- FTSE 100 stumbles at the open
- UK retail sales surprise on the upside
- Boohoo first half revenues slip 15%, CEO to step down
- China GDP growth hits 18-month low
- NVIDIA tests new record high
- Morgan Stanley’s third quarter continues strong run for investment banks
- Netflix shows its pedigree in earnings beat
- Brent crude at $74.6. Chinese stimulus fails to brighten demand outlook
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE 100 has opened down this morning, giving up some of the gains seen so far this week, with little in the way of corporate news to get excited about. But stronger than expected retail sales should provide some support to some consumer stocks. Volumes grew by 0.3% in September, compared to expectations of a 0.3% decline. But the good news was far from evenly spread. Mobile phones and computers performed best, perhaps reflecting the emergence of AI-enabled hardware from multiple manufacturers. Supermarket sales volumes were less encouraging, falling 2.4%, impacted by the miserable weather and a pull-back in demand for premium products.
Online clothing brand Boohoo is one retailer that’s not in growth territory. The total value of goods sold fell by 7%, with the UK down 2% and much sharper declines in the US and elsewhere. Revenue fell even faster – at 15%. The likes of Shein and Temu are making this a fiercely competitive market, and it’s taking a toll. . CEO John Little is to step down after a 5-year tenure. With the shares down nearly 90% in that period, few investors will be crying over his departure. The Group’s exploring options to maximise shareholder value, but any successor will need to lean heavily on the tiller from day one to turn this ship around.
Asian markets had a bumpy ride after China released its latest GDP figures. Third-quarter GDP expanded 4.6%, inching past estimates, but still the slowest read seen in 18 months. Questions abound as to whether the recent government support measures will be enough to support a pick-up in growth.
US markets held steady yesterday, as they continued to flirt with record highs. Big Tech (not the FTSE’s strong point) had the best of it stateside with AI champion NVIDIA finishing up 0.9% after pulling back from an all-time best of over $140 earlier in the day. Confidence is riding high after strong results from its key manufacturing partner, Taiwan Semiconductor Corporation (TSMC). Nvidia’s shares are up close to a mind-boggling 2,800% on a 5-year view. There’s plenty of pressure to keep outperforming, but its products are right in the industry’s sweet spot, so there’s a good chance of another guidance beat on 29th October.
Investment Bank Morgan Stanley finished the day flat, despite beating third-quarter forecasts. With the shares up 20% over the month, markets were already anticipating a decent outcome, signposted by similarly strong showings from rivals Goldman Sachs and JP Morgan Chase.
Its corporate clients have been taking advantage of strong equity markets to raise new funds, both through secondary issuances as well as IPOs. US IPO activity overall is up this year, but against very weak comparators and still relatively depressed versus historical norms. Increasing hopes of a soft landing could pave the way for a further upturn particularly if next month’s US election yields a decisive result. A sharp decline in credit loss provisions suggests further confidence in the US economy.
The market strength also helped boost equity trading revenues, offset by a decline in fixed income. There was a fall in M&A transactions completed, but CEO Ted Pick is bullish about the prospects for both acquisition activity and IPOs, while urging some caution on the timing of a recovery.
Brent crude is trading at around $74.6 per barrel, more than $5 off this month’s high point. Such wild swings are now becoming commonplace. Over the last six months, the peak-to-trough differential has been around 24%. China’s stimulus bonanza has done little to restore confidence around the demand outlook for the world’s biggest oil importer. But the potential for tension in the Middle East to ratchet up is ever-present. With so many opposing price drivers at play, volatility seems the only certainty.
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Netflix has brushed aside expectations once again, with beats everywhere you look from subscribers to earnings, and a confident set of fourth quarter estimates to top it all off. One could argue that the 4-5% share price move in after-hours trading is frothy, given the beats on the top line and subscriber numbers were both relatively small, but there’s no denying the current backdrop makes for good reading if you’re a Netflix fan.
Peers in the legacy media space are losing money hand over fist, meaning Netflix can push its advantage in content creation, while others can’t stomach allocating more capital. Ads are also in the mix for next year, and price hikes that have already begun in some markets have the potential to squeeze more from existing subscribers.
One key question is around how much price elasticity Netflix really has. This is inherently a fickle market, with consumers happy to swap streamer if they don’t think they’re getting value. The addition of fresh content is key to that, especially in areas like sporting events, and could give Netflix the edge it needs to push prices higher and keep customers coming back for more.”
For access to stock reports and articles please visit the Hargreaves Lansdown share research homepage or sign up to our updates. Our News & Insights page now provides real time reaction to market events throughout the day via HL Live.
