Morning Note: Market news and an update from Publicis.

Market News

US equity markets posted a modest gain last night – S&P 500 (+0.1%), Nasdaq (+0.4%) – spurred on by technology stocks. IBM rose by 8% after it delivered a positive revenue and cash flow outlook. Later today, results will be released by LVMH, Atlas Copco, American Airlines, Southwest Airlines, Intel, and Visa.

This morning in Asia, the Hang Seng (+2.0%) and Shanghai Composite (+3.0%) continued their recent bounce on the back of PBoC stimulus. In Japan, the Nikkei 225 was little changed and an auction of 40-year notes saw weak demand on growing expectations the Bank of Japan is moving toward ending its negative rate policy. The FTSE 100 is currently trading 0.1% lower at 7,512.

The Fed raised the rate on its Bank Term Funding Program after borrowing surged as institutions took advantage of its attractive financing terms. Effective immediately, the rate on the emergency facility will be no lower than the borrowing rate on reserve balances. The 10-year Treasury currently yields 4.16%, while gold slipped to $2,017 an ounce.

Stronger than expected UK January PMI – Services 53.8 vs 53.2 expected; Manufacturing 47.3 vs. 46.7 expected –

dealt a blow for doves advocating a spring Bank of England interest rate cut. Sterling moved higher in response and currently trades at $1.2722 and €1.1680.

Christine Lagarde will speak after today’s policy decision. Though the ECB is universally expected to leave rates unchanged, Lagarde may use her press conference to again push back against market expectations of a first cut in April.

Source: Bloomberg

Company News

Publicis Groupe has this morning released its full-year revenue update, which was ahead of market expectations, and unveiled its strategy to become the industry’s first AI-powered Intelligent System. In response, the shares have been marked up by 1%.

Publicis is a leading global communications group, with businesses including Saatchi & Saatchi, Leo Burnett, and Zenith Optimedia. The group generates one third of its revenue from each of data & technology (i.e., Sapient and Epsilon), creative, and media. The business serves a broad range of industries, including automotive (15% of net revenue), financial (14%), healthcare (13%), food & beverage (13%), and TMT (12%).

During 2023, net revenue grew by 4.2% to €13.1bn. Organic revenue – the group’s key operating metric (which strips out the impact of acquisitions and currency) – grew by 6.3%, outperforming the industry for the fourth year in a row. This was above company guidance range of 5.5%-6.0% which itself was upgraded in October. The group enjoyed a stronger-than-expected finish to the year, with Q4 up 5.7%.

Media, which accounts one third of revenue, grew by double digits organically, accelerating in Q4 supported by a faster ramp up in new business. Data and tech activities, another third of revenue, posted very solid growth overall. Within the division, as expected, Publicis Sapient saw ongoing delays in digital business transformation projects, like all comparable IT consulting firms, posting 3% organic growth on the year despite a modest decline in Q4. Epsilon recorded 10% organic growth, further accelerating in the second half with double-digit growth in Q4, led by the rise in demand for first-party data. Creative, the remaining third of revenue, was again very resilient in both the full year and Q4, with low single-digit organic growth.

All regions posted solid organic growth, with the US (60% of revenue) up 5.0% in the year, accelerating to 6.1% in Q4. Europe grew by 10.3%, while Asia Pacific was up 2.9%. Elsewhere, growth in Middle East & Africa and Latin America was 12.4% and 8.9%, respectively.

The group has also set out its AI strategy under which it is infusing a layer of AI across its platform organisation to connect its enterprise knowledge under one entity: CoreAI. CoreAI unifies all of Publicis’ proprietary data including the leading consumer data across 2.3bn profiles of people around the world, with trillions of data points. Publicis plans to invest €300m over the next three years as it becomes a true Intelligent System. The €100m spend in 2024 will be fully funded by internal efficiencies and have no dilutive impact on the group’s operating margin. It will be slightly margin accretive in 2025.

Today’s release was only a revenue update. Further detail on the group’s profitability and financial position will be published on 8 February.

Source: Bloomberg