Must read: FTSE 100, UK GDP, Aston Martin, Nike
Our head of investment rounds up the morning's big news.
29th September 2023 09:11
GLOBAL MARKETS
In the final day of trade of the third quarter, European markets are in a positive mood, despite a tumultuous month. JD Sports Fashion (LSE:JD.) is outperforming the FTSE 100 following an upbeat quarterly report from Nike Inc Class B (NYSE:NKE).
Wall Street is on track to log its worst month of 2023 while the DAX and the CAC are also on track for disappointing monthly performances. Expectations of ‘higher for longer’ interest rates and risk-off sentiment have dented demand for equities in recent weeks.
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Oil prices are on track to log their best quarter since the start of 2022, driven by weak supplies.
UK GDP
The UK economy grew by 0.2% in the second quarter following growth of 0.3% in the first quarter which was revised higher from 0.1%. Growth in the latest quarter was driven by a 1.2% increase in the production sector as falling input prices relieved pressure on manufacturers. Real households’ disposable income grew by 1.2% in the quarter and the household savings ratio grew by 9.1%.
GDP is now estimated to be 1.8% above pre-coronavirus levels. Following recent revisions, the UK is no longer at the bottom of the leaderboard in terms of the recovery of advanced economies since Covid. Now it is understood to have grown faster than Germany and France at 0.2% and 1.7% respectively.
Chancellor Jeremy Hunt said the UK GDP data out today once again proves the doubters wrong.
It has been a shock turn of events that the narrative around the UK’s sluggish post Covid recovery has been completely flipped on its head because of statistical revisions.
Despite this, the pound is on track for its worst month in a year since the mini-Budget turmoil in 2022. The depreciation has been driven by demand for the dollar amid expectations of higher for longer interest rates as well as risk-off investor appetite. There are also growing concerns about a risk of a UK economic slowdown or even a recession in the months ahead, weighing on sterling, as elevated inflation and higher interest rates take their toll.
ASTON MARTIN
The Yew Tree Consortium has upped its stake in Aston Martin Lagonda Global Holdings Ordinary Shares (LSE:AML), agreeing to purchase an additional 26 million ordinary shares in the company. Chairman Lawrence Stroll’s company, which was already the luxury carmaker’s biggest shareholder, now holds a 26.23% stake, higher by 3.27%.
This acts as a vote of confidence in the business, sending shares sharply higher by over 7%, bringing its year-to-date gain to around 80%. However longer-term shares are down by over 90% over the past five years. James Bond’s favourite automaker has suffered a chequered past, surviving several bankruptcies, but shares have revved back into the fast lane this year.
In July, Aston Martin’s second quarter results outpaced expectations driven by higher prices and strong demand. Earlier in the year, Chinese automaker Geely announced plans to invest approximately £234 million in the company. Luxury goods have also proven to be resilient amid the cost-of-living crisis amid the growing tranche of ultra-high net worth consumers who are largely shielded from the macro headwinds.
NIKE
Nike reported fiscal first-quarter earnings per share of 94 cents, outpacing expectations for 75 cents, sending shares higher by nearly 8% after-hours. Investors shrugged off its top line revenue figure which came in at $12.94 billion up 2%, but missing forecasts for the first time in two years. The sportswear giant kept its full-year outlook unchanged, targeting gross margin expansion of 1.4 to 1.6 percentage points. Sales in North America, its largest market, have struggled dropping 2% in the latest quarter, however this still came in ahead of forecasts. EMEA was a bright spot with sales up 8%.
Nike has been focusing on reducing inventory and raising prices, helping it to offset pressures from inflation on costs. However, in an encouraging sign, freight costs have been coming down. It is also reducing its promotions to boost margins ahead of the all-important festive shopping season. Competition is heating up, particularly when it comes to expensive running gear with the launch of Adidas’ $500 shoe which was worn by Tigist Assefa when she set a new women’s marathon world record this month. Plus, there’s competition from growing specialist brands like On Running and Hoka.
The latest results revealed that shoppers have been heading back to Nike’s physical stores as the post-pandemic shift away from e-commerce continues. Customers are enjoying the opportunity to see and feel products up close and try them on in store rather than shopping digitally and potentially having to send them back.
Nike’s after-hours gain lifted other stocks in the sector like adidas AG (XETRA:ADS) and JD Sports this morning which are rallying in Europe.
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