Second wave and stimulus gloom haunt markets, Hut’s first trading update is a hit

“A week out from the US Presidential election and any hopes of a stimulus package being agreed ahead of the vote look increasingly forlorn,” says AJ Bell Investment Director Russ Mould.

“Investors are likely to be kept busy this week with several of the biggest companies in the US set to serve up their third quarter earnings – these could help determine if the market’s mood sweetens or sours in the coming days.

“Coronavirus concerns as a second wave builds in Europe and the US are giving investors indigestion at the beginning of the week. Brexit-inspired sterling weakness helped spare the FTSE 100 from the larger losses seen in other European markets with the DAX down more than 2%, thanks to poor results for giant tech firm SAP.

“The laggards in the UK all had links to a travel sector, which will be one of the worst hit if countries can’t get Covid-19 under control – aviation engineer Rolls-Royce the biggest faller.”

The Hut Group

“E-commerce firm The Hut Group begins life as a public company very much on the front foot as it upgrades revenue guidance in its maiden trading update.

“Whether this is thanks to an unexpected trading boost or just canny management of investors’ expectations it should help keep sentiment towards the company in a positive place after a strong start in share price terms to life as a listed entity.

“In order to maintain this momentum the firm will rely on strong demand across its health supplement and beauty product sites through the Christmas trading period and upcoming Black Friday sales event.

“The longer-term excitement around the story is based on its Ingenuity platform which has been compared in some quarters to Ocado’s online solution for global groceries firms. The Hut essentially picking up the IT and logistical requirements of the likes of PZ Cussons, Hotel Chocolat and Nestle.

“For now this part of the business makes only a modest contribution and if the business is to hold on to its premium valuation, the market will expect to see rapid growth in this area. The good news is that, after minimal first half growth, a double-digit advance was conjured in the third quarter.

“Nagging corporate governance concerns linked to areas like a lack of independent directors and the structure of its bonus schemes are unlikely to be entirely erased by the appointment of outside special advisors to the Audit & Risk and Sustainability committees.”

These articles are for information purposes only and are not a personal recommendation or advice.

The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.