Markets tread water ahead of rate decisions, UK housing strength faces big test, TI Fluid is latest UK takeover target and Playtech shares jump

“Markets have not shown any panic after yesterday’s apparent assassination attempt on Donald Trump,” says Russ Mould, investment director at AJ Bell.

“Futures prices imply a fairly muted session when Wall Street opens on Monday, while there were only minimal changes to the major equity indices in Asia and Europe.

“The key focus for investors this week is the scale of any interest rate cuts by the Federal Reserve. A quarter percentage point would be seen as the Fed starting a ‘softly, slowly’ path to easing monetary policy in light of concerns about a weaker jobs market. However, traders are increasingly focused on a bigger cut, with a 59% probability of a half-percentage point reduction at the meeting.

“There have been suggestions that the Fed has been too slow to act, but it treads a fine line with regards to playing catch-up and going in too hard with rate cuts.

“A half-percentage point cut would show it is serious about making things easier for consumers and businesses, in the hope they spend more money. However, some investors might take such a move to be a signal that the Fed is really worried about the state of the economy. Therefore, it’s hard to predict with confidence how the market will react if the Fed does push through a half-percentage point cut.”

Housebuilders / UK house prices

“The 0.8% increase in average house prices for September is double the long-term average, according to Rightmove data.

“Unfortunately, a strong start to the autumn housing market wasn’t enough to trigger a rally in housebuilding shares as there are plenty of headwinds on the horizon. The likes of Barratt, Persimmon and Taylor Wimpey barely moved on the news.

“Their valuations are more likely to be driven upwards by Bank of England interest rate cuts and Labour accelerating its pro-housing policy decisions.

“Traders believe there is a 61% probability of the Bank of England keeping rates unchanged at its meeting this Thursday. Nervousness around the scale of changes to personal finances from next month’s Budget could make some prospective buyers think twice about wanting to move house in the near-term.

“Many individuals might be waiting for mortgage rates to come down a lot further, and/or to get clarity over any changes in the Budget that affect their money before committing to a house purchase or sale.”

TI Fluid Systems

“Another day, another bid approach for a down on its luck UK company. This time TI Fluid Systems is in the crosshairs with Canada’s ABC Technologies putting out the loaded statement it is ‘considering its position’ after having two initial bids rebuffed.

“TI Fluid Systems has struggled to make much headway since its 2017 IPO, not helped more recently by the uncertainty in the automotive market where regulation is pushing for a transition to electric vehicles but consumer demand isn’t keeping up.

“This makes it difficult for TI Fluid’s clients to make investment decisions, even if TI Fluid has worked hard to make itself ‘propulsion agnostic’ – i.e., it doesn’t matter if the demand comes from EVs or traditional petrol vehicles.

“Against this backdrop, shareholders may conclude they are best taking the money on the table from ABC, but this would mean a further thinning of the ranks of a UK market which has been picked apart in recent years by overseas predators.”

Playtech

“You can see why gambling software firm Playtech is considering getting shot of its consumer facing Snaitech business, based on today’s trading update. The business-to-business arm is the one driving earnings to be slightly above expectations for 2024 – supported by good growth across the Atlantic and tight cost control.

“Snaitech, over which discussions continue about a possible sale to Flutter, faces the vagaries of the betting market and, specifically, was hit by some punter-friendly sporting results in Italy at the start of the year.

“Playtech has also settled its issues with Mexican partner, Caliplay – which at one point saw the latter taking legal action to try and annul the relationship.

“Playtech will get some backdated payments, the right to dividends from its material stake in the venture and enter a revised software services agreement. Investors will likely see this as a good outcome which will allow Playtech to tap into potential growth in the Mexican market.”

These articles are for information purposes only and are not a personal recommendation or advice.