Markets Rally Towards Month End

Published on
  • Markets set to end month strongly.
  • Results season looks to be beating expectations.
  • Pearson continues to recover.
  • Marshalls lowers expectations as building slumps.
  • BT names Telia boss Allison Kirkby as new CEO.

Markets Rally To End Month Strongly

Friday night saw US equities making useful gains, especially in the tech-heavy Nasdaq market, where both Tesla (NASDAQ:TSLA) and Facebook-owner Meta Platforms (NASDAQ:META) jumped by over 4%. Enthusiasm was boosted by signs that US inflation and labour cost pressures were easing.

Bureau of Labor Statistics data showed wages growing at an annualised pace of 4%, while the Federal Reserve’s preferred inflation stat showed a rate of just 3%, the lowest reading for two years.

This buoyed hopes that the US economy might yet achieve a soft landing, despite the fastest and largest spate of interest rate hikes in decades. Optimism was further lifted by comments from Federal Reserve official Neel Kashkari that the inflationary outlook for the world’s largest economy is now “quite positive.

With the rally extending into Asia, where Chinese shares listed in Hong Kong proved especially strong, markets globally look set to deliver a strong return for the month of July, of almost 2% for sterling-based investors.

The UK market has participated too, with the FTSE All Share index delivering a return of 2.4% so far this month to leave the year-to-date total return, which includes dividends, just over 5% ahead.

Results Season Looks To Be Beating Expectations

With almost 70% of European companies now having reported their interim results analysts are crunching the numbers and coming out positive. Bloomberg strategists reckon that while economies may be slowing, half of companies reporting have beaten consensus expectations.

Margins are holding up better than seemed likely, today’s results from Spectris in the UK are a case in point. The UK-listed electronic controls manufacturer reported double digit profits growth boosted by a substantial margin increase after they initiated pricing increases and took market share.

Pearson Continues To Recover

Pearson plc (LON:PSON), one of the world’s leading educational and professional publishing houses continues to recover with the group announcing sales growth of 6% for the half year and margins were boosted by ongoing cost efficiency programmes.

Operating profits leapt 44% higher to £250m. Pearson CEO Andy Bird is confident of hitting full year expectations and, as so many chief executives seem keen to say these days, stressed the group’s existing strengths in deploying AI to drive the business forwards.

Marshalls Lowers Expectations

Marshalls plc (LON:MSLH) is one the UK’s leading producers of building materials and recently made a major expansion by acquiring Marley roofing products. Rising interest rates are taking their toll on construction activity though and Marshalls have today warned that their business is suffering.

Underlying sales are down 13% and half-year profits are now seen falling by a quarter as demand to new-build housing and discretionary markets like paving and garden stone projects fades. The group are battening down the hatches, making a further 250 roles redundant.

The group’s actions will conserve cash but also limit the level of sales margins that can be achieved for the rest of the year. The market reacted badly, marking the stock down 9%. Shares in other building-related businesses were hit too, with Travis Perkins notably weak, down some 3% in early trade.

BT Announces New CEO

Alison Rose might have stepped down as NatWest Group CEO last week, but the numbers of leading female FTSE 100 bosses is back up already, after BT announced that Allison Kirkby, currently the CEO of Scandi telco Teliawill be taking the top seat at BT when Philip Jansen steps down early next year.

Allison Kirkby has a long track record in the TMT sector, having worked at Virgin Media and Telia since 2010. Before that she qualified as a Chartered Management Accountant at Guinness in 1990 and has also held senior roles at P&G. Already a non-executive director at BT, Ms Kirkby intends to continue to execute the strategy already in place at BT.”

Article by Steve Clayton, head of equity funds, Hargreaves Lansdown