“After yesterday’s US inflation figures knocked the market for six, it’s no wonder that equities struggled for direction on Thursday,” says Russ Mould, Investment Director at AJ Bell.
“Hotter than expected inflation data has given the Federal Reserve yet another reason to sit on its hands and kick the prospect of a rate cut further down the road. The signs have been clear to see for a while and investors are now having to readjust their expectations for when we will finally see the much desired ‘pivot’ in monetary policy.
“Wall Street threw its toys out of the pram yesterday, with the S&P 500 down 1% and the small cap-focused Russell 2000 falling by 2.5% as risk appetite diminished. Futures prices indicate that US markets won’t have a second miserable session in a row when markets open for trading across the pond today, implying that we simply saw a knee-jerk reaction from investors and they’ve now had time to make more rational decisions.
“All this drama implies the ECB interest rate decision later today is not going to make pulses beat any faster. Rates are expected to be left unchanged at 4.5%. It will likely be accompanied by the usual message that the central bank will be ready to start cutting rates once there is sufficient evidence of inflation falling towards target.
“The FTSE 100 was flat at 7,965 as strength in commodity producers, healthcare and real estate was offset by weakness in financials, industrials and consumer stocks. Quite a few stocks trading without the right to their next dividend acted as a headwind for the sector, explaining why shares in Aviva, Lloyds and Phoenix were down.
“Kingfisher has been going through a tough period as a post-Covid hangover has made investors realise that the DIY boom of 2020 to 2022 has faded away. Its shares have struggled and investor sentiment has weakened. That might now be changing after HSBC upgraded its rating on the stock to ‘buy’ in the belief that improvement in the property market could benefit Kingfisher, putting the shares at the top of the FTSE 100 risers list.”
Astrazeneca
“It’s no coincidence that AstraZeneca has delivered shareholders some good news on the same day they are being asked to vote on a £1.8 million pay rise for chief executive Pascal Soriot.
“Announcing a 7% hike in the dividend is clearly positive for shareholders, but are they being buttered up so their vote swings a certain way? At face value this looks like a ‘something for you, something for Pascal, everyone’s a winner’ strategy.
“There has been a lot of debate about whether Soriot deserves an £18.7 million pay package. He’s certainly delivered a lot of value for shareholders and presided over a major period of growth for the business – and no-one is denying that. The moot point is the scale of his remuneration.
“Does anyone really deserve to take home that amount of money? It’s not wildly out of kilter with some of the peer group and AstraZeneca clearly wants to do everything it can to keep the architect of its success. However, it begs the question whether pay in general has got out of hand in the pharma sector.”
Lok’nStore
“Another day, another UK takeover. One by one, the UK stock market is being chipped away by foreign companies snapping up UK businesses. Self-storage group Lok’nStore is in the sights of Shurgard, a Belgian group which has made a cash offer for the business.
“The 15.9% bid premium looks measly and is significantly less than the 51% average premium seen on UK takeovers last year. It’s therefore a surprise to see Lok’nStore chairman Andrew Jacobs refer to the offer as representing ‘significant value for shareholders.’
“Lok’nStore may be a small guy in a big industry but that doesn’t mean investors will accept the first bid that comes along. Don’t be surprised if there is either reluctance from some shareholders to accept the offer or if another party throws their hat into the ring with a better price.”
These articles are for information purposes only and are not a personal recommendation or advice.
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- Wed, 24/04/2024 - 10:15