In TEAM’s global weekly market commentary, TEAM’s investment managers provide a stock market review for week commencing 21 November 2022.
In another muddling week for stocks, most markets edged higher as optimism over easing inflation offset concerns over rising Covid infections in China and downgrades to global economic growth forecasts. The blue-chip S&P 500 and technology focussed Nasdaq rose 0.4% and 0.3% respectively over the week.
US financial markets were closed for the Thanksgiving holiday on Thursday, and much of the following day, but the corporate news flow was brisk despite the shortened week. One of the biggest stories was the surprise return of Bob Iger to replace Bob Chapek as Walt Disney’s chief executive.
Chapek succeeded Iger less than 3 years ago at the helm of the entertainment giant but he struggled to gain the confidence of investors throughout his short term in charge and the release of disappointing third quarter earnings earlier this month seemed to be the writing on the wall.
The news of Iger’s return was well received and Disney’s shares jumped more than 6% on Monday to pare some of this year’s losses to 38%. Iger acquired Pixar, Marvel and Lucasfilm during his first stint as CEO, transforming Disney into the leading creative studio, and investors hope the septuagenarian will bring more sparkle during his sequel. Top of his to-do list will be improving the performance of its Disney’s streaming platform which added 14 million subscribers in the third quarter but lost $1.5 billion.
The World Cup in Qatar was not the only football story making headlines last week. The New York listed shares of Manchester United have risen more than 60% to a 4-year high of $21.25 since its majority owners confirmed that they will consider offers for the club. Premier League rival Chelsea was sold for £2.5 billion in May and the Glazer family is expected to hold out for a lot more from interested parties who are reported to include long-standing fan Sir Jim Ratcliffe, the billionaire owner of Ineos, and private investors from the US and the Gulf region.
Earlier this year, Forbes valued Manchester United at $4.6 billion, the third most valuable club in the world and just ahead of Liverpool, which has also been put up for sale by its American owners.
Chinese and Hong Kong listed stocks have been some of the better performers over the past month on the back of speculation that authorities are preparing to relax their zero-Covid policy. However, expectations were tempered last week as flare ups in new positive cases prompted more lockdowns across major cities.
Whilst most investors would have been prepared for the risk that Covid restrictions are extended, few would have predicted the protests that broke out over the weekend, led by criticism of Covid controls which social media users blamed for some residents being unable to escape from a deadly fire in a high-rise apartment building in the western city of Urumqi.
The footage of the demonstrations, and uncertainty over how the authorities will respond, initially weighed on sentiment and Hong Kong’s Hang Seng Index fell 1.6% during Monday’s trading session, before recovering on Tuesday. Labelling the rare public dissent as ‘Tiananmen 2.0’ is misleading and far-fetched, at this stage, and is much more connected to Covid restrictions than economic or social discontent.
Concerns over the spike in Covid infections in the world’s second largest economy added to downward pressure on energy prices and Brent Crude fell another $4 to $83 a barrel, its lowest level since January and more than 30% lower than in June. The EU and G7 also continued to work together on implementing a price cap on seaborne Russian oil and the US agreed to ease sanctions on Venezuela, allowing Chevron to resume production in the country.
Closer to home the OECD provided a bleak outlook for the UK economy, warning that it expects it to be the laggard in the G20, except for Russia, over the next 2 years. In its updated forecasts released on Tuesday, the Paris-based intergovernmental organisation predicated the UK economy will contract 0.4% in 2023, and grow just 0.2% in 2024. It cited the shortage of workers in some sectors which could push up wage inflation as well as the potential for higher interest rates to offset the government support to all households with their energy bills.
(Note: Price change is from close of business 21/11/22 to COB 28/11/22)
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