Blockbuster week for Asian markets, BP and Shell bounce back from oil price-driven sell-off and meat eaters out in force for Cranswick

“Having been one of the most unloved parts of the investment market for several years, investors have raced to buy Chinese shares in a blockbuster week for Asian markets,” says Russ Mould, investment director at AJ Bell.

“The fact the rally hasn’t run out of steam implies a sense of FOMO – fear of missing out on the big gains in Chinese shares we’ve seen in recent days.

“China’s CSI300 index has shot up by 15.7% this week. Hong Kong’s Hang Seng index was close behind, with a 12.9% weekly gain.

“A veritable feast of economic stimulus measures has led investors to take a more optimistic view of the earnings potential for Chinese companies and foreign ones selling into the country. Lower borrowing costs, smaller deposits for buying homes and more capacity for banks to lend money – these lay the foundations for greater economic activity among businesses and consumers.

“On paper, it looks interesting. But whether the desired results end up meeting investors’ expectations is another thing. China is notorious for throwing stimulus measures left, right and centre, and the success rate is patchy to say the least.

“The latest stimulus measures have boosted quite a few shares on the UK stock market because their fortunes are directly linked to China. This includes mining groups Glencore and Rio Tinto as investors hope that more economic activity in the Asian country will lead to greater demand for metals and minerals supplied by these businesses.

“Fashion group Burberry has also seen its shares jump this week, rising by 16% as Chinese consumers have historically been a major buyer of its clothes, and so greater economic activity could in theory see these individuals willing to spend more cash on its chequered wares. Burberry needs all the good news it can get, given how its share price had until this week been on a downtrend since April 2023 amid various setbacks to trading and strategy.”

Oil prices: BP & Shell

“Oil prices continued to be volatile after yesterday’s 2.5% decline amid fears that supplies could increase from the Middle East.

“There have been reports that Saudi Arabia and Libya could soon boost output which has triggered a sell-off in the price of oil, dragging the Brent Crude price down to $71 per barrel in the early hours of this morning. In July, oil was trading at nearly $88 per barrel – meaning we’ve seen a 19% decline in the energy price in just two months.

“Clearly that’s good for businesses as it cuts their transport and energy costs. It’s also good for the general public as it makes filling up the car a lot cheaper – in fact, it was only two days ago that the RAC said petrol prices had fallen to their lowest level for three years. They may now get even cheaper.

“What’s interesting is how shares in BP and Shell bounced back on Friday after yesterday’s big sell-off. That suggests investors have taken advantage of price weakness to top up on shares in the fossil fuel giants, perhaps eyeing an opportunity to lock in a decent dividend yield.”

Cranswick

“The UK still has a big appetite for meat despite growing popularity for plant-based food, judging by Cranswick’s trading update.

“Cranswick supplies all the major supermarkets and many hotel, pub and food service outlets with pork, chicken and more. It’s also got a big export business, particularly in far eastern markets.

“The company says trading over the past quarter has been stronger than expected, helped by robust volume growth in its core UK business, a good contribution from its pig farming operations, and simply running the business well.

“Analysts think it will make £191 million profit this year, up from £158 million last year – indicating that consumers are still eating a lot of meat, despite a structural shift for more people to go vegan or vegetarian.

“Cranswick will be aware of shifting consumer preferences and has some diversification built into its business. A pet food arm and a growing houmous operation, including a new facility in Manchester, offer some comfort if more people start to cut down on meat. However, bangers and pork chops are really the company’s bread and butter and it’s hard to see these disappearing from shopping baskets any time soon.”

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