Rishi Sunak, the UK Prime Minister, has caught everyone off guard, except his own cabinet, by announcing an early General Election on 4th July. This decision contrasts with the predictions of most pundits who had favoured October or November this year. The party conference season and the US Presidential Election appear to have influenced this timing. Additionally, the recent positive economic news on inflation, with the headline rate down to 2.3%, and growth, has likely played a role in this unexpected move, keeping Nigel Farage and the Reform party off balance.
Over the past week, UK and world markets experienced a slight decline as stronger-than-expected US economic data delayed the anticipated interest rate cuts by the Federal Reserve to later in the year. Only the technology-dominated Nasdaq index managed to reach record levels, driven by excellent corporate results. In fixed interest markets, yields rose modestly due to strong consumer confidence and positive economic indicators.
The US first-quarter corporate earnings results have given equity markets a solid foundation for their strong performance this year. With nearly all companies having reported, the aggregate S&P500 earnings increased by 6%, surpassing the expected 3.4%. More than three-quarters of companies exceeded consensus analyst forecasts.
Among the standout performers was Nvidia, an artificial intelligence star. Demand for its data centre products propelled first-quarter revenue to a staggering $26Bn, with year-on-year profits up by over 600%. Nvidia’s shares broke the $1,000 level and have risen by 120% since the start of 2024.
National Grid, the UK power utility, surprised investors with a massive £6.8Bn rights issue, the largest fundraising in the UK in fifteen years. This move is aimed at upgrading its electricity networks. Predictably, the shares fell by more than 10% following the announcement on Thursday. However, the 5-year, £60 billion infrastructure investment plan is expected to be sensible and necessary to maintain and improve network power reliability.
British financial services group Hargreaves Lansdown rejected a £4.7 billion bid from a consortium that included private equity firm CVC Advisers and the Abu Dhabi Investment Authority. Following this news, its shares rose by 22%. The company’s main shareholder and founder, Peter Hargreaves, remarked that he was “watching with interest”. The board disclosed that it turned down the 985p per share offer because it significantly undervalues the business.
In the cryptocurrency world, the US Securities and Exchange Commission approved the launch of an Ethereum Spot Exchange Traded Fund (ETF) on Thursday. While there are additional hurdles to overcome, it seems only a matter of time before Ethereum joins its big brother, Bitcoin Spot ETF, which launched on 11th January this year. Ethereum gained more than 11% over the week.
This week, investors should focus on three key events. First, the Eurozone inflation data will be released on Friday morning, followed by the US Federal Reserve’s preferred inflation measure later in the day. Finally, Donald Trump’s trial is concluding, with final arguments made yesterday, leaving the jury to commence deliberations with a possible decision by the end of the week. This could prove significant given how close the polls are between Biden and Trump for the November election.
TEAM plc (LON:TEAM) is building a new wealth, asset management and complementary financial services group. With a focus on the UK, Crown Dependencies and International Finance Centres, the strategy is to build local businesses of scale around TEAM’s core skill of providing investment management services.
