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“More stable market conditions were welcome after the recent sell-off, with tentative signs that some investors might be shifting their mindset from panic to a state of calm,” says Russ Mould, Investment Director at AJ Bell.
“Nvidia was among the big names caught up in the sell-off and pre-market trading on Thursday showed a small rebound in its share price. However, many other big tech names including Apple, Amazon and Microsoft showed further declines in pre-market trading, suggesting it is too early to call a broad recovery in the markets.
“The major European equity indices on Thursday were essentially flat, which some investors might take as a positive given the volatile conditions we’ve seen in recent days. In the UK, the FTSE 100 saw gains from utilities, consumer cyclicals and real estate and losses from basic materials and healthcare. Several big-name stocks slipped back as they traded without the rights to their next dividend, including Aviva.”
FTSE 100 and 250 Reshuffle
“EasyJet saw a share price bounce as it escaped relegation from the FTSE 100. Having been on the list of potential stocks to be booted from the index, a small pick-up in its share price in the past few days was enough to help it cling on to its top 100 ranking in the latest quarterly index reshuffle.
“That will have caused FTSE 100 index funds who might have started trimming their positions in recent days to rebuy the shares.
“The key UK index changes which take effect from 23 September are Hiscox getting back into the FTSE 100, Burberry being kicked out, and tech firm Raspberry Pi making its FTSE 250 debut after a successful IPO in June.
“Raspberry Pi securing a slot in the mid-cap index is a big win for the company. It should help to put the stock on the radar of more investors and provides a much-needed addition to the small pool of tech stocks in major UK equity indices.”
Royal Mail / International Distribution Services
“The fact Ofcom is considering Royal Mail’s proposal to ditch Saturday deliveries for second class post will be music to the ears of Czech billionaire Daniel Kretinsky, who is trying to buy the parent company, International Distributions Services.
“It would be an important step in trying to make operations more efficient, something that is of paramount importance to ensuring the business is fit for the future.
“Normally this type of news would move the dial for the share price but the bid situation means the stock is unlikely to react to such developments. It’s not a done deal and Ofcom has stressed that, whatever the decision, Royal Mail still needs to improve its service levels.”
ASOS
“The latest update from ASOS may be driving the shares higher but it’s less a case of celebration than relief.
“The deal to sell most of its stake in the Topshop and Topman brands and a refinancing of its debts has helped ease the cliff-edge the company faced on £500 million worth of convertible bonds due in 2026.
“The price paid by an investment firm owned by Danish clothing group Bestseller for a three-quarters stake in Topman and Topshop indicates a valuation for the assets as a whole which is some way below what ASOS paid for them in 2021.
“This could end up being an attractive deal for Bestseller, whose CEO has a material stake in ASOS itself, given the recent appetite for nineties and noughties brands – a period which represents Topshop and Topman’s heyday.
“ASOS will retain some exposure through its remaining 25% stake and the net result is the company’s CEO José Antonio Ramos Calamonte has more breathing space to pursue his turnaround strategy.
“There is a mixed picture for the underlying business with sales for the year to the end of August flagged to come in below expectations but profit at the EBITDA (earnings before interest, tax, depreciation and amortisation) level set to come in at the top end of estimates.
“The company is pushing a new Test & React initiative which could enable it to compete with fast fashion rivals by getting new products on the site quicker. However, there are longer-term risks facing the wider industry if eco-conscious Gen Z consumers turn their back on disposable fashion.”
Associated British Foods
“Primark has had a good run but it is not immune to the vagaries of the British weather and owner Associated British Food’s year-end trading update reveals the retail chain has been hit by the soggy summer.
“Blaming poor performance on the weather may not be the greatest look but it is understandable that it will have had an impact on Primark given its reliance on footfall to generate sales in the absence of an online offering, beyond click and collect.
“The operation is at least benefiting from lower costs in some areas which are helping to increase margins, although in certain areas like wages and investment in technology, outlays have gone up.
“With Primark not firing on all cylinders you might expect the wider group’s diversified model to come into its own but the company is also facing pressure in its sugar business where falling European sugar prices are having an impact.
“Elsewhere, the ingredients and grocery units are picking up some of the slack and the overall messaging for next financial year looks positive. Underpinned by strong cash generation, the company was also able to signal some confidence in its prospects with a £100 million extension to its share buyback programme.”
Jet2
“Jet2 has earned a reputation for being one of the most reliable names in the travel sector.
“There is a lot of trust in the business and that’s helped it to increase market share over the years and become one of the big players in the lower-cost end of the market. Demand is typically robust and the business continues to do well.
“Unfortunately, that’s not enough for investors. They’re currently spooked by a lack of earnings visibility and it doesn’t look like the situation is getting better any time soon.
“The sector has suffered from consumers leaving it until the last minute to book their flights. That’s led to a price war among airlines. Names like Jet2 are still managing to secure customers, but not quite at the optimum price.
“The bulk of the summer season has been good for Jet2, with a bump in packaged holiday customers helping to offset lower ticket prices for flight-only travellers. Sadly, its clientele is more last-minute Larry than book-ahead Betty. There is no end in sight for this booking trend and so it’s uncertain how many bums on seats it will eventually get for the final few months of its summer season and for its winter period.”
These articles are for information purposes only and are not a personal recommendation or advice.
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