Investec Market Review October 2023

• October was an extremely challenging month for equities across the board –FTSE 250 lost (6.5%), S&P (2.6%) and CAC 40 (3.5%) – amid increasing geopolitical tensions and worse than expected economic data.
  
  
• Only 6 out of 23 sectors ended the month in green. Oil & Gas Producers sector registered its fourth month of gains as it benefited from further rises in oil prices following the escalation of conflict in the Middle East.
  
  
• Shareholder selldown saved the day once again – UK ECM value and deal count for October were disappointing as Haleon’s £886m shareholder selldown made up over 2/3 of the deal value for the month.
  
  
• UK public M&A remained strong over the course of October as 8 transactions were announced, all of which were firm offers. Investec is pleased to act as broker to Tribal and The Restaurant Group with regards to their respective offers.

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Economic headlines in October

• UK inflation is proving sticky, holding at 6.7% YoY in September and slightly higher than consensus estimates for a 6.6% increase.
  
• UK consumer confidence slipped nine points to -30, taking it to its lowest point since July, whilst retail sales volumes also plunged, falling 0.9% on the month in September.
  
• UK net mortgage borrowing fell by £0.9bn in September – the largest fall since April 2023. Net mortgage approvals were also weak, down to 43.4k.
  
• ECB held key interest rates (deposit rate at 4.0%, main refinancing rate at 4.50% and marginal lending rate at 4.75%) putting an end to a streak of 10 consecutive rate hikes.
  
• US GDP bounced at an annualised rate of 4.9% in Q3, the fastest pace of growth since Q4 2021, thanks to resilient consumer spending trends
• US CPI came higher than expected in September at 3.7% YoY in September, raising prospect of further Fed rate hike.

A spooky October for markets as they fall into correction following the summer bonanza

Source: Bloomberg, FactSet, Macrobond, Calastone, Investec Economics
 

UK inflation –a sticky business for now?

Source: Bloomberg, FactSet, Macrobond, Calastone, Investec Economics

Since July economic outlook has brightened for the US but deteriorated for Euro area

Source: Bloomberg, FactSet, Macrobond, Calastone, Investec Economics

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Monthly sector snapshot

Drivers of sector performance in October

• Aero. & Defence stocks also benefited from growing geopolitical tensions. The sector registered a modest growth of 1.3% in October but has increased by almost 41.6%YTD and is set to become the best performing sector in 2023, with BAE System ahead of the pack.
• Oil prices continue to be a tailwind for Oil & Gas Producers following escalation of Israel-Hamas conflict and supply challenges in the Mideast.
• Support Services stocks retreated significantly in October after disappointing corporate updates from Travis Perkins and Rentokil. Rentokil dropped by over 40% over the course of the last weeks of the month after the group warned of lower US demand.

Sector performance (Year to date)

Source: FactSet, Financial Times, Investegate, ONS, Investec Economics

Sector performance (October 2023)

Source: FactSet, Financial Times, Investegate, ONS, Investec Economics

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ECM activity snapshot

Primary ECM issuance across the deal size spectrum in October

Public equity fund-raises by sector and highlighted deals

Selldowns in October 2023

Announced IPOs in October 2023

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.

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UK Public M&A activity in October

2023's scorecard

Selected deals

Source: Company announcements, FactSet, Practical Law
Note: Scorecard includes competing offers, withdrawn offers and formal sales processes of companies subject to the Takeover Codequoted on AIM or the Main Market.

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