Trading Day – US inflation hotter than expected

US inflation numbers come in hotter than expected, with headline inflation rising 0.4% from last month and 8.2% from last year.

More worryingly, core inflation, which leaves out more volatile food and energy prices, has climbed 0.6% for the 2nd consecutive month and is up 6.6% from last year.

Meanwhile, Mondi reported strong performance in the third quarter, with EBITDA increasing 55% despite significant cost pressures.

In other news, PSG Konsult reported strong cash flows and growth in assets under management (AUM).

Here is the biggest news of the day.

• US inflation numbers come in hotter than expected. Headline inflation rose 0.4% from last month and is up 8.2% from last year. More worryingly, core inflation, which leaves out more volatile food and energy prices, has climbed 0.6% for the 2nd consecutive month and is up 6.6% from last year. Inflation also seems to be broadening out, with more categories of items contributing to the overall increase. This is a worrying sign that inflation might be entrenched in consumer expectations, making it even more difficult to combat for the Fed. Following the release, markets are fully pricing in a 4th consecutive 0.75% rate hike by the Fed in November, with an 8% chance that the hike might be 1.00%.
• Mondi reports strong performance in the third quarter. EBITDA from continuing operations grew 55% from last year to €450 million. Higher average selling prices and overall volume growth more than offset significant cost pressures experienced by the company. The group’s Russian operations have been classified as held for sale and generated EBITDA of €129 million. On 12 August, Mondi announced that it had agreed to sell its most significant facility in Russia, Joint Stock Company Mondi Syktyvkar, together with two affiliated entities to Augment Investments Limited for a consideration of RUB 95 billion (around €1.5 billion). The disposal still depends on the approval of the Russian Federation’s Government Sub-Commission for the Control of Foreign Investments.
• PSG Konsult reports strong cash flows and growth. In its interim results for the half-year ended August, the company generated R825 million in cash flow from operations. It was spent frugally by PSG Konsult, returning R292 million to shareholders via dividends (R0.11 per share) and another R175 million through share repurchases. Despite this, the company grew its cash pile to nearly R2 billion. CEO, Francois Gouws commented that “There are benefits to holding excess cash at the moment. It gives us the means to take advantage of opportunities that might come along in a difficult market.” The group also managed to grow total assets under management (AUM) by 7% to R317 billion. Recurring headline earnings per share (HEPS) only grew 1% to R0.31, driven largely by the performance of PSG Wealth. Return on equity was 19.8%.
• Ascendis Health shareholders vote in favour of a deal to sell to Austell Pharma. More than 99% of shareholders voted for the offer, which was higher than that of the Pharma-Q and Imperial Pharma consortium.
• Afrimat expects a drop in profitability. The company released a trading statement for its half-year results ended August and expects headline earnings per share (HEPS) to drop between 10% and 20% to around R2.50. The drop is largely due to falling commodity prices but was partially offset by increased volumes. The company’s interim results are due on 27 October.