“The FTSE 100 extended yesterday’s positive momentum with a further 0.5% gain to 7,890 in early trading, powered by pharma, banking and consumer goods stocks,” says Russ Mould, Investment Director at AJ Bell.
“The breadth of the market gains across all sectors apart from energy and industrials would suggest widespread recovery in investor confidence, which is a positive sign.
“Yesterday, US airlines enjoyed a tailwind from United Airlines beating expectations and saying business travel demand was picking up. Today, UK airlines have entered the same slipstream as EasyJet’s results get the thumbs-up and International Consolidated Airlines flies right behind.
“There was always the risk that the post-pandemic travel boom would fade as persistently high interest rates led consumers to scale back spending, yet the airline sector continues to shake off these risks and soar higher.
“The one stock taking the market by surprise because of negative factors was Dunelm, previously seen as one of the biggest retail success stories of the past decade. Its shares dipped after third quarter results failed to impress. Dunelm called the sales environment ‘challenging’, which will disappoint investors given how it has been leaning on its value-led proposition to appeal to consumers who don’t want to pay too much for items. In theory, the current market should play to its strengths but even the market titans are finding life hard.”
Hipgnosis Songs Fund
“An end is in sight for one of the most chaotic events to unfold in the world of investment trusts for years.
“After much hype led to great disappointment, soundtracked by questionable corporate governance, Hipgnosis Songs Fund is now the recipient of a takeover bid from Concord. This might be the final chapter in the trust’s life as a listed entity, one that’s been filled with many dud notes.
“Whether it will be a smooth exit is another thing. It’s worth noting that chairman Robert Naylor has pleaded with the trust’s investment adviser Hipgnosis Songs Management and HSM’s majority owner Blackstone to agree an orderly termination of the investment advisory agreement.
“HSM’s founder Merck Mercuriadis went from being the star of the show, using his extensive network of contacts to strike royalty deals, to being the villain.
“An independent report last month concluded that HSM used revenue recognition policies and accrual estimates that led to the material overstatement of revenue and earnings. It also found HSM presented greater ownership and administration rights in music assets than the trust actually held, among other negative factors.
“Understandably, the relationship between the trust’s board and HSM is frosty to say the least. Industry analysts said it was not a case of ‘if’ but ‘when’ HSM would be fired as investment adviser. Mercuriadis has his reputation to protect and is unlikely to let go without a fight, so sit back and wait for the post-credits scene to unfold.”
Easyjet
“Narrowed first-half losses can be chalked up as a result for EasyJet – given the inherent seasonality of holidays means airlines often lose money in the winter months and make up for that over the summer.
“True, these figures were somewhat obscured by the timing of Easter but on the flipside the company also took a hit relating to the conflict in the Middle East.
“Consumers still seem to be willing to prioritise travel with the disposable income they have and by boosting capacity and rolling out its package holidays venture, EasyJet has positioned itself to take advantage of this trend.
“At what point people’s willingness and ability to spend money on a week in the sun dries up remains to be seen and this, along with pressures around the industry’s environmental impact, are the obvious clouds on an otherwise sunny horizon for EasyJet.”
Deliveroo
“Deliveroo is seeing growth in transaction value and revenue with international markets, making a strong contribution to overall growth. The company is notably sticking with its guidance despite operating in a market with robust competition, but there are signs it is losing ground to rival Just Eat Takeaway in the UK. If you compare the latter’s update with Deliveroo’s today, gross transaction value growth was slightly lower.
“The company’s take rate – or in other words, the amount it makes from each takeaway order on the platform – has stabilised but is still down year-on-year, which hints at these competitive pressures.
“The problem for Deliveroo is not just that it is scrapping with several others for a piece of the same pie but that the pie is getting smaller as people become less willing and able to splash out on regular takeaways.”
Dunelm
“Dunelm has transformed itself into a really sharp retail operator over recent years but that does not mean it is immune from the vagaries of consumer demand.
“Homewares are somewhat down the priority list when people are looking to allocate their pressured household finances and the property market remains shaky, with the scaling back of expectations for interest rate cuts doing nothing to help matters.
“So, while third-quarter sales were decent, taken as a whole, March saw an appreciable slowdown and guidance for full-year profit to be ‘broadly’ in line with expectations could be taken as a mild profit warning.
“When it comes to the factors the company can control, Dunelm is doing the right things and is showing no signs of panic despite volatile trading conditions. It continues to invest in a digital platform which has already seen vast improvement in recent years and is pressing ahead with its store roll-out programme.”
These articles are for information purposes only and are not a personal recommendation or advice.