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A big recovery in Asian markets helped give the FTSE 100 a lift as investors look to put a difficult week behind them.
Helping the market’s mood were signs that a trade agreement might still be possible between the US and China before the 1 November deadline, and slightly better-than-expected Chinese economic growth.
News the ruling party in Japan will sign a coalition deal, paving the way for Sanae Takaichi to become the country’s first female prime minister, has also been well received. Takaichi is widely seen as being business- and market-friendly and this breakthrough helped the Nikkei 225 surge to a new record high.
Futures prices implied a higher open on Wall Street as investors look to shrug off the concerns about the credit situation in the US which helped trip stocks up last week.
UK-listed banking stocks staged a modest recovery in early trading in London while Fresnillo was lower after gold prices fell from the all-time highs reached amid the recent stock market turmoil.
Legal & General nudged higher on news of its involvement in Sterling 20 – a partnership of UK pension providers committing to investing in the country’s infrastructure. It is committing £2 billion to areas including urban regeneration and affordable housing.
L’Oréal / Kering
Beauty and wellness are markets with significant untapped potential, and L’Oréal and Kering are teaming up to try and take advantage of this opportunity.
L’Oréal’s purchase of the House of Creed and the beauty and fragrance licences of Houses of Kering, including brands like Balenciaga and Gucci, should help bolster the company’s credentials in the high-end component of the beauty market.
For Kering, this is the first big move on the part of new CEO Luca de Meo, as he seeks to turn around the fortunes of the struggling luxury goods firm. Notably, it provides it access to L’Oréal’s logistics and distribution capabilities. It also allows the company to make a meaningful dent in its onerous borrowing pile.
Kering shares have already raced higher on de Meo’s appointment as investors took note of his successful spell leading a recovery at Renault – albeit in a different industry.
Longer term, there is a stated aspiration for L’Oreal and Kering to work together in wellness and longevity – the latter likely to become ever more prominent as technology develops and consumer appetite grows.
B&M
Dan Coatsworth, Head of Markets at AJ Bell, comments:
Just when it looked as if life couldn’t get any worse for B&M, along comes an accounting error which has ultimately cost the finance boss his job. The situation is highly embarrassing for the board and even worse for shareholders.
While CFO Mike Schmidt hasn’t been fired, there was no way he could have stayed with the company given the severity of the error discovered in the retailer’s accounts. He is stepping down and the search begins for a replacement.
Failing to recognise £7 million of freight costs is a major mistake and suggests that the business has poor financial controls. It’s inevitable that investors will now start to question if other accounting mistakes have been made.
The fact a £7 million cost issue has led to a £40 million downgrade to earnings guidance would suggest B&M’s margins are skinnier than some might have thought.
B&M recently announced a strategy reset and a series of initiatives to get back on top after a rocky period. These initiatives read like a beginner’s guide to retailing, begging the question why they weren’t implemented in the first place. Now we’ve had financial mistakes on top, so it’s only natural to wonder if the business has well and truly gone off the boil.
A big share price slump implies that some investors no longer want to hang around to find out.
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...
