“Stocks are up, the Vix volatility index is easing back, and US and UK government bond yields are falling. It’s as if everyone has forgotten about the gloomy outlook and instead regained an appetite for risk,” says Danni Hewson, Financial Analyst at AJ Bell.
“How long this party lasts is another matter as we’re about to enter the next earnings season and there is a fear that market expectations for sales and profits are too high, which means many companies could shock when they report.
“Next week we’ll get insight into the state of the consumer via results from PepsiCo and Walgreens Boots, together with a broader view of individuals and businesses via results from banking groups including Citigroup, JPMorgan and Wells Fargo. Any negative news from these names will cast a very dark cloud over the rest of the earnings season.
“It’s not often that Legal & General has to calm investors’ nerves, given it is meant to be a steady as she goes type of business. Its shares enjoyed a relief rally after reassuring the market that it hasn’t been a forced seller of gilts or bonds, and that it continues to have a good solvency coverage ratio.
“It’s been a while since Made.com’s shares rallied and so a 22.7% jump is worth noting. The troubled sofa company has been searching for a buyer and says talks have begun with several interested parties. A bidder will need deep pockets as the main reason why the business is up for sale is because of the difficulties in raising the level of finance needed to put the group on the right path to sustained profitability.”
“Being accused of poor business practices on primetime TV is never a good look and it’s no wonder that shares in Drax have fallen nearly 7% after the BBC investigation broadcast last night.
“The renewable energy producer was accused of chopping up wood from primary forests in Canada, despite insisting that it only used offcuts and sawdust from timber yards and diseased trees to make wood pellets to fuel its power stations.
“Many investors will have bought this stock thinking it had good ESG principles, but the TV programme would suggest otherwise.”
“Royal Mail has been rocked by employee strikes and things are only going to get worse given the timetable for further picket lines throughout October and November. It’s no wonder the group is desperate for the market to understand there is more to its business than simply delivering letters and parcels in the UK.
“Its overseas arm GLS has become increasingly important to the group’s earnings and that’s why the corporate name has changed to International Distributions Services, in the hope that people will stop thinking of the business simply as a fleet of red vans and workers in shorts pushing energy bills through doors. It’s not the snappiest of names and one wonders if Irregular Delivery Services might have been a more appropriate moniker.”
“For investors in Greggs, today’s update was comfort food akin to one of their sausage rolls. Despite all the pressures on consumers and a backdrop of rapidly rising costs the company is maintaining its guidance.
“New chief executive Roisin Currie had a hard act to follow when she stepped into the shoes of Roger Whiteside, but she deserves a pat on the back for delivering such resilient performance. In particular, the ability to keep a lid on inflationary pressures is some feat and suggests the company has managed its cost base effectively.
“While August suffered a little on an annual comparison thanks to people going abroad for holidays this year rather than staying at home, reassuringly September has seen a pick-up in business.
“Greggs is not resting on its laurels, investing in things like the automation of pizza production to help drive further efficiencies, broadening its plant-based range and continuing with its ambitious roll-out plan.
“The coming months will be a real acid test for Greggs as a proposition. Will people see it as an affordable option? Or will consumer spending be so pressured that sales dwindle? The trick is to keep selling products at attractive prices without sacrificing margins too much.”
These articles are for information purposes only and are not a personal recommendation or advice.