- FTSE gets boost from miners, banks
- But confidence is brittle
- Asos CEO leaves unexpectedly
Sentiment dampened by competing inflationary forces
Equities in London are struggling for direction as a host of forces coalesce to dampen sentiment. Comments from Monetary Policy Committee member Michael Saunders in the press over the weekend pointed to a shift in thinking at the Bank of England towards an earlier increase in interest rates in a bid to slow inflationary forces, news which has given the pound a boost on currency markets this morning. Meanwhile, the oil price continues to rise - hitting its highest level in three years this morning, feeding into the inflationary effect and the energy price crisis is not going away with business calls for government support seemingly falling on deaf ears.
One thing the oil price and fears over interest rate rises has done is given the FTSE100 a lift this morning, driven by the fact that oil majors and banks occupy a significant proportion of the index.
But business confidence is draining away according to accountancy firm BDO’s Business Trends report which showed that the supply chain crisis coupled with rising inflation is hitting confidence. A PWC report also out today showed that consumer confidence is beginning to wane and has fallen to levels last seen in March, as the third national lockdown was coming to an end.
Read Neil Wilson’s market report for more on stagflation concerns.
With the inflation genie seemingly out of the bottle, companies with pricing power are likely to be winners in the months ahead. See this week’s in depth feature for an exploration of which companies are in the strongest position.
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Asos boss leaves with profit warning
A share price decline for online fashion specialist Asos (ASC) which coincided with the ending of the third national lockdown in the spring and has been hastened by the resurgence of high street shopping took a further lurch southwards this morning on the news that chief executive Nick Beighton has resigned with immediate effect. Beighton has been with the business for over ten years, the last six in the hot seat, and the fact there is no immediate replacement lined up suggests his departure was not planned in advance. A statement from the company, alongside results for the year to August, said its focus for the coming months would be on international expansion and the board wanted to ensure that ‘we have the right leadership in place for the next phase’.
Results this morning, brought forward by a few days, laid bare concerns over rising costs as the company warned of ‘notable headwinds’ in the coming months particularly around freight and labour costs. Nonetheless, performance in the 12 months to August was strong, buoyed by lockdowns for much of the period, with reported profits rising 25 per cent to £177m. But management is now expecting profits for the current year to be somewhere in the region of £110m-£140m, which is significantly below previous expectations in the market. Shares fell as much as 14 per cent in reaction but have since clawed back some of their losses.
UK mining company to list on Aim this month
Hemerdon tungsten and tin mine south of Dartmoor closed ignominiously in 2018 with contractors retrieving expensive equipment before the administrators rolled in. Now new owner Tungsten West says it is fixing the extensive problems at the operation and is listing on Aim this month. The company will have a market capitalisation of just over £100m when it goes public on 21 October, and will raise £39m by issuing 65m new shares.
Tungsten West aims to get Hemerdon back in operation next year, and has another £36m in debt and prepay financing to pay for this. Former owner Wolf Minerals, an Australian company, put £170m into the project but got the processing of the mine’s ore completely wrong and went bust in 2018. Tungsten West said it would put a “material proportion of [the] rebuild costs” to fixing the processing plant. AH
GSK's malaria vaccine green light
The World Health Organization (WHO) is recommending widespread use of a malaria vaccine from GlaxoSmithKline’s (GSK) among children in sub-Saharan Africa and in other regions with moderate to high transmission rates. The WHO announcement follows an ongoing pilot programme in Ghana, Kenya and Malawi that has reached more than 800,000 children since 2019.
