Daily market update: FTSE 100 dips, Marks & Spencer, Experian, Severn Trent

The FTSE 100 dipped on Wednesday as a lasting solution to the Iran crisis remained elusive.

The latest ultimatum to Tehran from President Trump has done little to quell investor nervousness and oil prices remain above the $110 per barrel mark.

US stocks fell on Tuesday as investors reacted to rising government bond yields which reflect growing fears about inflation and the knock-on effect on interest rates.

There was some modest relief on the inflation front as UK CPI came in lower than expected, but this relief is likely to be temporary unless the Strait of Hormuz can be reopened in the near future. Utility, mining, defence and energy stocks were the bright spots in London, while retailers were among those on the back foot.

Marks & Spencer

While Marks & Spencer’s full-year results undoubtedly bear the scars of the damaging cyber-attack that hit the company last year, an increase in the dividend and confidence in a return to growth in the current financial year has won investors over.

Although last Spring’s cyber-attack was a major incident which caused significant disruption, the crisis now looks more like a blip in a story of continuing recovery at Marks & Spencer. The food arm has been a consistent performer over many years and is now augmented by the full consolidation of the Ocado Retail business. There are lofty ambitions to take greater share in the UK grocery market, but the clothing business is now firing too.

The recent deal to acquire a logistics hub from ASOS is expected to double online fashion sales and further reinvigorate this part of the group. An overdue revamp of the company’s loyalty programme could also provide a useful boost across both food and clothing. Previously this did not match up to Tesco’s Clubcard or Sainsbury’s Nectar card as a way of driving repeat business, however the relaunched Sparks card looks better set up to deliver these benefits.

The consumer backdrop may be unhelpful, but Marks seems to be doing all that is within its compass to keep driving the business forward.

Experian

As one of the companies caught up in the data and software sell-off unleashed by fears of AI disruption earlier this year, credit rating specialist Experian may have felt it had something to prove to shareholders.

However, despite unveiling a new share buyback and beating expectations with its full-year results, weaker than expected guidance for organic revenue growth for the current year has put the shares on the back foot. Management has been explicit in saying there is some conservatism baked into this guidance as it eyes a tricky geopolitical backdrop, but investors were still disappointed.

The combination of concern about AI disruption and regulatory pressures in the US – where there has been talk of a cap on credit card interest rates – have meant it has been difficult for Experian to get the benefit of the doubt from the market.

There is also a competitive threat posed by Fair Isaac Corporation which is seeking to cut out the middleman and sell its credit scores directly to mortgage lenders. Experian and other credit bureaus have fought back with their own scoring system, VantageScore, but the situation is creating a cloud of uncertainty.

The company is adamant that AI can be a benefit to the business and boost margins as it allows for growth without an increase in headcount. For now, the jury is out and the market appears to be unconvinced.

Severn Trent

Severn Trent’s results got a clean bill of health from the market. The water sector’s name has been mud with the markets for some time but several businesses seem to be finding their feet again. That’s reflected in Severn Trent’s results which unveiled a meaningful increase in long-term forecasts under new CEO James Jesic.

Crucially, the company seems to have got pollution incidents under control and has delivered a decent increase in the dividend to reward shareholders for their patience.