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FROM McDonald’s customers still “lovin’ it” to tech giants still standing strong, this is your round-up of five news stories that moved the markets this week.

1. A week is a long time in banking

A week that started with a public relations disaster for NatWest has ended on something of a high - profits-wise, at least - after the bank posted a sharp rise in profits.

These were better-than-expected first-half profits of £3.6bn, compared to the £2.6bn it made over the same period last year, at the bank which has spent the past week referred to up and down the country as “that bank embroiled in a fierce clash with former UKIP leader Nigel Farage”.  

The almighty row has resulted in the twin resignations of NatWest chief exec Alison Rose and Coutts chief exec Peter Flavel. But there was no mention of that as pre-tax operating profits that were posted wiped the floor with the £1.4bn forecast for the second quarter. Rising interest rates pushed profits higher at the 39% taxpayer-owned bank.

2. The tech giants are proving their mettle

Despite anticipated belt-tightening on both the customer and corporate fronts - or customer spending “optimisation” as Microsoft prefers to call it - the latest numbers from the tech giants are proving their resilience.

Microsoft’s earnings and revenue came in ahead of Wall Street’s expectations in the last quarter under review. Reported revenue came in 8% higher at $56.2bn with earnings per share up 21% at $2.69. Wall Street had been expecting revenue of $55.4bn and earnings of $2.55 a share. And that was in spite of continuing slow down in its Azure cloud platform. The numbers are not insignificant - growth was down 27% drop in the latest period, but not as bad as the 31% drop in the first months of July and the 46% it declined by a year ago.

Google came up trumps too for parent company Alphabet. They came in 7% up at $74.6bn in the three months to 30 June, ahead of the $72.8bn forecast.

3. Are US consumers pooh-poohing the idea of recession?

Maybe that expected belt-tightening has been a little over-egged. The latest data shows that US consumer confidence has risen to its highest level since July 2021. The Conference Board’s consumer index data for July shows a higher-then-expected level of confidence among consumers right now. With the jobs market looking resilient and inflation starting to cool, 2023 is turning into the summer of optimism.

Despite easing consumer expectations of a recession though, the Conference Board still anticipates the US will be in recession before the year is out.

4. Unilever says “we have passed peak inflation”

From Tresemmé, Dermalogica to Dove, a determined focus by shoppers all over the globe on personal care, has seen sales rise at Unilever. From basics such as deodorant (delivering double-digit growth) to high-end beauty launches by the likes of Dermalogica and Paula’s Choice, first-half operating profits rose by 3.3% to €5.2 billion, as consumers paid more for the products they wanted.

There’s no doubt that higher prices are boosting Unilever’s coffers, with the company acknowledging that volumes were virtually flat, aside from the beauty and wellbeing and personal care businesses.

All in all, the cost of living is proving profitable for this global giant, with full-year underlying sales growth expected to beat forecasts.

The outlook though for cash-strapped consumers is that price growth will ‘moderate’ as the year goes on. Unilever said “we have passed peak inflation” as prices rose 9.4% in the first-half of the year. In the fourth quarter of 2022 they rose by 13.3%.

5. Mmm, they’re lovin’ it

Wherever you fall on the “good times/ we’re all doomed” consumer mood continuum, and wherever you are in the world, odds are you may well have ‘celebrated’ or maybe “eaten your feelings”, as they say, with a Big Mac or the like.

Despite higher prices, McDonald’s customers are clearly still “lovin’ it” as the global burger chain posted forecast-beating earnings that doubled in the second quarter. It said higher prices and a higher number of customer visits in the US and strong sales in the majority of its international markets drove sales up by 11.7%. Analysts had pencilled in an 8.8% rise.

McDonald’s share price (US$) over the last 5 years

None

Source: Fidelity International, 28.7.18 to 29.7.23, share price in US$, excludes charges

Past performance is not a reliable indicator of future returns

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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