“Heightened tensions between Ukraine and Russia have brought a halt to the rally in equity markets seen last week,” says Russ Mould, Investment Director at AJ Bell.
“Investors were nervously watching proceedings from the side lines, particularly as oil prices crept up once again, including a 0.5% rise in Brent Crude to $85.84 a barrel. The commodity price has been strengthening amid concerns about tighter global supplies and a falling US rig count which implies less exploration and production activity.
“Asian markets were mostly down on Monday, including a 1.2% drop in the Nikkei 225 amid notable weakness in the real estate and healthcare sectors.
“The FTSE 100 held firm at 7,932. AstraZeneca and HSBC were the biggest drags in terms of index points, while 3i took the top spot among the risers as it extended last week’s gains. The investment trust’s biggest holding is a stake in value retailer Action and business has been booming for the Dutch company.
“Formerly known as National Express, Mobico dived 8% after a second delay to the publication of its results due to an ongoing accounting review of its German business. Reduced guidance has cast a dark cloud over the matter and left investors nervous about holding the shares in the run-up to the numbers being published.
“Scottish Mortgage shares dipped following speculation over the weekend regarding what activist investor Elliott might push the investment trust to do. Reports suggest it wants Scottish Mortgage to sell some of its holdings to lift the valuation of its portfolio. There is a suggestion that some of its unquoted assets could be worth more if sold than versus their current book value. The trust has already announced plans to buy back up to £1 billion worth of shares, a technique widely deployed by its peer group to narrow any discount to net asset value.”
S4 Capital
“Advertising group S4 Capital jumped nearly 3% after investors cottoned on to it being a takeover target. Martin Sorrell used the vehicle to aggressively buy a series of companies and establish a digital-focused rival to his former employer, WPP.
“The buy and build group initially excited the market as the acquisitions flattered its rapid revenue growth. However, S4 then didn’t produce the kind of results investors wanted, so the share price has been drifting for the past few years. The stock was trading well over 800p at its peak in 2021 – now it languishes around 44p. This slump in valuation has left S4 looking vulnerable and it could turn from predator to prey.”
Kingfisher
“As is often the case, profit warnings have come in threes for B&Q-owner Kingfisher. The company is being held back by its overseas operations and investors can only hope the progress the group has recently made with its UK business can be replicated in France and Poland.
“The company and the wider DIY sector did well during the pandemic as one of the few elements of physical retail able to continue trading. Pent-up demand for home improvements during lockdown, driven by people being stuck indoors and wanting to enhance their environment, was a strong driver of growth.
“That all changed when inflationary pressures took hold, higher borrowing costs hit the property market and the combination of these two factors hit consumers’ ability to spend on DIY and do-it-for-me projects.
“In the UK, the company has done a decent job of putting its B&Q and Screwfix operations back on track, taking market share as it gets the basics of managing stock levels and getting the right product to the right people at the right time.
“The company has also drastically improved its online presence, though it still expects a lag between a slight improvement in housing market conditions to fully feed through to demand.
“It will hope taking similar measures to those it has implemented in the UK will improve its prospects beyond these shores. If not, questions may be asked about the role these businesses play for the wider group and if the geographic diversification is worth maintaining in the long term.”
These articles are for information purposes only and are not a personal recommendation or advice.
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- Thu, 02/05/2024 - 10:55