UK markets stand firm, positive retail sales surprise lifts ASOS and Boohoo, and M&A juggernaut keeps trucking

“Investors may feel as if they’ve been soaked by a torrential shower given the state of the markets this year. Look closer and it’s clear that the FTSE 100 is the one with the best umbrella,” says Russ Mould, Investment Director at AJ Bell.

“A nice rise on Friday gave welcome ballast to portfolios and put the UK blue-chip index a mere 1.4% down year-to-date. Boring old commodity producers, utility providers and tobacco stocks have come to the UK market’s rescue, proving that successful investing is not all about backing the next big go-go growth stock.

“In general, global markets have been spooked this year by rising inflation and the prospect of interest rates going up fast and hard. Investors are worried that corporate earnings will come under pressure, businesses will invest less money and consumers will cut back on their spending. Markets price in what they think will happen and increasingly investors fear recession. How long such a rout would last is anyone’s guess, but investor confidence may remain weak until we see signs of inflation peaking.

“Perhaps markets are being overly pessimistic? UK retail sales in April were much better than expected, rising 1.4% versus forecasts of a 0.3% decline. The lifting of the energy price cap meant household bills shot up and so there was an expectation for people to be less willing to splash the cash in the shops. To some extent, we have seen signs of big-ticket item sales suffering, such as fewer people willing to buy a sofa.

“Clothing sales have been more resilient than expected, according to the new ONS data. Boohoo and ASOS both enjoyed a share price jump on the news as investors were taken aback by the sales trends. Recent months have seen shares decline in both companies as the market feared casual spending on tops, dresses and shirts would fall given that buying fewer non-essential clothes would be an easy way to save a bit of money now needed to pay for gas and electricity.

“M&A continues to be a strong theme on the UK market, with two more deals put on the table.

“Another player has entered the arena to fight for media group M&C Saatchi, with Next Fifteen Communications making a surprise bid. The board has quickly agreed the £310 million offer, following months of batting off interest from Vin Murria’s AdvancedAdvT vehicle.

“Since her first move, there has been a view from the target and from investors that Murria’s offers were too low, the latest being worth £254 million. It’s no wonder the board have been quick to say yes to Next Fifteen’s much more generous deal. AdvancedAdvT says it is considering its options, but it’s hard to imagine it will dig deeper than its rival.

“E-commerce platform group THG was also prey after Candy Ventures announced last night that it was considering an offer for the group and that a consortium of Belerion and King Street had proposed to pay 170p per share in a separate offer. The fact THG’s shares only jumped 27% to 147.59p – well short of the latter proposal – would suggest the market has little faith in the deal in that price range going through as THG doesn’t want to be bought.

“Various parties have been sniffing around THG after its significant share price decline since joining the stock market in 2020 at 500p per share, wondering if there was any value at the now depressed price. The company has been a horror show of an investment, with concerns about corporate governance, a lack of detailed information about the business components and a realisation that its Ingenuity e-commerce solution wasn’t as special as the hype originally suggested, with plenty of other businesses offering similar services.”

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.