Oil prices continue to ebb and flow as the narrative around the Iran war takes endless twists and turns.
Brent crude has put on $10 in less than a week, which is a significant move, with the black stuff now trading just below $89 a barrel.
It’s troubling but not enough to cause panic. Instead, it’s knocked the wind out of investors’ sails and left European markets drifting sideways.
The FTSE 100 dipped 0.2% as strength in energy stocks was offset by weakness in consumer cyclicals and industrials. Steam engineer Spirax fell 10% as investors were disappointed by the lack of upgrades to earnings guidance in its half-year results.
Investors might be frustrated with the lack of progress with Middle East peace talks, yet that hasn’t banished their risk appetite completely.
There was significant demand to back Intel’s latest fundraise despite ongoing worries about excessive spending on all things AI and questions about the pace and scale of financial returns on investment from some of the world’s biggest tech companies.
Intel set out to raise $15 billion but ended up getting $20 billion as investors were more than happy to support its expansion plans. This suggests there is a segment of the market that believe names like Intel should make hay while the sun shines.
Shein
Investors have been waiting for Shein’s IPO for longer than the Number 9 bus. Now it looks like the much-hyped event is about to happen, and the timing is interesting.
Reports suggest Shein is targeting a significantly lower valuation than its post-pandemic glory days. This is likely to reflect increased competition, a shift in the tariff and tax regime, and pressure on margins.
Once seen as the most disruptive force in global retail, Shein has lost its shine in recent years.
Reports suggest it could float in Hong Kong next week and that will be a major test for how investors now view the company.
Some investors wouldn’t touch Shein with a barge pole given ongoing concerns around business practices and governance standards. But others might be interested if the price is right.
InterContinental Hotels (IHG)
A combination of World Cup fever and resilient demand from affluent customers has helped InterContinental stand tall during a difficult period for the broader travel and hospitality sector.
However, with revenue coming in short of expectations, growth slowing in the second quarter and with the company warning about the continuing impact of the Middle East conflict, some investors checked out of the shares in the wake of its results.
IHG benefits from having a diverse mix of different hotel brands across the globe which typically allows it to offset weak performance in some areas with stronger showings elsewhere.
The hotels group is continuing to expand at pace, benefiting from its capital-light model. Because the business only owns a small proportion of its hotels and instead focuses on franchising and managing premises, it can generate strong margins and grow without employing lots of capital.
The continued roll-out of new rooms, allied to a generous hike in the dividend and the large ongoing share buyback programme, offers a clear indication of management’s confidence in the long-term outlook, however clouded the short-term picture is by geopolitical worries.
Bellway
A resilient full-year performance from housebuilder Bellway was overshadowed by recent trading which suggests future performance may be on shakier foundations.
The company is doing what it can in the face of difficult market conditions. Strong cash generation is enabling it to bolster its balance sheet while still returning funds to shareholders through buybacks.
However, the company had to pursue lower margin bulk sales to help deliver on its volume targets and there are clear signs of demand softening in recent months, with the forward order book shrinking substantially.
Like the rest of the sector, Bellway could do with some relief in the form of lower mortgage rates and easing build cost inflation, but this looks a distant prospect.
Management may pin their hopes on state-backed initiatives to provide some support with some reports suggesting the Help to Buy scheme might be revived. Bellway and its industry peers will be closely watching October’s Budget for any news on this front.
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...
