Morning Note: Market news and an update from shipping company Clarksons

Market News

Concerns about the health of the US economy, tariffs, and geopolitical developments are weighing on investors’ appetite for risk. The 10-year bond yield slipped back to 4.28%, while dollar suffered its worst week since November 2022. Gold trades at $2,910 an ounce, while the oil price fell for the 7th week in a row.

US non-farm payrolls for February came in at 151k, a touch below the 160k expected. The unemployment rate was 4.1%, just above the 4.0% forecast. Federal Reserve Chair Jerome Powell said the economy is fine and signalled patience amid Trump’s tariff whiplash. However, the market is now pricing in three rate cuts this year versus one as recently as 12 February,

China's deflationary pressures deepened, with CPI falling by 0.7% in February from a year earlier, its first drop in 13 months. The core measure, which also slid, highlights the need for policymakers to deliver stimulus quickly, Bloomberg Economics said.

The FTSE 100 is currently 0.3% lower at 8,656. The government will slash its civil service and use AI to boost efficiency in reforms to be unveiled this week. Separately, a survey found wages for new hires rose at the slowest pace in four years last month. Sterling trades at $1.2880 and €1.1910.

Mark Carney won the race to become Canada’s next PM, taking the reins at a particularly contentious time for the country amid its trade spat with the US. He pledged to keep retaliatory levies in place until “Americans show us respect.”

Source: Bloomberg

Company News

Clarkson PLC (Clarksons) has released its 2024 results which were in line with guidance. However, the outlook statement paints an uncertain picture and the shares, which are part of the FTSE 250 Index, have been marked down by 15% in early trading.

Clarksons is the world’s leading provider of integrated services and investment banking capabilities to the shipping and offshore markets. The group plays a vital intermediary role in the movement of most commodities around the world. The company is the market leader or number two in every shipping market, giving it scale and access to flows, deals and data that its smaller, sometimes niche competitors cannot match. This scale has conferred competitive advantages and driven attractive returns.

However, the shipping sector is cyclical and volatile – it has experienced varied market conditions over the last few years. The green transition is a global megatrend which is underpinning change in shipping. As shipowners and charterers drive to meet their net zero commitments, all are looking closely at supply chains for a lower emissions option. In response, Clarksons has scaled up its offer to advise its clients on the changing industry and the importance of becoming a more responsible business.

2024 was described as “another year of disruption, complexity, and opportunity for global shipping markets”. The fundamental supply and demand dynamics of the industry remained in fine balance, with underlying trade volume growth and disruptions to trade patterns increasing demand, while the supply side remained challenged by low orderbooks in certain sectors and a tight shipbuilding market.

Group revenue rose 3.4% to £661.4m, driven by growth across the business, while underlying profit before tax grew by 46% to a record £115.3m, in line with company guidance.

The Broking division, which accounts for 80% of group revenue, was supported by an active sale and purchase market across new-building and second-hand transactions, and generally robust conditions across all other sectors. Profit before taxation grew by 1% to £122.6m, with a margin of 23.2%.

The Financial division had a more challenging year, with profit falling from £6.6m to £5.2m. This reflected reduced investor risk appetite in certain sectors amid geopolitical uncertainty.

The Support division grew profit by 20% to £7.7m despite the significant reduction in transits through the Suez Canal. The Research unit grew by 13% to £9.5m as the group continued to supply the data that is increasingly key to decision-making. 90% of Research revenue is now recurring.

The highly cash generative nature of Clarkson’s business, supported by a strong balance sheet has enabled the group to continue to invest in the business to capitalise on the growth potential of its markets. Free cash resources were up from £175m to £216m. The company has delivered 22 years of consecutive dividend growth and has today announced a 7% increase in its payout to 109p (3% yield).

In the outlook statement, the group highlights that “the geo-political outlook remains uncertain as we enter 2025, with ongoing regional conflicts and trade tensions creating uncertainty for markets reflected by freight rates and asset values currently lower than 2024. The resolution or continuation of these events during the year will provide potential headwinds and tailwinds to the group’s performance”.

Source: Bloomberg