“After a see-saw start, the FTSE 100 was broadly unchanged in early trading with UK stocks treading water ahead of US jobs figures later on,” says AJ Bell Investment Director Russ Mould.
“The US market was closed yesterday for former president Jimmy Carter’s funeral so the only direction for UK shares came from Asia which saw mixed trading.
“A better-than-expected non-farm payrolls reading later would only reinforce the sense that US rates will stay at or near current levels for longer. NFPs always cause a bit of a splash anyway as the earliest release based on hard data to provide a barometer of the health of the world’s largest economy.
“In London, miners led the way on Friday, while Sainsbury’s was the latest retailer to get a bashing on its festive trading statement. This reflects the difficult UK backdrop, with gilt yields on the rise and the pound under the pump.”
Sainsbury’s
“Sainsbury’s has come on leaps and bounds with its grocery operations in recent years, fighting off the competition from Aldi and Lidl at the discount end and enticing people at the upper end from Waitrose.
“Its price points have struck a chord with shoppers, both those looking for a bargain on staples and those who want good quality items but don’t want to pay a pretty penny. Strategically, it is in a much better shape these days, but its situation is far from perfect.
“The story with Sainsbury’s is the same as it has been for the past year: Groceries are great, Argos less so. This would be fine if the supermarket chain wasn’t fussed with non-food interests, but Argos is a central part of its strategic growth plan so it has a problem on its hands.
“As it stands, the biggest part of its business is firing on all cylinders and the side attractions are the laggards, including clothing. Argos’ lacklustre performance has dragged for six consecutive quarters which in anyone’s book is a big warning sign.
“The backdrop is currently not supportive for Argos to thrive. Consumers are watching their pennies and non-essential items aren’t flying off the shelves. Quite how Sainsbury’s fixes the problem with Argos remains to be seen and it doesn’t feel like we will see a solution anytime soon.”
TSMC (Taiwan Semiconductor Manufacturing Company)
“Better than expected quarterly revenue from TSMC implies the AI boom is still running at top speed. This is effectively confirmation that money is still being thrown at AI left, right and centre.
“Companies across every sector imaginable have spent the past year or two looking at how AI can make their lives easier and orders for technology to support and facilitate AI-powered systems and services have been coming thick and fast.
“TSMC is the world’s largest contract chipmaker and its clients including Apple and Nvidia. The former is rolling out AI across its electronic devices and the latter is the market leader for chips to process information needed to make AI work.
“Just as Nvidia’s quarterly figures are a barometer of AI activity, TSMC’s sales and earnings are also crucial markers for the tech revolution. Therefore, the latest blockbuster quarter from TSMC could give the reassurance about the AI trend that investors want and need.”
Versace/Prada
“Times have been tough for the luxury sector and consolidation is inevitable. The sector has not been as immune to economic pressures as previously thought and the Chinese market, the engine of growth for lots of these brands and businesses, has proved much more difficult of late.
“In this context, consolidation is unsurprising and the latest chatter is that Prada is among the bidders for Versace – which has been put up for sale by current owner Capri Holdings. Capri also owns brands like Michael Kors and Jimmy Choo and there are even suggestions the whole group could be up for grabs.
“There are risks that a combination could only lead to double trouble but Versace is a brand with a storied history so you could see why Prada might want to bring it into the fold.”
Alliance Pharma
“The ranks of the AIM market will be further thinned as Alliance Pharma looks set to succumb to a bid from its largest investor.
“Alliance, which supplies over-the-counter drugs and has an international footprint, has had an up and down time as a public company and shareholders may welcome the opportunity to exit at a premium – even if the offer is some way below the shares’ 2022 peak.
“However, the departure of a profitable and well-established business is hardly good news for London’s challenged junior market.”
These articles are for information purposes only and are not a personal recommendation or advice.
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