The FTSE 100 dipped in early trading in stark contrast to the fireworks seen on Wall Street late last week.
The US rally was supported by weaker-than-anticipated US jobs numbers which helped dial down fears about an imminent rate hike from the Federal Reserve.
The Iran conflict remains a key source of concern for markets with a lasting resolution seeming a distant prospect at this point. Tehran has apparently resisted direct negotiations with Washington over a reopening of the Strait of Hormuz until several conditions are met.
A drop in US Treasury yields off the back of last week’s jobs numbers supported gold. Investors often turn their back on gold if interest rates are expected to go up a lot as that makes cash more attractive than the precious metal which offers no yield. Reduced expectations for interest rate hikes can have the opposite effect, with investors looking at gold once again. Also currently working in gold’s favour are ongoing tensions in the Middle East as investors seek assets that have historically held their value in uncertain times.
Miners did much of the heavy lifting in London, with housebuilders and data and software companies among those on the back foot.
Vistry
Vistry boss Adam Daniels must be wondering what he has walked into, having taken over the helm a little less than four months ago.
The business was already suffering thanks to cracks in the foundations of its regeneration and social housing focused model and due to accounting failures in its Southern division. There might now be a new challenge.
Reports suggest leading credit insurer Allianz Trade is reducing the cover it extends to Vistry’s suppliers. Suppliers use credit insurance to protect themselves against the risk customers might fail to pay for goods and services.
If they can’t get cover then suppliers might demand they are paid upfront, which could put further pressure on Vistry’s cash flow. Allianz Trade is not the only insurer out there and reportedly these new credit limits only apply to new trading agreements.
Vistry has responded to say the supply chain continues to be substantially covered by credit insurance and says it has seen no interruptions and is not aware of any supplier withdrawing its trade from the company.
However, the share price reaction shows investors are concerned and this will only ramp up the pressure on the company to pay down debt as it looks to weather a tricky period for the property market.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
