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“This weekend is extremely important for the future direction of global stock markets. The G20 summit will include trade talks between the US and China and investors will be looking for any sign that the two countries can sort out their differences,” says Russ Mould, Investment Director at AJ Bell.
“Investors in Asia are certainly looking optimistic with markets in China, Hong Kong, India and Japan all rallying. European markets are more muted including only a small movement from the UK’s FTSE 100 index.
“Domestic-focused UK stocks are among the top risers including ITV, Next and Marks & Spencer. Stocks falling because they are trading without the rights to their dividend include British American Tobacco and Burberry."
Kingfisher
“The DIY expert has turned to someone from a different part of the retail sector to lead its ongoing recovery efforts. Thierry Garnier used to run the French arm of supermarket chain Carrefour and more recently the same company’s Asian operations.
“The fact he hasn’t got a background in the DIY sector might bring some fresh thinking to Kingfisher. And the business needs all the help it can get given how profits have been falling of late.
“Carrefour recently struck a deal to sell 80% of its Chinese business to Suning.com, a Chinese retailer, as part of a broader trend in the retail sector for companies to pull back from weaker geographic interests. Kingfisher has been doing exactly the same, exiting its positions in Russia, Spain and Portugal.
“It’s fortunate that Garnier has a degree in engineering. He will need to be good with a screwdriver to take apart the bits of Kingfisher’s recovery plan that haven’t worked and to tighten up the best bits of the business.
“Don’t expect a radical reshaping of Kingfisher any time soon though. Garnier will need to spend time trying to understand its problems and coming up with a solution. Given how the previous CEO couldn’t get it right, Garnier will need to be a genius at his trade otherwise Kingfisher could be singing the same old song.”
Serco
“A return to growth in 2019 after several years of decline represents a significant milestone in the repair job Rupert Soames has done at outsourcing firm Serco since taking over in 2014.
“The company is booking plenty of new work and looks set to bring in revenue for the year at the top end of expectations.
“An increasingly cosmopolitan business, this first-half update shows the benefit of geographic diversification given the strong contribution from its Asia Pacific and North American operations.
“The latest update represents a significant achievement when you consider the dire position Soames inherited. However, a strategy of growth for its own sake is not a healthy one and investors must hope further opportunistic M&A activity is balanced against the need to not over-extend the balance sheet.
“Frequent acquisitions can be a danger sign. Deals are just as likely to destroy as to create shareholder value as the costs of integration are often underestimated, the potential benefits are overestimated, or management fail to acknowledge the impact of cultural differences.
“In this context Babcock’s rebuttal of Serco’s merger proposal earlier this year may prove to be a blessing in disguise.
“It is also worth considering the structural, regulatory and political risks facing outsourcing firms, particularly ones like Serco which are heavily exposed to public spending.”
These articles are for information purposes only and are not a personal recommendation or advice.