FTSE shrugs off inflation fears and Frontier Developments disappoints with sales guidance

“The FTSE 100 got off to a good start on Friday, building on a strong finish to trading on Wall Street last night,” says AJ Bell Investment Director Russ Mould.

“Investors may have been nervous ahead of yesterday’s US inflation numbers but despite consumer prices rising at their fastest rate since 2008, and more than economists expected, shares were up.

“Perhaps central banks really have convinced the markets that any rise in inflation will be short-lived and will not force them to ramp up rates too rapidly.

“Among the inflationary pressures currently playing out are wage increases driven by a scarcity of candidates for jobs in certain sectors. In this context it was notable to see recruitment firm Robert Walters upgrading its full year expectations amid strong demand for its services.

“While rising prices are not having a negative impact on equities at the moment, traditional store of value gold is starting to enjoy a decent run. The metal price is back above $1,900 per ounce and if it can maintain its recent momentum, traders may start to eye last year’s record highs.”

Frontier Developments

“Polish gaming company CD Projekt paid the price for releasing a game that wasn’t up to scratch, leading to a consumer backlash, and the market value of the company has since more than halved. Cyberpunk 1977 was one of 2020’s most anticipated releases, yet it was released full of bugs and glitches.

“This disaster should have been a wake-up call for the gaming industry not to release titles until they are fully tested and ready to enjoy. However, it seems as if Frontier Developments got the message too late.

“Its latest title, Elite Dangerous: Odyssey, came out in late May and the reviews have been brutal to say the least. Users say it is another Cyberpunk disaster with poor user interface, significant bugs and the game constantly crashing. Frontier has already pushed through two rounds of updates, but significant reputational damage might have already been done.

“The consensus forecast for Frontier was £146 million revenue in its financial year ending May 2022, but the gaming group now guides for £130 million to £150 million. That’s partly down to expectations that its F1 management game may be pushed back to the 2023 financial year.

“Given the disappointment associated with the latest Elite game, it’s prudent that Frontier doesn’t rush release any more releases.”

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