US equity markets moved higher last night – S&P 500 (+0.8%); Nasdaq (+0.8%) – on solid economic data. Following its IPO, Arm rose by 25%. The positive mood followed on into Asia this morning: Nikkei 225 (+1.1%, to a 2-month high); Hang Seng (+1.0%); Shanghai Composite (-0.3%). The FTSE 100 is currently trading 0.9% higher at 7,739. Sterling buys $1.2425 and €1.1655.

China’s economy picked up steam in August as a summer travel boom and a heftier stimulus push added to nascent signs of stabilisation. Industrial production and retail sales growth jumped more than expected. “Perhaps the peak pessimism is behind us,” said StanChart economist Ding Shuang. Meantime, the PBOC left its key policy rate unchanged, while injecting cash into the market for the 10th consecutive month.

The ECB raised interest rates by 25 basis points to 4% and highlighted “inflation continues to decline but is still expected to remain too high for too long”.

Detroit auto workers started their strike after talks between union leaders and the Big Three automakers fell through at the midnight deadline. Workers began walking out of Ford’s Michigan plant that makes the Bronco SUV, a GM facility in Missouri and a plant in Ohio that makes the Jeep Wrangler. It was the first time in history the UAW took action against all three carmakers simultaneously.

Brent Crude continues to march higher and currently trades at $93.74 a barrel, while gold moved up to $1,916 an ounce. Uranium prices hit 12-year high.

Last night, Adobe released quarterly results which exceeded market expectations but issued slightly muted guidance for the current quarter. In response, the shares fell 2% in after-hours trade.

Adobe is a global software company best known for the Acrobat product, considered the gold standard for creating, editing, scanning, signing, and sharing digital documents. The company generates annual revenue of more than $17bn through a recurring revenue model with real-time visibility – subscriptions account for more than 90% of the total. As a result, the business tends to be fairly resilient during economic downturns.

The group believes every disruptive technology has presented opportunities for Adobe to innovate and increase its addressable market opportunity. This has been true for cloud computing, mobile, as well as AI. The company estimates it has an addressable market of $205bn, leaving it well positioned for significant growth in the years ahead with its industry-leading products and platforms. In the field of AI, earlier in the year Google announced Adobe Firefly will be a premier generative AI partner for Bard, powering text-to-image capabilities. After an unprecedented beta that saw over 2bn images generated, Adobe Firefly models and the Firefly web application are now commercially available. In addition, NVIDIA and Adobe have announced they will collaborate on Generative AI optimisations across hardware and software. As a result, the group is seeing a new era of AI-enhanced creativity with innovations across its product portfolio.

During the three months to 1 September 2023, the third quarter of its financial year to 30 November 2023, revenue grew by 13% in constant currency to a record $4.83bn, in line with the $4.87bn market forecast. Growth was driven by strong demand across Creative Cloud, Document Cloud, and Experience Cloud.

Digital Media is the group’s largest division, accounting for 73% of revenue. During the quarter, revenue grew by 14% to $3.59bn, with Creative and Document Cloud were up 14% and 15%, respectively. Digital Media Annualised Recurring Revenue (ARR) grew by $464m to $14.6bn. Digital Experience grew by 11% to $1.23bn, while the smallest division, Publishing & Advertising, fell 17% to $67m.

The company earns very high operating margins, in the mid-40s. In the latest quarter, the margin rose from 44.1% to 46.3%. EPS grew by 20% to $4.09, better than the $3.98 expected by the market.

The business is very cash generative, with $1.87bn generated in the quarter, and the group ended the period with cash and short-term investments of $7.5bn. This was despite making significant investments in its technology platforms. The group repurchased $1.0bn of its shares during the quarter, leaving $3.15bn remaining on the current $15bn programme to be completed by FY2024.

Adobe provided guidance for the current quarter slightly above market expectations: revenue of $5.0bn and EPS of $4.10-$4.15.

Market news & adobe

Market News & UK Inflation

Market news and an update from IG Group.