Positivity around Tuesday’s record-breaking session on Wall Street, with the S&P hitting new highs, failed to make its way across the Atlantic on Wednesday.
European markets were in the red as the mood music continues to change daily. One minute investors are upbeat, the next they’re not.
Wall Street got a lift yesterday as investors resumed their bullish positioning ahead of the next quarterly earnings season. People are betting that the mega spending in AI is not letting up, and that inflationary pressures linked to a higher oil price won’t derail the tech-related good news.
In Europe, where there is a lower representation of AI-related names, investors are taking a more cautious stance. Oil prices remain above $100 a barrel and the inflation risks are clear to see.
Nonetheless, there is still plenty of good corporate news on both sides of the Atlantic that suggests non-AI activities are still robust.
Mid-cap defence products company Avon Technologies guided for full-year results to beat market expectations. Asset manager Bridgepoint upgraded its earnings guidance, while Hollywood Bowl implied its business was ticking over nicely. Frozen chip giant Lamb Weston beat first-quarter profit forecasts and raised its full-year outlook.
Shell
Shell upgraded its third-quarter gas production and implied its trading arm is enjoying another decent quarter following strong gains in Q2. Gyrations in the energy market amid ongoing fears about Middle East supply disruptions create the right kind of backdrop for commodity traders to make money.
This positive news has helped Shell become one of the top 10 best performing UK blue-chip shares so far in 2026. It’s also a reminder that the UK stock market might be full of ‘old economy’ companies, but these businesses are still relevant. It shows that AI is not the only way to make money on the markets.
Pennon
Pennon shareholders have been delivered a blow after the water company slashed its dividend.
Investors typically buy shares in utility companies for their dividends, seeing them as a reliable source of income and a bit of capital growth on top. Pennon has rebased its dividend by approximately 30% from the previous year, saying it will now target growth in line with inflation from the new lower level.
Investors are not going to like this news one bit, particularly as Pennon has gone cap in hand to ask them for more money. It is conducting a £550 million rights issue to help fund its investment programme to upgrade water infrastructure. While that should be to the benefit of the company longer term, many investors will only care about how much dividend cash goes into their pocket today.
Off the back of millions of pounds of fines linked to Pennon-owned South West Water and its poor water quality and environmental damage, it’s possible that some people will take the dividend cut as the final straw and close the taps on this investment.
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...