Daily market update: Novo Nordisk, Beazley, Watches of Switzerland, GSK

The dust settled on Wednesday after a dramatic session for tech-related stocks amid new AI disruption.

A lot of the focus since the AI theme emerged has been on the winners and while there has been attention on potential losers from the proliferation of artificial intelligence, this part of the story has mainly stayed in the background.

That changed on Tuesday when a raft of data and software businesses endured double-digit share price losses on the launch of a new suite of tools from AI outfit Anthropic for the legal sector.

RELX has a large presence in the legal space and was in the teeth of the resulting storm. It was among several names to endure double-digit declines as investors weighed the wider implications. To what extent AI can disintermediate traditional data analytics and software firms is not yet clear, but a lot of investors weren’t sticking around to find out.

Concerningly for the likes of RELX, London Stock Exchange, Rightmove and Sage there’s little sign of a share price recovery today, with bargain hunters not tempted to step in.

The market wasn’t troubled by guidance for a dip in annual earnings at SSE, instead focusing on the more significant news that its massive multi-year investment programme is on track. Delivering on this programme and its associated growth potential is far more relevant than a single year’s earnings per share.

Novo Nordisk

The weight-loss drugs market has exploded in what many people are calling the biggest opportunity in the healthcare industry for decades. Even though the market is dominated by just two players, one of them is feeling more pain than gain.

Novo Nordisk has fallen behind with efforts to improve the efficacy of its treatments, leaving Eli Lilly to gobble up market share. Drug prices are coming down more broadly across the areas in which Novo specialises, and competition is growing.

It has put the company in a difficult situation, and investors are unhappy, particularly as the healthcare sector more broadly has enjoyed a strong rally since last summer following three years in the doldrums.

Novo Nordisk’s shares were in the emergency room after crashing 17%, putting even more pressure on management to resuscitate the business.

Beazley

It was clear from previous statements that Zurich was determined to own Beazley. Having done the M&A dance for some time and tried its luck with various proposals, Zurich has finally offered the right number to win over the target’s board. There is always the right price for everything, and Zurich appears to have found it.

Zurich now needs to make a formal offer, and it looks the deal could be sewn up in a jiffy. An approximate 60% bid premium is higher than the average bump on UK takeovers in any of the past five years and could be sweet enough to win over shareholders.

The downside for the UK stock market is the potential loss of another major financials business, and one that has generated significant returns for investors over the years.

Watches of Switzerland

There is a touch of class to Watches of Switzerland’s trading update as the luxury goods market regains its poise. Demand for fancy watches has been good enough for the retailer to upgrade sales growth guidance. North America is humming along nicely for the group, and the UK is also looking sweet.

It feels like Watches of Switzerland is getting back on top after a post-pandemic wobble. In recent years it has faced a multitude of headwinds, from wealthier individuals paring back spending and weaker than expected tourist spending in the UK, to competition from the second-hand market and a period where tariffs were high on certain timepieces it sold in the US. The tone is now more upbeat from the company as it navigates challenges and the backdrop improves.

The reason why the shares fell on the news is the updated margin guidance, which now lies at the bottom end of previous estimates. This has been driven by investments in the business, product mix and some bad debts. A weaker dollar is also unhelpful given it reports in sterling. It’s clouded what is otherwise a reassuring performance.

GSK

The first set of results under new GSK boss Luke Miels can hardly be said to have made much of a splash but that may be no bad thing as far as he’s concerned.

The numbers are solid enough – sales rising and returns to shareholders continuing at pace even if earnings were a touch off expectations. Plus, there were no alarms on the outlook as GSK stuck with 2026 guidance.

This low-key start gives Miels space to chart out a course through what could be some choppy waters ahead as GSK faces the task of delivering commercially successful new drugs to make up for impending patent expiries, all while delivering on demanding growth targets.

Predecessor Emma Walmsley did set things up nicely for Miels in one sense, with GSK achieving five new drug approvals in 2025, all of which have significant potential. However, delivering on this potential will not be easy and the decision to set a £40 billion revenue target for 2031 also leaves Miels a hostage to fortune.

Reports suggest he may target M&A as he looks to augment GSK’s growth – with a focus on under-the-radar pharma and biotech names. While this sounds distinct from the sort of transformational acquisitions which often trip companies up, any acquisition strategy comes with risk.

GSK shares have recovered from last April’s lows but if you zoom out it’s still been left for dust by its closest peer AstraZeneca. Up until 2019 the two companies had a broadly comparable market value but that has changed dramatically in the intervening years.