BHP posts bumper profit, Ted Baker and Darktrace takeover news, Watches of Switzerland customers keep spending and FTSE higher despite signs of economic turmoil

“The FTSE 100 enjoyed steady gains despite continuing signs of economic turmoil in the UK,” says AJ Bell Financial Analyst Danni Hewson.

“In a sign of the weaker backdrop, the number of job vacancies fell for the first time in two years, although it is not a clear picture, with serious issues filling roles in certain sectors.

“This makes life difficult for the Bank of England as it looks to bring down rampant inflation without inflicting too much pain on businesses and households.

“The other major takeaway from today’s figures is the biggest real terms pay fall on record. This drop in spending power is bad news for consumer-facing businesses.

“Inflation is a positive for some though – miner BHP reported record first half profit as the price of commodities soared earlier in 2022.

“However, these numbers are in the rear-view mirror; of more interest is BHP’s expectation for a big rebound in resource-hungry China. BHP’s excitement about improving Chinese prospects is at odds with the more sober commentary delivered by many of its rivals.

“It’s been a torrid time for fashion retailer Ted Baker but beneath all the scandals and sorry trading performance there is clearly some value remaining in the brand.

“US Authentic Brands Group, which previously purchased Reebok among other names, clearly thinks the brand has something to offer as it has decided to swoop for the business in a cut-price deal.”

Watches of Switzerland

“The rich are still spending money despite the rising cost of living, judging by Watches of Switzerland’s latest update.

“Rising energy and food prices matter to lower income individuals because the extra costs are, in many cases, absorbing all the money previously left over on pay day. Yet for affluent people, inflation won’t massively change their lifestyle and so luxury goods continue to sell well.

“Watches of Switzerland’s US sales have doubled year-on-year in its most recent quarter, suggesting that inflationary pressures are being shrugged off by its clientele.

“The company seems very upbeat, rolling out more showrooms or upgrading existing ones, and it is making good progress with its expansion into Continental Europe.

“So far so good, yet there is one negative factor to consider – luxury watch prices on the secondary market are falling. While there is a risk that trend spreads into the primary market where Watches of Switzerland operates, so far there is no evidence of a dip in demand.

“Retailers continue to have long waiting lists for new models, with demand outweighing supply.

“One of the key attractions for premium watches is that they are seen to be a good investment as editions are limited and there are plenty of people who want to own them. If second-hand prices are falling, however, that dilutes the appeal of luxury watches from an investment perspective. It’s something to keep an eye on, particularly if second-hand prices for luxury watches fall below retail prices. Although reports suggest we’re a long way off that happening just yet.”

Darktrace

“After a tumultuous year-and-a-bit on the stock market it looks like AI-driven cyber security firm Darktrace might be set for an exit into private equity ownership.

“Though any deal is still in the early stages, the language around this preliminary approach doesn’t suggest huge resistance from Darktrace at this point.

“If it goes through, the acquisition of Darktrace would, yet again, thin the ranks of an already under-represented technology sector in London.

“You can see why going private might appeal. While Darktrace shares trade materially higher than the 350p IPO price, it has seen considerable volatility since its April 2021 float.

“The wild swings in the share price, while linked to instability in the tech space and wider markets, do suggest that UK investors have struggled to get to grips with this complex tech story.

“After all, Darktrace is in one of the hottest areas of the tech world, with demand for cyber security increasing amid concern over Russian cyber warfare linked to the conflict in Ukraine.

“The controversy surrounding its co-founder Mike Lynch hasn’t helped Darktrace, as he continues to fight extradition to the US on fraud charges.

“In the context of all these challenges, it is perhaps not that surprising that Darktrace may want to move out of the spotlight.”

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