers. Total Hulu subscribers grew 1% to 50.2 million. ESPN+ subscribers fell 2% to 24.8 million.

Palantir reported $105.5 million quarterly net income, or 4 cents per share, compared to $16.8 million, or 1 cent per share, in the year-ago quarter. The company has posted a net profit for six straight quarters.

“For comparison, we now earn more profit in a single quarter than the amount of revenue we generated in an entire year a little more than a decade ago,” CEO Alex Karp said in the shareholders’ letter.

Shopify shares tumbled even more 19% in early trading after the e-commerce company said gross margins would decrease as a result of the sale of its logistics business. Uber Technologies Inc.’s first-quarter bookings missed estimates, pushing its shares down 10% in the premarket.

Stocks in Europe touched a new high after upbeat results from brewer Anheuser-Busch InBev NV and Siemens Energy showed the earnings recovery filtering through to a wider swathe of the economy.

The benchmark Treasury yield was up 3 basis points at the time of writing to 4.49% while the dollar strengthened for a third day. UK 10 year Gilt was up 1 basis point to 4.14%.

On a separate note in the UK, earlier in the week figures released by Halifax showed that average house prices rose 0.1% on the month in April following a 0.9% decline in March.

On the year, house prices increased 1.1% following a 0.4% jump the month before.

Investors will now start to wind down from earnings and our attention will revert back to inflation and interest rate curves.

US policymakers are signalling that bets on a pivot to easier policy may be premature, with Federal Reserve Bank of Minneapolis President Neel Kashkari saying it’s likely the central bank will keep rates where they are “for an extended period of time.”

“We are now crawling through the tail end of earnings season and the market is lapsing into complacency,” said Hugh Grieves, fund manager of the Premier Miton US Opportunities fund. “The economy is ‘okay,’ rate cuts remain on the table and the oil price is declining. Unfortunately, that’s not a stable equilibrium.”

The Fed’s more deliberate approach has put it out of sync with central banks in Europe that have already embarked on easing. On Wednesday, Sweden’s Riksbank kicked off its rate-cutting cycle, easing policy for the first time in eight years. That followed the Swiss National Bank’s decision to leapfrog peers with an interest rate cut in March.

Tomorrow we will get the latest interest rate decision from the Bank of England followed by a statement and press conference with Governor Baily and the MPC.

We don’t expect any move in rates, but all eyes will be on Governor Bailey during his press conference. The latest data would suggest that inflation is taking a minor uptick on its overall downward trajectory. The main story is going to be in deciphering whether or not this isa concern to the bank.

Chairman Powell in the US was very clear that the next move would be down, but inflation across the water is proving to be much more sticky than over here in the UK.

The event should pass without incident but one thing to look out for is how the committee voted. Last month it was 8 votes to remain at 5.25% and one to cut to 5%.

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