The UK market flat-lined after the Dow Jones Industrial Average posted its largest contraction of the year, sparking fresh fears of an impending global recession. As ever, we’re in danger of talking ourselves into one, but analysts tend to hit the panic button whenever the yield on US 10-year treasuries drops below the 2-year rate.
Equity investors would be well advised to think twice about exiting positions in risk assets even if valuations begin to fall back in response to a wider economic malaise. If you’re holding a solid portfolio you should be able to ride out market slumps, but it might pay to consider a more active strategy if your portfolio includes a hefty proportion of Small-Cap and/or Aim stocks. Any pull-back will be more pronounced at that end of the market.
It’s also worth remembering that UK equities are relatively cheap compared to many global markets. And if you don’t panic in the face of related paper losses, bear markets present increased opportunities to snap-up mispriced risk assets.
Anyway, for the moment all of this is theoretical. There are more prosaic problems on show. Take Rolls-Royce (RR.), which on top of further technical issues linked to its Trent 1000 engines, has received news that Moody’s has downgraded its long-term senior unsecured debt rating from A3 to Baa1. Click here to get Alex Janiaud’s rundown on the rating agency’s assessment.
Alongside publication of its half-year figures, Prudential (PRU) has confirmed that the de-merger of its UK business will complete by the end of this year. Click here to get Alex Newman’s assessment of the move.
Alex has also been monitoring the ongoing spat between Burford Capital (BUR) and Muddy Waters Research. The short-seller has produced a counter-response to Burford’s own defence, amid claims of market manipulation and creative accounting. Click here to see the last instalment of what promises to be a drawn-out saga.
The fact that Germany’s economy has snapped into reverse gives you an indication that not all is well in the auto market generally. Add in a couple of specific issues and it’s not easy to appreciate why UK forecourts have been struggling. Tom Dines has been assessing the effects of the industry slowdown on two UK operations, namely Lookers (LOOK), which has put meat on the bones following last month’s profit warning and Marshall Motor Holdings (MMH), which, according to Tom, has put in a relatively resilient performance.
Balfour Beatty (BBY) has delivered its half-year numbers to the market and they’ll be keenly anticipated given the state of UK construction. Nilushi Karunaratne has been reviewing the group’s performance, highlighting the transition from sales through to profitability. Click here to find if Nilushi thinks the group is successfully distinguishing itself “in an industry notorious for wafer-thin margins and overstretched balance sheets”.
With the prospect of choppy waters ahead, it’s little wonder that investors are showing renewed interest in precious metals. Gold has been generating column inches of late, but silver prices have also been edging up. The IC’s mining analyst, Alex Hamer, has been looking at Hochschild Mining’s (HOC) half-year results, which he believes are derived from “a different time in the precious metals world”. Click here to get Alex’s take on life at Inmaculada”.
