Executive summary
- Global indices continued to recover lost ground over November, and market volatility eased throughout the month.
- Inflation and a generally downbeat outlook for the global economy continue to drive cautious investor sentiment, though thereare some expectations for a slow-down in the pace of interest rate rises.
- UK ECM activity remains sluggish, with the number of deals completing in November dipping relative to the prior month.
- Beazley plc completed its £347m Placing, the fourth largest follow-on transaction of 2022 so far.
- Investec acted as Sole Financial Adviser, Joint Bookrunner, Joint Underwriter and Nominated Adviser to Eagle Eye on its €38m acquisition of Untie Nots and £7m Placing.
- Momentum in UK public M&A gathered pace relative to October, though at low levels.
Market backdrop
Monthly market snapshot
November's key market drivers
- UK inflation accelerated to 41-year high of 11.1%
- Meanwhile, US CPI for October came in at 7.7%, down from 8.2% in September
- German, French and UK PMI data improved but remain in contraction territory
- UK pound continues to climb against the US Dollar
- China’s zero-COVID protests added uncertainty about China’s outlook
- Signalling by central banks that pace of interest rate hikes may be slowing
- Oil prices exhibit volatility amid reports of a potential output increase by Opec
- Mortgage approval rate in UK fall to lowest level since COVID-19 lockdown in June 2020
Global equity market performance & equity market volatility
Source: Bloomberg, FactSet
Inflation remains on the rise in the UK and Europe but slows down in the US
Source: Bloomberg, FactSet
UK interest rate projections show signs of stabilising
Source: Bloomberg, FactSet
UK sector performance
Monthly sector snapshot
Sector performance drivers and outlook commentary
- Mining stocks benefited from a hike in commodity prices towards the end of the month, in-part supported by a drop in COVID-19 cases in China for first time since 19 November, boosting hopes for economic activity in the country
- Tech Hardware & Equipment, and some other growth orientatedsectors registered a strong monthofshare price performances, as market expectations around further interest rate hikes cool
- Despite the expected slowdown of interest rate hikes, Real Estate stocks ended the month moderately down and continue to be one of the big losers on a year-to-date share price basis given downward pressure on domestic mortgage rate approvals and UK house prices
Sector performance (since mid-March 2020)
Source: FactSet
Sector performance (YTD)
Source: FactSet
Investec’s Economics –Summary of the Autumn Statement
- On 18 November, Chancellor Hunt announced details of the Autumn Statement 2022.
- Focus of the statement was to help households in the near-term whilst consolidate the public finances via a combination of windfall and stealth taxes, plus spending cuts in the second half of the five-year forecast horizon.
- Coming at a time of significant economic challenge for UK and global economy, the statement sought to reverse nearly all of the measures in the government’s so-called Growth Plan 2022, also known as the ‘mini-Budget’.
Summary of the key measures
Expansionary fiscal measures
Energy subsides
- Energy Price Guarantees to stay in place at £3,000 rather than £2,500
- Option to reduce the scale of support should energy prices increase further
- No clarity provided on energy bill support for businesses past April 2023
Welfare
- Cancellation of NIC hike maintained
- Pensions ‘triple lock’ to remain in place
- Benefits and benefit cap to be upgradedwith inflation
- Additional £900 cost of living payment along with equivalent £300 to pensioners
Other areas of spending
- National Living Wage (aged 23+) increaseof 9.7% to £10.42 an hour from 1 April 2023
- NHS andSchool budget increased to help absorb the extra burden from inflation
- Spending to be restrained by c.£30bn by 2027-28
Contractionary fiscal measures
Energy producers
- Temporary 45% levy on “excess returns” on low-carbon electricity producers
- Energy Profits Levy on oil and gas producers is raised by 10% to 35% from 2023 to 2028
Stealth taxes
- Frozen nominal thresholds for income tax, National Insurance Contributions and Inheritance tax until 2028
- Decline in dividend allowances from £2,000 to £1,000 in 2023/24 and then to £500 from 2024
- Additional rate of income tax to apply from £125,140 instead of from £150,000
Council tax
- Councils in England allowed to raise council tax bills by 5% without needing to hold a local referendum
Source: Investec Research, UK Government website
UK ECM UK ECM activity continues to fall over November
Deal numbers fell relative to October. Aggregate equity-issuance levels rise, but still remain relatively muted when compared to more ‘normal’ times
Public equity fund-raises by sector and highlighted deals
Sell-down activity over November
ECM issuance across the deal size spectrum in November
The UK IPO pipeline
Source: Dealogic. Analysis and commentary only includes transactions greater or equal to £5m, and only includes transactions involving an issue of new shares i.e. primary share issuances
