Equities extended their rally for another day as investors lapped up the prospect of a major shift in US political influence and a sharp drop in the oil price.
Stock markets rallied around the world immediately after the US midterm election results for multiple reasons.
First, there was relief that Donald Trump didn’t look like he would contest the result. Second, there was an admission from the Republican camp that the Iran war cost them a clean sweep in the election.
That has raised hopes of a swift resolution to help the party save face, with Trump potentially eyeing an opportunity to take the credit if an end to the war leads to a big drop in energy costs.
Brent crude pulled back sharply on Wednesday, falling from $101 to $94 per barrel in just two hours as the market priced in a greater probability of a resolution to the Middle East conflict. That is a step in the right direction to help ease inflationary pressures, although oil would need to fall by quite a bit more to reverse the forecast upward trajectory of interest rates.
The Bank of England is widely expected to raise interest rates to 4% today, but expectations for future rate rises have started to ease back. Last week, the market was pricing in 5% rates by December 2027. Now it looks like rates might peak at 4.5% or 4.75% in the second half of next year.
It looks like BP snuck in just in time to strike a deal to sell a 5% stake in Norwegian oil and gas producer Aker BP for $1.06 billion. It’s a sweet move for BP as it further helps to reduce its debt and rebuild the balance sheet.
Next / ASOS
The affordable end of the fashion sector is keeping its chin up despite cost-of-living pressures on consumers. Both Next and ASOS have reported reassuring updates that imply people are still splashing the cash on new clothes. Admittedly, performance is slightly disjointed but the main thing for investors is that overall progress is being made.
Next’s UK operations were more ‘steady as she goes’ than strutting their stuff on the catwalk. Saving its bacon were overseas operations which delivered very strong growth. Geographic and product diversification is giving the company an advantage, meaning its fortunes aren’t solely dependent on own-brand products and its homeland territory.
ASOS is getting its act together again after a lengthy turnaround programme. It has returned to profit and made big strides in strengthening the balance sheet. That’s a much better position to be in, particularly as there could be challenging times just around the corner.
The prospect of a sharp increase in household bills for UK residents from January amid a higher energy price cap means that Next and ASOS will be praying for a bumper Christmas. Both companies are facing the prospect of a major downturn in trading from the start of 2027 if households find they have much less in their pocket after paying the bills. The government’s cost-of-living support measures announced in the Budget are helpful, but they won’t cover all the extra costs that households are having to stomach.
Diageo
Drastic Dave seems to be making a difference at Diageo. Shareholders were pleased to see the absence of bad news which has dogged previous updates from the drinks group in recent years.
Chief executive Dave Lewis is making tangible progress with stripping costs out of the business and positioning Diageo at more affordable price points rather than focusing on the high end of the market.
That’s not to say the job is already done. While the key North American market saw sales decline less than anticipated, they are still on a downwards trajectory. The lingering concern for shareholders, like a hangover you just can’t shake, will be that shifting drinking habits among younger people will have a long-term impact on demand.
For now, Lewis is delivering on the plan he has set out to the market. Rebuilding credibility with the market is important but eventually investors will want evidence that the company can get back on a sustainable growth path.
BT
BT is dialling up profit growth, with cost savings and improved take-up of fibre broadband helping the company to a strong first half.
Earnings and profit were both modestly ahead of expectations and this has sustained the recent momentum behind the share price which is now up by a third so far in 2026.
After spending billions on the rollout of its fibre network, this capital expenditure is starting to tail off and the largesse which saw the company spend heavily on sports rights in the 2010s is now behind it.
BT is benefiting from an improving competitive position in its Openreach fibre business thanks to rival Virgin Media O2 scaling back its own ambitions in this area.
Its retail business should be bolstered by the customers secured through the acquisition of TalkTalk, assuming the deal gets regulatory approval.
With a more focused BT taking shape, the company now needs to hit its ambitious cash flow targets to keep investors on side.
Vistry
The latest update from Vistry is a reminder of how much needs fixing in the business. Like a new build where the toilet doesn’t flush, the walls are cracked and the floors are uneven, there is a long list of problems for chief executive Adam Daniels to address.
Progress has been made on reducing headcount and simplifying the corporate structure and the company is sticking with its full-year profit guidance, but debt is creeping higher and transaction delays have put pressure on the order book.
Concern about the levels of debt outweighed the underlying progress, and while the shares have picked up from their lows, they are still trading 55% below their 2026 starting point.
A problem facing the business is the unhelpful backdrop, where rising borrowing costs are acting to depress demand and inflationary pressures are lifting input costs.
Unlike some of its peers, who are sitting on net cash, Vistry must face these challenges while carrying significant borrowings, which compounds the situation.
The recent grant from Homes England was a welcome boost and provided a measure of reassurance about Vistry’s future but there is still lots to do to get this ailing business back on track.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...