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The FTSE 100 was firmly higher on Monday after the market took reassurance from Friday’s reading of US inflation, says AJ Bell Investment Director Russ Mould.
The fact the PCE number – closely followed by the Federal Reserve when making interest rate decisions – came in bang in line with expectations helped create a positive mood on Wall Street which largely carried into trading in Asian markets overnight and, in turn, European shares this morning.
Gold prices continue to mark new records, with expectations for further rate cuts from the Fed supportive given the precious metal does not offer income. Now above $3,800, gold has also been boosted by central bank buying over several years, weaker demand for traditional safe havens like US government bonds driven by concerns over US deficits and trade policy, dollar weakness and geopolitical tensions, including conflicts in the Middle East and Ukraine.
The threat of a shutdown in Washington, as policymakers engage in tense negotiations ahead of a deadline at midnight on Tuesday, is yet another factor driving support for gold.
Strength in precious metals prices helped lift shares in miners like Endeavour and Fresnillo in London, with gains seen in the insurance sector too. BP was the biggest faller, seeing modest declines as oil prices fell on the resumption of crude exports from Kurdistan."
GSK
It can never be great for a CEO’s ego when a share price goes up on news of their departure, but that’s what has happened to GSK chief executive Emma Walmsley this morning.
Walmsley has been patiently leading a turnaround of the pharmaceutical giant almost ever since she took over in 2017 and she can point to real evidence of progress, including the spin-off of consumer health arm Haleon.
However, litigation issues over Zantac and setbacks for its vaccine business – notably GSK was considered to have much more vaccine expertise than rival AstraZeneca before the pandemic – have held the business back.
Using the ultimate arbiter, GSK has achieved a total return of around 30% since Walmsley took charge compared with more than 180% for AstraZeneca. In this context there may be some eyebrows raised at an internal appointment being selected to take over in the form of current chief commercial officer Luke Miels, particularly given his tenure largely matches his current boss.
While it may not be reflected in the share price, Miels could be grateful in the longer term for the progress Walmsley has made in the background.
AstraZeneca
Although there has been no suggestion that AstraZeneca is imminently going to up sticks and move its primary listing from London, there may be some nervousness this morning around the risk that the UK market might lose one of its largest constituents.
While there is logic to shifting to a direct listing in the US rather than American Depositary Receipts beyond setting up for any longer-term moves, it does at least hint at the possibility of a more dramatic shift at some point in the future.
Big investors could well end up asking questions about AstraZeneca’s ultimate intentions ahead of a vote on the change later this year.
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...
