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“There was a huge sigh of relief after markets avoided a continuation of last week’s selloff. Asian markets led the recovery on Monday with Japan’s Nikkei 225 up 2.4% and China’s SSE up 1.2%. The FTSE 100 advanced 1.3%, though some of the other major European markets didn’t fare as well, including Germany’s DAX which slipped 0.7%,” says Russ Mould, Investment Director at AJ Bell.
“Two key news events over the weekend will have helped to patch up investor confidence. The US House of Representatives passed Joe Biden’s $1.9 trillion Covid support bill, which will now be passed to the Senate. That raises the prospect of new stimulus measures happening soon.
“High levels of spending in the US are expected to drive up inflation which is positive for the commodities market. Brent Crude oil advanced 1.8% to $65.58 per barrel on Monday, though its price faces a big test on Thursday when oil producers’ cartel OPEC+ holds its next meeting. The market will be watching closely to see if an increase in supply is agreed at the meeting as a large hike could cap any further gains with Brent Crude in the near-term.
“Also giving equities a lift was the news that US regulators have approved Johnson & Johnson’s single-dose Covid jab. That means the US can accelerate the pace of its vaccine rollout which already features the use of products from Pfizer and Moderna.
“On the UK stock market, investors flocked to buy shares in mining, energy, consumer cyclicals, tech and utilities. Housebuilders were in big demand following reports that Rishi Sunak’s Budget on Wednesday will include new ways to help first-time buyers. Persimmon, Taylor Wimpey and Barratt Developments all saw share price gains of 5% or more. “In the first hour of trading only two FTSE 100 stocks were in negative territory – Bunzl and Informa.”
Halfords
“The bullish trading statement from Halfords shows the love for cycling picked up by Britons during lockdown still has momentum.
“Pedal power is also helping Halfords to repay furlough income and mitigate the impact of lockdown on its autocentre car parts, repair and maintenance business.
“Crucially the company seems to have addressed the recent supply chain issues which had seen it struggle to keep up with demand even if supply remains ‘sub-optimal’ in its own words.
“While previous cycling booms, including the one linked to the 2012 Olympics, have lost traction rapidly, it may be that the more dramatic impact of Covid on our lives will make the cycling habit stick this time.
“There may be a natural saturation point for Halfords when everyone who wanted to buy a bike has bought one, but then people might consider upgrades, kids will get bigger and require new larger models and there is likely to be increased demand for Halfords’ services when it comes to repairing and maintaining cycles.
“It also has an opportunity to convince more people about the merits of moving to electric bikes.
“Halfords just needs to ensure it is flexible enough to meet fluctuating demand and remains the cycling retailer of choice.
“On the auto side Halfords could be a beneficiary of a reopening of the economy as people get their cars on the road or at least consider longer journeys for the first time in months and want to get their vehicles checked over to ensure they are road-safe and ready.
“It also seems to be picking up market share as the footprint of less resilient competitors likely begins to shrink.”
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