Markets calmer after a testing week, Reckitt rallies on favourable baby formula ruling, Amazon’s cloud credentials reinforced and new boss at Boohoo

“There was a sense of calm to the UK stock market after a testing week for investors,” says Russ Mould, Investment Director at AJ Bell.

“The run-up to the Budget kept everyone on their toes and the subsequent spike in gilt yields caused some big movements on the market. Fortunately, there was less drama on Friday, with the FTSE 250 holding firm, the FTSE 100 moving higher and gilt yields settling around the 4.5% level.

“Reckitt’s legal breakthrough propelled its shares to their highest level since March and gave a boost to the FTSE 100. Shell and BP also gave support to the FTSE 100 as oil prices bounced nearly 3% higher. Tesco jumped 0.6% after saying it would buy back a further £700 million worth of shares with money from its banking operations disposal.”

Reckitt

“Consumer goods firm Reckitt enjoyed a meaningful relief rally off the back of a ruling in the latest trial on disease risks associated with its baby formula.

“There has been nothing but bad news on this front for Reckitt for some time so it’s not a surprise this chink of light has been seized upon by investors in a positive way. There are still plenty of outstanding cases so this issue will not go away for Reckitt overnight, but it certainly represents a crumb of comfort for long-suffering shareholders.

“An eventual resolution of this issue could be a precursor to selling the Mead Johnson business which has been nothing short of a disaster for Reckitt since it was acquired for $16.6 billion in 2017. The company is already on track to sell a portfolio of home care brands like Air Wick and Cillit Bang by the end of next year as CEO Kris Licht continues his restructure of the business.”

Amazon

“It’s been a mixed week for US big tech with Amazon one of the few to get a positive market reaction.

“Amazon’s e-commerce arm is significantly more high profile but Amazon Web Services is the company’s real growth engine, with its leading position in cloud computing proving a massive boon. Demand is surging as companies look to develop and implement new generative AI tools requiring huge capacity for data storage.

“Servicing this comes at a cost – Amazon is having to spend huge sums on property, equipment and infrastructure both now and in the future – but the difference with some of its peers is that shareholders are able to see signs of a return on this investment.

“The company also stuck to guidance for the fourth quarter where others had proved a little more downbeat about the outlook, and created excitement by teasing new AI and cloud-based capabilities which it is set to share imminently.

“While the market is focused on cloud, the company’s retail and advertising businesses are also in decent shape.”

Boohoo

“Mike Ashley has been defeated in his quest to run Boohoo after the clothing retailer said it had appointed a new leader from within. Dan Finley is stepping up from running Boohoo-owned Debenhams to be group CEO.

“While relatively young for a CEO at 41, Finley’s background looks solid, having spent a decade as a JD Sports director and then nearly three years helping to transform Debenhams as a digital entity. Clearly that’s not a patch on Ashley’s extensive retail experience, but it’s the right type of CV to grab the top job for a company of Boohoo’s size.

“Finley will need some bright ideas to put Boohoo back on the right track. The fact a strategic review is already underway with suggestions that certain brands will be sold means that the new boss can hit the ground running. Normally it would take a period of six months for a new CEO to start the job and think about the future structure.

“That doesn’t mean all the big decisions have been made before Finley gets his new office. If anything, he is promoted just at the right time when a lot of preparatory work has been done on each division’s prospects, but he gets to make the final call on where Boohoo goes next.

“The challenge is immense. The previous boss, John Lyttle, spent years trying to fix Boohoo without any success. Finley will need to be creative, have a sharp focus, and think differently to his predecessor.

“There is also the risk that Mike Ashley flexes his muscles as a major shareholder via Frasers to cause disruption if he doesn’t like the new appointment. Ashley isn’t one to mince his words so it will be interesting to get his views on Finley’s suitability for the role.”

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