FTSE 100 higher, WPP rises on Unilever relief, Greggs’ growth slows, Mulberry rejects Frasers’ takeover bid, eBay in radical UK move and US dockworker strike could feed into higher inflation

“The FTSE 100 ticked higher on Tuesday morning with oil prices remaining steady despite Israel launching a ground offensive against Hezbollah in Lebanon,” says AJ Bell investment director Russ Mould.

“Gold prices ticked higher, within sight of record highs amid the Middle East turmoil, helping to lift precious metals miners on the UK stock market.

“The top riser was advertising group WPP on news it has secured a favourable outcome from major client Unilever’s latest media review, keeping some duties and adding new ones. Losing Unilever as a client would have been a major blow, so it was no surprise to see investors expressing some relief.

“Dockworkers across the US Eastern Seaboard have gone on strike for the first time since 1977. The stakes are high and if the walk-out persists beyond a week it could stoke inflationary pressures and lead to shortages on the shelves in the States.

“Corporate pessimism ahead of this month’s Budget was on full display as the Institute of Directors’ confidence index slipped to a two-year low. Labour’s messaging ahead of this major fiscal event has been very gloomy.”

Greggs

“Greggs has pursued multiple avenues to achieve growth in recent years, including home delivery, evening trading and a successful move into vegan products, but there are some signs in its latest update that it may need to pull another rabbit out of the hat.

“While like-for-like growth of 5% is nothing to sniff at against a tricky backdrop it does represent a material deceleration for Greggs. When you add in the shares’ strong run over recent times, it is not entirely surprising to see a bit of market disquiet.

“The company is not resting on its laurels. It continues to innovate in terms of its product range and it is also pressing ahead with its ambitious store roll-out programme. The nagging question for investors is when does Greggs hit saturation point?

“Greggs’ heavy investment in infrastructure to support further outlets suggests it sees continuing scope for growth for some time to come, and an excellent track record going back decades means it is likely to be afforded some trust by shareholders. However, achieving the scale of expansion which Greggs has outlined will not be easy and there could be some speed bumps along the way.”

Mulberry

“It’s handbags at dawn for Mulberry. Its two major shareholders have different views on who should help the company get back into fashion after a troubled period. Frasers might own 36.8% of the business but that doesn’t mean it holds sway over Mulberry. The target has an even bigger shareholder in 56.1% owner, Challice, and this party doesn’t want to get into bed with Frasers.

“We’re now in a situation whereby Mulberry has rejected a takeover proposal from Frasers but would happily accept its cash as part of a fundraising exercise to strengthen its finances. Challice doesn’t want Frasers to buy the company and believes Mulberry has the strength to dig itself out of a hole.

“It’s a bizarre situation where two parties own 92.9% of a quoted business. One has to question why Mulberry needs to remain on the stock market, given the costs associated with listing versus the relatively small size of the company.

“Challice is a Singapore-based investment vehicle controlled by billionaire Ong Beng Seng who owns luxury retail group Club21. Frasers is retail conglomerate controlled by billionaire Mike Ashley with a strategy to go more upmarket. Both are logical owners of Mulberry, making this a tricky situation.

“The easy option is for Challice to buy out Frasers at a premium and take Mulberry private, yet Mike Ashley is never one to give things up without a challenge. The fight for Mulberry is as much to do with egos as it is business. Expect more drama to unfold.”

eBay

“Retailer eBay’s decision to scrap fees for private sellers in the UK could be a game-changer for the business and stop rivals like Vinted from eating its lunch.

“Eliminating fees on nearly all areas will take away a major source of revenue for the company, meaning it has to make up this lost income through other means. While there are plans to boost advertising on the platform and offer financial services, it’s easy to spot how eBay is rebalancing its monetisation strategy. Essentially, the fees are going to be passed from the seller to the buyer from next year, which is a risky but calculated move if it wants to greatly increase the volume of goods sold on its platform.

“It’s great news for someone who has a house full of unwanted stuff. They can chuck it on eBay and hope someone takes it off their hands. But buyers might become pickier once they have to pay an extra fee on top of the purchase price.

“That said, eBay has already tested the water with the new pricing strategy in Germany and says it has improved the breadth and depth of products on its platform. More products should mean greater competition on the platform and that could keep prices low for buyers, making up for the fact they will soon have to pay a bit on top.

“The reselling platform is treading a thin line with the fee changes and is no doubt keeping its fingers crossed that the shift doesn’t backfire and it loses out.”

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