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“Banks and energy stocks were the flavour of the day on Tuesday, but sadly not enough to stop the FTSE 100 from slipping 0.1% to 6,791 as pharma and consumer goods stocks weighed on the index,” says Russ Mould, Investment Director at AJ Bell.
“After an impressive start to the year, equity markets are finding it harder to push ahead this week amid growing expectations for the Federal Reserve to start easing back on its monetary support measures towards the end of the year. However, expectations could easily change if the pandemic continues to trouble the US for months to come.
“We’re in a period where investors are trying to get their head round what could happen next.
“For much of 2020 the market was concerned about how much support central banks and governments would provide to help avoid severe economic crash. With Covid vaccines now being rolled out and a change of political leadership in the US, investors are now looking much further into the future and wondering not only when the world will get back on its feet but also how that might feed into inflation, interest rate hikes and so on.
“That could bring about a new spell of stock market volatility as investors react to signals from the bond market and central bank commentary.”
Kingfisher
“Kingfisher’s trading update would suggest thousands of people trying to work from home are going to continue to hear the banging through the wall from their neighbour’s DIY projects for quite some time.
“The working from home phenomenon has driven a new DIY fad, with people realising their home could do with sprucing up, particularly if they are going to spend a lot more time inside it.
“Kingfisher has been on a roll since the first lockdown with sales shooting up. Its fourth quarter trading update shows an acceleration in sales growth since mid-November, driven by its overseas territories and in particular France.
“While its stores are currently open across its geographical territories, it does have to contend with some restrictions such as the temporary closure of B&Q showrooms across the UK, and limits on the number of people allowed inside a store in other territories. This creates some uncertainty over the pace of future sales, and so does the fact that the pandemic is still raging.
“In three months’ time, longer daylight hours should provide another driver for sales as people start to think about doing up the outside of their home and working on the garden. By that time, there is also a hope that considerably more people will have been vaccinated and so will want to start to get out of the house and begin to enjoy life as we used to know it.
“That’s a double-edged sword for Kingfisher. On one hand, it could see a new tailwind for sales, but on the other its captive audience will start to have more freedom and so the purple patch for DIY demand could start to fade as there will be other distractions in life.
“One could see a situation where demand remains robust for much of the year, particularly if the pace of the vaccine roll-out is slower than currently expected and many people still remain nervous about going out again for a while. However, come 2022 it is fair to say that Kingfisher will face some very tough comparative figures to beat.”
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