Proactive Investors -
- FTSE 100 climbs 20 points to 8296
- Shein reported to be close to filing for London IPO
- GSK (LON:GSK) says it will appeal Zantac ruling by Delaware judge
Raspberry Pi to float next week
Tiny computer manufacturer Raspberry Pi is expected to float in London next week and raise almost £160 million.
A listing offer range of 260p to 280p was reported by Bloomberg News, which said existing backers and the company are hoping to raise around £157 million from selling new shares as well as existing ones.
Previous indications suggested that the maker of small computers for hobbyists was looking to raise £31.5 million of new capital.
The newswire indicated that conditional trading would begin on June 11.
Thoughts on manufacturing UK and European PMI
After the UK manufacturing sector rebounded back into positive territory, with the UK May PMI rising to a 22-month high, let's hear some analysis.
Peter Arnold, EY UK chief economist, says the survey "provided further signs that the sector's prolonged downturn may have ended", though the final print of 51.2 for May "still only signalled a small upturn in activity".
With input costs increasing at a slightly softer pace than in April, while prices charged inflation rose to its highest rate in a year, he says the EY ITEM Club "does not expect the survey's higher output price balance to have much impact on official headline CPI".
Boudewijn Driedonks, partner at McKinsey & Co, says it is "a sigh of relief after last month’s decline, which now seems more like a blip on the broader recovery trend".
Eurozone manufacturing PMI also came out this morning, showing tentative signs of recovery, though the sector remains in contraction.
The eurozone manufacturing PMI reached a 14-month high of 47.3, with both input and output prices also showing signs of stabilising.
"Overall, today’s PMI figures signal that economic growth is charting in the right direction," says Driedonks. "Despite lingering fragilities, there has been a marked pick-up in activity as firms report stronger demand and prices seem to be stabilising. With conditions starting to improve, many manufacturers will likely be entering the second half of the year with cautious optimism."
Elections and markets
"Elections can make a difference to markets, but it depends on the circumstances," says market analyst Neil Wilson at Finalto.
He points to Indian stocks hitting a record high on the back of exit polls as one example, and another being South Africa’s rand and stocks, which have both come under a fair bit of pressure on the uncertain election outcome and poor showing for the ruling ANC.
"Mexico’s ruling left-wing party seems to have comfortably won the presidential election, but the peso seems to be selling off a bit on the news to reach a 1-month low against the US dollar."
Pondering if elections matter for the UK market, he says: "I think there is a risk of overegging the importance of whether the ruling party is red or blue.
"Labour could borrow more – but as the Truss episode showed, markets and credit and debt are all about faith and trust and less about the specifics. Debts are sustainable until they are not.
"The City may instinctively prefer a Tory win on the whole, but investors could benefit from unlocking growth. Who knows? And Labour has done a good job on the prawn cocktail offensive."
The US presidential election matters "absolutely", on the other hand, he says, with Trump’s guilty verdict in his hush-money case raising the stakes further.
Meanwhile, European parliamentary elections "could show a big swing to the right", while the expectations of an ECB rate cut this week "could see some geopolitical premium in govt bond spreads on the results come the weekend".
"Fragmentation risks are the thing we are going to listen out for – but as yet we are not seeing much in the way of splintering of the core. The French result will be crucial to see how much Macron has lost the people."
Another GameStop Reddit-inspired rally
Shares in GameStop Corp (NYSE:GME) are up 65% higher in premarket trading after, you guessed it, someone tweeted some pictures of something.
Keith Gill, the former professional trader who goes by the moniker of Roaring Kitty, issued the first post from his Reddit (NYSE:RDDT) account in a while.
He posted a screenshot in the r/Superstonk chatroom entitled 'GME YOLO update' showing his latest trades in GameStop.
AMC Entertainment is also up 25% premarket, though there are no screenshots that we know of.
Monzo breaks into the black
Monzo is cementing its position as more than just a promising fintech challenger but a genuine rising force in the banking sector after reporting its first full year of profitability.
The app-based challenger bank achieved a profit before tax of £15.4 million, a big swing from the £116.3 million loss a year earlier.
Net interest income surged to £437.97 million from £164.25 million, while fees and commissions added over $200 million to the top line.
Chair Gary Hoffman said it was an important milestone, which are thoughts to be mulling a potential London listing
UK personal finance challenges remain
Mortgage borrowing and consumer spending were down in the first quarter of 2024, a new report from the UK financial industry shows, with with 1.6 million mortgages due to come off fixed rates this year.
There was a "noticeable uptick" in the number of mortgage applications, the UK Finance household finance review shows, though the sort of recovery this might normally indicate is dependent on the Bank of England, where rate reduction expectations have been pushed back to August, September or later.
Consumer spending was "weak", but spending on travel rose at the start of the year.
There was some reversal to the fall in savings levels seen last year, when households ran down their savings to help pay for day-to-day expenses, with overdraft debt at a 25-year low of £4.67 billion.
Credit card debt rose 10% year-on-year, with only 50% interest-bearing, the lowest since 1995.
Eric Leenders, managing director of personal finance at UK Finance, said: “Some households were in a better place financially in Q1 this year, but we are not out of the woods yet.
"Among the more positive signs, we can see that overdraft and interest-bearing credit card debt are at record lows, and many households have stopped using their savings to help with the rising cost of living."
He acknowledged that is not the case across all households, and said "lenders want to support anyone who might be struggling".
Also, Leenders noted that "cost of living pressures remain, and with 1.6 million mortgages due to come off fixed rates this year, there may be challenges ahead for some".
Mega week for markets, democracy too
This is a "mega week for financial markets", says market analyst Kathleen Brooks at XTB.
She points to should be a much-anticipated rate cut from the ECB (Thursday), the latest reading on payrolls in the US (Friday), the Indian and Mexican election result (already emerging), Nvidia’s new AI chip announcement and Opec+’s latest decision on oil production cuts - both yesterday.
Brooks also wonders whether the expected float news from Chinese clothing giant Shein will lift the spirits of the FTSE 100, after the index's down-and-up last week.
"If this does happen this week, then it would take London a step closer to being Shein’s IPO destination. While this filing does not indicate when its IPO would take place, it could be in the next few months, with Autumn seen as a likely date," she says.
"The company is expected to be valued at £50 billion, which would put it in the top 15 UK listed companies by market cap, and it would be the second largest UK listing in history."
The first UK election leaders’ debate will take place on Tuesday evening too, with the latest polls suggesting Labour has a big lead over the Tories, with the BBC’s poll tracker predicting Labour will win 45% of the vote, with the Conservatives in second place with 24% of the vote.
"We think that a narrowing of the Labour lead, or signs of a hung parliament are likely to have the most impact on UK asset prices, especially the pound, which is historically sensitive to unexpected political outcomes," says Brooks.
UK manufacturing PMI
The UK manufacturing purchasing managers’ index (PMI) rebounded back into positive territory in May, rising to a 22-month high of 51.2 in May from 49.1 in April.
A figure above 50 indicates expansion in the S&P Global PMI surveys.
Output expanded at the quickest pace in over two years on the back of improved intakes of new work, S&P said, with the outlook also having brightened too, with positive sentiment rising rsiong to its highest level since early-2022 as 63% of companies expect output to expand over the coming year.
Rob Dobson, director at S&P, says: "May saw a solid revival of activity in the UK manufacturing sector, with levels of production and new business both rising at the quickest rates since early-2022. The breadth of the recovery was also a positive, with concurrent output and new order growth registered for all of the main sub-industries (consumer, intermediate and investment goods) and all company size categories for the first time in over two years."
He says there were also signs of overseas demand also moving closer to stabilisation.
There was a "mixed picture" on price pressures at manufacturers, with factory gate output inflation strengthening for the fifth successive month, to its highest level in a year, but accompanied by "solid easing in the rate of increase in input costs [that] should help prevent price pressures from becoming embedded".