Markets avoid big sell-off on Russia mutiny, Aston Martin strikes EV deal with Lucid and Primark owner Associated British Foods lifts profit forecast

“The uprising in Russia could have sent shockwaves across equity and commodity markets but an apparent U-turn has meant only marginal volatility rather than a full-blown correction,” says Russ Mould, Investment Director at AJ Bell.

“Brent Crude had fallen by more than 4% over the past five days on fears about global economic weakness and how that would negatively impact demand. However, the oil price jumped 0.8% to $74.41 per barrel on Monday as markets contemplated a new period of uncertainty for supply.

“With more twists and turns to the Wagner mutiny than a theme park rollercoaster, markets aren’t ready to accept the drama is over, even though the rebel fighters have been stood down.

“Asian and European markets were weak on Monday, although one has to accept there were plenty of negative factors weighing on shares before the attempted coup in Russia, namely high inflation and further interest rate rises.

“China’s SSE index fell 1.5% after the renminbi hit a seven-month low against the dollar over concerns about the sustainability of the country’s post-Covid economic reopening, together with weak data on tourist spending. There are concerns over slowing growth and shrinking exports, issues that will no doubt trigger a new round of stimulus initiatives by the Chinese government.

“In the UK, the FTSE 100 fell 0.4% to 7,434, dragged down by weakness among banks and packaging companies.

“Cineworld dived 26% to 0.54p after confirming it was on track to go into administration and subsequently delist its shares from the London Stock Exchange. Neither event comes as a shock given this fits with previously announced financial restructuring plans and adheres to earlier warnings that shareholders would be left with nothing. Importantly, its cinema operating subsidiaries will continue to trade as normal.”

Aston Martin

“Aston Martin shares continued their strong run, now up more than 130% year-to-date. Driving the latest rally is a deal with US group Lucid to make high performance electric vehicles. Lucid is to supply powertrain components in exchange for $232 million cash and 28.4 million shares, making it a 3.7% shareholder in Aston Martin.

“It’s the latest in a string of strategic initiatives designed to make the iconic British car maker more relevant in the modern age, having recently struck a partnership with Geely to access technologies and components and have a bigger foot in the door in China.”

Associated British Foods

“There are a few factors underpinning the brightening outlook for Associated British Foods-owned Primark.

“At a time when people are really watching their pennies, its low-cost clothing is attractive. Particularly for those jetting off on holiday and facing a big cost to do so, who therefore want to refresh their summer outfits on a budget.

“The recovery of physical retail has also provided a big boost to a brand which only has a very limited web-based presence. It should not come as any surprise that when it comes to clothes, shopping in-store is a winner.

“After all, picking up an item, getting a proper sense of its look and feel and then trying it on in an actual changing room seems preferable to looking at an item on a screen, ordering it off the internet and then having to go to the faff of returning it by post or courier if it doesn’t fit right or look the same on you as it does on the internet model.

“The company is also pushing through some price increases and it’s encouraging Primark has the headroom to do so without damaging its value credentials. Particularly when, on a relative basis, it still looks cheaper than high street rivals.

“Longer term there remain questions about the sustainability of Primark’s supply chain and its somewhat disposable clothing options.

“Often neglected in the analysis of the wider group is the food business, which offers some diversification. This part of the business continues to perform well and the company continues to invest for future growth.”

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