Daily market update: FTSE, GSK, BP, Reckitt, Burberry

“The FTSE 100 is the ultimate tease, once again flirting above the 9,000 level before taking a step back,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“What really matters is that the UK stock market is strutting its stuff and continuing to press ahead. It joined the rest of Europe by basking in the sun and trading higher than the previous day.

“The FTSE’s overall gain was all the more impressive when you consider that GSK was having a disastrous day and trying to be the mother of all anchors on the stock index. Shell and BP came to the rescue as they lifted the UK market up, with strong support from consumer giants Reckitt and Unilever.

“BP has struck a deal to sell its US onshore wind business to LS Power, marking its second asset disposal in as many weeks as the company tries to reshape for the future. Last week it bundled up various operations including 300 Dutch retail sites and 15 electric vehicle charging hubs in a sale to Catom. These are only small assets in the grand scheme of things, and it will take a lot more, particularly on a larger scale, to truly win back the market’s favour.

“Among mid-caps, Senior jumped 10% after selling its aerostructures business and announcing a small share buyback.”

GSK

“A troubling £3.8 billion has been wiped off the value of GSK after the US drug regulator cast doubt over its blood cancer drug, Blenrep, being approved for use. The FDA has voted against the proposed dosage from a benefit/risk perspective. It means the likelihood of Blenrep’s approval next week is looking extremely slim.

“There is always a high risk with drug developments and pharmaceutical companies are no strangers to setbacks. However, Blenrep was particularly important to GSK, with analysts forecasting peak annual sales in the region of £2.9 billion and the drug had one of the highest probabilities of approval in its pipeline.

“This situation, along with the prospect of new tariffs on drugs imported into the US, means GSK is suddenly on the sick bed. GSK has lost nearly a tenth of its market value in the past eight days, which is worrying for a company of its stature.”

Reckitt

“There will be some relief that Reckitt has achieved an exit from its Essential Home cleaning products business after recent market volatility threatened to derail the sale.

“The price tag seems roughly in line with what the market initially hoped Reckitt might be able to achieve – so it doesn’t seem like there has been a major compromise on valuation to get the deal across the line.

“More importantly, it allows the reshaping of the business to continue as chief executive Kris Licht seeks to focus on the company’s faster growing brands. These so-called ‘Powerbrands’ like Gaviscon, Dettol and Durex account for more than 80% of group revenue.

“Focus may now switch to the destiny of Mead Johnson Nutrition, the troubled infant formula business whose $18 billion capture in 2017 proved to be a disastrous deal, accounting for many of Reckitt’s current challenges. It remains a source of litigation risk, which in itself could make achieving any sale a tough ask.

“Reckitt also has to deal with the continuing challenge from shoppers trading down to supermarket own-brand or cheaper alternatives amid uncertain economic conditions.”

Burberry

“Burberry showed some signs it might be able to leave its recent chequered history behind as its latest update contained evidence of recovery.

“The company’s previous strategy of trying to find itself a place at the table in the very high-end luxury market proved ill-fated and that has left recently appointed CEO Joshua Schulman to try and get things back on track.

“His plan has been built on focusing attention on the brand’s traditional strengths in areas like outerwear and scarves, clearing excess inventory, cutting costs and investing in its digital platform. Having stabilised the business, there is evidence Schulman is beginning to gain some traction with his turnaround effort.

“Although sales are still declining, the rate of decline has slowed considerably and by more than the market expected.

“The problem is that Burberry is operating against less than favourable market conditions, so it could end up running hard just to stand still. It was notable to see the business acknowledge the challenging backdrop and its key Chinese market, in particular, remains under pressure.

“There has also been some speculation around the future of creative director Daniel Lee – a critical role in the business.”

These articles are for information purposes only and are not a personal recommendation or advice.