One Knightsbridge Capital Monday Espresso Podcast

Monday Espresso Podcast - 6th May 2024

[00:00:00] Nathan Sweeney: Good morning, everybody. It is Monday the 6th of May. Today I'm joined by Sarah Todino, our European Analyst and Assistant Portfolio Manager. Good morning, Sarah.

[00:00:10] Sarah Todino: Good morning, Nathan.

[00:00:11] Nathan Sweeney: We'll get some insight from Sarah in a second. Firstly, let's recap on what was driving markets last week. As always, there's quite a lot to unpack, so let's dive straight in.

[00:00:21] Nathan Sweeney: Equity markets were broadly positive last week, buoyed by good company earnings. Also, we did have news from the Federal Reserve that they currently weren't thinking about raising interest rates from here, which also helped to settle markets. Really what stood out for me was the performance in Asia, particularly China, as we saw some strong performance coming through there, some markets up over 2%, and this is due to a continuation in growth in the economy, although slow, but it seems as if that economic recovery is underway within China.

[00:00:53] Nathan Sweeney: The other thing that stood out was oil prices. The oil price was down about 5% for the week, so big move there. We're seeing an easing in tensions in the Middle East, and this is easing concerns about supply chain disruption. And also we had an increase in oil stockpiles in the US, which put that downward pressure on the oil price.

[00:01:11] Nathan Sweeney: Now, lastly, the thing that stood out from a company perspective last week was Apple's earnings. So, the largest company in the world reported their earnings, and we did see the share price move up about 7% after they announced these earnings results. Now, they did say that iPhone sales were down for the quarter, however, not down as much as people expected, and the big news there was that they were actually looking to buy back 110 billion dollars worth of their shares.

[00:01:40] Nathan Sweeney: So this is the largest buyback that the company has ever made. So Sarah, what was on your radar last week?

[00:01:47] Sarah Todino: Well, all eyes were on the Fed and there were no surprises. The Federal Reserve kept interest rates unchanged on Wednesday and indicated that higher for longer was more likely given the market concerns over inflation, which has been running hot.

[00:02:00] Nathan Sweeney: Okay, that's interesting. So speaking of inflation, we did have inflation data out in Europe. So what was that telling us?

[00:02:06] Sarah Todino: Yes, well we have the opposite in Europe, so core inflation has been falling since July last year, and April's year on year figure of 2.7% was ahead of forecasts and lower than March's 2.9% reading.

[00:02:19] Nathan Sweeney: Good news there as well on the inflation front, and interesting that we're seeing a divergence between inflation in Europe and the US. So if we're seeing lower inflation coming through in Europe, how is that impacting the economy?

[00:02:32] Sarah Todino: So the inflation data we're seeing in Europe continues to support the case for the ECB to cut interest rates in June.

[00:02:39] Sarah Todino: We've also had GDP growth figures in Europe this week, and they've expanded 0.3% in the first quarter. And this was above market expectations of 0.1% growth. And that was largely driven by the growth in Spain, France, Italy, and Germany.

[00:02:56] Nathan Sweeney: And I think, you know, investors will definitely cheer that.

[00:02:58] Nathan Sweeney: There's been a lot of talk about when we get interest rate cuts. And given the fact that inflation is coming down, that means that it's likely that we get interest rate cuts in June from the ECB. Now, from our own perspective, does any of that data change our view on Europe?

[00:03:14] Sarah Todino: It's actually one of the reasons that we moved from underweight to neutral.

[00:03:18] Sarah Todino: So there are improving signs in Europe but we are still mindful that there is a manufacturing slowdown in Europe, but it's good to see that improving growth in Germany.

[00:03:28] Nathan Sweeney: Okay. Thank you, Sarah. Lots of great insight there. So lastly, I'd just like to take a quick look at the week ahead. This week we do have quite an important meeting in the UK. We've got the bank of England meeting, and you know, this is the meeting where they'll decide if they're going to cut interest rates or not. And we don't expect them to make any big announcement at this meeting. However, we do anticipate that they might use this meeting to tee up what they expect to do in the following meeting, because a lot of people are expecting that they may cut interest rates in June.

[00:03:59] Nathan Sweeney: We also have growth coming out in the UK. So growth figures and those figures are expected to come in at 0.3%. So again, starting to see an uptick in growth in the UK, similar to what we saw in Europe last week. And we have inflation data out in China. Now we also have companies reporting their earnings. So we saw some good earnings coming through last week and we'll have big companies report this week as well. The likes of Uber and Disney.

[00:04:24] Nathan Sweeney: So, one more thing I'd like to mention. If you do have any questions you'd like to submit, please do send them in as we would be delighted to bring them up on the show. Thank you, Sarah. And have a great week, everybody.