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“A decline in the dollar following the US midterm elections has given a welcome boost to the mining sector as it will be cheaper for many foreign companies to buy dollar-denominated commodities. Interestingly there is also an unusual movement of both cyclical and defensive stocks rising in harmony.
“On the London market, stocks like United Utilities, SSE, Rio Tinto and CRH all move up, helping to drive the FTSE 100 1% higher to 7,111. Markets elsewhere in Europe were also strong including a 1.15% rise in Paris’ CAC 40 index in early trading,” says Russ Mould, investment director at AJ Bell.
Marks and Spencer
“The world’s most frustrating recovery story continues to limp along with no end in sight for when the business will truly be fixed.
“Food has been the weakest part over the past six months with a 2.9% decline in like-for-like sales, partially blamed on reducing prices and removing ‘complex and confusing’ promotions. Strategically that looks to be the correct decision, up to a point.
“It is vital that customers can make a decision quickly and not spend ages working out whether a ham sandwich is included in a meal deal or not.
“Marks & Spencer needs to live up to its reputation of quality products while also being more competitive on pricing. However, one has to wonder if there is a risk in the business swinging the needle too far towards budget territory.
“For example, you can now get a packet of chocolate biscuits in Marks & Spencer for a mere 75p which puts it in competition with mainstream supermarkets. Surely that threatens the appeal of its higher priced, premium products as customers may just plump for the cheapest option – in essence Marks & Spencer’s value range could cannibalise sales of its other ranges.
“Value doesn’t always have to mean low prices. A Marks & Spencer customer needs to feel they are getting great value for the price they are paying, and that still applies if they are paying slightly more than they would in Tesco for a product that is also better quality.
“As for clothing, the decision to reduce the number of options looks wise as long as it doesn’t forget its unique selling point, namely stocking a wide range of different sizes per line.
“It feels like the restructuring plans have been in place for a long time, yet each trading update sees management talk optimistically about the future rather than showing solid proof of progress. This truly is a juggernaut that will take a very long time to turn around.”
Persimmon
“Persimmon chief executive Jeff Fairburn may have thought he had successfully navigated the furore over his £75m bonus but a disastrous TV interview in which he uncomfortably failed to acknowledge the issue may well have been the final straw for the housebuilder.
“His inability to handle a question from a reporter last month helped breathe new life into the story, when a stock answer would probably have batted the issue away.
“His exit comes a little under a year after the departure of his former chairman Nicholas Wrigley and head of the remuneration committee Jonathan Davie who accepted responsibility for failing to include any cap on the long-term incentive plan agreed in 2012 which created the issue in the first place.
“The slight irony to all this is that Fairburn leaves a business in pretty good shape, with today’s accompanying third quarter trading update suggesting the business is on track to hit full year forecasts.
“Group managing director David Jenkinson will fill in while the company hunts for a permanent successor.
“Any new appointment is likely to find his pay and incentives closely scrutinised and may face a less supportive backdrop than Fairburn enjoyed.”
Redrow
“Amid some complaints about stamp duty and minor issues with Help to Buy, despite the extension of the scheme by two years in the recent Budget, the key news ahead of housebuilder Redrow’s AGM is the departure of founder and executive chairman Steve Morgan.
“Morgan started the business back in the 1970s but left in 2000 to pursue other ventures. He returned nine years ago to help drag the company out of a downward spiral in the wake of the financial crisis.
“He did so successfully, helped by a supportive environment created by low interest rates and the Help to Buy scheme.
“The total return achieved for shareholders by Redrow since Morgan came back in March 2009 is 482% and he will retire almost exactly a decade after he rejoined the business in March 2019.
“This time Morgan is highly unlikely to return again, even if Redrow were to hit rocky ground. The company appears to have played it safe with his replacement as current chief executive John Tutte steps up to chair the group.”
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