“The latest GfK survey on UK consumer confidence shows a fresh decline to -9 in June and leaves us without a score above zero since January 2016. This may help to explain the woes of many retailers but perhaps executives at (and shareholders in) the house builders need to start paying attention to this data too,” says Russ Mould, AJ Bell Investment Director.
The share bull market in the US has currently run for 3,399 days – just 53 days shy of the longest bull-run since the second world war of 3,452 days which ran between October 1990 and March 2000.
“General Electric announced the merger of its oil and gas operations with Baker Hughes in October 2016, when times were tough for oil services and equipment providers, and closed the transaction in July 2017, right near the sector’s lows. There now has to be a risk that it will undo that deal just as trading conditions start to improve, judging by today’s trading statements from FTSE 250 firms Hunting and Wood Group,” says Russ Mould, AJ Bell Investment Director.
“After a stumble in spring, amid the Cambridge Analytica data scandal and broader worries over regulation, trade and tariffs, technology stocks are surging higher once more. The Fang+ index in America, which consists of ten high-flyers in total, has just passed the 3,000 level for the first time. It took the benchmark just 1,365 days to get there after its launch at 1,000 in autumn 2014. By contrast it took the NASDAQ Composite 1,570 days to get from 1,000 to 3,000 between July 1995 and November 1999,” says Russ Mould, AJ Bell Investment Director.
“A vote of 6 - 3 to leave interest rates unchanged at 0.5% and Quantitative Easing (QE) unchanged at £445 billion suggests that the Bank of England is closer to the European Central Bank rather than the more aggressive US Federal Reserve in its outlook, with any tightening of monetary policy likely to come slowly and in modest steps,” says AJ Bell Investment Director Russ Mould.
“Second-guessing Tony Pidgley, chairman of Berkeley Homes, is usually unwise and investors appear to be taking his forecast that profits have peaked at the house builder more seriously today than when he first made it back in December,” says Russ Mould, AJ Bell Investment Director.
The FCA today released its Financial Lives survey of UK consumers’ attitudes to financial products.
“The latest promotions to – and relegations from – the FTSE 100 index come into effect today and investors will be intrigued to see how shares in both relegated firms are down in early trading. G4S is down 3% and Mediclinic down 1%. A glance at the promoted firms will show that GVC is up 1% to perhaps suggest there is a trading strategy that could be followed here, although a 3% fall in the other index entrant, Ocado, suggests that there isn’t such easy money to be found after all,” says Russ Mould, AJ Bell Investment Director.
“Sainsbury’s chief executive Mike Coupe may have been caught singing ‘We’re in the Money’ when his guard was temporarily down but Tesco boss Dave Lewis must be feeling equally pleased with himself after the first-quarter sales figures,” says Russ Mould, AJ Bell Investment Director.
“The US Federal Reserve’s determination to continue tightening monetary policy, via both higher interest rates and sterilisation of Quantitative Easing, is likely to make life more difficult for investors, if history is any guide, even if financial markets are largely still behaving as if improved returns on cash and increased borrowing costs poses little or no threat,” says Russ Mould, AJ Bell Investment Director.
“To the surprise of many, OPEC and Russia have stuck to the production cuts of 1.8 million barrels a day that they agreed upon in December 2016, even extending them to the end of this year, but all eyes are now on the oil cartel’s latest meeting in Vienna on 22 June, to see if Riyadh and Moscow in particular decide to stay with the status quo or start to nudge output higher,” says Russ Mould, AJ Bell Investment Director.
“It might not be a household name although a record of 39 consecutive increases of more than 5% in Halma’s annual dividend suggests that it should be, especially as this track record means the FTSE 100 firm is a good example of how a company that gets the basics right can reward patient investors,” says Russ Mould, AJ Bell Investment Director.
“Investors don’t appear to be overly worried about the latest state of affairs with international trade following the G7 meeting, given that markets in Asia and Europe move ahead on Monday. In the UK, the FTSE 100 moved up 0.5% in early trading to 7,718, helped by gains in utility, tobacco and financial stocks,” says Russ Mould, investment director at AJ Bell.
“At least the BT share price showed some mercy as it failed to bounce sharply upon the announcement that chief executive Gavin Patterson will step down later this year, but investors and the company’s board have finally decided it is time for new leadership,” says AJ Bell Investment Director Russ Mould.
“Today it is the turn of the National Audit Office to unpick and quantify the cost of the Carillion debacle,” says AJ Bell Investment Director Russ Mould. “The NAO hands out further criticism of the Government’s efforts to monitor the financial health of central government’s sixth biggest supplier by value, suggesting it did too little too late to properly monitor the risk posed by its reliance on Carillion and make appropriate contingency plans.”
“So much for claims last July from RPC’s chief executive officer, Pim Vervaat, that the plastics packaging specialist’s share price ‘significantly undervalues the performance to date and the Group’s future prospects,’ says Russ Mould, AJ Bell Investment Director.
“George Osborne received all sorts of criticism when he sold a 6% stake in Royal Bank of Scotland at 330p a share, for a £1 billion loss, back in 2015, so his successor Philip Hammond was always going to get a hard time if he sold any further Government holdings at less than the taxpayer’s 502p purchase price. Patriots may also be disappointed to note that the four lead investment banks who co-managed the deal were all American, although RBS may not have been too keen to work with direct local competitors such as HSBC and Barclays anyway,” says Russ Mould, AJ Bell Investment Director.
Influential Work and Pensions Committee chairman Frank Field MP has written to the trustees of the Dixons Retirement and Employee Security Scheme – the defined benefit scheme of Dixons Carphone – raising the issue of the balance struck between paying dividends and deficit repayments.
“The latest quarterly reshuffle of the FTSE 100 index is due to be calculated on the basis of closing market valuations on Tuesday 29 May and at the moment Ocado is poised to break into the UK’s corporate elite at the expense of support services firm G4S,” says Russ Mould, AJ Bell Investment Director.
“A sharp jump in Marks & Spencer’s shares this morning means that the retailer got its news management right, by releasing the details of big store closures ahead of its results, but the numbers themselves are nothing to be proud of and show just how much work there is still to be done,” says Russ Mould, AJ Bell Investment Director.
“The FTSE 100 continues to overcome investors’ concerns over the Brexit negotiations, a wobbly Government, indecisive central bank and modest UK economic growth as it reaches further new highs. There are three good reasons why the index could keep going, too, and launch a fresh assault on the 8,000 mark – although investors also need to be aware of the potential downside and what could still go wrong,” says Russ Mould, AJ Bell Investment Director.
“Investors appear to be taking today’s very cautious trading outlook from Ryanair in their stride, as the airline’s shares are gaining altitude in early trading. This may be a reflection of the company management’s long-term track record of getting it right and providing customers with what they want, hopes that the spat with the unions is over and that further consolidation in the airline business will help keep supply and demand in balance,” says Russ Mould, AJ Bell Investment Director.
Russ Mould, investment director at AJ Bell, looks at four factors that have helped power the FTSE 100 to record highs:
“Ocado’s fourth overseas technology partnership, with American grocery giant Kroger, is potentially the biggest of them all so far and this means more pain for the short-sellers who continue to question the lofty valuation attributed to the FTSE 250 firm’s shares,” says Russ Mould, AJ Bell Investment Director.
“Today’s decision from Culture Secretary Matt Hancock and Sports Minister Tracey Crouch to reduce the maximum stake on a Fixed Odds Betting Terminal to £2 is prompting a predictable degree of wailing from some bookmakers, although their share prices are proving relatively resilient,” says Russ Mould, AJ Bell Investment Director.
“The report prepared by the Parliamentary Business and Work and Pensions Committees on Carillion offers a clear analysis of what caused the company to collapse and offers a potent-looking list of potential responses, including a break-up of the big auditing firms, an overhaul of the UK’s corporate governance regime and how management teams are paid and reform of key regulators,” says Russ Mould, AJ Bell Investment Director. “The problem is that we have been here before. The debate over how companies are run and for whose benefit still rages on, with investors seemingly no better protected now than in the early 1990s, given that a FTSE 250 firm has just been able to go broke in plain sight.
“While no-one at RBS will be able to take any pride in yet another huge fine from a regulator, and shareholders can hardly be pleased that the firm’s book value is taking another hit as a result, today’s news that the bank has, in principle, reached a settlement with the US Department of Justice over the alleged mis-selling of mortgage-backed securities is likely to be taken as good news by the stock market for four reasons,” says Russ Mould, AJ Bell Investment Director.
The Bank of England’s Monetary Policy Committee has voted by a majority of 7-2 to maintain Bank Rate at 0.5%
“The Bank of England’s latest policy flip-flop has already hit the pound hard, and may not do much for the Old Lady of Threadneedle’s credibility either, but it could help bring utility and real estate stocks back into focus,” says Russ Mould, AJ Bell Investment Director.
“The natural temptation is to put the weak British Retail Consortium sales figures together with St. Modwen’s decision to sell around a quarter of its retail property portfolio and come up with yet further gloomy headlines – but perhaps investors need to think a little harder,” says Russ Mould, AJ Bell Investment Director.
“Oil traders may have seen President Trump’s decision to withdraw the US from the 2015 nuclear sanctions coming from some distance away but confirmation of the move and American plans to exclude OPEC’s third-biggest producer* from global markets is still giving a fresh lift to the price of crude,” says Russ Mould, AJ Bell Investment Director.
“The hit TV series Billions, which follows the fortunes of a New York hedge fund manager, has recently witnessed the death of a visionary entrepreneur when his new space rocket crashed to earth with him on board and you can’t help but wonder if the canny writers were having a gentle dig at Tesla’s Elon Musk,” says Russ Mould, AJ Bell Investment Director.
“Apple beat analysts’ forecasts for its second quarter, reassured on iPhone growth and upped its already massive cash returns to investors, by increasing its dividend and launching a new $100 billion share buyback scheme – but the fact that its shares rose only 2% after hours, shedding some of their initial gains, suggests that the tech firm has yet to convince everyone that it remains a growth stock rather than a more mature cash machine,” says Russ Mould, AJ Bell Investment Director.
“BP’s best operating profit since 2014 leaves the oil major’s shares trading at a five-year high as investors welcome the support the first-quarter earnings figures show for the company’s tempting dividend yield, even if there are still a few issues regarding cash flow, which still does not technically cover the quarterly shareholders payout,” says Russ Mould, AJ Bell Investment Director.
“Assuming the Competition and Markets Authority lets the deal pass relatively unhindered – and the manner in which it waived through the Tesco-Booker deal suggests it might – then the next decision that will follow the proposed Sainsbury-Asda merger is Morrisons’ competitive response,” says Russ Mould, AJ Bell Investment Director.
“Tuesday’s second-quarter figures from Apple have huge implications for both the company’s own shares, the wider technology sector and even the whole US stock market, as they may leave investors having to decide whether they are happy to swap state-of-the-art technological engineering for financial engineering,” says Russ Mould, AJ Bell Investment Director.
“One of the underperforming (and unloved) UK stock market’s redeeming virtues is its juicy dividend yield, some 4.2% on the FTSE 100, and income-seekers will be pleased to see a solid set of first-quarters results from oil major Royal Dutch Shell – not least as the company is the single-biggest dividend payer in the UK, with its forecast distribution representing around 13% of estimated payments from the FTSE 100’s members in 2018,” says Russ Mould, AJ Bell Investment Director.
“A small increase in margin debt in the USA suggests that investors may be finding their nerve again after a rocky spring, marked by fears over rising interest rates, inflation, trade wars and a wobble in tech stocks, but with the levels of borrowing against portfolios at near record-high levels some may see this as a danger sign rather than a good reason to plough back into American stocks,” says Russ Mould, AJ Bell Investment Director.
“Since the death of its legendary (and eponymous) founder in 1971, bookmaking giant William Hill has six different owners, including its current shareholders, and the acquisition of Sky Bet for £3.4 billion by Canada’s Stars Group, could again put the Hills name in the merger and acquisitions frame,” says AJ Bell Investment Director, Russ Mould.
“One year after launching his Debenhams Redesigned strategy, Sergio Bucher, the company’s boss, must be wondering what he has let himself in for by taking the job, as today’s first-half interims show falling profits, rising debt and a slashed dividend, while the departure of his chief financial office for Selfridges is hardly a vote of confidence either,” says Russ Mould, AJ Bell Investment Director.
“At first glance Unilever’s first-quarter update reads well with underlying sales growth of 3.4% and the launch of a new €6 billion share buy back scheme,” says Russ Mould, AJ Bell Investment Director.
“The rapid unravelling of the Klepierre-Hammerson-Intu love triangle deals a blow to those investors who feel the unloved UK real estate investment trusts (REITs) sector offers a nugget of value at a time when the FTSE indices trade within 10% of their all-time highs,” says Russ Mould, AJ Bell Investment Director.
“The big five banks all report first quarter figures over the next two weeks, starting with Lloyds on 25 April. This will be a telling period for the FTSE 100 overall because the index’s earnings progress in 2018 remains heavily reliant upon financials (notably banks), with a consensus forecast of a 30% increase in aggregate pre-tax profit underpinned by a 40% surge (or £10.6 billion) increase from the Big Five banks,” says Russ Mould, AJ Bell Investment Director.
“An acceleration in wage growth for British workers may put the Bank of England on a state of alert when it comes to the next interest rate increase but the nation’s retailers may be pleased to see it after a very difficult start to the year,” says Russ Mould, AJ Bell Investment Director.
Over a quarter of the FTSE 100 benchmark’s constituents are due to release figures or host their annual general meetings in the next two weeks and this could go a long way to shaping how UK equities perform in the coming weeks and months,” says Russ Mould, AJ Bell Investment Director.
What would have happened if investors had bought the world’s biggest companies at previous stock market peaks? (WARNING: It’s not pretty)
“There can be no clearer demonstration of how stock markets work – and how confusing they can seem – than today’s share price moves at online retailer ASOS and grocery giant Tesco. ASOS’ interim sales rose by 27% and the shares fell sharply. Tesco’s sales rose by barely 3% and the shares leapt to the top of the FTSE 100 leaderboard,” says Russ Mould, AJ Bell Investment Director.
“Spotify shares are trading some 17% above their $132 initial reference price after their first week on the public markets but even that gain pales compared to the 51% average leap over the same time frame at Twitter, Snap and fellow recent float Dropbox,” says Russ Mould, AJ Bell Investment Director.
“Investment legend Warren Buffett never tires of reminding investors that they cannot buy what is popular and do well, so by implication the best opportunities may lie with what is currently unpopular – and few if any sectors will be less popular than retail right now,” says Russ Mould, AJ Bell Investment Director.
The FCA has issued a Policy Statement detailing a number of changes being implemented as part of its Asset Management Market Study.
“As GVC’s acquisition of Ladbrokes Coral becomes effective leading to the cancellation of the target’s shares by no later than 08:00 on Thursday 29th, a 52nd founding member of the original FTSE 100 in January 1984 will disappear from view. Two more, GKN and Hammerson, are also both facing questions over their independence, after the bids from Melrose and France’s Klepierre respectively,” says Russ Mould, AJ Bell Investment Director.
“Next’s 54-page-long results release is a whopper but it is what is missing from the statement that matters more than what is in it – there is no profit warning, there is no dividend cut and there is no sense of panic,” says Russ Mould, AJ Bell Investment Director.
“Weak UK sales growth, disappointing cash flow and ongoing product availability problems mean that Kingfisher’s boss Veronique Laury has yet to fully beat the DIY expert back into shape,” says Russ Mould, AJ Bell Investment Director.
“Sherborne has built a formidable reputation for squeezing improved financial and operational performance from the companies in which it invests and Edward Bramson clearly feels that Barclays shares are going cheap, given the prevailing discount to the book, or net asset value. The question now is what the activist investor thinks Barclays should be doing differently and how he intends to get those views across to the bank’s boss, Jes Staley,” says Russ Mould, AJ Bell Investment Director.
“It was not for nothing that Micro Focus used to be nicknamed ‘Hocus Pocus Micro Focus’ by analysts in the 1990s, as a result of its volatile earnings and reputation for dishing out profit warnings,” says Russ Mould, AJ Bell Investment Director.
“It seems as if the preferred narrative of the new chair of the US Federal Reserve, Jay Powell, is that the US economy is getting stronger and that tighter monetary policy is required, via interest rate increases and further reductions in the size of the central bank’s balance sheet,” says Russ Mould, AJ Bell Investment Director.
“The combination of rising sales, a healthy jump in pre-tax profits, lower debt, an increased ordinary dividend and even a special dividend of 4p sounds very appealing but investors are still declining to stock up on shares in Morrison,” says AJ Bell Investment Director Russ Mould.
“Kinshasa is famous for hosting 1974’s heavyweight boxing match between George Foreman and Muhammad Ali but the Democratic Republic of Congo’s capital is now hosting a more delicate form of negotiation between President Joseph Kabila’s Government and the miners who work in the country. Randgold Resources has met with the President this week and discussions are set to continue as the DR Congo prepares to sign a new mining code into law,” says Russ Mould, AJ Bell Investment Director.
“The old saying about ‘profit is a matter of opinion but cash is a matter of fact’ is one that investors should always bear in mind, as it can help them avoid potential portfolio losers and find possible winners.
“A 14% increase in the total dividend to 71.3p a share means Intertek remains a member of the select band of 26 current FTSE 100 firms that has increased its shareholder payout every year for the last ten,” says Russ Mould, AJ Bell Investment Director.
“The most recent GfK survey on UK consumer confidence showed a reading of -10 for February, only just above the four-year lows reached by the indicator late last year, and this may help to explain the woes of retailers such as Toys R Us and Maplins (not to mention quoted companies such as Debenhams and Mothercare, whose shares are grinding relentlessly lower,” says Russ Mould, AJ Bell Investment Director.
“The absence of a special dividend for the first time since 2011, the appearance of further exceptional costs and an increase in the programming budget are all weighing on ITV’s shares today, “ says Russ Mould, AJ Bell Investment Director.
“Questions will be asked about the structure of 2012’s long-term incentive plan, the riches it bestowed upon management and how shareholders let it through on the nod, but Persimmon has gone a long way to calming at least one unhappy party by showering investors in the stock with a cash windfall of their own,” says Russ Mould, AJ Bell Investment Director.
“Hammerson’s full-year results show that not all real estate investment trusts (REITs) are equal, as the increase in its net asset value per share compares with the drop at Capital & Counties, outpaces the growth at Intu but lags the latest advance at Segro,” says Russ Mould, AJ Bell Investment Director.
“Willie Walsh and his fellow executives at International Consolidated Airlines are likely to be perplexed, if not downright irritated, by the bumpy reception given to the firm’s fourth-quarter figures and launch of a €500 million share buyback, but to many experienced investors the cash return may be as much of a red flag as it is good news,” says Russ Mould, AJ Bell Investment Director.
“The latest quarterly reshuffle of the FTSE 100 index is due to be calculated on the basis of closing market valuations on Tuesday 27 February and at the moment Royal Mail is set to make a return at the expense of real estate investment trust Hammerson,” says Russ Mould, AJ Bell Investment Director.
“HSBC has just shown its best growth in customer deposits and loans since early 2014 and shown its first increase in risk-weighted assets for four years, but the shares are down, as if investors are politely telling the new management team of chair Mark Tucker and chief executive John Flint not to get too aggressive when it comes to future expansion plans or even acquisitions,” says Russ Mould, AJ Bell Investment Director.
“A return to sales growth in the fourth quarter, increased cost-saving targets and a higher dividend are not proving enough for shareholders in Reckitt Benckiser, whose shares are the worst performers in the FTSE 100 in early trading” says Russ Mould, AJ Bell Investment Director.
“America’s Senate may have reached a deal to increase the national Government’s debt ceiling from its (already surpassed) limit of $19.8 trillion but the need to increase federal borrowing suggests that the foundations of the US economic recovery may be more precarious than they seem – especially as corporate and consumer debt is rising sharply too,” says Russ Mould, AJ Bell Investment Director.
“With Western market slang in mind it may be a bit unfortunate that on 16 February China will welcome the Year of the Dog, especially as the Shanghai Composite index has been caught up in the turbulence caused by concerns over US interest rates and the gradual withdrawal of Quantitative Easing by the US Federal Reserve,” says Russ Mould, AJ Bell Investment Director.
“Since the latest stumble in UK stocks appears to have taken its lead from overseas events, namely US wage inflation and the possibility of American interest rates rising more quickly than previously thought, it might be worth investors taking a global perspective,” comments Russ Mould, investment director at AJ Bell.
“For the last two years, Shell has been dogged by concerns that its annual dividend was at risk of a cut owing to the plunge in oil and natural gas prices but today’s full-year figures for 2017 should help to put such worries to rest, thanks to an extensive self-help programme and also a rebound in crude,” says Russ Mould, AJ Bell Investment Director.
“Retailers, restaurateurs and housebuilders (and their shareholders) will all be relieved to see an increase in both in the GfK headline consumer confidence figure and the major purchase sub-index for January,” says Russ Mould, AJ Bell Investment Director.
“The rise in the yield available from Government bonds has not happened overnight but it has finally started to draw investors’ attention in a classic case of ‘boiling frog’ syndrome: the water has been getting slowly hotter (bond yields going slowly higher), with the frog (or in this case investors) barely noticing at first, but the heat is now reaching a level whereby the first signs of discomfort are perhaps becoming evident,” says Russ Mould, AJ Bell Investment Director.
“This is a big fortnight for big oil. Royal Dutch Shell is due to report its full-year results for 2017 on Thursday, quickly followed by fellow majors Chevron and ExxonMobil on Friday and BP next week and each company will be delighted to see Brent crude trading around $70 a barrel and West Texas Intermediate around $65,” says Russ Mould, AJ Bell Investment Director.
The FTSE 350 stocks with the highest percentage of US revenues.
“Since the UK’s vote to leave the EU in June 2016 one straightforward trade has been ‘pound down, FTSE 100 up’ as a result of the high proportion of stocks with a big percentage of their earnings overseas. But the pound’s sudden surge could force a rethink and lead investors to focus on neglected plays on the domestic economy,” says AJ Bell Investment Director Russ Mould.
“Having been carried out by online grocer Ocado yesterday short sellers are being bitten by Pets at Home today, as the specialist retailer and provider of veterinary and grooming services reveals stronger-than-expected trading for the third quarter,” says AJ Bell investment director, Russ Mould.
“The stock market is currently taking a relatively relaxed view of the fifth major US Government shutdown since 1990 for three reasons,” says AJ Bell Investment Director Russ Mould. “None of the prior shutdowns lasted for more than 21 days, none of them derailed the major share indices in any way and there is clearly a belief that the Democrats and Republicans will reach agreement quickly to prevent any lasting harm being done to the services or to the economy.”
“All four leading US stock market indices – Dow Jones Industrials, S&P 500, Nasdaq Composite and Russell 2000 – continue to rack up a string of record closing highs. One common explanation for this is the potential benefits of President Trump’s Tax Cuts and Jobs Act and with the US corporate reporting season about to hit top gear we will find out whether investors’ lofty expectations are realistic are not,” says Russ Mould, AJ Bell Investment Director.
“If the Dow Jones Industrials rises by a further 1.3% to 26,450 by the close on Friday the headline US index will have generated its best return ever in the first year of any post-war President, something which Donald Trump may well be keen to crow about on Twitter,” says Russ Mould, AJ Bell Investment Director.
“Yield-hungry fixed-income investors will be concerned by gathering speculation about the supposedly imminent demise of the 30-odd-year bull run in bonds but today’s UK inflation figures will at least offer little new to frighten them or the Bank of England,” says AJ Bell Investment Director Russ Mould.
“While the recriminations are only just beginning, investors can immediately draw six lessons from the Carillion debacle which they will be able to apply to stocks from all geographies and sectors,” says Russ Mould, AJ Bell Investment Director.
“Brent crude oil broke through the $70 a barrel mark yesterday for the first time in over three years and it would be no surprise if private investors and professional money managers were to start revisiting the industry and its leading stocks if this price strength persists,” says Russ Mould, AJ Bell Investment Director.
“Today’s trading statement, which sees housing completions come in at the top end of management’s expectations and no repeat of 2016’s quality and customer relations problems, shows that Bovis is firmly on the way back under chief executive Greg Fitzgerald,” says Russ Mould, AJ Bell Investment Director.
“Investors are showing disappointment with M&S’ Christmas update, as Food sales fell for the fourth straight quarter and the decline at Clothing and Home reaccelerated, to leave the firm lagging the big supermarkets and leading specialist retailers in both categories,” says Russ Mould, AJ Bell Investment Director.
“A second straight drop in Sainsbury’s general merchandise sales will have knees knocking at investors in Marks and Spencer ahead of its festive update tomorrow but investors in the grocery giant will still be pleased to see an increase in overall like-for-like sales growth, good progress at Argos and a small upgrade to profit forecasts for the full year to March,” says Russ Mould, investment director at AJ Bell.