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- Stocks rallied after retail stocks showed resilience on Wall Street, helping to support broader markets.
- The minutes of the Federal Open Market Committee will be closely watched for the direction of inflation and interest rates.
- Brent Crude rises, closing in on $88 a barrel amid supply issues.
- High Energy Costs and Consumers Delaying Accessory Purchases Cut Pets At Home Profits
- Manchester United shares soar on news of possible sale
- Celebrity mentions will be part of crypto probe into FTX collapse
Q3 2022 Hedge Fund Letters, Talks & More
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Wall Street Resilience
A pinch of sugar in the form of more resilient retail sales numbers helped lift Wall Street, sparking expectations that the U.S. economy will emerge from the fight against inflation without too many bruises.
Investors had already registered repeated warnings from central bank policymakers that higher rates would persist for longer, so attention appears to be turning to how well the economy can be saved from damage, in the meantime.
So the better-than-dreaded update to electronics chain Best Buy has helped boost morale and expectations for the all-important holiday shopping season.
Federal Open Market Committee minutes released later today will be closely watched for final thoughts from Fed officials in hopes of a firmer guide on the rate range to rise.
Trade is expected to be flat at the open, and any indication that the Fed is reluctant to slow down with rate hikes in the future could send stock prices lower again.
Oil prices rose as OPEC+ member nations indicate ongoing production restrictions are set to continue. Investors are also weighing the supply-side impact of a G7 plan to cap the price of Russian oil, especially as Russia has indicated it will not sell crude to countries that support a price limit, adding to concerns that further shortages could hit the world. markets.
A drop in profits for pets at home
Rising energy prices partly explain why Pets at Home Group PLC’s (LON:PETS) update put the cat among the pigeons, but changing customer behavior during the cost of living crisis is also behind the decline in profits.
Rising costs drove underlying pretax profit down 9.3% as rising freight and energy bills took their toll. Although essentials like cat litter and hygiene products provided a sunnier area of increased sales, people clearly carry over highly discretionary spending on toys and pet fashion with spending on accessories. down 3.5%.
The group’s growing customer base adds resilience, however, as overall pet food sales increased by more than 15.1%. This has kept full-year forecasts unchanged, with full-year earnings still expected in line with expectations, but until inflationary pressures abate there will be a clear lack of grass to chat in updates.
Sale Manchester United
The owners of Manchester United PLC (NYSE:MANU) hope the urge to shop will extend to those with very deep pockets. Speculation saw shares rocket up 14% before market close in New York and the club’s confirmation prompted a further 11% rise in after-hours trading.
It is expected that many interested parties will want to get a piece of the action, whether through a partnership, full or partial sale, but this will come at a steep price. Although the market capitalization, implied by the share price, is close to $2.5 billion, its estimated value is well above $4.5 billion given the expected level of interest.
Ineos chief executive and majority shareholder Sir Jim Ratcliffe has previously said he was interested in buying the club, but at the time the family were unwilling to sell. It’s clear that this time they mean business, having commissioned the Raine Group, which helped broker the sale of Chelsea for $3.2 billion, as the club’s exclusive financial advisers.
FTX Scandal
Any hopes that a red and white knight fueled by crypto gains could rise to pay top dollar for Man U have evaporated, however, as the FTX scandal has sent shockwaves through the industry.
The latest revelations from lawyers picking up rubbish left behind after the exchange collapsed show the company was run as a personal fiefdom of founder Sam Bankman-Fried.
The discovery that one of the units spent $300 million on property in the Bahamas, much of it for senior executives and Bankman-Fried’s family shows that governance has been completely shot down.
Crypto speculators continue to circle coins and tokens, picking up Bitcoin at what they see as a bargain price of just over $16,400, adding some momentum to the currency, but with the regulators more inclined to wade, it is likely that there will be further volatility to come.
Now, the focus is on the celebrities who got paid to be FTX cheerleaders and helped get ordinary investors to part with their money. American footballer Tom Brady and model Gisele Bundchen are among the stars paid to promote the swap.
The Texas State Securities Board has confirmed that the celebrity endorsements will be part of the larger investigation into what went so wrong as it investigates potential security law violations.
Already Kim Kardashian has been fined over $1 million for an Ethereum Max crypto promotion she participated in without disclosing to her millions of followers that she received money for doing so.
Regulators are clearly horrified by the damage superstar celebrities can do to the bank balances of vulnerable consumers, who are swayed by almost every move they make. Illusions of quick riches can spread far too quickly on social media with speculation amplified by reposts from millions of followers.
Article by Susannah Streeter, Senior Investment and Market Analyst, Hargreaves Lansdown
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