The Trump economy
A Wall Street Journal article outlined the potential implications for the global economy under a second Trump term. Should Trump implement higher tariffs as an end unto themselves rather than simply a tool for negotiation, one estimate suggests tariffs could reach their highest level since the 1930s. In the short run, some prices in the U.S. would rise and growth might suffer as consumers and businesses adjust to the new taxes on imported goods. The long-term impact depends on whether other countries retaliate, and how far Trump would be willing to negotiate. The outcome could be anything from an all-out trade war to a new trading system among U.S. allies united by their collective frustration with China. U.S. tariffs would go from among the lowest to highest among major economies. If other countries retaliated, the rise in global trade barriers would have no modern precedent, said Doug Irwin, a trade historian at Dartmouth College.
UK inflation falls below BoE target
UK inflation fell below the Bank of England’s (BoE) 2% target for the first time in over three years, with consumer prices rising 1.7% in September, down from 2.2%. This unexpected decline has led investors to anticipate quicker interest rate cuts, with money markets now betting on back-to-back reductions in November and December. Bloomberg reports that the drop in inflation was driven by cheaper airfares and petrol prices while services inflation slowed to 4.9%, below the BoE’s forecast. Despite the easing price pressures, caution remains as inflation may rise again in the coming months.
Lower eurozone inflation supports rate cut
According to Eurostat data, annual inflation in the Euro area was 1.7% in September 2024, down from 2.2% in August. A year earlier, the rate was 4.3%. European Union (EU) annual inflation was 2.1% in September 2024, down from 2.4% in August. A year earlier, the rate was 4.9%.
In response, the European Central Bank (ECB) lowered interest rates for the third time this year as a hastier retreat in inflation allows it to offer support to the region’s stuttering economy.
Adidas winning in sneaker brand war
Adidas (ADSD-TRQX) stock has outperformed Nike (NKE-NASQ) by 54% year-to-date. Revenue guidance for the financial year increased to ~10%, which compares favourably to Nike’s flat to down guidance. Retro models like the adidas Samba, Spezial and Campus are doing much of heavy lifting, however, sustained success will depend on management not making the same mistake as Nike and rehashing retro models at the expense of innovation.
Luxury brands feel consumer pain
The Financial Times reported total group sales at LVMH Moet Hennessy Louis Vuitton SE (MCP-TRQX) are down 3% for the quarter and flat year-on-year (yoy). The key fashion and leather goods division is down 5% and China was again seriously disappointing with Asia (ex. Japan) sales down 16% for the quarter under review and now down 12% for the first nine months of 2024. The market, it seems, sees this as a classic macro downturn, and one that will soon reverse. Analysts, for instance, are pencilling in mid-single-digit sales growth for LVMH next year. However, it is by no means clear that the luxury sector will seamlessly return to rapid growth when the macro drag eventually clears. Bloomberg reported that Swiss watch exports were also down in September, falling by 12.6% yoy to CHF 1.96 billion, according to the Federation of the Swiss Watch Industry, impacting Compagnie Financiere Richemont SA (CFRZ-TRQX). Exports to China dropped significantly by 49.7% while exports to the USA and Japan increased by 2.4% and 2%, respectively.
Pro EV indicators
Bloomberg reports that roughly 10% of all miles driven in an Uber (UBER-NASQ) around the world are now in an electric vehicle (EV). Nowhere in the world is Uber doing better with its electric ambitions than London, where 30% of miles driven in its vehicles are zero-emission. Growing an electric ride-hailing fleet is now core to Uber’s business model. “Our number one competitor is personal car ownership,” he said. “In the US, we want you to get rid of that second car and in many other places in the world, we want you to get rid of the car.”
Trading update : 23 October 2024
The Trump economy
A Wall Street Journal article outlined the potential implications for the global economy under a second Trump term. Should Trump implement higher tariffs as an end unto themselves rather than simply a tool for negotiation, one estimate suggests tariffs could reach their highest level since the 1930s. In the short run, some prices in the U.S. would rise and growth might suffer as consumers and businesses adjust to the new taxes on imported goods. The long-term impact depends on whether other countries retaliate, and how far Trump would be willing to negotiate. The outcome could be anything from an all-out trade war to a new trading system among U.S. allies united by their collective frustration with China. U.S. tariffs would go from among the lowest to highest among major economies. If other countries retaliated, the rise in global trade barriers would have no modern precedent, said Doug Irwin, a trade historian at Dartmouth College.
UK inflation falls below BoE target
UK inflation fell below the Bank of England’s (BoE) 2% target for the first time in over three years, with consumer prices rising 1.7% in September, down from 2.2%. This unexpected decline has led investors to anticipate quicker interest rate cuts, with money markets now betting on back-to-back reductions in November and December. Bloomberg reports that the drop in inflation was driven by cheaper airfares and petrol prices while services inflation slowed to 4.9%, below the BoE’s forecast. Despite the easing price pressures, caution remains as inflation may rise again in the coming months.
Lower eurozone inflation supports rate cut
According to Eurostat data, annual inflation in the Euro area was 1.7% in September 2024, down from 2.2% in August. A year earlier, the rate was 4.3%. European Union (EU) annual inflation was 2.1% in September 2024, down from 2.4% in August. A year earlier, the rate was 4.9%.
In response, the European Central Bank (ECB) lowered interest rates for the third time this year as a hastier retreat in inflation allows it to offer support to the region’s stuttering economy.
Adidas winning in sneaker brand war
Adidas (ADSD-TRQX) stock has outperformed Nike (NKE-NASQ) by 54% year-to-date. Revenue guidance for the financial year increased to ~10%, which compares favourably to Nike’s flat to down guidance. Retro models like the adidas Samba, Spezial and Campus are doing much of heavy lifting, however, sustained success will depend on management not making the same mistake as Nike and rehashing retro models at the expense of innovation.
Luxury brands feel consumer pain
The Financial Times reported total group sales at LVMH Moet Hennessy Louis Vuitton SE (MCP-TRQX) are down 3% for the quarter and flat year-on-year (yoy). The key fashion and leather goods division is down 5% and China was again seriously disappointing with Asia (ex. Japan) sales down 16% for the quarter under review and now down 12% for the first nine months of 2024. The market, it seems, sees this as a classic macro downturn, and one that will soon reverse. Analysts, for instance, are pencilling in mid-single-digit sales growth for LVMH next year. However, it is by no means clear that the luxury sector will seamlessly return to rapid growth when the macro drag eventually clears. Bloomberg reported that Swiss watch exports were also down in September, falling by 12.6% yoy to CHF 1.96 billion, according to the Federation of the Swiss Watch Industry, impacting Compagnie Financiere Richemont SA (CFRZ-TRQX). Exports to China dropped significantly by 49.7% while exports to the USA and Japan increased by 2.4% and 2%, respectively.
Pro EV indicators
Bloomberg reports that roughly 10% of all miles driven in an Uber (UBER-NASQ) around the world are now in an electric vehicle (EV). Nowhere in the world is Uber doing better with its electric ambitions than London, where 30% of miles driven in its vehicles are zero-emission. Growing an electric ride-hailing fleet is now core to Uber’s business model. “Our number one competitor is personal car ownership,” he said. “In the US, we want you to get rid of that second car and in many other places in the world, we want you to get rid of the car.”
United Health drags Dow lower
United Health Group (UNH-NASQ) fell -8.1%, with this $500-billion+ market cap business having an outsized impact on the Dow. United Health Group plays across the healthcare stack, from administering medical health schemes to owning healthcare facilities. The main issues were that the key “medical loss ratio” – what the insurer spends for patient care – was far worse than anticipated and the impact of a hack was also a larger issue than previously guided.
BHP Aus outage hits copper production
The Olympic Dam copper mine in South Australia owned by BHP Group Ltd. (BHPL-TRQX) has been hit by an electrical storm, causing a halt in operations, according to a report by the Australian Financial Review. It was unclear how long BHP will halt production. A storm in 2016 resulted in 15 days of lost output at a cost of A$137 million ($105 million), the publication said.
Optimism rising ahead of MTBPS
Optimism for the upcoming Medium-Term Budget Policy Statement (MTBPS) has risen due to a rerating of SA sovereign bond yields, a stronger South African rand (ZAR), and avoiding fiscal slippage, with markets expecting a healthier national balance sheet. However, structural challenges persist, impeding the potential for growth. Investec Chief Economist Annabel Bishop and Treasury Economist Tertia Jacobs discussed the Finance Minister’s priorities ahead of the mini budget on 30 October in a recent episode of the No Ordinary Wednesday podcast. You can listen here.
SACCI Business Confidence Index dips
Business confidence in South Africa dropped by 1.3 points to 110.2 in September 2024, reflecting ongoing economic challenges despite the recent economic recovery. Positive factors include increased tourist arrivals, better manufacturing output, rising exports, and a decrease in inflation. However, SACCI highlighted rising uncertainty related to government inconsistencies. Declines in new vehicle sales, retail performance, and the real value of building plans were noted as unfavourable indicators.
BHP execs visit SA, reigniting Anglo deal hopes
BHP Group Ltd. (BHPL-TRQX) chief executive Mike Henry met government officials in South Africa, fuelling speculation that the Australian miner will resurrect its failed £39 billion bid for Johannesburg-based rival Anglo American (AGL-JSE). Henry and chief development officer Catherine Raw met South African government officials and the Public Investment Corporation, the state-owned asset manager, said three people with knowledge of the details quoted in the Financial Times.
Information correct at time of publishing. It is important to conduct thorough research and analysis using a combination of fundamental and technical analysis techniques to make informed trading decisions. Additionally, consider your risk tolerance, investment objectives, and time horizon when assessing company performance for trading.