Market report: Wall Street hits record highs, Yen weakens
- US stocks power to year’s high
- Yen drops after Bank of Japan keeps rates below zero
- Superbad news from Superdry
- Rum goings-on at Hipgnosis
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“The bulls were running on Wall Street last night, with stocks powering to a new highpoint. The S&P index of leading US stocks rose 0.5% to close at 4,741 its highest level so far in 2023 and within a whisker of the all-time record reached at the beginning of 2022. Tech stocks led the way with most of the Magnificent Seven group of mega-cap tech names pushing higher. Adobe gained almost 3%, despite having to drop its $20bn pursuit of Figma after UK and European regulators opposed the deal.
Apple suffered a setback in the courts after they ruled that sensor systems in the Apple Watch infringed the intellectual property rights of medtech Masimo Corp. Apple immediately announced that it would cease US sales of the watch models impacted by the ruling. This isn’t the end of the road for the Apple Watch, just the transition to the next stage of what are likely to be expensive discussions between Apple and Masimo, with the latter now holding more cards than it had before the court’s ruling.
Bank of Japan Governor Kazuo Ueda has said that it is “hard to show” plans to exit from the policy of negative interest rates in Japan. Speaking after the BoJ left rates unchanged, Governor Ueda gave few signs that the Bank feels able to move away from its increasingly isolated stance on rates. Whenever central banks take positions that the market thinks are unsustainable, it’s always the currencies that play the role of the canary in the coal mine. No surprise then to see the Yen weakening by around 1% against every major currency overnight as investors vote with their feet.
Superbad news from Superdry this morning. The recent turn for the worse in the weather is not enough to rescue trading for the first half of their financial year. Retail sales for the group are down 13.1% compared to last year, whilst the wholesale channel is 41% down, partly reflecting an exit from the US wholesale market. Bad weather in recent weeks has moderated the drop in sales rates, but they remain in negative territory. The group are trying to raise cash and cut costs. Progress here has seen an initial £35m of cost savings targeted and the group has sold Asian assets for £28m. A credit facility with Hilco Capital brings access to another £25m. Overall, results are coming in significantly below management’s expectations. Superdry shares have tumbled by 28% at the open this morning.
Hipgnosis Songs Fund has always been an unusual animal on the stock market. They own portfolios of songs, for which they collect the royalties. That idea’s simple enough, but what’s it worth? And that’s where it all gets a bit rum. In theory, if you know how often a song will be played on the radio, how often it is streamed and how often people purchase recordings of it or play it on stage, you can create a discounted cash flow model and a number will pop out. Today, however, the group have announced a delay to their interim results. The reason for this is that the numbers popping out of the valuation process are not what was expected.
Seasoned market followers will know that the normal sequence of events when a unique business which has assembled a seemingly valuable portfolio of non-traditional assets expresses uncertainty about their value it is rarely good news. However, Hipgnosis have reported today that their independent valuer has in fact put a radically higher valuation upon their portfolio than even they were expecting. Awkwardly, it also suggests that the valuation at which they had sold a portfolio of songs to a related party was well below that true value. Hipgnosis say they will publish their results before year end. It might even be worth stepping away from the turkey to have a look at them. Despite the high valuation put on the portfolio, the market is treating Hipgnosis with caution this morning, with the shares down 3.3% in early trade.”
