Report by Saltmarsh Economics

Last week saw the PM Rishi Sunak suggesting an autumn UK general election, consistent with David Owen’s last note on the UK. August could be a pivotal month for the BoE’s MPC, with one further meeting (19th Sept) before a possible Oct 10th poll. In the interim, Deputy Governor Ben Broadbent and Jonathan Haskel - who again voted for a rate rise at the last meeting – will step down and Chief Economist Huw Pill’s and Catherine L Mann’s appointments will likely be renewed. A changing composition at the MPC could also have a bearing on what happens to UK monetary policy later in the year. However, David remains far from convinced that 2024 will be the start of the significant rate cuts priced into the curve. He has written before about the biases in the market and amongst many commentators hoping to see the return of much lower rates.

Report by Saltmarsh Economics

David Owen’s latest note examines the quarterly data on UK and EU-72 greenhouse gas emissions. If trends seen in recent decades are maintained, UK net zero 2050 could very well be achieved. However, much of the improvement has been driven by changes in energy usage and going forward there needs to be more fundamental changes in behaviour, driven by government. As David has highlighted before, the increasing focus on climate change by central banks and rating agencies could eventually lead to major changes in the global benchmarks. Climate change has yet to be priced into the sovereign bond space. However, led in part by the ECB, could that be about to change?

Materials

The can-maker’s equity is expected to come under further pressure - the main concerns cited in Gradient’s 13-page report include: 1) Volume and profitability headwinds. 2) Inventory growth higher than targeted and has outpaced forward sales estimates. 3) Growth in receivables suggests a pull-forward of revenue. 4) Accrued compensation fell to a five-year low relative to adjusted operating expenses. 5) Despite the recent share-price correction, BALL still appears expensive. Other active shorts Gradient have initiated coverage on this year include ADT, Cerence, Lamb Weston, Owen’s & Minor and RingCentral.