- Melrose ready for take-off
- IP Group announces an actual take-off (and landing)
- Crude oil holding steady around $71
- Sterling tries to halt the dive
- IQE warns, may sell Taiwan ops
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“Markets are opening uncertainly across the UK and Europe, taking their lead from directionless trading in Asian overnight, rather than the sharp Wall Street sell-off seen on Friday night, which saw the Nasdaq composite drop by over 2%. Major tech names dropped in Friday’s session, with Microsoft and Nvidia both dropping around 3%, whilst Amazon shed over 4%. Tesla was the only member of the Magnificent 7 group to make progress, adding another 3%, taking its total gains since Donald Trump’s re-election to almost 50%, adding around $40bn to Elon Musk’s net worth in the process.
Asian markets initially picked up on two key stimuli and headed higher in early trade. Firstly, China’s President Xi expressed a willingness to engage with newly elected President Trump, once his term begins, notwithstanding Trump’s frequent calls for heavy tariffs to be placed on Chinese imports to the USA. Trump is of course there for the deal and always goes in loud. Markets will no doubt spend many months hanging what each of these two leaders say to each other and to the wider world until a new basis for trade between the two is settled. Sentiment was also lifted by a key Chinese market regulator’s announcement that listed companies should concentrate on trying to raise their returns to investors. If only it were that easy. In the end confidence seems to have faded and Asian markets have given back much of their early progress.
Aerospace and Defence manufacturer Melrose Group have issued a trading update that reassures on the current year outcome, which sees operating profits coming in within the existing guidance of £550m to £570m, with debts also in line with expectations. They go on to express confidence in lifting underlying operating profits to £700m in 2025 with a big uplift in cash flow next year and beyond. Melrose are not immune to the supply chain issues currently dogging the aerospace sector, but with all of their Risk & Revenue Sharing Partnerships now generating cash and the group’s restructuring programmes nearing completion, Melrose have been able to keep profits moving forward. Investors have reacted very positively to the statement, pushing the shares up around 7% in early trading in relief that Melrose have succeeded in avoiding the worst of the industry’s current challenges.
IP Group on the other hand has announced an actual take off. One of their portfolio companies, AMSL Aero, an experimental Australian aerospace venture, has successfully achieved the first free flights of their “Vertiia” aircraft. Vertiia is an emissions-free long-range eVTOL aircraft. It launches and lands like a helicopter, then flies like a fixed wing aircraft at up to 300km/hour, carrying four passengers and a pilot. Powered by batteries or hydrogen, Vertiia is one of a new generation of green micro-aircraft that could become the taxis of the future. AMSL already has pre-production orders for 26 Vertiia craft which could see them ferrying passengers and medics around Australia. For now though, further trials, including on hydrogen power and with on-board pilots must be completed before airworthiness can be approved by regulators.
Crude oil is trading steadily just above $71 this morning, potentially marking a trough after a sharp decline from over $90 in the Spring of 2024. Tensions in the Middle East and fundamental oversupply of crude are the opposing forces driving the price of black gold in 2024 and with Donald Trump likely to impose a tougher stance toward Iran once he takes office, this tension is likely to carry on for a while longer.
Sterling has dived from over $1.34 down to $1.26 since the start of October. Trading today sees sterling attempting to steady around $1.262 and generally making upwards progress against a basket of other major currencies.
Cardiff-based silicon wafer producer IQE has issued another warning about its near-term profitability. The group now thinks its cash earnings will be closer to £5m this year, a fraction of the level expected eighteen months ago. IQE cites weak customer demand in a number of key sectors and is exploring ways of raising cash. A previously planned IPO of its Taiwanese division may now shift to a full sale of the business. Near-term financing of an additional £15m has been offered by the group’s largest shareholder, Lombard Odier and IQE will now consult with other investors about whether to proceed with this. IQE shares have dropped around 15% in early trading to a twenty year low of 9p.”
