This week has seen the men’s Euro 2024 group stages wrap up with England topping their group, despite some lacklustre performances to date. While the final group match on Tuesday was a dull affair, televised political debates in the UK and US have provided more entertainment for viewers.
There are rumours circulating this morning that the Democrat party are considering replacing Biden as their candidate following his performance last night. In the aftermath of the debate, the odds of Trump becoming the next US President spiked and that could potentially force the Democrats to act. The pair duelled over a wide range of topics, from immigration, foreign policy and even golf handicaps, with Trump dismissing Biden’s claim that he once had a golf handicap of 6! It was interesting to see that US equity futures jumped on Thursday evening on the back of a perceived victory for Trump. Here in the UK the market does not foresee such a close election race as the US, with Labour expected to win with a majority. Wednesday’s debate did little to change this expectation.
Chinese fast fashion retailer, Shein, has kicked off the process for a listing on the London Stock Exchange, which would be a huge victory for the UK market that has seen multiple companies head to the US to list. Valued at $66bn, the deal would be one of the UK’s largest ever. However, there is still a long way to go with a human rights group urging the FCA to block Shein’s initial public offering (IPO) over concerns around labour standards.
Staying in the UK, electrical gadget retailer Currys, which rejected a takeover bid earlier in the year, posted positive results. The company has now forecast that artificial intelligence (AI) powered gadgets are set to further boost profits after reporting a 10% rise in profit before tax over 2023. Currys was the first retailer to launch the Microsoft Copilot PC, a computer with an in-built AI companion, whilst also using their own AI to improve after sales service. Currys CEO believes the company is “best placed to benefit” from the AI – wave of technology, as they also become Microsoft’s first retail repair partner in the UK.
There was less positive company news from two large firms this week with Nike and L’Oreal both providing disappointing updates. This could potentially be early evidence of a weakening global consumer, given a backdrop of high rates in the western world and a sluggish China. Bad news could be good news for markets however, with central banks likely to cut interest rates should they have concerns around the health of the consumer.
Inflation data from Canada, Australia and Japan came in ahead of expectations this week. This will no doubt alert all central banks to the possibility that the battle against inflation may not yet be over, and there is a risk inflation re-accelerates into the second half of the year. In the case of Japan, the Bank of Japan may need to raise interest rates to help stabilise the currency, which has continued to weaken versus a basket of currencies. It is currently trading at 38-year lows versus the USD. The Japanese yen looks cheap on a wide range of metrics, and we see the potential for the currency to mean revert over the medium term.
In a week light on key economic data, it was pleasing to see UK GDP for Q1 revised upwards to 0.7%. The UK economy appears to be grinding on, despite interest rates of 5.25%. US PCE inflation data, which is one of the US Fed’s favoured measures of inflation, came in at 0.1% (month-on-month). Bond yields dropped on the release on Friday afternoon as it supports the case for the US Fed to consider rate cuts.
As we look ahead to next week there should be a lot more to cover with the first round of French elections taking place in addition to the UK General Election. Alongside these major events we will have key US employment data to dissect.
Andy Triggs, Head of Investments
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