Join our community of smart investors

Today's markets: Stocks sell off, tax whammy, Dunelm shines & more

Shares in London started the day weakly
Today's markets: Stocks sell off, tax whammy, Dunelm shines & more

 

  • Stagflation fears haunt markets
  • Health and social care levy to hit workers and investors in the pocket
  • Dunelm crowns strong year with special divi

Euro stocks sell off 

European stocks saw brisk selling in early trade after a drop for Wall Street and a weak handover from Asia. All sectors in the Stoxx 600 are down in early trade and the major bourses trade -1 per cent to the downside. But it was another record high for the Nasdaq and again there is a slow growth feel to the stock market – things that don’t need cyclical economic growth doing well like Netflix – new all-time high – and Tesla. Cruise liners, casinos and Disney were the best performers though – signs that it’s not all doom and gloom with regards Delta and vaccines. Industrials were weak but so too some of the bond proxies like real estate and utilities as bond yields rose. The Dow fell 270pts to 35,100, while the S&P 500 declined 0.34% to 4,520. It seems like the kind of uptick in consumer spend and consumption into the back end of the year will not be as strong as thought due to delta. James Bullard, a relative hawk, said tapering should go ahead soon. US futures heading lower – definite pullback mode so watch out – question is how quickly the market is to buy the dip, so schooled in doing so it is.

Neil Wilson is chief market analyst at Markets.com

For his full market report, including comment on Bitcoin’s price movements, click here. 

Tax whammy for investors and company owners

The Conservative party has become the party of taxation. Some turnaround from the last several hundred years but the hammer blow of Covid-19 on the UK economy, the impact on the National Health Service and the longstanding problem of how to fund social care for an ageing population prompted Boris Johnson to propose an increase to national insurance payments by both employers and employees by 1.25 per cent yesterday. While the move has prompted outcry among the tabloids about the highest taxation burden in decades, investors were also perturbed by the increase in taxation on dividends, aimed at raising an extra £600m a year. 

This means lower rate taxpayers will pay 8.75 per cent tax on dividends from 2022, higher rate taxpayers 33.75 per cent and the top rate of tax payers will pay 39.35 per cent tax on dividends. The move will come as a particular blow to company owners who pay themselves in dividends but who may also be paying more National Insurance for their employees. 

Meanwhile, pensioners were dealt a blow this week when the government announced it was suspending the ‘triple lock’ guarantee for pensions rises for one year after a post-pandemic surge in wage rates - part of the formulation for pension increases meant pensions were in line for an increase of something like 8 per cent. The government pledged a 2.5 per cent increase for this year, or higher if the prevailing rate of inflation is above that level.

Dunelm enjoys consumer revival

Homewares specialist Dunelm’s (DNLM) results were a sea of green this morning with sales rising 26 per cent to £1.34bn, profits up 44.6 per cent at £157.8m and other metrics such as market share, active customers and digital sales growth (+115 per cent) also up strongly.  Shares rose almost 9 per cent in response - boosted by news of a special dividend of 65p which, on top of the normal dividend of 35p, takes the total payout for investors to 100p. Meanwhile management said that notwithstanding any supply chain issues, which is clearly not a given in the current climate, profits for the 2022 financial year should be modestly ahead of the current forecasts in the market. 

Halfords flags bike shortage

Cycling supply chain problems have triggered a bike shortage and dampened Halfords’ (HFD) sales growth, the car and bicycle retailer said on Wednesday, adding that such issues are expected to “continue for some time”. 

Total group revenues rose roughly a tenth year-on-year for the 20 weeks ending 20 August. Pointing to the “highly unusual sales patterns” of the pandemic-hit comparative period, Halfords noted that two-year sales growth stood at a more pronounced 18.7 per cent. The company attributed this improvement to the enhanced scale of its autocentres business, growth in retail motoring and growth in retail cycling.

But the supply squeeze was plain to see in the diverging performances of Halfords’ business units. While retail motoring sales rose more than a half on a like-for-like basis against FY2021 figures, retail cycling sales dropped more than a fifth.

Halfords said that kids and electric bikes have had a better ride in recent weeks, but availability has been particularly low in its adult mechanical category. Still, as the UK’s largest bicycle seller, it believes it is “well positioned to navigate these challenges”. HC

Sanofi bolsters transplant specialism with Kadmon deal

Sanofi (FR:SAN) has agreed to buy Nasdaq-quoted biopharma company Kadmon Holdings (US:KDMN) for $1.9bn, in a move that brings the French pharma giant a further bridgehead in its transplant portfolio. Kadmon’s Rezurock drug is an FDA-approved treatment for adults and children with chronic graft-versus-host disease after failure of at least two previous lines of systemic therapy.

Kadmon shareholders will receive $9.50 a share in cash. Bosses at Kadmon and Sanofi have unanimously backed the deal.

“Our existing scale, expertise, and relationships in transplant create an ideal platform to achieve the full potential of Rezurock”, said Sanofi’s executive vice president of general medicines Olivier Charmeil. This “will address the significant unmet medical needs of patients with chronic graft-versus-host disease around the world.” HC